Exhibit 10.2
TECHNOLOGY SPECIALISTS, INC.
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of April 11, 1996 (the "AGREEMENT"), between
TECHNOLOGY SPECIALISTS, INC., a Pennsylvania corporation (the "COMPANY") and
CHEMICAL BANK (the "Lender
WITNESSETH:
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WHEREAS, the Company, the Lender and Chemical Bank, as Administrative
Agent, are parties to the Credit Agreement dated as of April __, 1996 (as the
same may be amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), pursuant to which, among other things, the Lender made term
loans to the Company;
WHEREAS, in order to induce the Lender to execute and deliver the
Credit Agreement and to make such term loan to the Company, the Company has
agreed to execute and deliver this Agreement and to issue to the Lender the
warrants hereinafter described;
WHEREAS, the Company wishes to set forth, in this Agreement, among
other things, the form and provisions of the Warrant Certificates and the terms
and conditions on which they may be issued, exchanged, exercised and replaced;
NOW, THEREFORE, in consideration of the premises herein contained the
parties hereto agree as follows:
1. DEFINITIONS
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As used in this Agreement the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"Affiliate" shall mean as to any Person (the "Primary Person"), any
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, the Primary Person. For purposes of this definition,
control of a Person shall mean the power, directly or indirectly, to (i) vote
20% or more of the securities having ordinary voting power for the election of
directors of such Person or
(ii) direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Appraisal Procedure" shall mean a procedure whereby two independent
appraisers, one chosen by the Company and one by a majority in interest of the
Disputing Holders, shall be selected in order to select a third independent
appraiser. Each party shall deliver a notice to the other appointing its
appraiser within 15 days after the Appraisal Procedure is invoked. The third
independent appraiser shall be chosen within 10 days thereafter by the mutual
consent of such first two appraisers or, if such first two appraisers fail to
agree, the appointment shall be made by the American Arbitration Association, or
any organization successor thereto, from a panel of arbitrators having
experience in the appraisal of the subject matter to be appraised. The decision
of the third appraiser so appointed and chosen shall be given within 30 days
after the selection of such third appraiser and shall be binding and conclusive
on the Company and the Holders. The costs of conducting any Appraisal Procedure
shall be done as follows: (a) the fees and expenses of the appraiser appointed
by the Disputing Holders shall be done by the Disputing Holders; (b) the fees
and expenses of the appraiser appointed by the Company and any costs incurred by
the Company shall be home by the Company and (c) the fees and expenses of a
third appraiser shall be done (i) by the Company if such Appraisal Procedure
shall result in a determination that is disparate by 10% or more from the
Company's initial determination and (ii) by the Disputing Holders if such
Appraisal Procedure shall result in a determination that is disparate by less
than 10% from the Company's initial determination.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Change of Control" shall mean a change of at least 50% of the Fully
Diluted Outstanding ownership of the Company from the Closing Date.
"Closing Date" shall mean April 11, 1996.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the conunon stock, $.01 par value per share,
of the Company, as constituted on the Closing Date, and any capital stock into
which such Common Stock may thereafter be changed, and shall also include (i)
capital stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of Common Stock upon any reclassification
thereof which is also not preferred as to dividends or assets over any other
class of stock of the Company and which is not subject to redemption and (ii)
shares of common stock of any successor or acquiring corporation (as defined in
Section 4.8) received by or distributed to the holders of Common Stock of the
Company in the circumstances contemplated by Section 4.8.
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"Contractual Obligation" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or other
undertaking for which such Person is a party or by which it or any of its
property is bound.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for Additional
Shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Current Market Price" shall mean, in respect of any security on any
date herein specified, (a) if there shall then be a public market for the
security, the average of the daily market prices for 10 consecutive Business
Days commencing 15 days before such date; the daily market price for each such
Business Day being (i) the last sale price on such day on the principal stock
exchange on which such security is then listed or admitted to trading, (ii) if
no sale takes place on such day on any such exchange, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange, (iii) if the security is not then listed or admitted to trading
on any stock exchange, the average of the last reported closing bid and asked
prices on such day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automated Quotations System or the National
Quotation Bureau, Inc., (iv) if neither such corporation at the time is engaged
in the business of reporting such prices, as furnished by any similar firm then
engaged in such business, or (v) if there is no such firm, as furnished by any
member of the NASD selected mutually by the Required Holders and the Company or,
if they cannot agree upon such selection, as selected by two such members of the
NASD, one of which shall be selected by the Required Holders and one of which
shall be selected by the Company; or (b) at any time prior to the time there is
a public market for the security, the Fair Market Value per share of such
security.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, $1.87 as adjusted pursuant to this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Fair Market Value" shall mean the fair market value of the business
or property (including any security) in question, as determined in good faith by
the Board of Directors of the Company, PROVIDED, however, that the Fair Market
Value of any security for which a Current Market Price (determined without
regard to clause (b) of the definition thereof) is available shall be such
Current Market Price of such security. The Fair Market Value of the Company
shall be the Fair Market Value of the Company and its subsidiaries.
Notwithstanding the foregoing, if, at any date of determination of the Fair
Market Value of the Company, the Common Stock of any class shall then be
publicly traded, the Fair Market Value of the Company on such date shall be the
Current Market Price on such date multiplied by the number of Fully Diluted
Outstanding shares of Common
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Stock.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of the Warrants and other options or
warrants to purchase, or securities convertible into, shares of common stock
outstanding on such date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Holder" shall mean each Person in whose name the Warrants or any
Warrant Stock are registered on the books of the Company maintained for such
purpose.
"Issue Date" shall mean any of the dates listed in Section 2.1 or the
first Business Day after such date.
"NASD" shall mean the National Association of Securities Dealers,
Inc., or any successor corporation thereto.
"Other Property" shall have the meaning set forth in Section 4.8.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any Subsidiary, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Conunon Stock.
"Permitted Issuances" shall mean (i) the issuance of shares of Common
Stock upon exercise of the Warrants, (ii) if there shall then be a public market
for the Common Stock, the issuance of shares of Conunon Stock upon receipt by
the Company of the Current Market Price therefor described in clause (a) of the
definition of "Current Market Price", (iii) the issuance of options or shares
relating to any benefit plan, stock option plan, stock purchase plan or any
other compensation plan, agreement or arrangement offered solely to the
officers, directors, employees and/or consultants of the Company and its
Affiliates, (iv) at any time prior to the time there is a public market for the
Common Stock, the issuance of shares of Common Stock for consideration equal to
the fair value of such shares as determined in good faith by the Board of
Directors of the Company, (v) issuance of shares of Common Stock upon exercise
of the option to purchase 75,000 shares of Common Stock held by ▇▇▇▇▇▇ ▇▇▇▇▇ as
of the date hereof, (vi) the issuance of any shares of Common Stock upon the
conversion of shares of any other class of Common Stock and (vii) the issuance
of shares of Common Stock in a Public Offering. Any determination by the Board
of Directors of the Company pursuant to the preceding sentence may be challenged
in good faith by Required Holders with 15 days of receipt of notice of such
determination, and any dispute shall be
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resolved by the Appraisal Procedure.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Public Company" shall have the meaning set forth in Section 13.1.
"Public Offering" shall mean the offering of shares of Common Stock
pursuant to a registration statement declared effective by the Commission.
"Required Holders" shall mean the Holders of Warrants exercisable for
in excess of 50% of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants, whether or not then
exercisable.
"Requirement of Law" shall mean, as to any Person, the certificate of
incorporation and by-laws or other organizational OT governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitration or a court or other governmental authority, in each case applicable
to or binding on such Person or any of the property thereof or to which such
Person or any of its property is subject.
"Restricted Conunon Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Series A Non-Voting Conunon Stock" shall mean the series A NonVoting
Common Stock of the Company, par value $.01 per share.
"Subsidiary" shall mean any Person of which an aggregate of more than
50% of the outstanding stock or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other managers of such
Person (irrespective of whether, at the time, stock or other ownership interests
of any other class or classes of such Person shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by the Company and/or one or more
Subsidiaries of the Company.
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"Termination Event" shall mean the first to occur of the following:
(i) payment or prepayment of the Loans (as defined in the Credit Agreement) made
under the Credit Agreement, (ii) a Change of Control and (iii) a Public
Offering.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Certificate" shall mean a certificate evidencing one or more
Warrants, substantially in the form of Exhibit A hereto, with such changes
therein as may be required to reflect any adjustments made pursuant to Section
4.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of Warrants pursuant to Section
2.2, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
Holders of the Warrants upon the exercise thereof.
"Warrants" shall mean the warrants issued pursuant to this Agreement
and shall include all warrants issued upon transfer, division or combination of,
or in substitution for, any thereof. All Warrants shall at all times be
identical as to terms and conditions and date, except as to the number of shares
of Common Stock for which they may be exercised. A Warrant shall entitle the
holder thereof to purchase from the Company one share of Common Stock (subject
to adjustment as provided in Section 4).
2. ISSUANCE, EXERCISE OF WARRANT
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2.1. ISSUANCE OF Warrants. The Company hereby agrees to issue in
favor of the Lender on each Issue Date set forth below (or, if such Issue Date
is not a Business Day, on any of the next 20 Business Days following such Issue
Date), PROVIDED that no Termination Event has occurred, Warrants in an amount
equal to the number of Warrants listed for such Issue Date set forth below:
ISSUE DATE WARRANTS TO PURCHASE NO. OF SHARES
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Closing Date 68,728
I/i/1998 18,087
I/i/1999 18,471
I/l/2000 18,868
On each Issue Date (PROVIDED that no Termination Event has occurred), the
Company shall deliver to the Lender Warrant Certificates evidencing the Warrants
then being issued to the Lender. Each
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issued Warrant shall entitle the Holder thereof to purchase from the Company
one share of Series A Non-Voting Common Stock (subject to adjustment as
provided in Section 4). The failure of the Company to issue any Warrants as
contemplated above shall be without prejudice to the rights of the Lender to
cause such Warrants to be issued at any time after the relevant Issue Date at
the Lender's request.
2.2. MANNER OF EXERCISE. The Holder may at any time and from time
to time, prior to a Termination Event and from and after the earliest of (a) one
year from the Closing Date, (b) the occurrence of a Termination Event and (c)
each respective Issue Date, exercise the Warrants issued on such Issue Date
evidenced by a Warrant Certificate, on any Business Day, for all or any part of
the number of shares of Series A Non-Voting Common Stock purchasable thereunder.
In order to exercise the Warrants, in whole or in part, a Holder
shall deliver to the Company at its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇, or at the
office or agency designated by the Company pursuant to Section 12, (i) a
written notice of such Holder's election to exercise the Warrants, which
notice shall specify the number of shares of Common Stock to be purchased,
(ii) payment of the Warrant Price in the manner provided below, and (iii) the
Warrant Certificate or Warrant Certificates evidencing the Warrants. Such
notice shall be substantially in the form of the form of election to purchase
appearing at the end of the Warrant Certificate as Exhibit A, duly executed
by such Holder or its agent or attorney. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within three (3) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to such Holder a certificate or certificates representing the
aggregate number of full shares of Series A Non-Voting Common Stock issuable
upon such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered
shall be, to the extent possible, in such denomination or denominations as
such Holder shall request in the notice and shall be registered in the name
of Holder or, subject to Section 9, such other name as shall be designated in
the notice. The Warrants shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and such
Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares for all purposes, as of the
date the notice, together with the check or checks representing payment of
the Warrant Price and the Warrant Certificate or Warrant Certificates, is
received by the Company as described above and all taxes required to be paid
by such Holder, if any, pursuant to Section 2.3 prior to the issuance of such
shares have been paid. If the Warrants evidenced by a Warrant Certificate
shall have been exercised, the Company shall, at the time of delivery of the
certificate or certificates representing Warrant Stock, deliver to Holder a
new Warrant Certificate evidencing the rights of Holder to purchase the
unpurchased shares of Series A Non-Voting Common Stock represented by the old
Warrant Certificate, which new Warrant Certificate shall in all other
respects be identical with the old Warrant Certificate. Notwithstanding any
provision herein to the contrary, the Company shall not be required to
register shares in the name of any Person who acquired any Warrant or any
Warrant Stock otherwise than in accordance with this Agreement.
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Payment of the Warrant Price shall be made at the option of the Holder
(i) by certified or official bank check or (ii) if such Holder shall then be a
lender under the Credit Agreement, by such Holder's transferring to the Company
a principal amount of the outstanding term loans of such Holder under the Credit
Agreement, or any other debt of the Company held by such Holder, equal to the
Warrant Price or (iii) by termination of Warrants having a Fair Market Value
equal to the Warrant Price or (iv) in immediately available funds or (v) any
combination thereof.
2.3. PAYMENT OF Taxes. All shares of Series A Non-Voting Common
Stock issuable upon the exercise of Warrants pursuant to the terms hereof shall
be validly issued, fully paid and nonassessable and without any preemptive
fights. The Company shall pay all expenses in connection with, and all taxes
and other governmental charges that may be imposed with respect to, the issuance
or delivery thereof, unless such tax or charge is imposed by law upon Holder, in
which case such taxes or charges shall be paid by Holder. The Company shall not
be required, however, to pay any tax or other charge imposed in connection with
any transfer involved in the issue of any certificate for shares of Warrant
Stock issuable upon exercise of Warrants in any name other than that of Holder,
and in such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax or other charge
is due.
2.4. FRACTIONAL SHARES. The Company shall not be required to issue
a fractional share of Series A Non-Voting Common Stock upon the exercise of
Warrants. As to any fraction of a share which the Holder of Warrants would
otherwise be entitled to purchase upon such exercise, the Company shall pay a
cash adjustment in respect of such final fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date of
exercise.
2.5. CONTINUED VALIDITY. A Holder of shares of Warrant Stock
(other than a holder who acquires such shares after the same have been publicly
sold pursuant to a Registration Statement under the Securities Act) shall
continue to be entitled with respect to such shares to all rights to which it
would have been entitled as Holder under Sections 6, 7, 9, 10, 11 and 13 of this
Agreement. The Company will, at the time of each exercise of Warrants upon the
request of the Holder of the shares of Warrant Stock issued upon the exercise
thereof, acknowledge in writing, in form reasonably satisfactory to such Holder,
its continuing obligation to afford to such Holder all such rights; PROVIDED,
HOWEVER, that if such Holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Company to afford to such
Holder all such rights.
3. TRANSFERS, DIVISION AND COMBINATION
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3.1. TRANSFER. Subject to compliance with Section 9, transfer of
Warrants, in whole or in part, shall be registered on the books of the Company
to be maintained for such purpose, upon surrender of the Warrant Certificate
representing such Warrants at the principal office of the Company referred to in
Section 2.2 or the office or agency designated by the Company pursuant to
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Section 12, together with a written assignment substantially in the form of
Exhibit B to the Warrant Certificate duly executed by the Holder or its agent or
attorney, and funds sufficient to pay any transfer taxes payable by such Holder
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall, subject to Section 9, execute and deliver a new
Warrant Certificate or Warrant Certificates in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant Certificate or Warrant
Certificates evidencing the portion of the old Warrant Certificate not so
assigned, and the old Warrant Certificate shall promptly be canceled. A
Warrant, if properly assigned in compliance with Section 9, may be exercised by
a new Holder for the purchase of shares of Warrant Stock without having a new
Warrant Certificate or Warrant Certificates issued. If requested by the
Company, a new Holder shall acknowledge in writing, in form reasonably
satisfactory to the Company, such Holder's continuing obligation under
Section 9.
3.2. DIVISION AND COMBINATION. Subject to Section 9, any Warrant
Certificate may be divided or combined with other Warrant Certificates upon
presentation hereof at the aforesaid office or agency of the Company, together
with a written notice specifying the names and denominations in which new
Warrant Certificates are to be issued, signed by a Holder or its agent or
attorney. Subject to compliance with Section 3.1 as to any transfer which may
be involved in such division or combination, the Company shall execute and
deliver a new Warrant Certificate or Warrant Certificates in exchange for the
Warrant Certificate or Warrant Certificates to be divided or combined in
accordance with such notice.
3.3. EXPENSES. Subject to subsection 2.3, the Company shall
prepare, issue and deliver at its own expense (other than transfer taxes) the
new Warrant Certificate or Warrant Certificates under this Section 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its
aforesaid office or agency, books for the registration and the registration of
transfer and exchange of the Warrants and the Warrant Stock.
4. ADJUSTMENTS
The number of shares of Warrant Stock for which Warrants are
exercisable, and the price at which such shares may be purchased upon exercise
of Warrants, shall be subject to adjustment from time to time after the Closing
Date as set forth in this Section 4. Such adjustment shall apply whether or not
the related Warrants have been issued and any unissued Warrants shall be
adjusted as though such Warrants had been issued. When issued, any Warrants
issued after the Closing Date shall be issued in amounts reflecting any
adjustment pursuant to this Section 4 during the period from the Closing Date to
the date of issuance thereof that would have been made to such Warrants had they
been outstanding since the Closing Date. The Company promptly shall give each
Holder written notice of any event described below which requires an adjustment
pursuant to this Section 4 at the time of such event.
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4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time after the Closing Date the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Conunon Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which a Warrant is
exercisable immediately after the occurrence of any such event shall be
adjusted to equal the number of shares of Conunon Stock which a record holder
of the same number of shares of Common Stock for which a Warrant is
exercisable immediately prior to the occurrence of such event would own or be
entitled to receive after the happening of such event, and (ii) the Current
Warrant Price shall be adjusted to equal the Current Warrant Price multiplied
by a fraction, the numerator of which shall be the number of shares of Common
Stock for which a Warrant is exercisable immediately prior to the adjustment
and the denominator of which shall be the number of shares for which a
Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time after the Closing
Date the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other distribution of-
(a) cash;
(b) any evidences of its indebtedness (other than Convertible
Securities), any shares of its stock (other than Additional Shares of Common
Stock or Convertible Securities) or any other securities or property of any
nature whatsoever (other than cash); or
(c) any warrants or other rights to subscribe for or purchase any
evidences of its indebtedness (other than Convertible Securities), any shares of
its stock (other than Additional Shares of Common Stock or Convertible
Securities) or any other securities (other than Additional Shares of Common
Stock or Convertible Securities) or property of any nature whatsoever; then (i)
the number of shares of Common Stock for which a Warrant is exercisable shall be
adjusted to equal the product obtained by multiplying the number of shares of
Common Stock for which a Warrant is exercisable immediately prior to such
adjustment by a fraction (A) the numerator of which shall be the Current Market
Price per share of Common Stock at the date of taking such record and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock, minus the amount allocable to one share of Common Stock of any such cash
so distributable and of the fair value (as determined in good faith by the Board
of Directors of the Company, which may be
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challenged in good faith by Required Holders within 15 days of receipt of
notice of such determination, and any dispute shall be resolved by the
Appraisal Procedure) of any and all such evidences of indebtedness, shares of
stock, other securities or property or warrants or other subscription or
purchase rights so distributable, and (ii) the Current Warrant Price shall be
adjusted to equal (A) the Current Warrant Price multiplied by the number of
shares of Common Stock for which a Warrant is exercisable immediately prior
to the adjustment divided by (B) the number of shares for which a Warrant is
exercisable immediately after such adjustment. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and
shares of any other class of stock other than Convertible Securities shall be
deemed a distribution by the Company to the holders of its Common Stock of
such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination,
as the case may be, of the outstanding shares of Common Stock within the
meaning of Section 4. 1.
4.3. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK,. (a) (i) If
at any time after the Closing Date the Company shall (except as hereinafter
provided) issue or sell any Additional Shares of Common Stock, other than
Permitted Issuances, for consideration in an amount per Additional Share of
Common Stock less than the Current Market Price, then the Current Warrant
Price shall be reduced to a price determined by dividing (A) an amount equal
to the sum of (X) the number of shares of Common Stock Outstanding
immediately prior to such issuance or sale multiplied by the then existing
Current Warrant Price, plus (Y) the consideration, if any, received by the
Company upon such issuance or sale, by (B) the total number of shares of
Common Stock Outstanding immediately after such issuance or sale and (ii)
upon each adjustment of the Current Warrant Price as a result of the
calculations made pursuant to this Section 4, each Warrant outstanding prior
to the making of the adjustment in the Current Warrant Price shall thereafter
be treated as that number of Warrants, and shall evidence the right to
purchase, at the adjusted Current Warrant Price, that number of shares of
Common Stock, obtained by (i) multiplying the number of shares of Common
Stock for which a Warrant is exercisable immediately prior to the adjustment
by the Current Warrant Price in effect immediately prior to the adjustment,
and (ii) dividing the product so obtained by the Current Warrant Price
obtained immediately after such adjustment of the Current Warrant Price.
(b) The provisions of paragraph (a) of Section 4.3 shall not
apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 4.1 or 4.2. No adjustment of the number
of shares of Common Stock for which a Warrant shall be exercisable shall be
made under paragraph (a) of Section 4.3 upon the issuance of any Additional
Shares of Common Stock which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any Convertible Securities, if any
such adjustment shall previously have been made (or if no adjustment was
required) upon the issuance of such warrants or other rights or upon the
issuance of such Convertible Securities (or upon the issuance of any warrant
or other rights therefor) pursuant
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to Section 4.4 or Section 4.5.
4.4. ISSUANCE OF WARRANTS OR OTHER RIGHTS. (a) If at any time
after the Closing Date the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
distribution of, or shall in any manner (whether directly or by assumption in
a merger in which the Company is the surviving corporation) issue or sell,
any warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable other
than Permitted Issuances, then: (i) in the case of any such dividend or
distribution, the number of shares of Common Stock for which a Warrant is
exercisable shall be adjusted to equal the product obtained by multiplying
the number of shares of Common Stock for which a Warrant is exercisable
immediately prior to the taking of such record or such issuance or sale by a
fraction (A) the numerator of which is the number of shares of Common Stock
which would be Outstanding immediately after the issuance or sale of the
maximum number of Additional Shares of Common Stock issuable pursuant to all
such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities, and (B) the denominator of which
is the number of shares of Common Stock Outstanding immediately prior to the
taking of such record or the issuance or sale of such warrants or other
rights; and (ii) in the case of any such issuance (other than as a dividend
or distribution) or sale, if the price per share for which Common Stock is
issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
Current Market Price in effect immediately prior to the time of such
distribution, issue or sale, then the Current Warrant Price shall be adjusted
as provided in Section 4.3(a) on the basis that (A) the maximum number of
Additional Shares of Conunon Stock issuable pursuant to all such warrants or
other rights or necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued and outstanding,
(B) the price per share for such Additional Shares of Common Stock shall be
deemed to be the lowest possible price per share in any range of prices per
share at which such Additional Shares of Common Stock are available to such
holders, and (C) the Company shall be deemed to have received all of the
consideration payable therefor, if any, as of the date of the actual issuance
of such warrants or other rights. No further adjustments of the Current
Warrant Price shall be made upon the actual issuance of such Common Stock or
of such Convertible Securities upon exercise of such warrants or other rights
or upon the actual issuance of such Common Stock upon such conversion or
exchange of such Convertible Securities.
(b) If any Additional Share of Common Stock issuable pursuant to
all such warrants or other rights or necessary to effect the conversion or
exchange of all such Convertible Securities is issuable in exchange for
consideration in an amount per such Additional Share of Common Stock equal to
or more than the greater of the Current Warrant Price and the Current Market
Price at the time such record is taken or such warrants or other rights are
issued or sold, then the Current Warrant Price as to the number of shares of
Common Stock for which a Warrant is exercisable prior to the adjustment under
Section 4.4(a)(i) shall not change, and the Current Warrant Price for each of
the incremental number of shares of Common Stock for which this Warrant
becomes exercisable after such adjustment shall be equal to the fair value of
such consideration per
12
Additional Share of Common Stock.
4.5. ISSUANCE OF CONVERTIBLE SECURITIES. (a) If at any time the
Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution of, or shall
in any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell, any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, other than Permitted Issuances, then: (i) in the
case of any such dividend or distribution, the number of shares of Common
Stock for which a Warrant is exercisable shall be adjusted to equal the
product obtained by multiplying the number of shares of Common Stock for
which a Warrant is exercisable immediately prior to the taking of such record
or such issuance or sale by a fraction (A) the numerator of which is the
number of shares of Common Stock which would be Outstanding immediately after
the issuance or sale of the maximum number of Additional Shares of Common
Stock necessary to effect the conversion or exchange of all such Convertible
Securities, and (B) the denominator of which is the number of shares of
Common Stock Outstanding immediately prior to the taking of such record or
the issuance or sale of such Convertible Securities; and (ii) in the case of
any such issuance (other than a dividend or distribution) or sale, if the
price per share for which Conunon Stock is issuable upon such conversion or
exchange shall be less than the Current Market Price in effect immediately
prior to the time of such issue or sale of Convertible Securities, then the
Current Warrant Price shall be adjusted as provided in Section 4.3(a) on the
basis that (A) the maximum number of Additional Shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding, (B) the price
per share of such Additional Shares of Common Stock shall be deemed to be the
lowest possible price in any range of prices at which such Additional Shares
of Common Stock are available to such holders, and (C) the Company shall be
deemed to have received all of the consideration payable therefor, if any, as
of the date of actual issuance of such Convertible Securities. No adjustment
of the Current Warrant Price shall be made under this Section 4.5 upon the
issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor,
if any such adjustment shall previously have been made upon the issuance of
such warrants or other rights pursuant to Section 4.4. No further adjustments
of the Current Warrant Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Securities and,
if any issue or sale of such Convertible Securities is made upon exercise of
any warrant or other right to subscribe for or to purchase or any warrant or
other right to purchase any such Convertible Securities for which adjustments
of the Current Warrant Price have been or are to be made pursuant to other
provisions of this Section 4, or if no such adjustment was required, no
further adjustments of the Current Warrant Price shall be made by reason of
such issue or sale.
(b) If any Additional Share of Common Stock issuable upon
conversion or exchange of all such Convertible Securities is issuable in
exchange for consideration in an amount per such Additional Share of Conunon
Stock equal to or more than the greater of the Current Warrant Price and the
Current Market Price at the time such record is taken or such Convertible
Securities are issued or sold, then the Current Warrant Price as to the
number of shares of Common Stock for which this Warrant is exercisable prior
to the adjustment under Section 4.5(a)(i) shall not
13
change, but the Current Warrant Price for each of the incremental number of
shares of Common Stock for which
a War-rant becomes exercisable after such adjustment shall be equal to the
fair value of such consideration per Additional Share of Common Stock.
4.6. SUPERSEDING ADJUSTMENT. If, at any time after any
adjustment of the number of shares of Common Stock for which a Warrant is
exercisable shall have been made pursuant to Section 4.4 or Section 4.5 as
the result of any issuance of warrants, options, rights or Convertible
Securities, and such warrants, options or rights, or the right of conversion
or exchange in such other Convertible Securities, shall expire, and all or a
portion of such warrants, options or rights, or the fight of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, then such
previous adjustment shall be rescinded and annulled and the Additional Shares
of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a recomputation shall be made of the effect of such warrants,
rights or options or other Convertible Securities on the then outstanding
Warrants, but not on any then outstanding Warrant Stock, on the basis of
treating the number of Additional Shares of Common Stock or other property,
if any, theretofore actually issued or issuable pursuant to the previous
exercise of any such warrants, rights or options or any such right of
conversion or exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and receivable
therefor.
4.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which a Warrant is
exercisable provided for in this Section 4:
(a) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Shares of Common Stock or any Convertible Securities or any
warrants, options or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Company therefor shall be
the amount of the cash received by the Company therefor, or, if such
Additional Shares of Cormnon Stock or Convertible Securities are offered by
the Company for subscription, the subscription price, or, if such Additional
Shares of Common Stock or Convertible Securities are sold to underwriters or
dealers for public offering without a subscription offering, the initial
public offering price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends, but not subtracting any
compensation, discounts or expenses paid or incurred by the Company for and
in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration
other than cash, then, except as herein otherwise expressly provided, the
amount of such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as mutually determined in good
faith by the Required Holders and the Board of Directors of the Company. In
case any Additional Shares of Conunon Stock or any Convertible Securities or
any warrants or other rights to subscribe for or purchase such Additional
14
Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company or, if
Required Holders object to such determination within 15 days of notice
thereof, as determined in an Appraisal Procedure, of such portion of the
assets and business of the nonsurviving corporation as the Required Holders
and such Board in good faith shall mutually determine to be attributable to
such Additional Shares of Common Stock, Convertible Securities, warrants or
other rights, as the case may be. The consideration for any Additional
Shares of Common Stock issuable pursuant to any warrants, options or other
rights to subscribe for or purchase the same shall be the consideration
received by the Company for issuing such warrants or other rights plus the
additional consideration payable to the Company upon exercise of such
warrants or other rights. The consideration for any Additional Shares of
Common Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration, if any, received by the Company for issuing
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Company in respect
of the subscription for or purchase of such Convertible Securities, plus the
additional consideration, if any, payable to the Company upon the exercise of
the right of conversion or exchange in such Convertible Securities. In case
of the issuance at any time of any Additional Shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible Securities
a consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment that would
otherwise be required may be postponed (except in the case of a subdivision
or combination of shares of the Common Stock, as provided for in Section 4.1)
up to, but not beyond, the date of exercise of any Warrants if such
adjustment either by itself or with other adjustments not previously made
adds or subtracts less than 1% to the number of shares of Common Stock for
which the Warrants initially issued pursuant to this Agreement are
exercisable immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as
such adjustment, together with other adjustments required by this Section 4
and not previously made, would result in a minimum adjustment or on the date
of exercise. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its
occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock resulting from an issuance of
additional Warrants to any Holder pursuant to this Section 4 shall be taken
into account to the nearest 1/10th of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before the distribution to stockholders
15
thereof, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any such
adjustment previously made in respect thereof shall be rescinded and annulled.
(e) ESCROW OF WARRANT STOCK. If after any property becomes
distributable pursuant to this Section 4 by reason of taking of any record of
the holders of Common Stock, but prior to the occurrence of the event for
which such record is taken, any Holder exercises Warrants, any Additional
Shares of Common Stock issuable upon exercise by reason of such adjustment
shall be deemed the last shares of Common Stock for which this Warrant is
exercised (notwithstanding any other provision to the contrary herein) and
such shares or other property shall be held in escrow for Holder by the
Company to be issued to Holder upon and to the extent that the event actually
takes place, upon payment of the then Current Warrant Price. Notwithstanding
any other provision to the contrary herein, if the event for which such
record was taken fails to occur or is rescinded, then such escrowed shares
shall be canceled by the Company and escrowed property returned.
(f) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination
may be challenged in good faith by the Required Holders within 15 days of
notice of such determination, and any dispute shall be resolved by the
Appraisal Procedure.
4.8. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with and into another
corporation (where the Company is not the surviving corporation or where
there is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another corporation and, pursuant to the
terms of such reorganization, reclassification, merger, consolidation or
disposition of assets, shares of common stock of the successor or acquiring
corporation, or any cash, shares of stock or other securities or property of
any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or
distributed to the holders of Common Stock of the Company, then each Holder
shall have the right thereafter to receive, upon exercise of a Warrant,
solely the number of shares of common stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation, sale, transfer or disposition by a
holder of the number of shares of Common Stock for which a Warrant is
exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation, sale, transfer or
disposition, the successor or acquiring corporation (if other than the
Company) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition of this Agreement to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order
to provide for adjustments of shares of the Common Stock for which a Warrant
is exercisable which
16
shall be as nearly equivalent as practicable to the adjustments provided for
in this Section 4. For purposes of this Section 4.8 "common stock of the
successor or acquiring corporation" shall include stock of such corporation
of any class which is not preferred as to dividends or assets over any other
class of stock of such corporation and which is not subject to redemption and
shall also include any evidences of indebtedness, shares of stock or other
securities which are convertible into or exchangeable for any such stock,
either immediately or upon the arrival of a specified date or the happening
of a specified event and any warrants or other rights to subscribe for or
purchase any such stock. The foregoing provisions of this Section 4.8 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations, sales, transfers or dispositions.
5. NOTICES TO WARRANT HOLDERS
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of
Common Stock for which a Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to Section 4, the Company shall
forthwith prepare a certificate to be executed by the chief financial officer
of the Company setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including
a description of the basis on which the Board of Directors of the Company
determined the fair value of any evidences of indebtedness, shares of stock,
other securities or property or warrants or other subscription or purchase
rights referred to in Section 4), specifying the number of shares of Common
Stock for which a Warrant is exercisable and (if such adjustment was made
pursuant to Section 4.8) describing the number and kind of any other shares
of stock or Other Property for which a Warrant is exercisable, and any change
in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to each Holder. The Company shall keep at its
office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
5.2. NOTICE OF CERTAIN CORPORATE ACTION. Each Holder shall be
entitled to the same rights to receive notice of corporate action as any
holder of Common Stock.
6. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants as follows:
(a) The Company is a corporation duly organized and validly
existing under the laws of the State of Pennsylvania, has the power and
authority to execute and deliver this Agreement and the Warrant
Certificates, to issue the Warrants and to perform its obligations under
this Agreement and the Warrant Certificates.
(b) The execution, delivery and performance by the Company of this
Agreement
17
and the Warrant Certificates, the issuance of the Warrants and the
issuance of the Warrant Stock upon exercise of the Warrants have been
duly authorized by all necessary corporate action and do not and will
not violate, or result in a breach of, or constitute a default under or
require any consent under, or result in the creation of any lien or
security interest upon the
assets of the Company pursuant to, any Requirement of Law or any
Contractual Obligation binding upon the Company.
(c) This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid, binding and enforceable obligation
of the Company. When the Warrants and the Warrant Certificates have been
issued as contemplated hereby, (i) the Warrants and the Warrant
Certificates will constitute legal, valid, binding and enforceable
obligations of the Company and (ii) the Warrant Stock, when issued upon
exercise of the Warrants in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable shares of Common
Stock with no personal liability attaching to the ownership thereof.
(d) (i) The total number of shares of all classes of stock that
the Company shall have authority to issue is 31,000,000 shares, consisting
solely of shares of Common Stock, par value $.01 per share, of which, after
giving effect to the transactions contemplated herein and all other
issuances of capital stock of the Company as of the date hereof, 1,574,478
shares of Common Stock will be issued and outstanding and 512,346 shares of
Common Stock will be reserved for future issuance. The delivery hereunder
by the Company to the Lender of the Warrants issued on the Closing Date
will transfer and convey to the Lender good and marketable title to such
Warrants and, upon exercise of such Warrants and payment of the Warrant
Price in accordance with this Agreement, good and marketable title to the
Conunon Stock purchased upon such exercise, free and clear of all
preemptive rights, liens, charges and encumbrances, except for restrictions
on transfer set forth in this Agreement or arising under the Federal and
state securities laws. Except as contemplated by the shares reserved for
future issuance referred to above, the Company does not have outstanding
any stock or securities convertible into or exchangeable for any shares of
its stock, nor, except as so contemplated, does it have outstanding any
agreements, rights or options entitling any person to subscribe for or to
purchase any capital stock or securities convertible into or exchangeable
for any of its shares of stock. The Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock, other than put rights to ▇▇▇▇▇▇
▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇.
(e) The Company has provided to the Holder copies of (i) the
audited consolidated balance sheet of the Company as at December 31, 1995,
(ii) audited consolidated statements of income, shareholders' equity and of
cash flow of the Company as at December 31, 1995, (iii) annual projections
of the Company for 1996, and (iv) quarterly projections of the Company
for 1996.
18
6.2. WARRANT Holders. Each Holder hereby represents and warrants as
follows:
(a) It is acquiring the Warrants for its own account, as
principal, for the purpose of investment and not with a view to or for sale
in connection with any distribution thereof. Each Holder hereby represents
that it will not offer to sell, sell or otherwise dispose of any of the
Warrants or any Warrant Stock in violation of the Securities Act or any
other applicable state or federal securities laws.
(b) It has to its satisfaction reviewed the business and affairs
of the Company and understands the risks of, and other considerations
relating to, its receipt of the Warrant Stock. Such Holder has been
furnished a copy of the Company's most recent audited financial statements,
annual projections, monthly projections and all other information requested
by it relating to the Company and its activities and proposed activities.
(c) It has sufficient knowledge and experience in business and
financial matters to be capable of utilizing the information made available
to it to fully and completely evaluate the merits and risks of owning the
Warrant Stock.
(d) it has been furnished with or given adequate access to such
information about the Company and the Warrants as it has requested, (ii) it
has made its own independent inquiry and investigation into, and based
thereon has formed an independent judgment concerning, the Company, (iii)
it is able to bear the economic risks of the investment in the Common Stock
upon exercise of the Warrants, (iv) it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Company and (v) it is an "accredited
investor" within the meaning of "accredited investor" under Regulation D of
the Securities Act of 1933, as amended.
7. CERTAIN COVENANTS
7.1. NO IMPAIRMENT. The Company shall not by any action
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Agreement, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of each Holder against Impairment. Without
limiting the generality of the foregoing, the Company will use reasonable
good faith efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this
Agreement.
Upon the request of a Holder, the Company will at any time during
the period this Agreement is in effect acknowledge in writing, in form
satisfactory to such Holder, the continuing
19
validity of this Agreement and the obligations of the Company hereunder.
7.2. RESERVATION AND AUTHORIZATION OF CONUNON STOCK, REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY. From and after the Closing
Date, the Company shall at all times reserve and keep available for issue
upon the exercise of Warrants such number of its authorized but unissued
shares of Common Stock as will be sufficient to permit the exercise in full
of all outstanding Warrants. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrants and payment therefor in
accordance with the terms of this Agreement, shall be duly and validly issued
and fully paid and nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing
the Current Warrant Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Cormnon
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which a Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of Warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in the Securities Act) before such shares may be so issued, the
Company will in good faith and as expeditiously as possible and at its
expense endeavor to cause such shares to be duly registered.
8. TAKING OF RECORD, STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company
to the holders of its Conunon Stock with respect to which any provision of
Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the
close of business on a Business Day. The Company will not at any time,
except upon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in preventing
or delaying the exercise or transfer of any Warrants or any Warrant Stock.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrants and the Warrant Stock shall not be transferred before
satisfaction of the conditions specified in this Section 9, which conditions
are intended to ensure compliance with
20
the provisions of the Securities Act with respect to the transfer of any
Warrant or any Warrant Stock. Each Holder, by entering into this Agreement
and accepting the Warrants, agrees to be bound by the provisions of this
Section 9.
21
9.1. RESTRICTIVE LEGEND. Except as otherwise provided in this
Section 9, each certificate representing Warrants or Warrant Stock, shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or any
applicable state securities laws, and may not be sold or transferred
in the absence of such registration or an exemption therefrom. Such
securities are subject to the restrictions and privileges specified in
a Warrant Agreement, dated as of April ___, 1996, between the Company
and the initial holders of securities named therein, a copy of which
is on file with the Secretary of the Company and will be furnished
without charge to the holder hereof upon written request, and the
holder of this certificate agrees to be bound thereby."
9.2. NOTICE OF PROPOSED TRANSFERS, REQUESTS FOR REGISTRATION.
Prior to any transfer of any Warrants or any shares of Restricted Conunon
Stock, the Holder of such Warrants or Restricted Common Stock shall give five
days' prior written notice to the Company of such Holder's intention to
effect such transfer (a "TRANSFER Notice"). Holder agrees that it will not
sell, transfer or otherwise dispose of Warrants or any shares of Restricted
Common Stock, in whole or in part, except pursuant to an effective
registration statement under the Securities Act or an exemption from
registration thereunder. Each certificate, if any, evidencing such shares of
Restricted Common Stock issued upon such transfer shall bear the restrictive
legend set forth in Section 9.1, and each Warrant Certificate issued upon
such transfer shall bear the restrictive legend set forth in Section 9.1,
unless in either case such transfer is pursuant to an effective registration
statement under the Securities Act or in the opinion of the transferee's or
Holder's counsel delivered to the Company in connection with such transfer
(which opinion and counsel shall be reasonably satisfactory to the Company)
such legend is not required in order to ensure compliance with the Securities
Act.
9.3. TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirement of Section 9.1 shall terminate as to any particular
Warrant or share of Warrant Stock or Restricted Common Stock (or Common Stock
issuable upon the exercise of the Warrants) (i) when and so long as such
security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto, or (ii) when the holder thereof shall have
delivered to the Company the written opinion of counsel to such holder, which
opinion and counsel shall be reasonably satisfactory to the Company, stating
that such legend is not required in order to ensure compliance with the
Securities Act. Whenever the restrictions imposed by Section 9 shall
terminate as to any Warrants or any Restricted Common Stock, as hereinabove
provided, the Holder thereof shall be entitled to receive from the Company,
at the expense of the Company, a new Warrant Certificate or a new certificate
representing such Common Stock, as the case may be, not bearing the
restrictive legend set forth in Section 9.1.
22
9.4. LISTING ON SECURITIES EXCHANGE. If the Company shall list
any shares of Common Stock on any securities exchange, it will, at its
expense, use its best efforts to list thereon, maintain and, when necessary,
increase such listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable securities exchange rules, issuable upon the
exercise of the Warrants so long as any shares of Common Stock shall be so
listed. Nothing contained in this subsection 9.4 shall require the Company
to register any security under the Securities Act.
10. SUPPLYING INFORMATION
The Company shall reasonably cooperate with each Holder of a
Warrant and each Holder of Restricted Common Stock in supplying such
information as may be reasonably necessary for such Holder to complete and
file any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Restricted Conunon Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of a certificate representing Warrants or Warrant Stock and
indemnity reasonably satisfactory to it (it being understood that the written
agreement of the Lender shall be sufficient indemnity) and in case of
mutilation upon surrender and cancellation hereof or thereof, the Company
will execute and deliver in lieu hereof or thereof a new Warrant or new stock
certificate as the case may be, of like tenor to such Holder; PROVIDED, in
the case of mutilation, no indemnity shall be required if the certificate
representing Warrants or Warrant Stock in identifiable form is surrendered to
the Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration or transfer, division or combination as provided herein.
13. FINANCIAL AND BUSINESS INFORMATION
13.1. QUARTERLY INFORMATION. The Company will deliver to each
Holder the quarterly information delivered in accordance with subsection
7.1(b) of the Credit Agreement, accompanied by the certification of the
Company's chief executive officer or chief financial officer in accordance
with subsection 7.2 of the Credit Agreement.
23
13.2. ANNUAL INFORMATION. The Company will deliver to each Holder
the annual information delivered in accordance with subsection 7.1(a) of the
Credit Agreement, accompanied by the certification of the Company's chief
executive officer or chief financial officer in accordance with subsection
7.2 of the Credit Agreement.
13.3. FILINGS. The Company will file on or before the required
date all required regular or periodic reports (pursuant to the Exchange Act)
with the Commission and will deliver to each Holder promptly upon their
becoming available one copy of each report, notice or proxy statement sent by
the Company to its stockholders generally.
14. APPRAISAL RIGHTS
Upon each determination of Fair Market Value of any business or
property (including any security) hereunder (other than a determination
relating solely to setting the value of fractional shares), the Company shall
promptly give notice thereof to all Holders, setting forth in reasonable
detail the calculation of such Fair Market Value and the method and basis of
determination thereof, as the case may be. Unless a majority in interest of
the Holders agree in writing with such determination prior to the expiration
of the 15-day period referred to below, if a majority in interest of Holders
(the "DISPUTING HOLDERS") shall disagree with such determination and shall,
by notice to the Company given within 15 days after the Company's notice of
such determination, elect to dispute such determination, such dispute shall
be resolved in accordance with this Section 14. In the event that a
determination of Current Market Price of a security pursuant to clause (a) of
the definition thereof is disputed, such dispute shall be submitted to a New
York Stock Exchange member firm selected by the Company and reasonably
acceptable to a majority in interest of the Disputing Holders, whose
determination of Current Market Price shall be binding on the Company and the
Holders. If such determination is disparate by less than 10% from the
Company's initial determination, the fees and expenses of such determination
shall be done by the Disputing Holders and if such determination is disparate
by 10% or more from the Company's initial determination, the fees and
expenses of such determination shall be done by the Company. In the event
that a determination of Fair Market Value, other than a determination solely
involving clause (a) of the definition of Current Market Price, is disputed,
such dispute shall be resolved through the Appraisal Procedure.
15. LIMITATION OF LIABILITY, NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative action by any
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of any Holder, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company. Except as may otherwise be provided by law or by separate
agreement between a Holder and the Company, no Holder, as such, shall be
entitled to vote or be deemed the holder of Common Stock or any other
securities (other than Warrants) of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained herein be
construed to confer upon
24
any Holder the rights of a stockholder of the Company or the right to vote
for the election of directors or upon any matters submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate
action or to receive notice of meetings or other actions affecting
stockholders (except as provided herein), or to receive dividends or
otherwise, until the Warrants shall have been exercised in accordance with
the terms and conditions hereof.
16. MISCELLANEOUS
16.1. NONWAIVER AND EXPENSES. No course of dealing or any delay
or failure to exercise any right hereunder on the part of any Holder shall
operate as a waiver of such right or otherwise prejudice such Holder's
rights, powers or remedies. If the Company fails to make, when due, any
payments provided for hereunder, or fails to comply with any other provision
of this Agreement, the Company shall pay to the applicable Holders such
amounts as shall be sufficient to cover any reasonable costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by the Holders in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
16.2. NOTICE GENERALLY. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Agreement shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, telex, telecopier or overnight air courier guaranteeing next day
delivery, addressed as follows:
(a) If to any Holder at:
Chemical Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 100 1 7
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company at:
Technology Specialists, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
25
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Three First National Place Suite 3800
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, or three (3) Business
Days after the same shall have been deposited in the United States mail.
16.3. INDEMNIFICATION. (a) The Company agrees to indemnify and
hold harmless each Holder, its officers, directors, employees, agents, and
attorneys from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by
or asserted against such Holder relating to or arising out of (i) such
Holder's exercise of the Warrants and/or ownership of any shares of Warrant
Stock issued in consequence thereof, or (ii) any litigation to which such
Holder is made a party in its capacity as a stockholder or warrantholder of
the Company; PROVIDED, HOWEVER that the Company will not be liable hereunder
to the extent that any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses or
disbursements (A) arise from or relate to any violation by such Holder of any
law or regulation applicable to it or (B) are found in a final non-appealable
judgment by a court to have resulted from such Holder's gross negligence, bad
faith or willful misconduct or violation of law.
(b) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person or
entity entitled to indemnification hereunder shall (i) give prompt written
notice to the indemnifying party after the receipt by the indemnified party
of a written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified
party will claim indemnification or contribution pursuant to this Agreement;
PROVIDED, HOWEVER, that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its
obligations under subsection 16.3 hereof, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice, and
(ii) unless in such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying parties with
respect to such claim, permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party.
If the indemnifying party is entitled to, and does, assume the defense of
such claim, the indemnified party shall have the right to employ separate
counsel and to participate in the defense thereof, but the fees and expenses
of such counsel shall be done by the indemnified party. Whether or not such
defense is assumed by the indemnifying party, the indemnifying party shall
not be subject to any liability for any settlement made without its consent
(but such consent will not be unreasonably withheld). No indemnifying party
shall be permitted to consent to the entry of any judgment or to enter into
any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such
26
indemnified party of a release from all liability in respect of such claim or
litigation. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel in any one jurisdiction for all parties
indemnified by such indemnifying party with respect to such claim, unless in
the reasonable judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party
shall be obligated to pay the fees and expenses of such additional counsel or
counsels.
16.4. REMEDIES. Each Holder of Warrants and Warrant Stock, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under Section 9 of this Agreement. The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of Section 9 of this Agreement and hereby
agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
16.5. SUCCESSORS AND ASSIGNS. Subject to the provisions of
subsection 3.1, this Agreement and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successor of the Company and the
successors and assigns of any Holder. The provisions of this Agreement are
intended to be for the benefit of all Holders from time to time of the
Warrants and Warrant Stock, and shall be enforceable by any such Holder.
16.6. AMENDMENT. This Agreement may be modified or amended or the
provisions hereof waived with the written consent of the Company and the
Required Holders, provided that no Warrant may be modified or amended to
reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the prior written consent of the Holder thereof,
unless substantially similar adjustments are made to all the Warrants then
outstanding.
16.7. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
16.8. HEADINGS. The headings used in this Agreement are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Agreement.
16.9. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. In all
respects, including all matters of construction, validity and performance,
this Agreement and the obligations arising hereunder shall be governed by,
and construed and enforced in accordance with, the laws of the State of New
York applicable to contracts made and performed in such state, without regard
to the
27
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. THE COMPANY CONSENTS TO PERSONAL JURISDICTION,
WAIVES ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT
ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF NEW
YORK, STATE OF NEW YORK. Service of process on the Company or any Holder in
any action arising out of or relating to this Agreement shall be effective if
mailed to such party in accordance with the procedures and requirements set
forth in 16.2. Nothing herein shall preclude any Holder or the Company from
bringing suit or taking other legal action in any other jurisdiction.
16.10. MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER TIES AGREEMENT.
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the date first above written.
TECHNOLOGY SPECIALISTS, INC.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇, Jr.
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇, Jr.
Title: CEO
CHEMICAL BANK, as Lender
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
29
EXHIBIT A
To Warrant
AGREEMENT
[FORM OF WARRANT CERTIFICATE]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM. SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS
AND PRIVILEGES SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF APRIL ,
1996, BETWEEN TECHNOLOGY SPECIALISTS, INC., AND THE INITIAL HOLDER OF
SECURITIES NAMED THEREIN, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON
WRITTEN REQUEST, AND THE HOLDER OF THIS CERTIFICATE AGREES TO BE BOUND
THEREBY.
No. -
--- ---
WARRANT CERTIFICATE
TECHNOLOGY SPECIALISTS, INC.
This Warrant Certificate certifies that ___________________________________,
or registered assigns, is the registered holder of - Warrants (the
"WARRANTS") to purchase shares of series A non-voting common stock of
Technology Specialists, Inc., (the "COMPANY"). Each Warrant entitles the
holder, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to below, to purchase from the Company, during the
Exercise Period, as such term is defined in the Warrant Agreement, one fully
paid and nonassessable share of series A non-voting comrnon stock of the
Company (a "WARRANT SHARE") at a price (the "EXERCISE PRICE") of $1.87 per
Warrant Share payable in lawful money of the United States of America
(subject to adjustment as provided in Section 4 of the Warrant Agreement),
or, as provided in Section 2.2 of the Warrant Agreement, by the transfer of
certain debt to the Company, upon surrender of this Warrant Certificate,
execution of the annexed Election to Purchase Form and payment of the
Exercise Price at the office of the Company at _________________________ or
such other address as the Company may specify in writing to the registered
holder of the Warrants evidenced hereby. The Exercise Price is subject to
adjustment upon the occurrence of certain events as set forth in the Warrant
Agreement.
30
The Company may deem and treat the registered holders of the
Warrants evidenced hereby as the absolute owner thereof (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the
purpose of any exercise hereof and of any distribution to the holders hereof,
and for all other purposes.
Warrant Certificates, when surrendered at the office of the Company
at the above-mentioned office address or at the Company's headquarters by the
registered holder hereof in person or by a legal representative duly
authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of
like tenor evidencing in the aggregate a like number of Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company at the above-mentioned address, a
new Warrant Certificate or Warrant Certificates of like tenor and evidencing
in the aggregate a like number of Warrants shall be issued to the transferee
in exchange for this Warrant Certificate to the transferee(s) and, if less
than all the Warrants evidenced hereby are to be transferred, the registered
holder hereof, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
This Warrant Certificate is one of the Warrant Certificates
referred to in the Warrant Agreement, dated as of April __, 1996, between the
Company and the initial holder of Warrants party thereto (the "WARRANT
AGREEMENT"). Said Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders, and in the event of any
conflict between the terms of this Warrant Certificate and the provisions of
the Warrant Agreement, the provisions of the Warrant Agreement shall control.
31
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed as of the date set forth below.
Dated: , 199
-------------------- -
TECHNOLOGY SPECIALISTS, INC.
By
--------------------------------------
Title:
32
EXHIBIT A TO
WARRANT CERTIFICATE
ELECTION TO PURCHASE FORM
[To be executed only upon exercise of Warrants]
The undersigned registered owner of this Warrant Certificate
irrevocably EXERCISES____________ Warrants for the purchase of ________
Shares of Series A Non-Voting Common Stock of Technology Specialists, Inc.,
and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this War-rant Certificate and the Warrant Agreement
and requests that certificates for the shares of Series A Non-Voting Common
Stock hereby purchased (and any securities or other property issuable upon
such exercise) be issued in the name of and delivered to
________________________ whose address is _________________________ and, if
such shares of Series A Non-Voting Common Stock shall not include all of the
shares of Series A Non-Voting Common Stock issuable as provided in this
Warrant Certificate, that a new Warrant Certificate of like tenor and date
for the balance of the shares of Series A Non-Voting Common Stock issuable
hereunder be delivered to the undersigned.
-------------------------------------
(Name of Registered Owner)
-------------------------------------
(Signature of Registered Owner)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
33
EXHIBIT B TO
WARRANT CERTIFICATE
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
Certificate hereby sells, assigns and transfers unto the assignee named below
all of the rights of the undersigned under this Warrant Certificate, with
respect to the number of shares of Series A Non-Voting Common Stock set forth
below:
NAME AND ADDRESS OF ASSIGNEE NO. OF SHARES OF COMMON STOCK
---------------------------- -----------------------------
and does hereby irrevocably constitute and appoint ______________________
attorney-in-fact to register such transfer on the books of Technology
Specialists, Inc., maintained for the purpose, with full power of
substitution in the premises.
Dated:
---------------------------------
Name:
----------------------------------
Signature:
-----------------------------
Witness:
-------------------------------
The assignee named above hereby agrees to purchase and take the Warrant
Certificate pursuant to and in accordance with the terms and conditions of
the Warrant Agreement, dated as of April __, 1996, between Technology
Specialists, Inc., and the initial holder named therein and agrees to be
bound thereby.
Dated:
---------------------------------
Name:
----------------------------------
Signature:
-----------------------------
34
EXHIBIT B
To Warrant
AGREEMENT
WARRANT REGISTER
NAME AND
ADDRESS
WARRANT ORIGINAL NUMBER OF WARRANT
CERTIFICATE NO. OF WARRANTS HOLDER
--------------- --------------- ----------
------------------------
------------------------
------------------------
------------------------
Attn:
-------------------
35
EXHIBIT C
To Warrant
AGREEMENT
April 11, 1996
Chemical Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Gentlemen:
Reference is made to that certain Warrant Agreement, dated as of April 1
1, 1996, between Technology Specialists, Inc., a Pennsylvania corporation
(the "Company"), and Chemical Bank (the "Lender"), pursuant to which the
Company will issue warrants to purchase shares of Common Stock of the Company
(the "Warrant Agreement"). Capitalized terms used but not defined herein are
used herein as defined in the Warrant Agreement.
Each of TSI Investment Company 1, L.L.C. ("TIC-1") and TSI Investment
Company II, L.L.C. ("TIC-II") agree as follows:
1 . (a) TIC-I and TIC-11 will not sell a majority of the Company's
Common Stock, in a single transaction or a series of related transactions (a
"Sale"), except to an independent third party who agrees to purchase Common
Stock as part of a transaction in which a PRO RATA portion (the group for PRO
RATA purposes consisting of TIC-1, TIC-II and the Holders) of the aggregate
number of shares of Common Stock being purchased by such independent third
party will be purchased from each Holder who chooses to participate in such
transaction.
(b) Before TIC-1 or TIC-II accepts any offer to sell shares of
Common Stock in connection with a Sale, TIC-1 and TIC-11 will give written
notice (the "Takealong Notice") to the Company (which will, within five days
of the date of receipt of such notice (the "Take-along Notice Date"), send or
deliver a copy of the Take-along Notice to the Holders), stating the material
terms of such offer. Any Holder who wishes to participate in such Sale as to
its PRO RATA portion (the group for PRO RATA purposes consisting of TIC-I,
TIC-II and the Holders) will give the Company notice to such effect within
fifteen (15) days of the Take-along Notice Date.
2. TIC-1 or TIC-11 may transfer shares of Common Stock, without
complying with the terms of Paragraph 1 of this letter agreement, (i) in a
registered public offering, or (ii) to Permitted
36
Transferees (as hereinafter defined) who consent in writing to be bound by
the terms of this letter agreement. "Permitted Transferees" means the owners
of equity interests in TIC-1 or TIC-II, the owners of equity interests in
such owners, the spouse or lineal descendants of any such owner, any trust
for the benefit of any such owner or the benefit of such owner's spouse or
lineal descendants, any corporation, partnership or limited liability company
in which any such owner and the spouse and the lineal descendants of such
owner are the owners of all of the equity interests and the personal
representative of any such owner upon such owner's death for purposes of
administration of such owner's estate or upon such owner's incompetency for
purposes of the protection and management of the assets of such owner.
3. This letter agreement shall terminate upon the earlier of (a) the
consummation of a public offering of Common Stock of the Company pursuant to
a registration statement declared effective by the Securities and Exchange
Commission and (b) the sale of the Company, including, but not limited to, a
Sale, by any means to an independent third party.
Sincerely,
TSI INVESTMENT COMPANY I, L.L.C.
By: ▇▇▇▇-▇▇▇▇▇▇ L.P., its Manager
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
a General Partner
TSI INVESTMENT COMPANY 11, L.L.C.
By: ▇▇▇▇-▇▇▇▇▇▇ L.P., its Manager
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
a General Partner
37