Exhibit 10.26

FORM OF WARRANT TO PURCHASE SERIES D PREFERRED STOCK

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

WARRANT TO PURCHASE

SHARES OF SERIES D PREFERRED STOCK

OF

COMPREHENSIVE CARE CORPORATION

Expires May 13, 2012

Number of Shares:             

Date of Issuance: May 13, 2009

FOR VALUE RECEIVED, the undersigned, Comprehensive Care Corporation, a Delaware
corporation (together with its successors and assigns, the “Issuer”), hereby
certifies that                              is entitled to subscribe for and
purchase, during the Term (as hereinafter defined), up to
                             shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Series D Preferred Stock of the Issuer, par value $50.00 per share (the “Series
D Preferred Stock”), at an exercise price per share equal to the Warrant Price
then in effect, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth.

1. Term. The term of this Warrant shall commence on May 13, 2009 and shall
expire at 6:00 p.m., eastern time, on May 13, 2012 (such period being the
“Term”).

2. Method of Exercise; Payment; Issuance of New Warrant; Transfer and Exchange.

(a) Time of Exercise. The purchase rights represented by this Warrant may be
exercised in whole or in part during the Term beginning on the date of issuance
hereof. However, this Warrant may not be exercised until the Issuer has
increased its authorized capital from its current 30 million common shares.

(b) Method of Exercise. The Holder hereof may exercise this Warrant, in whole or
in part, by the surrender of this Warrant (with the exercise form attached in
Appendix A hereto duly executed) at the principal office of the Issuer, and by
the payment to the Issuer of an amount of consideration therefore equal to the
Warrant Price in effect on the date of such exercise multiplied by the number of
shares of Warrant Stock with respect to which this Warrant is then being
exercised, payable at such Holder’s election (i) by certified or official bank
check or by wire transfer to an account designated by the Issuer, (ii) by
“cashless exercise” in accordance with the provisions of subsection (c) of this
Section 2, or (iii) when permitted by clause (ii), by a combination of the
foregoing methods of payment selected by the Holder of this Warrant.

(c) Cashless Exercise. Notwithstanding any provisions herein to the contrary and
commencing six-months following the Original Issue Date if the Per Share Market
Value of one share of Series D Preferred Stock is greater than the Warrant Price
(at the date of calculation as set forth below), in lieu of exercising this
Warrant by payment of cash, the Holder may exercise this Warrant by a cashless
exercise and shall receive the number of shares of Series D Preferred Stock
equal to an amount (as determined below) by surrender of this Warrant at the
principal office of the Issuer together with the properly endorsed Notice of
Exercise in which event the Issuer shall issue to the Holder a number of shares
of Series D Preferred Stock computed using the following formula:

LOGO [g64515tx_p46.jpg]

 

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Where    X =    the number of shares of Series D Preferred Stock to be issued to
the Holder.    Y =    the number of shares of Series D Preferred Stock
purchasable upon exercise of all of the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being exercised.    A =
   the Warrant Price.    B =    the Per Share Market Value of one share of
Series D Preferred Stock.

An example of a cashless exercise is attached as Appendix B.

(d) Issuance of Stock Certificates. In the event of any exercise of this Warrant
in accordance with and subject to the terms and conditions hereof, certificates
for the shares of Warrant Stock so purchased shall be dated the date of such
exercise and delivered to the Holder hereof within a reasonable time, not
exceeding three (3) Trading Days after such exercise (the “Delivery Date”) or,
at the request of the Holder, issued and delivered to the Depository Trust
Company (“DTC”) account on the Holder’s behalf via the Deposit Withdrawal Agent
Commission System (“DWAC”) within a reasonable time, not exceeding three
(3) Trading Days after such exercise, and the Holder hereof shall be deemed for
all purposes to be the holder of the shares of Warrant Stock so purchased as of
the date of such exercise. Notwithstanding the foregoing to the contrary, the
Issuer or its transfer agent shall only be obligated to issue and deliver the
shares to the DTC on a holder’s behalf via DWAC if such exercise is in
connection with a sale and the Issuer and its transfer agent are participating
in DTC through the DWAC system. The Holder shall deliver this original Warrant,
or an indemnification undertaking with respect to such Warrant in the case of
its loss, theft or destruction, at such time that this Warrant is fully
exercised. With respect to partial exercises of this Warrant, the Issuer shall
keep written records for the Holder of the number of shares of Warrant Stock
exercised as of each date of exercise.

(e) Transferability of Warrant. Subject to Section 2(g) hereof, this Warrant may
be transferred by a Holder, in whole or in part. If transferred pursuant to this
paragraph, this Warrant may be transferred on the books of the Issuer by the
Holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant at the principal office of the Issuer, properly endorsed (by the Holder
executing an assignment in the form attached hereto) and upon payment of any
necessary transfer tax or other governmental charge imposed upon such transfer.
This Warrant is exchangeable at the principal office of the Issuer for Warrants
to purchase the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange. All
Warrants issued on transfers or exchanges shall be dated the Original Issue Date
and shall be identical with this Warrant except as to the number of shares of
Warrant Stock issuable pursuant thereto.

(f) Continuing Rights of Holder. The Issuer will, at the time of or at any time
after each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing the extent, if any, of its continuing obligation to
afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.

 

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(g) Compliance with Securities Laws.

(i) The Holder of this Warrant, by acceptance hereof, acknowledges that this
Warrant and the shares of Warrant Stock to be issued upon exercise hereof are
being acquired solely for the Holder’s own account and not as a nominee for any
other party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be issued
upon exercise hereof except pursuant to an effective registration statement, or
an exemption from registration, under the Securities Act and any applicable
state securities laws.

(ii) Except as provided in paragraph (iii) below, this Warrant and all
certificates representing shares of Warrant Stock issued upon exercise hereof
shall be stamped or imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”)
OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR THE ISSUER SHALL HAVE RECEIVED AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

(iii) The Issuer agrees to reissue this Warrant or certificates representing any
of the Warrant Stock, without the legend set forth above if at such time, prior
to making any transfer of any such securities, the Holder shall give written
notice to the Issuer describing the manner and terms of such transfer. Such
proposed transfer will not be effected until: (a) either (i) the Issuer has
received an opinion of counsel reasonably satisfactory to the Issuer, to the
effect that the registration of such securities under the Securities Act is not
required in connection with such proposed transfer, (ii) a registration
statement under the Securities Act covering such proposed disposition has been
filed by the Issuer with the Securities and Exchange Commission and has become
effective under the Securities Act, (iii) the Issuer has received other evidence
reasonably satisfactory to the Issuer that such registration and qualification
under the Securities Act and state securities laws are not required, or (iv) the
Holder provides the Issuer with reasonable assurances that such security can be
sold pursuant to Rule 144 under the Securities Act; and (b) either (i) the
Issuer has received an opinion of counsel reasonably satisfactory to the Issuer,
to the effect that registration or qualification under the securities or “blue
sky” laws of any state is not required in connection with such proposed
disposition, or (ii) compliance with applicable state securities or “blue sky”
laws has been effected or a valid exemption exists with respect thereto. The
Issuer will respond to any such notice from a holder within three (3) Trading
Days. In the case of any proposed transfer under this Section 2(g), the Issuer
will use reasonable efforts to comply with any such applicable state securities
or “blue sky” laws, but shall in no event be required, (x) to qualify to do
business in any state where it is not then qualified, (y) to take any action
that would subject it to tax or to the general service of process in any state
where it is not then subject, or (z) to comply with state securities or “blue
sky” laws of any state for which registration by coordination is unavailable to
the Issuer. The restrictions on transfer contained in this Section 2(g) shall be
in addition to, and not by way of limitation of, any other restrictions on
transfer contained in any other section of this Warrant. Whenever a certificate
representing the Warrant Stock is required to be issued to a the Holder without
a legend, in lieu of delivering physical certificates representing the Warrant
Stock, the Issuer shall cause its transfer agent to electronically transmit the
Warrant Stock to the Holder by crediting the account of the Holder’s Prime
Broker with DTC through its DWAC system (to the extent not inconsistent with any
provisions of this Warrant).

(h) Accredited Investor Status. In no event may the Holder exercise this Warrant
in whole or in part unless the Holder is an “accredited investor” as defined in
Regulation D under the Securities Act.

(i) No Mandatory Redemption. This Warrant may not be called or redeemed by the
Issuer without the written consent of the Holder.

 

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3. Stock Fully Paid; Reservation and Listing of Shares; Covenants.

(a) Stock Fully Paid. The Issuer represents, warrants, covenants and agrees that
all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, when issued in accordance with the terms of
this Warrant, be duly authorized, validly issued, fully paid and non-assessable
and free from all taxes, liens and charges created by or through the Issuer. The
Issuer further covenants and agrees that during the period within which this
Warrant may be exercised, the Issuer will at all times have authorized and
reserved for the purpose of the issuance upon exercise of this Warrant a number
of authorized but unissued shares of Series D Preferred Stock equal to at least
one hundred percent (100%) of the number of shares of Series D Preferred Stock
issuable upon exercise of this Warrant without regard to any limitations on
exercise.

(b) Reservation. If any shares of Series D Preferred Stock required to be
reserved for issuance upon exercise of this Warrant or as otherwise provided
hereunder require registration or qualification with any Governmental Authority
under any federal or state law before such shares may be so issued, the Issuer
will in good faith use its best efforts as expeditiously as possible at its
expense to cause such shares to be duly registered or qualified. If the Issuer
shall list any shares of Series D Preferred Stock on any securities exchange or
market it will, at its expense, list thereon, and maintain and increase when
necessary such listing, of, all shares of Warrant Stock from time to time issued
upon exercise of this Warrant or as otherwise provided hereunder (provided that
such Warrant Stock has been registered pursuant to a registration statement
under the Securities Act then in effect), and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Series D
Preferred Stock shall be so listed. The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.

(c) Loss, Theft, Destruction of Warrants. Upon receipt of evidence satisfactory
to the Issuer of the ownership of and the loss, theft, destruction or mutilation
of any Warrant and, in the case of any such loss, theft or destruction, upon
receipt of indemnity or security satisfactory to the Issuer or, in the case of
any such mutilation, upon surrender and cancellation of such Warrant, the Issuer
will make and deliver, in lieu of such lost, stolen, destroyed or mutilated
Warrant, a new Warrant of like tenor and representing the right to purchase the
same number of shares of Series D Preferred Stock.

(d) Payment of Taxes. The Issuer will pay any documentary stamp taxes
attributable to the initial issuance of the Warrant Stock issuable upon exercise
of this Warrant; provided, however, that the Issuer shall not be required to pay
any tax or taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates representing Warrant Stock in a name
other than that of the Holder in respect to which such shares are issued.

4. Adjustment of Warrant Price and Number of Shares Issuable Upon Exercise. The
Warrant Price and the number of shares of Warrant Stock that may be purchased
upon exercise of this Warrant shall be subject to adjustment from time to time
as set forth in this Section 4. Upon each adjustment of the Warrant Price, the
Holder of this Warrant shall thereafter be entitled to purchase, at the Warrant
Price resulting from such adjustment, the number of shares of Series D Preferred
Stock obtained by multiplying the Warrant Price in effect immediately prior to
such adjustment by the number of shares purchasable pursuant hereto immediately
prior to such adjustment, and dividing the product thereof by the Warrant Price
resulting from such adjustment.

(a) Adjustment Due to Dividends, Stock Splits, Etc. If, at any time on or after
the Original Issuance Date, the number of outstanding shares of Series D
Preferred Stock is increased by a (i) dividend payable in any kind of shares of
capital stock of the Corporation, (ii) stock split, (iii) combination,
(iv) reclassification or (v) other similar event, the Conversion Price shall be
proportionately reduced by multiplying the Warrant Price by a fraction of which
the numerator shall be the number of outstanding shares of Series D Preferred
Stock immediately before such event and of which the denominator shall be the
number of outstanding shares of Series D Preferred Stock immediately after such
event, or if the number of outstanding shares of Series D Preferred Stock is
decreased by a reverse stock split, combination or reclassification of shares,
or other similar event, the Conversion Price shall be proportionately increased
by multiplying the Warrant Price by a fraction of which the numerator shall be
the number of outstanding shares of Series D Preferred Stock immediately before
such event and of which the denominator shall be the number of outstanding
shares of Series D Preferred Stock immediately after such event. In such event,
the Issuer shall notify the Corporation’s Transfer Agent of such change on or
before the effective date thereof.

 

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(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time after the
Original Issuance Date, there shall be (i) any reclassification or change of the
outstanding shares of Series D Preferred Stock or Common Stock, (ii) any
consolidation or merger of the Corporation with any other entity (other than a
merger in which the Corporation is the surviving or continuing entity and its
capital stock is unchanged), (iii) any sale or transfer of all or substantially
all of the assets of the Corporation, (iv) any share exchange or tender offer
pursuant to which all of the outstanding shares of Series D Preferred Stock or
Common Stock are effectively converted into other securities or property; or
(v) any distribution of the Corporation’s assets to holders of the Series D
Preferred Stock as a liquidation or partial liquidation dividend or by way of
return of capital (each of (i) - (v) above being a “Corporate Change”), and, if
such Corporate Change is not a Liquidation Event pursuant to the terms of
Paragraph 5, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant, the same amount and kind of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Corporate Change if it had been, immediately prior to such Corporate Change, the
holder of the number of shares of Warrant Stock then issuable upon exercise in
full of this Warrant, and in any such case, appropriate provisions (in form and
substance reasonably satisfactory to the Holder) shall be made with respect to
the rights and interests of the Holder to the end that the economic value of the
Warrant Stock is in no way diminished by such Corporate Change and that the
provisions hereof including, without limitation, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is not the Issuer, an immediate adjustment of the Warrant Price so that the
Warrant Price immediately after the Corporate Change reflects the same relative
value as compared to the value of the surviving entity’s common stock that
existed immediately prior to such Corporate Change and the value of the Series D
Preferred Stock immediately prior to such Corporate Change. If holders of Series
D Preferred Stock are given any choice as to the securities, cash or property to
be received in a Corporate Change, then the Holder shall be given the same
choice as to the consideration it receives upon any exercise of this Warrant
following such Corporate Change.

(c) Other Adjustments. If the Issuer takes any action affecting the Series D
Preferred Stock after the date hereof that would be covered by this Section 4,
but for the manner in which such action is taken or structured, and such action
would in any way diminish the value of the Warrant or Warrant Stock, then the
Warrant Price shall be adjusted in such manner as the Board shall in good faith
determine to be equitable under the circumstances.

(d) Purchase Rights. In addition to any adjustments pursuant to subsections
(a)-(d) above, if at any time the Issuer are grants, issues or sells any
options, convertible securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
shares of common stock (the “Purchase Rights”), then the Holder will be entitled
to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
proportionate number of shares of Series D Preferred Stock acquirable upon
complete exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Series D
Preferred Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

(e) Redemption Right. No sooner than fifteen (15) days nor later than ten
(10) days prior to the consummation of a Corporate Change that constitutes a
change of control, but not prior to the public announcement of such change of
control, the Issuer shall deliver written notice thereof via facsimile and
overnight courier to the Holder (a “Change in Control Notice”). At any time
during the period beginning after the Holder’s receipt of a Change of Control
Notice and ending ten (10) Trading Days after the consummation of such change of
control, the Holder may require the Issuer to redeem all or any portion of this
Warrant by delivering written notice thereof (“Change in Control Redemption
Notice”) to the Issuer, which Change of Control Redemption Notice shall indicate
the amount the Holder is electing to be redeemed. Any such redemption shall be
in cash in the amount equal to the value of the remaining unexercised portion of
this Warrant on the date of such consummation, which value shall be determined
by use of the Black Scholes Option Pricing Model reflecting (A) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the
remaining term of this Warrant as of such date of request and (B) an expected
volatility equal to the 100-day volatility obtained from the HVT function on
Bloomberg for the 100-day period ending on the date of the Change of Control
Redemption Notice.

 

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5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share Number
shall be adjusted pursuant to Section 4 hereof (for purposes of this Section 5,
each an “adjustment”), the Issuer shall cause its Chief Financial Officer to
prepare and execute a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment. Any dispute between the Issuer and the Holder of this Warrant with
respect to the matters set forth in such certificate may at the option of the
Holder of this Warrant be submitted to a national or regional accounting firm
reasonably acceptable to the Issuer and the Holder, provided that the Issuer
shall have ten (10) days after receipt of notice from such Holder of its
selection of such firm to object thereto, in which case such Holder shall select
another such firm and the Issuer shall have no such right of objection. The firm
selected by the Holder of this Warrant as provided in the preceding sentence
shall be instructed to deliver a written opinion as to such matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute. Such opinion shall be final and binding on the parties hereto. The
costs and expenses of the initial accounting firm shall be paid equally by the
Issuer and the Holder and, in the case of an objection by the Issuer, the costs
and expenses of the subsequent accounting firm shall be paid in full by the
Issuer.

6. Definitions. For the purposes of this Warrant, the following terms have the
following meanings:

“Additional Shares of Series D Preferred Stock” means all shares of Series D
Preferred Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original Issue
Date, except for those issued in a Permitted Financing.

“Board” shall mean the Board of Directors of the Issuer.

“Capital Stock” means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.

“Certificate of Incorporation” means the Certificate of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.

“Conversion Factor” means the rate at which the Series D Preferred Stock
converts into Common Stock, at the time of the issue of this warrant, the
Conversion Factor is 100,000.

“Common Stock” means the Common Stock, $0.01 par value per share, of the Issuer
and any other Capital Stock into which such stock may hereafter be changed.

“Governmental Authority” means any governmental, regulatory or self-regulatory
entity, department, body, official, authority, commission, board, agency or
instrumentality, whether federal, state or local, and whether domestic or
foreign.

“Holders” mean the Persons who shall from time to time own any Warrant. The term
“Holder” means one of the Holders.

“Independent Appraiser” means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.

“Issuer” means Comprehensive Care Corporation, a Delaware corporation, and its
successors.

“Original Issue Date” means May 13, 2009.

 

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“OTC Bulletin Board” means the over-the-counter electronic bulletin board.

“Other Common” means any other Capital Stock of the Issuer of any class which
shall be authorized at any time after the date of this Warrant (other than
Series D Preferred Stock) and which shall have the right to participate in the
distribution of earnings and assets of the Issuer without limitation as to
amount.

“Outstanding Series D Preferred Stock” means, at any given time, the aggregate
amount of outstanding shares of Series D Preferred Stock, assuming full
exercise, conversion or exchange (as applicable) of all options, warrants and
other Securities which are convertible into or exercisable or exchangeable for,
and any right to subscribe for, shares of Series D Preferred Stock that are
outstanding at such time.

“Person” means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.

“Per Share Market Value” means on any particular date the per share market price
of the Common Stock multiplied by the Conversion Factor where the per share
market price of the Common Stock means, (a) the last closing bid price per share
of the Common Stock on such date on the OTC Bulletin Board or another registered
national stock exchange on which the Common Stock is then listed, or if there is
no such price on such date, then the closing bid price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the OTC Bulletin Board or any registered national
stock exchange, the last closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the OTC Bulletin Board or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of business on
such date, or (c) if the Common Stock is not then reported by the OTC Bulletin
Board or the National Quotation Bureau Incorporated (or similar organization or
agency succeeding to its functions of reporting prices), then the “Pink Sheet”
quotes for the applicable Trading Days preceding such date of determination, or
(d) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Independent Appraiser selected in good
faith by the Holder; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to select an
additional Independent Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Independent Appraiser;
and provided, further that all determinations of the Per Share Market Value
shall be appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair market value
by an Independent Appraiser shall be based upon the fair market value of the
Issuer determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative of
value, and the determination of the additional Independent Appraiser, if any, or
of the Independent Appraisers otherwise shall be final and binding on all
parties. In determining the fair market value of any shares of Series D
Preferred Stock or Common Stock, no consideration shall be given to any
restrictions on transfer of the Series D Preferred Stock or Common Stock imposed
by agreement or by federal or state securities laws, or to the existence or
absence of, or any limitations on, voting rights.

“Securities” means any debt or equity securities of the Issuer, whether now or
hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. “Security” means one of the Securities.

“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute then in effect.

“Series D Preferred Stock” means the Series D Preferred Stock, $50.00 par value
per share, of the Issuer and any other Capital Stock into which such stock may
hereafter be changed.

 

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“Subsidiary” means any corporation at least 50% of whose outstanding Voting
Stock shall at the time be owned directly or indirectly by the Issuer or by one
or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.

“Term” has the meaning specified in Section 1 hereof.

“Trading Day” means (a) a day on which the Common Stock is traded on the OTC
Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted as set
forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday,
Sunday and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
government action to close.

“Voting Stock” means, as applied to the Capital Stock of any corporation,
Capital Stock of any class or classes (however designated) having ordinary
voting power for the election of a majority of the members of the Board of
Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.

“Warrants” means the Warrants issued pursuant to this Warrant, without
limitation, and any other warrants of like tenor issued in substitution or
exchange for any thereof pursuant to the provisions of Section 2(c), 2(d) or
2(e) hereof or of any of such other Warrants.

“Warrant Price” initially means $25,000.00 (TWENTY FIVE THOUSAND DOLLARS), as
such price may be adjusted from time to time as shall result from the
adjustments specified in this Warrant, including Section 4 hereto.

“Warrant Share Number” means at any time the aggregate number of shares of
Warrant Stock which may at such time be purchased upon exercise of this Warrant,
after giving effect to all prior adjustments and increases to such number made
or required to be made under the terms hereof.

“Warrant Stock” means Series D Preferred Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.

7. Other Notices. In case at any time:

 

  (a) the Issuer shall make any distributions to the holders of Series D
Preferred Stock; or

 

  (b) the Issuer shall authorize the granting to all holders of its Series D
Preferred Stock of rights to subscribe for or purchase any shares of Capital
Stock of any class or other rights; or

 

  (c) there shall be any reclassification of the Capital Stock of the Issuer; or

 

  (d) there shall be any capital reorganization by the Issuer; or

 

  (e) there shall be any (i) consolidation or merger involving the Issuer or
(ii) sale, transfer or other disposition of all or substantially all of the
Issuer’s property, assets or business (except a merger or other reorganization
in which the Issuer shall be the surviving corporation and its shares of Capital
Stock shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
subsidiary); or

 

  (f) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Issuer or any partial liquidation of the Issuer or
distribution to holders of Series D Preferred Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such

 

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reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Series D
Preferred Stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their certificates for
Series D Preferred Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be. Such notice shall be
given at least twenty (20) days prior to the action in question and not less
than ten (10) days prior to the record date or the date on which the Issuer’s
transfer books are closed in respect thereto. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Series D Preferred Stock.

8. Amendment and Waiver. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), by a
written instrument or written instruments executed by the Issuer and the Holder;
provided, however, that no such amendment or waiver shall reduce the Warrant
Share Number, increase the Warrant Price, shorten the period during which this
Warrant may be exercised or modify any provision of this Section 8 without the
consent of the Holder of this Warrant. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of this Warrant unless the same consideration is also offered to all holders of
the Warrants.

9. Governing Law; Jurisdiction. This Warrant shall be governed by and construed
in accordance with the internal laws of the State of Florida, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Warrant shall
not be interpreted or construed with any presumption against the party causing
this Warrant to be drafted. The Issuer and the Holder agree that venue for any
dispute arising under this Warrant will lie exclusively in the state or federal
courts located in Hillsborough County, Florida, and the parties irrevocably
waive any right to raise forum non conveniens or any other argument that Florida
is not the proper venue. The Issuer and the Holder irrevocably consent to
personal jurisdiction in the state and federal courts of the state of Florida.
The Issuer and the Holder consent to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Warrant and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 9 shall affect or limit any right to serve process in any other
manner permitted by law. The Issuer agrees to pay all costs and expenses of
enforcement of this Warrant, including, without limitation, reasonable
attorneys’ fees and expenses. The parties hereby waive all rights to a trial by
jury.

10. Notices. All notices, requests, consents or other communications required or
permitted hereunder shall be in writing and shall be hand delivered or mailed
first class postage prepaid, registered or certified mail, to the following
address:

In the case of the Issuer:

John Hill, Co-Chief Executive Officer

Comprehensive Care Corporation

3405 W. Martin Luther King Jr. Blvd, Suite 101

Tampa, FL 33607

In the case of the Holder:

 

 

           

 

           

 

           

 

           

Such notices and other communications shall, for all purposes of this Agreement,
be treated as being effective upon being delivered personally or, if sent by
mail, five days after the same has been deposited in a regularly maintained
receptacle for the deposit of United States mail, addressed as set forth above,
and postage prepaid. Any party hereto may from time to time change its address
for notices by giving written notice of such changed address to the other party
hereto.

 

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11. Remedies. The Issuer stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Issuer in
the performance of or compliance with any of the terms of this Warrant are not
and will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.

12. Successors and Assigns. This Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors and assigns of the
Issuer, the Holder hereof and (to the extent provided herein) the Holders of
Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.

13. Modification and Severability. If, in any action before any court or agency
legally empowered to enforce any provision contained herein, any provision
hereof is found to be unenforceable, then such provision shall be deemed
modified to the extent necessary to make it enforceable by such court or agency.
If any such provision is not enforceable as set forth in the preceding sentence,
the unenforceability of such provision shall not affect the other provisions of
this Warrant, but this Warrant shall be construed as if such unenforceable
provision had never been contained herein.

14. Headings. The headings of the Sections of this Warrant are for convenience
of reference only and shall not, for any purpose, be deemed a part of this
Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.

 

COMPREHENSIVE CARE CORPORATION

By:

 

 

 

 

 

 

 

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APPENDIX A

WARRANT EXERCISE FORM

COMPREHENSIVE CARE CORPORATION

The undersigned                     , pursuant to the provisions of the within
Warrant, hereby elects to purchase              shares of Series D Preferred
Stock of Comprehensive Care Corporation covered by the within Warrant.

 

Dated:  

 

    Signature  

 

      Address  

 

       

 

Number of shares of Series D Preferred Stock beneficially owned or deemed
beneficially owned by the Holder on the date of Exercise:
                                        

The undersigned is an “accredited investor” as defined in Regulation D under the
Securities Act of 1933, as amended.

The undersigned intends that payment of the Warrant Price shall be made as
(check one):

Cash Exercise             

Cashless Exercise             

If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $
             by certified or official bank check (or via wire transfer) to the
Issuer in accordance with the terms of the Warrant.

If the Holder has elected a Cashless Exercise, a certificate shall be issued to
the Holder for the number of shares equal to the whole number portion of the
product of the calculation set forth below, which is                     . The
Company shall pay a cash adjustment in respect of the fractional portion of the
product of the calculation set forth below in an amount equal to the product of
the fractional portion of such product and the Per Share Market Value on the
date of exercise, which product is                     .

 

Where:

  LOGO [g64515tx_p56.jpg]

The number of shares of Series D Preferred Stock to be issued to the Holder
                                         (“X”).

The number of shares of Series D Preferred Stock purchasable upon exercise of
all of the Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being exercised                                         
(“Y”).

The Warrant Price                      (“A”).

The Per Share Market Value of one share of Series D Preferred Stock
                     (“B”).

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

ASSIGNMENT

FOR VALUE RECEIVED,                      hereby sells, assigns and transfers
unto                      the within Warrant and all rights evidenced thereby
and does irrevocably constitute and appoint                     , attorney, to
transfer the said Warrant on the books of the within named corporation.

 

Dated:  

 

    Signature  

 

      Address  

 

       

 

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED,                      hereby sells, assigns and transfers
unto                      the right to purchase              shares of Warrant
Stock evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint                     , attorney, to transfer
that part of the said Warrant on the books of the within named corporation.

 

Dated:  

 

    Signature  

 

      Address  

 

       

 

FOR USE BY THE ISSUER ONLY:

This Warrant No. W-             canceled (or transferred or exchanged) this
             day of             ,         , shares of Series D Preferred Stock
issued therefore in the name of                     , Warrant No. W-            
issued for              shares of Series D Preferred Stock in the name of
                    .

 

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COMPREHENSIVE CARE CORPORATION AND SUBSIDIARIES

APPENDIX B

CASHLESS CONVERSION EXAMPLE

 

Example:   One year following issue of Warrant, Holder of 10 warrants wishes to
exercise all the warrants on a cashless basis pursuant to Section 2 (c). On that
date, CompCare’s FMV as determined by its closing share price for its Common
Stock was $1.25 per share (in accordance with the definition of Per Share Market
Value provided in Section 7).

Using the following formula:

LOGO [g64515tx_p58.jpg]

 

Where    X =    the number of shares of Series D Preferred Stock to be issued to
the Holder.    Y =    the number of shares of Series D Preferred Stock
purchasable upon exercise of all of the Warrant, in this example, this will be
10.    A =    the Warrant Price, being $25,000 per Series D share.    B =    the
Per Share Market Value of one share of Series D Preferred Stock, in this example
using the definition provided in Section 7, being the share price for the Series
D stock will be the share price for the Common Stock multiplied by the
Conversion Factor. In this example, this will be $1.25 multiplied by 100,000 =
$125,000.

Thus:

LOGO [g64515tx_p58a.jpg]

 

Therefore    X = 8   Series D Shares

In this example, the Holder can request a cashless exercise of the full 10
warrants and receive 8 Series D Preferred Stock in return. Note that the Warrant
will now be canceled in its entirety and be deemed fully exercised. Where the
Warrant Share Number was for greater than 10 warrants, a new warrant will be
issued where the new Warrant Share Number will be the existing Warrant Share
Number prior to the cashless conversion less 10.

 

57