Class B Common Stock and Warrant Purchase Agreement - Raymond Karsan Holdings Inc., Parthenon Investors LP, PCIP Investors, JMH Partners Corp., Shad Run Investments LP, TSG Co-Investors LLC, the Shattan Group LLC, Thomas S. Shattan, Gregory E. Mendel adn G. Kevin Fechtmeyer
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CLASS B COMMON STOCK AND WARRANT PURCHASE AGREEMENT
by and among
RAYMOND KARSAN HOLDINGS, INC.
and
PARTHENON INVESTORS, L.P.
PCIP INVESTORS
JMH PARTNERS CORP.
SHAD RUN INVESTMENTS, L.P.
TSG CO-INVESTORS, LLC
THE SHATTAN GROUP, LLC
THOMAS S. SHATTAN
GREGORY E. MENDEL
G. KEVIN FECHTMEYER
________________________________________
Dated as of December 16, 1999
________________________________________
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TABLE OF CONTENTS
Page
1. DEFINITIONS .......................................................... 2
2. THE ISSUANCE AND SALE ................................................ 2
2.1 The Issuance and Sale ......................................... 2
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2.2 The Seller Warrants ........................................... 3
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2.3 The Shattan Warrants .......................................... 3
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2.4 Purchase Price Adjustments .................................... 3
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3. THE CLOSING .......................................................... 8
3.1 Time and Place of Closing ..................................... 8
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3.2 Closing Date Transfers ........................................ 9
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4. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY ................. 9
4.1 Organization, Power and Standing .............................. 9
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4.2 Capitalization and Investments ................................ 9
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4.3 Financial Statements, etc ..................................... 10
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4.4 Title to Assets ............................................... 11
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4.5 Compliance with Laws, etc ..................................... 12
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4.6 Non-Contravention, etc ........................................ 12
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4.7 Real Property ................................................. 12
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4.8 Litigation, etc ............................................... 13
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4.9 Intellectual Property Rights .................................. 14
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4.10 Contracts, etc ................................................ 14
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4.11 Liabilities ................................................... 17
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4.12 Change in Condition ........................................... 17
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4.13 Insurance ..................................................... 19
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4.14 Transactions with Affiliates .................................. 19
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4.15 Tax Matters ................................................... 19
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4.16 No Illegal Payments, etc ...................................... 21
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4.17 Employee Benefit Plans ........................................ 22
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4.18 Environmental Matters ......................................... 23
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4.19 Labor Relations ............................................... 23
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4.20 Government Contracts and Subcontracts ......................... 24
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4.21 Officers, Directors and Employees ............................. 24
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4.22 Customers and Suppliers ....................................... 24
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4.23 Customer Warranty Coverage .................................... 25
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4.24 Key-Man Life Insurance ........................................ 25
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4.25 Financial Advisory, Finder's or Broker's Fees ................. 25
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4.26 No Governmental Consent or Approval Required .................. 25
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4.27 Disclosure .................................................... 25
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5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR ....................... 25
5.1 Corporate Matters ............................................. 26
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5.2 Authorization and Enforceability .............................. 26
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5.3 Non-Contravention, etc ........................................ 26
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5.4 Investment Intent ............................................. 26
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5.5 Finder's or Broker's Fees ..................................... 27
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6. CERTAIN AGREEMENTS OF THE PARTIES .................................... 27
6.1 Exclusivity ................................................... 27
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6.2 Access to Premises and Information ............................ 27
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6.3 Operation of Business in the Ordinary Course .................. 27
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6.4 Certain Notices of Material Developments, etc ................. 28
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6.5 Preparation for Closing ....................................... 28
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6.6 Expenses of Transaction ....................................... 28
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6.7 Public Announcement ........................................... 28
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6.8 Confidentiality Covenants of the Company ...................... 28
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6.9 Management Option Plan ........................................ 29
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6.11 "Key-Man" Life Insurance ...................................... 29
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7. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE INVESTOR ................ 29
7.1 Representations, Warranties and Covenants ..................... 29
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7.2 No Material Adverse Change .................................... 29
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7.3 Consents, Approvals, etc ...................................... 29
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7.4 Transaction Agreements ........................................ 30
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7.5 Indebtedness .................................................. 30
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7.6 Litigation .................................................... 30
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7.7 Corporate Proceedings ......................................... 30
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7.8 Opinion of Counsel ............................................ 30
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7.9 Redemption of Stock ........................................... 30
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7.10 Financing ..................................................... 31
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7.11 Management Agreement .......................................... 31
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8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE COMPANY ................. 31
8.1 Representations, Warranties and Covenants ..................... 31
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8.2 Consents, Approvals, etc ...................................... 31
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8.3 Transaction Agreements ........................................ 31
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8.4 Corporate Proceedings ......................................... 31
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8.5 Opinion of Counsel ............................................ 32
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9. INDEMNIFICATION ...................................................... 32
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9.1 Indemnification ............................................... 32
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9.2 Limitations ................................................... 32
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9.3 Nature and Survival of Claims; Time Limits .................... 32
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10. DEFINITIONS ......................................................... 33
10.1 Cross Reference Table ......................................... 33
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10.2 Certain Definitions ........................................... 34
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11. TERMINATION ......................................................... 41
11.1 Termination of Agreement ...................................... 41
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11.2 Effect of Termination ......................................... 41
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12. MISCELLANEOUS ....................................................... 42
12.1 Governing Law ................................................. 42
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12.2 Entire Agreement .............................................. 42
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12.3 Amendment or Waiver ........................................... 42
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12.4 Notices ....................................................... 42
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12.5 Survival, etc ................................................. 43
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12.6 Headings, etc ................................................. 43
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12.7 Schedules; Listed Documents, etc .............................. 44
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12.8 Transfer Taxes ................................................ 44
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12.9 Severability .................................................. 44
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12.10 Counterparts .................................................. 44
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12.11 Certain Costs and Expenses .................................... 44
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12.12 Successors and Assigns ........................................ 45
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12.13 Set-Off ....................................................... 45
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12.14 Consent to Jurisdiction ....................................... 45
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12.15 WAIVER OF JURY TRIAL .......................................... 46
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EXHIBITS
EXHIBIT A-1 - Form of Class A-1 Warrant
EXHIBIT A-2 - Form of Class A-2 Warrant
EXHIBIT B - Form of Class B Warrant
EXHIBIT C-1 - Form of Class C-1 Seller Warrant
EXHIBIT C-2 - Form of Class C-2 Seller Warrant
EXHIBIT D - Form of Class D Warrant
EXHIBIT E - Form of Class E Warrant
EXHIBIT F - Amended and Restated Articles of Incorporation
EXHIBIT G - Form of Management Agreement
EXHIBIT H - Form of Call Right Agreement
EXHIBIT I - Form of Investor Put Agreement
EXHIBIT J - Form of Registration Rights Agreement
EXHIBIT K - Form of Stockholders Agreement
SCHEDULES
Schedule 4.1 - Foreign Qualification/Good Standing
Schedule 4.2.1 - Ownership of Shares and Interests
Schedule 4.2.2 - Contractual Obligation Respecting Capital Stock
Schedule 4.2.3 - Voting Trusts, etc.
Schedule 4.2.4 - Capital Stock of Subsidiaries
Schedule 4.2.5 - Investments
Schedule 4.3.2 - Financial Statements
Schedule 4.4. - Liens
Schedule 4.6 - Non-Contravention, etc.
Schedule 4.7.1 - Business Locations
Schedule 4.7.2 - Real Property
Schedule 4.8 - Litigation
Schedule 4.9 - Intangibles
Schedule 4.10.1 - Contractual Obligations
Schedule 4.10.2 - Breaches of Contractual Obligations
Schedule 4.11 - Liabilities
Schedule 4.12 - Change in Condition
Schedule 4.13(a) - Insurance Policies
Schedule 4.13(b) - Liability Claims
Schedule 4.14(a) - Affiliate Relationships
Schedule 4.14(b) - Affiliate Transactions
Schedule 4.14(c) - Affiliate Accounting
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Schedule 4.15 - Tax Matters
Schedule 4.17 - Benefit Plans
Schedule 4.18 - Environmental Matters
Schedule 4.19 - Labor Disputes
Schedule 4.20 - Government Contracts
Schedule 4.21(a) - Employee Information
Schedule 4.21(b) - Employee Departures
Schedule 4.22 - Customers and Suppliers
Schedule 4.23 - Warranty Coverages
Schedule 4.26 - Governmental Consents
Schedule 6.3 - Contemplated Transactions
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CLASS B COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This Class B Common Stock and Warrant Purchase Agreement (the "Agreement")
dated as of December 16, 1999 by and among Raymond Karsan Holdings, Inc., a
Pennsylvania corporation ("RK Holdings" and together with its subsidiaries, the
"Company"), Parthenon Investors, L.P., a Delaware limited partnership (the
"Parthenon Investors"), PCIP Investors, a Delaware general partnership ("PCIP"),
JMH Partners Corp., a Delaware corporation (together with Parthenon Investors
and PCIP, "Parthenon"), Shad Run Investments, L.P., a Delaware limited
partnership ("Shad Run"), TSG Co-Investors, LLC, a Delaware limited liability
company ("TSG"), The Shattan Group, LLC, a Delaware limited liability company,
Thomas S. Shattan, Gregory E. Mendel, and G. Kevin Fechtmeyer (together with The
Shattan Group, LLC, Thomas S. Shattan and Gregory E. Mendel, "Shattan")
(Shattan, Parthenon, Shad Run and TSG are referred to herein collectively as the
"Investors") provides for the issuance and sale of certain shares of Class B
common stock and warrants for the purchase of Class A common stock of the
Company. To the extent an Investor assigns certain of its rights under this
Agreement to any co-investment fund or Affiliate, such entities, together with
the Investors, will be referred to as the "Investors."
Recitals
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WHEREAS, the Company recently effected a reorganization (the
"Reorganization"), whereby International Holding Company, Inc., a Pennsylvania
corporation ("IHC") and Insurance Services, Inc., a Pennsylvania corporation
("ISI") were merged with and into Raymond Karsan Associates, Inc. ("RKA"), a
wholly owned subsidiary of RK Holdings;
WHEREAS, RK Holdings wishes to issue and sell to Parthenon, Shad Run and
TSG and Parthenon, Shad Run and TSG wish to purchase from RK Holdings 98,948
shares of Class B Common Stock, $.01 par value ("Class B Common Stock"), of RK
Holdings, Warrants for the purchase of 9,905 shares of Class A Common Stock,
$.01 par value, of RK Holdings ("Class A Common Stock") at an exercise price of
$0.01 per share, in the form of Exhibits A-1 and A-2 hereto (the "Class A-1
Warrants" and "Class A-2 Warrants"), Warrants for the purchase of 17,888 shares
of Class A Common Stock of RK Holdings at an exercise price of $835.00 per
share, in the form of Exhibit B hereto (the "Class B Warrants" and, collectively
with the Class A-1 and A-2 Warrants, the "Cash Warrants"), and certain rights to
require the Company to repurchase certain shares of Class B Common Stock and
Warrants pursuant to the Investor Put Agreements between RK Holdings and each of
such Investors (the "Put Rights"). The Class B Common Stock, the Cash Warrants,
and the Put Rights are referred to herein collectively as the "Purchased
Securities". The terms of the Class B Common Stock are set forth in the Amended
and Restated Articles of Incorporation of RK Holdings, a copy of which is set
forth as Exhibit F hereto, which has been filed by RK Holdings with the
Pennsylvania Secretary of State's office immediately prior to the Closing
hereunder.
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WHEREAS, RK Holdings wishes to issue and sell to Shattan, and Shattan
wishes to purchase from RK Holdings, Warrants for the purchase of 3,962 shares
of Class A Common Stock, at an exercise price of $167 per share, in the form of
Exhibit D hereto (the "Class D Warrants") and Warrants for the purchase of 328
shares of Class A Common Stock of RK Holdings, at an exercise price of $835 per
share, in the form of Exhibit E hereto (the "Class E Warrants", and together
with the Class D Warrants, the "Shattan Warrants"). The Cash Warrants and the
Shattan Warrants are referred to collectively herein as the "Investor Warrants";
WHEREAS, the Company will redeem at Closing, on terms which shall be
reasonably satisfactory to the Investors, all of its capital stock owned by each
of Barry Raymond and Jerry Connolly for an aggregate price of $7,338,564.00 (the
"Raymond Redemption Agreement" and the "Connolly Redemption Agreement",
respectively);
WHEREAS, the Company will issue Class C-1 Warrants and Class C-2 Warrants
for the purchase, in the aggregate, of 9,905 shares of Class A Common Stock to
Existing Stockholders as a dividend on the Closing Date;
WHEREAS, the Board of Directors of RK Holdings has approved and deems it
advisable and in the best interest of RK Holdings to complete the transactions
hereinabove described upon the terms and subject to the conditions set forth
herein; and
WHEREAS, in furtherance of such transactions, the Board of Directors of
each of RK Holdings, ISI and IHC have unanimously approved and the stockholders
of both ISI and IHC have each by majority vote approved this Agreement.
Agreement
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Therefore, in consideration of the foregoing and the mutual agreements and
covenants set forth below, the parties hereto hereby agree as follows:
1. DEFINITIONS.
Certain capitalized terms are used in this Agreement as specifically
defined herein. These definitions are set forth or referred to in Section 10
hereof.
2. THE ISSUANCE AND SALE.
2.1 The Issuance and Sale. On the Closing Date (as defined in Section 3.1
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below), subject to the terms and conditions set forth in this Agreement,
Parthenon, Shad Run and TSG will purchase and RK Holdings will sell and issue:
(a) 98,948 shares of RK Holdings' Class B Common Stock, (b) the Class A-1,
Class A-2 and Class B Warrants for the purchase of shares of RK Holdings' Class
A Common Stock, and (c) the Put Rights requiring RK Holdings to
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repurchase from Parthenon, Shad Run and TSG certain shares of Class B Common
Stock and Warrants for $22,000,000 (the "Cash Investment").
2.2 The Seller Warrants. On the Closing Date (as defined in Section 3.1
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below), RK Holdings will issue to the Existing Stockholders as a dividend Class
C-1 and Class C-2 Warrants for the purchase, in the aggregate, of 9,905 shares
of RK Holdings' Class A Common Stock, in the form of Exhibit C-1 and Exhibit C-2
hereto (the "Seller Warrants").
2.3 The Shattan Warrants. On the Closing Date (as defined in Section 3.1
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below), subject to the terms and conditions set forth in this Agreement, RK
Holdings will issue to Shattan (a) the Class D Warrants for the purchase of
3,962 shares of RK Holdings' Class A Common Stock and (b) the Class E Warrants
for the purchase of 328 shares of RK Holdings' Class A Common Stock.
2.4 Purchase Price Adjustments.
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2.4.1 In the event that the Company recognizes a Tax Liability
at any time after the Closing, the aggregate amount paid for the
Purchased Securities shall be adjusted and shall require either (a) a
return of cash to the Investor equal to 47% of the total Tax Liability
(the "Cash Adjustment") or (b) a distribution of additional shares of
Class B Common Stock equal to the amount of the Cash Adjustment
divided by $167. RK Holdings shall make the foregoing adjustment in
accordance with clause (b) above if the Board of Directors (including
at least one Investor Director) determines that making the adjustment
pursuant to clause (a) above would (i) constitute, result in or give
rise to any breach or violation of, or any default or right or cause
of action under, any agreement to which the Company is, from time to
time, a party or (ii) leave the Company with less cash than, in the
good faith judgment of the Board of Directors, is necessary to operate
the business of the Company and its subsidiaries in the ordinary
course or business.
2.4.2 After the Closing, the number of outstanding Investor
Securities and Seller Warrants shall be adjusted (the "Adjustment") as
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follows:
(a) the Company shall issue (i) to each Investor a number
of additional shares of Class B Common Stock equal to such
Investor's Class B Common Adjustment, if any, (ii) to each
Investor, additional Class A Warrants exercisable for a number of
shares of Class A Common Stock equal to such Investor's Class A
Warrant Adjustment, (iii) to each Parthenon Investor additional
Class B Warrants exercisable for a number of shares of Class A
Common Stock equal to its Class B Warrant Adjustment, if any,
(iv) to each holder, additional Class C Warrants exercisable for
a number of shares of Class A Common Stock equal to
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such holder's Class C Warrant Adjustment, (v) additional Class D
Warrants exercisable for a number of shares of Class A common
Stock equal to the Class D Warrant Adjustment, if any, and (vi)
additional Class E Warrants exercisable for a number of shares of
Class A common Stock equal to the Class E Warrant Adjustment, if
any.
(b) each Call Right Agreement and each Investor Put
Agreement shall be automatically amended to increase the number
of shares subject to the Class B Call Right and the Primary Put
Right by the relevant Call Right Adjustment, if any, and to
increase the number of shares subject to the Secondary Put Right
by the relevant Put Right Adjustment, if any.
2.4.3 As soon as practicable, and in any event within 120 days,
after the Closing Date, the Company shall cause Deloitte & Touche LLP
(or other independent certified public accountants of recognized
national standing selected by Company) to prepare and deliver to
Parthenon an audited consolidated balanced sheet as of December 31,
1999 and related statement of earnings of the Company for the year
ended December 31, 1999 (the "1999 Statement of Earnings"). The 1999
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Statement of Earnings shall be prepared in accordance with GAAP in a
manner consistent with the preparation of the Company's most recent
audited financial statements delivered to Parthenon prior to the date
of this Agreement. The Company shall prepare and deliver to
Parthenon, simultaneously with the delivery of the 1999 Statement of
Earnings, a statement (the "Statement") setting forth in reasonable
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detail the Company's calculation of its Adjusted EBITDA, and its
calculation of the Adjustment, if any.
2.4.4 Parthenon's accountants shall, at the Company's expense,
have 45 days after the delivery of the 1999 Statement of Earnings and
the Statement to dispute any portion of the Company's calculation of
the 1999 Statement of Earnings or the Adjustment (a "Dispute"). The
Company shall cause its accountants to make their work papers
available to Parthenon's accountants. In the event of a Dispute,
Parthenon or its accountants may deliver a notice of the Dispute to
the Company (the "Disagreement Notice"), specifying, in reasonable
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detail, those items or amounts in the 1999 Statement of Earnings as to
which Parthenon disagrees. If Parthenon does not deliver a
Disagreement Notice to the Company within such 45-day period, the 1999
Statement of Earnings and the Statement shall become final, conclusive
and binding on all of the parties hereto for all purposes of
calculating the Adjustment and shall not be subject to appeal of any
kind.
2.4.5 If Parthenon or its accountants delivers a Disagreement
Notice to the Company pursuant to Section 2.4.4, Parthenon and its
accountants and the Company and its accountants shall use their
reasonable efforts to reach agreement
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on the disputed items or amounts in order to determine the Adjustment.
If both parties do not resolve all disputed items or amounts within 30
days after delivery of the Disagreement Notice, this Agreement and the
disputed items and amounts will be submitted to an independent
nationally recognized accounting firm mutually acceptable to both
Parthenon and the Company (the "Independent Accountants") for
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determination of the appropriate Adjustment pursuant to this Section
2.4. The written report of the Independent Accountants (the "Report")
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shall be delivered to each of the Company and Parthenon promptly, and
shall be final, conclusive and binding upon each of the Sellers and
the Buyer. The procedures for resolution of disputes concerning the
1999 Statement of Earnings and the Statement set forth in Section
2.4.4 hereof and this Section 2.4.5 shall be final, conclusive and
binding on all of the parties hereto for all purposes of calculating
the Adjustment, and shall not be subject to appeal of any kind. The
fees and expenses of the Independent Accountants shall be borne
equally by the Company, on the one hand, and the Investors, on the
other hand, and each of the Company and the Investors agree to execute
a reasonably acceptable engagement letter, if requested to do so by
the Independent Accountants.
2.4.6 From the Closing Date until the final determination of the
Adjustment, the Company shall give Parthenon, its accountants and the
Independent Accountants, if any, reasonable access to the Company's
books and records and their respective employees who are responsible
for financial matters.
2.4.7 The Adjustment, if any, shall be computed as follows:
(a) calculate the excess of $7.5 million over the Adjusted
EBITDA (the "Deficit"),
(b) multiply the Deficit by 6, and divide by $45 million
(the "Interim Adjustment Percentage"),
2.4.8 Calculation of adjusted total capitalization
(a) Management Share and Option Percentage (the "MSOP")=
TSOP- Interim Adjustment Percentage
(i) TSOP = total equity percentage prior to the
Adjustment represented by shares held by stockholders
other than Investors and by options outstanding or
authorized for issuance pursuant to Section 6.9 (assuming
the exercise of all options and the Class A and Class D
Warrants)
(b) Total Outstanding Initial Adjusted ("TOIA") = MSO/MSOP
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(i) MSO = total number of shares outstanding held by
stockholders who are not investors and total shares of
Class A Common Stock issuable in respect of options
outstanding or authorized for issuance pursuant to Section
6.9
(c) Investor Percentage = with respect to any security in
question, number of Class A shares represented by the amount of
such security held by such holder/Investor prior to the
Adjustment / total number of Class A shares represented by the
total outstanding amount of such security prior to the Adjustment
2.4.9 Class A-1 Warrant Adjustments
(a) Adjusted Class A-1 Warrant ("ACAW")= TOIA * CAWP *
Investor Percentage
(i) CAWP = 2.5% + (.5 * Interim Adjusted Percentage)
(b) Class A Warrant Adjustment = ACAW - CAW
(i) CAW = total number of shares of Class A Common
Stock issuable to such Investor upon the exercise of the
Class A Warrant prior to the Adjustment
2.4.10 Class C-1 Warrant Adjustments
(a) Adjusted Class C Warrant ("ACCW")= TOIA * CCWP *
Investor Percentage
(i) CCWP = 2.5% + (.5 * Interim Adjusted Percentage)
(b) Class C Warrant Adjustment = ACCW - CCW
(i) CCW = total number of shares of Class A Common
Stock issuable to such holder upon the exercise of the
Class C Warrant prior to the Adjustment
2.4.11 Class D Warrant Adjustments
(a) Adjusted Class D Warrant ("ACDW")= TOIA * 1.8%*
Investor Percentage
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(b) Class D Warrant Adjustment = ACDW - CDW
(i) CDW = total number of shares of Class A Common
Stock issuable to such Investor upon the exercise of the
Class D Warrant prior to the Adjustment
2.4.12 Class B Warrant Adjustments
(a) Adjusted Class B Warrants ("ACBW") = TOFD * 7.5% *
Investor Percentage
(i) TOFD = MSO / DMSOP
(ii) DMSOP = MSOP * 92.36%
(b) Class B Warrant Adjustment = ACBW - CBW
(i) CBW = total number of shares of Class A Common
Stock issuable to such Investor upon the exercise of the
Class B Warrant prior to the Adjustment
2.4.13 Class E Warrant Adjustments
(a) Adjusted Class E Warrant ("ACEW") = TOFD* 1.8% *
Investor Percentage
(b) Class E Warrant Adjustment = ACEW - CEW
(i) CEW = total number of shares of Class A Common
Stock issuable to such Investor upon the exercise of the
Class E Warrant
2.4.14 Class B Common Stock Adjustments
(a) Investor Class B Common Initial Adjusted ("CBCIA") =
TOIA * CBP * Investor Percentage
(i) CBP = 27.5% + (.5 * Interim Adjustment
Percentage)
(b) Investor Initial Adjusted Percentage ("IIAP") = Investor
Holdings / Adjusted Outstanding
(i) Investor Holdings = the sum of such Investor's
CBCIA, ACAW, ACBW, ACDW.
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(ii) Adjusted Outstanding = the sum of the CBCIA for
all Investors + all outstanding Class A Common Stock + such
Investor's ACAW, ACBW and ACDW.
(c) Investor Final Adjustment Percentage ("IFAP") = IIAP /
80%
(d) Investor Final Adjustment ("IFA") = ((IFAP * Adjusted
Outstanding) - Investor Holdings / (1 - IFAP))
(e) Class B Common Adjustment for each Investor = CBCIA +
IFA + 5 - Class B Common Stock held by such Investor prior to the
Adjustment
2.4.15 Call Right Adjustments
(a) Call Right Adjustment for each Investor = IFA + 5 - CRS
(i) CRS = number of shares of Class B Common Stock
subject to the Class B Call Right in such Investor's Call
Right Agreement prior to the Adjustment.
2.4.16 Put Right Adjustments
(a) Put Right Adjustment for each Investor = CBCIA - PRS
(i) PRS = number of shares of Class B Common Stock
subject to the Secondary Put Right in such Investor's
Investor Put Agreement prior to the Adjustment.
3. THE CLOSING.
3.1 Time and Place of Closing. The closing of the purchase and sale of
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the Purchased Securities and the other transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Ropes & Gray, One
International Place, Boston, or such other location as the parties may agree, at
10:00 a.m. (Boston time) on December 16, 1999 or if the conditions to Closing
set forth in Sections 8 and 9 hereof shall not have been satisfied at such date,
at such later time or date prior to termination of this Agreement as the
Investors may specify by not fewer than three (3) business days prior written
notice to the Company (such date being referred to herein as the "Closing
Date").
3.2 Closing Date Transfers. At the Closing:
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3.2.1 Parthenon, Shad Run and TSG will deliver the Cash
Investment to the Company by wire transfer of immediately available
federal funds as directed by the Company; and
3.2.2 the Company will issue to the Investors certificates and
warrants representing the Purchased Securities and the Shattan
Warrants.
4. REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY.
In order to induce the Investors to enter into and perform this Agreement
and to consummate the transactions contemplated hereby, the Company represents
and warrants to the Investor as follows:
4.1 Organization, Power and Standing. RK Holdings and each of its
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Subsidiaries is a corporation duly organized or formed, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation, has all requisite corporate power and authority to execute, deliver
and perform each of the Transaction Agreements to which it is a party, to carry
on the Business as currently conducted and to consummate the transactions
contemplated hereby. The Company has heretofore delivered to the Investors a
true and complete copy of (a) the Charter and By-laws of the Company and each of
its Subsidiaries (including the charter and By-laws of ISI and IHC in effect
prior to the Reorganization), (b) the minute books of the Company and each of
its Subsidiaries and (c) the stock or other ownership interest ledger of the
Company and each of its Subsidiaries, each of which is accurate and complete
through the date hereof. The Company is duly qualified or licensed to do
business as a foreign corporation, and is in good standing as such, in each
jurisdiction listed on Schedule 4.1, and the jurisdictions so listed are the
only jurisdictions where the failure to be so qualified or licensed and in good
standing would have a Material Adverse Effect.
4.2 Capitalization and Investments.
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4.2.1 The total capital stock authorized and the capitalization
of RK Holdings is set forth on Schedule 4.2.1. All of the Class A
Common Stock will be owned of record by the Existing Stockholders on
the Closing Date in the amounts set forth with respect to such
stockholders under the heading "Class A Stock Ownership" on Schedule
4.2.1 hereto. All of the outstanding shares of capital stock of RK
Holdings are duly authorized and validly issued, fully paid and
nonassessable.
4.2.2 Except as set forth on Schedule 4.2.2, there is no
Contractual Obligation or Charter or By-law provision which obligates
the Company to issue, purchase or redeem, or make any payment in
respect of, any shares of capital stock or other securities
convertible into or exchangeable for shares of capital
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stock or which provides for any stock appreciation or similar right or
grants any right to share in the equity, income, revenues or cash flow
of the Company.
4.2.3 Except as set forth on Schedule 4.2.3, there are no
voting trusts, shareholder agreements, commitments, undertakings,
understandings, proxies or other restrictions to which any Existing
Stockholder or the Company is a party which directly or indirectly
restrict or limit in any manner, or otherwise relate to, the voting,
sale or other disposition of any shares of capital stock of RK
Holdings.
4.2.4 Except as disclosed on Schedule 4.2.4, all of the
outstanding shares of capital stock of the Subsidiaries of RK Holdings
are duly authorized, validly issued, fully paid and nonassessable and
are owned, beneficially and of record, by RK Holdings free and clear
of any Liens. Except as disclosed on Schedule 4.2.4, there are no (i)
outstanding options obligating any of the Subsidiaries to issue or
sell shares of capital stock of such Subsidiary or to grant, extend or
enter into any such option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of
any person other than the Company with respect to the voting of, or
the right to participate in dividends or other earnings on, any
capital stock of the Subsidiaries.
4.2.5 The Company does not have an Investment in any Person
other than Investments in (a) demand deposit or money market accounts,
(b) cash equivalents (i.e., marketable obligations issued or
guaranteed by the government of the United States that mature within
180 days of the acquisition thereof or money market funds that invest
in securities similar to such United States government securities) and
(c) Investments listed on Schedule 4.2.5.
4.3 Financial Statements, etc.
-------------------------
4.3.1 Financial Information. The Company has heretofore
---------------------
delivered to the Investors true and complete copies of each of the
following (collectively, the "Financial Statements"):
(a) The audited combined balance sheets of the Company as
of December 31, 1997 and 1998, and the combined statements of
operations, of stockholders' equity (deficiency), and of cash
flow for the respective fiscal years ended December 31, 1997 and
1998, together with the notes thereto and reports thereon by
Deloitte & Touche (the "Year End Financials").
(b) The audited combined balance sheet of the Company as
of June 30, 1999, and the related combined statements of
operations, of stockholders' equity (deficiency), and of cash
flow for the six months then
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ended, together with the notes thereof and report thereon by
Deloitte & Touche (the "Six Month Financials").
(c) Monthly unaudited financial statements of the Company,
consisting of a balance sheet and related statements of earnings
and changes in retained earnings and cash flow, for each calendar
month since December 31, 1998 through October 31, 1999 (the
"Interim Financials" and together with the Year End Financials
and the Six Month Financials, the "Financial Statements").
(d) The pro forma financial information of the Company
(the "Pro Formas"), included in the Offering Memorandum.
(e) The projected financial information of the Company
(the "Projections") included in the Offering Memorandum.
4.3.2 Character of Financial Information. Except as set forth
----------------------------------
on Schedule 4.3.2, the Financial Statements (including the notes
thereto) were prepared in accordance with GAAP consistently applied
throughout the periods specified therein. The Financial Statements are
correct and complete and present fairly, in all material respects, the
financial position and results of operations of the Company for the
periods specified therein, and are consistent with books and records
of the Company subject in the case of the Interim Financials to an
absence of notes and normal year-end adjustments which will not in the
aggregate be material. The Pro Formas were prepared in good faith and
represent the effects of the referenced transactions on the Financial
Statements covered thereby. The Projections were prepared in good
faith, based on assumptions believed to be reasonable, and represent
the Company's best estimate as of the date hereof respecting the
Company's financial performance for the periods covered thereby.
4.4 Title to Assets. The Company has good and marketable title to or, in
---------------
the case of property held under lease or other Contractual Obligation, a valid
and Enforceable right to use, all of its properties, rights and assets, whether
real or personal and whether tangible or intangible (collectively, the
"Assets"), including without limitation all properties, rights and assets
reflected in the Balance Sheet (except for Assets which have been sold or
otherwise disposed of since the Balance Sheet Date as permitted under Section
4.12 hereof). The Assets are not subject to any Lien other than Liens described
on Schedule 4.4. The tangible Assets are in good working order, operating
condition and state of repair, ordinary wear and tear excepted. The Assets
constitute all properties, rights and assets held for, used in or necessary for
the conduct of the Business of the Company as currently conducted.
4.5 Compliance with Laws, etc. The operations of the Business as
--------------------------
heretofore or currently conducted were not and are not in violation of, nor is
the Company in default or
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violation under, any Legal Requirement, except for such violations or defaults
as have not had and will not have in the aggregate a Material Adverse Effect.
To the Knowledge of the Company, all future expenditures with respect to the
operations of its Business as currently conducted that are required to meet the
provisions of any Legal Requirement currently in effect (or, to the Knowledge of
the Company, enacted but to take effect in future) will not in the aggregate
have a Material Adverse Effect. The Company has been duly granted all licenses,
permits, franchises and other authorizations under any Legal Requirement
necessary for the conduct of the Business as currently conducted or currently
proposed to be conducted, except licenses, permits, franchises and other
authorizations the failure of which to have been obtained has not had and will
not have in the aggregate a Material Adverse Effect.
4.6 Non-Contravention, etc. Neither the execution and delivery of this
-----------------------
Agreement nor the consummation by the Company of any of the transactions
contemplated hereby does or will constitute, result in or give rise to (a) a
breach of or a default or violation under any provision of the Charter or By-
laws of the Company or (b), except as set forth on Schedule 4.6, (i) a breach or
violation under any provision of any Contractual Obligation of the Company, (ii)
the acceleration of the time for performance of any obligation under any such
Contractual Obligation, (iii) the imposition of any Lien upon or the forfeiture
of any Asset (including, without limitation, any Asset held under a lease or
license), (iv) a requirement that any consent under, or waiver of, any such
Contractual Obligations, Charter or By-law provision be obtained or (v) any
severance payments, right of termination, modification of terms, or any other
right or cause of action under any such Contractual Obligation or Charter or By-
law provision, except in the case of clause (b)(i) above where such breaches,
defaults, events or violation would not have a Material Adverse Effect.
4.7 Real Property.
-------------
4.7.1 Schedule 4.7.1 sets forth a list of the addresses of
each location at which any equipment or inventory is located or
where the Company has an office or other place of business.
4.7.2 The Company does not and has never owned any real
property. Schedule 4.7.2 lists all contracts for the lease or
sublease of real property by the Company currently in effect (the
"Leases"). The Company has delivered to the Investor correct and
complete copies of the Leases (as amended to date). To the best
of the Company's Knowledge, with respect to each Lease:
(a) the Lease is legal, valid binding, enforceable, and
in full force and effect;
(b) the Lease will continue to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms following the consummation of the
transactions contemplated hereby;
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<PAGE>
(c) the Company is not, and, to the Company's
Knowledge, no other party to the lease or sublease is in
material breach or default, and no event has occurred which,
with notice or lapse of time or both, would constitute a
material breach or default or permit termination,
modification, or acceleration thereunder or impair any right
of the Company to exercise and obtain the benefit of any
options contained in such Lease;
(d) there are no disputes, oral agreements, or
forbearance programs in effect as to the Lease;
(e) with respect to each Lease that is a sublease,
the representations and warranties set forth in subsections
(a) through (d) above are true and correct are true and
correct with respect to the underlying Lease;
(f) the Company has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any
interest in the Lease; or
(g) all facilities leased or subleased thereunder
have received all approvals of governmental authorities
(including licenses and permits) required in connection with
the operation thereof and have been operated and maintained
in accordance with applicable laws, rules, and regulations.
4.8 Litigation, etc. Except as set forth on Schedule 4.8, there is
----------------
no litigation, at law or in equity, or any proceeding before or investigation by
any Governmental Authority pending (or, to the Knowledge of the Company,
threatened) against the Company, or any basis therefor, except for such
potential litigation or proceedings which have not had and will not have in the
aggregate a Material Adverse Effect. There is no litigation at law or in equity,
or any proceeding before, or investigation by, any Governmental Authority,
pending (or, to the Knowledge of the Company, threatened) against the Company,
or any basis therefor, which seeks rescission of, seeks to enjoin the
consummation of, or otherwise relates to, this Agreement or any of the
transactions contemplated hereby. No judgment, decree or order of any
Governmental Authority (a) has been, to the Company's knowledge, issued against
any Person (other than the Company) which has had or will have a Material
Adverse Effect or (b) has been issued against the Company.
4.9 Intellectual Property Rights. For purposes of this Agreement,
----------------------------
"Intangibles" shall mean: all trade and product names; foreign letters patent,
patents, patent applications, and unpatented proprietary developmental records;
trademarks, service marks, logos and copyrights (including registrations and
applications); trade secrets, know-how and other proprietary or confidential
information; computer software; and other intangible property and rights that
are directly or indirectly owned, licensed or otherwise used by the Company.
Schedule 4.9 lists all
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significant Intangibles owned or used by the Company. Except as set forth on
Schedule 4.9, the Company owns or has the valid right to use all Intangibles
used in or necessary for the conduct of its Business as presently conducted free
and clear of all liens, licenses or encumbrances of any kind. The Company has
never received any charge, complaint, claim, demand, or notice alleging any
interference, infringement, misappropriation, or violation, including any claim
that the Company must license or refrain from using any Intangibles. The use by
the Company of the Intangibles does not infringe or misappropriate and has not
infringed or misappropriated any rights of any third party, and, to the
Company's Knowledge, no activity, except as set forth on Schedule 4.9 hereto, of
any third party infringes upon or misappropriates the rights of the Company with
respect to any of the Intangibles. The Company does not own any patents, and
has no pending patent applications, relating to the Business. Except as set
forth on Schedule 4.9 hereto, no other Person has any ownership of or right to
use the Intangibles (except such right to use such Intangibles as would not have
a Material Adverse Effect) or has notified the Company in writing that it is
claiming any ownership of or right to use any Intangibles.
4.10 Contracts, etc.
---------------
4.10.1 Certain Contractual Obligations. Set forth on
-------------------------------
Schedule 4.10.1 hereto is a true and complete list of all of the
following Contractual Obligations of the Company:
(a) All collective bargaining agreements and other
labor agreements, all employment or consulting agreements,
and all other plans, agreements, arrangements, practices or
other Contractual Obligations (other than any Employee Plan)
which constitute Compensation or benefits, including post
retirement benefits, to any of the officers or employees or
former officers or employees (or any spouse or family member
of any such current or former officer or employee) of the
Company.
(b) All Contractual Obligations under which the
Company is or may become obligated to pay any legal,
accounting, brokerage, finder's or similar fees or expenses
in connection with, or has incurred any severance pay or
special Compensation obligations which would become payable
by reason of, this Agreement or consummation of the
transactions contemplated hereby.
(c) All Contractual Obligations (including, without
limitation, options) to sell or otherwise dispose of any
Assets other than in the Ordinary Course of Business.
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<PAGE>
(d) All Contractual Obligations under which the
Company has or will after the Closing have any liability or
obligation to or for the benefit of any Existing Stockholder
or any other Affiliate of the Company.
(e) All Contractual Obligations under which the
Company has any liability or obligation for Debt or
constituting or giving rise to a Guarantee of any liability
or obligation of any Person, or under which any Person has
any liability or obligation constituting or giving rise to a
Guarantee of any liability or obligation of the Company
(including, without limitation, partnership and joint
venture agreements).
(f) All Contractual Obligations, other than this
Agreement, under which the Company is or may become
obligated to pay any amount in respect of deferred or
conditional purchase price, indemnification obligations,
purchase price adjustment or otherwise in connection with
any (i) acquisition or disposition of assets or securities,
(ii) merger, consolidation or other business combination, or
(iii) series or group of related transactions or events of a
type specified in subclauses (i) and (ii).
(g) All Contractual Obligations for the sale of
products or provision of services by the Company that (i)
individually involve products or services having a value of
at least $100,000, (ii) have a term extending more than one
year after the Closing Date, (iii) to which the United
States federal government or any state, local or foreign
government or any agency or department of any of the
foregoing is a party, or (iv) that renders the Company a
subcontractor at any tier to any prime Contractual
Obligation to which the United States federal government or
any state, local or foreign government or any agency or
department of any of the foregoing is a party.
(h) All purchase obligations (whether or not in the
Ordinary Course of Business), which require minimum
purchases by the Company.
(i) All advertising contracts.
(j) All standard forms of purchase orders and sales
orders.
(k) All leases or other Contractual Obligations
(including all amendments) under which any real property or
other tangible asset is held or used by the Company.
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<PAGE>
(l) All leases or other Contractual Obligations under
which the Company is liable as lessor with respect to any real
property or other tangible asset.
(m) All licenses or other Contractual Obligations
(including all amendments) under which any Intangible is held or
used by the Company.
(n) All licenses or other Contractual Obligations under
which the Company is liable as licensor with respect to any
Intangibles.
(o) All Contractual Obligations under which the Company
is or may be prohibited or restricted from competing (i) in any
business, (ii) in any geographic area and/or (iii) for any
current or potential customers anywhere in the world.
(p) All Contractual Obligations (other than purchase
orders or sales orders) not required to be listed on Schedule
4.10.1 pursuant to clauses (a) through (n) above which
individually involve liabilities of the Company in excess of
$100,000.
The Company has heretofore delivered to the Investors a true and
complete copy of each of the Contractual Obligations, or a narrative
description of those Contractual Obligations that are not in writing,
listed on Schedule 4.10.1 hereto, each as in effect on the date hereof and
as it will be in effect at the Closing, including, without limitation, all
amendments thereto.
4.10.2 Nature of Contracts, etc. Each Contractual Obligation to
-------------------------
which the Company is a party is, and after giving effect to the
Closing hereunder and the consummation of the transactions
contemplated hereby will be, Enforceable by the Company except for
such failures to be so Enforceable as have not had and will not have
in the aggregate a Material Adverse Effect. No breach or default by
the Company under any Contractual Obligation to which it is a party
has occurred and is continuing, and no event has occurred which with
notice or lapse of time would constitute such a breach or default or
permit termination, modification or acceleration by any other Person
under any of such contracts, other than such breaches, defaults and
events as have not had and will not have in the aggregate a Material
Adverse Effect. No breach or default by the Company under any
Contractual Obligation or Legal Requirement to which it is a party or
by which it or any of its property is bound or affected with respect
to any Government Order. To the Knowledge of the Company, except as
set forth on Schedule 4.10.2 hereto, no breach or default by any other
Person under any of the foregoing has occurred and is continuing, and
no event has occurred which with notice or lapse of time would
constitute such a breach or default or permit termination,
modification or
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<PAGE>
acceleration by the Company under any of the foregoing, other than
breaches, defaults and events which have not had and will not have in
the aggregate a Material Adverse Effect.
4.11 Liabilities. The Company does not have any liabilities or other
-----------
obligations, whether absolute, accrued, contingent, due, to become due, or
otherwise, other than: (a) obligations and liabilities of the Company set forth
on the Balance Sheet (or described specifically in the notes thereto); (b)
obligations and liabilities of the Company incurred since the Balance Sheet Date
in the Ordinary Course of Business; (c) obligations and liabilities of the
Company in respect of Contractual Obligations; and (d) obligations and
liabilities of the Company that either individually or in the aggregate will not
exceed $25,000.
4.12 Change in Condition. From and after the Balance Sheet Date to and
-------------------
including the date hereof, the Company has conducted its Business only in the
Ordinary Course of Business and has maintained the value of its Business as a
going concern and, except as set forth on Schedule 4.12, its relationships with
customers, distributors, suppliers, vendors, employees, agents and others.
Without limiting the generality of the foregoing, except as set forth on
Schedule 4.12, which matters have not had and will not have in the aggregate a
Material Adverse Effect, since the Balance Sheet Date the Company has not:
(a) Entered into any transaction otherwise than on an
arms' length basis or any transaction with any Existing
Stockholder or any Affiliate thereof (other than the Raymond
Redemption Agreement and the Connolly Redemption Agreement);
(b) Made any capital expenditure in excess of $100,000
individually or $500,000 in the aggregate;
(c) Incurred or otherwise become liable in respect of any
Debt, except for borrowings in the Ordinary Course of Business
under the Company's Loan and Security Agreement with Heller
Financial, Inc., or become liable in respect of any Guarantee;
(d) Created or suffered the imposition of any Lien upon
any assets, whether tangible or intangible, of the Company;
(e) (i) Sold, leased to others or otherwise disposed of
any of its assets, (ii) entered into any Contractual Obligation
relating to (A) the purchase of any capital stock of or interest
in any Person, (B) the purchase of assets constituting a business
or (C) any merger, consolidation or other business combination,
(iii) canceled or compromised any Debt or claim (other than
compromises of accounts receivable in the Ordinary Course of
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Business), (iv) waived or released any right of substantial value
or (v) instituted, settled or agreed to settle any material
Action;
(f) (i) Made any changes in the rate of Compensation of
any director, officer, employee, or consultant to, or agent of
the Company, except for changes in the Ordinary Course of
Business to the compensation of Persons other than directors and
officers of the Company, or (ii) paid or agreed to pay any extra
Compensation to any such Person (including, without limitation,
any such payments to be made in connection with and/or from the
proceeds of the transactions contemplated hereby);
(g) Submitted any material bids or proposals to any third
party with respect to the Business, or entered into any material
contracts, commitments or agreements;
(h) Suffered any material damage, destruction or loss
(whether or not covered by insurance) to any of its assets,
whether tangible or intangible;
(i) Made any change in its customary methods of accounting
or accounting practices, pricing policies or payment or credit
practices, or failed to pay any creditor any amount owed to such
creditor when due, or granted any extensions of credit other than
in the Ordinary Course of Business (it being understood that the
consummation of the Reorganization required the Company to change
from a cash method to an accrual method of accounting for income
tax purposes);
(j) Made any Distributions;
(k) Entered into any Contractual Obligation to do any of the
things referred to in clauses (a) through (i) above; and
(l) Suffered or incurred any Material Adverse Effect, nor
any event or events which in the aggregate will have a Material
Adverse Effect.
4.13 Insurance. Set forth on Schedule 4.13(a) is a list of all liability
---------
(including, without limitation, public liability, products liability and
automobile liability), workers' compensation, property, casualty, directors and
officers, errors and omissions and other policies by which the Company has been
insured since December 31, 1997 and, in the case of liability policies, since
December 31, 1995 (the "Insurance Policies"), true and complete copies of which
have been furnished to the Investors. Such list includes the type of policy,
form of coverage, policy number and insurer, coverage dates, named insured,
limit of liability and deductible. Except for the
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matters set forth on the loss runs annexed to Schedule 4.13(b) and the matters
set forth on Schedule 4.13(b), there have been no liability claims which have
been made against the Company or, to the Knowledge of the Company, any
occurrence which may give rise to any such claim against the Company.
4.14 Transactions with Affiliates. All of the Existing Stockholders are
----------------------------
officers, directors or employees of the Company. Except as set forth on
Schedule 4.14(a) (together with the Existing Stockholders relationships
described in the preceding sentence, the "Affiliate Relationships"), none of the
Affiliates of Existing Stockholders (other than the Company) or of the Company
is an officer, director, employee, consultant, competitor, customer,
distributor, supplier or vendor of the Company. During the two-year period
ending on the Closing Date, (a) the terms of the Affiliate Relationships have
not been altered in any respect which has had or will have in the aggregate a
Material Adverse Effect, and (b) except as set forth on Schedule 4.14(b), there
have been no transactions between the Company, on the one hand, and any Existing
Stockholder or any Affiliate thereof, on the other hand, other than the
Affiliate Relationships and other relationships, Contractual Obligations and
transactions the termination or non-continuation of which has not had and will
not have in the aggregate a Material Adverse Effect. Except as set forth on
Schedule 4.14(c), all transactions between the Company on the one hand, and the
Existing Stockholders or any Affiliate thereof on the other hand, which occurred
during the periods covered by the Financial Statements are reflected in the
Financial Statements at amounts which do not overstate the net worth or net
income of the Company as compared with fair market values and prices which would
have been charged and paid between parties at arms' length at the time of the
entering into of the transactions in question.
4.15 Tax Matters. Except as set forth on Schedule 4.15:
-----------
4.15.1 all Tax Returns that are required to have been filed
by or with respect to the Company have been duly and timely filed in
accordance with all applicable Legal Requirements and such Tax
Returns are true, correct and complete, and no claim has been made
by any taxing authority in a jurisdiction where the Company does not
file Tax Returns that the Company is or may be subject to taxation
by that jurisdiction,
4.15.2 all Taxes due and payable (whether or not shown on
any Tax Return) in respect of the Company have been paid in full,
4.15.3 the liability of the Company for Taxes (a) did not,
as of the date of the most recent financial statements, exceed the
accruals for Taxes (excluding any reserve established to reflect
timing differences between book and Tax income) set forth on the
face of the Balance Sheet (rather than in any notes thereto), and
(b) will not, as of the Closing Date, exceed the accruals for Taxes
liability (excluding any reserve established to reflect timing
differences between book and
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Tax income) set forth on the face of the Balance Sheet (rather than
in any notes thereto),
4.15.4 except as set forth on Schedule 4.15.4, no Tax
Return referred to in Section 4.15.1 has been the subject of
examination or audit by the Internal Revenue Service ("IRS") or the
appropriate state, local or foreign taxing authority,
4.15.5 no deficiencies have been asserted or assessments
made as a result of any examinations of the Tax Returns referred to
in Section 4.15.1 by the IRS and/or a state, local or foreign taxing
authority,
4.15.6 there is no action, suit, proceeding, audit, claim,
deficiency or assessment pending (or, to the Knowledge of the
Company, threatened) with respect to any Taxes of the Company, and
there are no Liens on or other security interests in any of the
assets of the Company that arose in connection with any failure (or
alleged failure) to pay any Tax other than for current Taxes not yet
due and payable,
4.15.7 no waivers of statutes of limitations have been
given or requested by or with respect to any Taxes of the Company,
4.15.8 no powers of attorney with respect to Taxes of the
Company are currently in force,
4.15.9 the Company does not have any equity interest in
another entity that is classified for tax purposes as a corporation
or partnership,
4.15.10 the Company has not made nor is obligated nor is a
party to an agreement that could obligate it to make any
compensation-related payments that would not be deductible by reason
of Code sections 162, 280G or 404,
4.15.11 the Company does not have any liability for the
Taxes of any Person under Treas. Reg. (S) 1.1502-6 (and/or any
similar provision of state, local, or foreign law), as a transferee
or successor, by contract, or otherwise, or is a party to or bound
by any Contractual Obligation relating to any allocation or sharing
of Taxes,
4.15.12 the Company has provided to the Investors true,
complete, and correct copies of all Tax Returns filed by it with
taxing authorities since December 31, 1997 and all requests for
extensions or waivers and notices or claims given or received with
respect thereto,
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4.15.13 the Company has withheld and paid to the IRS or the
appropriate state, local or foreign taxing authority all amounts
required to be withheld from the wages of the employees, independent
contractors, creditors, stockholders or other third parties of the
Company under state law, foreign law and the applicable provisions
of the Code,
4.15.14 all contributions and other Taxes due from the
Company pursuant to any unemployment insurance or workers
compensation laws and all sales or use Taxes which are due or
payable by the Company prior to the date hereof have been paid in
full and will be so paid through the Closing Date, and
4.15.15 no consent to the application of Section 341(f) of
the Code has been made by or on behalf of the Company with regard to
any assets or property held, acquired or to be acquired by the
Company.
4.16 No Illegal Payments, etc. No Existing Stockholder nor the Company,
------------------------
nor any of their respective officers, employees or agents, has (a) directly or
indirectly given or agreed to give any gift, contribution, payment or similar
benefit to any supplier, customer, governmental employee or other Person who
was, is or may be in a position to help or hinder the Company (or assist in
connection with any actual or proposed transaction) or made or agreed to make
any contribution, or reimbursed any political gift or contribution made by any
other Person, to any candidate for federal, state, local or foreign public
office, in either case (i) which would subject the Company or the Investors to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, or (ii) the non-continuation of which has had or will have in the
aggregate a Material Adverse Effect, or (b) established or maintained any
unrecorded fund or asset or made any false entries on any books or records for
any purpose.
4.17 Employee Benefit Plans.
----------------------
4.17.1 Disclosure. Schedule 4.17 sets forth an accurate,
----------
current and complete list of all Plans. With respect to each Plan,
the Company has provided to the Investors accurate, current and
complete copies of each of the following: (i) where the plan has been
reduced to writing, the plan document together with all amendments;
(ii) where the plan has not been reduced to writing, a written
summary of all material plan terms; (iii) where applicable, copies of
any trust agreements, custodial agreements, insurance policies,
administration agreements and similar agreements, and investment
management or investment advisory agreements; (iv) copies of any
summary plan descriptions, employee handbooks or similar employee
communications; (v) in the case of any plan, if any, that is intended
to be qualified under Section 401(a) of the Code, a copy of the most
recent determination letter from the IRS and a copy of any request
for such a determination; (vi) in the case of any funding
arrangement, if any, intended to qualify as a VEBA under Section
501(c)(9) of the Code, a copy of the IRS letter
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determining that it so qualifies; and (vii) in the case of any plan,
if any, for which Forms 5500 are required to be filed, a copy of the
three most recently filed Forms 5500, with schedules attached. No
provision of any Plan would result in any limitation on the ability
of the Company to terminate the plan.
4.17.2 No Defined Benefit Pension Plans. None of the Company
--------------------------------
nor any corporation, trust, partnership or other entity that would be
considered as a single employer with the Company under Section
4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code
has ever maintained or been required to contribute to any Employee
Plan subject to Title IV of ERISA.
4.17.3 Plan Qualification; Plan Administration; Certain
------------------------------------------------
Taxes and Penalties. Each Plan that is intended to be qualified under
-------------------
Section 401(a) of the Code is so qualified. Each Plan, including any
associated trust or fund, has been administered in accordance with
its terms and with all applicable Legal Requirements, and nothing has
occurred with respect to any Plan that has subjected or could subject
the Company to a liability under Section 409 or Section 502 of ERISA
or Chapter 43 of Subtitle D or section 6652 of the Code. Each
participant directed Pension Plan is an "ERISA Section 404(c) Plan"
within the meaning of Department of Labor Regulation Section 1.404
(c) -1.
4.17.4 All Contributions and Claims and Premiums Paid.
----------------------------------------------
Except as set forth on Schedule 4.17.4, all required contributions,
assessments and premium payments on account of each Plan have been
made. There are no existing (or, to the Knowledge of the Company,
threatened) lawsuits, claims or other controversies relating to a
Plan, other than routine claims for information or benefits in the
normal course. No Plan is the subject of examination by a government
agency or a participant in a government sponsored amnesty, voluntary
compliance or similar program.
4.17.5 Retiree Benefits; Certain Welfare Plans. Except as
---------------------------------------
set forth on Schedule 4.17.5, other than as required under Section
601 et seq. of ERISA, no Plan that is a Welfare Plan provides
benefits or coverage following retirement or other termination of
employment. Each welfare benefit trust or fund that constitutes or is
associated with a Plan and that is intended to be exempt from federal
income tax under Section 501(c)(9) of the Code is so exempt.
4.18 Environmental Matters. There is no Action pending or, to the
---------------------
Knowledge of the Company, threatened, against the Company in respect of (a)
noncompliance by the Company with any Environmental Law or (b) release into the
environment of any pollutant, contaminant or toxic or hazardous material,
substance or waste, whether solid, liquid or gas, (each a "Hazardous Substance")
on, at or from any property presently occupied or operated by the Company.
Except as set forth on Schedule 4.18, there has been no release or threatened
release of Hazardous
-22-
<PAGE>
Substances on, upon, into or from any site currently or heretofore owned, leased
or otherwise used by the Company, other than such releases or threatened
releases that in the aggregate have not had and will not have a Material Adverse
Effect. Except as set forth on Schedule 4.18, to the Knowledge of the Company,
there have been no Hazardous Substances generated by the Company that have been
disposed of or come to rest at any site that has been included in any published
U.S. federal, state or local "superfund" site list or any other similar list of
hazardous or toxic waste sites published by any governmental authority in the
United States. Except as set forth on Schedule 4.18, to the Knowledge of the
Company, there are no underground storage tanks located on, no polychlorinated
biphenyls ("PCBs") or PCB-containing equipment used or stored on, and no
hazardous waste as defined by the Resource Conservation and Recovery Act, as
amended, stored on, any site owned or operated by the Company, except for the
storage of hazardous waste in quantities that are used by the Company in the
Ordinary Course of Business.
4.19 Labor Relations. None of the employees of the Company is represented
---------------
by a labor union, and no petition has been filed, nor has any proceeding been
instituted by any employee or group of employees with any labor relations board
or commission seeking recognition of a collective bargaining representative. To
the Knowledge of the Company, there is no organizational effort currently being
made or threatened by or on behalf of any labor union to organize any employees
of the Company, and no demand for recognition of any employees of the Company
has been made by or on behalf of any labor organization. Except as set forth on
Schedule 4.19, to the Knowledge of the Company, there is no pending or
threatened employee strike, work stoppage or labor dispute with respect to any
employees of the Company. Except as set forth on Schedule 4.19, there are no
controversies or disputes pending between the Company on the one hand and any of
its employees on the other hand before any court, commission, board, agency,
arbitrator, grievance procedure or any other forum.
4.20 Government Contracts and Subcontracts. Except as set forth on
-------------------------------------
Schedule 4.20, the Company has received no written claims, penalties, or causes
or action against the Company the basis of which is an actual or alleged
violation of, or noncompliance with, any applicable law, regulation or order (a)
related to a Contractual Obligation between the Company and the United States
federal government or any other state, local or foreign government or any
division or agency of any of the foregoing (a "Government Contract"), which
contract relates or related to the Business or (b) related to a Contractual
Obligation between the Company and any other party, which Contractual Obligation
relates or related to the Business and renders or rendered the Company a
subcontractor at any tier to a prime Contractual Obligation with the United
States federal government or any other state, local or foreign government or any
division or agency of any of the foregoing (a "Government Subcontract"). Except
as set forth on Schedule 4.20, to the Company's Knowledge, there is no
reasonable basis for any claim, penalty or cause of action against the Company
alleging a violation of, or noncompliance with, any applicable law, regulation
or order related to any Government Contract or Government Subcontract to which
the Company is a party and that relates or related to the Business, except for
such claims, penalties or causes of action as do not, in the aggregate, have a
Material Adverse Effect. For purposes of this Section 4.20, claims, penalties
and causes of action alleging a violation of, or noncompliance
-23-
<PAGE>
with, any applicable law, regulation or order include, but are not limited to,
those purporting to be based on failure to comply with cost accounting
standards, allowable costs, allocation of costs, omissions or errors in
disclosure statements, or defective pricing.
4.21 Officers, Directors and Employees. Schedule 4.21(a) sets forth: (a)
---------------------------------
the name, title and total compensation of each officer and director of the
Company (after giving effect to the Reorganization); (b) the name, title and
total compensation of each other employee, consultant, agent or other
representative of the Company (after giving effect to the Reorganization) whose
current or committed annual rate of compensation (including bonuses and
commissions) exceeds $70,000. Except as set forth on Schedule 4.21(b) and
except for Barry Raymond and Jerry Connolly, none of such persons has stated
orally or in writing that he or she will cancel or otherwise terminate such
person's relationship with the Company.
4.22 Customers and Suppliers. Except as set forth on Schedule 4.22, since
-----------------------
the Balance Sheet Date, (a) no significant customer (or group of customers which
in the aggregate is significant) of the Business has given the Company notice
or, to the Knowledge of the Company, has taken any other action which has given
the Company any reason to believe that such customer (or group of customers)
will cease to purchase services or reduce significantly the amount of services
purchased from the Company and (b) no significant vendor (or group of vendors
which in the aggregate is significant) of the Business has given the Company
notice or, to the Knowledge of the Company, has taken any other action which has
given the Company any reason to believe that such vendor (or group of vendors)
will cease to supply or adversely change its price or terms to the Company of
any products or services.
4.23 Customer Warranty Coverage. Schedule 4.23 contains a complete list
--------------------------
and description of all express warranty coverages (including terms of such
coverages, expiration dates, and estimated amounts of liability) extended by
Company for repair or replacement of defective products or service related to
the Business, as of the date indicated thereon, other than those contained in
Contractual Obligations listed on Schedule 4.10.1. The Company has not received
written notice of any outstanding, pending or threatened claims based on such
warranty coverage, except as set forth on Schedule 4.23.
4.24 Key-Man Life Insurance. The Company has in place a "key-man" life
----------------------
insurance policy, in the amount of six million ($6,000,000), on Nooruddin S.
Karsan such policy being payable to the Company.
4.25 Financial Advisory, Finder's or Broker's Fees. Except for the
---------------------------------------------
Shattan Group LLC and Robert W. Baird & Co., no financial advisor, finder agent
or similar intermediary (a "Financial Advisor") has acted on behalf of the
Existing Stockholders or the Company in connection with this Agreement or the
transactions contemplated hereby, and, except for the aggregate fee of one
million three hundred sixty-two thousand dollars ($1,362,000) to be paid to the
Shattan Group LLC and Robert W. Baird & Co., there are no brokerage commissions,
finders' fees or similar fees or commissions payable in connection therewith
based on any agreement,
-24-
<PAGE>
arrangement or understanding with the Existing Stockholders or the Company or on
any action taken by the Existing Stockholders or the Company.
4.26 No Governmental Consent or Approval Required. Except as disclosed on
--------------------------------------------
Schedule 4.26 and except for (a) filings required by the HSR Act, if any, and
(b) federal or state securities law filings which have been made or which will
be made in a timely manner, no authorization, consent, approval or other order
of, declaration to, or filing with, any Governmental Authority or any other
Person is required for or in connection with the valid and lawful (i)
authorization, execution and delivery of any of the Transaction Documents by the
Company or (ii) the authorization, issuance, sale and delivery of the Purchased
Securities by the Company.
4.27 Disclosure. Neither this Agreement (including, without limitation,
----------
the Schedules hereto) nor the Financial Statements, the Offering Memorandum
(taken as a whole), nor any certificate furnished or to be furnished by or on
behalf of the Company or the Existing Stockholders, contains or will contain any
untrue statement of a material fact. This Agreement (including, without
limitation, the Schedules hereto), the Financial Statements and the Offering
Memorandum do not, considered as a whole, omit to state a material fact
necessary in order to make the statements contained herein and therein not
misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
In order to induce the Company to enter into and perform this Agreement and
to consummate the transactions contemplated hereby, each Investor represents and
warrants, severally as to itself, to the Company as follows:
5.1 Corporate Matters. Each Investor that is not a individual is a
-----------------
corporation, limited partnership, general partnership or limited liability
company duly formed, validly existing and in good standing under the laws of the
jurisdiction of its formation, and each Investor has all requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby.
5.2 Authorization and Enforceability. Each of this Agreement, the
--------------------------------
Stockholders Agreement and a Call Right Agreement has been duly authorized,
executed and delivered by such Investor that is a party thereto, and is
Enforceable against such Investor.
5.3 Non-Contravention, etc. Neither the execution, delivery nor
----------------------
performance of this Agreement nor the consummation of the transactions
contemplated hereby does or will constitute, result in or give rise to any
breach or violation of, or any default or right or cause of action under, any
Contractual Obligation of or the agreement of limited partnership of such
Investor or any Legal Requirement applicable to such Investor. No approval,
consent, waiver, authorization or other order of, and no declaration, filing,
registration, qualification or recording with, any Governmental Authority or any
other Person, including, without limitation, any party to
-25-
<PAGE>
any Contractual Obligation of the Investor, is required to be obtained or made
by or on behalf of the Investor in connection with the execution, delivery or
performance of this Agreement and the transactions contemplated hereby by such
Investor, except for (a) filings required by the HSR Act, if any, and (b) items
which shall have been obtained or made and shall be in full force and effect at
the Closing.
5.4 Investment Intent. Such Investor is acquiring the Purchased
-----------------
Securities or the Shattan Warrants for its own account for the purpose of
investment and not with a view to, or for sale in connection with, any
distribution thereof. Such Investor is an "accredited investor" within the
meaning of Regulation D under the Securities Act of 1933, and the Investor can
bear the risk of loss of the entire value of its investment in the Company. Such
Investor acknowledges that the Purchased Securities have not been registered or
qualified under any federal or state securities laws, and may not be offered,
sold, transferred, pledged, hypothecated or otherwise assigned unless they are
registered under the Securities Act of 1933 and any applicable "Blue Sky" laws
of any state or an exemption from such registration is available and that the
Company, in issuing the stock and securities hereunder is relying upon, among
other things, the representations and warranties of such Investor contained in
this Section 5. Such Investor has been provided access to such information and
documents regarding the Company as the Investor has requested and has been
afforded an opportunity to ask questions of, and receive answers from,
representatives of the Company concerning the terms and conditions of this
Agreement and the Purchased Securities.
5.5 Finder's or Broker's Fees. Such Investor represents and warrants
-------------------------
to the Company that no Financial Advisor has acted on behalf of such Investor in
connection with this Agreement or the transactions contemplated hereby and that
there are no brokerage commissions, finders' fees, or similar fees or
commissions payable in connection therewith based on any agreement, arrangement
or understanding with the Investor or on any action taken by such Investor.
6. CERTAIN AGREEMENTS OF THE PARTIES.
6.1 Exclusivity. Until the earlier of December 31, 1999 and a
-----------
termination by Parthenon pursuant to Section 11.1(a) or such date as the parties
may otherwise agree in writing upon (the "Exclusivity Period"), the Company will
not and will cause all employees, representatives and agents of the Company not
to, directly or indirectly, solicit or initiate or enter into discussions or
transactions or Contractual Obligations with or encourage or provide any
information to any Person (other than the Investors and its designees)
concerning any sale of stock by (or by the stockholders of), or any merger or
share exchange or sale or other disposition of securities or substantial assets
or recapitalization or any similar transaction involving, the Company. During
the Exclusivity Period, the Company will notify Parthenon immediately upon
becoming aware that any Person has made any proposal, offer, inquiry, or contact
with respect to any such transaction.
-26-
<PAGE>
6.2 Access to Premises and Information. Prior to the Closing, the
----------------------------------
Company will permit the Investors and their prospective investors and lenders
and their respective authorized representatives to have full access to their
premises and documents, books and records and to make copies during normal
business hours of such financial and operating data and other information with
respect to the Company as the Investors, such investors or lenders, or any of
their representatives shall reasonably request. The Company will cause to be
delivered such additional information and copies of documents, books and records
relating to the Company as may be reasonably requested by the Investors, such
investors or lenders, or any of their representatives.
6.3 Operation of Business in the Ordinary Course. On and prior to the
--------------------------------------------
Closing Date, the Company will conduct the Business only in the Ordinary Course
of Business, and will use all commercially reasonable efforts to maintain the
value of the Business as a going concern and the relationships of the Company
with customers, suppliers, vendors, employees, agents and others. Without
limiting the generality of the foregoing, except for the transactions
specifically contemplated hereunder or as set forth on Schedule 6.3 and except
for its continuing negotiation for the disposition of its temporary and
"temporary to permanent" staffing division, without the written consent of
Parthenon, from and after the date hereof the Company will conduct itself so
that the Company would not be in violation of Section 4.12 of this Agreement if
such Section were applicable during the period from and after the date hereof to
and including the Closing Date.
6.4 Certain Notices of Material Developments, etc. Prior to the
---------------------------------------------
Closing, the Company will give the Investors written notice of any material
development affecting the Business, or the financial condition or prospects of
the Company; provided, however, that no such disclosure shall be deemed to amend
-------- -------
any Schedule hereto, or prevent or cure any breach of or inaccuracy in, or
disclose any exception to, any of the representations and warranties set forth
herein. Prior to the Closing, each party will give the other prompt written
notice upon becoming aware of any breach of or inaccuracy in any representation
or warranty of such notifying party; provided, however, that no such disclosure
-------- -------
shall be deemed to amend any Schedule hereto, or prevent or cure any breach of
or inaccuracy in, or disclose any exception to, any of the representations and
warranties set forth herein.
6.5 Preparation for Closing. Each party will use all commercially
-----------------------
reasonable efforts to bring about the fulfillment of each of the conditions
precedent set forth in this Agreement and to consummate the transactions
contemplated in the Recitals.
6.6 Expenses of Transaction. All costs and expenses (including legal
-----------------------
fees and expenses) incurred by the Investors and the Company in connection with
this Agreement and the transactions contemplated hereby (including the senior
credit facility with Fleet National Bank) shall be paid by the Company.
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<PAGE>
6.7 Public Announcement. No public announcement shall be made by any
-------------------
party with respect to the consummation of the transactions contemplated hereby
or the terms thereof without the prior consent of the Investor and the Company;
provided, however, that this Section 6.7 shall not prohibit (a) any disclosure
-------- -------
by any Investor in the ordinary course to any of its investors, (b) any
disclosure required by law, or (c) any disclosure made in connection with the
enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby.
6.8 Confidentiality Covenants of the Company. The Company will not,
----------------------------------------
and will cause its Affiliates not to, at any time after the Closing, directly or
indirectly, without the prior written consent of Parthenon, disclose or use, in
any way harmful to the Investors, or otherwise contrary to the interests of the
Investors, any confidential or proprietary information involving or relating to
any Investor; provided, however, that the information subject to the foregoing
-------- -------
provisions of this sentence shall be deemed not to include any information known
generally in the industry (other than as a result of disclosure in violation
hereof by either the Company or any such Affiliate thereof); and provided,
--------
further, that the provisions of this Section 6.8 shall not prohibit any
-------
retention of records or disclosure required by law or made in connection with
the enforcement of any right or remedy relating to this Agreement or the
transactions contemplated hereby.
6.9 Management Option Plan. As soon as reasonably possible following
----------------------
the Closing, the Company agrees to establish an option plan for the purpose of
granting options to members of the Company's management, including options to
acquire 7,000 shares of Class A Common Stock to be granted to individuals
designated by the Company's Board of Directors following the Closing.
6.10 Senior Credit Facility. On or before December 24, 1999, the
----------------------
Company shall have entered into a senior credit facility with Fleet National
Bank, in accordance with the terms described in the commitment letter of Fleet
National Bank dated December 15, 1999, and otherwise on terms reasonably
satisfactory to Parthenon.
6.11 "Key-Man" Life Insurance. Within 90 days of the Closing, the
-----------------------
Company shall have obtained a "key-man" life insurance policy on Nooruddin S.
Karsan, such policy being payable to the Company, in the amount of four million
($4,000,000), such policy to contain such other terms and from such insurer as
may be reasonably satisfactory to the Investors or shall have increased its
current key-man life insurance policy to provide for a total of ten million
($10,000,000) in key-man life insurance.
7. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE INVESTORS.
The obligations of the Investors to consummate the transactions
contemplated by this Agreement and complete the Closing are subject to the
satisfaction, at or prior to the Closing, of
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<PAGE>
all of the following conditions, compliance with which, or the occurrence of
which, may be waived prior to the Closing in writing by each Investor in its
sole discretion:
7.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of the Company contained in this Agreement shall be true and correct
as of the Closing Date with the same force and effect as if made at and as of
the Closing (except that representations and warranties made as of a specific
date shall continue to be true and correct as at such date). The Company shall
have performed and satisfied all covenants and agreements required by this
Agreement to be performed or satisfied prior to the Closing. The Company shall
have furnished to the Investors an unqualified certificate, dated the Closing
Date, to the effect that the conditions specified in this Section 7.1 have been
satisfied.
7.2 No Material Adverse Change. Without limiting the generality of
--------------------------
Section 7.1, since the Balance Sheet Date, no Material Adverse Effect shall have
occurred, nor shall any event or events have occurred which could reasonably be
expected in the aggregate to have a Material Adverse Effect.
7.3 Consents, Approvals, etc. To the extent required thereunder, the
-------------------------
Company shall have secured written consents or waivers under all Contractual
Obligations in a manner reasonably satisfactory in form and substance to the
Investors, necessary to permit the consummation of the transactions contemplated
hereby or otherwise reasonably requested by the Investors. The Company shall
have caused to have been obtained or made and be in full force and effect all
approvals, consents, waivers, authorizations and other orders of, and
declarations, filings, registrations, qualifications and recordings with, any
Governmental Authority (the "Government Approvals") necessary to be obtained or
made by the Company, in order to permit the consummation of the transactions
contemplated hereby or otherwise reasonably requested by the Investors.
7.4 Transaction Agreements. The parties thereto, other than the
----------------------
Investors, shall have executed and delivered the Stockholders Agreement,
Registration Rights Agreement, each Investor Put Agreement and each Call Right
Agreement. The Company shall have filed the Amended and Restated Articles of
Incorporation. Existing Stockholders (other than Barry Raymond and Jerry
Connolly) who hold Class A Common Stock of RK Holdings' immediately prior to the
Closing which represents at least 80% of the outstanding Class A Common Stock of
RK Holdings immediately prior to the Closing (assuming the redemption of all
common stock held by Barry Raymond and Jerry Connolly) shall have executed and
delivered the Stockholders Agreement.
7.5 Indebtedness. All obligations of the Company in respect of Debt
------------
outstanding immediately prior to the closing shall be prepaid in full by the
Company.
7.6 Litigation. No action or proceeding shall have been instituted at
----------
or prior to the Closing before any court, arbitrator or other governmental body
by any Person or instituted or
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<PAGE>
threatened by any Governmental Authority, relating to this Agreement or any of
the transactions contemplated hereby or against the Company, any Existing
Stockholder or any Investor, the result of which could prevent or make illegal
the consummation of any such transaction or could otherwise have a material
adverse effect on any Investor or have a Material Adverse Effect.
7.7 Corporate Proceedings. All corporate proceedings, including the
---------------------
Reorganization of the Company described in the Preamble, required to be taken on
the part of the Company in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory to the Investors. The Investors
shall have received copies of officers' certificates, secretary's certificates,
good standing certificates, incumbency certificates and other customary closing
documents as the Investors may reasonably request in connection with the
transactions contemplated hereby.
7.8 Opinion of Counsel. The Company shall have furnished the Investors
------------------
with a favorable opinion of Pepper Hamilton, LLP in form and substance
reasonably satisfactory to each Investor or its counsel.
7.9 Redemption of Stock. The Company shall have redeemed all the
-------------------
capital stock owned by Barry Raymond and Jerry Connolly pursuant to the Raymond
Redemption Agreement and the Connolly Redemption Agreement for an aggregate
price of $7,338,564 on terms reasonably satisfactory to the Investors.
7.10 Financing. The Company shall have obtained a firm commitment letter
---------
from Fleet National Bank for a senior credit facility in a minimum principal
amount of $10 million in a form and on terms reasonably satisfactory to
Parthenon.
7.11 Management Agreement. The Company and Parthenon Capital, Inc. shall
--------------------
enter into a Management Agreement in substantially the form of Exhibit G
attached hereto.
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE COMPANY.
The obligation of the Company to consummate the transactions contemplated
by this Agreement and complete the Closing are subject to the satisfaction, at
or prior to the Closing, of all of the following conditions, compliance with
which, or the occurrence of which, may be waived prior to the Closing in writing
by the Company in its sole discretion:
8.1 Representations, Warranties and Covenants. All representations and
-----------------------------------------
warranties of the Investors contained in this Agreement shall be true and
correct as of the Closing with the same force and effect as if made at and as of
the Closing (except that representations and warranties made as of a specific
date shall continue to be true and correct as at such date). Each Investor
shall have performed and satisfied all covenants and agreements required by this
Agreement to be performed or satisfied by such Investor at or prior to the
Closing. Each Investor
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<PAGE>
shall have furnished to the Company an unqualified certificate, dated the
Closing Date, to the effect that the conditions specified in this Section 8.1
have been satisfied.
8.2 Consents, Approvals, etc. Each Investor shall have secured written
-------------------------
consents or waivers under all Contractual Obligations of such Investor, in a
manner reasonably satisfactory in form and substance to the Company, necessary
to permit the consummation of the transactions contemplated hereby or otherwise
reasonably requested by the Company. Each Investor shall have caused to have
been obtained or made and be in full force and effect all Government Approvals
necessary to be obtained or made by such Investor, in order to permit the
consummation of the transactions contemplated hereby or otherwise reasonably
requested by the Company.
8.3 Transaction Agreements. Each Investor shall have executed and
----------------------
delivered the Stockholders Agreement and each of Parthenon, Shad Run and TSG
shall have executed and delivered a Call Right Agreement.
8.4 Corporate Proceedings. All partnership or limited liability company
---------------------
proceedings required to be taken on the part of each Investor in connection with
the transactions contemplated by this Agreement shall be reasonably satisfactory
to the Company. The Company shall have received copies of officers'
certificates, secretary's certificates, good standing certificates, incumbency
certificates and other customary closing documents as the Company may reasonably
request in connection with the transactions contemplated hereby.
8.5 Opinion of Counsel. Parthenon Investors shall have furnished the
------------------
Company with a favorable opinion of Ropes & Gray in form and substance
reasonably satisfactory to the Company or its counsel.
9. INDEMNIFICATION.
9.1 Indemnification. Subject to the limitations set forth in this
---------------
Section 9, the Company shall indemnify and hold harmless, to the fullest extent
permitted by law, the Investors, their officers, directors, employees, agents
and Affiliates (collectively, the "Investor Indemnitees"), from, against and in
respect of any Losses arising from or related to any of the following:
9.1.1 any breach or default in performance by the Company of
any covenant or agreement contained in this Agreement or any
Transaction Agreement; and
9.1.2 any breach of any representation or warranty made by the
Company in this Agreement, any Transaction Agreement or in any
certificate, instrument or other document delivered by or on behalf
of the Company pursuant hereto or thereto (as each such
representation or warranty would read if all qualifications as
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<PAGE>
to materiality (including without limitation in the definition of
Material Adverse Effect) were deleted therefrom).
9.2 Limitations. The Company shall not have any obligation to indemnify
-----------
any Investor Indemnitee pursuant to Section 9.1 unless and until the aggregate
of all such individual Losses incurred or sustained by all Investor Indemnitees
in respect of Section 9.1 exceeds $150,000, whereupon the Company shall be
obligated in respect of all such Losses; provided, however, that the foregoing
-------- -------
limitation shall not apply to Losses arising from (a) any claim with respect to
the representations and warranties contained in Section 4.2 or (b) any claim
based upon fraud or intentional misrepresentation.
9.3 Nature and Survival of Claims; Time Limits. All representations and
------------------------------------------
warranties made herein or in any Transaction Agreement or pursuant hereto or
thereto or in connection with the transactions contemplated hereby and thereby
shall, regardless of any investigation made at any time by or on behalf of any
party hereto or of any information any party may have in respect thereof,
survive the Closing and continue in effect until the thirty-sixth (36th) month
anniversary of the Closing Date except for representations and warranties
contained in Sections 4.2 and 5.3, which will continue in full force and effect
indefinitely, and except for the representations and warranties contained in
Section 4.5, 4.15, 4.16 and 4.17.3 which shall survive until sixty (60) days
following the expiration of the applicable statute of limitations. Any claim for
indemnification pursuant to this Section 9 as a result of any breach of
representation or warranty must be made within the period of time during which
such representation or warranty survives the Closing. Any claim described in the
preceding sentence made within the applicable time period (and, to the extent of
such claim, any representation or warranty upon which such claim is based) shall
survive thereafter until such claim is finally resolved. For purposes of this
Section 9, any claim for indemnification shall be duly made by giving written
notice of such claim to the Company. The covenants and agreements of the parties
set forth in this Agreement shall survive indefinitely.
10. DEFINITIONS.
10.1 Cross Reference Table. The following terms defined elsewhere in
---------------------
this Agreement in the Sections set forth below shall have the respective
meanings therein defined:
Term Definition
---- ----------
"Affiliate Relationships" Section 4.14
"Agreement" Preamble
"Assets" Section 4.4
"Cash Adjustment" Section 2.4
"Cash Investment" Section 2.1
"Cash Warrants" Recitals
"Class A Common Stock" Recitals
"Class A Warrants" Recitals
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<PAGE>
"Class B Common Stock" Recitals
"Class B Warrants" Recitals
"Closing" Section 3.1
"Closing Date" Section 3.1
"Company" Preamble
"Connolly Redemption Agreement" Recitals
"Exclusivity Period" Section 6.1
"Final Termination Date" Section 11.1
"Financial Advisor" Section 4.25
"Financial Statements" Section 4.3.1
"Government Approvals" Section 7.3
"Government Contract" Section 4.20
"Government Subcontract" Section 4.20
"Hazardous Substance" Section 4.18
"Insurance Policies" Section 4.13
"Intangibles" Section 4.9
"Interim Financials" Section 4.3.1.
"Investor" Preamble
"Investor Warrants" Recitals
"IRS" Section 4.15.4
"Leases" Section 4.7.2
"Losses" Section 9.1
"Pro Formas" Section 4.3.1
"Projections" Section 4.3.1
"Put Right" Recitals
"Purchased Securities" Recitals
"Raymond Redemption Agreement" Recitals
"Reorganization" Recitals
"Seller Warrants" Section 2.2
"Shattan Warrants" Recitals
"Six Month Financials" Section 4.3.1
"Warrant" Recitals
"Year End Financials" Section 4.3.1
10.2 Certain Definitions. The following terms shall have the following
-------------------
meanings:
"1999 Continuing Revenue" shall be calculated based upon amounts included
-----------------------
in the 1999 Financial Statements and shall mean the amount calculated by
subtracting (i) revenue of the Discontinued Businesses from (ii) total revenues
of the Company; provided, however, that revenue of the Discontinued Businesses
-------- -------
referred to in (i) shall not include the revenue of Discontinued Businesses that
are accounted for as discontinued operations in accordance with GAAP.
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"1999 Financial Statements" shall mean the audited combined financial
-------------------------
statements as of and for the year ended December 31, 1999, together with the
footnotes thereto and the unqualified report thereon by the Company's
independent accountants. The audited combined financial statements as of and
for the year ended December 31, 1999 are to be prepared in accordance with GAAP,
consistently applied in relation to the Financial Statements.
The Company's independent accountants for the purposes of the 1999
Financial Statements shall be a "Big Five" public accounting firm.
"Action" shall mean any action, cause of action or suit (in contract or
------
tort or otherwise), arbitration or other proceeding by or before any
Governmental Authority.
"Adjusted EBITDA" shall mean EBITDA:
---------------
(i) plus or minus the amount of EBITDA of the Discontinued Businesses to
the extent that EBITDA has been reduced or increased, respectively,
thereby. The amount of EBITDA of the Discontinued Businesses must be
calculated in accordance with GAAP, on a basis that is consistent
with the preparation of the Financial Statements and 1999 Financial
Statements, and in a manner that is consistent with the Company's
historical calculations of EBITDA of the Discontinued Businesses.
Only expenses directly attributable to the Discontinued Businesses
should be included in the calculation of EBITDA; in no event shall
any allocations of general corporate or other expenses be included
in such calculation;
(ii) plus a pro forma adjustment of $200,000, representing Barry
Raymond's 1999 annual compensation;
(iii) plus or minus adjustments (i) to eliminate the effects of expenses
which were excessive or insufficient in prior periods and (ii) to
eliminate the effects of policies or approaches used in preparation
of the December 31, 1999 audited financial statements that are
different from historic practices or future practices of the
Company.
"Affiliate" shall mean, as to any specified Person at any time, (i) each
---------
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with, such specified Person at such time, (ii) each
Person who is or has been within two years prior to the time in question an
officer, director or direct or indirect beneficial holder of at least 5% of any
class of the outstanding capital stock or other equity interests of such
specified Person and the Members of the Immediate Family of each such officer,
director or holder, and (iii) each Person of which such specified Person or an
Affiliate (as defined in clauses (i) or (ii) above) thereof shall, directly or
indirectly, beneficially own at least 5% of any class of outstanding capital
stock or other evidence of beneficial interest at such time; provided, however,
-------- -------
that from and after the
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Closing, the Company, the Existing Stockholders and each of their Affiliates
shall be deemed not to be Affiliates of the Investor, and the Investor shall be
deemed not to be an Affiliate of the Company or the Existing Stockholders and
such Persons, for any purposes of this Agreement. With respect to any natural
Person, "Affiliate" shall also include without limitation Members of the
Immediate Family of such natural Person.
"Balance Sheet Date" shall mean June 30, 1999.
------------------
"Business" shall mean the business of the Company, including, without
--------
limitation, as such business is reflected in the Offering Memorandum.
"By-laws" shall mean by-laws and other similar provisions (other than the
-------
Charter) relating to the management, governance or internal regulation of a
Person (other than an individual) or interpretative of the Charter of such
Person, each as from time to time in effect.
"Call Right Agreement" shall mean a Call Right Agreement dated the Closing
--------------------
Date between the Company and each of Parthenon, Shad Run and TSG substantially
in the form attached hereto as Exhibit H.
"Charter" shall mean the certificate or articles of incorporation or
-------
organization, operating agreement, statute, constitution, joint venture or
partnership agreement or articles or other charter or governing documents of any
Person (other than an individual), each as from time to time in effect.
"Code" shall mean the federal Internal Revenue Code of 1986 or any
----
successor statute, and the rules and regulations thereunder, and in the case of
any referenced section of any such statute, rule or regulation, any successor
section thereto, collectively and as from time to time amended and in effect.
"Compensation," as applied to any Person, shall mean all salaries,
------------
compensation, remuneration or bonuses, and all retirement, vacation, insurance
or other fringe benefits paid or provided, directly or indirectly, by the
Company to such Person or Members of the Immediate Family of such Person.
"Contractual Obligation" shall mean, with respect to any Person, any
----------------------
contract, agreement, understanding, deed, mortgage, lease, license, commitment,
undertaking, arrangement or understanding, written or oral, or other document or
instrument, excluding the Charter and By-laws of such Person, to which or by
which such Person is a party or otherwise subject or bound or to which or by
which any property or right of such Person is subject or bound.
"Debt" of any Person means all obligations of such Person (i) for borrowed
----
money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii)
for the deferred purchase price of goods or services (other than trade payables
or accruals incurred in the Ordinary Course of
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Business), (iv) under capital leases and (v) in the nature of Guarantees of the
obligations described in clauses (i) through (iv) above of any other Person.
"Discontinued Businesses" shall mean (i) the business of developing,
-----------------------
marketing, licensing, installing and maintaining the searcher software product,
which the Company refers to as its searcher business, (ii) the business of
supplying customers with light industrial and clerical workers on a temporary
basis, which the Company refers to as its temporary staffing business, (iii) the
business of performing contingency and retainer-based searches for physical
therapists for the home health industry, which the Company refers to as its home
health business, (iv) the business of implementing enterprise resource planning
software in Puerto Rico, and (v) the permanent placement revenue and expenses
directly generated by Lamb, Dimke, Brooks and Zemper. Notwithstanding this
definition, none of these businesses will be considered Discontinued Businesses
for purposes of calculating Adjusted EBITDA if these businesses have not been
---
disposed of or otherwise shutdown by February 28, 2000.
"Distribution" shall mean, with respect to the capital stock of or other
------------
evidence of beneficial interest in any Person, (i) the declaration or payment of
any dividend on or in respect of any shares of any class of such capital stock
or beneficial interest; (ii) the purchase, redemption or other retirement of any
shares of any class of such capital stock or beneficial interest, directly, or
indirectly through a Subsidiary or otherwise; (iii) any other distribution on or
in respect of any shares of any class of such capital stock or beneficial
interest, or on or in respect of any stock appreciation or similar right, and
(iv) any payment or other transfer of all or any part of any interest in any
asset to any Affiliate, other than the Company.
"Employee Plan" shall mean any plan, program, agreement, policy or
-------------
arrangement (a "plan"), whether or not reduced to writing, that is (i) a welfare
benefit plan within the meaning of Section 3(1) of ERISA (a "Welfare Plan");
(ii) a pension benefit plan within the meaning of Section 3(2) of ERISA (a
"Pension Plan"); (iii) a stock bonus, stock purchase, stock option, restricted
stock, stock appreciation right or similar equity-based plan; or (iv) any other
deferred-compensation, retirement, welfare-benefit, bonus, incentive or fringe-
benefit plan.
"Enforceable" shall mean, with respect to any Contractual Obligation stated
-----------
to be Enforceable by or against any Person, that such Contractual Obligation is
a legal, valid and binding obligation enforceable by or against such Person in
accordance with its terms, except to the extent that enforcement of the rights
and remedies created thereby is subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application
affecting the rights and remedies of creditors and to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
"ERISA" shall mean the federal Employee Retirement Income Security Act of
-----
1974 or any successor statute, and the rules and regulations thereunder, and in
the case of any referenced section of any such statute, rule or regulation, any
successor section thereto, collectively and as from time to time amended and in
effect.
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"Existing Stockholders" shall mean all stockholders and optionholders of
---------------------
the Company (other than the Investors) at the time of the Closing, it being
understood that Barry Raymond and Jerry Connolly will not be stockholders of the
Company at the time of Closing.
"GAAP" shall mean United States generally accepted accounting principles as
----
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in other such
statements by such other entity as have been approved by a significant segment
of the accounting profession, as in effect for the relevant time period.
"Governmental Authority" shall mean any U.S. Federal, state or local or any
----------------------
foreign government, governmental authority, regulatory or administrative agency,
board, governmental commission, court or tribunal (or any department, bureau or
division thereof) or any arbitral body.
"Government Order" shall mean any order, writ, judgment, injunction,
----------------
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Guarantee" shall mean (i) any guarantee of the payment or performance of,
---------
or any contingent obligation in respect of, any indebtedness or other obligation
of any other Person, (ii) any other arrangement whereby credit is extended to
one obligor on the basis of any promise or undertaking of another Person (A) to
pay the indebtedness of such obligor, (B) to purchase any obligation owed by
such obligor, (C) to purchase or lease assets (other than inventory in the
ordinary course of business) under circumstances that would enable such obligor
to discharge one or more of its obligations, or (D) to maintain the capital,
working capital, solvency or general financial condition of such obligor, and
(iii) any liability as a general partner of a partnership or as a venturer in a
joint venture in respect of indebtedness or other obligations of such
partnership or venture.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
"Investment" shall mean (i) any share of capital stock, partnership or
----------
other equity interest, evidence of indebtedness or other security issued by any
other Person, (ii) any loan, advance, prepayment or extension of credit to, or
contribution to the capital of, any other Person (other than the creation of
receivables which comply with the provisions of Section 4.5 hereof), (iii) any
acquisition of a business of any other entity or (iv) any commitment or option
to make any Investment.
"Investor Put Agreement" shall mean an Investor Put Agreement dated the
----------------------
Closing Date between the Company and each of Parthenon, Shad Run and TSG
substantially in the form of Exhibit I.
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"Knowledge" shall mean, with respect to a Person, the knowledge after
---------
reasonable inquiry of the specified Person. In the case of the knowledge of the
Company, knowledge shall include the knowledge after reasonable investigation of
Rudy Karsan, Barry Raymond, Bill Erickson, Don Volk, Elliot Clark, Tom Connolly,
Greg Gunther, Kevin Hudson, Troy Kanter, Grant Parker, and Anita Sakuru.
"Legal Requirement" shall mean any federal, state, local or foreign law,
-----------------
statute, standard, ordinance, code, order, rule, regulation, resolution or
promulgation, or any order, judgment or decree of any Governmental Authority, or
any license, franchise, permit or similar right granted under any of the
foregoing, or any similar provision having the force and effect of law.
"Lien" shall mean any mortgage, pledge, lien, security interest, charge,
----
claim, equity, encumbrance, restriction on transfer, conditional sale or other
title retention device or arrangement (including, without limitation, a capital
lease), transfer for the purpose of subjection to the payment of any
indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
--------
however, that the term "Lien" shall not include (i) statutory liens for Taxes to
-------
the extent that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the use of real property if the same do not detract
from the value of such property or impair its use in the Business as currently
conducted, (iii) statutory or common law liens to secure landlords, lessors or
renters under leases or rental agreements confined to the premises rented to the
extent that no payment or performance under any such lease or rental agreement
is in arrears or is otherwise due, (iv) deposits or pledges made in connection
with, or to secure payment of, worker's compensation, unemployment insurance,
old age pension programs mandated under applicable Legal Requirements or other
social security (v) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, statutory or common law liens to secure
claims for labor, materials or supplies and other like liens, which secure
obligations to the extent that payment thereof is not in arrears or otherwise
due and (vi) restrictions on transfers of securities imposed by applicable state
and federal securities laws.
"Material Adverse Effect" shall mean a material adverse effect on the
-----------------------
business, operations, assets, prospects, or condition, financial or otherwise,
of the Company.
"Members of the Immediate Family," with respect to any individual, shall
-------------------------------
mean each spouse, parent, aunt, uncle, brother, sister or child of such
individual, each spouse of any such Person, each child of any of the
aforementioned Persons, each trust created in whole or in part for the benefit
of one or more of the aforementioned Persons and each custodian or guardian of
any property of one or more of the aforementioned Persons.
"Offering Memorandum" means the Company's Confidential Private Placement
-------------------
Memorandum dated September 1999 for the Class B Common Stock With Warrants of RK
Holdings.
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<PAGE>
"Ordinary Course of Business" shall mean the ordinary course of business
---------------------------
consistent with past custom and practice (including, without limitation, with
respect to quantity, timing and frequency).
"Person" shall mean any individual, partnership, corporation, limited
------
liability company, association, trust, joint venture, unincorporated
organization or other entity, and any government, governmental department or
agency or political subdivision thereof.
"Plan" shall mean any Employee Plan to which the Company contributes or is
----
obligated to contribute, or under which the Company has or may have any
liability for contributions, premiums or benefits, or which benefits any current
or former employee director or independent contractor of the Company or the
beneficiaries of any such person.
"Registration Rights Agreement" shall mean the Registration Rights
-----------------------------
Agreement dated the Closing Date among the Company and the Investors
substantially in the form attached hereto as Exhibit J.
"Stockholders Agreement" shall mean the Stockholders Agreement dated the
----------------------
Closing Date among the Company, the Investors, the Existing Stockholders who
hold Class A Common Stock immediately prior to the Closing which represents at
least 80% of the outstanding Class A Common Stock immediately prior to the
Closing (assuming the redemption of all common stock held by Barry Raymond and
Jerry Connolly, substantially in the form attached hereto as Exhibit K.
"Subsidiary" shall mean any Person of which any other specified Person
----------
shall own directly or indirectly through a Subsidiary, a nominee arrangement or
otherwise at least a majority of the outstanding capital stock (or other shares
of beneficial interest) entitled to vote generally or at least a majority of the
partnership, joint venture or similar interests, or in which any other specified
Person is a general partner or joint venturer without limited liability.
"Tax or Taxes" shall mean any foreign, federal, state or local income,
------------
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real or personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Liability" shall mean any Tax or Taxes owed by the Company or by any
-------------
company acquired by the Company through merger prior to the date hereof and/or
any Tax or Taxes owed as a result of the Company's acquisition of any of the
aforementioned companies.
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<PAGE>
"Tax Return" shall mean all federal, state, local and foreign Tax returns,
----------
Tax reports, claims for refund of Tax and declarations of estimated Tax, or
other statement relating to Taxes and any schedule or attachments to any of the
foregoing.
"Transaction Agreements" shall mean this Agreement, the Stockholders
----------------------
Agreement, the Registration Rights Agreement, the Call Right Agreements, the
Investor Put Agreements, the Investor Warrants, and the Company's Amended and
Restated Articles of Incorporation.
11. TERMINATION.
11.1 Termination of Agreement. This Agreement may be terminated by the
------------------------
parties only as provided below:
(a) Parthenon may terminate this Agreement by giving written
notice to the Company at any time prior to the Closing in the
event there has been a material breach of any representation or
warranty made by the Company in this Agreement (including,
without limitation, the Schedules hereto) or a material breach by
the Company of any covenant or agreement made in, or any duty
with respect to, this Agreement (including, without limitation,
the Schedules hereto).
(b) The Company may terminate this Agreement by giving
written notice to the Investors at any time prior to the Closing
in the event there has been a material breach of any
representation or warranty made by the Investors in this
Agreement (including, without limitation, the Schedules hereto)
or a material breach by the Investors of any covenant or
agreement made in, or any duty with respect to, this Agreement
(including, without limitation, the Schedules hereto).
(c) The Investors may terminate this Agreement by giving
written notice to the Company at any time after 5:00 p.m. on
December 31 (the "Final Termination Date") but prior to the
Closing if the Closing shall not have occurred by such time by
reason of the failure of any condition set forth in Section 7
hereof to be satisfied (unless the failure results primarily from
one or more breaches or violations of this Agreement by the
Investor or inaccuracies in representations of the Investors
hereunder).
(d) The Company may terminate this Agreement by giving
written notice to the Investors at any time after 5:00 p.m. on
the Final Termination Date but prior to the Closing if the
Closing shall not have occurred by such time by reason of the
failure of any condition set forth in Section 8 hereof to be
satisfied (unless the failure results primarily from one or more
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<PAGE>
breaches or violations of this Agreement by the Company or
inaccuracies in representations of the Company hereunder).
11.2 Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 11.1, all obligations of the parties hereunder
shall terminate without any liability of any party to any other party; provided,
--------
however, that no termination of this Agreement shall relieve any party of
-------
liabilities in respect of any breaches or violations of this Agreement or any
duty with respect hereto by such party or any inaccuracies in any
representations by such party hereunder prior to termination.
12. MISCELLANEOUS.
12.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic substantive laws of the Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule that would cause the application of the laws of any other jurisdiction.
12.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties with respect to such
subject matter.
12.3 Amendment or Waiver. The parties hereto may not amend, modify or
-------------------
waive any provision of this Agreement except by a written instrument executed by
the Investor and the Company. No waiver of any provision of this Agreement (a)
shall be deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar), (b) shall constitute a continuing waiver unless
otherwise expressly provided therein or (c) shall be effective unless in
writing.
12.4 Notices. Any notices or other communications required or permitted
-------
hereunder shall be effective if in writing and delivered personally or sent by
overnight courier addressed as follows:
If to the Company to Raymond Karsan Holdings, Inc.
170 South Warner Road
Wayne, PA 19087
Attention: Nooruddin S. Karsan
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<PAGE>
With a copy to: Pepper Hamilton LLP
3000 Two Logan Square
Philadelphia, PA 19103-2799
Attention: Barry Abelson
If to Parthenon to: Parthenon Investors, L.P.
200 State Street
Boston, MA 02109
Attention: Archie Jones
With a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Attention: Daniel S. Evans
If to Shad Run: Shad Run Investments, Inc.
3512 Clay Street
San Francisco, CA 94118
Attention: Sara M. Hendrickson
With a copy to: Haythe & Curley
237 Park Avenue
New York, NY 10017
Attention: Andrew J. Beck
If to TSG Co-Investors, TSG Co-Investors, LLC
Shattan, Thomas S. Shattan, The Shattan Group, LLC
Gregory E. Mendel or Thomas S. Shattan
G. Kevin Fechtmeyer to: Gregory E. Mendel
G. Kevin Fechtmeyer
590 Madison Avenue
New York, NY 10022
Attention: G. Kevin Fechtmeyer
With a copy to: Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, NY 10022
Attn: Robert Londin
Unless otherwise specified herein, such notices or other communications shall be
deemed effective (a) on the date delivered, if delivered personally or (b) one
business day after being sent by overnight courier, if sent by overnight
courier. Each of the parties hereto shall be entitled to specify a different
address by giving notice as aforesaid to each of the other parties hereto.
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12.5 Survival, etc. All representations, warranties, covenants and
--------------
agreements made by or on behalf of any party hereto in this Agreement
(including, without limitation, the Schedules hereto), or pursuant to any
document, certificate, financial statement or other instrument referred to
herein or delivered in connection with the transactions contemplated hereby,
shall be deemed to have been material, of independent significance and relied
upon by the parties hereto, notwithstanding any investigation made by or on
behalf of any of the parties hereto or any opportunity therefor or any actual or
constructive knowledge thereby obtained, and shall survive the execution and
delivery of this Agreement and the Closing as provided herein (subject to
Section 9.3 hereof).
12.6 Headings, etc. Section and subsection headings are included solely
--------------
for convenience, are not intended to be full or accurate descriptions of the
content thereof and shall not affect the construction hereof. This Agreement
shall be deemed to express the mutual intent of the parties, and no rule of
strict construction shall be applied against any party.
12.7 Schedules; Listed Documents, etc. Neither the listing nor
---------------------------------
description of any item, matter or document in any Schedule hereto nor the
furnishing or availability for review of any document shall be construed to
modify, qualify or disclose an exception to any representation or warranty of
any party made herein or in connection herewith, except to the extent that such
representation or warranty specifically refers to such Schedule and such
modification, qualification or exception is clearly described in such Schedule.
The parties hereto intend that each representation, warranty, covenant and
agreement contained herein shall have independent significance. If any party has
breached any representation, warranty, covenant or agreement contained herein in
any respect, the fact that there exists another representation, warranty,
covenant or agreement relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the fact that such party is in breach of the first
representation, warranty, covenant or agreement.
12.8 Transfer Taxes. The Company shall pay any stock transfer Taxes, real
--------------
property transfer Taxes, sales Taxes, documentary stamp Taxes, recording charges
and other similar Taxes arising under any Legal Requirement in connection with
the transactions contemplated hereby on the Closing Date.
12.9 Severability. In the event that any provision hereof would, under
------------
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted by applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
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<PAGE>
12.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
12.11 Certain Costs and Expenses. In the event that the transactions
--------------------------
contemplated by this Agreement and the other Transaction Agreements shall be
consummated, the Company agrees to pay, on demand, all future reasonable out-of-
pocket expenses and costs of the Investor (including reasonable attorney and
other professional fees and expenses) incurred in connection with its investment
in the Purchased Securities, including without limitation in connection with (a)
any amendment or waiver of, or consent under, this Agreement or any other
Transaction Agreement (whether or not the same becomes effective), or the
Investors' consideration of the same, (b) the service by employees of the
Investors on the Board of Directors of the Company or the provision of any
consulting, advisory or other services to the Company and (c) the exercise or
performance, or the preservation or enforcement, of its rights under this
Agreement or any other Transaction Agreement.
12.12 Successors and Assigns. All of the terms and provisions of this
----------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective transferees, successors and assigns (each of which
shall be deemed to be a party hereto for all purposes hereof); provided,
--------
however, that (a) no party may transfer or assign any of its rights or
-------
obligations hereunder without the consent of the other party, and (b) no
transfer or assignment by any party shall relieve such party of any of its
obligations hereunder, provided, further however, that each Investor may assign
-------- ------- -------
all or part of its rights hereunder to any co-investment fund or Affiliate, and
provided, further however, that effective upon or after the Closing, the Company
-------- ------- -------
may transfer or assign its rights or obligations hereunder to the lender or
lenders who provide financing in connection with the transactions contemplated
hereby. Except as expressly provided herein, this Agreement shall not confer
any right or remedy upon any Person other than the parties and their respective
transferees, successors and assigns.
12.13 Set-Off. Amounts owing by one party hereto to another party hereto
-------
under any provision of this Agreement (including without limitation Section 9)
or any other Transaction Agreement may be set-off against any amounts owing by
the second party to the first party under any provision of this Agreement
(including without limitation Section 9) or any other Transaction Agreement.
12.14 Consent to Jurisdiction. Each party to this Agreement, by its
-----------------------
execution hereof, (a) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the non-exclusive jurisdiction of the state
courts of the Commonwealth of Pennsylvania or the United States District Court
located in the District of Pennsylvania for the purpose of any action, claim,
cause of action or suit (in contract, tort or otherwise), inquiry, proceeding or
investigation arising out of or based upon this Agreement or relating to the
subject matter hereof, (b) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert by way of motion, as a defense or
otherwise, in any such action, any claim that it is not subject personally to
the
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<PAGE>
jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such proceeding brought in one of
the above-named courts is improper, or that this Agreement or the subject matter
hereof may not be enforced in or by such court, and (c) hereby agrees not to
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each party hereby consents to service of process in any such
proceeding in any manner permitted by Pennsylvania law, and agrees that service
of process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 12.4 hereof is reasonably calculated to
give actual notice.
12.15 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
--------------------
LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE)
ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION,
CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY,
PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OF ANY
TRANSACTION AGREEMENT OR THE SUBJECT MATTER HEREOF OF THEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. THE COMPANY
ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE INVESTORS THAT THIS SECTION 12.15
CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE INVESTORS ARE RELYING AND WILL
RELY IN ENTERING INTO THIS AGREEMENT, THE TRANSACTION AGREEMENTS AND ANY OTHER
AGREEMENTS RELATING HERETO OR THERETO OR CONTEMPLATED HEREBY OR THEREBY. ANY
PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 12.15
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE
WAIVER OF ITS RIGHT TO TRIAL BY JURY.
-45-
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have hereunto set their hands under seal, as of the date first above
written.
THE COMPANY: RAYMOND KARSAN HOLDINGS, INC.
By: /s/ Nooruddin Karsan
----------------------------------
Name: Nooruddin Karsan
Title: Chief Executive Officer
THE INVESTORS: PARTHENON INVESTORS, L.P.
By: /s/ John Rutherford
----------------------------------
Name: John Rutherford
Title: Managing Director
PCIP INVESTORS, a Delaware general partnership
By: /s/ John Rutherford
----------------------------------
Name: John Rutherford
Title: Partner
JMH PARTNERS CORP.
By: /s/ W. Anthony Brooke
----------------------------------
Name: W. Anthony Brooke
Title: Chairman
SHAD RUN INVESTMENTS, L.P.
By: Shad Run Investments, Inc
General Partner
By: /s/ Sara M. Hendrickson
----------------------------------
Name: Sara M. Hendrickson
Title: President
-46-
<PAGE>
TSG CO-INVESTORS, LLC
By: /s/ G. Kevin Fechtmeyer
----------------------------------
Name: G. Kevin Fechtmeyer
Title: Vice President
THE SHATTAN GROUP, LLC
By: G. Kevin Fechtmeyer
----------------------------------
Name: G. Kevin Fechtmeyer
Title: Managing Director
THOMAS S. SHATTAN
/s/ Thomas S. Shattan
-------------------------------------
GREGORY E. MENDEL
/s/ Gregory E. Mendel
-------------------------------------
G. KEVIN FECHTMEYER
/s/ G. Kevin Fechtmeyer
-------------------------------------
-47-
<PAGE>
EXHIBIT A-1
-----------
This warrant and any shares represented by this warrant have not been
registered under the securities act of 1933, as amended, and may not be
transferred, sold or otherwise disposed of except pursuant to an effective
registration under said act or pursuant to an exemption from such
registration.
The voting of the shares of stock issuable pursuant to this warrant, and
the sale, encumbrance or other disposition of such stock and this warrant
are subject to the provisions of a stockholders agreement dated as of
December 16, 1999 (the "stockholders agreement") to which the issuer and
certain of its stockholders are party. Furthermore, such stock and this
warrant may be sold or otherwise transferred only in compliance with the
stockholders agreement. A complete and correct copy of the stockholders
agreement may be inspected at the principal office of the issuer or
obtained from the issuer without charge.
RAYMOND KARSAN HOLDINGS, INC.
Class A-1 Common Stock Purchase Warrant
No. [_] Wayne, Pennsylvania
December 16, 1999
THIS CERTIFIES THAT, for value received, and subject to the conditions on
exercise and other provisions hereinafter set forth, [ ] or
transferees permitted under the Stockholders Agreement (the "Holder"), is
entitled to purchase from Raymond Karsan Holdings, Inc., a Pennsylvania
corporation (the "Company"), under the conditions specified in this Warrant (the
"Warrant"), [ ] shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Class A Common Stock, $0.01 par value per share, of the Company at an initial
exercise price of $0.01 per share (such exercise price, as from time to time
adjusted in accordance with the terms hereof, the "Warrant Price"). Certain
capitalized terms used in this Warrant are defined in Section 14 below.
This Warrant is one of a series of warrants (collectively, the "Warrants")
issued pursuant to clause (b) of Section 2.1 of the Purchase Agreement. A copy
of the Purchase Agreement may be inspected at the principal office of the
Company or obtained from the Company without charge.
1. EXERCISABILITY. Unless earlier terminated pursuant to Section 2, this
Warrant shall become exercisable upon the earliest to occur of the following:
<PAGE>
1.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities of less
than the IRR Hurdle, or (ii) Proceeds on the Purchased Securities of less than
the Proceeds Threshold;
1.2 the consummation of a Sale Transaction that results in (i) an IRR on
the Purchased Securities of less than the IRR Hurdle, or (ii) Proceeds on the
Purchased Securities of less than the Proceeds Threshold;
1.3 the determination by a majority of the Management Stockholders (as
defined in the Stockholders Agreement) that it is not reasonably likely that a
Qualified Public Offering or Sale Transaction will result in (i) an IRR on the
Purchased Securities of at least the IRR Hurdle, and (ii) Proceeds on the
Purchased Securities of at least the Proceeds Threshold; and
1.4 December 16, 2006.
2. TERMINATION. This Warrant shall terminate on the earlier of the following:
2.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities of at
least the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of at least
the Proceeds Threshold;
2.2 the consummation of a Sale Transaction or other sale of Purchased
Securities that results in (i) an IRR on the Purchased Securities of at least
the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of at least the
Proceeds Threshold; and
2.3 the written consent to such termination by the Holders of Warrants to
acquire a majority of the shares of common stock originally subject to the
Warrants.
3. EXERCISE OR CONVERSION OF WARRANT.
3.1 Manner of Exercise or Conversion; Payment.
(a) Exercise. This Warrant may be exercised by the holder
hereof, in whole or in part, during normal business hours on any Business
Day on or prior to the Expiration Date, by surrender of this Warrant to the
Company at its office maintained pursuant to Section 13.2(a) hereof,
accompanied by a subscription in substantially the form attached to this
Warrant (or a reasonable facsimile thereof) duly executed by such holder
and accompanied by payment, in cash or by check payable to the order of the
Company (or by any combination of such methods), in the amount obtained by
multiplying (a) the number of shares of Class A Common Stock (without
giving effect to any adjustment thereof) designated in such subscription by
(b) the Exercise Price, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
-2-
<PAGE>
nonassessable shares of Class A Common Stock determined as provided in
Section 4 hereof.
(b) Conversion. This Warrant may be converted by the holder
hereof, in whole or in part, into shares of Class A Common Stock, during
normal business hours on any Business Day on or prior to the Expiration
Date, by surrender of this Warrant to the Company at its office maintained
pursuant to Section 13.2(a) hereof, accompanied by a conversion notice in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder, and such holder shall thereupon be
entitled to receive a number of duly authorized, validly issued, fully paid
and nonassessable shares of Class A Common Stock equal to the quotient of:
(i) the excess of:
(A) an amount equal to the sum of (x) the product of (aa)
the number of shares of Class A Common Stock determined
as provided in Section 2 hereof which such holder would
be entitled to receive upon exercise of this Warrant
for the number of shares of Class A Common Stock
designated in such conversion notice multiplied by (bb)
the Current Market Price of each such share of Class A
Common Stock so designated and (y) the Current Market
Price of any Other Securities and the fair value of any
other property (determined in good faith by the Board
of Directors of the Company) such holder would be
entitled to receive upon exercise of this Warrant for
the number of shares of Class A Common Stock designated
in such conversion notice
over
(B) an amount equal to (x) the number of shares of Class A
Common Stock (without giving effect to any adjustment
thereof) designated in such conversion notice
multiplied by (y) the Exercise Price
divided by
(ii) such Current Market Price of a share of Class A Common
Stock.
For all purposes of this Warrant (other than this Section 3.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the conversion of this Warrant into Class A Common Stock in
accordance with the terms of this Section 3.1(b).
3.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant
-3-
<PAGE>
shall have been surrendered to the Company as provided in Section 3.1 hereof,
and at such time the Person or Persons in whose name or names any certificate or
certificates for shares of Class A Common Stock shall be issuable upon such
exercise as provided in Section 3.3 hereof shall be deemed to have become the
holder or holders of record thereof.
3.3 Delivery of Stock Certificates, etc. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within
three Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof or as such holder may direct:
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A Common Stock
to which such holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which such holder would otherwise be entitled, cash
in an amount equal to the same fraction of the Market Price per share on
the Business Day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate on the
face or faces thereof for the number of shares of Class A Common Stock
equal to the number of such shares (without giving effect to any adjustment
thereof) called for on the face of this Warrant minus the number of such
shares designated by the holder upon such exercise as provided in Section
3.1 hereof.
4. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
4.1 General; Number of Shares; Warrant Price. The number of shares of
Class A Common Stock which the holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be equal to the product of:
(a) the number of shares of Class A Common Stock which would otherwise
(but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 3.1
hereof, and
(b) a fraction of which (i) the numerator is the Initial Warrant Price,
and (ii) the denominator is the Warrant Price in effect on the date of
such exercise.
The "Initial Warrant Price" shall be the Exercise Price. The "Warrant Price"
shall initially be the Initial Warrant Price, shall be adjusted and readjusted
from time to time as provided in this Section 4 and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 4. The "Trigger Price" shall initially be
$167 per share of Class A Common Stock and shall be adjusted and readjusted from
time to time as provided in this Section 4 and, as so adjusted or readjusted,
shall remain in effect until a further adjustment or readjustment thereof is
required by this Section 4.
-4-
<PAGE>
4.2 Adjustments for Dividends, Distributions, Stock Splits, etc.
(a) Dividends and Distributions. In case at any time or from
time to time, the holders of Class A Common Stock shall have received, or
(on or after the record date fixed for the determination of shareholders
eligible to receive) shall have become entitled to receive, without payment
therefor:
(i) other or additional stock or Other Securities or
property (other than cash) by way of dividend, or
(ii) any cash, or
(iii) other or additional stock or other securities or
property (including cash) by way of spin-off, split-
up, reclassification, recapitalization, combination
of shares or similar corporate rearrangement, other
-----
than additional shares of Class A Common Stock issued
----
as a stock dividend or in a stock-split (adjustments
in respect of which are provided for in Section
4.2(b) below),
then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 3, shall be entitled, without the payment of
any additional consideration or the taking of any further action, to
receive the amount of stock, Other Securities and property (including cash
in the cases referred to in subdivisions (ii) and (iii) of this Section
4.2(a)) which such holder would hold on the date of such exercise if on the
date hereof he had been the holder of record of the number of shares of
Common Stock provided for herein and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such
shares and all such other or additional stock and other securities and
property (including cash in the cases referred to in subdivisions (ii) and
(iii) of this Section 4.2(a)) receivable by him as aforesaid during such
period, giving effect to all adjustments called for during such period by
Section 4.
(b) Treatment of Stock Dividends, Stock Splits, etc. In the
event that the Company shall (i) issue Common Stock Equivalents, or
securities exercisable for or convertible into Common Stock Equivalents, as
a dividend or other distribution on outstanding Common Stock Equivalents,
(ii) subdivide its outstanding Common Stock Equivalents, or (iii) combine
its outstanding shares of Common Stock Equivalents into a smaller number of
shares of Common Stock Equivalents, then, in each such event, the Warrant
Price and the Trigger Price shall, simultaneously with the happening of
such event, be adjusted by multiplying each of the then current Warrant
Price and Trigger Price by a fraction, (a) the numerator of which shall be
the number of shares of Common Stock Equivalents outstanding immediately
prior to such event, and (b) the denominator of which shall be the number
of shares of Common Stock Equivalents outstanding immediately after such
event, and the product so obtained shall thereafter be the Warrant Price
and Trigger Price,
-5-
<PAGE>
respectively, then in effect. The Warrant Price and Trigger Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4.2(b). Upon
each adjustment of the Warrant Price or Trigger Price, the holder of this
Warrant shall thereafter be entitled to purchase at the Warrant Price
resulting from such adjustment, the number of shares obtained by dividing
the product of the number of shares purchasable pursuant hereto immediately
prior to such adjustment and the Warrant Price immediately preceding such
adjustment by the Warrant Price resulting from such adjustment.
4.3 Reorganization, Consolidation or Merger. In case at any time or from
time to time the Company shall (a) effect a reorganization, (b) consolidate with
or merge into any other person, (c) voluntarily or involuntarily dissolve,
liquidate or wind-up, or (d) transfer all or substantially all of its properties
or assets to any other person, then in each such case, as a condition thereto,
lawful and adequate provision shall be made so that the holder of this Warrant,
on the exercise or conversion hereof as provided in Section 1 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Class A Common Stock issuable on such exercise immediately prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such reorganization, consolidation, merger or
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustments thereafter as
provided in Section 4.
4.4 Adjustment for Issuance of Common Stock Equivalents Below Trigger
Price.
(a) General. In any case to which Sections 4.2 and 4.3 hereof are
not applicable, where the Company shall issue or sell shares of its Common
Stock Equivalents after December 16, 1999 without consideration or for a
consideration per share less than the Trigger Price in effect pursuant to
the terms of this Warrant at the time of issuance or sale of such
additional shares, except where such shares are issued or sold pursuant to
the exercise of any warrant or option or issued prior to the date of this
Warrant, then the Warrant Price in effect hereunder shall simultaneously
with such issuance or sale be reduced to a price determined by multiplying
the Warrant Price then in effect hereunder by a fraction, the numerator of
which is the sum of (i) the product of the total number of shares of Common
Stock Equivalents outstanding immediately prior to such issuance or sale
multiplied by the Trigger Price in effect hereunder at the time of such
issuance or sale, plus (ii) the aggregate consideration received by the
Company upon such issuance or sale, and the denominator of which is the
product of the total number of shares of Common Stock Equivalents
outstanding immediately after issuance or sale of such additional shares
multiplied by the Trigger Price in effect hereunder at the time of such
issuance.
-6-
<PAGE>
(b) Options; Convertible Securities. In case the Company shall issue
or sell any Options or Convertible Securities after December 16, 1999 there
shall be determined the price per share for which Common Stock Equivalents
are issuable upon the conversion or exercise thereof, such determination to
be made by dividing (i) the sum of the total amount received or receivable
by the Company as consideration for the issue or sale of such Options or
Convertible Securities plus the minimum aggregate amount of additional
consideration payable to the Company upon the conversion or exercise
thereof, by (ii) the maximum number of shares of Common Stock Equivalents
of the Company issuable upon the conversion or exercise of all of such
Options or Convertible Securities. If the price per share so determined
shall be less than the applicable Trigger Price, then, for purposes of
Section 4.4(a) hereof, such issue or sale shall be deemed to be an issue or
sale (as of the date of issue or sale of such Options or Convertible
Securities) of such maximum number of shares of Common Stock Equivalents at
the price per share so determined and such maximum number of shares shall
be deemed to be outstanding after such issuance, provided that, upon the
expiration of such rights of conversion or exercise of such Options or
Convertible Securities, if any thereof shall not have been exercised, the
adjusted Warrant Price shall forthwith be readjusted and thereafter be the
price which it would have been had an adjustment been made on the basis
that the only shares of Common Stock Equivalents so issued or sold were
issued or sold upon the conversion or exercise of such Options or
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
for the issue or sale of all of such Options or Convertible Securities
which shall have been converted or exchanged.
(c) Record Date. If the Company takes a record of the holders of
Common Stock Equivalents for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock Equivalents, Options
or Convertible Securities, or (ii) to subscribe for or purchase Common
Stock Equivalents, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the Common Stock
Equivalents deemed to have been issued or sold upon the declaration of such
dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
4.5 Minimum Adjustment of Warrant Price and Trigger Price. If the amount
of any adjustment of the Warrant Price required pursuant to this Section 4 would
be less than one-tenth (1/10) of one percent (1%) of the Warrant Price or
Trigger Price, as the case may be, in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one tenth (1/10) of one
percent (1%) of such Warrant Price or Trigger Price.
-7-
<PAGE>
4.6 Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 4, treasury shares shall not be deemed to be
outstanding.
4.7 Calculation of Consideration Received. If any Common Stock
Equivalents, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock Equivalents, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Current Market Price thereof as of the date of receipt. For
purposes of this Warrant, the fair value of any consideration other than cash
and securities shall be determined by the board of directors of the Company
using its good faith discretion.
4.8 Integrated Transactions. In case any Options are issued in connection
with the issue or sale of Other Securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued for a consideration of $1.00 (as adjusted consistent to give effect to
the occurrences set forth in Sections 4.2 and 4.3).
5. REPURCHASE OF WARRANTS.
5.1 Right to "Put" Warrant. If a Realization Event shall not have
occurred prior to the fifth anniversary of the date as of which this Agreement
is executed and this Warrant becomes exercisable within six months of such
anniversary, Investor or any other holder of this Warrant may, at any time and
from time to time during the six month period immediately thereafter, by notice
to the Company (the "Put Notice"), elect to sell to the Company (and the Company
hereby, agrees to purchase from Investor or any other such holder), at the Put
Purchase Price specified in Section 5.3(a) hereof, such number of Warrants as
are specified in the Put Notice on the Business Day specified in the Put Notice,
which Business Day shall be not less than 20 days nor more than 30 days after
the receipt by the Company of said Put Notice (the date on which the Company
receives the Put Notice is referred to as the "Put Notice Date"). The right
created by this Section 5.1 shall terminate upon the occurrence of a Realization
Event. Any Warrants not sold to the Company pursuant to this Section 5 shall
automatically convert into Class A Common Stock in accordance with Section
3.1(b) (provided that, for purposes of this Section 5, the Current Market Price
shall be the Market Price (defined below)).
5.2 Realization Event. A "Realization Event" shall mean (a) a Qualified
-----------------
Public Offering, or (b) a transaction in which all of Investor's Warrants and
Other Securities are exchanged either for cash or for Other Securities of
another Person, provided that such Other Securities are traded on a national
securities exchange or the Nasdaq National Market and are not subject to any
-8-
<PAGE>
restrictions under the Securities Act and such Person's outstanding Other
Securities (other than those held by such Person's Affiliates) have an aggregate
public market value of not less than $500 million.
5.3 Purchase Price.
--------------
(a) Put Purchase Price. The purchase price for the Warrants
------------------
purchased by the Company pursuant to this Section 5 (the "Put Purchase
Price") shall be an amount equal to the Market Price (as defined below) on
the relevant Put Notice Date for the number of Other Securities that would
be obtained upon the exercise of the portion of such Warrant being
purchased).
(b) Market Price. "Market Price" shall mean the value on a
------------
specified date of the shares of Class A Common Stock underlying the Warrant
which could be obtained in an initial public offering of such Class A
Common Stock. Within five business days of the Put Notice Date, the holders
of the Warrants shall suggest three investment banking firms, from which
the Company shall select one (the selected firm being the "Arbitrator").
The Arbitrator shall be instructed to determine the Market Price consistent
with the first sentence of this Section 5.3(b), within thirty days from the
Put Notice Date. The expenses of any such Arbitrator shall be shared
equally by the Company and the relevant holder.
5.4 Payments of Put Purchase Price. The Put Purchase Price may be paid in
cash or in subordinated debt of the Company ("Put Notes"). Put Notes shall bear
interest, payable semiannually, at the Prime Rate plus 3.5% and shall have a
term of two years. The principal shall be payable in four equal installments
over the term of the Put Notes. The Company shall use its best efforts to
negotiate all senior debt obligations to permit the payment of any Put Purchase
Price as it becomes due. In the event that payments under the Put Notes or
payment of the Put Purchase Price would cause the Company to be in default of
the terms of its senior indebtedness, such payments can be deferred until the
earlier of (i) the first date on which Company could make such payments without
causing such a default and (ii) the third anniversary of the Put Notice Date.
6. NO IMPAIRMENT. The Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise plus the amount deemed to have been paid
upon issuance of this Warrant, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Class A Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Class A Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
-9-
<PAGE>
7. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in
the shares of Class A Common Stock issuable upon the exercise of this Warrant,
the Company at its expense will promptly compute such adjustment or readjustment
in accordance with the terms of this Warrant and prepare a report setting forth
such adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the number of shares of Class A Common Stock
outstanding or deemed to be outstanding, and (b) the Warrant Price in effect
immediately prior to such issue or sale and as adjusted and readjusted (if
required by Section 4 hereof) on account thereof. The Company will forthwith
mail a copy of each such report to each holder of a Warrant and will, upon the
written request at any time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price and the Trigger Price at the time in
effect and showing in reasonable detail how it was calculated. The Company will
also keep copies of all such reports at its office maintained pursuant to
Section 13.2(a) hereof and will cause the same to be available for inspection at
such office during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the holder thereof.
8. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of
stock of any class or any other securities or property, or to receive
any other right, or
(b) the declaration by the Company of any dividend payable in stock
upon Common Stock Equivalents or any other distribution by the Company
to the holders of Common Stock Equivalents, or
(c) the Company proposing to make an offer for subscription pro
rata to the holders of its Common Stock Equivalents of any additional
shares of stock of any class or other rights, or
(d) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or
any transfer of all or substantially all the assets of the Company to
any other Person, or
(e) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(f) any other action of a type referred to in Section 4 hereof,
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<PAGE>
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Class A
Common Stock shall be entitled to exchange their shares of Class A Common Stock
for the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up and a description in reasonable detail of
the transaction. Such notice shall be mailed at least 45 days prior to the date
therein specified. At no time prior to the date therein specified shall the
Company take any action which could prevent the exercise or conversion of this
Warrant in accordance with the terms hereof.
9. REGISTRATION OF WARRANTS AND COMMON STOCK. If any shares of Class A Common
Stock required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (including without limitation the Hart-Scott-Rodino Antitrust
Improvements Act of 1976) before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. The shares of Class A Common Stock (and Other Securities) issuable upon
exercise of this Warrant shall constitute Registrable Shares (as such term is
defined in the Registration Rights Agreement). Each holder of this Warrant
shall be entitled to all of the benefits afforded to a holder of any such
Registrable Shares under the Registration Rights Agreement. At any such time as
the Class A Common Stock is listed on any national securities exchange or
quotation system, the Company will, at its expense, obtain promptly and maintain
the approval for listing on each such exchange or system, upon official notice
of issuance, the shares of Class A Common Stock issuable upon exercise of the
then outstanding Warrants and will use its best efforts to maintain the listing
of such shares after their issuance at all times when the Class A Common Stock
is so listed.
10. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
December 16, 1999 shall (a) effect a reorganization, (b) consolidate with or
merge with or into any other entity, or (c) transfer all or substantially all of
its properties or assets to any other person or entity, then, in each such case,
the holder of this Warrant, upon the exercise hereof as provided in Section 3 at
any time after the consummation of such reorganization, consolidation, merger or
transfer, as the case may be, shall be entitled to receive, in lieu of the Class
A Common Stock (or Other Securities) issuable upon such exercise prior to such
consummation, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation if such holder
had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4 hereof. The Company shall not
consummate any such reorganization, consolidation, merger or transfer unless the
resulting, surviving or transferee entity, as the case may be, expressly agrees
in writing, reasonably
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<PAGE>
satisfactory to the holders of a majority of the Warrants then outstanding, to
fulfil the Company's obligations under this Warrant and this Section 10.
11. PERFORMANCE OF OBLIGATIONS. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder of this Warrant against dilution or
other impairment to the extent set forth in this Warrant.
12. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Class A Common Stock of each class from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Class A Common Stock issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable.
13. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
13.1 Ownership of Warrants. The Company may treat the person in whose name
Warrant is registered on the register kept at the office of the Company
maintained pursuant to Section 13.2(a) hereof as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, except that, if
and when any Warrant is properly assigned in blank, the Company may (but shall
not be obligated to) treat the bearer thereof as the owner of such Warrant for
all purposes, notwithstanding any notice to the contrary. A Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
13.2 Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office in Wayne, Pennsylvania
where notices, presentations and demands in respect of this Warrant may be
made upon it. Such office shall be maintained at 170 South Warner Road,
Wayne, Pennsylvania 19087 until such time as the Company shall notify the
holders of the Warrants of any change of location of such office within the
United States.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 13.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of holders of Warrants,
the transfers thereof and the names and addresses of transferees of
Warrants shall be registered in such register. The Person in whose name
any Warrant shall be so registered shall be deemed and treated as the owner
and holder
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<PAGE>
thereof for all purposes of this Warrant, and the Company shall not be
affected by any notice or knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 13.2(a) hereof, the Company at its expense
will execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
13.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to Section 13.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
14. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Affiliate: Any Person directly or indirectly controlling, controlled by or
under direct or indirect common control with the Company (or other specified
Person) and shall include (a) any Person who is an officer, director or
beneficial holder of at least 10% of the outstanding capital stock of the
Company (or other specified Person), (b) any Person of which the Company (or
other specified Person) or any officer or director of the Company (or other
specified Person) shall, directly or indirectly, either beneficially own at
least 10% of the outstanding equity securities or constitute at least a 10%
participant, and (c) in the case of a specified Person who is an individual,
Members of the Immediate Family of such Person; provided, however, that the
Investor shall not be an Affiliate of the Company for purposes of this
Agreement.
Arbitrator: As defined in Section 5.3(b).
Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts or New York, New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
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<PAGE>
Class A Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Class A Common Stock shall have been
changed or any stock resulting from any reclassification of such Class A Common
Stock.
Common Stock: Class A and Class B Common Stock, $0.01 par value per share,
of the Company.
Common Stock Equivalents: Any class of common stock of the Company which is
entitled to share ratably with holders of Class A Common Stock in any
distributions including distributions upon the liquidation, dissolution or
winding-up of the Company, and any other class of common stock of the Company
and/or stock of any class into which these shares may hereafter be changed or
any stock resulting from any reclassification of such common stock, provided
that the number of such shares shall, for purposes of the Warrants, be deemed to
equal the actual number of shares of such Common Stock multiplied by the Sharing
Ratio.
Company: As defined in the introduction to this Warrant and shall include
any Person which shall succeed to or assume the obligations of the Company under
the Warrant.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Class A Common Stock) or other securities directly or indirectly
convertible into or exchangeable for shares of Common Stock Equivalents.
Current Market Price: With respect to any security (or other asset), on
any date specified herein, the average daily market price during the period of
the most recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no class of such security is
then listed or admitted to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price shall be the fair value
thereof determined in good faith by the Board of Directors of the Company as of
the specified date. Notwithstanding the foregoing, in the event the Warrant is
exercised in connection with the Company's initial public offering of such
security or Common Stock Equivalents, the Current Market Price per share of such
security or Common Stock Equivalents, as the case may be, shall be equal to the
per share offering price to the public of such security or Common Stock
Equivalents, as the case may be, issued in the initial public offering.
Exercise Price: As defined in the introduction to this Warrant.
Expiration Date: As defined in the introduction to this Warrant.
Initial Warrant Price: As defined in Section 4.1 hereof.
IRR: Shall mean the internal annual rate of return, calculated in a manner
consistent with the "IRR" function in Microsoft Corporation's Excel spreadsheet
software (based on a year of twelve thirty-day months), realized (or deemed to
be realized) by the Holder on its investment
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<PAGE>
pursuant to the Purchase Agreement in the Purchased Securities, such rate of
return to be calculated on (i) the cash outflow consisting of the $22,000,000
paid for the Purchased Securities and (ii) the series of cash inflows consisting
of all amounts realized (or deemed to be realized) by the Holder in respect of
the Purchased Securities. For purposes of such calculation, (A) the cash outflow
and each cash inflow shall be deemed to have occurred on the last day of the
calendar month in which it occurred, (B) except to the extent specifically
provided herein, an amount shall not be treated as a cash inflow unless and
until actually received in cash, (C) securities that are traded on a national
securities exchange or the NASDAQ Stock Market that are received in the sale of
Purchased Securities shall (unless earlier sold for cash) be deemed to result in
a cash inflow on the Resale Day in an amount equal to the Current Market Price
of such securities on such date, (D) Common Stock retained in a Liquidity Event
shall (unless earlier sold for cash) be deemed to result in a cash inflow, on
the later of (i) the date of the Liquidity Event and (ii) if securities were
received in the Liquidity Event, the Resale Day, in an amount equal to the
Current Market Price of such Common Stock on such date, and (E) in the case of a
Qualified Public Offering, upon the Resale Day, the Holder shall be deemed to
have realized a cash inflow equal to the Current Market Price of all Purchased
Securities then held by it.
IRR Hurdle: Shall mean, as of the date the relevant event is consummated,
the amount specified below for such date:
Twelve Months Ended IRR Hurdle
----------
December 17,
-----------
2000 80%
2001 70%
2002 60%
2003 50%
2004 and thereafter 40%
Market Price: As defined in Section 5.3(b).
Members of the Immediate Family: As applied to any individual, means each
parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust created for the benefit of one or more
of such persons and each custodian of a property of one or more such persons.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Class A Common Stock or Convertible
Securities, excluding rights, warrants and options granted on or after the
Original Issue Date, to employees, officers, directors or consultants of the
Company or any subsidiary thereof pursuant to any stock option plan or agreement
adopted by the Board of Directors.
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<PAGE>
Original Issue Date: Means the date on which any shares of Class B Common
Stock, $0.01 par value per share, of the Company first were issued pursuant to
the Purchase Agreement.
Other Securities: Any stock (other than Class A Common Stock) and other
securities, property or assets of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Class A Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Class A Common
Stock or Other Securities pursuant hereto or otherwise.
Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Prime Rate: The rate of interest announced publicly by Fleet National Bank
in Boston, Massachusetts, from time to time, as Fleet National Bank's prime
rate.
Proceeds: Shall mean cash proceeds realized (or deemed to be realized) by
the Holder in respect of the sale of Purchased Securities (or realized in
respect of the sale of securities acquired in respect of the sale of Purchased
Securities); provided, however, that (A) securities received by the Holder that
are traded on a national securities exchange or the NASDAQ Stock Market that are
received in the sale of Purchased Securities shall (unless earlier sold for
cash) be deemed to result in cash proceeds on the Resale Day in an amount equal
to the Current Market Price of such securities on such date, (B) Common Stock
retained in a Sale Transaction shall (unless earlier sold for cash) be deemed to
result in cash proceeds, on the later of (i) the date of the Sale Transaction
and (ii) if securities were received in the Sale Transaction, the Resale Day, in
an amount equal to the Current Market Price of such Common Stock on such date,
and (C) in the case of a Qualified Public Offering, upon the Resale Day,
Parthenon shall be deemed to have realized Proceeds equal to the Current Market
Price of all Purchased Securities then held by it.
Proceeds Threshold: Shall mean, as of the date that the relevant Proceeds
amount is determined, the amount specified below for such date:
Twelve Months Ended Proceeds
December 17, Threshold
----------- ---------
2000 $ 39,600,000
2001 $ 63,800,000
2002 $ 90,200,000
2003 $112,200,000
2004 and thereafter $118,800,000
Purchase Agreement: Shall mean the Class B Common Stock and Warrant
Purchase Agreement dated as of December 16, 1999 by and among the Company, the
Holder, PCIP
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Investors, JMH Partners Corp., Shad Run Investments, L.P., TSG Co-Investors,
L.L.C., The Shattan Group, LLC, Thomas S. Shattan, Gregory E. Mendel and G.
Kevin Fechtmeyer.
Purchased Securities: Shall mean the securities referred to as the Class B
Common Stock and the Class B Warrants in the Purchase Agreement, together with
any other securities of the Company issued upon conversion thereof or in
exchange therefor.
Purchaser: As defined in the introduction to this Warrant.
Put Notes: As defined in Section 5.4.
Put Notice: As defined in Section 5.1.
Put Notice Date: As defined in Section 5.1.
Put Purchase Price: As defined in Section 5.3(a).
Qualified Public Offering: Shall have the meaning provided in Section 1 of
the Stockholders Agreement.
Realization Event: As defined in Section 5.2.
Registration Rights Agreement: The Registration Rights Agreement dated as
of December 16, 1999, in the form of Exhibit J to the Purchase Agreement, as
from time to time in effect.
Resale Day: Shall mean, (i) in the case of a Qualified Public Offering,
any business day more than thirty days after the expiration of any
"underwriter's lockup" or similar resale limitation in connection with such
Qualified Public offering on any applicable securities held by Parthenon and
(ii) in the case of a Sale Transaction other than a Qualified Public Offering
the tenth business day after the first date when all the relevant securities
received in such Liquidity Event are traded on a national securities exchange or
the NASDAQ Stock Market and freely salable under Rule 145 under the Securities
Act of 1933, as amended (or any successor rule), and not subject to any
"pooling," "tax-free reorganization" or similar contractual resale restrictions
entered into in connection with the Sale Transaction.
Sale Transaction: Shall mean (i) any sale or series of sales by the Holder
of at least 90% of the Purchased Securities, whether by merger, consolidation,
recapitalization, share exchange, redemption or otherwise, and (ii) any sale (or
series of sales of assets resulting in) of all or substantially all the assets
of the Company; provided, however, that in the case of a series of sales, the
Sale Transaction shall be deemed to occur on the date of the sale that results
in Parthenon having sold at least 90% of such Purchased Securities, and in the
case of a Sale
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<PAGE>
Transaction in which Parthenon receives securities in respect of the sale of
Purchased Securities, the Resale Date.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations thereunder, all as the same shall be in
effect at the time.
Sharing Ratio: With respect to a Common Stock Equivalent, the ratio of (a)
the distribution payable upon the liquidation and distribution of the Company on
one share of such Common Stock Equivalent to (b) the distribution payable upon
the liquidation and distribution of the Company on one share of Class A Common
Stock.
Stockholders Agreement: The Stockholders Agreement dated as of December
16, 1999, in the form of Exhibit K to the Purchase Agreement, as from time to
time in effect.
Trigger Price: As defined in Section 4.1(a).
Warrant Price: As defined in Section 4.1.
Warrants: As defined in the introduction to this Warrant.
15. REMEDIES. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company 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.
16. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company. Notwithstanding the foregoing,
the officers and Board of Directors of the Company shall have all fiduciary
duties to the holder hereof which such officers and Board of Directors would
have if the holder hereof held the shares of Class A Common Stock obtainable
upon the exercise hereof.
17. NOTICES. Any notice or other communication in connection with this
Warrant shall be deemed to be delivered if in writing (or in the form of a telex
or telecopy to be given only during the recipient's normal business hours unless
arrangements have otherwise been made to receive such notice by telex or
telecopy outside of normal business hours) addressed as hereinafter provided and
if either (x) actually delivered at said address or (y) in the case of a letter,
seven Business Days shall have elapsed after the same shall have been deposited
in the United States mails, postage prepaid and registered or certified: (a) if
to any holder of any Warrant, at the
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<PAGE>
registered address of such holder as set forth in the register kept at the
office of the Company maintained pursuant to Section 13.2(a) hereof; or (b) if
to the Company, to the attention of its President at its office maintained
pursuant to Section 13.2(a) hereof; provided, however, that the exercise of any
Warrant shall be effective in the manner provided in Section 3 hereof.
18. MISCELLANEOUS. Any term of this Warrant may be amended and the observance
of any term of this Warrant may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with (i) the written
consent of the Company and the Holder or (ii) for all Warrants, the written
consent of the Company and the holders of a majority of the Warrants then
outstanding. This Warrant shall be construed and enforced in accordance with
and governed by the domestic substantive laws of the Commonwealth of
Pennsylvania without giving effect to any choice or conflict of law provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction. The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
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<PAGE>
IN WITNESS WHEREOF, Raymond Karsan Holdings, Inc. has caused this Warrant
to be signed by its duly authorized officer under its corporate seal, attested
by its duly authorized officer, and to be dated as of December ____, 1999.
RAYMOND KARSAN HOLDINGS, INC.
[SEAL]
By:________________________
Title:
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________/1/ shares of
the Class A Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: ___________________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________________
(Street Address)
___________________________________________
(City) (State) (Zip Code)
____________________________
/1/ Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
additional shares of Class A Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the Warrant, to the holder surrendering the Warrant.
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<PAGE>
FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
converts such Warrant with respect to __________/1/ shares of the Class A
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to , whose address is .
Dated: ___________________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________________
(Street Address)
___________________________________________
(City) (State) (Zip Code)
____________________________
/1/ Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial conversion, the portion thereof as to which this
Warrant is being converted), in either case without making any adjustment for
additional shares of Class A Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial conversion, a
new Warrant or Warrants will be issued and delivered, representing the
unconverted portion of the Warrant, to the holder surrendering the Warrant.
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<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase __________/1/ shares of Class A Common
Stock of RAYMOND KARSAN HOLDINGS, INC. to which such Warrant relates, and
appoints Attorney to make such transfer on the books of
RAYMOND KARSAN HOLDINGS, INC. maintained for such purpose, with full power of
substitution in the premises.
Dated: ____________________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
____________________________________________
(Street Address)
____________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
__________________________
/1/ Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
additional shares of Class A Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the Warrant, to the holder surrendering the Warrant.
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EXHIBIT A-2
-----------
This warrant and any shares represented by this warrant have not been registered
under the securities act of 1933, as amended, and may not be transferred, sold
or otherwise disposed of except pursuant to an effective registration under said
act or pursuant to an exemption from such registration.
The voting of the shares of stock issuable pursuant to this warrant, and the
sale, encumbrance or other disposition of such stock and this warrant are
subject to the provisions of a stockholders agreement dated as of December 16,
1999 (the "stockholders agreement") to which the issuer and certain of its
stockholders are party. Furthermore, such stock and this warrant may be sold or
otherwise transferred only in compliance with the stockholders agreement. A
complete and correct copy of the stockholders agreement may be inspected at the
principal office of the issuer or obtained from the issuer without charge.
RAYMOND KARSAN HOLDINGS, INC.
Class A-2 Common Stock Purchase Warrant
No. [ ] Wayne, Pennsylvania
December 16, 1999
THIS CERTIFIES THAT, for value received, and subject to the conditions on
exercise and other provisions hereinafter set forth, [ ] or transferees
permitted under the Stockholders Agreement (the "Holder"), is entitled to
purchase from Raymond Karsan Holdings, Inc., a Pennsylvania corporation (the
"Company"), under the conditions specified in this Warrant (the "Warrant"),
[ ] shares (subject to adjustment as hereinafter provided) of the duly
authorized, validly issued, fully paid and non-assessable Class A Common Stock,
$0.01 par value per share, of the Company at an initial exercise price of $0.01
per share (such exercise price, as from time to time adjusted in accordance with
the terms hereof, the "Warrant Price"). Certain capitalized terms used in this
Warrant are defined in Section 14 below.
This Warrant is one of a series of warrants (collectively, the "Warrants")
issued pursuant to clause (b) of Section 2.1 of the Purchase Agreement. A copy
of the Purchase Agreement may be inspected at the principal office of the
Company or obtained from the Company without charge.
1. EXERCISABILITY. Unless earlier terminated pursuant to Section 2, this
Warrant shall become exercisable upon the earliest to occur of the following:
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1.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities of less
than the IRR Hurdle, or (ii) Proceeds on the Purchased Securities of less than
the Proceeds Threshold;
1.2 the consummation of a Sale Transaction that results in (i) an IRR on
the Purchased Securities of less than the IRR Hurdle, or (ii) Proceeds on the
Purchased Securities of less than the Proceeds Threshold;
1.3 the determination by a majority of the Management Stockholders (as
defined in the Stockholders Agreement) that it is not reasonably likely that a
Qualified Public Offering or Sale Transaction will result in (i) an IRR on the
Purchased Securities of at least the IRR Hurdle, and (ii) Proceeds on the
Purchased Securities of at least the Proceeds Threshold; and
1.4 December 16, 2006.
2. TERMINATION. This Warrant shall terminate on the earlier of the following:
2.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities of at
least the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of at least
the Proceeds Threshold;
2.2 the consummation of a Sale Transaction or other sale of Purchased
Securities that results in (i) an IRR on the Purchased Securities of at least
the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of at least the
Proceeds Threshold; and
2.3 the written consent to such termination by the Holders of Warrants to
acquire a majority of the shares of common stock originally subject to the
Warrants.
3. EXERCISE OR CONVERSION OF WARRANT.
3.1 Manner of Exercise or Conversion; Payment.
(a) Exercise. This Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day on or
prior to the Expiration Date, by surrender of this Warrant to the Company
at its office maintained pursuant to Section 13.2(a) hereof, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied
by payment, in cash or by check payable to the order of the Company (or by
any combination of such methods), in the amount obtained by multiplying (a)
the number of shares of Class A Common Stock (without giving effect to any
adjustment thereof) designated in such subscription by (b) the Exercise
Price, and such holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and
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nonassessable shares of Class A Common Stock determined as provided in
Section 4 hereof.
(b) Conversion. This Warrant may be converted by the holder hereof,
in whole or in part, into shares of Class A Common Stock, during normal
business hours on any Business Day on or prior to the Expiration Date, by
surrender of this Warrant to the Company at its office maintained pursuant
to Section 13.2(a) hereof, accompanied by a conversion notice in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder, and such holder shall thereupon be
entitled to receive a number of duly authorized, validly issued, fully paid
and nonassessable shares of Class A Common Stock equal to the quotient of:
(i) the excess of:
(A) an amount equal to the sum of (x) the product of (aa) the
number of shares of Class A Common Stock determined as
provided in Section 2 hereof which such holder would be
entitled to receive upon exercise of this Warrant for the
number of shares of Class A Common Stock designated in such
conversion notice multiplied by (bb) the Current Market
Price of each such share of Class A Common Stock so
designated and (y) the Current Market Price of any Other
Securities and the fair value of any other property
(determined in good faith by the Board of Directors of the
Company) such holder would be entitled to receive upon
exercise of this Warrant for the number of shares of Class A
Common Stock designated in such conversion notice
over
(B) an amount equal to (x) the number of shares of Class A
Common Stock (without giving effect to any adjustment
thereof) designated in such conversion notice multiplied by
(y) the Exercise Price
divided by
(ii) such Current Market Price of a share of Class A Common
Stock.
For all purposes of this Warrant (other than this Section 3.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the conversion of this Warrant into Class A Common Stock in
accordance with the terms of this Section 3.1(b).
3.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant
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shall have been surrendered to the Company as provided in Section 3.1 hereof,
and at such time the Person or Persons in whose name or names any certificate or
certificates for shares of Class A Common Stock shall be issuable upon such
exercise as provided in Section 3.3 hereof shall be deemed to have become the
holder or holders of record thereof.
3.3 Delivery of Stock Certificates, etc. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within
three Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof or as such holder may direct:
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A Common Stock
to which such holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which such holder would otherwise be entitled, cash
in an amount equal to the same fraction of the Market Price per share on
the Business Day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate on the
face or faces thereof for the number of shares of Class A Common Stock
equal to the number of such shares (without giving effect to any adjustment
thereof) called for on the face of this Warrant minus the number of such
shares designated by the holder upon such exercise as provided in Section
3.1 hereof.
4. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
4.1 General; Number of Shares; Warrant Price. The number of shares of
Class A Common Stock which the holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be equal to the product of:
(a) the number of shares of Class A Common Stock which would otherwise
(but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 3.1
hereof, and
(b) a fraction of which (i) the numerator is the Initial Warrant Price,
and (ii) the denominator is the Warrant Price in effect on the date of
such exercise.
The "Initial Warrant Price" shall be the Exercise Price. The "Warrant Price"
shall initially be the Initial Warrant Price, shall be adjusted and readjusted
from time to time as provided in this Section 4 and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 4. The "Trigger Price" shall initially be
$167 per share of Class A Common Stock and shall be adjusted and readjusted from
time to time as provided in this Section 4 and, as so adjusted or readjusted,
shall remain in effect until a further adjustment or readjustment thereof is
required by this Section 4.
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4.2 Adjustments for Dividends, Distributions, Stock Splits, etc.
(a) Dividends and Distributions. In case at any time or from time to
time, the holders of Class A Common Stock shall have received, or (on or
after the record date fixed for the determination of shareholders eligible
to receive) shall have become entitled to receive, without payment
therefor:
(i) other or additional stock or Other Securities or property
(other than cash) by way of dividend, or
(ii) any cash, or
(iii) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares
or similar corporate rearrangement, other than additional
----- ----
shares of Class A Common Stock issued as a stock dividend
or in a stock-split (adjustments in respect of which are
provided for in Section 4.2(b) below),
then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 3, shall be entitled, without the payment of
any additional consideration or the taking of any further action, to
receive the amount of stock, Other Securities and property (including cash
in the cases referred to in subdivisions (ii) and (iii) of this Section
4.2(a)) which such holder would hold on the date of such exercise if on the
date hereof he had been the holder of record of the number of shares of
Common Stock provided for herein and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such
shares and all such other or additional stock and other securities and
property (including cash in the cases referred to in subdivisions (ii) and
(iii) of this Section 4.2(a)) receivable by him as aforesaid during such
period, giving effect to all adjustments called for during such period by
Section 4.
(b) Treatment of Stock Dividends, Stock Splits, etc. In the event
that the Company shall (i) issue Common Stock Equivalents, or securities
exercisable for or convertible into Common Stock Equivalents, as a dividend
or other distribution on outstanding Common Stock Equivalents, (ii)
subdivide its outstanding Common Stock Equivalents, or (iii) combine its
outstanding Common Stock Equivalents into a smaller number of shares of
Common Stock Equivalents, then, in each such event, the Warrant Price and
the Trigger Price shall, simultaneously with the happening of such event,
be adjusted by multiplying each of the then current Warrant Price and
Trigger Price by a fraction, (a) the numerator of which shall be the number
of shares of Common Stock Equivalents outstanding immediately prior to such
event, and (b) the denominator of which shall be the number of shares of
Common Stock Equivalents outstanding immediately after such event, and the
product so obtained shall thereafter be the Warrant Price and Trigger
Price, respectively,
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then in effect. The Warrant Price and Trigger Price, as so adjusted, shall
be readjusted in the same manner upon the happening of any successive event
or events described herein in this Section 4.2(b). Upon each adjustment of
the Warrant Price or Trigger Price, the holder of this Warrant shall
thereafter be entitled to purchase at the Warrant Price resulting from such
adjustment, the number of shares obtained by dividing the product of the
number of shares purchasable pursuant hereto immediately prior to such
adjustment and the Warrant Price immediately preceding such adjustment by
the Warrant Price resulting from such adjustment.
4.3 Reorganization, Consolidation or Merger. In case at any time or from
time to time the Company shall (a) effect a reorganization, (b) consolidate with
or merge into any other person, (c) voluntarily or involuntarily dissolve,
liquidate or wind-up, or (d) transfer all or substantially all of its properties
or assets to any other person, then in each such case, as a condition thereto,
lawful and adequate provision shall be made so that the holder of this Warrant,
on the exercise or conversion hereof as provided in Section 1 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Class A Common Stock issuable on such exercise immediately prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such reorganization, consolidation, merger or
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustments thereafter as
provided in Section 4.
4.4 Adjustment for Issuance of Common Stock Equivalents Below Trigger
Price.
(a) General. In any case to which Sections 4.2 and 4.3 hereof are
not applicable, where the Company shall issue or sell shares of its Common
Stock Equivalents after December 16, 1999 without consideration or for a
consideration per share less than the Trigger Price in effect pursuant to
the terms of this Warrant at the time of issuance or sale of such
additional shares, except where such shares are issued or sold pursuant to
the exercise of any warrant or option or issued prior to the date of this
Warrant, then the Warrant Price in effect hereunder shall simultaneously
with such issuance or sale be reduced to a price determined by multiplying
the Warrant Price then in effect hereunder by a fraction, the numerator of
which is the sum of (i) the product of the total number of shares of Common
Stock Equivalents outstanding immediately prior to such issuance or sale
multiplied by the Trigger Price in effect hereunder at the time of such
issuance or sale, plus (ii) the aggregate consideration received by the
Company upon such issuance or sale, and the denominator of which is the
product of the total number of shares of Common Stock Equivalents
outstanding immediately after issuance or sale of such additional shares
multiplied by the Trigger Price in effect hereunder at the time of such
issuance.
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<PAGE>
(b) Options; Convertible Securities. In case the Company shall issue
or sell any Options or Convertible Securities after December 16, 1999 there
shall be determined the price per share for which Common Stock Equivalents
are issuable upon the conversion or exercise thereof, such determination to
be made by dividing (i) the sum of the total amount received or receivable
by the Company as consideration for the issue or sale of such Options or
Convertible Securities plus the minimum aggregate amount of additional
consideration payable to the Company upon the conversion or exercise
thereof, by (ii) the maximum number of shares of Common Stock Equivalents
of the Company issuable upon the conversion or exercise of all of such
Options or Convertible Securities. If the price per share so determined
shall be less than the applicable Trigger Price, then, for purposes of
Section 4.4(a) hereof, such issue or sale shall be deemed to be an issue or
sale (as of the date of issue or sale of such Options or Convertible
Securities) of such maximum number of shares of Common Stock Equivalents at
the price per share so determined and such maximum number of shares shall
be deemed to be outstanding after such issuance, provided that, upon the
expiration of such rights of conversion or exercise of such Options or
Convertible Securities, if any thereof shall not have been exercised, the
adjusted Warrant Price shall forthwith be readjusted and thereafter be the
price which it would have been had an adjustment been made on the basis
that the only shares of Common Stock Equivalents so issued or sold were
issued or sold upon the conversion or exercise of such Options or
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
for the issue or sale of all of such Options or Convertible Securities
which shall have been converted or exchanged.
(c) Record Date. If the Company takes a record of the holders of
Common Stock Equivalents for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock Equivalents, Options
or Convertible Securities, or (ii) to subscribe for or purchase Common
Stock Equivalents, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the Common Stock
Equivalents deemed to have been issued or sold upon the declaration of such
dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
4.5 Minimum Adjustment of Warrant Price and Trigger Price. If the amount
of any adjustment of the Warrant Price required pursuant to this Section 4 would
be less than one-tenth (1/10) of one percent (1%) of the Warrant Price or
Trigger Price, as the case may be, in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one tenth (1/10) of one
percent (1%) of such Warrant Price or Trigger Price.
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<PAGE>
4.6 Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 4, treasury shares shall not be deemed to be
outstanding.
4.7 Calculation of Consideration Received. If any Common Stock
Equivalents, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock Equivalents, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Current Market Price thereof as of the date of receipt. For
purposes of this Warrant, the fair value of any consideration other than cash
and securities shall be determined by the board of directors of the Company
using its good faith discretion.
4.8 Integrated Transactions. In case any Options are issued in connection
with the issue or sale of Other Securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued for a consideration of $1.00 (as adjusted consistent to give effect to
the occurrences set forth in Sections 4.2 and 4.3).
5. REPURCHASE OF WARRANTS.
5.1 Right to "Put" Warrant. If a Realization Event shall not have
occurred prior to the fifth anniversary of the date as of which this Agreement
is executed and this Warrant becomes exercisable within six months of such
anniversary, Investor or any other holder of this Warrant may, at any time and
from time to time during the six month period immediately thereafter, by notice
to the Company (the "Put Notice"), elect to sell to the Company (and the Company
hereby, agrees to purchase from Investor or any other such holder), at the Put
Purchase Price specified in Section 5.3(a) hereof, such number of Warrants as
are specified in the Put Notice on the Business Day specified in the Put Notice,
which Business Day shall be not less than 20 days nor more than 30 days after
the receipt by the Company of said Put Notice (the date on which the Company
receives the Put Notice is referred to as the "Put Notice Date"). The right
created by this Section 5.1 shall terminate upon the occurrence of a Realization
Event. Any Warrants not sold to the Company pursuant to this Section 5 shall
automatically convert into Class A Common Stock in accordance with Section
3.1(b) (provided that, for purposes of this Section 5, the Current Market Price
shall be the Market Price (defined below)).
5.2 Realization Event. A "Realization Event" shall mean (a) a Qualified
-----------------
Public Offering, or (b) a transaction in which all of Investor's Warrants and
Other Securities are exchanged either for cash or for Other Securities of
another Person, provided that such Other Securities are traded on a national
securities exchange or the Nasdaq National Market and are not subject to any
restrictions under the Securities Act and such Person's outstanding Other
Securities (other than
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<PAGE>
those held by such Person's Affiliates) have an aggregate public market value of
not less than $500 million.
5.3 Purchase Price.
--------------
(a) Put Purchase Price. The purchase price for the Warrants
------------------
purchased by the Company pursuant to this Section 5 (the "Put Purchase
Price") shall be an amount equal to the Market Price (as defined below) on
the relevant Put Notice Date for the number of Other Securities that would
be obtained upon the exercise of the portion of such Warrant being
purchased).
(b) Market Price. "Market Price" shall mean the value on a specified
------------
date of the shares of Class A Common Stock underlying the Warrant which
could be obtained in an initial public offering of such Class A Common
Stock. Within five business days of the Put Notice Date, the holders of
the Warrants shall suggest three investment banking firms, from which the
Company shall select one (the selected firm being the "Arbitrator"). The
Arbitrator shall be instructed to determine the Market Price consistent
with the first sentence of this Section 5.3(b), within thirty days from the
Put Notice Date. The expenses of any such Arbitrator shall be shared
equally by the Company and the relevant holder.
5.4 Payments of Put Purchase Price. The Put Purchase Price may be paid in
cash or in subordinated debt of the Company ("Put Notes"). Put Notes shall bear
interest, payable semiannually, at the Prime Rate plus 3.5% and shall have a
term of two years. The principal shall be payable in four equal installments
over the term of the Put Notes. The Company shall use its best efforts to
negotiate all senior debt obligations to permit the payment of any Put Purchase
Price as it becomes due. In the event that payments under the Put Notes or
payment of the Put Purchase Price would cause the Company to be in default of
the terms of its senior indebtedness, such payments can be deferred until the
earlier of (i) the first date on which Company could make such payments without
causing such a default and (ii) the third anniversary of the Put Notice Date.
6. NO IMPAIRMENT. The Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise plus the amount deemed to have been paid
upon issuance of this Warrant, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Class A Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Class A Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
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<PAGE>
7. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in
the shares of Class A Common Stock issuable upon the exercise of this Warrant,
the Company at its expense will promptly compute such adjustment or readjustment
in accordance with the terms of this Warrant and prepare a report setting forth
such adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the number of shares of Class A Common Stock
outstanding or deemed to be outstanding, and (b) the Warrant Price in effect
immediately prior to such issue or sale and as adjusted and readjusted (if
required by Section 4 hereof) on account thereof. The Company will forthwith
mail a copy of each such report to each holder of a Warrant and will, upon the
written request at any time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price and the Trigger Price at the time in
effect and showing in reasonable detail how it was calculated. The Company will
also keep copies of all such reports at its office maintained pursuant to
Section 13.2(a) hereof and will cause the same to be available for inspection at
such office during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the holder thereof.
8. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) the declaration by the Company of any dividend payable in stock
upon Common Stock Equivalents or any other distribution by the Company to
the holders of Common Stock Equivalents, or
(c) the Company proposing to make an offer for subscription pro rata
to the holders of its Common Stock Equivalents of any additional shares of
stock of any class or other rights, or
(d) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(e) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
(f) any other action of a type referred to in Section 4 hereof,
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the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Class A
Common Stock shall be entitled to exchange their shares of Class A Common Stock
for the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up and a description in reasonable detail of
the transaction. Such notice shall be mailed at least 45 days prior to the date
therein specified. At no time prior to the date therein specified shall the
Company take any action which could prevent the exercise or conversion of this
Warrant in accordance with the terms hereof.
9. REGISTRATION OF WARRANTS AND COMMON STOCK. If any shares of Class A Common
Stock required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (including without limitation the Hart-Scott-Rodino Antitrust
Improvements Act of 1976) before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. The shares of Class A Common Stock (and Other Securities) issuable upon
exercise of this Warrant shall constitute Registrable Shares (as such term is
defined in the Registration Rights Agreement). Each holder of this Warrant
shall be entitled to all of the benefits afforded to a holder of any such
Registrable Shares under the Registration Rights Agreement. At any such time as
the Class A Common Stock is listed on any national securities exchange or
quotation system, the Company will, at its expense, obtain promptly and maintain
the approval for listing on each such exchange or system, upon official notice
of issuance, the shares of Class A Common Stock issuable upon exercise of the
then outstanding Warrants and will use its best efforts to maintain the listing
of such shares after their issuance at all times when the Class A Common Stock
is so listed.
10. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
December 16, 1999 shall (a) effect a reorganization, (b) consolidate with or
merge with or into any other entity, or (c) transfer all or substantially all of
its properties or assets to any other person or entity, then, in each such case,
the holder of this Warrant, upon the exercise hereof as provided in Section 3 at
any time after the consummation of such reorganization, consolidation, merger or
transfer, as the case may be, shall be entitled to receive, in lieu of the Class
A Common Stock (or Other Securities) issuable upon such exercise prior to such
consummation, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation if such holder
had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4 hereof. The Company shall not
consummate any such reorganization, consolidation, merger or transfer unless the
resulting, surviving or transferee entity, as the case may be, expressly agrees
in writing, reasonably
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satisfactory to the holders of a majority of the Warrants then outstanding, to
fulfil the Company's obligations under this Warrant and this Section 10.
11. PERFORMANCE OF OBLIGATIONS. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder of this Warrant against dilution or
other impairment to the extent set forth in this Warrant.
12. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Class A Common Stock of each class from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Class A Common Stock issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable.
13. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
13.1 Ownership of Warrants. The Company may treat the person in whose
name any Warrant is registered on the register kept at the office of the Company
maintained pursuant to Section 13.2(a) hereof as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, except that, if
and when any Warrant is properly assigned in blank, the Company may (but shall
not be obligated to) treat the bearer thereof as the owner of such Warrant for
all purposes, notwithstanding any notice to the contrary. A Warrant, if properly
assigned, may be exercised by a new holder without a new Warrant first having
been issued.
13.2 Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office in Wayne, Pennsylvania where
notices, presentations and demands in respect of this Warrant may be made
upon it. Such office shall be maintained at 170 South Warner Road, Wayne,
Pennsylvania 19087 until such time as the Company shall notify the holders
of the Warrants of any change of location of such office within the United
States.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 13.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of holders of Warrants,
the transfers thereof and the names and addresses of transferees of
Warrants shall be registered in such register. The Person in whose name
any Warrant shall be so registered shall be deemed and treated as the owner
and holder
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<PAGE>
thereof for all purposes of this Warrant, and the Company shall
not be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 13.2(a) hereof, the Company at its expense
will execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
13.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to Section 13.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
14. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Affiliate: Any Person directly or indirectly controlling, controlled by or
under direct or indirect common control with the Company (or other specified
Person) and shall include (a) any Person who is an officer, director or
beneficial holder of at least 10% of the outstanding capital stock of the
Company (or other specified Person), (b) any Person of which the Company (or
other specified Person) or any officer or director of the Company (or other
specified Person) shall, directly or indirectly, either beneficially own at
least 10% of the outstanding equity securities or constitute at least a 10%
participant, and (c) in the case of a specified Person who is an individual,
Members of the Immediate Family of such Person; provided, however, that the
Investor shall not be an Affiliate of the Company for purposes of this
Agreement.
Arbitrator: As defined in Section 5.3(b).
Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts or New York, New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
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Class A Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Class A Common Stock shall have been
changed or any stock resulting from any reclassification of such Class A Common
Stock.
Common Stock: Class A and Class B Common Stock, $0.01 par value per share,
of the Company.
Common Stock Equivalents: Any class of common stock of the Company which is
entitled to share ratably with holders of Class A Common Stock in any
distributions including distributions upon the liquidation, dissolution or
winding-up of the Company, and any other class of common stock of the Company
and/or stock of any class into which these shares may hereafter be changed or
any stock resulting from any reclassification of such common stock, provided
that the number of such shares shall, for purposes of the Warrants, be deemed to
equal the actual number of shares of such Common Stock multiplied by the Sharing
Ratio.
Company: As defined in the introduction to this Warrant and shall include
any Person which shall succeed to or assume the obligations of the Company under
the Warrant.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Class A Common Stock) or other securities directly or indirectly
convertible into or exchangeable for shares of Common Stock Equivalents.
Current Market Price: With respect to any security (or other asset), on
any date specified herein, the average daily market price during the period of
the most recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no class of such security is
then listed or admitted to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price shall be the fair value
thereof determined in good faith by the Board of Directors of the Company as of
the specified date. Notwithstanding the foregoing, in the event the Warrant is
exercised in connection with the Company's initial public offering of such
security or Common Stock Equivalents, the Current Market Price per share of such
security or Common Stock Equivalents, as the case may be, shall be equal to the
per share offering price to the public of such security or Common Stock
Equivalents, as the case may be, issued in the initial public offering.
Exercise Price: As defined in the introduction to this Warrant.
Expiration Date: As defined in the introduction to this Warrant.
Initial Warrant Price: As defined in Section 4.1 hereof.
IRR: Shall mean the internal annual rate of return, calculated in a manner
consistent with the "IRR" function in Microsoft Corporation's Excel spreadsheet
software (based on a year of twelve thirty-day months), realized (or deemed to
be realized) by the Holder on its investment
-xv-
<PAGE>
pursuant to the Purchase Agreement in the Purchased Securities, such rate of
return to be calculated on (i) the cash outflow consisting of the $22,000,000
paid for the Purchased Securities and (ii) the series of cash inflows consisting
of all amounts realized (or deemed to be realized) by the Holder in respect of
the Purchased Securities. For purposes of such calculation, (A) the cash outflow
and each cash inflow shall be deemed to have occurred on the last day of the
calendar month in which it occurred, (B) except to the extent specifically
provided herein, an amount shall not be treated as a cash inflow unless and
until actually received in cash, (C) securities that are traded on a national
securities exchange or the NASDAQ Stock Market that are received in the sale of
Purchased Securities shall (unless earlier sold for cash) be deemed to result in
a cash inflow on the Resale Day in an amount equal to the Current Market Price
of such securities on such date, (D) Common Stock retained in a Liquidity Event
shall (unless earlier sold for cash) be deemed to result in a cash inflow, on
the later of (i) the date of the Liquidity Event and (ii) if securities were
received in the Liquidity Event, the Resale Day, in an amount equal to the
Current Market Price of such Common Stock on such date, and (E) in the case of a
Qualified Public Offering, upon the Resale Day, the Holder shall be deemed to
have realized a cash inflow equal to the Current Market Price of all Purchased
Securities then held by it.
IRR Hurdle: Shall mean, as of the date the relevant event is consummated,
the amount specified below for such date:
Twelve Months Ended IRR Hurdle
----------
December 17,
-----------
2000 120%
2001 110%
2002 100%
2003 80%
2004 and thereafter 60%
Market Price: As defined in Section 5.3(b).
Members of the Immediate Family: As applied to any individual, means each
parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust created for the benefit of one or more
of such persons and each custodian of a property of one or more such persons.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Class A Common Stock or Convertible
Securities, excluding rights, warrants and options granted on or after the
Original Issue Date, to employees, officers, directors or consultants of the
Company or any subsidiary thereof pursuant to any stock option plan or agreement
adopted by the Board of Directors.
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<PAGE>
Original Issue Date: Means the date on which any shares of Class B Common
Stock, $0.01 par value per share, of the Company first were issued pursuant to
the Purchase Agreement.
Other Securities: Any stock (other than Class A Common Stock) and other
securities, property or assets of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Class A Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Class A Common
Stock or Other Securities pursuant hereto or otherwise.
Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Prime Rate: The rate of interest announced publicly by Fleet National Bank
in Boston, Massachusetts, from time to time, as Fleet National Bank's prime
rate.
Proceeds: Shall mean cash proceeds realized (or deemed to be realized) by
the Holder in respect of the sale of Purchased Securities (or realized in
respect of the sale of securities acquired in respect of the sale of Purchased
Securities); provided, however, that (A) securities received by the Holder that
are traded on a national securities exchange or the NASDAQ Stock Market that are
received in the sale of Purchased Securities shall (unless earlier sold for
cash) be deemed to result in cash proceeds on the Resale Day in an amount equal
to the Current Market Price of such securities on such date, (B) Common Stock
retained in a Sale Transaction shall (unless earlier sold for cash) be deemed to
result in cash proceeds, on the later of (i) the date of the Sale Transaction
and (ii) if securities were received in the Sale Transaction, the Resale Day, in
an amount equal to the Current Market Price of such Common Stock on such date,
and (C) in the case of a Qualified Public Offering, upon the Resale Day,
Parthenon shall be deemed to have realized Proceeds equal to the Current Market
Price of all Purchased Securities then held by it.
Proceeds Threshold: Shall mean, as of the date that the relevant Proceeds
amount is determined, the amount specified below for such date:
Twelve Months Ended Proceeds
December 17, Threshold
------------ ---------
2000 $ 48,400,000
2001 $ 96,800,000
2002 $176,000,000
2003 $231,000,000
2004 and thereafter $231,000,000
Purchase Agreement: Shall mean the Class B Common Stock and Warrant
Purchase Agreement dated as of December 16, 1999 by and among the Company, the
Holder, PCIP
-xvii-
<PAGE>
Investors, JMH Partners Corp., Shad Run Investments, L.P., TSG Co-
Investors, L.L.C., The Shattan Group, LLC, Thomas S. Shattan, Gregory E. Mendel
and G. Kevin Fechtmeyer.
Purchased Securities: Shall mean the securities referred to as the Class B
Common Stock and the Class B Warrants in the Purchase Agreement, together with
any other securities of the Company issued upon conversion thereof or in
exchange therefor.
Purchaser: As defined in the introduction to this Warrant.
Put Notes: As defined in Section 5.4.
Put Notice: As defined in Section 5.1.
Put Notice Date: As defined in Section 5.1.
Put Purchase Price: As defined in Section 5.3(a).
Qualified Public Offering: Shall have the meaning provided in Section 1 of
Stockholders Agreement.
Realization Event: As defined in Section 5.2.
Registration Rights Agreement: The Registration Rights Agreement dated as
of December 16, 1999, in the form of Exhibit J to the Purchase Agreement, as
from time to time in effect.
Resale Day: Shall mean, (i) in the case of a Qualified Public Offering,
any business day more than thirty days after the expiration of any
"underwriter's lockup" or similar resale limitation in connection with such
Qualified Public offering on any applicable securities held by Parthenon and
(ii) in the case of a Sale Transaction other than a Qualified Public Offering
the tenth business day after the first date when all the relevant securities
received in such Liquidity Event are traded on a national securities exchange or
the NASDAQ Stock Market and freely salable under Rule 145 under the Securities
Act of 1933, as amended (or any successor rule), and not subject to any
"pooling," "tax-free reorganization" or similar contractual resale restrictions
entered into in connection with the Sale Transaction.
Sale Transaction: Shall mean (i) any sale or series of sales by the Holder
of at least 90% of the Purchased Securities, whether by merger, consolidation,
recapitalization, share exchange, redemption or otherwise, and (ii) any sale (or
series of sales of assets resulting in) of all or substantially all the assets
of the Company; provided, however, that in the case of a series of sales, the
Sale Transaction shall be deemed to occur on the date of the sale that results
in Parthenon having sold at least 90% of such Purchased Securities, and in the
case of a Sale
-xviii-
<PAGE>
Transaction in which Parthenon receives securities in respect of the sale of
Purchased Securities, the Resale Date.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations thereunder, all as the same shall be in
effect at the time.
Sharing Ratio: With respect to a Common Stock Equivalent, the ratio of
(a) the distribution payable upon the liquidation and distribution of the
Company on one share of such Common Stock Equivalent to (b) the distribution
payable upon the liquidation and distribution of the Company on one share of
Class A Common Stock.
Stockholders Agreement: The Stockholders Agreement dated as of
December 16, 1999, in the form of Exhibit K to the Purchase Agreement, as from
time to time in effect.
Trigger Price: As defined in Section 4.1(a).
Warrant Price: As defined in Section 4.1.
Warrants: As defined in the introduction to this Warrant.
15. REMEDIES. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or com pliance 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.
16. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company. Notwithstanding the foregoing,
the officers and Board of Directors of the Company shall have all fiduciary
duties to the holder hereof which such officers and Board of Directors would
have if the holder hereof held the shares of Class A Common Stock obtainable
upon the exercise hereof.
17. NOTICES. Any notice or other communication in connection with this Warrant
shall be deemed to be delivered if in writing (or in the form of a telex or
telecopy to be given only during the recipient's normal business hours unless
arrangements have otherwise been made to receive such notice by telex or
telecopy outside of normal business hours) addressed as hereinafter provided and
if either (x) actually delivered at said address or (y) in the case of a letter,
seven Business Days shall have elapsed after the same shall have been deposited
in the United States mails, postage prepaid and registered or certified: (a) if
to any holder of any Warrant, at the
-xix-
<PAGE>
registered address of such holder as set forth in the register kept at the
office of the Company maintained pursuant to Section 13.2(a) hereof; or (b) if
to the Company, to the attention of its President at its office maintained
pursuant to Section 13.2(a) hereof; provided, however, that the exercise of any
Warrant shall be effective in the manner provided in Section 3 hereof.
18. MISCELLANEOUS. Any term of this Warrant may be amended and the observance
of any term of this Warrant may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with (i) the written
consent of the Company and the Holder or (ii) for all Warrants, the written
consent of the Company and the holders of a majority of the Warrants then
outstanding. This Warrant shall be construed and enforced in accordance with
and governed by the domestic substantive laws of the Commonwealth of
Pennsylvania without giving effect to any choice or conflict of law provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction. The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
-xx-
<PAGE>
IN WITNESS WHEREOF, Raymond Karsan Holdings, Inc. has caused this Warrant
to be signed by its duly authorized officer under its corporate seal, attested
by its duly authorized officer, and to be dated as of December ____, 1999.
RAYMOND KARSAN HOLDINGS, INC.
[SEAL]
By:________________________
Title:
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________/2/ shares of
the Class A Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
___________________________
/2/ Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for additional shares of Class A Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
this Warrant, may be delivered upon exercise. In the case of a partial
exercise, a new Warrant or Warrants will be issued and delivered, representing
the unexercised portion of the Warrant, to the holder surrendering the Warrant.
-i-
<PAGE>
FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
converts such Warrant with respect to __________/1/ shares of the Class A
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
___________________
/1/ Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial conversion, the portion thereof as to
which this Warrant is being converted), in either case without making any
adjustment for additional shares of Class A Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of a
partial conversion, a new Warrant or Warrants will be issued and delivered,
representing the unconverted portion of the Warrant, to the holder surrendering
the Warrant.
-i-
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase __________/1/ shares of Class A Common
Stock of RAYMOND KARSAN HOLDINGS, INC. to which such Warrant relates, and
appoints Attorney to make such transfer on the books of
RAYMOND KARSAN HOLDINGS, INC. maintained for such purpose, with full power of
substitution in the premises.
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signed in the presence of:
________________________________
________________________________
/1/ Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for additional shares of Class A Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
this Warrant, may be delivered upon exercise. In the case of a partial
exercise, a new Warrant or Warrants will be issued and delivered, representing
the unexercised portion of the Warrant, to the holder surrendering the Warrant.
-i-
<PAGE>
EXHIBIT B
---------
This warrant and any shares represented by this warrant have not been registered
under the securities act of 1933, as amended, and may not be transferred, sold
or otherwise disposed of except pursuant to an effective registration under said
act or pursuant to an exemption from such registration. The Warrant represented
by this certificated and the shares issuable hereunder may be sold or otherwise
transferred in compliance with, and are subject to the provisions of, the
Stockholders Agreement dated as of December 16, 1999 among the issuer hereof and
the other parties thereto. Complete and correct copies of such Agreement are
available for inspection at the principal office of the issuer hereof and will
be furnished without charge to the holder of this Warrant or such shares upon
written request.
RAYMOND KARSAN HOLDINGS, INC.
Class B Common Stock Purchase Warrant
No. [_] Wayne, Pennsylvania
December 16, 1999
RAYMOND KARSAN HOLDINGS, INC., a Pennsylvania corporation (the "Company"),
for value received, hereby certifies that [ ] (the "Purchaser"),
or assigns, is entitled to purchase from the Company [ ] duly authorized,
validly issued, fully paid and nonassessable shares of Class A Common Stock,
$0.01 par value (the "Class A Common Stock"), of the Company at the purchase
price of $835.00 (the "Exercise Price"), at any time or from time to time prior
to 5:00 P.M. Boston time, on December 16, 2006 (the "Expiration Date"), all
subject to the terms, conditions and adjustments set forth below in this
Warrant.
This Warrant is one of the Class A Common Stock Warrants (the "Warrants,"
such term to include any such warrants issued in substitution therefor)
originally issued in connection with the execution and delivery of the Class B
Common Stock and Warrant Purchase Agreement dated as of December 16, 1999 (as
from time to time in effect, the "Purchase Agreement") by and among the Company
and the Investors. Certain capitalized terms used in this Warrant are defined
in Section 11 hereof.
1. EXERCISE OR CONVERSION OF WARRANT.
1.1 Manner of Exercise or Conversion; Payment.
(a) Exercise. This Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day on or
prior to the Expiration Date, by surrender of this Warrant to the Company
at its office maintained pursuant to
-ii-
<PAGE>
Section 10.2(a) hereof, accompanied by a subscription in substantially the
form attached to this Warrant (or a reasonable facsimile thereof) duly
executed by such holder and accompanied by payment, in cash or by check
payable to the order of the Company (or by any combination of such
methods), in the amount obtained by multiplying (a) the number of shares of
Class A Common Stock (without giving effect to any adjustment thereof)
designated in such subscription by (b) the Exercise Price, and such holder
shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A Common Stock
determined as provided in Section 2 hereof.
(b) Conversion. This Warrant may be converted by the holder hereof,
in whole or in part, into shares of Class A Common Stock, during normal
business hours on any Business Day on or prior to the Expiration Date, by
surrender of this Warrant to the Company at its office maintained pursuant
to Section 10.2(a) hereof, accompanied by a conversion notice in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder, and such holder shall thereupon be
entitled to receive a number of duly authorized, validly issued, fully paid
and nonassessable shares of Class A Common Stock equal to the quotient of:
(i) the excess of:
(A) an amount equal to the sum of (x) the product of (aa) the
number of shares of Class A Common Stock determined as
provided in Section 2 hereof which such holder would be
entitled to receive upon exercise of this Warrant for the
number of shares of Class A Common Stock designated in such
conversion notice multiplied by (bb) the Current Market
Price of each such share of Class A Common Stock so
designated and (y) the Current Market Price of any Other
Securities and the fair value of any other property
(determined in good faith by the Board of Directors of the
Company) such holder would be entitled to receive upon
exercise of this Warrant for the number of shares of Class A
Common Stock designated in such conversion notice over
(B) an amount equal to (x) the number of shares of Class A
Common Stock (without giving effect to any adjustment
thereof) designated in such conversion notice multiplied by
(y) the Exercise Price divided by
(ii) such Current Market Price of a share of Class A Common
Stock.
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<PAGE>
For all purposes of this Warrant (other than this Section 1.1), any
reference herein to the exercise of this Warrant shall be deemed to
include a reference to the conversion of this Warrant into Class A
Common Stock in accordance with the terms of this Section 1.1(b).
1.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Day on which this Warrant shall have been surrendered to the Company as
provided in Section 1.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Class A Common Stock
shall be issuable upon such exercise as provided in Section 1.3 hereof shall be
deemed to have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within three Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof or as such holder may direct:
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A
Common Stock to which such holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount equal to
the same fraction of the Current Market Price per share on the
Business Day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate
on the face or faces thereof for the number of shares of Class A
Common Stock equal to the number of such shares (without giving
effect to any adjustment thereof) called for on the face of this
Warrant minus the number of such shares designated by the holder
upon such exercise as provided in Section 1.1 hereof.
2. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
2.1 General; Number of Shares; Warrant Price. The number of shares
of Class A Common Stock which the holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be equal to the product of:
(a) the number of shares of Class A Common Stock which would
otherwise (but for the provisions of this Section 2) be issuable
upon such exercise, as designated by the holder hereof pursuant
to Section 1.1 hereof, and
(b) a fraction of which (i) the numerator is the Initial Warrant
Price, and (ii) the denominator is the Warrant Price in effect on
the date of such exercise.
-iv-
<PAGE>
The "Initial Warrant Price" shall be the Exercise Price. The "Warrant Price"
shall initially be the Initial Warrant Price and shall be adjusted and
readjusted from time to time as provided in this Section 3 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 3. The "Trigger Price" shall initially be
$835 per share of Class A Common Stock and shall be adjusted and readjusted from
time to time as provided in this Section 2 and, as so adjusted and readjusted,
shall remain in effect until a further adjustment or readjustment thereof is
required by this Section 2.
2.2 Adjustments for Dividends, Distributions, Stock Splits, etc.
(a) Dividends and Distributions. In case at any time or from time to
time, the holders of Class A Common Stock shall have received, or (on or
after the record date fixed for the determination of shareholders eligible
to receive) shall have become entitled to receive, without payment
therefor:
(1) other or additional stock or Other Securities or property
(other than cash) by way of dividend, or
(2) any cash, or
(3) other or additional stock or Other Securities or property
(including cash) by way of spinoff, split-up,
reclassification, recapitalization, combination of shares or
similar corporate rearrangement, other than additional
----- ----
shares of Class A Common Stock issued as a stock dividend or
in a stock split (adjustments in respect of which are
provided for in Section 2.2(b) below),
then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 1, shall be entitled without the payment of
any additional consideration or the taking of any further action, to
receive the amount of stock and Other Securities and property (including
cash in the cases referred to in subdivisions (ii) and (iii) of this
Section 2.2(a)) which such holder would hold on the date of such exercise
if on the date hereof such holder had been the holder of record of the
number of shares of Common Stock provided for herein and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and all such other or additional stock and
Other Securities and property (including cash in the cases referred to in
subdivisions (ii) and (iii) of this Section 2.2(a)) receivable by him as
aforesaid during such period, giving effect to all adjustments called for
during such period by this Section 2.
(b) Treatment of Stock Dividends, Stock Splits, etc. In the event
that the Company shall (i) issue Common Stock Equivalents, or securities
exercisable for or
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<PAGE>
convertible into Common Stock Equivalents, as dividend or other
distribution on outstanding Common Stock Equivalents, (ii) subdivide its
outstanding shares of Common Stock Equivalents, or (iii) combine its
outstanding shares of Common Stock Equivalents into a smaller number of
shares of Common Stock Equivalents, then, in each such event, the Warrant
Price and the Trigger Price shall, simultaneously with the happening of
such event, be adjusted by multiplying each of the then current Warrant
Price and Trigger Price by a fraction, (a) the numerator of which shall be
the number of shares of Common Stock Equivalents outstanding immediately
prior to such event, and (b) the denominator of which shall be the number
of shares of Common Stock Equivalents outstanding immediately after such
event, and the product so obtained shall thereafter be the Warrant Price
and the Trigger Price, respectively, then in effect. The Warrant Price and
Trigger Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this
Section 2.2(b). Upon each adjustment of the Warrant Price or Trigger Price,
the holder of this Warrant shall thereafter be entitled to purchase at the
Warrant Price resulting from such adjustment, the number of shares obtained
by dividing the product of the number of shares purchasable pursuant hereto
immediately prior to such adjustment and the Warrant Price immediately
preceding such adjustment by the Warrant Price resulting from such
adjustment.
2.3 Reorganization, Consolidation or Merger. In case at any time or
from time to time the Company shall (a) effect a reorganization, (b) consolidate
with or merge into any other Person, (c) voluntarily or involuntarily dissolve,
liquidate or wind-up, or (d) transfer all or substantially all of its properties
or assets to any other person, then in each such case, as a condition thereto,
lawful and adequate provision shall be made so that the holder of this Warrant,
on the exercise or conversion hereof as provided in Section 1 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Class A Common Stock issuable on such exercise immediately prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such reorganization, consolidation, merger or
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustments thereafter as
provided in this Section 2.
2.4 Adjustment for Issuance of Common Stock Equivalents Below Trigger
Price.
(a) General. In any case to which Sections 2.2 and 2.3 hereof are not
applicable, where the Company shall issue or sell shares of Common Stock
Equivalents after December 16, 1999 without consideration or for a
consideration (or evidencing a value of Common Stock Equivalents) per share
less than the Trigger Price in effect pursuant to the terms of this Warrant
at the time of issuance or sale of such additional shares, except where
such shares are issued or sold pursuant to the exercise of any warrant or
option or issued prior to the date of this Warrant, then the Warrant Price
in effect hereunder shall simultaneously with such issuance or sale be
reduced to a price
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<PAGE>
determined by multiplying the Warrant Price then in effect hereunder by a
fraction, the numerator of which is the sum of (a) the product of the total
number of shares of Common Stock Equivalents outstanding immediately prior
to such issuance or sale multiplied by the Trigger Price in effect
hereunder at the time of such issuance or sale, plus (b) the aggregate
consideration received by the Company upon such issuance or sale, and the
denominator of which is the product of the total number of shares of Common
Stock Equivalents outstanding immediately after issuance or sale of such
additional shares multiplied by the Trigger Price in effect hereunder at
the time of such issuance.
(b) Options; Convertble Securities. In case the company issue or sell
any Options or Convertible Securities after December 16, 1999 there shall
be determined the price per share for which Common Stock Equivalents are
issuable upon the conversion or exercise thereof, such determination to be
made by dividing (a) the sum of the total amount received or receivable by
the Company as consideration for the issue or sale of such Options or
Convertible Securities plus the minimum aggregate amount of additional
consideration payable to the Company upon the conversion or exercise
thereof, by (b) the maximum number of shares of Common Stock Equivalents of
the Company issuable upon the conversion or exercise of all of such Options
or Convertible Securities. If the price per share so determined shall be
less than the applicable Trigger Price, then, for purposes of Section
2.4(a) hereof, such issue or sale shall be deemed to be an issue or sale
(as of the date of issue or sale of such Options or Convertible Securities)
of such maximum number of shares of Common Stock Equivalents at the price
per share so determined and such maximum number of shares shall be deemed
to be outstanding after such issuance, provided that, upon the expiration
of such rights of conversion or exercise of such Options or Convertible
Securities, if any thereof shall not have been exercised, the adjusted
Warrant Price shall forthwith be readjusted and thereafter be the price
which it would have been had an adjustment been made on the basis that the
only shares of Common Stock Equivalents so issued or sold were issued or
sold upon the conversion or exercise of such Options or Convertible
Securities, and that they were issued or sold for the consideration
actually received by the Company upon such conversion or exchange, plus the
consideration, if any, actually received by the Company for the issue or
sale of all such Options or Convertible Securities which shall have been
converted or exchanged.
(c) Record Date. If the Company takes a record of the holders of
Common Stock Equivalents for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock Equivalents, Options
or Convertible Securities, or (ii) to subscribe for or purchase Common
Stock Equivalents, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the shares of Common
Stock Equivalents deemed to have been issued or sold upon the declaration
of such dividend or upon the making of such other distribution or the date
of the granting of such right of subscription or purchase, as the case may
be.
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2.5 Minimum Adjustment of Warrant Price and Trigger Price. If the
amount of any adjustment of the Warrant Price required pursuant to this Section
2 would be less than one-tenth (1/10) of one percent (1%) of the Warrant Price
or Trigger Price, as the case may be, in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one tenth (1/10) of one
percent (1%) of such Warrant Price or Trigger Price.
2.6 Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 2, treasury shares shall not be deemed to be
outstanding.
2.7 Calculation of Consideration Received. If any Common Stock
Equivalents, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock Equivalents, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Current Market Price thereof as of the date of receipt. For
purposes of this Warrant, the fair value of any consideration other than cash
and securities shall be determined by the board of directors of the Company
using its good faith discretion.
2.8 Integrated Transactions. In case any Options are issued in connection
with the issue or sale of Other Securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued for a consideration of $1.00 (as adjusted consistent to give effect to
the occurrences set forth in Sections 2.2 and 2.3).
3. NO IMPAIRMENT. The Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise plus the amount deemed to have been paid
upon issuance of this Warrant, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Class A Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Class A Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
4. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment
in the shares of Class A Common Stock issuable upon the exercise of this
Warrant, the Company at
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its expense will promptly compute such adjustment or readjustment in accordance
with the terms of this Warrant and prepare a report setting forth such
adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or readjustment is
based, including a statement of (a) the number of shares of Class A Common Stock
outstanding or deemed to be outstanding, and (b) the Warrant Price in effect
immediately prior to such issue or sale and as adjusted and readjusted (if
required by Section 2 hereof) on account thereof. The Company will forthwith
mail a copy of each such report to each holder of a Warrant and will, upon the
written request at any time of any holder of a Warrant, furnish to such holder a
like report setting forth the Warrant Price and the Trigger Price at the time in
effect and showing in reasonable detail how it was calculated. The Company will
also keep copies of all such reports at its office maintained pursuant to
Section 10.2(a) hereof and will cause the same to be available for inspection at
such office during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the holder thereof.
5. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any Other Securities or property, or to receive any other right,
or
(b) the declaration by the Company of any dividend payable in stock
upon Common Stock Equivalents or any other distribution by the Company to
the holders of the Common Stock Equivalents, or
(c) the Company proposing to make an offer for subscription pro rata
to the holders of its Common Stock Equivalents of any additional shares of
stock of any class or other rights, or
(d) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(e) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(f) any other action of a type referred to in Section 2 hereof,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or
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expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, the time, if any such time is to be fixed, as of
which the holders of record of Class A Common Stock shall be entitled to
exchange their shares of Class A Common Stock for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction. Such
notice shall be mailed at least 45 days prior to the date therein specified. At
no time prior to the date therein specified shall the Company take any action
which could prevent the exercise or conversion of this Warrant in accordance
with the terms hereof.
6. REGISTRATION OF WARRANTS AND COMMON STOCK. If any shares of Class A Common
Stock required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (including without limitation the Hart-Scott-Rodino Antitrust
Improvements Act of 1976) before such shares may be issued upon exercise, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. The shares of Class A Common Stock (and Other Securities) issuable upon
exercise of this Warrant shall constitute Registrable Shares (as such term is
defined in the Registration Rights Agreement). Each holder of this Warrant
shall be entitled to all of the benefits afforded to a holder of any such
Registrable Shares under the Registration Rights Agreement. At any such time as
the Class A Common Stock is listed on any national securities exchange or
quotation system, the Company shall, at its expense, obtain promptly and
maintain the approval for listing on each such exchange or system, upon official
notice of issuance, the shares of Class A Common Stock issuable upon exercise of
the then outstanding Warrants and will use its best efforts to maintain the
listing of such shares after their issuance at all times when the Class A Common
Stock is so listed.
7. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
December 16, 1999 shall (a) effect a reorganization, (b) consolidate with or
merge with or into any other entity, or (c) transfer all or substantially all of
its properties or assets to any other person or entity, then, in each such case,
the holder of this Warrant, upon the exercise hereof as provided in Section 1 at
any time after the consummation of such reorganization, consolidation, merger or
transfer, as the case may be, shall be entitled to receive, in lieu of the Class
A Common Stock (or Other Securities) issuable upon such exercise prior to such
consummation, the stock and Other Securities and property (including cash) to
which such holder would have been entitled upon such consummation if such holder
had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 2 hereof. The Company shall not
consummate any such reorganization, consolidation, merger or transfer, unless
the resulting, surviving or transferee entity, as the case may be, expressly
agrees in writing, reasonably satisfactory to the holders of a majority of the
Warrants then outstanding, to fulfill the Company's obligations under this
Warrant and this Section 7.
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8. PERFORMANCE OF OBLIGATIONS. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the holder of this Warrant against dilution or
other impairment to the extent set forth in this Warrant.
9. RESERVATION OF STOCK, ETC. The Company shall at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Class A Common Stock of each class from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Class A Common Stock issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable.
10. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
10.1 Ownership of Warrants. The Company may treat the person in whose
name any Warrant is registered on the register kept at the office of the Company
maintained pursuant to Section 10.2(a) hereof as the owner and holder thereof
for all purposes, notwithstanding any notice to the contrary, except that, if
and when any Warrant is properly assigned in blank, the Company may (but shall
not be obligated to) treat the bearer thereof as the owner of such Warrant for
all purposes, notwithstanding any notice to the contrary. A Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
10.2 Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office in Wayne, Pennsylvania where
notices, presentations and demands in respect of this Warrant may be made
upon it. Such office shall be maintained at 170 South Warner Road, Wayne,
PA 19087 until such time as the Company shall notify the holders of the
Warrants of any change of location of such office within the United States.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 10.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of holders of Warrants,
the transfers thereof and the names and addresses of transferees of
Warrants shall be registered in such register. The Person in whose name any
Warrant shall be so registered shall be deemed and treated as the owner and
holder thereof for all purposes of this Warrant, and the Company shall not
be affected by any notice or knowledge to the contrary.
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(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or conversion or for exchange at the office of the
Company maintained pursuant to Section 11.2(a) hereof, the Company at its
expense will execute and deliver to or upon the order of the holder thereof
a new Warrant or Warrants of like tenor, in the name of such holder or as
such holder (upon payment by such holder of any applicable transfer taxes)
may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
10.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to Section 11.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
11. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts or New York, New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Class A Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Class A Common Stock shall have been
changed or any stock resulting from any reclassification of such Class A Common
Stock.
Common Stock: Class A and Class B Common Stock $0.01 par value per share,
of the Company.
Common Stock Equivalents: Any class of common stock of the Company which is
entitled to share ratably with holders of Class A Common Stock in any
distributions including distributions upon the liquidation, dissolution or
winding-up of the Company and any other class of common stock of the Company
and/or any class into which those shares may hereafter be changed or any stock
resulting from any reclassification of such common stock, provided that the
number of such shares shall, for purposes of the Warrants, be deemed to equal
the actual number of shares of such Common Stock multiplied by the Sharing
Ratio.
Company: As defined in the introduction to this Warrant and shall include
any Person which shall succeed to or assume the obligations of the Company under
this Warrant.
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Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Class A Common Stock) or Other Securities directly or indirectly
convertible into or exchangeable for shares of Common Stock Equivalents.
Current Market Price: With respect to any security (or other asset), on any
date specified herein, the average daily market price during the period of the
most recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no class of such security is
then listed or admitted to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price shall be the fair value
thereof determined in good faith by the Board of Directors of the Company as of
the specified date. Notwithstanding the foregoing, in the event the Warrant is
exercised in connection with the Company's initial public offering of such
security or Common Stock Equivalents, the Current Market Price per share of such
security or Common Stock Equivalents, as the case may be, shall be equal to the
per share offering price to the public of such security or Common Stock
Equivalents, as the case may be, issued in the initial public offering.
Exercise Price: As defined in the introduction to this Warrant.
Expiration Date: As defined in the introduction to this Warrant.
Initial Warrant Price: As defined in Section 2.1 hereof.
Investors: Parthenon Investors, L.P., PCIP Investors, JMH Partners Corp.,
Shad Run Investments, L.P., TSG Co-Investors L.L.C., The Shattan Group, LLC,
Thomas S. Shattan, Gregory E. Mendel and G. Kevin Fechtmeyer.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Class A Common Stock or Convertible
Securities, excluding rights, warrants and options granted on or after the
Original Issue Date, to employees, officers, directors or consultants of the
Company or any subsidiary thereof pursuant to any stock option plan or agreement
adopted by the Board of Directors.
Original Issue Date: Means the date on which any shares of Class B Common
Stock, $0.01 par value per share, of the Company first were issued pursuant to
the Purchase Agreement.
Other Securities: Any stock (other than Class A Common Stock) and other
securities, property or assets of the Company or any other Person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Class A Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Class A Common
Stock or Other Securities pursuant hereto or otherwise.
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Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: As defined in the introduction to this Warrant.
Registration Rights Agreement: The Registration Rights Agreement dated as
of December 16, 1999 in the form of Exhibit J to the Purchase Agreement, as from
time to time in effect.
Securities Act: The Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations thereunder, all as the same shall
be in effect at the time.
Sharing Ratio: With respect to a Common Stock Equivalent, the ratio of (a)
the distribution payable upon the liquidation and distribution of the Company on
one share of such Common Stock Equivalent to (b) the distribution payable upon
the liquidation and distribution of the Company on one share of Class A Common
Stock.
Stockholders Agreement: The Stockholders Agreement dated as of December
16, 1999, in the form of Exhibit K to the Purchase Agreement, as from time to
time in effect.
Trigger Price: As defined in Section 2.1 hereof.
Warrant Price: As defined in Section 2.1 hereof.
Warrants: As defined in the introduction to this Warrant.
12. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company 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.
13. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company. Notwithstanding the foregoing,
the officers and Board of Directors of the Company shall have all fiduciary
duties to the holders hereof which such officers and Board of Directors would
have if the holders hereof held the shares of Class A Common Stock obtainable
upon the exercise hereof.
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14. NOTICES. Any time that either the holder or the Company shall be
required to give notice or other communication in connection with this Warrant,
such notice shall be deemed to be delivered if it is delivered in writing (or in
the form of a telex or telecopy to be given only during the recipient's normal
business hours unless arrangements have otherwise been made to receive such
notice by telex or telecopy outside of normal business hours) addressed as
hereinafter provided and if either (x) actually delivered at said address or (y)
in the case of a letter, seven Business Days shall have elapsed after the same
shall have been deposited in the United States mails, postage prepaid and
registered or certified: (a) if to any holder of any Warrant, at the registered
address of such holder as set forth in the register kept at the office of the
Company maintained pursuant to Section 11.2(a) hereof; or (b) if to the Company,
to the attention of its President at its office maintained pursuant to Section
11.2(a) hereof; provided, however, that the exercise of any Warrant shall be
effective in the manner provided in Section 2 hereof.
15. MISCELLANEOUS. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with (i) the
written consent of the Company and the holders or (ii) for all Warrants, the
written consent of the Company and the holders of a majority of the Warrants
then outstanding. This Warrant shall be binding upon any Person succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets. This Warrant shall be construed and enforced in
accordance with and governed by the domestic substantive laws of the
Commonwealth of Pennsylvania without giving effect to any choice or conflict of
law provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction. The section headings in this
Warrant are for purposes of convenience only and shall not constitute a part
hereof.
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IN WITNESS WHEREOF, Raymond Karsan Holdings, Inc. has caused this Warrant
to be sign by its duly authorized officer under its corporate seal, attested by
its duly authorized officer, and to be dated as of December __, 1999.
RAYMOND KARSAN HOLDINGS, INC.
[SEAL]
By:_________________________________
Name:
Title:
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FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________ shares of the
Class A Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________
(Street Address)
___________________________________
(City) (State) (Zip Code)
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FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
converts such Warrant with respect to __________/1/ shares of the Class A
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
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FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right represented by such
Warrant to purchase __________/1/ shares of Class A Common Stock of RAYMOND
KARSAN HOLDINGS, INC. to which such Warrant relates, and appoints
Attorney to make such transfer on the books of RAYMOND KARSAN HOLDINGS, INC.
maintained for such purpose, with full power of substitution in the premises.
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
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EXHIBIT C-1
-----------
This warrant and any shares represented by this warrant have not been
registered under the securities act of 1933, as amended, and may not be
transferred, sold or otherwise disposed of except pursuant to an effective
registration under said act or pursuant to an exemption from such
registration.
The voting of the shares of stock issuable pursuant to this warrant, and
the sale, encumbrance or other disposition of such stock and this warrant
are subject to the provisions of a stockholders agreement dated as of
December 16, 1999 (the "stockholders agreement") to which the issuer and
certain of its stockholders are party. Furthermore, such stock and this
warrant may be sold or otherwise transferred only in compliance with the
stockholders agreement. A complete and correct copy of the stockholders
agreement may be inspected at the principal office of the issuer or
obtained from the issuer without charge.
RAYMOND KARSAN HOLDINGS, INC.
Class C-1 Common Stock Purchase Warrant
No. [ ] Wayne, Pennsylvania
December 16, 1999
THIS CERTIFIES THAT, for value received, and subject to the conditions on
exercise and other provisions hereinafter set forth, [ ] or
transferees permitted under the Stockholders Agreement (the "Holder"), is
entitled to purchase from Raymond Karsan Holdings, Inc., a Pennsylvania
corporation (the "Company"), under the conditions specified in this Warrant (the
"Warrant"), [ ] shares (subject to adjustment as hereinafter provided) of the
duly authorized, validly issued, fully paid and non-assessable Class A Common
Stock, $0.01 par value per share, of the Company at an initial exercise price of
$0.01 per share (such exercise price, as from time to time adjusted in
accordance with the terms hereof, the "Warrant Price"). Certain capitalized
terms used in this Warrant are defined in Section 12 below.
This Warrant is one of a series of warrants (collectively, the "Warrants")
issued pursuant to Section 2.2 of the Purchase Agreement. A copy of the
Purchase Agreement may be inspected at the principal office of the Company or
obtained from the Company without charge.
1. EXERCISABILITY. Unless earlier terminated pursuant to Section 2, this
Warrant shall become exercisable upon the earliest to occur of the following:
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1.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities greater
than or equal to the IRR Hurdle, or (ii) Proceeds on the Purchased Securities
which are greater than or equal to the Proceeds Threshold; and
1.2 the consummation of a Sale Transaction that results in (i) an IRR on
the Purchased Securities greater than or equal to the IRR Hurdle, or (ii)
Proceeds on the Purchased Securities which are greater than or equal to the
Proceeds Threshold.
In the event that full exercise of this Warrant would cause the condition that
triggered the exercisability of the Warrant not to be fulfilled (as a result of
the incremental IRR and/or Proceeds resulting from the shares subject to the
Warrant), this Warrant shall become exercisable only for the largest number of
shares of Class A Common Stock as will result in such condition being fulfilled.
2. TERMINATION. This Warrant shall terminate on the earlier of the following:
2.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities of less
than the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of less than
the Proceeds Threshold;
2.2 the consummation of a Sale Transaction or other sale of Purchased
Securities that results in (i) an IRR on the Purchased Securities of less than
the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of less than the
Proceeds Threshold;
2.3 the written consent to such termination by the Holders of Warrants to
acquire a majority of the shares of common stock originally subject to the
Warrants;
2.4 the determination by a majority of the Management Stockholders (as
defined in the Stockholders Agreement) that it is not reasonably likely that a
Qualified Public Offering or Sale Transaction will result in (i) an IRR on the
Purchased Securities of at least the IRR Hurdle, and (ii) Proceeds on the
Purchased Securities of at least the Proceeds Threshold; and
2.5 December 16, 2006.
3. EXERCISE OR CONVERSION OF WARRANT.
3.1 Manner of Exercise or Conversion; Payment.
(a) Exercise. This Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day on or
prior to the Expiration Date, by surrender of this Warrant to the Company
at its office maintained pursuant to Section 11.2(a) hereof, accompanied by
a subscription in substantially the form attached
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to this Warrant (or a reasonable facsimile thereof) duly executed by such
holder and accompanied by payment, in cash or by check payable to the order
of the Company (or by any combination of such methods), in the amount
obtained by multiplying (a) the number of shares of Class A Common Stock
(without giving effect to any adjustment thereof) designated in such
subscription by (b) the Exercise Price, and such holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully
paid and nonassessable shares of Class A Common Stock determined as
provided in Section 4 hereof.
(b) Conversion. This Warrant may be converted by the holder hereof,
in whole or in part, into shares of Class A Common Stock, during normal
business hours on any Business Day on or prior to the Expiration Date, by
surrender of this Warrant to the Company at its office maintained pursuant
to Section 11.2(a) hereof, accompanied by a conversion notice in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder, and such holder shall thereupon be
entitled to receive a number of duly authorized, validly issued, fully paid
and nonassessable shares of Class A Common Stock equal to the quotient of:
(i) the excess of:
(A) an amount equal to the sum of (x) the product of (aa) the
number of shares of Class A Common Stock determined as
provided in Section 2 hereof which such holder would be
entitled to receive upon exercise of this Warrant for the
number of shares of Class A Common Stock designated in such
conversion notice multiplied by (bb) the Current Market
Price of each such share of Class A Common Stock so
designated and (y) the Current Market Price of any Other
Securities and the fair value of any other property
(determined in good faith by the Board of Directors of the
Company) such holder would be entitled to receive upon
exercise of this Warrant for the number of shares of Class A
Common Stock designated in such conversion notice
over
(B) an amount equal to (x) the number of shares of Class A
Common Stock (without giving effect to any adjustment
thereof) designated in such conversion notice multiplied by
(y) the Exercise Price
divided by
(ii) such Current Market Price of a share of Class A Common
Stock.
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For all purposes of this Warrant (other than this Section 3.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the conversion of this Warrant into Class A Common Stock in
accordance with the terms of this Section 3.1(b).
3.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in Section 3.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Class A Common Stock
shall be issuable upon such exercise as provided in Section 3.3 hereof shall be
deemed to have become the holder or holders of record thereof.
3.3 Delivery of Stock Certificates, etc. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within
three Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof or as such holder may direct:
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A Common Stock
to which such holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which such holder would otherwise be entitled, cash
in an amount equal to the same fraction of the Current Market Price per
share on the Business Day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate on the
face or faces thereof for the number of shares of Class A Common Stock
equal to the number of such shares (without giving effect to any adjustment
thereof) called for on the face of this Warrant minus the number of such
shares designated by the holder upon such exercise as provided in Section
3.1 hereof.
4. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
4.1 General; Number of Shares; Warrant Price. The number of shares of
Class A Common Stock which the holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be equal to the product of:
(a) the number of shares of Class A Common Stock which would otherwise
(but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 3.1
hereof, and
(b) a fraction of which (i) the numerator is the Initial Warrant Price,
and (ii) the denominator is the Warrant Price in effect on the date of
such exercise.
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The "Initial Warrant Price" shall be the Exercise Price. The "Warrant Price"
shall initially be the Initial Warrant Price, shall be adjusted and readjusted
from time to time as provided in this Section 4 and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 4. The "Trigger Price" shall initially be
$167 per share of Class A Common Stock and shall be adjusted and readjusted from
time to time as provided in this Section 4 and, as so adjusted or readjusted,
shall remain in effect until a further adjustment or readjustment thereof is
required by this Section 4.
4.2 Adjustments for Dividends, Distributions, Stock Splits, etc.
(a) Dividends and Distributions. In case at any time or from time to
time, the holders of Class A Common Stock shall have received, or (on or
after the record date fixed for the determination of shareholders eligible
to receive) shall have become entitled to receive, without payment
therefor:
(i) other or additional stock or Other Securities or property
(other than cash) by way of dividend, or
(ii) any cash, or
(iii) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares
or similar corporate rearrangement, other than additional
----- ----
shares of Class A Common Stock issued as a stock dividend
or in a stock-split (adjustments in respect of which are
provided for in Section 4.2(b) below),
then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 3, shall be entitled, without the payment of
any additional consideration or the taking of any further action, to
receive the amount of stock, Other Securities and property (including cash
in the cases referred to in subdivisions (ii) and (iii) of this Section
4.2(a)) which such holder would hold on the date of such exercise if on the
date hereof he had been the holder of record of the number of shares of
Common Stock provided for herein and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such
shares and all such other or additional stock and other securities and
property (including cash in the cases referred to in subdivisions (ii) and
(iii) of this Section 4.2(a)) receivable by him as aforesaid during such
period, giving effect to all adjustments called for during such period by
Section 4.
(b) Treatment of Stock Dividends, Stock Splits, etc. In the event
that the Company shall (i) issue additional shares of Common Stock
Equivalents, or securities exercisable for or convertible into Common Stock
Equivalents, as a dividend or other distribution on outstanding Common
Stock Equivalents, (ii) subdivide its outstanding shares of Common
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Stock Equivalents, or (iii) combine its outstanding shares of Common Stock
Equivalents into a smaller number of shares of Common Stock Equivalents,
then, in each such event, the Warrant Price and the Trigger Price shall,
simultaneously with the happening of such event, be adjusted by multiplying
each of the then current Warrant Price and Trigger Price by a fraction, (a)
the numerator of which shall be the number of shares of Common Stock
Equivalents outstanding immediately prior to such event, and (b) the
denominator of which shall be the number of shares of Common Stock
Equivalents outstanding immediately after such event, and the product so
obtained shall thereafter be the Warrant Price and Trigger Price,
respectively, then in effect. The Warrant Price and Trigger Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4.2(b). Upon
each adjustment of the Warrant Price or Trigger Price, the holder of this
Warrant shall thereafter be entitled to purchase at the Warrant Price
resulting from such adjustment, the number of shares obtained by dividing
the product of the number of shares purchasable pursuant hereto immediately
prior to such adjustment and the Warrant Price immediately preceding such
adjustment by the Warrant Price resulting from such adjustment.
4.3 Reorganization, Consolidation or Merger. In case at any time or from
time to time the Company shall (a) effect a reorganization, (b) consolidate with
or merge into any other person, (c) voluntarily or involuntarily dissolve,
liquidate or wind-up, or (d) transfer all or substantially all of its properties
or assets to any other person, then in each such case, as a condition thereto,
lawful and adequate provision shall be made so that the holder of this Warrant,
on the exercise or conversion hereof as provided in Section 1 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Class A Common Stock issuable on such exercise immediately prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such reorganization, consolidation, merger or
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustments thereafter as
provided in Section 4.
4.4 Adjustment for Issuance of Common Stock Equivalents Below Trigger
Price.
(a) General. In any case to which Sections 4.2 and 4.3 hereof are
not applicable, where the Company shall issue or sell shares of its Common
Stock Equivalents after December 16, 1999 without consideration or for a
consideration per share less than the Trigger Price in effect pursuant to
the terms of this Warrant at the time of issuance or sale of such
additional shares, except where such shares are issued or sold pursuant to
the exercise of any warrant or option or issued prior to the date of this
Warrant, then the Warrant Price in effect hereunder shall simultaneously
with such issuance or sale be reduced to a price determined by multiplying
the Warrant Price then in effect hereunder by a fraction, the numerator of
which is the sum of (i) the product of the total number of shares of Common
Stock Equivalents outstanding immediately prior to such issuance or
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<PAGE>
sale multiplied by the Trigger Price in effect hereunder at the time of
such issuance or sale, plus (ii) the aggregate consideration received by
the Company upon such issuance or sale, and the denominator of which is the
product of the total number of shares of Common Stock Equivalents
outstanding immediately after issuance or sale of such additional shares
multiplied by the Trigger Price in effect hereunder at the time of such
issuance.
(b) Options; Convertible Securities. In case the Company shall issue
or sell any Options or Convertible Securities after December 16, 1999 there
shall be determined the price per share for which Common Stock Equivalents
are issuable upon the conversion or exercise thereof, such determination to
be made by dividing (i) the sum of the total amount received or receivable
by the Company as consideration for the issue or sale of such Options or
Convertible Securities plus the minimum aggregate amount of additional
consideration payable to the Company upon the conversion or exercise
thereof, by (ii) the maximum number of shares of Common Stock Equivalents
of the Company issuable upon the conversion or exercise of all of such
Options or Convertible Securities. If the price per share so determined
shall be less than the applicable Trigger Price, then, for purposes of
Section 4.4(a) hereof, such issue or sale shall be deemed to be an issue or
sale (as of the date of issue or sale of such Options or Convertible
Securities) of such maximum number of shares of Common Stock Equivalents at
the price per share so determined and such maximum number of shares shall
be deemed to be outstanding after such issuance, provided that, upon the
expiration of such rights of conversion or exercise of such Options or
Convertible Securities, if any thereof shall not have been exercised, the
adjusted Warrant Price shall forthwith be readjusted and thereafter be the
price which it would have been had an adjustment been made on the basis
that the only shares of Common Stock Equivalents so issued or sold were
issued or sold upon the conversion or exercise of such Options or
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
for the issue or sale of all of such Options or Convertible Securities
which shall have been converted or exchanged.
(c) Record Date. If the Company takes a record of the holders of
Common Stock Equivalents for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock Equivalents, Options
or Convertible Securities, or (ii) to subscribe for or purchase Common
Stock Equivalents, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the Common Stock
Equivalents deemed to have been issued or sold upon the declaration of such
dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
4.5 Minimum Adjustment of Warrant Price and Trigger Price. If the amount
of any adjustment of the Warrant Price required pursuant to this Section 4 would
be less than one-tenth (1/10) of one percent (1%) of the Warrant Price or
Trigger Price, as the case may be, in effect at
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<PAGE>
the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one tenth
(1/10) of one percent (1%) of such Warrant Price or Trigger Price.
4.6 Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 4, treasury shares shall not be deemed to be
outstanding.
4.7 Calculation of Consideration Received. If any Common Stock
Equivalents, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock Equivalents, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Current Market Price thereof as of the date of receipt. For
purposes of this Warrant, the fair value of any consideration other than cash
and securities shall be determined by the board of directors of the Company
using its good faith discretion.
4.8 Integrated Transactions. In case any Options are issued in connection
with the issue or sale of Other Securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued for a consideration of $1.00 (as adjusted consistent to give effect to
the occurrences set forth in Sections 4.2 and 4.3).
5. NO IMPAIRMENT. The Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise plus the amount deemed to have been paid
upon issuance of this Warrant, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Class A Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Class A Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
6. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment
in the shares of Class A Common Stock issuable upon the exercise of this
Warrant, the Company at its expense will promptly compute such adjustment or
readjustment in accordance with the terms of this Warrant and prepare a report
setting forth such adjustment or readjustment and showing in reasonable detail
the method of calculation thereof and the facts upon which such adjustment or
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<PAGE>
readjustment is based, including a statement of (a) the number of shares of
Class A Common Stock outstanding or deemed to be outstanding, and (b) the
Warrant Price in effect immediately prior to such issue or sale and as adjusted
and readjusted (if required by Section 4 hereof) on account thereof. The Company
will forthwith mail a copy of each such report to each holder of a Warrant and
will, upon the written request at any time of any holder of a Warrant, furnish
to such holder a like report setting forth the Warrant Price and the Trigger
Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its office
maintained pursuant to Section 11.2(a) hereof and will cause the same to be
available for inspection at such office during normal business hours by any
holder of a Warrant or any prospective purchaser of a Warrant designated by the
holder thereof.
7. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) the declaration by the Company of any dividend payable in stock
upon Common Stock Equivalents or any other distribution by the Company to
the holders of Common Stock Equivalents, or
(c) the Company proposing to make an offer for subscription pro rata
to the holders of its Common Stock Equivalents of any additional shares of
stock of any class or other rights, or
(d) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(e) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(f) any other action of a type referred to in Section 4 hereof,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Class A
Common Stock shall be entitled to
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<PAGE>
exchange their shares of Class A Common Stock for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction. Such
notice shall be mailed at least 45 days prior to the date therein specified. At
no time prior to the date therein specified shall the Company take any action
which could prevent the exercise or conversion of this Warrant in accordance
with the terms hereof.
8. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
December 16, 1999 shall (a) effect a reorganization, (b) consolidate with or
merge with or into any other entity, or (c) transfer all or substantially all of
its properties or assets to any other person or entity, then, in each such case,
the holder of this Warrant, upon the exercise hereof as provided in Section 3 at
any time after the consummation of such reorganization, consolidation, merger or
transfer, as the case may be, shall be entitled to receive, in lieu of the Class
A Common Stock (or Other Securities) issuable upon such exercise prior to such
consummation, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation if such holder
had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4 hereof. The Company shall not
consummate any such reorganization, consolidation, merger or transfer unless the
resulting, surviving or transferee entity, as the case may be, expressly agrees
in writing, reasonably satisfactory to the holders of a majority of the Warrants
then outstanding, to fulfil the Company's obligations under this Warrant and
this Section 8.
9. PERFORMANCE OF OBLIGATIONS. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder of this Warrant against dilution or
other impairment to the extent set forth in this Warrant.
10. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Class A Common Stock of each class from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Class A Common Stock issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable.
11. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
11.1 Ownership of Warrants. The Company may treat the person in whose
name any Warrant is registered on the register kept at the office of the Company
maintained pursuant to Section 11.2(a) hereof as the owner and holder thereof
for all purposes, notwithstanding any
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notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. A Warrant, if properly assigned, may be exercised by
a new holder without a new Warrant first having been issued.
11.2 Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office in Wayne, Pennsylvania where
notices, presentations and demands in respect of this Warrant may be made
upon it. Such office shall be maintained at 170 South Warner Road, Wayne,
Pennsylvania 19087 until such time as the Company shall notify the holders
of the Warrants of any change of location of such office within the United
States.
(b) The Company shall cause to be kept at its office maintained
pursuant to Sec tion 11.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of holders of Warrants,
the transfers thereof and the names and addresses of transferees of
Warrants shall be registered in such register. The Person in whose name
any Warrant shall be so registered shall be deemed and treated as the owner
and holder thereof for all purposes of this Warrant, and the Company shall
not be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 11.2(a) hereof, the Company at its expense
will execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
11.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to Section 11.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
12. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
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Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts or New York, New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Class A Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Class A Common Stock shall have been
changed or any stock resulting from any reclassification of such Class A Common
Stock.
Common Stock: Class A and Class B Common Stock, $0.01 par value per share,
of the Company.
Common Stock Equivalents: Any class of common stock of the Company which is
entitled to share ratably with holders of Class A Common Stock in any
distributions including distributions upon the liquidation, dissolution or
winding-up of the Company and any other class of common stock of the Company
and/or stock of any class into which these shares may hereafter be changed or
any stock resulting from any reclassification of such common stock, provided
that the number of such shares shall, for purposes of the Warrants, be deemed to
equal the actual number of shares of such Common Stock multiplied by the Sharing
Ratio.
Company: As defined in the introduction to this Warrant and shall include
any Person which shall succeed to or assume the obligations of the Company under
the Warrant.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Class A Common Stock) or other securities directly or indirectly
convertible into or exchangeable for shares of Common Stock Equivalents.
Current Market Price: With respect to any security (or other asset), on
any date specified herein, the average daily market price during the period of
the most recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no class of such security is
then listed or admitted to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price shall be the fair value
thereof determined in good faith by the Board of Directors of the Company as of
the specified date. Notwithstanding the foregoing, in the event the Warrant is
exercised in connection with the Company's initial public offering of such
security or Common Stock Equivalents, the Current Market Price per share of such
security or Common Stock Equivalents, as the case may be, shall be equal to the
per share offering price to the public of such security or Common Stock
Equivalents, as the case may be, issued in the initial public offering.
Exercise Price: As defined in the introduction to this Warrant.
Expiration Date: As defined in the introduction to this Warrant.
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Initial Warrant Price: As defined in Section 4.1 hereof.
IRR: Shall mean the internal annual rate of return, calculated in a manner
consistent with the "IRR" function in Microsoft Corporation's Excel spreadsheet
software (based on a year of twelve thirty-day months), realized (or deemed to
be realized) by the holders of Purchased Securities on their investment pursuant
to the Purchase Agreement in the Purchased Securities, such rate of return to be
calculated on (i) the cash outflow consisting of the $22,000,000 paid for the
Purchased Securities and (ii) the series of cash inflows consisting of all
amounts realized (or deemed to be realized) by such holders in respect of the
Purchased Securities. For purposes of such calculation, (A) the cash outflow
and each cash inflow shall be deemed to have occurred on the last day of the
calendar month in which it occurred, (B) except to the extent specifically
provided herein, an amount shall not be treated as a cash inflow unless and
until actually received in cash, (C) securities that are traded on a national
securities exchange or the NASDAQ Stock Market that are received in the sale of
Purchased Securities shall (unless earlier sold for cash) be deemed to result in
a cash inflow on the Resale Day in an amount equal to the Current Market Price
of such securities on such date, (D) Common Stock retained in a Liquidity Event
shall (unless earlier sold for cash) be deemed to result in a cash inflow, on
the later of (i) the date of the Liquidity Event and (ii) if securities were
received in the Liquidity Event, the Resale Day, in an amount equal to the
Current Market Price of such Common Stock on such date, and (E) in the case of a
Qualified Public Offering, upon the Resale Day, each holder of Purchased
Securities shall be deemed to have realized a cash inflow equal to the Current
Market Price of all Purchased Securities then held by it.
IRR Hurdle: Shall mean, as of the date the relevant event is consummated,
the amount specified below for such date:
Twelve Months Ended IRR Hurdle
----------
December 17,
-----------
2000 80%
2001 70%
2002 60%
2003 50%
2004 and thereafter 40%
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Class A Common Stock or Convertible
Securities, excluding rights, warrants and options granted on or after the
Original Issue Date, to employees, officers, directors or consultants of the
Company or any subsidiary thereof pursuant to any stock option plan or agreement
adopted by the Board of Directors.
Original Issue Date: Means the date on which any shares of Class B Common
Stock, $0.01 par value per share, of the Company first were issued pursuant to
the Purchase Agreement.
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Other Securities: Any stock (other than Class A Common Stock) and other
securities, property or assets of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Class A Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Class A Common
Stock or Other Securities pursuant hereto or otherwise.
Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Proceeds: Shall mean cash proceeds realized (or deemed to be realized) by
any holder of Purchased Securities in respect of the sale of Purchased
Securities (or realized in respect of the sale of securities acquired in respect
of the sale of Purchased Securities); provided, however, that (A) securities
received by such holder that are traded on a national securities exchange or the
NASDAQ Stock Market that are received in the sale of Purchased Securities shall
(unless earlier sold for cash) be deemed to result in cash proceeds on the
Resale Day in an amount equal to the Current Market Price of such securities on
such date, (B) Common Stock retained in a Sale Transaction shall (unless earlier
sold for cash) be deemed to result in cash proceeds, on the later of (i) the
date of the Sale Transaction and (ii) if securities were received in the Sale
Transaction, the Resale Day, in an amount equal to the Current Market Price of
such Common Stock on such date, and (C) in the case of a Qualified Public
Offering, upon the Resale Day, Parthenon shall be deemed to have realized
Proceeds equal to the Current Market Price of all Purchased Securities then held
by it.
Proceeds Threshold: Shall mean, as of the date that the relevant Proceeds
amount is determined, the amount specified below for such date:
Twelve Months Ended Proceeds
December 17, Threshold
------------ ---------
2000 $ 39,600,000
2001 $ 63,800,000
2002 $ 90,200,000
2003 $112,200,000
2004 and thereafter $118,800,000
Purchase Agreement: Shall mean the Class B Common Stock and Warrant
Purchase Agreement dated as of December 16, 1999 by and among the Company,
Parthenon Investors, L.P., PCIP Investors, JMH Partners Corp., Shad Run
Investments, L.P., TSG Co-Investors, L.L.C., The Shattan Group, LLC, Thomas S.
Shattan, Gregory E. Mendel and G. Kevin Fechtmeyer.
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Purchased Securities: Shall mean the securities referred to as the Class B
Common Stock and the Class B Warrants in the Purchase Agreement, together with
any other securities of the Company issued upon conversion thereof or in
exchange therefor.
Purchaser: As defined in the introduction to this Warrant.
Qualified Public Offering: Shall have the meaning provided in Section 1 of
the Stockholders Agreement.
Resale Day: Shall mean, (i) in the case of a Qualified Public Offering,
any business day more than thirty days after the expiration of any
"underwriter's lockup" or similar resale limitation in connection with such
Qualified Public offering on any applicable securities held by Parthenon and
(ii) in the case of a Sale Transaction other than a Qualified Public Offering
the tenth business day after the first date when all the relevant securities
received in such Liquidity Event are traded on a national securities exchange or
the NASDAQ Stock Market and freely salable under Rule 145 under the Securities
Act of 1933, as amended (or any successor rule), and not subject to any
"pooling," "tax-free reorganization" or similar contractual resale restrictions
entered into in connection with the Sale Transaction.
Sale Transaction: Shall mean (i) any sale or series of sales by a holder
of at least 90% of the Purchased Securities, whether by merger, consolidation,
recapitalization, share exchange, redemption or otherwise, and (ii) any sale (or
series of sales of assets resulting in) of all or substantially all the assets
of the Company; provided, however, that in the case of a series of sales, the
Sale Transaction shall be deemed to occur on the date of the sale that results
in Parthenon having sold at least 90% of such Purchased Securities, and in the
case of a Sale Transaction in which Parthenon receives securities in respect of
the sale of Purchased Securities, the Resale Date.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations thereunder, all as the same shall be in
effect at the time.
Sharing Ratio: With respect to a Common Stock Equivalent, the ratio of (a)
the distribution payable upon the liquidation and distribution of the Company on
one share of such Common Stock Equivalent to (b) the distribution payable upon
the liquidation and distribution of the Company on one share of Class A Common
Stock.
Stockholders Agreement: The Stockholders Agreement dated as of December
16, 1999, in the form of Exhibit K to the Purchase Agreement, as from time to
time in effect.
Trigger Price: As defined in Section 4.1 hereof.
Warrant Price: As defined in Section 4.1 hereof.
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Warrants: As defined in the introduction to this Warrant.
13. REMEDIES. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company 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.
14. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company. Notwithstanding the foregoing,
the officers and Board of Directors of the Company shall have all fiduciary
duties to the holder hereof which such officers and Board of Directors would
have if the holder hereof held the shares of Class A Common Stock obtainable
upon the exercise hereof.
15. NOTICES. Any notice or other communication in connection with this Warrant
shall be deemed to be delivered if in writing (or in the form of a telex or
telecopy to be given only during the recipient's normal business hours unless
arrangements have otherwise been made to receive such notice by telex or
telecopy outside of normal business hours) addressed as hereinafter provided and
if either (x) actually delivered at said address or (y) in the case of a letter,
seven Business Days shall have elapsed after the same shall have been deposited
in the United States mails, postage prepaid and registered or certified: (a) if
to any holder of any Warrant, at the registered address of such holder as set
forth in the register kept at the office of the Company maintained pursuant to
Section 11.2(a) hereof; or (b) if to the Company, to the attention of its
President at its office maintained pursuant to Section 11.2(a) hereof; provided,
however, that the exercise of any Warrant shall be effective in the manner
provided in Section 3 hereof.
16. MISCELLANEOUS. Any term of this Warrant may be amended and the observance
of any term of this Warrant may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with (i) the written
consent of the Company and the Holder or (ii) for all Warrants, the written
consent of the Company and the holders of a majority of the Warrants then
outstanding. This Warrant shall be construed and enforced in accordance with
and governed by the domestic substantive laws of the Commonwealth of
Pennsylvania without giving effect to any choice or conflict of law provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction. The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
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IN WITNESS WHEREOF, Raymond Karsan Holdings, Inc. has caused this Warrant
to be signed by its duly authorized officer under its corporate seal, attested
by its duly authorized officer, and to be dated as of December ___, 1999.
RAYMOND KARSAN HOLDINGS, INC
[SEAL]
By:________________________
Title:
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________/2/ shares of
the Class A Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: __________________________________
(Signature must conform in all
respects to name of holders as
specified on the face of Warrant)
__________________________________
(Street Address)
__________________________________
(City) (State) (Zip Code)
_________________
/2/ Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any adjustment
for additional shares of Class A Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
this Warrant, may be delivered upon exercise. In the case of a partial
exercise, a new Warrant or Warrants will be issued and delivered, representing
the unexercised portion of the Warrant, to the holder surrendering the Warrant.
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FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
converts such Warrant with respect to __________/1/ shares of the Class A
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
________________________
/1/ Insert here the number of shares called for on the face of this
Warrant (or, in the case of a partial conversion, the portion thereof as to
which this Warrant is being converted), in either case without making any
adjustment for additional shares of Class A Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of a
partial conversion, a new Warrant or Warrants will be issued and delivered,
representing the unconverted portion of the Warrant, to the holder surrendering
the Warrant.
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FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase __________/1/ shares of Class A Common
Stock of RAYMOND KARSAN HOLDINGS, INC. to which such Warrant relates, and
appoints Attorney to make such transfer on the books of RAYMOND KARSAN
HOLDINGS, INC. maintained for such purpose, with full power of substitution in
the premises.
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
__________________________
/1/ Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
additional shares of Class A Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the Warrant, to the holder surrendering the Warrant.
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EXHIBIT C-2
-----------
This warrant and any shares represented by this warrant have not been registered
under the securities act of 1933, as amended, and may not be transferred, sold
or otherwise disposed of except pursuant to an effective registration under said
act or pursuant to an exemption from such registration.
The voting of the shares of stock pursuant to this warrant, and the sale,
encumbrance or other disposition of such stock and this warrant are subject to
the provisions of a stockholders agreement dated as of December 16, 1999 (the
"stockholders agreement") to which the issuer and certain of its stockholders
are party. Furthermore, such stock and this warrant may be sold or otherwise
transferred only in compliance with the stockholders agreement. A complete and
correct copy of the stockholders agreement may be inspected at the principal
office of the issuer or obtained from the issuer without charge.
RAYMOND KARSAN HOLDINGS, INC.
Class C-2 Common Stock Purchase Warrant
No. [ ] Wayne, Pennsylvania
December 16, 1999
THIS CERTIFIES THAT, for value received, and subject to the conditions on
exercise and other provisions hereinafter set forth, [ ] or transferees
permitted under the Stockholders Agreement (the "Holder"), is entitled to
purchase from Raymond Karsan Holdings, Inc., a Pennsylvania corporation (the
"Company"), under the conditions specified in this Warrant (the "Warrant"), [ ]
shares (subject to adjustment as hereinafter provided) of the duly authorized,
validly issued, fully paid and non-assessable Class A Common Stock, $0.01 par
value per share, of the Company at an initial exercise price of $0.01 per share
(such exercise price, as from time to time adjusted in accordance with the terms
hereof, the "Warrant Price"). Certain capitalized terms used in this Warrant are
defined in Section 12 below.
This Warrant is one of a series of warrants (collectively, the "Warrants")
issued pursuant to Section 2.2 of the Purchase Agreement. A copy of the
Purchase Agreement may be inspected at the principal office of the Company or
obtained from the Company without charge.
1. EXERCISABILITY. Unless earlier terminated pursuant to Section 2, this
Warrant shall become exercisable upon the earliest to occur of the following:
1.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities greater
than or equal to the IRR Hurdle, or
<PAGE>
(ii) Proceeds on the Purchased Securities which are greater than or equal to the
Proceeds Threshold; and
1.2 the consummation of a Sale Transaction that results in (i) an IRR on
the Purchased Securities greater than or equal to the IRR Hurdle, or (ii)
Proceeds on the Purchased Securities which are greater than or equal to the
Proceeds Threshold.
In the event that full exercise of this Warrant would cause the condition that
triggered the exercisability of the Warrant not to be fulfilled (as a result of
the incremental IRR and/or Proceeds resulting from the shares subject to the
Warrant), this Warrant shall become exercisable only for the largest number of
shares of Class A Common Stock as will result in such condition being fulfilled.
2. TERMINATION. This Warrant shall terminate on the earlier of the following:
2.1 the consummation of a Qualified Public Offering at a price to the
public per share that results in (i) an IRR on the Purchased Securities of less
than the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of less than
the Proceeds Threshold;
2.2 the consummation of a Sale Transaction or other sale of Purchased
Securities that results in (i) an IRR on the Purchased Securities of less than
the IRR Hurdle, and (ii) Proceeds on the Purchased Securities of less than the
Proceeds Threshold;
2.3 the written consent to such termination by the Holders of Warrants to
acquire a majority of the shares of common stock originally subject to the
Warrants;
2.4 the determination by a majority of the Management Stockholders (as
defined in the Stockholders Agreement) that it is not reasonably likely that a
Qualified Public Offering or Sale Transaction will result in (i) an IRR on the
Purchased Securities of at least the IRR Hurdle, and (ii) Proceeds on the
Purchased Securities of at least the Proceeds Threshold; and
2.5 December 16, 2006.
3. EXERCISE OR CONVERSION OF WARRANT.
3.1 Manner of Exercise or Conversion; Payment.
(a) Exercise. This Warrant may be exercised by the holder hereof, in
whole or in part, during normal business hours on any Business Day on or
prior to the Expiration Date, by surrender of this Warrant to the Company
at its office maintained pursuant to Section 11.2(a) hereof, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by such holder and accompanied
by payment, in cash or by check payable to the order of the Company (or by
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any combination of such methods), in the amount obtained by multiplying (a)
the number of shares of Class A Common Stock (without giving effect to any
adjustment thereof) designated in such subscription by (b) the Exercise
Price, and such holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully paid and nonassessable shares of
Class A Common Stock determined as provided in Section 4 hereof.
(b) Conversion. This Warrant may be converted by the holder hereof,
in whole or in part, into shares of Class A Common Stock, during normal
business hours on any Business Day on or prior to the Expiration Date, by
surrender of this Warrant to the Company at its office maintained pursuant
to Section 11.2(a) hereof, accompanied by a conversion notice in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such holder, and such holder shall thereupon be
entitled to receive a number of duly authorized, validly issued, fully paid
and nonassessable shares of Class A Common Stock equal to the quotient of:
(i) the excess of:
(A) an amount equal to the sum of (x) the product of (aa) the
number of shares of Class A Common Stock determined as
provided in Section 2 hereof which such holder would be
entitled to receive upon exercise of this Warrant for the
number of shares of Class A Common Stock designated in such
conversion notice multiplied by (bb) the Current Market
Price of each such share of Class A Common Stock so
designated and (y) the Current Market Price of any Other
Securities and the fair value of any other properly
(determined in good faith by the Board of Directors of the
Company) such holder would be entitled to receive upon
exercise of this Warrant for the number of shares of Class A
Common Stock designated in such conversion notice
over
(B) an amount equal to (x) the number of shares of Class A
Common Stock (without giving effect to any adjustment
thereof) designated in such conversion notice multiplied by
(y) the Exercise Price
divided by
(ii) such Current Market Price of a share of Class A Common
Stock.
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<PAGE>
For all purposes of this Warrant (other than this Section 3.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the conversion of this Warrant into Class A Common Stock in
accordance with the terms of this Section 3.1(b).
3.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in Section 3.1 hereof, and at such time the Person or Persons in whose
name or names any certificate or certificates for shares of Class A Common Stock
shall be issuable upon such exercise as provided in Section 3.3 hereof shall be
deemed to have become the holder or holders of record thereof.
3.3 Delivery of Stock Certificates, etc. As soon as practicable after each
exercise of this Warrant, in whole or in part, and in any event within three
Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof or as such holder may direct:
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A Common Stock
to which such holder shall be entitled upon such exercise plus, in lieu of
any fractional share to which such holder would otherwise be entitled, cash
in an amount equal to the same fraction of the Current Market Price per
share on the Business Day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate on the
face or faces thereof for the number of shares of Class A Common Stock
equal to the number of such shares (without giving effect to any adjustment
thereof) called for on the face of this Warrant minus the number of such
shares designated by the holder upon such exercise as provided in Section
3.1 hereof.
4. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
4.1 General; Number of Shares; Warrant Price. The number of shares of
Class A Common Stock which the holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be equal to the product of:
(a) the number of shares of Class A Common Stock which would otherwise
(but for the provisions of this Section 4) be issuable upon such
exercise, as designated by the holder hereof pursuant to Section 3.1
hereof, and
(b) a fraction of which (i) the numerator is the Initial Warrant Price,
and (ii) the denominator is the Warrant Price in effect on the date
of such exercise.
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<PAGE>
The "Initial Warrant Price" shall be the Exercise Price. The "Warrant Price"
shall initially be the Initial Warrant Price, shall be adjusted and readjusted
from time to time as provided in this Section 4 and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 4. The "Trigger Price" shall initially be
$167 per share of Class A Common Stock and shall be adjusted and readjusted from
time to time as provided in this Section 4 and, as so adjusted or readjusted,
shall remain in effect until a further adjustment or readjustment thereof is
required by this Section 4.
4.2 Adjustments for Dividends, Distributions, Stock Splits, etc.
(a) Dividends and Distributions. In case at any time or from time to
time, the holders of Class A Common Stock shall have received, or (on or
after the record date fixed for the determination of shareholders eligible
to receive) shall have become entitled to receive, without payment
therefor:
(i) other or additional stock or Other Securities or property
(other than cash) by way of dividend, or
(ii) any cash, or
(iii) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares
or similar corporate rearrangement, other than additional
----- ----
shares of Class A Common Stock issued as a stock dividend
or in a stock-split (adjustments in respect of which are
provided for in Section 4.2(b) below),
then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 3, shall be entitled, without the payment of
any additional consideration or the taking of any further action, to
receive the amount of stock, Other Securities and property (including cash
in the cases referred to in subdivisions (ii) and (iii) of this Section
4.2(a)) which such holder would hold on the date of such exercise if on the
date hereof he had been the holder of record of the number of shares of
Common Stock provided for herein and had thereafter, during the period from
the date hereof to and including the date of such exercise, retained such
shares and all such other or additional stock and other securities and
property (including cash in the cases referred to in subdivisions (ii) and
(iii) of this Section 4.2(a)) receivable by him as aforesaid during such
period, giving effect to all adjustments called for during such period by
Section 4.
(b) Treatment of Stock Dividends, Stock Splits, etc. In the event
that the Company shall (i) issue additional shares of Common Stock
Equivalents, or securities exercisable for or convertible into Common Stock
Equivalents, as a dividend or other distribution on outstanding Common
Stock Equivalents, (ii) subdivide its outstanding shares of Common
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<PAGE>
Stock Equivalents, or (iii) combine its outstanding shares of Common Stock
Equivalents into a smaller number of shares of Common Stock Equivalents,
then, in each such event, the Warrant Price and the Trigger Price shall,
simultaneously with the happening of such event, be adjusted by multiplying
each of the then current Warrant Price and Trigger Price by a fraction, (a)
the numerator of which shall be the number of shares of Common Stock
Equivalents outstanding immediately prior to such event, and (b) the
denominator of which shall be the number of shares of Common Stock
Equivalents outstanding immediately after such event, and the product so
obtained shall thereafter be the Warrant Price and Trigger Price,
respectively, then in effect. The Warrant Price and Trigger Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 4.2(b). Upon
each adjustment of the Warrant Price or Trigger Price, the holder of this
Warrant shall thereafter be entitled to purchase at the Warrant Price
resulting from such adjustment, the number of shares obtained by dividing
the product of the number of shares purchasable pursuant hereto immediately
prior to such adjustment and the Warrant Price immediately preceding such
adjustment by the Warrant Price resulting from such adjustment.
4.3 Reorganization, Consolidation or Merger. In case at any time or from
time to time the Company shall (a) effect a reorganization, (b) consolidate with
or merge into any other person, (c) voluntarily or involuntarily dissolve,
liquidate or wind-up, or (d) transfer all or substantially all of its properties
or assets to any other person, then in each such case, as a condition thereto,
lawful and adequate provision shall be made so that the holder of this Warrant,
on the exercise or conversion hereof as provided in Section 1 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Class A Common Stock issuable on such exercise immediately prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon such
consummation or in connection with such reorganization, consolidation, merger or
dissolution, as the case may be, if such holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustments thereafter as
provided in Section 4.
4.4 Adjustment for Issuance of Common Stock Equivalents Below Trigger
Price.
(a) General. In any case to which Sections 4.2 and 4.3 hereof are
not applicable, where the Company shall issue or sell shares of its Common
Stock Equivalents after December 16, 1999 without consideration or for a
consideration per share less than the Trigger Price in effect pursuant to
the terms of this Warrant at the time of issuance or sale of such
additional shares, except where such shares are issued or sold pursuant to
the exercise of any warrant or option or issued prior to the date of this
Warrant, then the Warrant Price in effect hereunder shall simultaneously
with such issuance or sale be reduced to a price determined by multiplying
the Warrant Price then in effect hereunder by a fraction, the numerator of
which is the sum of (i) the product of the total number of shares of Common
Stock Equivalents outstanding immediately prior to such issuance or
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sale multiplied by the Trigger Price in effect hereunder at the time of
such issuance or sale, plus (ii) the aggregate consideration received by
the Company upon such issuance or sale, and the denominator of which is the
product of the total number of shares of Common Stock Equivalents
outstanding immediately after issuance or sale of such additional shares
multiplied by the Trigger Price in effect hereunder at the time of such
issuance.
(b) Options; Convertible Securities. In case the Company shall issue
or sell any Options or Convertible Securities after December 16, 1999 there
shall be determined the price per share for which Common Stock Equivalents
are issuable upon the conversion or exercise thereof, such determination to
be made by dividing (i) the sum of the total amount received or receivable
by the Company as consideration for the issue or sale of such Options or
Convertible Securities plus the minimum aggregate amount of additional
consideration payable to the Company upon the conversion or exercise
thereof, by (ii) the maximum number of shares of Common Stock Equivalents
of the Company issuable upon the conversion or exercise of all of such
Options or Convertible Securities. If the price per share so determined
shall be less than the applicable Trigger Price, then, for purposes of
Section 4.4(a) hereof, such issue or sale shall be deemed to be an issue or
sale (as of the date of issue or sale of such Options or Convertible
Securities) of such maximum number of shares of Common Stock Equivalents at
the price per share so determined and such maximum number of shares shall
be deemed to be outstanding after such issuance, provided that, upon the
expiration of such rights of conversion or exercise of such Options or
Convertible Securities, if any thereof shall not have been exercised, the
adjusted Warrant Price shall forthwith be readjusted and thereafter be the
price which it would have been had an adjustment been made on the basis
that the only shares of Common Stock Equivalents so issued or sold were
issued or sold upon the conversion or exercise of such Options or
Convertible Securities, and that they were issued or sold for the
consideration actually received by the Company upon such conversion or
exchange, plus the consideration, if any, actually received by the Company
for the issue or sale of all of such Options or Convertible Securities
which shall have been converted or exchanged.
(c) Record Date. If the Company takes a record of the holders of
Common Stock Equivalents for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock Equivalents, Options
or Convertible Securities, or (ii) to subscribe for or purchase Common
Stock Equivalents, Options or Convertible Securities, then such record date
shall be deemed to be the date of the issue or sale of the Common Stock
Equivalents deemed to have been issued or sold upon the declaration of such
dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
4.5 Minimum Adjustment of Warrant Price and Trigger Price. If the amount
of any adjustment of the Warrant Price required pursuant to this Section 4 would
be less than one-tenth (1/10) of one percent (1%) of the Warrant Price or
Trigger Price, as the case may be, in effect at
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the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one tenth
(1/10) of one percent (1%) of such Warrant Price or Trigger Price.
4.6 Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 4, treasury shares shall not be deemed to be
outstanding.
4.7 Calculation of Consideration Received. If any Common Stock
Equivalents, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock Equivalents, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Current Market Price thereof as of the date of receipt. For
purposes of this Warrant, the fair value of any consideration other than cash
and securities shall be determined by the board of directors of the Company
using its good faith discretion.
4.8 Integrated Transactions. In case any Options are issued in connection
with the issue or sale of Other Securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued for a consideration of $1.00 (as adjusted consistent to give effect to
the occurrences set forth in Sections 4.2 and 4.3).
5. NO IMPAIRMENT. The Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise plus the amount deemed to have been paid
upon issuance of this Warrant, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Class A Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Class A Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
6. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment in
the shares of Class A Common Stock issuable upon the exercise of this Warrant,
the Company at its expense will promptly compute such adjustment or readjustment
in accordance with the terms of this Warrant and prepare a report setting forth
such adjustment or readjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which such adjustment or
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readjustment is based, including a statement of (a) the number of shares of
Class A Common Stock outstanding or deemed to be outstanding, and (b) the
Warrant Price in effect immediately prior to such issue or sale and as adjusted
and readjusted (if required by Section 4 hereof) on account thereof. The Company
will forthwith mail a copy of each such report to each holder of a Warrant and
will, upon the written request at any time of any holder of a Warrant, furnish
to such holder a like report setting forth the Warrant Price and the Trigger
Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its office
maintained pursuant to Section 11.2(a) hereof and will cause the same to be
available for inspection at such office during normal business hours by any
holder of a Warrant or any prospective purchaser of a Warrant designated by the
holder thereof.
7. NOTICES OF CORPORATE ACTION. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) the declaration by the Company of any dividend payable in stock
upon Common Stock Equivalents or any other distribution by the Company to
the holders of Common Stock Equivalents, or
(c) the Company proposing to make an offer for subscription pro rata
to the holders of its Common Stock Equivalents of any additional shares of
stock of any class or other rights, or
(d) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(e) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(f) any other action of a type referred to in Section 4 hereof,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the holders of record of Class A
Common Stock shall be entitled to
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exchange their shares of Class A Common Stock for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction. Such
notice shall be mailed at least 45 days prior to the date therein specified. At
no time prior to the date therein specified shall the Company take any action
which could prevent the exercise or conversion of this Warrant in accordance
with the terms hereof.
8. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
December 16, 1999 shall (a) effect a reorganization, (b) consolidate with or
merge with or into any other entity, or (c) transfer all or substantially all of
its properties or assets to any other person or entity, then, in each such case,
the holder of this Warrant, upon the exercise hereof as provided in Section 3 at
any time after the consummation of such reorganization, consolidation, merger or
transfer, as the case may be, shall be entitled to receive, in lieu of the Class
A Common Stock (or Other Securities) issuable upon such exercise prior to such
consummation, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation if such holder
had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4 hereof. The Company shall not
consummate any such reorganization, consolidation, merger or transfer unless the
resulting, surviving or transferee entity, as the case may be, expressly agrees
in writing, reasonably satisfactory to the holders of a majority of the Warrants
then outstanding, to fulfil the Company's obligations under this Warrant and
this Section 8.
9. PERFORMANCE OF OBLIGATIONS. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder of this Warrant against dilution or
other impairment to the extent set forth in this Warrant.
10. RESERVATION OF STOCK, ETC. The Company will at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Class A Common Stock of each class from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Class A Common Stock issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable.
11. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
11.1 Ownership of Warrants. The Company may treat the person in whose name
any Warrant is registered on the register kept at the office of the Company
maintained pursuant to Section 11.2(a) hereof as the owner and holder thereof
for all purposes, notwithstanding any
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notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes, notwithstanding
any notice to the contrary. A Warrant, if properly assigned, may be exercised by
a new holder without a new Warrant first having been issued.
11.2 Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office in Wayne, Pennsylvania where
notices, presentations and demands in respect of this Warrant may be made
upon it. Such office shall be maintained at 170 South Warner Road, Wayne,
Pennsylvania 19087 until such time as the Company shall notify the holders
of the Warrants of any change of location of such office within the United
States.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 11.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of holders of Warrants,
the transfers thereof and the names and addresses of transferees of
Warrants shall be registered in such register. The Person in whose name any
Warrant shall be so registered shall be deemed and treated as the owner and
holder thereof for all purposes of this Warrant, and the Company shall not
be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Sec tion 11.2(a) hereof, the Company at its expense
will execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
11.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to Section 11.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
12. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
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Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts or New York, New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Class A Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Class A Common Stock shall have been
changed or any stock resulting from any reclassification of such Class A Common
Stock.
Common Stock: Class A and Class B Common Stock, $0.01 par value per share,
of the Company.
Common Stock Equivalents: Any class of common stock of the Company which is
entitled to share ratably with holders of Class A Common Stock in any
distributions including distributions upon the liquidation, dissolution or
winding-up of the Company and any other class of common stock of the Company
and/or stock of any class into which these shares may hereafter be changed or
any stock resulting from any reclassification of such common stock, provided
that the number of such shares shall, for purposes of the Warrants, be deemed to
equal the actual number of shares of such Common Stock multiplied by the Sharing
Ratio.
Company: As defined in the introduction to this Warrant and shall include
any Person which shall succeed to or assume the obligations of the Company under
the Warrant.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Class A Common Stock) or other securities directly or indirectly
convertible into or exchangeable for shares of Common Stock Equivalents.
Current Market Price: With respect to any security (or other asset), on
any date specified herein, the average daily market price during the period of
the most recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no class of such security is
then listed or admitted to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price shall be the fair value
thereof determined in good faith by the Board of Directors of the Company as of
the specified date. Notwithstanding the foregoing, in the event the Warrant is
exercised in connection with the Company's initial public offering of such
security or Common Stock Equivalents, the Current Market Price per share of such
security or Common Stock Equivalents, as the case may be, shall be equal to the
per share offering price to the public of such security or Common Stock
Equivalents, as the case may be, issued in the initial public offering.
Exercise Price: As defined in the introduction to this Warrant.
Expiration Date: As defined in the introduction to this Warrant.
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Initial Warrant Price: As defined in Section 4.1 hereof.
IRR: Shall mean the internal annual rate of return, calculated in a manner
consistent with the "IRR" function in Microsoft Corporation's Excel spreadsheet
software (based on a year of twelve thirty-day months), realized (or deemed to
be realized) by the holders of Purchased Securities on their investment pursuant
to the Purchase Agreement in the Purchased Securities, such rate of return to be
calculated on (i) the cash outflow consisting of the $22,000,000 paid for the
Purchased Securities and (ii) the series of cash inflows consisting of all
amounts realized (or deemed to be realized) by such holders in respect of the
Purchased Securities. For purposes of such calculation, (A) the cash outflow
and each cash inflow shall be deemed to have occurred on the last day of the
calendar month in which it occurred, (B) except to the extent specifically
provided herein, an amount shall not be treated as a cash inflow unless and
until actually received in cash, (C) securities that are traded on a national
securities exchange or the NASDAQ Stock Market that are received in the sale of
Purchased Securities shall (unless earlier sold for cash) be deemed to result in
a cash inflow on the Resale Day in an amount equal to the Current Market Price
of such securities on such date, (D) Common Stock retained in a Liquidity Event
shall (unless earlier sold for cash) be deemed to result in a cash inflow, on
the later of (i) the date of the Liquidity Event and (ii) if securities were
received in the Liquidity Event, the Resale Day, in an amount equal to the
Current Market Price of such Common Stock on such date, and (E) in the case of a
Qualified Public Offering, upon the Resale Day, each holder of Purchased
Securities shall be deemed to have realized a cash inflow equal to the Current
Market Price of all Purchased Securities then held by it.
IRR Hurdle: Shall mean, as of the date the relevant event is consummated,
the amount specified below for such date:
Twelve Months Ended IRR Hurdle
----------
December 17,
-----------
2000 120%
2001 110%
2002 100%
2003 80%
2004 and thereafter 60%
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Class A Common Stock or Convertible
Securities, excluding rights, warrants and options granted on or after the
Original Issue Date, to employees, officers, directors or consultants of the
Company or any subsidiary thereof pursuant to any stock option plan or agreement
adopted by the Board of Directors.
Original Issue Date: Means the date on which any shares of Class B Common
Stock, $0.01 par value per share, of the Company first were issued pursuant to
the Purchase Agreement.
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Other Securities: Any stock (other than Class A Common Stock) and other
securities, property or assets of the Company or any other person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Class A Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Class A Common
Stock or Other Securities pursuant hereto or otherwise.
Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Proceeds: Shall mean cash proceeds realized (or deemed to be realized) by
any holder of Purchased Securities in respect of the sale of Purchased
Securities (or realized in respect of the sale of securities acquired in respect
of the sale of Purchased Securities); provided, however, that (A) securities
received by such holder that are traded on a national securities exchange or the
NASDAQ Stock Market that are received in the sale of Purchased Securities shall
(unless earlier sold for cash) be deemed to result in cash proceeds on the
Resale Day in an amount equal to the Current Market Price of such securities on
such date, (B) Common Stock retained in a Sale Transaction shall (unless earlier
sold for cash) be deemed to result in cash proceeds, on the later of (i) the
date of the Sale Transaction and (ii) if securities were received in the Sale
Transaction, the Resale Day, in an amount equal to the Current Market Price of
such Common Stock on such date, and (C) in the case of a Qualified Public
Offering, upon the Resale Day, Parthenon shall be deemed to have realized
Proceeds equal to the Current Market Price of all Purchased Securities then held
by it.
Proceeds Threshold: Shall mean, as of the date that the relevant Proceeds
amount is determined, the amount specified below for such date:
Twelve Months Ended Proceeds
December 17, Threshold
------------ ---------
2000 $ 48,400,000
2001 $ 96,800,000
2002 $176,000,000
2003 $231,000,000
2004 and thereafter $231,000,000
Purchase Agreement: Shall mean the Class B Common Stock and Warrant
Purchase Agreement dated as of December 16, 1999 by and among the Company,
Parthenon Investors, L.P., PCIP Investors, JMH Partners Corp., Shad Run
Investments, L.P., TSG Co-Investors, L.L.C., The Shattan Group, LLC, Thomas S.
Shattan, Gregory E. Mendel and G. Kevin Fechtmeyer.
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Purchased Securities: Shall mean the securities referred to as the Class B
Common Stock and the Class B Warrants in the Purchase Agreement, together with
any other securities of the Company issued upon conversion thereof or in
exchange therefor.
Purchaser: As defined in the introduction to this Warrant.
Qualified Public Offering: Shall have the meaning provided in Section 1 of
the Stockholders Agreement.
Resale Day: Shall mean, (i) in the case of a Qualified Public Offering,
any business day more than thirty days after the expiration of any
"underwriter's lockup" or similar resale limitation in connection with such
Qualified Public offering on any applicable securities held by Parthenon and
(ii) in the case of a Sale Transaction other than a Qualified Public Offering
the tenth business day after the first date when all the relevant securities
received in such Liquidity Event are traded on a national securities exchange or
the NASDAQ Stock Market and freely salable under Rule 145 under the Securities
Act of 1933, as amended (or any successor rule), and not subject to any
"pooling," "tax-free reorganization" or similar contractual resale restrictions
entered into in connection with the Sale Transaction.
Sale Transaction: Shall mean (i) any sale or series of sales by a holder
of at least 90% of the Purchased Securities, whether by merger, consolidation,
recapitalization, share exchange, redemption or otherwise, and (ii) any sale (or
series of sales of assets resulting in) of all or substantially all the assets
of the Company; provided, however, that in the case of a series of sales, the
Sale Transaction shall be deemed to occur on the date of the sale that results
in Parthenon having sold at least 90% of such Purchased Securities, and in the
case of a Sale Transaction in which Parthenon receives securities in respect of
the sale of Purchased Securities, the Resale Date.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations thereunder, all as the same shall be in
effect at the time.
Sharing Ratio: With respect to a Common Stock Equivalent, the ratio of (a)
the distribution payable upon the liquidation and distribution of the Company on
one share of such Common Stock Equivalent to (b) the distribution payable upon
the liquidation and distribution of the Company on one share of Class A Common
Stock.
Stockholders Agreement: The Stockholders Agreement dated as of December
16, 1999, in the form of Exhibit K to the Purchase Agreement, as from time to
time in effect.
Trigger Price: As defined in Section 4.1 hereof.
Warrant Price: As defined in Section 4.1 hereof.
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Warrants: As defined in the introduction to this Warrant.
13. REMEDIES. The Company stipulates that the remedies at law of the holder of
this Warrant in the event of any default or threatened default by the Company in
the performance of or com pliance 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.
14. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company. Notwithstanding the foregoing,
the officers and Board of Directors of the Company shall have all fiduciary
duties to the holder hereof which such officers and Board of Directors would
have if the holder hereof held the shares of Class A Common Stock obtainable
upon the exercise hereof.
15. NOTICES. Any notice or other communication in connection with this Warrant
shall be deemed to be delivered if in writing (or in the form of a telex or
telecopy to be given only during the recipient's normal business hours unless
arrangements have otherwise been made to receive such notice by telex or
telecopy outside of normal business hours) addressed as hereinafter provided and
if either (x) actually delivered at said address or (y) in the case of a letter,
seven Business Days shall have elapsed after the same shall have been deposited
in the United States mails, postage prepaid and registered or certified: (a) if
to any holder of any Warrant, at the registered address of such holder as set
forth in the register kept at the office of the Company maintained pursuant to
Section 11.2(a) hereof; or (b) if to the Company, to the attention of its
President at its office maintained pursuant to Section 11.2(a) hereof; provided,
however, that the exercise of any Warrant shall be effective in the manner
provided in Section 3 hereof.
16. MISCELLANEOUS. Any term of this Warrant may be amended and the observance
of any term of this Warrant may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with (i) the written
consent of the Company and the Holder or (ii) for all Warrants, the written
consent of the Company and the holders of a majority of the Warrants then
outstanding. This Warrant shall be construed and enforced in accordance with
and governed by the domestic substantive laws of the Commonwealth of
Pennsylvania without giving effect to any choice or conflict of law provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction. The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
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<PAGE>
IN WITNESS WHEREOF, Raymond Karsan Holdings, Inc. has caused this Warrant
to be signed by its duly authorized officer under its corporate seal, attested
by its duly authorized officer, and to be dated as of December ___, 1999.
RAYMOND KARSAN HOLDINGS, INC.
[SEAL]
By:________________________
Title:
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________/2/ shares of
the Class A Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
_____________________
/2/ Insert here the number of shares called for on the face of this Warrant (or,
in the case of a partial exercise, the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment for additional
shares of Class A Common Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of this Warrant,
may be delivered upon exercise. In the case of a partial exercise, a new Warrant
or Warrants will be issued and delivered, representing the unexercised portion
of the Warrant, to the holder surrendering the Warrant.
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FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
converts such Warrant with respect to __________/1/ shares of the Class A
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
_____________________
/1/ Insert here the number of shares called for on the face of this Warrant (or,
in the case of a partial conversion, the portion thereof as to which this
Warrant is being converted), in either case without making any adjustment for
additional shares of Class A Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial conversion, a
new Warrant or Warrants will be issued and delivered, representing the
unconverted portion of the Warrant, to the holder surrendering the Warrant.
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FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase __________/1/ shares of Class A Common
Stock of RAYMOND KARSAN HOLDINGS, INC. to which such Warrant relates, and
appoints Attorney to make such transfer on the books of
RAYMOND KARSAN HOLDINGS, INC. maintained for such purpose, with full power of
substitution in the premises.
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
__________________________
/1/ Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which this
Warrant is being exercised), in either case without making any adjustment for
additional shares of Class A Common Stock or any other stock or other securities
or property or cash which, pursuant to the adjustment provisions of this
Warrant, may be delivered upon exercise. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the Warrant, to the holder surrendering the Warrant.
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EXHIBIT D
---------
This warrant and any shares represented by this warrant have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws and may not be transferred, sold or
otherwise disposed of except pursuant to an effective registration under
said act and applicable state securities laws or pursuant to an exemption
from such registration.
The voting of the shares of stock issuable pursuant to this warrant, and
the sale, encumbrance or other disposition of such stock and this warrant
are subject to the provisions of a Stockholders Agreement dated as of
December 16, 1999 (the "Stockholders Agreement") to which the issuer and
certain of its stockholders are party. Furthermore, such stock and this
warrant may be sold or otherwise transferred only in compliance with the
Stockholders Agreement. A complete and correct copy of the Stockholders
Agreement may be inspected at the principal office of the issuer or
obtained from the issuer without charge.
RAYMOND KARSAN HOLDINGS, INC.
Class D Common Stock Purchase Warrant
No. [ ] Wayne, Pennsylvania
December 16, 1999
THIS CERTIFIES THAT, for value received, and subject to the conditions on
exercise and other provisions hereinafter set forth, [ ] or transferees
permitted under the Stockholders Agreement ("Holder") is entitled to purchase
from Raymond Karsan Holdings, Inc., a Delaware corporation (the "Company"),
under the conditions specified in this Warrant (the "Warrant"), [ ] shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Class A Common Stock, $0.01 par value per
share ("Class A Common Stock"), of the Company at an initial exercise price of
$167.00 per share (such exercise price, as from time to time adjusted in
accordance with the terms hereof, the "Warrant Price"). Certain capitalized
terms used in this Warrant are defined in Section 12 below.
This Warrant is one of a series of warrants (collectively, the "Warrants")
issued pursuant to clause (b) of Section 2.3 of the Purchase Agreement. A copy
of the Purchase Agreement may be inspected at the principal office of the
Company or obtained from the Company without charge.
1 EXERCISABILITY. This Warrant shall become exercisable on December 16, 1999
but may not be exercised later than December 16, 2006.
<PAGE>
2 EXERCISE OR CONVERSION OF WARRANT.
2.1 Manner of Exercise or Conversion; Payment.
(a) Exercise. This Warrant may be exercised by the Holder hereof, in
whole or in part, during normal business hours on any Business Day on or after
the date hereof, by surrender of this Warrant to the Company at its office
maintained pursuant to Section 11.2(a) hereof, accompanied by a subscription in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such Holder and accompanied by payment, in cash or by
check payable to the order of the Company (or by any combination of such
methods), in the amount obtained by multiplying (a) the number of shares of
Class A Common Stock (without giving effect to any adjustment thereof)
designated in such subscription by (b) the Warrant Price, and such Holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Class A Common Stock determined as
provided in this Section 2 hereof.
(b) Conversion. This Warrant may be converted by the Holder hereof, in
whole or in part, into shares of Class A Common Stock, during normal business
hours on any Business Day on or after the date hereof, by surrender of this
Warrant to the Company at its office maintained pursuant to Section 11.2(a)
hereof, accompanied by a conversion notice in substantially the form attached to
this Warrant (or a reasonable facsimile thereof) duly executed by such Holder,
and such Holder shall thereupon be entitled to receive a number of duly
authorized, validly issued, fully paid and nonassessable shares of Class A
Common Stock equal to the quotient of:
(1) the excess of:
(a) an amount equal to the sum of (x) the product of (aa) the number
of shares of Class A Common Stock which such Holder would be
entitled to receive upon exercise of this Warrant for the number
of shares of Class A Common Stock designated in such conversion
notice multiplied by (bb) the Current Market Price of each such
share of Class A Common Stock so designated and (y) the Current
Market Price of any Other Securities and the fair value of any
other property (determined in good faith by the Board of
Directors of the Company) such Holder would be entitled to
receive upon exercise of this Warrant for the number of shares
of Class A Common Stock designated in such conversion notice
over
<PAGE>
(b) an amount equal to (x) the number of shares of Class A
Common Stock (without giving effect to any adjustment
thereof) designated in such conversion notice multiplied by
(y) the Warrant Price
divided by
(c) such Current Market Price of a share of Class A Common
Stock.
For all purposes of this Warrant (other than this Section 2.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the conversion of this Warrant into Class A Common Stock in
accordance with the terms of this Section 2.1
2.2 When Exercise Effective. Each exercise or conversion of this
Warrant shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in Section 2.1 hereof, and at such time the Person or
Persons in whose name or names any certificate or certificates for shares of
Class A Common Stock shall be issuable upon such exercise as provided in Section
2.3 hereof shall be deemed to have become the Holder or Holders of record
thereof.
2.3 Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within three Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof or as such Holder may direct:
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A
Common Stock to which such Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash in an amount equal to
the same fraction of the Current Market Price per share on the
Business Day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate
on the face or faces thereof for the number of shares of Class A
Common Stock equal to the number of such shares (without giving
effect to any adjustment thereof) called for on the face of this
Warrant minus the number of such shares designated by the Holder
upon such exercise as provided in Section 2.1 hereof.
2.4 Each certificate for Warrant Common Stock initially issued upon
exercise of this Warrant, unless at the time of exercise such Warrant Common
Stock are registered under the Securities Act, shall bear the following legend
(and any additional legend required by any securities exchange upon which such
Warrant Class A Common Stock may, at the time of such exercise, be listed) on
the face thereof:
<PAGE>
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may be offered, sold or
transferred only if registered pursuant to the provisions of such laws, or if in
the opinion of counsel satisfactory to the Company, an exemption from such
registration is available."
3 ADJUSTMENT OF WARRANT PRICE AND CLASS A COMMON STOCK ISSUABLE UPON
EXERCISE.
3.1 General; Number of Shares; Warrant Price. The number of shares of
Class A Common Stock which the Holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be equal to the product of:
(a) the number of shares of Class A Common Stock which would otherwise
(but for the provisions of this Section 3) be issuable upon such
exercise, as designated by the Holder hereof pursuant to Section 2.1
hereof, and
(b) a fraction of which (i) the numerator is the Initial Warrant Price,
and (ii) the denominator is the Warrant Price in effect on the date of
such exercise.
The "Initial Warrant Price" shall be $167.00. The "Warrant Price" shall
initially be the Initial Warrant Price and shall be adjusted and readjusted from
time to time as provided in this Section 3 and, as so adjusted or readjusted,
shall remain in effect until a further adjustment or readjustment thereof is
required by this Section 3.
3.2 Adjustments for Dividends, Distributions, Stock Splits, etc.
(a) Dividends and Distributions. In case at any time or from time to
time, the Holders of Class A Common Stock shall have received, or (on or after
the record date fixed for the determination of shareholders eligible to receive)
shall have become entitled to receive, without payment therefor:
(1) other or additional stock or Other Securities or property (other
than cash) by way of dividend, or
(2) any cash, or
(3) other or additional stock or Other Securities or property
(including cash) by way of spinoff, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement, other than additional shares of Class A Common
----- ----
Stock issued as a stock dividend or in a stock split (adjustments
in respect of which are provided for in Section 3.2(b) below),
<PAGE>
then and in each such case the Holder of this Warrant, on the exercise
hereof as provided in Section 2, shall be entitled without the payment of
any additional consideration or the taking of any further action, to
receive the amount of stock and Other Securities and property (including
cash in the cases referred to in subdivisions (ii) and (iii) of this
Section 3.2(a)) which such Holder would hold on the date of such exercise
if on the date hereof such Holder had been the holder of record of the
number of shares of Common Stock provided for herein and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and all such other or additional stock and
Other Securities and property (including cash in the cases referred to in
subdivisions (ii) and (iii) of this Section 3.2(a)) receivable by such
Holder as aforesaid during such period, giving effect to all adjustments
called for during such period by this Section 3.
(b) Treatment of Stock Dividends, Stock Splits, etc. In the event
that the Company shall (i) issue Common Stock Equivalents, or securities
exercisable for or convertible into Common Stock Equivalents, as dividend
or other distribution on outstanding Common Stock Equivalents, (ii)
subdivide its outstanding shares of Common Stock Equivalents, or (iii)
combine its outstanding shares of Common Stock Equivalents into a smaller
number of shares of the Common Stock Equivalents, then, in each such event,
the Warrant Price shall, simultaneously with the happening of such event,
be adjusted by multiplying the then current Warrant Price by a fraction,
(a) the numerator of which shall be the number of shares of Common Stock
Equivalents outstanding immediately prior to such event, and (b) the
denominator of which shall be the number of shares of Common Stock
Equivalents outstanding immediately after such event, and the product so
obtained shall thereafter be the Warrant Price then in effect. The Warrant
Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this
Section 3.2. 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 obtained by dividing
the product of the number of shares purchasable pursuant hereto immediately
prior to such adjustment and the Warrant Price immediately preceding such
adjustment by the Warrant Price resulting from such adjustment.
3.3 Reorganization, Consolidation or Merger. In case at any time or
from time to time the Company shall (a) effect a reorganization, (b) consolidate
with or merge into any other Person, (c) voluntarily or involuntarily dissolve,
liquidate or wind-up, or (d) transfer all or substantially all of its properties
or assets to any other Person, then in each such case, as a condition thereto,
lawful and adequate provision shall be made so that the Holder of this Warrant,
on the exercise or conversion hereof as provided in Section 2 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Class A Common Stock issuable on such exercise immediately prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such reorganization, consolidation, merger or
<PAGE>
dissolution, as the case may be, if such Holder had so exercised this Warrant,
immediately prior thereto, all subject to further adjustments thereafter as
provided in this Section 3.
3.4 Adjustment for Issuance of Common Stock Equivalents Below Warrant
Price.
(a) General. In any case to which Sections 3.2 and 3.3 hereof are
not applicable, where the Company shall issue or sell shares of Common
Stock Equivalents after December 16, 1999 without consideration or for a
consideration (or evidencing a value of Common Stock Equivalents) per share
less than the Warrant Price in effect pursuant to the terms of this Warrant
at the time of issuance or sale of such additional shares, except where
such shares are issued or sold pursuant to the exercise of any warrant or
option or issued prior to the date of this Warrant, then the Warrant Price
in effect hereunder shall simultaneously with such issuance or sale be
reduced to a price determined by multiplying the Warrant Price then in
effect hereunder by a fraction, the numerator of which is the sum of (i)
the product of the total number of shares of Common Stock Equivalents
outstanding immediately prior to such issuance or sale multiplied by the
Warrant Price in effect hereunder at the time of such issuance or sale,
plus (ii) the aggregate consideration received by the Company upon such
issuance or sale, and the denominator of which is the product of the total
number of shares of Common Stock Equivalents outstanding immediately after
issuance or sale of such additional shares multiplied by the Warrant Price
in effect hereunder at the time of such issuance.
(b) Options; Convertible Securities. In case the Company shall
issue or sell any Options or Convertible Securities after December 16, 1999
there shall be determined the price per share for which Common Stock
Equivalents are issuable upon the conversion or exercise thereof, such
determination to be made by dividing (i) the sum of the total amount
received or receivable by the Company as consideration for the issue or
sale of such Options or Convertible Securities plus the minimum aggregate
amount of additional consideration payable to the Company upon the
conversion or exercise thereof, by (ii) the maximum number of shares of
Common Stock Equivalents of the Company issuable upon the conversion or
exercise of all of such Options or Convertible Securities. If the price per
share so determined shall be less than the applicable Warrant Price in
effect immediately prior to such issuance, then, for purposes of Section
3.4(a) hereof, such issue or sale shall be deemed to be an issue or sale
(as of the date of issue or sale of such Options or Convertible Securities)
of such maximum number of shares of Common Stock Equivalents at the price
per share so determined and such maximum number of shares shall be deemed
to be outstanding after such issuance, provided that, upon the expiration
of such rights of conversion or exercise of such Options or Convertible
Securities, if any thereof shall not have been exercised, the adjusted
Warrant Price shall forthwith be readjusted and thereafter be the price
which it would have been had an adjustment been made on the basis that the
only shares of Common Stock Equivalents so issued or sold were issued or
sold upon the conversion or exercise of such Options or Convertible
Securities, and that they were issued or sold for the consideration
actually
<PAGE>
received by the Company upon such conversion or exchange, plus the
consideration, if any, actually received by the Company for the issue or
sale of all such Options or Convertible Securities which shall have been
converted or exchanged.
(c) Record Date. If the Company takes a record of the holders of
Common Stock Equivalents for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock Equivalents, Options
or Convertible Securities, or (2) to subscribe for or purchase Common Stock
Equivalents, Options or Convertible Securities, then such record date shall
be deemed to be the date of the issue or sale of the shares of Common Stock
Equivalents deemed to have been issued or sold upon the declaration of such
dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
3.5 Minimum Adjustment of Warrant Price. If the amount of any adjustment
of the Warrant Price required pursuant to this Section 3 would be less than one-
tenth (1/10) of one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one tenth (1/10)
of one percent (1%) of such Warrant Price.
3.6 Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 3, treasury shares shall not be deemed to be
outstanding.
3.7 Calculation of Consideration Received. If any Common Stock
Equivalents, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock Equivalents, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Current Market Price thereof as of the date of receipt. For
purposes of this Warrant, the fair value of any consideration other than cash
and securities shall be determined by the board of directors of the Company
using its good faith discretion.
3.8 Integrated Transactions. In case any Options are issued in connection
with the issue or sale of Other Securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options shall be deemed to have been
issued for a consideration of $1.00 (as adjusted consistent to give effect to
the occurrences set forth in Sections 3.2 and 3.3).
<PAGE>
4 NO IMPAIRMENT. The Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise plus the amount deemed to have been paid
upon issuance of this Warrant, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Class A Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Class A Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
5 REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment
in the shares of Class A Common Stock issuable upon the exercise of (and the
Warrant Price under) this Warrant, the Company at its expense will promptly
compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a report setting forth such adjustment or readjustment and
showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the number of shares of Class A Common Stock outstanding or deemed to be
outstanding, and (b) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by Section 3 hereof) on
account thereof. The Company will forthwith mail a copy of each such report to
each Holder of a Warrant and will, upon the written request at any time of any
Holder of a Warrant, furnish to such Holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its office
maintained pursuant to Section 11.2(a) hereof and will cause the same to be
available for inspection at such office during normal business hours by any
Holder of a Warrant or any prospective purchaser of a Warrant designated by the
Holder thereof.
<PAGE>
6 NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record of the Holders of any class
of securities for the purpose of determining the Holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any Other Securities or property, or to receive any other right,
or
(b) the declaration by the Company of any dividend payable in stock
upon Common Stock Equivalents or any other distribution by the Company to
the holders of the Common Stock Equivalents, or
(c) the Company proposing to make an offer for subscription pro rata
to the holders of its Common Stock Equivalents of any additional shares of
stock of any class or other rights, or
(d) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(e) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(f) any other action of a type referred to in Section 3 hereof,
the Company shall mail to each Holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the Holders of record of Class A
Common Stock shall be entitled to exchange their shares of Class A Common Stock
for the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up and a description in reasonable detail of
the transaction. Such notice shall be mailed at least 45 days prior to the date
therein specified. At no time prior to the date therein specified shall the
Company take any action which could prevent the exercise or conversion of this
Warrant in accordance with the terms hereof.
7 REGISTRATION OF WARRANTS AND COMMON STOCK. If any shares of Class A Common
Stock required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (including without limitation the Hart-Scott-Rodino Antitrust
Improvements Act of 1976) before
<PAGE>
such shares may be issued upon exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The shares of Class A Common
Stock (and Other Securities) issuable upon exercise of this Warrant shall
constitute Registrable Shares (as such term is defined in the Registration
Rights Agreement). Each Holder of this Warrant shall be entitled to all of the
benefits afforded to a Holder of any such Registrable Shares under the
Registration Rights Agreement. At any such time as the Class A Common Stock is
listed on any national securities exchange or quotation system, the Company
shall, at its expense, obtain promptly and maintain the approval for listing on
each such exchange or system, upon official notice of issuance, the shares of
Class A Common Stock issuable upon exercise of the then outstanding Warrants and
will use its best efforts to maintain the listing of such shares after their
issuance at all times when the Class A Common Stock is so listed.
8 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
December 16, 1999 shall (a) effect a reorganization, (b) consolidate with or
merge with or into any other entity, or (c) transfer all or substantially all of
its properties or assets to any other person or entity, then, in each such case,
the Holder of this Warrant, upon the exercise hereof as provided in Section 2 at
any time after the consummation of such reorganization, consolidation, merger or
transfer, as the case may be, shall be entitled to receive, in lieu of the Class
A Common Stock (or Other Securities) issuable upon such exercise prior to such
consummation, the stock and Other Securities and property (including cash) to
which such Holder would have been entitled upon such consummation if such Holder
had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 3 hereof. The Company shall not
consummate any such reorganization, consolidation, merger or transfer, unless
the resulting, surviving or transferee entity, as the case may be, expressly
agrees in writing, reasonably satisfactory to the Holders of a majority of the
Warrants then outstanding, to fulfill the Company's obligations under this
Warrant and this Section 8.
9 PERFORMANCE OF OBLIGATIONS. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder of this Warrant against dilution or
other impairment to the extent set forth in this Warrant.
10 RESERVATION OF STOCK, ETC. The Company shall at all times reserve and keep
available, solely for issuance and delivery upon exercise of the Warrants, the
number of shares of Class A Common Stock of each class from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Class A Common Stock issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable.
<PAGE>
11 OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
11.1 Ownership of Warrants. The Company may treat the person in whose name
any Warrant is registered on the register kept at the office of the Company
maintained pursuant to Section 11.2(a) hereof as the owner and Holder thereof
for all purposes, notwithstanding any notice to the contrary, except that, if
and when any Warrant is properly assigned in blank, the Company may (but shall
not be obligated to) treat the bearer thereof as the owner of such Warrant for
all purposes, notwithstanding any notice to the contrary. A Warrant, if properly
assigned, may be exercised by a new Holder without a new Warrant first having
been issued.
11.2 Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office in Wayne, Pennsylvania where
notices, presentations and demands in respect of this Warrant may be made
upon it. Such office shall be maintained at 170 South Warner Road, Wayne,
PA 19087 until such time as the Company shall notify the Holders of the
Warrants of any change of location of such office within the United States.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 11.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of Holders of Warrants,
the transfers thereof and the names and addresses of transferees of
Warrants shall be registered in such register. The Person in whose name any
Warrant shall be so registered shall be deemed and treated as the owner and
Holder thereof for all purposes of this Warrant, and the Company shall not
be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or conversion or for exchange at the office of the
Company maintained pursuant to Section 11.2(a) hereof, the Company at its
expense will execute and deliver to or upon the order of the Holder thereof
a new Warrant or Warrants of like tenor, in the name of such Holder or as
such Holder (upon payment by such Holder of any applicable transfer taxes)
may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
11.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to Section 11.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
<PAGE>
12 DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Affiliate: Any Person directly or indirectly controlling, controlled by or
under direct or indirect common control with the Company (or other specified
Person) and shall include (a) any Person who is an officer, director or
beneficial holder of at least 10% of the outstanding capital stock of the
Company (or other specified Person), (b) any Person of which the Company (or
other specified Person) or any officer or director of the Company (or other
specified Person) shall, directly or indirectly, either beneficially own at
least 10% of the outstanding equity securities or constitute at least a 10%
participant, and (c) in the case of a specified Person who is an individual,
Member of the Immediate Family of such Person; provided, however, that the
Holder shall not be an Affiliate of the Company for purposes of this Agreement.
Arbitrator: As defined in Section 17.3(b).
Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts or New York, New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Class A Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Class A Common Stock shall have been
changed or any stock resulting from any reclassification of such Class A Common
Stock.
Common Stock: Class A and Class B Common Stock $0.01 par value per share,
of the Company.
Common Stock Equivalents: Any class of common stock of the Company which is
entitled to share ratably with holders of Class A Common Stock in any
distributions including distributions upon the liquidation, dissolution or
winding-up of the Company and any other class of common stock of the Company
and/or any class into which those shares may hereafter be changed or any stock
resulting from any reclassification of such common stock, provided that the
number of such shares shall, for purposes of the Warrants, be deemed to equal
the actual number of shares of such Common Stock multiplied by the Sharing
Ratio.
Company: As defined in the introduction to this Warrant and shall include
any Person which shall succeed to or assume the obligations of the Company under
this Warrant.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Class A Common Stock) or Other Securities directly or indirectly
convertible into or exchangeable for shares of Common Stock Equivalents.
Current Market Price: With respect to any security (or other asset), on any
date specified herein, the average daily market price during the period of the
most recent 20 days, ending on
<PAGE>
such date, on which the national securities exchanges were open for trading,
except that if no class of such security is then listed or admitted to trading
on any national securities exchange or quoted in the over-the-counter market,
the Current Market Price shall be the fair value thereof determined in good
faith by the Board of Directors of the Company as of the specified date.
Notwithstanding the foregoing, in the event the Warrant is exercised in
connection with the Company's initial public offering of such security or Common
Stock Equivalents, the Current Market Price per share of such security or Common
Stock Equivalents, as the case may be, shall be equal to the per share offering
price to the public of such security or Common Stock Equivalents, as the case
may be, issued in the initial public offering.
Initial Warrant Price: As defined in Section 3.1 hereof.
Market Price: As defined in Section 17.3(b).
Members of the Immediate Family: As applied to any individual, means each
parent, spouse, child, brother, sister or the spouse of a child, brother or
sister of the individual, and each trust created for the benefit of one or more
of such persons and each custodian of a property of one or more such persons.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Class A Common Stock or Convertible
Securities, excluding rights, warrants and options granted on or after the
Original Issue Date, to employees, officers, directors or consultants of the
Company or any subsidiary thereof pursuant to any stock option plan or agreement
adopted by the Board of Directors.
Original Issue Date: Means December 16, 1999.
Other Securities: Any stock (other than Class A Common Stock) and other
securities, property or assets of the Company or any other Person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Class A Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Class A Common
Stock or Other Securities pursuant hereto or otherwise.
Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Prime Rate: The rate of interest announced publicly by Fleet National Bank
in Boston, Massachusetts, from time to time, as Fleet National Bank's prime
rate.
Purchase Agreement: Shall mean the Class B Common Stock and Warrant
Purchase Agreement dated as of December 16, 1999 by and between the Company and
other parties thereto.
<PAGE>
Put Notes: As defined in Section 17.4.
Put Notice: As defined in Section 17.1.
Put Notice Date: As defined in Section 17.1.
Put Purchase Price: As defined in Section 17.3(a).
Qualified Public Offering: Shall have the meaning provided in Section 1 of
the Stockholders' Agreement.
Registration Rights Agreement: The Registration Rights Agreement dated as
of December 16, 1999 in the form of Exhibit J to the Purchase Agreement, as from
time to time in effect.
Securities Act: The Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations thereunder, all as the same shall
be in effect at the time.
Sharing Ratio: With respect to a Common Stock Equivalent, the ratio of (a)
the distribution payable upon the liquidation and distribution of the Company on
one share of such Common Stock Equivalent to (b) the distribution payable upon
the liquidation and distribution of the Company on one share of Class A Common
Stock.
Stockholders Agreement: The Stockholders Agreement dated as of December
16, 1999, in the form of Exhibit K to the Purchase Agreement, as from time to
time in effect.
Warrant Price: As defined in Section 3.1.
Warrants: As defined in the introduction to this Warrant.
13 REMEDIES. The Company stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Company 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.
14 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such Holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company. Notwithstanding the
<PAGE>
foregoing, the officers and Board of Directors of the Company shall have all
fiduciary duties to the Holders hereof which such officers and Board of
Directors would have if the Holders hereof held the shares of Class A Common
Stock obtainable upon the exercise hereof.
15 NOTICES. Any time that either the Holder or the Company shall be
required to give notice or other communication in connection with this Warrant,
such notice shall be deemed to be delivered if it is delivered in writing (or in
the form of a telex or telecopy to be given only during the recipient's normal
business hours unless arrangements have otherwise been made to receive such
notice by telex or telecopy outside of normal business hours) addressed as
hereinafter provided and if either (x) actually delivered at said address or (y)
in the case of a letter, seven Business Days shall have elapsed after the same
shall have been deposited in the United States mails, postage prepaid and
registered or certified: (a) if to any Holder of any Warrant, at the registered
address of such Holder as set forth in the register kept at the office of the
Company maintained pursuant to Section 11.2(a) hereof; or (b) if to the Company,
to the attention of its President at its office maintained pursuant to Section
11.2(a) hereof; provided, however, that the exercise of any Warrant shall be
effective in the manner provided in Section 2 hereof.
16 [Intentionally left blank.]
17 REPURCHASE OF WARRANTS.
17.1 Right to "Put" Warrant. If a Realization Event (as defined in
Section 17.2 below) shall not have occurred prior to the fifth anniversary of
the date as of which this Agreement is executed and this Warrant becomes
exercisable within six months of such anniversary, Holders or any other holder
of this Warrant may, at any time and from time to time during the six month
period immediately thereafter, by notice to the Company (the "Put Notice"),
elect to sell to the Company (and the Company hereby, agrees to purchase from
Holder or any other such holder), at the Put Purchase Price specified in Section
17.3(a) hereof, such number of Warrants as are specified in the Put Notice on
the Business Day specified in the Put Notice, which Business Day shall be not
less than 20 days nor more than 30 days after the receipt by the Company of said
Put Notice (the date on which the Company receives the Put Notice is referred to
as the "Put Notice Date"). The right created by this Section 17.1 shall
terminate upon the occurrence of a Realization Event (as defined in Section 17.2
below). Any Warrants not sold to the Company pursuant to this Section 17 shall
automatically convert into Class A Common Stock in accordance with Section
2.1(b) (provided that, for purposes of this Section 17, the Current Market Price
shall be the Market Price (as defined in Section 17.3(b) below)).
17.2 Realization Event. A "Realization Event" shall mean (a) a Qualified
Public Offering, or (b) a transaction in which all of the Holders' Warrants and
Other Securities are exchanged either for cash or for Other Securities of
another Person, provided that such Other Securities are traded on a national
securities exchange or the Nasdaq National Market and are not subject to any
restrictions under the Securities Act and such Person's outstanding Other
Securities
<PAGE>
(other than those held by such Person's Affiliates) have an aggregate public
market value of not less than $500 million.
17.3 Purchase Price.
(a) Put Purchase Price. The purchase price for the Warrants
------------------
purchased by the Company pursuant to this Section 17 (the "Put Purchase
Price") shall be an amount equal to the Market Price (as defined below) on
the relevant Put Notice Date for the number of Other Securities that would
be obtained upon the exercise of the portion of such Warrant being
purchased.
(b) Market Price. "Market Price" shall mean the value on a specified
------------
date of the shares of Class A Common Stock underlying the Warrant which
could be obtained in an initial public offering of such Class A Common
Stock. Within five Business Days of the Put Notice Date, the holders of the
Warrants shall suggest three investment banking firms, from which the
Company shall select one (the selected firm being the "Arbitrator"). The
Arbitrator shall be instructed to determine the Market Price consistent
with the first sentence of this Section 17.3(b), within thirty days from
the Put Notice Date. The expenses of any such Arbitrator shall be shared
equally by the Company and the relevant holder.
17.4 Payments of Put Purchase Price. The Put Purchase Price may be
paid in cash or in subordinated debt of the Company ("Put Notes"). Put Notes
shall bear interest, payable semiannually, at the Prime Rate plus 3.5% and shall
have a term of two years. The principal shall be payable in four equal
installments over the term of the Put Notes. The Company shall use its best
efforts to negotiate all senior debt obligations to permit the payment of any
Put Purchase Price as it becomes due. In the event that payments under the Put
Notes or payment of the Put Purchase Price would cause the Company to be in
default of the terms of its senior indebtedness, such payments can be deferred
until the earlier of (i) the first date on which Company could make such
payments without causing such a default and (ii) the third anniversary of the
Put Notice Date.
<PAGE>
18 MISCELLANEOUS. Any term of this Warrant may be amended and the
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with (i) the
written consent of the Company and the Holders or (ii) for all Warrants, the
written consent of the Company and the Holders of a majority of the Warrants
then outstanding. This Warrant shall be binding upon any Person succeeding to
the Company by merger, consolidation or acquisition of all or substantially all
of the Company's assets. This Warrant shall be construed and enforced in
accordance with and governed by the domestic substantive laws of the
Commonwealth of Pennsylvania without giving effect to any choice or conflict of
law provision or rule that would cause the application of the domestic
substantive laws of any other jurisdiction. The section headings in this
Warrant are for purposes of convenience only and shall not constitute a part
hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE>
IN WITNESS WHEREOF, Raymond Karsan Holdings, Inc. has caused this
Warrant to be sign by its duly authorized officer under its corporate seal,
attested by its duly authorized officer, and to be dated as of December __,
1999.
RAYMOND KARSAN HOLDINGS, INC.
[SEAL]
By:_________________________________
Name:
Title:
ATTEST:
By:_________________________________
Name:
Title:
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________ shares of the
Class A Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
<PAGE>
FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
converts such Warrant with respect to __________/1/ shares of the Class A
Common Stock which such holder would be entitled to receive upon the exercise
hereof, and requests that the certificates for such shares be issued in the name
of, and delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase __________/1/ shares of Class A Common
Stock of RAYMOND KARSAN HOLDINGS, INC. to which such Warrant relates, and
appoints Attorney to make such transfer on the books of
RAYMOND KARSAN HOLDINGS, INC. maintained for such purpose, with full power of
substitution in the premises.
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
<PAGE>
EXHIBIT E
---------
This warrant and any shares represented by this warrant have not been
registered under the Securities Act of 1933, as amended, or under
applicable state securities laws and may not be transferred, sold or
otherwise disposed of except pursuant to an effective registration under
said act and applicable state securities laws or pursuant to an exemption
from such registration.
The voting of the shares of stock issuable pursuant to this warrant, and
the sale, encumbrance or other disposition of such stock and this warrant
are subject to the provisions of a Stockholders Agreement dated as of
December 16, 1999 (the "Stockholders Agreement") to which the issuer and
certain of its stockholders are party. Furthermore, such stock and this
warrant may be sold or otherwise transferred only in compliance with the
Stockholders Agreement. A complete and correct copy of the Stockholders
Agreement may be inspected at the principal office of the issuer or
obtained from the issuer without charge.
RAYMOND KARSAN HOLDINGS, INC.
Class E Common Stock Purchase Warrant
No. [ ] Wayne, Pennsylvania
December 16, 1999
THIS CERTIFIES THAT, for value received, and subject to the conditions on
exercise and other provisions hereinafter set forth, [ ] or transferees
permitted under the Stockholders Agreement ("Holder") is entitled to purchase
from Raymond Karsan Holdings, Inc., a Delaware corporation (the "Company"),
under the conditions specified in this Warrant (the "Warrant"), [ ] shares
(subject to adjustment as hereinafter provided) of the duly authorized, validly
issued, fully paid and non-assessable Class A Common Stock, $0.01 par value per
share ("Class A Common Stock"), of the Company at an initial exercise price of
$835.00 per share (such exercise price, as from time to time adjusted in
accordance with the terms hereof, the "Exercise Price"). Certain capitalized
terms used in this Warrant are defined in Section 12 below.
This Warrant is one of a series of warrants (collectively, the "Warrants")
issued pursuant to clause (b) of Section 2.3 of the Purchase Agreement. A copy
of the Purchase Agreement may be inspected at the principal office of the
Company or obtained from the Company without charge.
1. EXERCISABILITY. This Warrant shall become exercisable on December 16, 1999
but may not be exercised later than December 16, 2006.
<PAGE>
2. EXERCISE OR CONVERSION OF WARRANT.
2.1 Manner of Exercise or Conversion; Payment.
(a) Exercise. This Warrant may be exercised by the Holder
hereof, in whole or in part, during normal business hours on any Business
Day on or after the date hereof, by surrender of this Warrant to the
Company at its office maintained pursuant to Section 11.2(a) hereof,
accompanied by a subscription in substantially the form attached to this
Warrant (or a reasonable facsimile thereof) duly executed by such Holder
and accompanied by payment, in cash or by check payable to the order of the
Company (or by any combination of such methods), in the amount obtained by
multiplying (a) the number of shares of Class A Common Stock (without
giving effect to any adjustment thereof) designated in such subscription by
(b) the Exercise Price, and such Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Class A Common Stock determined as provided in this
Section 2 hereof.
(b) Conversion. This Warrant may be converted by the Holder
hereof, in whole or in part, into shares of Class A Common Stock, during
normal business hours on any Business Day on or after the date hereof, by
surrender of this Warrant to the Company at its office maintained pursuant
to Section 11.2(a) hereof, accompanied by a conversion notice in
substantially the form attached to this Warrant (or a reasonable facsimile
thereof) duly executed by such Holder, and such Holder shall thereupon be
entitled to receive a number of duly authorized, validly issued, fully paid
and nonassessable shares of Class A Common Stock equal to the quotient of:
(1) the excess of:
(a) an amount equal to the sum of (x) the product of (aa)
the number of shares of Class A Common Stock which such
Holder would be entitled to receive upon exercise of
this Warrant for the number of shares of Class A Common
Stock designated in such conversion notice multiplied
by (bb) the Current Market Price of each such share of
Class A Common Stock so designated and (y) the Current
Market Price of any Other Securities and the fair value
of any other property (determined in good faith by the
Board of Directors of the Company) such Holder would be
entitled to receive upon exercise of this Warrant for
the number of shares of Class A Common Stock designated
in such conversion notice
over
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<PAGE>
(b) an amount equal to (x) the number of shares of
Class A Common Stock (without giving effect to any
adjustment thereof) designated in such conversion
notice multiplied by (y) the Exercise Price
divided by
(c) such Current Market Price of a share of Class A
Common Stock.
For all purposes of this Warrant (other than this Section 2.1), any
reference herein to the exercise of this Warrant shall be deemed to include
a reference to the conversion of this Warrant into Class A Common Stock in
accordance with the terms of this Section 2.1
2.2 When Exercise Effective. Each exercise or conversion of this
Warrant shall be deemed to have been effected immediately prior to the close of
business on the Business Day on which this Warrant shall have been surrendered
to the Company as provided in Section 2.1 hereof, and at such time the Person or
Persons in whose name or names any certificate or certificates for shares of
Class A Common Stock shall be issuable upon such exercise as provided in Section
2.3 hereof shall be deemed to have become the Holder or Holders of record
thereof.
2.3 Delivery of Stock Certificates, etc. As soon as practicable
after each exercise of this Warrant, in whole or in part, and in any event
within three Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof or as such Holder may direct:
(a) a certificate or certificates for the number of duly authorized,
validly issued, fully paid and nonassessable shares of Class A
Common Stock to which such Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash in an amount equal to
the same fraction of the Current Market Price per share on the
Business Day next preceding the date of such exercise; and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, dated the date hereof and calling in the aggregate
on the face or faces thereof for the number of shares of Class A
Common Stock equal to the number of such shares (without giving
effect to any adjustment thereof) called for on the face of this
Warrant minus the number of such shares designated by the Holder
upon such exercise as provided in Section 2.1 hereof.
2.4 Each certificate for Warrant Common Stock initially issued upon
exercise of this Warrant, unless at the time of exercise such Warrant Common
Stock are registered under the Securities Act, shall bear the following legend
(and any additional legend required by any securities exchange upon which such
Warrant Class A Common Stock may, at the time of such exercise, be listed) on
the face thereof:
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<PAGE>
"These securities have not been registered under the Securities Act of
1933, as amended, or under any state securities laws and may be offered, sold or
transferred only if registered pursuant to the provisions of such laws, or if in
the opinion of counsel satisfactory to the Company, an exemption from such
registration is available."
3. ADJUSTMENT OF WARRANT PRICE AND CLASS A COMMON STOCK ISSUABLE UPON
EXERCISE.
3.1 General; Number of Shares; Warrant Price. The number of shares of
Class A Common Stock which the Holder of this Warrant shall be entitled to
receive upon each exercise hereof shall be equal to the product of:
(a) the number of shares of Class A Common Stock which would otherwise
(but for the provisions of this Section 3) be issuable upon such
exercise, as designated by the Holder hereof pursuant to Section 2.1
hereof, and
(b) a fraction of which (i) the numerator is the Initial Warrant Price,
and (ii) the denominator is the Warrant Price in effect on the date of
such exercise.
The "Initial Warrant Price" shall be the Exercise Price. The "Warrant Price"
shall initially be the Initial Warrant Price and shall be adjusted and
readjusted from time to time as provided in this Section 3 and, as so adjusted
or readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by this Section 3. The "Trigger Price" shall initially be
$835 per share of Class A Common Stock and shall be adjusted and readjusted from
time to time as provided in this Section 3 and, as so adjusted and readjusted,
shall remain in effect until a further adjustment or readjustment thereof is
required by this Section 3.
3.2 Adjustments for Dividends, Distributions, Stock Splits, etc.
(a) Dividends and Distributions. In case at any time or from time to
time, the Holders of Class A Common Stock shall have received, or (on or
after the record date fixed for the determination of shareholders eligible
to receive) shall have become entitled to receive, without payment
therefor:
(1) other or additional stock or Other Securities or property
(other than cash) by way of dividend, or
(2) any cash, or
(3) other or additional stock or Other Securities or property
(including cash) by way of spinoff, split-up,
reclassification, recapitalization, combination of shares or
similar corporate rearrangement, other than additional
----- ----
shares of Class A Common Stock issued as a stock
-xxvi-
<PAGE>
dividend or in a stock split (adjustments in respect of
which are provided for in Section 3.2(b) below),
then and in each such case the Holder of this Warrant, on the exercise
hereof as provided in Section 2, shall be entitled without the payment of
any additional consideration or the taking of any further action, to
receive the amount of stock and Other Securities and property (including
cash in the cases referred to in subdivisions (ii) and (iii) of this
Section 3.2(a)) which such Holder would hold on the date of such exercise
if on the date hereof such Holder had been the holder of record of the
number of shares of Common Stock provided for herein and had thereafter,
during the period from the date hereof to and including the date of such
exercise, retained such shares and all such other or additional stock and
Other Securities and property (including cash in the cases referred to in
subdivisions (ii) and (iii) of this Section 3.2(a)) receivable by such
Holder as aforesaid during such period, giving effect to all adjustments
called for during such period by this Section 3.
(b) Treatment of Stock Dividends, Stock Splits, etc. In the event that
the Company shall (i) issue Common Stock Equivalents, or securities
exercisable for or convertible into Common Stock Equivalents, as dividend
or other distribution on outstanding Common Stock Equivalents, (ii)
subdivide its outstanding shares of Common Stock Equivalents, or (iii)
combine its outstanding shares of Common Stock Equivalents into a smaller
number of shares of the Common Stock Equivalents, then, in each such event,
the Warrant Price and the Trigger Price shall, simultaneously with the
happening of such event, be adjusted by multiplying each of the then
current Warrant Price and Trigger Price by a fraction, (a) the numerator of
which shall be the number of shares of Common Stock Equivalents outstanding
immediately prior to such event, and (b) the denominator of which shall be
the number of shares of Common Stock Equivalents outstanding immediately
after such event, and the product so obtained shall thereafter be the
Warrant Price and the Trigger Price, respectively, then in effect. The
Warrant Price and Trigger Price, as so adjusted, shall be readjusted in the
same manner upon the happening of any successive event or events described
herein in this Section 3.2. Upon each adjustment of the Warrant Price or
Trigger Price, the Holder of this Warrant shall thereafter be entitled to
purchase at the Warrant Price resulting from such adjustment, the number of
shares obtained by dividing the product of the number of shares purchasable
pursuant hereto immediately prior to such adjustment and the Warrant Price
immediately preceding such adjustment by the Warrant Price resulting from
such adjustment.
3.3 Reorganization, Consolidation or Merger. In case at any time or
from time to time the Company shall (a) effect a reorganization, (b) consolidate
with or merge into any other Person, (c) voluntarily or involuntarily dissolve,
liquidate or wind-up, or (d) transfer all or substantially all of its properties
or assets to any other Person, then in each such case, as a condition thereto,
lawful and adequate provision shall be made so that the Holder of this Warrant,
on the exercise or conversion hereof as provided in Section 2 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such
-xxvii-
<PAGE>
dissolution, as the case may be, shall receive, in lieu of the Class A Common
Stock issuable on such exercise immediately prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such Holder would have been entitled upon such consummation or in
connection with such reorganization, consolidation, merger or dissolution, as
the case may be, if such Holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustments thereafter as provided in this
Section 3.
3.4 Adjustment for Issuance of Common Stock Equivalents Below Trigger
Price.
(a) General. In any case to which Sections 3.2 and 3.3 hereof
are not applicable, where the Company shall issue or sell shares of Common
Stock Equivalents after December 16, 1999 without consideration or for a
consideration (or evidencing a value of Common Stock Equivalents) per share
less than the Trigger Price in effect pursuant to the terms of this Warrant
at the time of issuance or sale of such additional shares, except where
such shares are issued or sold pursuant to the exercise of any warrant or
option or issued prior to the date of this Warrant, then the Warrant Price
in effect hereunder shall simultaneously with such issuance or sale be
reduced to a price determined by multiplying the Warrant Price then in
effect hereunder by a fraction, the numerator of which is the sum of (i)
the product of the total number of shares of Common Stock Equivalents
outstanding immediately prior to such issuance or sale multiplied by the
Trigger Price in effect hereunder at the time of such issuance or sale,
plus (ii) the aggregate consideration received by the Company upon such
issuance or sale, and the denominator of which is the product of the total
number of shares of Common Stock Equivalents outstanding immediately after
issuance or sale of such additional shares multiplied by the Trigger Price
in effect hereunder at the time of such issuance.
(b) Options; Convertible Securities. In case the Company shall
issue or sell any Options or Convertible Securities after December 16, 1999
there shall be determined the price per share for which Common Stock
Equivalents are issuable upon the conversion or exercise thereof, such
determination to be made by dividing (i) the sum of the total amount
received or receivable by the Company as consideration for the issue or
sale of such Options or Convertible Securities plus the minimum aggregate
amount of additional consideration payable to the Company upon the
conversion or exercise thereof, by (ii) the maximum number of shares of
Common Stock Equivalents of the Company issuable upon the conversion or
exercise of all of such Options or Convertible Securities. If the price per
share so determined shall be less than the applicable Trigger Price, then,
for purposes of Section 3.4(a) hereof, such issue or sale shall be deemed
to be an issue or sale (as of the date of issue or sale of such Options or
Convertible Securities) of such maximum number of shares of Common Stock
Equivalents at the price per share so determined and such maximum number of
shares shall be deemed to be outstanding after such issuance, provided
that, upon the expiration of such rights of conversion or exercise of such
Options or Convertible Securities, if any thereof shall not have been
exercised, the adjusted Warrant Price shall forthwith be readjusted and
thereafter be the price which
-xxviii-
<PAGE>
it would have been had an adjustment been made on the basis that the only
shares of Common Stock Equivalents so issued or sold were issued or sold
upon the conversion or exercise of such Options or Convertible Securities,
and that they were issued
or sold for the consideration actually received by the Company upon
such conversion or exchange, plus the consideration, if any, actually
received by the Company for the issue or sale of all such Options or
Convertible Securities which shall have been converted or exchanged.
(c) Record Date. If the Company takes a record of the holders of
Common Stock Equivalents for the purpose of entitling them (1) to receive a
dividend or other distribution payable in Common Stock Equivalents, Options
or Convertible Securities, or (2) to subscribe for or purchase Common Stock
Equivalents, Options or Convertible Securities, then such record date shall
be deemed to be the date of the issue or sale of the shares of Common Stock
Equivalents deemed to have been issued or sold upon the declaration of such
dividend or upon the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
3.5 Minimum Adjustment of Warrant Price and Trigger Price. If the amount
of any adjustment of the Warrant Price required pursuant to this Section 3 would
be less than one-tenth (1/10) of one percent (1%) of the Warrant Price or
Trigger Price, as the case may be, in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate at least one tenth (1/10) of one
percent (1%) of such Warrant Price or Trigger Price.
3.6 Shares Deemed Outstanding. For all purposes of the computations to be
made pursuant to this Section 3, treasury shares shall not be deemed to be
outstanding.
3.7 Calculation of Consideration Received. If any Common Stock
Equivalents, Options or Convertible Securities are issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock Equivalents, Options or
Convertible Securities are issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company shall be
the fair value of such consideration, except where such consideration consists
of securities, in which case the amount of consideration received by the Company
shall be the Current Market Price thereof as of the date of receipt. For
purposes of this Warrant, the fair value of any consideration other than cash
and securities shall be determined by the board of directors of the Company
using its good faith discretion.
3.8 Integrated Transactions. In case any Options are issued in connection
with the issue or sale of Other Securities of the Company, together comprising
one integrated transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options
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<PAGE>
shall be deemed to have been issued for a consideration of $1.00 (as adjusted
consistent to give effect to the occurrences set forth in Sections 3.2 and 3.3).
4. NO IMPAIRMENT. The Company (a) will not permit the par value of any shares
of stock receivable upon the exercise of this Warrant to exceed the amount
payable therefor upon such exercise plus the amount deemed to have been paid
upon issuance of this Warrant, (b) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock on the exercise of the Warrants from time
to time outstanding, (c) will not take any action which results in any
adjustment of the Warrant Price if the total number of shares of Class A Common
Stock issuable after the action upon the exercise of all of the Warrants would
exceed the total number of shares of Class A Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
5. REPORT AS TO ADJUSTMENTS. In each case of any adjustment or readjustment
in the shares of Class A Common Stock issuable upon the exercise of (and the
Warrant Price under) this Warrant, the Company at its expense will promptly
compute such adjustment or readjustment in accordance with the terms of this
Warrant and prepare a report setting forth such adjustment or readjustment and
showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the number of shares of Class A Common Stock outstanding or deemed to be
outstanding, and (b) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by Section 3 hereof) on
account thereof. The Company will forthwith mail a copy of each such report to
each Holder of a Warrant and will, upon the written request at any time of any
Holder of a Warrant, furnish to such Holder a like report setting forth the
Warrant Price and the Trigger Price at the time in effect and showing in
reasonable detail how it was calculated. The Company will also keep copies of
all such reports at its office maintained pursuant to Section 11.2(a) hereof and
will cause the same to be available for inspection at such office during normal
business hours by any Holder of a Warrant or any prospective purchaser of a
Warrant designated by the Holder thereof.
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<PAGE>
6. NOTICES OF CORPORATE ACTION. In the event of:
(a) any taking by the Company of a record of the Holders of any class
of securities for the purpose of determining the Holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any Other Securities or property, or to receive any other right,
or
(b) the declaration by the Company of any dividend payable in stock
upon Common Stock Equivalents or any other distribution by the Company to
the holders of the Common Stock Equivalents, or
(c) the Company proposing to make an offer for subscription pro rata
to the holders of its Common Stock Equivalents of any additional shares of
stock of any class or other rights, or
(d) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other Person or any
transfer of all or substantially all the assets of the Company to any other
Person, or
(e) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company, or
(f) any other action of a type referred to in Section 3 hereof,
the Company shall mail to each Holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place, the time, if
any such time is to be fixed, as of which the Holders of record of Class A
Common Stock shall be entitled to exchange their shares of Class A Common Stock
for the securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up and a description in reasonable detail of
the transaction. Such notice shall be mailed at least 45 days prior to the date
therein specified. At no time prior to the date therein specified shall the
Company take any action which could prevent the exercise or conversion of this
Warrant in accordance with the terms hereof.
7. REGISTRATION OF WARRANTS AND COMMON STOCK. If any shares of Class A Common
Stock required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (including without limitation the Hart-Scott-Rodino Antitrust
Improvements Act of 1976) before
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such shares may be issued upon exercise, the Company shall, at its expense and
as expeditiously as possible, use its best efforts to cause such shares to be
duly registered or approved, as the case may be. The shares of Class A Common
Stock (and Other Securities) issuable upon exercise of this Warrant shall
constitute Registrable Shares (as such term is defined in the Registration
Rights Agreement). Each Holder of this Warrant shall be entitled to all of the
benefits afforded to a Holder of any such Registrable Shares under the
Registration Rights Agreement. At any such time as the Class A Common Stock is
listed on any national securities exchange or quotation system, the Company
shall, at its expense, obtain promptly and maintain the approval for listing on
each such exchange or system, upon official notice of issuance, the shares of
Class A Common Stock issuable upon exercise of the then outstanding Warrants and
will use its best efforts to maintain the listing of such shares after their
issuance at all times when the Class A Common Stock is so listed.
8. REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case the Company after
December 16, 1999 shall (a) effect a reorganization, (b) consolidate with or
merge with or into any other entity, or (c) transfer all or substantially all of
its properties or assets to any other person or entity, then, in each such case,
the Holder of this Warrant, upon the exercise hereof as provided in Section 2 at
any time after the consummation of such reorganization, consolidation, merger or
transfer, as the case may be, shall be entitled to receive, in lieu of the Class
A Common Stock (or Other Securities) issuable upon such exercise prior to such
consummation, the stock and Other Securities and property (including cash) to
which such Holder would have been entitled upon such consummation if such Holder
had so exercised this Warrant immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 3 hereof. The Company shall not
consummate any such reorganization, consolidation, merger or transfer, unless
the resulting, surviving or transferee entity, as the case may be, expressly
agrees in writing, reasonably satisfactory to the Holders of a majority of the
Warrants then outstanding, to fulfill the Company's obligations under this
Warrant and this Section 8.
9. PERFORMANCE OF OBLIGATIONS. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the Holder of this Warrant against dilution or
other impairment to the extent set forth in this Warrant.
10. RESERVATION OF STOCK, ETC. The Company shall at all times reserve and
keep available, solely for issuance and delivery upon exercise of the Warrants,
the number of shares of Class A Common Stock of each class from time to time
issuable upon exercise of all Warrants at the time outstanding. All shares of
Class A Common Stock issuable upon exercise of any Warrants shall be duly
authorized and, when issued upon such exercise, shall be validly issued, fully
paid and nonassessable.
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11. OWNERSHIP, TRANSFER AND SUBSTITUTION OF WARRANTS.
11.1 Ownership of Warrants. The Company may treat the person in whose name
any Warrant is registered on the register kept at the office of the Company
maintained pursuant to Section 11.2(a) hereof as the owner and Holder thereof
for all purposes, notwithstanding any notice to the contrary, except that, if
and when any Warrant is properly assigned in blank, the Company may (but shall
not be obligated to) treat the bearer thereof as the owner of such Warrant for
all purposes, notwithstanding any notice to the contrary. A Warrant, if properly
assigned, may be exercised by a new Holder without a new Warrant first having
been issued.
11.2 Office; Transfer and Exchange of Warrants.
(a) The Company will maintain an office in Wayne, Pennsylvania where
notices, presentations and demands in respect of this Warrant may be made
upon it. Such office shall be maintained at 170 South Warner Road, Wayne,
PA 19087 until such time as the Company shall notify the Holders of the
Warrants of any change of location of such office within the United States.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 11.2(a) hereof a register for the registration and
transfer of the Warrants. The names and addresses of Holders of Warrants,
the transfers thereof and the names and addresses of transferees of
Warrants shall be registered in such register. The Person in whose name any
Warrant shall be so registered shall be deemed and treated as the owner and
Holder thereof for all purposes of this Warrant, and the Company shall not
be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or conversion or for exchange at the office of the
Company maintained pursuant to Section 11.2(a) hereof, the Company at its
expense will execute and deliver to or upon the order of the Holder thereof
a new Warrant or Warrants of like tenor, in the name of such Holder or as
such Holder (upon payment by such Holder of any applicable transfer taxes)
may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
11.3 Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than a purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to Section 11.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
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12. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
Business Day: Any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in Boston, Massachusetts or New York, New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
Class A Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Class A Common Stock shall have been
changed or any stock resulting from any reclassification of such Class A Common
Stock.
Common Stock: Class A and Class B Common Stock $0.01 par value per share,
of the Company.
Common Stock Equivalents: Any class of common stock of the Company which is
entitled to share ratably with holders of Class A Common Stock in any
distributions including distributions upon the liquidation, dissolution or
winding-up of the Company and any other class of common stock of the Company
and/or any class into which those shares may hereafter be changed or any stock
resulting from any reclassification of such common stock, provided that the
number of such shares shall, for purposes of the Warrants, be deemed to equal
the actual number of shares of such Common Stock multiplied by the Sharing
Ratio.
Company: As defined in the introduction to this Warrant and shall include
any Person which shall succeed to or assume the obligations of the Company under
this Warrant.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Class A Common Stock) or Other Securities directly or indirectly
convertible into or exchangeable for shares of Common Stock Equivalents.
Current Market Price: With respect to any security (or other asset), on any
date specified herein, the average daily market price during the period of the
most recent 20 days, ending on such date, on which the national securities
exchanges were open for trading, except that if no class of such security is
then listed or admitted to trading on any national securities exchange or quoted
in the over-the-counter market, the Current Market Price shall be the fair value
thereof determined in good faith by the Board of Directors of the Company as of
the specified date. Notwithstanding the foregoing, in the event the Warrant is
exercised in connection with the Company's initial public offering of such
security or Common Stock Equivalents, the Current Market Price per share of such
security or Common Stock Equivalents, as the case may be, shall be equal to the
per share offering price to the public of such security or Common Stock
Equivalents, as the case may be, issued in the initial public offering.
Initial Warrant Price: As defined in Section 3.1 hereof.
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Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either shares of Class A Common Stock or Convertible
Securities, excluding rights, warrants and options granted on or after the
Original Issue Date, to employees, officers, directors or consultants of the
Company or any subsidiary thereof pursuant to any stock option plan or agreement
adopted by the Board of Directors.
Original Issue Date: Means December 16, 1999.
Other Securities: Any stock (other than Class A Common Stock) and other
securities, property or assets of the Company or any other Person (corporate or
otherwise) which the Holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Class A Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Class A Common
Stock or Other Securities pursuant hereto or otherwise.
Person: A corporation, an association, a partnership, an organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: Shall mean the Class B Common Stock and Warrant
Purchase Agreement dated as of December 16, 1999 by and between the Company and
other parties thereto.
Registration Rights Agreement: The Registration Rights Agreement dated as
of December 16, 1999 in the form of Exhibit J to the Purchase Agreement, as from
time to time in effect.
Securities Act: The Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations thereunder, all as the same shall
be in effect at the time.
Sharing Ratio: With respect to a Common Stock Equivalent, the ratio of (a)
the distribution payable upon the liquidation and distribution of the Company on
one share of such Common Stock Equivalent to (b) the distribution payable upon
the liquidation and distribution of the Company on one share of Class A Common
Stock.
Stockholders Agreement: The Stockholders Agreement dated as of December
16, 1999, in the form of Exhibit K to the Purchase Agreement, as from time to
time in effect.
Trigger Price: As defined in Section 3.1.
Warrant Price: As defined in Section 3.1.
Warrants: As defined in the introduction to this Warrant.
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13. REMEDIES. The Company stipulates that the remedies at law of the Holder of
this Warrant in the event of any default or threatened default by the Company 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.
14. NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in this Warrant
shall be construed as conferring upon the Holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such Holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company. Notwithstanding the foregoing,
the officers and Board of Directors of the Company shall have all fiduciary
duties to the Holders hereof which such officers and Board of Directors would
have if the Holders hereof held the shares of Class A Common Stock obtainable
upon the exercise hereof.
15. NOTICES. Any time that either the Holder or the Company shall be required
to give notice or other communication in connection with this Warrant, such
notice shall be deemed to be delivered if it is delivered in writing (or in the
form of a telex or telecopy to be given only during the recipient's normal
business hours unless arrangements have otherwise been made to receive such
notice by telex or telecopy outside of normal business hours) addressed as
hereinafter provided and if either (x) actually delivered at said address or (y)
in the case of a letter, seven Business Days shall have elapsed after the same
shall have been deposited in the United States mails, postage prepaid and
registered or certified: (a) if to any Holder of any Warrant, at the registered
address of such Holder as set forth in the register kept at the office of the
Company maintained pursuant to Section 11.2(a) hereof; or (b) if to the Company,
to the attention of its President at its office maintained pursuant to Section
11.2(a) hereof; provided, however, that the exercise of any Warrant shall be
effective in the manner provided in Section 2 hereof.
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<PAGE>
16. MISCELLANEOUS. Any term of this Warrant may be amended and the observance
of any term of this Warrant may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with (i) the written
consent of the Company and the Holders or (ii) for all Warrants, the written
consent of the Company and the Holders of a majority of the Warrants then
outstanding. This Warrant shall be binding upon any Person succeeding to the
Company by merger, consolidation or acquisition of all or substantially all of
the Company's assets. This Warrant shall be construed and enforced in accordance
with and governed by the domestic substantive laws of the Commonwealth of
Pennsylvania without giving effect to any choice or conflict of law provision or
rule that would cause the application of the domestic substantive laws of any
other jurisdiction. The section headings in this Warrant are for purposes of
convenience only and shall not constitute a part hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, Raymond Karsan Holdings, Inc. has caused this Warrant
to be sign by its duly authorized officer under its corporate seal, attested by
its duly authorized officer, and to be dated as of December __, 1999.
RAYMOND KARSAN HOLDINGS, INC.
[SEAL]
By:_________________________________
Name:
Title:
ATTEST:
By:_________________________________
Name:
Title:
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<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, __________ shares of the
Class A Common Stock and herewith makes payment of $ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
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<PAGE>
FORM OF CONVERSION NOTICE
[To be executed only upon conversion of Warrant]
To RAYMOND KARSAN HOLDINGS, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
converts such Warrant with respect to __________/1/ shares of the Class A Common
Stock which such holder would be entitled to receive upon the exercise hereof,
and requests that the certificates for such shares be issued in the name of,
and delivered to , whose address is .
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
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FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right
represented by such Warrant to purchase __________/1/ shares of Class A Common
Stock of RAYMOND KARSAN HOLDINGS, INC. to which such Warrant relates, and
appoints Attorney to make such transfer on the books of
RAYMOND KARSAN HOLDINGS, INC. maintained for such purpose, with full power of
substitution in the premises.
Dated: _________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signed in the presence of:
__________________________
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