Document:

exhibit_4-2.htm

EXHIBIT 4.2

COMMON STOCK PURCHASE WARRANT

HYTHIAM, INC.

 

 

Warrant Shares: ___________

 

Initial Exercise Date: _______________, 2010

Issue Date: _______________, 2010

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, _____________ (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after ________________ (the “Initial Exercise Date”) and on or prior to the close of business on the three (3) year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Hythiam, Inc., a Delaware corporation (the “Company”), up to ______ shares (the “Warrant Shares”) of Common Stock.  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.                      Definitions.  As used herein, the following terms have the following meanings:

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.  With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.

 

“Board of Directors” means the board of directors of the Company.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Registration Statement” means the effective registration statement with Commission File No. 333-[_____________] which registers the sale of the Warrants and the Warrant Shares.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

  

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“Subsidiary” means any subsidiary of the Company, and shall, where applicable, also include any subsidiary of the Company formed or acquired after the date hereof.

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).

 

“Transaction Documents” means the Warrant and any other documents or agreements executed in connection with the Warrant.

 

“Transfer Agent” means American Stock Transfer & Trust Company, the current transfer agent of the Company, with a mailing address of 59 Maiden Lane, New York, New York 10038 and a facsimile number of (718) 765-8724, and any successor transfer agent of the Company.

 

Section 2.                      Exercise.

 

a) Exercise of Warrant.  Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto; and, within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below.  Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to any Notice of Exercise Form within two (2) Business Days of receipt of such notice.  In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b) Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $_____, subject to adjustment hereunder (the “Exercise Price”).

 

c) Cashless Exercise.  If at the time of exercise hereof there is no effective registration statement registering, or the prospectus contained therein is not available for the issuance of the Warrant Shares to the Holder and all of the Warrant Shares are not then registered for resale by Holder into the market at market prices from time to time on an effective registration statement for use on a continuous basis (or the prospectus contained therein is not available for use), then this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

  

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(A) = the VWAP on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

	
  

	
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

	
  

	
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time), (b)  if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).

d) Mechanics of Exercise.

 

i. Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is then a participant in such system and either (A) there is an effective Registration Statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant is being exercised via cashless exercise, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise Form, (B) surrender of this Warrant (if required) and (C) payment of the aggregate Exercise Price as set forth above (including by cashless exercise, if permitted) (such date, the “Warrant Share Delivery Date”).  This Warrant shall be deemed to have been exercised on the first date on which all of the foregoing have been delivered to the Company.  The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid. 

 

ii. Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

  

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iii. Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then, the Holder will have the right to rescind such exercise.

 

iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

v. No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

vi. Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

vii. Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

  

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e) Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination and shall have no liability for exercises of the Warrant that are in noncompliance with the Beneficial Ownership Limitation.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon not less than sixty-one (61) days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply.  Any such increase or decrease will not be effective until the sixty-first (61st) day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

  

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Section 3.                      Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) [Reserved]

 

c) Subsequent Rights Offerings.  If the Company, at any time while the Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP on the record date mentioned below, then, the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP.  Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.

 

d) Pro Rata Distributions.  If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holders) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been

 

  

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accepted by the holders of fifty percent (50%) or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than fifty percent (50%) of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant).  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Warrant, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

  

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g) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least ten (10) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder is entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 4.                      Transfer of Warrant.

 

a) Transferability.  This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

  

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b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date set forth on the first page of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d) Representation by the Holder.  The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.                      Miscellaneous.

 

a) No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

  

9

  

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of the Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof.  Each of the Company and Holder agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by the Warrant (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each of the Company and Holder hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding.  Each of the Company and Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) 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 contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  If either the Company or Holder shall commence an action or proceeding to enforce any provisions of the Warrant, then, the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

 

f) Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.

 

g) Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies.  Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

  

10

  

h) Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given.  The address for such notices and communications shall be as follows: (i) if to the Company, 11150 Santa Monica Blvd., Suite 1500, Los Angeles, CA 90025, Fax: (310) 444-5300, Attention: Terren S. Peizer, with a copy to Glenn D. Smith, c/o Kaye Scholer LLP, 1999 Avenue of the Stars, 17th Floor, Los Angeles, California 90067, Fax: (310) 788-1200, and (ii) if to Holder [_____________________], with a copy to [_____________________].

 

i) Limitation of Liability.  No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j) Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l) Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and holders holding warrants at least equal to sixty-seven percent (67%) of the warrant shares issuable upon exercise of all then outstanding warrants issued in the offering under which Holder purchased this Warrant.

 

m) Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

(Signature Pages Follow)

  

11

  

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	
HYTHIAM, INC.

	  
	  	  	  
	
By:

	  	  
	  	
Name:

	  
	  	
Title:

	  

 

  

12

  

NOTICE OF EXERCISE

TO:           HYTHIAM, INC.

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of (check applicable box):

 

	  	[  ] in lawful money of the United States; or
	  	  	  
	  	[  ] [if permitted] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).

   

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	  	  	  

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

 

 

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  

[SIGNATURE OF HOLDER]

Name of Investing Entity: ________________________________________________________________________

 

Signature of Authorized Signatory of Investing Entity: _________________________________________________

 

Name of Authorized Signatory: ___________________________________________________________________

 

Title of Authorized Signatory: ____________________________________________________________________

 

Date: _______________________________________

  

13

  

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

____________________________________________________________________________________________.

Dated:  ____________________, _______

 

 

	
Holder’s Signature:

	  	  
	  	  	  
	
Holder’s Address:

	  	  
	  	  	  
	  	  	  

Signature Guaranteed:  ___________________________________________

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

 

 

14Q1 2010 Exhibit 10.1

Exhibit 10.1

FOURTH AMENDED AND RESTATED SECURED PROMISSORY NOTE

(For Revolving Line of Credit, Advances and Guaranteed Obligations)

	
$3,000,000
	
April 29, 2010
	
Los Angeles, California

For Value Received, the undersigned MyMedicalRecords, Inc. (formerly mymedicalrecords.com, Inc.), a Delaware
corporation ("Borrower") and a wholly-owned subsidiary of MMR Information Systems, Inc. (formerly Favrille,
Inc.), a Delaware corporation ("Parent"), promises to pay to the order of The RHL Group, Inc., a California
corporation ("Lender"), the sum of up to Three Million Dollars ($3,000,000) (sometimes referred to as a
"Reserve Line of Credit" herein), on a revolving basis, with interest from the date of disbursement on the
Unpaid Balance, as that term is used herein, and defined below, from time to time outstanding.  Capitalized terms used
herein without definition shall, unless otherwise indicated, have the meanings given to such terms in the Security
Agreement dated July 31, 2007, which grants certain security interests in the Collateral owned by Borrower, as therein
defined. Borrower and Lender agree that the terms of this Third Amended and Restated Secured Promissory Note
("Third Amended Note") apply to the increased Reserve Line of Credit.

This Fourth Amended Note is intended to update and amend that certain Secured Promissory Note (the
"Original Note") dated July 30, 2007, as amended by the Amended and Restated Secured Promissory Note
(the "First Amended Note"), dated August 23, 2007, and as further amended by the Second Amended and
Restate Secured Promissory Note (the "Second Amended Note") dated August 1, 2008, which was modified
by the Allonge dated January 27, 2009 (the "Allonge"),  which notes were approved by the Borrower's Board
of Directors by resolutions dated July 23, 2007, August 30, 2007 and June 2, 2008, respectively, which was further
amended by the Third Amended and Restated Secured Promissory Note .  As stated therein, the Original Note, the First
Amended Note, the Second Amended Note and the Third Amended Note provided for increases, if necessary, in the
amount of the Reserve Line of Credit, and the terms of the Security Agreement entered into on July 31, 2007 provide for
that agreement to apply to advances in excess of the therein stated "Amount".  The terms of the Security
Agreement shall be deemed to apply to, and a security interest is hereby granted to the Lender, for all advances made,
under this Fourth Amended Note to the same extent, validity, security and priority as to advances under the Original
Note, the First Amended Note, the Second Amended Note and the Third Amended Note.

The original of the First Amended Note, Second Amended Note and Third Amended Note, including the Allonge,
have been marked as "superseded".  If and only if the Fourth Amended Note is deemed unenforceable, or if
the Security Agreement is, for any reason, deemed not to apply to the Fourth Amended Note, then the terms of the Third
Amended Note, (or the Second Amended Note including the Allonge, or the First Amended Note or the Original Note, as
the case may be and if necessary) shall be deemed reinstated to the extent necessary to: (a) repay the advances of the
Lender, and (b) provide for security to the Lender.

	
PROMISSORY NOTE
	
Page 1 of 6

The term "Unpaid Balance" shall mean all of the following: (a) the funds actually lent to the Borrower,
including interest, fees, and costs thereon (which includes reasonable legal expenses of Lender in connection with this
Fourth Amended Note) ; (b) any funds paid or advanced for the benefit of the Borrower at the request of Borrower to
third parties, including charges made on the Lender's credit or charge cards, or credit or charge cards for which Lender
is liable (exclusive of interest on such charges) ("Credit Card Advances") on or after July 23, 2007, (c)
subject to the last sentence of this paragraph, any amounts guaranteed by the Lender at the request of Borrower, for
which the guarantees are still outstanding (including any balance still due under the January 9th, 2009
guarantee of Robert H. Lorsch to Singer Lewak LLP), (d) unpaid consulting fees, salary or expenses accrued or owed to
Lender.  However, any amounts guaranteed by the Lender and unpaid consulting fees shall not be included in the
$3,000,000 Reserve Line of Credit limit.    

The entire Unpaid Balance shall be due and payable at the end of each calendar month, provided however, that if
the Borrower is not otherwise in default under the Original Note, the First Amended Note, the Second Amended Note,
the Third Amended Note or this Fourth Amended Note or the Security Agreement entered into on or about July 31, 2007,
the Reserve Line of Credit shall continue in existence for the next succeeding month, and payment of the full Unpaid
Balance shall be similarly deferred.  However, notwithstanding any other provision in this Note: (1) the obligation to pay
interest on a monthly basis, and the obligation to pay the Credit Card Advances, shall continue to be due and payable on
a monthly basis, and (b) unless otherwise agreed in writing by Lender, the entire unpaid balance shall be due and owing,
without extension, April 29, 2011 (the "Final Maturity Date").

The monthly payment shall not include any interest for amounts guaranteed by the Lender unless the Lender has
performed on the guarantee, whether by payment or otherwise, except that on the Final Maturity Date the Borrower must
pay all amounts due, including payment in full of the amount of any still then outstanding guarantees (which latter
amount shall be placed in a trust account pending payment by the Borrower of the guaranteed obligation (and
subsequent release of the funds back to the Borrower) or payment to the guaranteed party in accordance with any
agreement between the Lender and the guaranteed party.)

Upon the occurrence of an Event of Default, as defined in this Note or the Security Agreement, the Final Maturity
Date shall be accelerated without further action by the Lender.

Interest shall accrue at the rate equal to the lesser of 10% per annum or the maximum rate
allowed under the California Constitution.  Said rate shall continue in effect for the entire period
of the Reserve Line of Credit up to the Final Maturity Date.  At no time shall the interest rate, and fees, if applicable,
exceed the maximum rate chargeable by law.

Borrower acknowledges and agrees that the Unpaid Balance is presently due and owing, that the Unpaid Balance is
$1,507,342 as of April 29, 2010, which amount includes the $200,000 Loan Origination Fee due immediately upon
signing,   and that there are no defenses, at law or in equity, to the amount due under this Note as of the date of the
execution of this Note.

Borrower and Parent understand that Lender is charging, in addition to interest, as described above a "Loan
Origination Fee."  The Loan Origination Fee is payable to Lender on

	
PROMISSORY NOTE
	
Page 2 of 6

the date of this Fourth Amended Note and, in
the event of any renewal for an additional six-month term, on any such renewal date.  The Loan Origination Fee shall be
$200,000 (which amount is included above). Such amount shall be used to exercise warrants that the Lender owns in
the Company at the sole option of the Borrower.    In addition, Lender shall receive  2,614,684  warrants to acquire
shares of Parent's common stock at an exercise price of $0.21 per share which represents two warrants per dollar
outstanding on the Note as of the renewal date. Such warrants shall be fully vested and be exercisable in cash or in a
cashless exercise at any time prior to their fourth anniversary of issuance, and which shall be non-transferrable without
the consent of Parent, which consent is not to be unreasonably withheld.

All payments on this Note are payable at, and all writings respecting the warrants shall be sent to, Lender's
accountant at the following address, with a copy to Borrower:  NKSF, 10100 Santa Monica Blvd., Suite 1300, Los
Angeles, California 90067, Attn: Thomas Kingsley, and RHL Group, PO Box 17034, Beverly Hills, CA 90210, or at such
other place as the Lender or any other holder hereof shall notify Borrower in writing.

All payments received by the Lender on this Note may be applied by Lender as follows: first, to the payment of all
fees and expenses owed under this Note or the Security Agreement dated July 31, 2007; second, to the payment of
accrued and unpaid interest then due and owing; and third, to principal.

This Note may be prepaid in whole or in part, without penalty.  In the event of partial prepayments, the prepayments
and proceeds shall be applied as described in the just preceding paragraph. 

Notwithstanding anything else in this Agreement, the entire Unpaid Balance shall be due and owing, without
extension on the occurrence of any of the following, unless otherwise agreed by Lender in writing: (a) a change in
ownership or control of Borrower in an amount equal to or greater than 1/3 of outstanding voting stock; (b) a transfer of
at least 1/3 of the assets of Borrower; (c) a change in the composition of Borrower's Board of Directors, Officers and/or
senior management; (d) Parent or Borrower shall first be the subject of a case pending in any
United States Bankruptcy Court; (e) Parent or Borrower shall suffer the appointment of a receiver appointed in any state
or federal court action, or other proceeding;  (f) Parent or Borrower shall be the subject of any writ of attachment or writ
of execution; (g) Parent or Borrower shall not be in full compliance with all of its covenants in prior agreements by June
30, 2010; (h) Parent and Borrower shall fall out of compliance with its covenants on and after  June 30,2010; (i)
Borrower shall have less than $200,000 in cash in its bank accounts or such other amount as necessary to
maintain operations through the subsequent thirty (30) days on and after June 30, 2010; or (j)
Borrower and Parent shall not timely pay any obligations due respecting payroll and all associated payroll taxes at any
time during the term of the Note.  Notwithstanding the foregoing sentence, Lender hereby expressly waives, both now
and in the future, any Default or Event of Default under this Note and the Security Agreement that arises from or is
related to the Closing (as that term is defined in the Agreement and Plan of Merger and Reorganization dated November
8, 2008 by and among Borrower, Parent and a wholly-owned merger subsidiary

	
PROMISSORY NOTE
	
Page 3 of 6

of Parent (the "Merger Agreement") and the consummation of the transactions described in the Merger Agreement.

The Security Agreement relating to the Original Note, and the AMENDED NOTE, the Second Amended Note, the
Third Amended Note or this Fourth Amended Note shall jointly be referred to as the "Loan Documents".

Upon the happening of any failure to make any payment under the Loan Documents, or any other "Event of
Default" as defined in the Security Agreement, Lender may at its option declare the entire unpaid balance of this
Note, together with interest accrued thereon, to be immediately due and payable.  Upon receiving notice of Default,
Borrower will have 7 calendar days to cure such Event of Default.  In the event the Borrower fails to cure the default, the
Lender may proceed to exercise any rights or remedies that it may have under any of the Loan Documents or under this
Note or such other rights and remedies which, subject to the provisions of this Note and Loan Documents, the Lender
may have at law, equity or otherwise. In the event of such acceleration, Borrower may discharge its obligations to the
Lender by paying the unpaid balance hereof as of the date of such payment, plus accrued interest and fees, in the
manner set forth above.

Upon an Event of Default (as defined in the Security Agreement), the interest rate hereunder shall be computed as
the higher of: (a) the highest rate then allowed by law, or (b) the rate described herein.

After default, in addition to principal and accrued interest, the Lender shall be entitled to collect all costs of collection,
including, but not limited to, reasonable attorneys' fees incurred in connection with any of the lender's reasonable
collection efforts, whether or not suit on this Note is filed, and all such costs and expenses shall be payable on
demand.

No failure on the part of the Lender or other holder hereof to exercise any right or remedy hereunder, whether before
or after the happening of a default, shall constitute a waiver thereof, and no waiver of any past default shall constitute
waiver of any future default or of any other default.  No failure to accelerate the debt evidenced hereby by reason of
default hereunder, or acceptance of a past due installment or indulgence granted from time to time shall be construed to
be a waiver of the right to insist upon prompt payment thereafter, or shall be deemed to be a novation of this Note or as
a reinstatement of the debt evidenced hereby or a waiver of such right of acceleration or any other right, or be construed
so as to preclude the exercise of any right which Lender may have, whether by the laws of the State of California, by
agreement or otherwise, and Borrower and each endorser or guarantor hereby expressly waives the benefit of any
statute or rule of law or equity which would produce a result contrary to or in conflict with the foregoing.  This Note may
not be changed orally, but only by an agreement in writing signed by the party against whom such agreement is sought
to be enforced.

Borrower and each endorser or guarantor of this Note hereby waives presentment, protest, demand, and diligence,
notice of dishonor and notice of nonpayment. 

All agreements between Borrower and Lender, whether now existing or hereafter arising, and whether oral or
written, are hereby expressly limited so that in no contingency or event

	
PROMISSORY NOTE
	
Page 4 of 6

whatsoever, whether by acceleration of maturity
hereof or otherwise, shall the amount paid or agreed to be paid to Lender of the holder hereof, or collected by Lender or
such holder for the use, forbearance or detention of the money to be loaned hereunder or otherwise, or for the payment
or performance of any covenant or obligation contained herein, or in any other document pertaining to the indebtedness
evidenced hereby, exceed the maximum amount permissible under governing usury laws as applicable in this
transaction,  If, under any circumstances whatsoever, fulfillment of any provision hereof or of the Loan Documents or
any other documents, at the time performance of such provision shall be due, shall involve exceeding the limit of validity
prescribed by law for this transaction, then the obligation to be fulfilled shall be reduced to the limit of such validity; and if
under any circumstances Lender or other holder hereof shall ever receive an amount deemed interest by applicable law,
which would exceed the highest lawful rate allowed for this transaction, such amount that would be excessive interest
under governing laws as applicable to this transaction shall be applied to the reduction of the principal amount owing
hereunder and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal and
such other indebtedness, the excess shall be deemed to have been a payment made by mistake and shall be refunded
to Borrower or to any other person making such payment on Borrower's behalf.  All sums paid or agreed to be paid to
the holder hereto for the use, forbearance or detention of the indebtedness of Borrower evidenced hereby, outstanding
from time to time shall, to the extent permitted by governing law, and to the extent necessary to preclude exceeding the
limit of validity prescribed by law as applicable to this transaction, shall be amortized, pro-rated, allocated and spread
from the date of disbursement of the proceeds of this Note until payment in full of the loan evidenced hereby so that the
actual rate of interest on account of such indebtedness is uniform throughout the term hereof.  The terms and provisions
of this paragraph shall control and supersede every other provision of all agreements between Borrower, and endorser
or guarantor and Lender. 

This Note shall be governed by and construed under the laws of the State of California applicable to contracts made
and to be performed entirely in that State without regard to the principles thereof regarding conflict of laws.  Borrower
and each endorser or guarantor hereby submits to personal jurisdiction in said State for the enforcement of Borrower's
obligations hereunder, and waives any and all personal rights under the law of the other state to object to jurisdiction
within such State for the purposes of litigation to enforce such obligations of Borrower.  In the event such litigation is
commenced, Borrower agrees that service of process may be made and personal jurisdiction over Borrower obtained,
by service of a copy of the summons, complaint and other pleadings required to commence such litigation upon
Borrower's appointed agent for service of process in such state with a copy to:

Ingrid Safranek

   MyMedicalRecords, Inc.

   29341⁄2 Beverly Glen Circle, #702

   Los Angeles, CA 90077

The holder of this note shall be entitled, without limitation, to all of the rights and remedies of the Lender under
the Loan Agreements with respect to this Note.  In the event of any conflict between the terms and conditions of the
Security Agreement and those of this Note, the terms and conditions of this Note shall control.  The obligations of
Borrower pursuant to this Note are secured by the Security Agreement.

	
PROMISSORY NOTE
	
Page 5 of 6

Borrower represents that it has obtained all of the corporate authority necessary to execute this Note.

IN WITNESS WHEREOF, Borrower has executed this instrument by its duly authorized signatories as of the date
first above written

 

MyMedicalRecords, Inc., a Delaware corporation ("Borrower")

Name: Ingrid Safranek

Title: CFO

Signature: /s/ Ingrid Safranek     

Date: May 12, 2010

 

For limited purposes of agreement to pay the Loan Origination Fee, 

MMR Information Systems, Inc., a Delaware corporation ("Parent")

 

Name: Ingrid Safranek

Title: CFO

Signature: /s/ Ingrid Safranek     

Date: May 12, 2010

 

 

	
PROMISSORY NOTE
	
Page 6 of 6

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