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EXHIBIT 10.3
FORM OF WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
OFFERED FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS
WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER ARE SUBJECT TO AND
HAVE THE BENEFIT OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF OCTOBER 2, 2000
BETWEEN ADVANCE PARADIGM, INC. AND RITE AID CORPORATION, A COPY OF WHICH IS ON
FILE WITH ADVANCE PARADIGM, INC. THE WARRANTS EVIDENCED BY THIS CERTIFICATE HAVE
BEEN INITIALLY ISSUED WITH SENIOR SUBORDINATED NOTES DUE 2010 OF ADVANCE
PARADIGM, INC. AND ON OR PRIOR TO OCTOBER 2, 2002, ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND ARE SUBJECT TO CERTAIN ADJUSTMENTS UPON THE
REDEMPTION OR REPAYMENT OF THE NOTES AS SET FORTH IN THIS WARRANT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
Warrant No. 01 Dated October 2, 2000
WARRANT
TO PURCHASE SUCH NUMBER OF SHARES OF COMMON STOCK AS SET FORTH IN ARTICLE 1
HEREIN OF
ADVANCE PARADIGM, INC.
EXPIRING OCTOBER 2, 2010
THIS IS TO CERTIFY THAT, for value received, RITE AID CORPORATION
("RITE AID") or registered assigns (THE "HOLDER") is entitled to purchase from
ADVANCE PARADIGM, INC., a Delaware corporation (the "COMPANY"), at any time or
from time to time after the Second Anniversary and prior to 5:00 p.m., New York
City time, on October 2, 2010 ("EXPIRATION DATE"), at the place where the
Warrant Agency is located, at the Exercise Price, the number of
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shares of Common Stock of the Company, set forth in Article 1 herein, all
subject to adjustment and upon the terms and conditions hereinafter provided.
The Warrants are being issued in connection with the issuance to Rite
Aid of $200 million aggregate principal amount of the Company's senior
subordinated Notes due 2010 pursuant to that certain Indenture dated as of
October 2, 2000, by and between the Company, the Trustee named therein and the
Guarantors parties thereto.
The Warrants are subject to certain restrictions on transfer and
assignment as set forth in Section 6.4 herein.
Certain terms used in this Warrant are defined in Article 5.
ARTICLE 1
GRANT
SECTION 1.1 Number of Shares Issuable upon Exercise of Warrant. The maximum
number of shares of Common Stock issuable upon exercise of the Warrant shall
initially be 780,000 shares (the "MAXIMUM AMOUNT"), subject to certain
anti-dilution adjustments as provided in Article 4 herein.
SECTION 1.2 Reduction upon Redemption or Repayment of the Notes in Part on or
Prior to the Second Anniversary. If the Company repurchases, redeems or repays
an aggregate principal amount of the Notes not to exceed $75.0 million pursuant
to Section 3.07 of the Indenture or, any principal amount, pursuant to Section
4.14 of the Indenture, in any case, on or prior to the Second Anniversary, then
without any further action by the Company, the Maximum Amount, as adjusted
pursuant to Article 4 herein, shall be reduced by the same percentage as the
percentage of Notes redeemed or repaid on or prior to the Second Anniversary.
SECTION 1.3 Cancellation upon Redemption or Repayment of the Notes in Full on or
Prior to the Second Anniversary. Notwithstanding anything to the contrary
contained herein, if the Company repurchases, redeems or repays one hundred
percent (100%) of the aggregate principal amount of the Notes pursuant to
Section 3.07 of the Indenture on or prior to the Second Anniversary, then
without any further action by the Company, this Warrant shall be cancelled and
of no further effect.
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ARTICLE 2
EXERCISE OF WARRANTS
SECTION 2.1 Method of Exercise. To exercise this Warrant, in whole or in part,
the Holder shall deliver on any Business Day, which Business Day shall be after
the Second Anniversary, to the Company, at the Warrant Agency, (a) this Warrant,
(b) the Form of Election to Purchase attached hereto as Annex A, and (c) payment
of the Exercise Price with respect to such Warrant Shares. Such payment may be
made, at the option of the Holder, either by cash, certified bank check in New
York Clearing House Funds or wire transfer in an amount equal to the product of
(i) the Exercise Price then in effect times (ii) the number of Warrant Shares
for which this Warrant is being exercised.
SECTION 2.2 Exercise by Surrender of Warrant. In addition to the method of
payment set forth in Section 2.1 hereof and in lieu of any cash payment required
thereunder, the Holder of the Warrant shall have the right at any time and from
time to time to exercise the Warrant, in full or in part, by surrendering the
Warrant Certificate and the Form of Election to Purchase attached hereto as
Annex B, in the manner specified in Section 2.1 in exchange for the number of
Warrant Shares determined according to the following cashless exercise formula:
Warrant Shares = (A x B) - (A x C)
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B
For purposes of the foregoing formula:
A = the total number of shares with
respect to which this Warrant is then being
exercised.
B = the Market Price.
C = the Exercise Price then in effect at
the time of such exercise.
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Solely for the purposes of this Section 2.2, Market Price shall mean
the greater of Market Price on the date immediately prior to the date of
exercise or Current Market Price.
SECTION 2.3 Issuance of Certificates. The Company shall, as promptly as
practicable and in any event within three Business Days after receipt of such
Form of Election to Purchase, Warrant and payment, whether payment is made in
accordance with Section 2.1 or 2.2 above, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a certificate or
certificates representing the aggregate number of shares of Common Stock to be
issued pursuant to such notice, subject to Section 2.5. The share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice, and shall be issued in the name of the Holder or such other name or
names as shall be designated in such notice. This Warrant 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 for all purposes to have become a Holder of record of
shares, as of the date the aforementioned notice and payment is deemed to have
been given to the Company. If this Warrant shall have been exercised only in
part, the Company shall, at the time of delivery of such certificate or
certificates, deliver to the Holder a new Warrant evidencing the rights to
purchase the remaining shares of Common Stock called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant, or, at
the request of the Holder specified in such notice, appropriate notation may be
made on this Warrant which shall then be returned to the Holder. All Warrants
delivered for exercise shall be cancelled by the Company.
SECTION 2.4 Shares to Be Fully Paid and Nonassessable. All Warrant Shares shall
be validly issued, fully paid and nonassessable, issued without violation of any
preemptive or similar rights of any security holder of the Company and free from
all taxes, liens, and charges created by or through the Company with respect to
the issue thereof, and if the Common Stock is then listed on any national
securities exchange or quoted on Nasdaq, shall be duly listed or quoted thereon,
as the case may be.
SECTION 2.5 No Fractional Shares Required to Be Issued. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of this
Warrant. If any fraction of a share would, but for this Section, be issuable
upon such exercise of this Warrant, the Company shall pay to the Holder an
amount in cash equal to such fraction multiplied by the Market Price of one
share of Common Stock on the date of exercise.
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SECTION 2.6 Share Legend. Each certificate for Warrant Shares, unless at the
time of exercise such shares are registered under the Securities Act, shall bear
the following legend:
"This security has not been registered under the Securities Act of
1933, as amended, and may not be sold or offered for sale unless
registered under said Act and any applicable state securities laws or
unless an exemption from such registration is available. This security
is also subject to and has the benefit of a Registration Rights
Agreement dated as of October 2, 2000 between Advance Paradigm, Inc.
and Rite Aid Corporation, copies of which are on file with Advance
Paradigm, Inc. The Warrants evidenced by this certificate have been
initially issued with Senior Subordinated Notes due 2010 of Advance
Paradigm, Inc. and on or prior to October 2, 2002, are subject to
certain restrictions on transfer and are subject to certain adjustments
upon the redemption or repayment of the Notes as set forth in this
Warrant."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public offering pursuant to a registration statement under the Securities
Act) shall also bear such legend unless, in the opinion of counsel selected by
the Holder of such certificate (who may be an employee of such Holder) and
reasonably acceptable to the Company, the securities represented thereby need no
longer be subject to restrictions on resale under the Securities Act.
SECTION 2.7 Reservation. The Company has duly reserved and will keep available
for issuance upon exercise of the Warrant the total number of Warrant Shares
deliverable from time to time upon exercise of all Warrants from time to time
outstanding.
SECTION 2.8 Taxes. The Company shall pay all expenses and any and all
documentary, stamp and other similar taxes which may be payable with respect to
the issuance and delivery of Warrant Shares and any new Warrant upon exercise of
this Warrant; provided, however that the Company shall not be required to pay
any transfer tax or taxes which may be payable in respect of any transfer
involved in the issue of the Warrant or Warrant Shares in the name other than
the registered holder of the Warrant surrendered upon exercise of the Warrant,
and the Company shall not
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be required to issue or deliver such Warrant unless or until the Person or
Persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.
ARTICLE 3
WARRANT AGENCY; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
SECTION 3.1 Warrant Agency. As long as this Warrant remains outstanding, the
Company shall perform the obligations of and be the warrant agency with respect
to the Warrant (the "WARRANT AGENCY") at its address set forth on the signature
page or at such other address as the Company shall specify by written notice to
the Holder.
SECTION 3.2 Ownership of Warrant. The Company may deem and treat the Person in
whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any Person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until due presentment of this Warrant for registration of
transfer as provided in this Article 3.
SECTION 3.3 Transfer of Warrant. The Company agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrant, and transfer of
this Warrant and all rights hereunder shall be registered, in whole or in part,
on such books, upon surrender of this Warrant at the Warrant Agency, together
with the Form of Assignment attached hereto as Annex C, duly executed by the
Holder or its duly authorized agent or attorney. Subject to Section 6.4 herein,
upon surrender, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denominations specified in
the instrument of assignment (which shall be whole numbers of shares only) and
shall issue to the assignor a new Warrant evidencing the portion of this Warrant
not so assigned, if any, and this Warrant shall promptly be cancelled.
SECTION 3.4 Division or Combination of Warrants. Subject to Section 6.4 herein,
this Warrant may be divided or combined with other Warrants upon presentment
hereof and of any Warrant or Warrants with which this Warrant is to be combined
at the Warrant Agency, together with the annexed Form of Assignment,
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specifying the names and denominations (which shall be whole numbers of shares
only) in which the new Warrant or Warrants are to be issued, signed by the
Holder or Holders thereof or their respective duly authorized agents or
attorneys. Subject to compliance with Section 3.3 and 6.4 as to any transfer or
assignment which may be involved in the division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
SECTION 3.5 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
evidence reasonably satisfactory to the Company of the ownership of and the
loss, theft, destruction or mutilation of any Warrant, and in the case of any
such loss, theft or destruction, upon receipt of indemnity or security
reasonably satisfactory to the Company (it being understood and agreed that if
the holder of the Warrant is Rite Aid or one of its subsidiaries or affiliates,
then a written agreement of indemnity alone shall be satisfactory to the Company
and no further security shall be required), the Company will make and deliver,
in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of
like tenor and representing the right to purchase the same aggregate number of
shares of Common Stock.
SECTION 3.6 Expenses of Delivery of Warrants. The Company shall pay all expenses
and other charges payable in connection with the preparation, issuance and
delivery of Warrants hereunder.
ARTICLE 4
ANTIDILUTION PROVISIONS
SECTION 4.1 Adjustment Generally. The Exercise Price and the number of shares of
Common Stock (or other securities or property) issuable upon exercise of this
Warrant shall be subject to adjustment from time to time, as follows:
SECTION 4.2 Adjustment for Stock Dividends, Distributions and Subdivisions. In
the event the Company shall declare or pay any dividend or make any other
distribution on the Common Stock payable in shares of Common Stock, or shall
effect a subdivision of the outstanding Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock), then and in each such case, the applicable
Exercise Price in effect immediately prior to such stock dividend, distribution
or
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subdivision shall, concurrently with the effectiveness of such stock dividend,
distribution or subdivision, be proportionately decreased, provided that, in the
event such issuance is declared but not effected, the applicable Exercise Price
shall be readjusted as if such issuance was not declared.
SECTION 4.3 Adjustments for Combination or Consolidation of Common Stock. In the
event the outstanding Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then and in each such case, the applicable Exercise Price in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
SECTION 4.4 Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In the event the Company (i) consolidates with or merges
into any other corporation or entity and is not the continuing or surviving
corporation or entity of such consolidation or merger, (ii) permits any other
corporation or entity to consolidate with or merge into the Company and the
Company is the continuing or surviving corporation but, in connection with such
consolidation or merger, the shares of Common Stock are changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (iii) transfers all or substantially all of its properties or
assets, directly or indirectly, to any other corporation or entity (other than
to a wholly owned Subsidiary of the Company if such Subsidiary remains wholly
owned by the Company after such transfer or any other transaction or series of
transactions related to such transfer), then, and in each such event, proper
provision shall be made so that, upon the basis and the terms and in the manner
provided in this Section 4.4 (but subject to prior reduction under Section 1.2
and (for the avoidance of doubt) not in the case of cancellation under Section
1.3), each Holder, upon any exercise at any time after the consummation of such
consolidation, merger or transfer, shall be entitled to receive, in lieu of the
shares of Common Stock issuable upon any exercise prior to such consummation,
the stock and other securities, cash and property to which such Holder would
have been entitled upon such consummation if such Holder had exercised its
Warrants immediately prior to such consummation (or, if applicable, any record
date with respect to such transaction), subject to adjustments (subsequent to
such corporate action) as nearly equivalent as possible to the adjustments
provided for in this Article 4. Notwithstanding anything contained herein to the
contrary, (A) the Company will not effect any of the transactions described in
clauses (i) through (iii) of this Section 4.4 unless, prior to the consummation
thereof, each corporation or entity (other than the Company) which may be
required to deliver any stock, securities, cash or property
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upon the exercise of the Warrants shall assume, by written instrument, a copy of
which shall be delivered to each Holder, the obligation to deliver to such
Holder such shares of stock, securities, cash or property as such holder may be
entitled to receive upon exercise of the Warrants.
SECTION 4.5 Adjustments for Reclassification, Exchange and Substitution. If the
Common Stock issuable upon exercise of the Warrants is changed into the same or
a different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than a subdivision,
combination or consolidation of shares, or merger, consolidation or asset sale,
provided for in Sections 4.2, 4.3 and 4.4), then and in each such case, the
applicable Exercise Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionateley
adjusted such that the Warrants shall be exercisable into, in lieu of the number
of shares of Common Stock which the Holders would otherwise have been entitled
to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the Holders upon exercise of the Warrants immediately before that
change. For avoidance of doubt, it is stipulated that the provisions of this
Section 4.5 shall not apply to any exchange, reclassification, or substitution
of shares of Common Stock into shares of Series B Preferred Stock pursuant to
the JLL Exchange Agreement. No class or series of Common Stock shall be so
changed into shares of any other class or series of stock unless a proportional
and equivalent change is made with respect to all other classes or series of
Common Stock.
SECTION 4.6 Adjustment of Exercise Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company, at any time following the Issue Date,
issues or sells Additional Shares of Common Stock for no consideration or for
consideration per share less than the Current Market Price in effect immediately
prior to such issuance or sale, then and in each such event, the applicable
Exercise Price shall be reduced, concurrently with such issue or sale, to a
price (calculated to the nearest cent) determined by multiplying the applicable
Exercise Price by a fraction (i) the numerator of which shall be (A) the number
of shares of Common Stock outstanding immediately prior to such issue or sale,
plus (B) the number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of Additional Shares of Common
Stock so issued or sold would purchase at the Current Market Price, and (ii) the
denominator of which shall be (A) the number of shares of Common Stock
outstanding immediately prior to such issue or sale plus (B) the number of
Additional Shares of Common Stock so issued or sold.
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The provisions of this Section 4.6 shall not apply to any issuance or sale of
Additional Shares of Common Stock for which an adjustment is provided under
Section 4.7.
SECTION 4.7 Issue of Securities Deemed Issue of Additional Shares of Common
Stock. In the event (i) the Company at any time after the Issue Date shall
issue, sell or grant any Options or Convertible Securities, or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities and (ii) the consideration
per share for the Additional Shares of Common Stock issuable upon the exercise
of such Options, or in the case of Convertible Securities, the conversion or
exchange of such Convertible Securities shall be less than the Current Market
Price in effect immediately prior to such issue, sale or grant, or such record
date, as the case may be, then, and in each such case, (A) the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be issuances of Additional Shares of
Common Stock issued as of the time of such issue, sale or grant or, in case such
a record date shall have been fixed, as of the close of business on such record
date, and (B) the Exercise Price shall be adjusted in accordance with Section
4.6 on the date of and immediately prior to such issue, sale or grant, or the
record date, as the case may be. In any such case in which Additional Shares of
Common Stock are deemed to be issued or sold pursuant to this Section 4.7:
(1) no further adjustment in the applicable Exercise Price shall be
made upon the subsequent issue of Convertible Securities or Common
Stock upon the exercise of such Options or conversion or exchange of
such Convertible Securities;
(2) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any decrease in the
consideration payable to the Company, or increase in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the adjustments to the Exercise Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such decrease or
increase becoming effective, be recomputed (and the then applicable
Exercise Price shall automatically be adjusted as so recomputed)
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to reflect such increase or decrease insofar as it affects such Options
or the rights of conversion or exchange under such Convertible
Securities which are outstanding at such time; and
(3) no readjustment pursuant to the preceding clause (2) shall have the
effect of increasing the applicable Exercise Price to an amount which
exceeds the lower of (A) the applicable Exercise Price on the original
adjustment date and (B) the applicable Exercise Price that would have
resulted from any issuance of Additional Shares of Common Stock between
the original adjustment date and such readjustment date.
The consideration per share deemed to be received by the Company for Additional
Shares of Common Stock relating to Options and Convertible Securities, shall be
determined by dividing (x) the total amount, if any, actually received by the
Company as consideration for the issue, sale, grant or assumption of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating to such
Options or Convertible Securities without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Company upon the exercise in full of such Options or the conversion or exchange
in full of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise in full of such Options for Convertible
Securities and the conversion or exchange in full of such Convertible
Securities, by (y) the maximum number of Additional Shares of Common Stock (as
set forth in the instruments relating to such Options or Convertible Securities,
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
SECTION 4.8 Distribution of Assets. If the Company shall declare or make any
dividend or other distribution of evidences of its Indebtedness or assets
(including without limitation, securities, rights, warrants or options) to
Holders of Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash other than ordinary cash
distributions not to exceed on an annual basis 12% of the Market Price of the
Common Stock, stock or other securities, property, rights or options by way of a
dividend, spin off, reclassification, corporate rearrangement or other similar
transaction) (a "DISTRIBUTION"), at any time after the issuance of this Warrant,
then, in each such case, the Exercise Price in effect immediately prior to the
close of business on the record date fixed for the determination of Holders of
Common Stock entitled to receive the Distribution shall be
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reduced, effective as of the close of business on such record date, to a price
determined by multiplying such Exercise Price by a fraction of which (A) the
numerator shall be the Market Price of the Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (B) the denominator shall be the Market Price of the
Common Stock on the trading day immediately preceding such record date.
SECTION 4.9 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the applicable Exercise Price pursuant to this
Article 4, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each Holder a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the consideration received or to be received by the Company for
any Additional Shares of Common Stock issued or sold or deemed to have been
issued, (ii) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (iii) the applicable Exercise Price in effect immediately prior
to such issue or sale and as adjusted and readjusted on account thereof. The
Company shall, upon the written request at any time of any Holder, furnish or
cause to be furnished to such Holder, a like certificate setting forth (i) the
applicable Exercise Price at the time in effect, and showing how it was
calculated, and (ii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon exercise. At the
request of the Holders of a majority of the then outstanding Warrants, the
Company will have the certificates referred to in this Section 4.10 prepared and
delivered by an internationally recognized independent accounting firm.
SECTION 4.10 Notwithstanding any of the foregoing provisions of this Article 4,
no adjustment in the Exercise Price need be made until all cumulative
adjustments amount to 1% or more of the Exercise Price as last adjusted. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.
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ARTICLE 5
DEFINITIONS
The following terms, as used in this Warrant, have the following
meanings:
"ADDITIONAL SHARES OF COMMON STOCK" means all shares of Common Stock
issued or sold by the Company after the Issue Date, whether or not subsequently
reacquired or retired by the Company, other than shares of Common Stock: (i)
issued upon the conversion or exchange of any series or class of Capital Stock
issued and outstanding on the Issue Date into another series or class of Capital
Stock of the Company without any additional consideration to the Company by the
holder thereof; (ii) issued upon conversion of any shares of Series A Preferred
Stock or Series B Preferred Stock into any class or series of Common Stock;
(iii) issued upon the exercise of Options or warrants that have been issued
prior to, and are outstanding as of, the Issue Date; (iv) issued upon exercise
of Options granted prior to the 120th day following the Issue Date to employees,
consultants, officers or directors of the Company pursuant to any stock option
plan in effect on the Issue Date and consistent with past practice, but in any
event not in excess of 25,000 shares during such 120-day period; (v) issued
prior to the 120th day following the Issue Date to customers in the ordinary
course of business consistent with past practice, but in any event not in excess
of 25,000 shares during such 120-day period; (vi) issued upon exercise of this
Warrant; and (vii) issued upon exercise of Management Options.
"BUSINESS DAY" means any day except Saturday, Sunday and any day on
which banking institutions located in New York City, New York generally are
authorized or required by law or other governmental action to be closed.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents of corporate
stock, (iii) in the case of a partnership or limited liability company,
partnership interests (whether general or limited) and (iv) any other interest
or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing person.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company and following the approval by the stockholders of the Company of the
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adoption of the Second Amended and Restated Certificate of Incorporation of the
Company in connection with the Company's acquisition of 100% of the equity of
PCS Holding Corporation from Rite Aid, Common Stock shall be deemed to mean the
Class A Common Stock of the Company.
"COMPANY" means Advance Paradigm, Inc., a Delaware corporation, and its
successors.
"CONVERTIBLE SECURITIES" means any evidences of indebtedness, shares
(other than shares of Common Stock) or other securities that, by their terms,
are directly or indirectly convertible into or exchangeable for Additional
Shares of Common Stock. For the avoidance of doubt, it is stipulated that shares
of Series B Preferred Stock, whether issued on the date hereof or hereafter
shall not be deemed Convertible Securities.
"CURRENT MARKET PRICE" means, as of any date, the average of the daily
Market Prices of the Common Stock for twenty consecutive Trading Days
immediately preceding such date.
"EXERCISE PRICE" means $20.00, per share, subject to adjustment
pursuant to Article 4.
"HOLDER" has the meaning set forth in the first paragraph of this
Warrant, provided that, prior to October 2, 2002, the Holder shall mean the
registered owner of the Notes to which this Warrant is originally attached,
unless such Warrant is detached from the Notes as set forth in Section 6.4
herein.
"ISSUE DATE" means October 2, 2000.
"JLL EXCHANGE AGREEMENT" means the Exchange Agreement dated as of the
Issue Date between the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Levy Fund III, L.P., a
Delaware limited partnership, relating to the exchange of shares of Common Stock
into shares of Series B Preferred Stock, as the same may be amended,
supplemented or restated from time to time.
"MANAGEMENT OPTIONS" means options to purchase up to an aggregate of
1,790,000 shares of Common Stock at an initial exercise price of $20 per share
issued to officers and employees on or before the Issue Date. For purposes of
this Warrant the Management Options shall be deemed issued before the Issue
Date.
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"MARKET PRICE" means:
(a) with respect to any security, on any given day, (i) if such
security is listed or authorized for trading on a national securities exchange,
the last sale price of such security, regular way, on such date, or if no such
sale takes place on such date, the average of the closing bid and asked prices
thereof, on such date, in each case as officially reported on the principal
national securities exchange on which such security is listed or authorized for
trading; (ii) if such security is not listed or authorized for trading on a
national securities exchange but is quoted on the Nasdaq National Market, (A)
the price of the last trade, as reported on the Nasdaq National Market, not
identified as having been reported late to such system, or (B) if such security
is so traded, but not so quoted, the average of the last bid and ask prices, as
those prices are reported on the Nasdaq National Market, (iii) if such security
is not listed or authorized for trading on a national securities exchange or the
Nasdaq National Market or any comparable system but has a nationally recognized
existing trading market, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose or (iv) if such
security is not listed or authorized for trading on a national securities
exchange or the Nasdaq National Market or any comparable system and does not
have a nationally recognized existing trading market, the fair value of such
security as (A) determined by an agreement between the Company and the Holders
of a majority of the outstanding Warrants or (B) if the Company and such Holders
fail to agree, determined jointly by an independent investment banking firm
retained by the Company and by an independent investment banking firm retained
by such Holders, or (C) if the Company or such Holders shall fail so to retain
an independent investment banking firm within five Business Days of the
retention of such firm by the Company or such Holders, as the case may be,
determined solely by the firm so retained or (D) if the firms so retained by the
Company and by such Holders shall be unable to reach joint determination within
15 Business Days of the retention of the last firm so retained, determined by
another independent investment banking firm chosen by the first two such firms;
and (b) with respect to any other asset or property, the fair market value of
such asset or property as (i) determined by an agreement between the Company and
the Holders of a majority of the outstanding Warrants or (ii) if the Company and
such Holders fail to agree, determined jointly by an independent investment
banking firm retained by the Company and by an independent investment banking
firm retained by such Holders, or (iii) if the Company or such Holders shall
fail so to retain an independent investment banking firm within five Business
Days of the retention of such firm by
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the Company or such Holders, as the case may be, determined solely by the firm
so retained or (iv) if the firms so retained by the Company and by such Holders
shall be unable to reach a joint determination within 15 Business Days of the
retention of the last firm so retained, determined by another independent
investment banking firm chosen by the first two such firms.
"NASD" means The National Association of Securities Dealers, Inc.
"NASDAQ" means The National Association of Securities Dealers, Inc.
Automated Quotation System.
"NOTES" shall mean the $200 million aggregate principal amount of
senior subordinated notes, initially bearing interest at the rate of 11% per
annum, issued to Rite Aid Corporation under an indenture (as such may be amended
or supplemented from time to time, the "INDENTURE") dated as of October 2, 2000,
among Advance Paradigm, Inc., the Trustee named therein and the Guarantors named
therein.
"OPTIONS" means rights, options or warrants to subscribe for, purchase
or otherwise acquire either Additional Shares of Common Stock or Convertible
Securities. For avoidance of doubt, it is stipulated that the following are not
options: (i) any rights, options or warrants to subscribe for, purchase or
otherwise acquire the shares of Common Stock referred to in clause (iv) or (v)
of the definition of Additional Shares of Common Stock, and (ii) any right or
option to acquire shares of Series B Preferred Stock pursuant to the JLL
Exchange Agreement.
"PCS ACQUISITION" means the Company's acquisition of all of the Capital
Stock of PCS Holding Corporation, from Rite Aid.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
"PRINCIPAL MARKET" means the Nasdaq National Market or if the Common
Stock is not traded on the Nasdaq National Market, then the principal securities
exchange or trading market for the Common Stock.
"SECOND ANNIVERSARY" means October 2, 2002.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, and
rules and regulations of the Securities and Exchange Commission thereunder.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"TRADING DAY" means (x) if the applicable security is listed or
admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which the New York Stock Exchange or such other
national securities exchange is open for business or (y) if the applicable
security is quoted on the Nasdaq National Market, a day on which a trade may be
made on the Nasdaq National Market or (z) if the applicable security is not
otherwise listed, admitted for trading or quoted, any day other than a Saturday
or Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"WARRANT AGENCY" has the meaning set forth in Section 3.1.
"WARRANT SHARES" means the shares of Common Stock issuable upon the
exercise of the Warrants.
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ARTICLE 6
MISCELLANEOUS
SECTION 6.1 Notices. Notices and other communications provided for herein shall
be in writing and may be given by mail, courier, confirmed telex or facsimile
transmission and shall, unless otherwise expressly required, be deemed given
when received or, if mailed, four Business Days after being deposited in the
United States mail with postage prepaid and properly addressed. In the case of
the Holder, such notices and communications shall be addressed to its address as
known on the books maintained by the Warrant Agency, unless the Holder shall
notify the Warrant Agency that notices and communications should be sent to a
different address (or telex or facsimile number), in which case such notices and
communications shall be sent to the address (or telex or facsimile number)
specified by the Holder.
SECTION 6.2 Amendments. The provisions of this Warrant may be amended, modified
or waived only with the written consent of the Company and the Holder(s) of at
least fifty percent (50%) of the Warrants.
SECTION 6.3 Governing Law. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW).
SECTION 6.4 Transfer; Covenants to Bind Successor and Assigns. All covenants,
stipulations, promises and agreements contained in this Warrant by or on behalf
of the Company or the Holder shall bind its successors and assigns, whether so
expressed or not.
This Warrant shall be transferable and assignable by the Holder hereof
in whole or from time to time in part to any other Person, without the consent
of the Company, and the provisions of this Warrant shall be binding upon and
inure to the benefit of the Holder hereof and its successors and assigns,
subject to the following provisions:
(a) Each Warrant is initially being issued with Senior Subordinated
Notes due 2010, each Note in a principal amount of $1,000. Prior to October 2,
2002, this Warrant may be transferred or assigned only together with the related
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Notes and only for the purpose of effecting, or in conjunction with, an
exchange, transfer or assignment of such Notes.
(b) Notwithstanding the foregoing, on or prior to October 2, 2002, Rite
Aid shall have the right at any time, and from time to time, to transfer any
Notes without the related Warrants in connection with sales of Notes pursuant to
Rule 144A under the Securities Act. In the event of any such separation, Rite
Aid will hold the related Warrants until October 2, 2002.
(c) After October 2, 2002, this Warrant may be transferred or assigned
without regard to the related Notes to which this Warrant was initially issued.
SECTION 6.5 No Impairment; Regulatory Compliance and Cooperation; Notice of
Expiration
(a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization, reclassification,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder against impairment. Without limiting the generality of the
foregoing, the Company shall take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, free
and clear of all liens, and shall use its reasonable best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants after August
1, 2010 but before September 1, 2010, notice of the Expiration Date. If the
Company fails to fulfill in a timely manner the notice obligation set forth in
the prior sentence, it shall provide such notice as soon as possible thereafter,
but no failure to fulfill in a timely manner such notice obligation shall result
in an extension of the Expiration Date.
SECTION 6.6 No Stockholder Rights. Prior to exercise of this Warrant, the Holder
shall not be entitled to any rights of a stockholder with respect to the shares
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of Common Stock purchasable upon exercise, including, without limitation, the
right to vote such shares of Common Stock, receive dividends or other
distributions thereon, exercise preemptive rights or be notified of stockholder
meetings, and, except as explicitly stated herein, the Holder shall not be
entitled to any notice or other communication concerning the business or affairs
of the Company.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
in its corporate name by one of its officers thereunto duly authorized, and its
corporate seal to be hereunto affixed, attested by its Secretary or an Assistant
Secretary, all as of the day and year first above written.
ADVANCE PARADIGM, INC.
By:
-------------------
Name:
Title:
Address:
Attention:
Telephone No:
Facsimile No:
Attest:
----------------------
Name:
Title:
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ANNEX A
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 2.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______ Warrant Shares and
herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of Advance Paradigm,
Inc. in the amount of $________, all in accordance with the terms of Section 2.1
of the Warrant dated as of October 2, 2000 between Advance Paradigm, Inc. and
Rite Aid Corporation. The undersigned requests that certificates for such
securities be registered in the name of the undersigned whose address is
___________________ and that such certificates be delivered to the undersigned
at such address.
Dated:____________________ , 20___
Signature ______________________
(Signature must conform in
all respects to name of
Holder as specified on the
face of the Warrant
Certificate or with the
name of the assignee
appearing on the Form of
Assignment attached
hereto.)
________________________________
(Insert Social Security
or Other Identifying
Number of Holder)
A-1
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ANNEX B
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 2.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______ Warrant Shares all
in accordance with the terms of Section 2.2 of the Warrant dated as of October
2, 2000 between Advance Paradigm, Inc. and Rite Aid Corporation. The undersigned
requests that certificates for such securities be registered in the name of the
undersigned whose address is _________________ and that such certificates be
delivered to the undersigned at such address. Attached hereto is a schedule
showing the undersigned's calculation of the number of Warrant Shares issuable
on such cashless exercise.
Dated:______________________ 20___
Signature _______________________
(Signature must conform in
all respects to name of
Holder as specified on the
face of the Warrant
Certificate or with the
name of the assignee
appearing on the Form of
Assignment attached
hereto.)
_________________________________
(Insert Social Security
or Other Identifying
Number of Holder)
B-1
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ANNEX C
[FORM OF ASSIGNMENT]
(To be executed by the registered Holder if such Holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ hereby sells, assigns and
transfers under
________________________________________________________
(Please print name and address of transferee)
the Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________ ,20___
Signature:
_______________________
(Signature must conform in
all respects to name of
Holder as specified on the
face of the Warrant
Certificate.)
_____________________________
(Insert Social Security
or Other Identifying
Number of Holder)