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As filed with the Securities and Exchange Commission on March 12, 1997
Registration No. 333-01750
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 3 TO
FORM S-3
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
8000 TOWERS CRESCENT DRIVE, SUITE 810
VIENNA, VIRGINIA 22182
(703) 749-4600
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)
MICHAEL S. PINKERT, PRESIDENT
8000 TOWERS CRESCENT DRIVE, SUITE 810
VIENNA, VIRGINIA 22182
(703) 749-4600
(Name, address, zip code and telephone number,
including area code, of agent for service)
Copy to:
Ernest M. Stern, Esq.
Venable, Baetjer, Howard & Civiletti, LLP
1201 New York Avenue, N.W.
Washington, D.C. 20005
(202) 962-4800
Fax: (202) 962-8300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO
TIME AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[TO BE INSERTED ON THE LEFT HAND MARGIN OF THIS COVER PAGE]
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
330,000 SHARES
MHM SERVICES, INC.
COMMON STOCK
This Prospectus relates to 330,000 shares of common stock, par value $.01
per share (the "Common Stock), of MHM Services, Inc. (the "Company") held by
the selling stockholders named herein, which may be offered for sale from time
to time by such selling stockholders, or by their pledgees, donees, transferees
or other successors in interest (the "Selling Stockholders"). The Company will
not receive any proceeds from the sale of the shares of the Common Stock by the
Selling Stockholders. The Company will bear the costs relating to the
registration of the shares of the Common Stock, estimated to be approximately
$12,000.
The Selling Stockholders may offer shares of the Common Stock for sale
from time to time through agents in one or more transactions on the American
Stock Exchange or such other exchange on which such shares are then listed, in
one or more private transactions, or in a combination of such methods of sale,
at prices and on terms then prevailing or at prices and terms then obtainable.
See "Plan of Distribution." The Selling Stockholders and any agents through
whom the shares of Common Stock are made may be deemed to be underwriters
within the meaning of the Securities Act of 1933, as amended, and the
commissions or discounts and other compensation paid to such persons may be
regarded as underwriters compensation.
The Common Stock is quoted on the American Stock Exchange under the symbol
"MHM." On March __, 1997, the closing price of the Common Stock as reported by
the American Stock Exchange was $ .
--------------
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE DISCUSSION
UNDER "RISK FACTORS" BEGINNING ON PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES 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 ___________, 1997
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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. In addition, such materials may be accessed electronically
at the Commission's site on the World Wide Web, located at http://www.sec.gov.
The Common Stock is quoted 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-3 (herein,
together with all amendments and exhibits thereto, referred to as the
"Registration Statement"), under the Securities Act of 1933, as amended (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 following documents, filed with the Commission (File No. 1-12238)
pursuant to the Exchange Act, are hereby incorporated by reference in this
Prospectus: (i) the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1996; (ii) the Company's Current Report on Form 8-K filed
November 21, 1996; (iii) the Company's first amendment to its Annual Report
filed on Form 10-K/A on January 28, 1997; (iv) the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1996 filed February 13, 1997;
(v) the Company's Current Report on Form 8-K filed January 16, 1997; (vi) 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 other documents filed by the Company pursuant to Section 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date hereof and prior to
termination of the offering of the Common Stock pursuant to this Prospectus
shall be deemed to be incorporated by reference herein and to be a part of this
Prospectus from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon oral or written request of any such person,
a copy of any or all of the documents incorporated herein by reference, other
than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests should be directed to
MHM Services, Inc., 8000 Towers Crescent Drive, Suite 810, Vienna, Virginia,
22182, Attn: Investor Relations, telephone (703) 749-4600.
[INSIDE FRONT COVER]
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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, ESTIMATES OF AMOUNTS THAT ARE NOT
YET DETERMINABLE 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, AN
ADVERSE DECISION IN ITS SUIT AGAINST MEDIQ CHALLENGING THE VALIDITY OF ITS
PROMISSORY NOTE TO MEDIQ, THE USE OF THE AVAILABLE CASH RESOURCES TO FUND
CONTINUED OPERATING LOSSES, THE AMOUNT AND TIMING OF GOVERNMENT REIMBURSEMENT
AND THE RESULTS OF REVIEW OF CERTAIN MEDICARE CLAIMS, RISKS ASSOCIATED WITH
INDUSTRY CONSOLIDATION AND ACQUISITIONS, THE NEED TO MANAGE GROWTH, 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 $14,377,000 for the fiscal
year ended September 30, 1996, and $923,000 for the three month period ended
December 31, 1996, and there can be no assurance that the Company will return
to profitability, or that the losses will not be higher for fiscal year 1997
and future periods.
CONTINUED AMEX LISTING; POTENTIAL ADVERSE EFFECTS OF DELISTING. The
standards for initial listing on the American Stock Exchange ("AMEX") require
that a company, for equity issues, must have (i) a minimum public distribution
of 500,000 shares, together with a minimum of 800 public shareholders, or a
minimum public distribution of 1,000,000 shares together with a minimum of 400
public shareholders; and (ii) a minimum market price of $3.00 per share and
$3,000,000 aggregate market value for a reasonable period of time prior to the
filing of the listing application. The AMEX Company Guide provides that the
AMEX Board of Governors has discretion, at any time, and without notice, to
suspend dealings in, or remove any security from, listing or unlisted trading
privileges when, in the opinion of the AMEX: (a) the financial condition and/or
operating results of the issuer appear to be unsatisfactory; or (b) it appears
that the extent of public distribution of the aggregate market value of the
security has become so reduced as to make further dealings on the AMEX
inadvisable; or (c) the issuer has sold or otherwise disposed of its principal
operating assets, or has ceased to be an operating company; or (d) the issuer
has failed to comply with its listing agreements with the AMEX; or (e) any
other event shall occur or any condition shall exist which makes further
dealings on the AMEX unwarranted. The AMEX has adopted guidelines with respect
to the financial condition and/or operating results that will prompt the AMEX
to normally consider suspending dealings in or delisting securities of a
company which: (i) has stockholders' equity of less than $2,000,000 if such
company has sustained losses from continuing operations and/or net losses in
two of its most recent fiscal years; or (ii) has sustained losses from
continuing operations and/or net losses in its five most recent fiscal years;
or (iii) has stockholders' equity of less than $4,000,000 if such company has
sustained losses from continuing operations and/or net losses in three of its
four most recent fiscal years; or (iv) has sustained losses that are so
substantial in relation to its overall operations or its existing financial
resources, or its financial condition has become so impaired that it appears
questionable, in the opinion of the AMEX, as to whether such company will be
able to continue operations and/or meet its obligations as they mature.
The Company, as of December 31, 1996, had negative stockholders' equity of
$4,505,000. In addition, the Company has sustained operating losses in three
of its four most recent fiscal years. Accordingly, the Company currently fails
to meet the financial standards for continued listing on the AMEX. While the
AMEX has discretion to consider a variety of factors in making a decision to
suspend or delist a security, including a Company's prospects for growth, there
can be no assurance that the Company will continue to be listed on the AMEX or
satisfy the standards for listing on another exchange or NASDAQ. Failure to be
listed on an exchange or NASDAQ will adversely affect the price of the
Company's common stock and the ability of the Company's shareholders to sell
their shares.
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If the Company were unable to satisfy the AMEX requirements for continued
listing and the share price for its Common Stock were to remain below $5.00 per
share, unless the Company satisfied certain asset or revenue tests (at least
$2,000,000 in net tangible assets if in business at least three years, or
average revenues of at least $6,000,000 for the last three years, a test the
Company now meets), the Common Stock would become subject to the so-called
"penny stock" rules promulgated by the Securities and Exchange Commission (the
"Commission"). Under the penny stock rules, a broker or dealer selling penny
stock to anyone other than an established customer or "accredited investor"
(generally, an individual with net worth in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction otherwise is exempt. In addition, the penny stock
rules require the broker or dealer to deliver, prior to any transaction, a
disclosure schedule prepared by the Commission relating to the penny stock
market, unless the broker or dealer or the transaction otherwise is exempt. A
broker or dealer also is required to disclose commissions payable thereto and
to the registered representative and current quotations for the securities. In
addition, a broker or dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.
These additional sales practices and disclosure requirements could adversely
effect the level of trading activity in the secondary market and could impede
the sale of the Company's Common Stock in that market, resulting in an adverse
effect on the price of the Common Stock in the secondary market.
UNFAVORABLE RULING IN MEDIQ SUIT. The Company executed on August 31, 1993
a five year promissory note (the "MEDIQ Note") for $11,500,000 to MEDIQ, its
former corporate parent, in connection with a spin-off of the Company by MEDIQ.
The MEDIQ Note represented the balance of unpaid payment obligations imposed
on the Company by MEDIQ for, as MEDIQ described it, management fees and
intercompany interest. The original principal amount of the MEDIQ Note bears
interest at a rate of prime plus 1.5% (9.75% at September 30, 1996),with
monthly payments of interest only through September 1995 and then monthly
principal and interest payments for the following three years (principal
payments of $767,000 were made in 1996, and principal payments of $766,000 are
due in 1997), based on a fifteen year amortization period, with the balance due
on August 31, 1998.
The Company filed a complaint on February 10, 1997 in the Superior Court
of New Jersey, Chancery Division - Essex County against MEDIQ alleging that the
MEDIQ Note is invalid on the grounds that MEDIQ breached its obligations to the
Company in connection with forcing the Company to execute the MEDIQ Note, the
MEDIQ Note lacks consideration, the MEDIQ Note is unconscionable and it
unjustly enriches MEDIQ at the Company's expense. The Company has asked the
Court to permanently enjoin MEDIQ from assigning, transferring or enforcing the
MEDIQ Note, declare it null and void, require MEDIQ to return to the Company
all payments MEDIQ has received on the MEDIQ Note and award the Company
compensatory, consequential and punitive damages. The Company has been current
in its payments under the MEDIQ Note until the payment due for February 1997.
Consequently, the outstanding amounts owed by the Company under the MEDIQ Note
($10,542,000) have been classified as a current liability. There can be no
assurance that the Company will be successful in its suit against MEDIQ.
An adverse decision by the Court on the Company's complaint against MEDIQ
could force the Company to file for reorganization under the U.S. Bankruptcy
Code since the Company does not anticipate that cash flows from operations will
be sufficient to repay the accelerated MEDIQ Note. The Company may be
unsuccessful in its attempt to reorganize under the U.S. Bankruptcy Code and
could be forced to liquidate all its assets. Shareholders of the Company would
be unlikely to recover any of their investment in the Company should
liquidation occur.
UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN. As a result of the
Company's continued negative operating results, 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,
1996 included an explanatory paragraph which stated that such conditions raise
substantial doubt as to the Company's ability to continue as a going concern.
Since the independent auditor's report, the Company has continued to experience
negative operating results and, primarily as a result of its failure to pay the
February installment of the MEDIQ Note, for the quarter ended December 31,
1996, the Company reported negative working capital of $8,157,000. In an
effort to improve this situation for both the immediate future and the
long-term, the Company sold certain assets relating to its Hospital Division in
April and May 1996, instituted a lawsuit to challenge the validity of the MEDIQ
Note, is 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."
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INCREASED DEPENDENCE ON EXTENDED CARE SERVICES DIVISION. Of the Company's
two operating divisions (the Extended Care Services Division and the Hospital
Division), 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 67%, 86%, 67% and 59% of the Company's net revenues in
the fiscal years ended September 30, 1996, 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.
In an attempt to improve the Company's financial condition, during April
and May 1996 the Company sold six of its seven freestanding facilities. 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 result of the Company's
operations. The Company's Extended Care Services Division, since its founding
in October 1993, has generated only 33%, 14% and 3% of net revenues for the
years ended September 30, 1996, 1995 and 1994, respectively. In addition, the
rapid expansion of the Extended Care Services Division has resulted in
increased costs, and, with the allocation of overhead related to the operations
of the Extended Care Services Division that can no longer be absorbed by the
Hospital Division since the Company's sale of six of its freestanding
facilities, 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. In December 1995, the Company
acquired the behavioral healthcare clinic operations from National Mentor,
Inc., in December 1996 the Company acquired the geropsychiatric management
services of Liberty Bay Colony Health Services, and in February 1997 the
Company was awarded a contract to provide on-site dental services to all
inmates of the Delaware State Prison Systems. 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 in
institutional settings.
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, that the Extended
Care Services Division will generate profits even if acquisitions are
consummated, 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 and make the Company unable to fulfill its debt
obligations and sustain operations at a level at which the Company could
continue as a going concern. See "The Company."
RELATIONSHIPS OF CERTAIN PERSONS WITH MEDIQ. 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 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. The
relationship of the above individuals with MEDIQ may be adverse to the
interests of stockholders of the Company generally, particularly in light of
the Company's lawsuit, discussed above, to declare the MEDIQ Note invalid.
REIMBURSEMENT FOR MENTAL HEALTH SERVICES/REVIEW OF MEDICARE CLAIMS. 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.
In July 1995 the Company acquired certain assets of Supportive Counseling
Care ("SCC") of Manhattan Beach, California, a provider of behavioral
healthcare services to extended care facilities, and entered into a 40-year
management contract to provide administrative services to SCC. In March 1966,
the Company became aware that the Medicare fiscal intermediary in Southern
California intended to commence in April 1996 a prepayment review of claims for
reimbursement under
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the Medicare program submitted by SCC as well as other industry providers in
the region. In November 1996, the Company decided to discontinue the
operations of SCC based upon SCC's continued operating losses and negative cash
flow, resulting in part from significant delays in Medicare reimbursement.
CHANGES IN MENTAL HEALTH INDUSTRY. Recently, the healthcare 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 healthcare 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."
COMPETITION. Competition in the mental and nonacute 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 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, through its wholly-owned subsidiaries, MHM of Colorado, Inc.
("Hospital Division") and MHM Extended Care Services, Inc. ("Extended Care
Services Division"), offers, arranges for and manages nonacute healthcare
services primarily in institutional settings. Such services include behavioral
healthcare, podiatry, optometry and dentistry. Since its founding, the
Company's goal has been to offer the highest quality, cost-effective care in
the industry. Prior to the sales of six of the Company's freestanding
facilities, in April and May 1996, 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 86% of net revenues
for fiscal 1995 and comprised 77% of the Company's total assets at the end of
fiscal 1995. As a result of the Company's sale of the six freestanding
facilities, the Hospital Division represented only 67% of net revenues in
fiscal 1996. The Company's Extended Care Services Division provides
specialized medical and behavioral health services to approximately 655 nursing
homes in ten states. The Extended Care Services Division also provides
behavioral healthcare to more than 2,000 Medicaid patients residing in nursing
homes under a contract with the State of Georgia.
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.
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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 33% and 14%
of the Company's net revenues in fiscal 1996 and 1995, respectively) through
the pursuit of non-physician practice acquisition and management opportunities.
In July 1995, the Company's Extended Care Services Division acquired
certain assets of Supportive Counseling Care ("SCC") of Manhattan Beach,
California, a provider of behavioral healthcare services to extended care
facilities, and entered into a 40-year management contract to provide
administrative services to SCC. As consideration for the acquired assets, the
Company paid $500,000 in cash and notes. The Company's Extended Care Services
Division also entered into a 40-year management contract to provide
administrative services to SCC. The operating results related to these assets
are included in the Company's consolidated results of operations from the date
of acquisition. In November 1996, the Company decided to discontinue the
operations of SCC based upon SCC's continued operating losses and negative cash
flow, resulting in part from significant delays in Medicare reimbursement. The
Company shut down SCC's operations in early December 1996. Fixed assets of
approximately $12,000 will either be sold or redeployed elsewhere in the
Company. All other SCC assets have been written off as of September 30, 1996.
The Company issued a purchase warrant in connection with the SCC
acquisition. Such warrant provides the holder thereof, upon the occurrence of
certain events (such as an initial public offering of such subsidiary, MHM
Extended Care Services, Inc.), the right (subject to certain vesting
conditions) until July 1998 to acquire 9,000 shares (subject to adjustment
under certain circumstances) of the common stock of such subsidiary at a
purchase price of $1.00 per share (subject to adjustment under certain
circumstances). Such subsidiary currently has 1,000,000 shares of its common
stock authorized, par value $.01 per share, and 100,000 shares of its common
stock issued.
In December 1995, the Company's Extended Care Services Division acquired
the behavioral healthcare clinic operations of National Mentor, Inc. located in
Charlestown and Taunton, Massachusetts. As consideration for the acquired
assets, the Company paid $150,000 in cash and agreed to pay $338,000 in 36 equal
monthly installments. The Company renamed the operations "MHM Counseling
Services." The operating results of the acquired business are included in the
Company's consolidated results of operations from the date of acquisition.
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 January 24, 1996, and amended April 11, 1996, by and between
the Company and BHC (the "BHC Sale"). The Hospitals were sold for
approximately $10,209,000, consisting of $9,049,000 in cash and $1,160,000 in
assumed liabilities of the freestanding facilities (reflecting post-closing
adjustments by both parties).
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 (of which $134,000 remains in escrow). The Company
7
<PAGE> 10
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.
Effective December 1, 1996, the Company's Extended Care Services Division
acquired, pursuant to an Agreement (the "Liberty Bay Agreement") by and among
the Company, MHM Extended Care Services, Inc., Liberty Bay Colony Health
Services, Inc. ("Liberty Bay") and Liberty Management Group, Inc. ("Liberty
Management"), certain assets and contractual rights from Liberty Bay which
constituted Liberty Bay's geropsychiatric management services operations in
Massachusetts. The Company has commenced integrating these operations with MHM
Counseling Services and the combined operations will operate under the name
"MHM/Bay Colony Counseling Services", and, as a result of the acquisition, will
serve approximately 80 extended care facilities.
As consideration for the purchase, the Company paid Liberty Bay $150,000
in cash and issued a promissory note in the principal amount of $150,000 (the
"Liberty Bay Note"). The purchase price will be primarily allocated to
intangible assets. The Liberty Bay Note provides for quarterly interest
payments at an annual rate of 9% and the payment of the principal amount in one
installment on December 1, 1999. The Company also agreed to pay Liberty Bay
additional consideration consisting of 20% of "cash flow" (as such term is
defined in the Liberty Bay Agreement) from the acquired contracts over the five
year period commencing December 1, 1996. Such additional consideration is
payable annually by the Company and is calculated on a contract-by-contract
basis.
As a result of the Company's continued negative operating results, as well
as reduced collections of accounts receivable, including reimbursement review
of certain Medicare claims in southern California, the Company has been
experiencing difficulty generating sufficient cash flows from operations to
meet its obligations and sustain its operations without the use of available
cash reserves. The report of the Company's independent auditors on the
Company's financial statements at September 30, 1996, includes an explanatory
paragraph which states that such conditions raise substantial doubt as to the
Company's ability to continue as a going concern. In a continuing effort to
improve this situation for both the immediate future and the long-term, the
Company sold certain assets relating to its Hospital Division and is taking
steps to reduce operating expenses, finance its working capital requirements,
restructure debt, raise additional capital and 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.
On February 10, 1997, the Company filed a lawsuit against MEDIQ, alleging
that the $11.5 million note, incurred by the Company when it was a subsidiary
of MEDIQ as part of intercompany payment obligations of approximately $21
million that MEDIQ imposed on the Company from 1986-1993 while the Company was
a subsidiary of MEDIQ ("MEDIQ Note"), was invalid. The suit charged, among
other things, that MEDIQ breached its obligations to the Company in forcing the
Company to execute the MEDIQ Note and that the MEDIQ Note unjustly enriched
MEDIQ at the Company's expense. The Company asked the Court to permanently
enjoin MEDIQ from assigning, transferring or enforcing the Note, declare the
Note null and void, require that MEDIQ return to the Company all payments that
MEDIQ has received under the MEDIQ Note and award it compensatory,
consequential and punitive damages. The Company was current in its payments on
the MEDIQ Note until the payment due for February 1997.
Effective February 1, 1997, the Company entered into a contract worth
$425,000 a year to provide on-site dental services to all inmates of the
Delaware State Prison Systems.
At a Board of Directors meeting on February 10, 1997, Carolyn Zimmerman
and Steven H. Wheeler, now Vice President-Finance and Vice
President-Operations, respectively, of the Company, were elected to fill the
vacancies on the Board created by the resignations of H. Scott Miller and
Michael F. Sandler effective January 10, 1997. In addition, at that Board
meeting Lee Calligaro was appointed Vice President and General Counsel of the
Company and Nancy Neal was appointed Secretary.
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 shareholders. The Company's principal executive
offices are located at 8000 Towers Crescent Drive, Suite 810, Vienna, Virginia
22182, and its telephone number is (703) 749-4600.
8
<PAGE> 11
USE OF PROCEEDS
The net proceeds from the sale of shares of the Common Stock will be
received by the Selling Stockholders. The Company will not receive any
proceeds from any sale of shares of the Common Stock by the Selling
Stockholders.
SELLING STOCKHOLDERS
In November 1993, the Company acquired substantially all of the assets and
assumed certain liabilities (collectively, the "ICH Assets") of ICH Services,
L.L.C. ("ICH"). ICH acquired the ICH Assets from HCI Services, Inc. ("HCI").
The consideration for the acquisition consisted of an aggregate of 330,000
shares of the Company's Common Stock. Additional consideration in cash or
additional shares of the Company's Common Stock, at the option of the seller,
may be payable in the future based upon 20% of the fair market value of the
assets acquired after three years, or earlier under certain circumstances, such
as the sale or merger of the Company ("Earn-out Provision"). The shares of the
Company's Common Stock issued in connection with the acquisition of the ICH
Assets were also subject to the terms of a certain Registration Rights
Agreement, dated November 18, 1993 (the "Registration Rights Agreement"), which
provided certain demand and incidental registration rights under the Securities
Act.
Pursuant to the terms of the Registration Rights Agreement, the persons
listed below have proposed to sell the shares of Common Stock indicated below
pursuant to the plan of distribution described elsewhere herein.
The following table provides the names and addresses of each Selling
Stockholder and the amount of the Common Stock offered hereby and the amount of
the Common Stock owned beneficially by each of such Selling Stockholders.
<TABLE>
<CAPTION>
Beneficial Beneficial Shares Owned
Name and Address Shares Owned Shares Offered After Offering*
- ---------------- ------------ -------------- -----------------------
<S> <C> <C> <C>
CIBC Trust Company (Bahamas) 26,373 26,373
Limited, Trustee (1)
Shirley Street, P.O. Box N-3933
Nassau, Bahamas
W.C. McGraw 15,675 15,675
P.O. Box 888670
Atlanta, GA 30356
H. Charles Mohler, D.D.S. 495 495
706 Douglas Drive
Johnson City, TN 37604
Thomas Newbill 9,075 9,075
7205 Riverside Drive
Atlanta, GA 30328
Point Venture Partners, L.P. (2) 118,854 118,854
2970 USX Tower
600 Grant Street
Pittsburgh, PA 15219
</TABLE>
9
<PAGE> 12
<TABLE>
<S> <C> <C>
Point Venture Partners Pennsylvania, 6,600 6,600
L.P. (2)
2970 USX Tower
600 Grant Street
Pittsburgh, PA 15219
Carol Skiba 27 27
7425 E. Portland Street
Scottsdale, AZ 85257
James D. Strausburg 19 19
1490 Moores Mill Road
Atlanta, GA 30327
Walnut Capital Corp. (3) 82,455 82,455
8000 Towers Crescent Drive, Suite 1070
Vienna, VA 22182
Windy City, Inc. (4) 20,354 20,354
8000 Towers Crescent Drive, Suite 1070
Vienna, VA 22182
David C. Winters 573 573
1506 Holly Banks Circle
Dunwoody, GA 30338
Venture First II, L.P. (5) 49,500 49,500
4811 Thornwood Drive
Acworth, GA 30102
</TABLE>
*The amount of shares of Common Stock that will continue to be beneficially
owned by the Selling Shareholders after this offering is undetermined at this
time since the Company is negotiating with the Selling Shareholders the
Earn-out Provision and the amount of cash or Common Stock which they will be
entitled to receive.
10
<PAGE> 13
(1) Sole voting and investment control of the subject securities is vested in
CIBC Trust Company, Limited in their institutional capacity as Trustee.
The beneficiaries of the Trust are so-called "discretionary beneficiaries"
and are not entitled to any specific distributions or trust corpus, nor
can they direct the voting or investment control of the assets held by the
Trust, which control is vested solely with CIBC Trust Company, Limited as
Trustee.
(2) Point Venture Partners, L.P. and Point Venture Partners Pennsylvania,
L.P. are managed by the same general partner, Point Venture Associates,
L.P., a limited partnership whose general partners are Don J. Casturo,
Kent L. Engelmeier and Derek F. Minno.
(3) Walnut Capital Corp. is a wholly-owned subsidiary of Walnut Financial
Services, Inc., a publicly traded concern. Sole voting and investment
control of Walnut Capital assets is vested in Walnut Capital's President,
Mr. Joel S. Kanter.
(4) Sole voting and investment control of Windy City's assets is vested in
Windy City's President, Mr. Joel S. Kanter.
(5) The general partner of Venture First II, L.P. is Venture First
Associates II, L.P., whose general partners are James Douglas Mullins,
Riverwest Ventures, Inc., Benton Otto Wheeley and William Andrew Grubbs.
The sole stockholder of Riverwest Venture, Inc. is James Douglas Mullins.
In addition to their role as members of ICH, certain of the Selling
Stockholders were formerly officers and directors of HCI. None of such
persons is currently an officer or director of HCI. Except as described
above, none of the Selling Stockholders listed above has held any position
or office or had any other material relationship within the past three
years with the Company or any of its predecessors or affiliates.
PLAN OF DISTRIBUTION
Any distribution of the shares of the Common Stock by the Selling
Stockholders, or by pledgees, donees, transferees or other successors in
interest, may be effected from time to time in one or more of the following
transactions: (a) to underwriters who will acquire shares of the Common
Stock for their own account and resell them in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale (any public offering price
and any discount or concessions allowed or re-allowed or paid to dealers
may be changed from time to time); (b) through brokers, acting as principal
or agent, in transactions (which may involve block transactions) on the
American Stock Exchange, or on one or more exchanges on which the Common
Stock is then listed, in special offerings, exchange distributions pursuant
to the rules of the applicable exchanges or in the over-the-counter market,
or otherwise, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices or at fixed
prices; or (c) directly or through brokers or agents in private sales at
negotiated prices, or by any other legally available means. The shares of
the Common Stock may be sold by the Selling Stockholders pursuant to this
Prospectus or otherwise pursuant to Rule 144 promulgated under the
Securities Act.
The Selling Stockholders and such underwriters, brokers, dealers or
agents, upon effecting a sale of shares of the Common Stock, may be
considered "underwriters" as that term is defined by the Securities Act.
Underwriters participating in any offering made pursuant to this
Prospectus (as amended or supplemented from time to time) may receive
underwriting discounts and commissions, and discounts or concessions may
be allowed or reallowed or paid to dealers, and brokers or agents
participating in such transactions may receive brokerage or agent's
commissions or fees.
At the time a particular offering of shares of the Common Stock is made,
to the extent required, a Prospectus Supplement will be distributed which
will set forth the amount of shares of the Common Stock being offered and
the terms of offering, including the purchase price or public offering
price, the purchase price paid by an underwriter for shares of the Common
Stock purchased from the Selling Stockholders, the name or names of any
underwriters, dealers or agents, any discounts, commissions and other
items constituting compensation from the Selling Stockholders any
discounts, commissions or concessions allowed or re-allowed or paid to
dealers.
11
<PAGE> 14
To comply with the securities laws of certain states, if applicable, the
shares of the Common Stock will be sold in such jurisdictions, if required,
only through registered or licensed brokers or dealers. In addition, in
certain states, the shares of the Common Stock may not be sold unless the
shares of the Common Stock have been registered or qualified for sale in such
state or an exemption from registration or qualification is available and
complied with.
The Company and the Selling Stockholders have agreed that the Company will
bear all costs, expenses and fees in connection with the registration of the
shares of the Common Stock. The Selling Stockholders will bear the cost of all
commissions and discounts, if any, attributable to the sale of the shares of
the Common Stock. The Selling Stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of
the shares of the Common Stock against certain liabilities, including
liabilities arising under the Securities Act. The Company and the Selling
Stockholders have agreed to indemnify each other and certain other persons
against certain liabilities in connection with the offering of the shares of
the Common Stock, including liabilities arising under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Venable, Baetjer, Howard & Civiletti, LLP, 1201 New York Avenue,
N.W., Washington, D.C. 20005.
EXPERTS
The financial statements and the related financial schedule incorporated
in this Prospectus by reference from the Company's Annual Report on Form 10-K
for the year ended September 30, 1996 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference (which report expresses an unqualified opinion and includes
an explanatory paragraph relating to substantial doubt about the Company's
ability to continue as a going concern), and have been so incorporated in
reliance upon the report of such firm, given upon their authority as experts
in accounting and auditing.
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Law (the "Delaware Law") 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 Law, 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 registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant 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
registrant 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 Act and will be governed by the final adjudication of such
issue.
12
<PAGE> 15
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company, the Selling Stockholders or any underwriter. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such an offer in such jurisdiction. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs
of the Company since such date.
, 1997
------------------
MHM SERVICES, INC.
330,000 Shares
Common Stock
($.01 par value)
P R O S P E C T U S
-------------------
13
<PAGE> 16
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.....................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...........................
RISK FACTORS..............................................................
THE COMPANY...............................................................
USE OF PROCEEDS...........................................................
SELLING STOCKHOLDERS......................................................
PLAN OF DISTRIBUTION......................................................
LEGAL MATTERS.............................................................
EXPERTS...................................................................
COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.....
14
<PAGE> 17
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the shares of
the Common Stock being registered hereby:
<TABLE>
<S> <C>
SEC Registration Fee $ 184.91
Accountants' Fees and Expenses 1,500.00*
Legal Fees 7,000.00*
Blue Sky Filing Fees and Expenses 2,500.00*
Miscellaneous 1,000.00
-----------
Total $ 12,184.91*
===========
</TABLE>
* Estimated, subject to change
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Law (the "Delaware Law") 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 Law, 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.
II-1
<PAGE> 18
ITEM 16. EXHIBITS.
2.1 Agreement by and between the Company and ICH Services, L.L.C., dated
November 18, 1993 (incorporated by reference to the Company's Form 8-K
report, dated October 2, 1993)
2.2 Amendment No. 1 dated October 12, 1995 to Agreement by and between the
Company and ICH Services, L.L.C. dated November 18, 1993 (filed
herewith)
4.1 Specimen copy of Common Stock Certificate (incorporated by reference to
the Company's Registration Statement on Form 8-K, 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 Current Report on Form 8-K dated May 15,
1996)
4.3 Certificate of Amendment to the Company's Restated Certificate of
Incorporation (incorporated by reference to the Company's Current
Report on Form 8-K/A dated September 6, 1996)
4.4 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 Venable, Baetjer, Howard & Civiletti, LLP (filed herewith)
23.1 Consent of Deloitte & Touche LLP (filed herewith)
23.2 Consent of Venable, Baetjer, Howard & Civiletti, LLP (included in
Exhibit 5)
24 Power of Attorney (included on signature page)
II-2
<PAGE> 19
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
post-effective amendments 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 the 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
the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended, that are incorporated by reference in the 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 registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934, as amended) that is
incorporated by reference in the 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.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934, as amended; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the prospectus is
sent or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
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 registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant 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
registrant 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 Act and will be governed by the final adjudication of such
issue.
The undersigned registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form
II-3
<PAGE> 20
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933, as amended, shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus 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.
II-4
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, hereunto
duly authorized, in the County of Fairfax, Commonwealth of Virginia.
Dated: March 12, 1997
MHM SERVICES, INC.
By: /s/ Michael S. Pinkert
------------------------------
Michael S. Pinkert, President
and Chief Executive Officer
By: /s/ Carolyn Zimmerman
------------------------------
Carolyn Zimmerman
Vice President-Finance and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons, in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael S. Pinkert President and Chief
- -------------------------- Executive Officer March 12, 1997
Michael S. Pinkert
* Director March 12, 1997
- --------------------------
William P. Ferretti
* Director March 12, 1997
- --------------------------
Kenneth A. Kessler, M.D.
/s/ Carolyn Zimmerman Director March 12, 1997
- --------------------------
Carolyn Zimmerman
/s/ Steven H. Wheeler Director March 12, 1997
- --------------------------
Steven H. Wheeler
* /s/ Michael S. Pinkert March 12, 1997
- --------------------------
Michael S. Pinkert,
*as attorney-in-fact
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5
[VENEBLE, BAETJER, HOWARD & CIVILETTI, LLP LETTERHEAD]
March 12, 1997
MHM Services, Inc.
8000 Towers Crescent Drive
Suite 810
Vienna, VA 22182
Re: Registration on Form S-3
Gentlemen:
We have acted as counsel for MHM Services, Inc., a Delaware corporation
(the "Company") in connection with a registration statement on Form S-3 (No.
333-1750) of the Company filed with the Securities and Exchange Commission
(the "Commission") on February 28, 1996 (as amended from time to time, the
"Registration Statement"),pertaining to the registration of 330,000 shares
of common stock of the Company (the "Shares") for sale by certain holders
thereof.
In connection with this opinion, we have considered such questions of law
as we have deemed necessary as a basis for the opinions set forth below, and we
have examined or otherwise are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of the following: (i) the
Registration Statement; (ii) the Certificate of Incorporation and By-laws of
the Company, as amended and as currently in effect; (iii) the Registration
Rights Agreement dated November 18, 1993 and amendment number one thereto,
dated October 12, 1995 and correspondence in connection with a proposed second
amendment to that Agreement; (iv) certain resolutions of the Board of Directors
of the Company relating to the issuance of the Shares and the other
transactions contemplated by the Registration Statement; and (v) such other
documents as we have deemed necessary or appropriate as a basis for the opinion
set forth below. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such copies. As
to any facts material to this opinion that we did not independently establish
or verify, we have relied upon statements and representations of officers and
other representatives of the Company and others.
<PAGE> 2
MHM Services, Inc.
March 6, 1997
Page 2
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized for issuance and, when sold, will be legally issued, fully paid
and nonassessable.
We are members of the Bar of the District of Columbia. We do not express
any opinion herein as to matters governed by the laws of any jurisdiction other
than the District of Columbia, the corporate law of the state of Delaware and
the federal laws of the United States of America. This opinion does not extend
to the securities or "blue sky" laws of the District of Columbia, Delaware or
any other state.
The foregoing opinions are predicated upon and qualified by the following:
(a) This letter is strictly limited to the matters
expressly set forth herein and no statements or opinions
should be inferred beyond such matters.
(b) The statements made and opinions rendered herein are
based upon and limited by the laws (including statutes,
regulations, orders, decisions and agency statements of
policy) as in effect as of the date hereof and our knowledge
of the facts relevant to such opinions on such date. We
assume no obligation to update the opinions set forth herein.
(c) Except as agreed by us in writing in advance (i) the
opinions expressed herein are solely for the benefit of the
addressee hereof and may be relied upon solely by such
addressee for the purposes for which this letter is furnished
and (ii) no portion of this letter or any portion hereof may
be reproduced or distributed to any person.
<PAGE> 3
MHM Services, Inc.
March 6, 1997
Page 3
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement and to the reference to our firm under
the caption "Legal Matters" in the Prospectus that forms a part thereof.
Very truly yours,
VENABLE, BAETJER, HOWARD &
CIVILETTI, LLP
<PAGE> 1
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
MHM Services, Inc. on Amendment No. 3 to Form S-3 of our report dated December
30, 1996 (which report expresses an unqualified opinion and includes an
explanatory paragraph relating to the Company's ability to continue as a going
concern), appearing in the Annual Report on Form 10-K of MHM Services, Inc. for
the year ended September 30, 1996 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Washington, D.C.
March 5, 1997
