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EXHIBIT 4.1
ADVANCE PARADIGM, INC.
WARRANT AGREEMENT
This Warrant Agreement (this "Agreement") dated as of February 26, 1999
is entered into by and between Advance Paradigm, Inc., a Delaware corporation
(the "Company") and Foundation Health Systems, Inc.("FHS").
TERMS OF AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and FHS hereby agree as follows:
Section 1. SERVICES AGREEMENT. Reference is made to that certain
Services Agreement dated as of the date hereof entered into by and among the
Company, Integrated Pharmaceutical Services and FHS (the "Services Agreement").
Capitalized terms not otherwise defined herein shall have the meanings given to
them in the Services Agreement.
Section 2. GRANT OF THE RIGHT TO PURCHASE COMMON STOCK. The Company
hereby grants to FHS the right, and FHS shall be entitled, subject to the terms
and conditions hereinafter set forth, to purchase from the Company 200,000
shares of its common stock, par value $0.01 per share (the "Common Stock")(which
number is referred to herein as the "Total Exercise Number") at a per share
exercise price equal to $35.50 (the "Exercise Price"). The right to purchase
such shares shall be evidenced by five (5) warrant certificates each in the form
of Exhibit A hereto (collectively, the "Warrant Certificates" and each a
"Warrant Certificate"). Subject to Section 3 hereof, each Warrant Certificate
shall be delivered to the FHS following the Vesting Date (as defined below)
thereof. The Total Exercise Number and Exercise Price of such shares are subject
to adjustment as provided in Section 4 hereof.
Section 3. EXERCISE OF WARRANT CERTIFICATES. The purchase rights
granted hereunder will be exercisable as to twenty percent (20%) of the Total
Exercise Number as of the first anniversary of the effective date of the
Services Agreement, and the right to exercise with respect to an additional
twenty percent (20%) of the Total Exercise Number will accrue on each of the
next four anniversaries of the effective date of the Services Agreement (each a
"Vesting Date") and will be cumulative; provided, however, that if on any
vesting date the number of lives for which the Company is providing integrated
pharmacy benefit management services under the Services Agreement is less than
four (4) million, then the scheduled vesting for such date will be forfeited.
The Warrant Certificates may be exercised only so long as the Company is the
exclusive vendor of integrated pharmacy benefit management services for FHS,
consistent with and subject to the terms and conditions of the Services
Agreement. Except as otherwise provided for herein, the term of the Warrant
Certificates and the right to purchase Common
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Stock as described therein shall commence on the Vesting Date of such Warrant
Certificate and will end on the earlier of February 26, 2005 or three months
following the termination date of the Services Agreement (the "Exercise
Period"). Shares of Common Stock purchased upon exercise of each Warrant
Certificate shall at the time of purchase be paid for in full. To the extent
that the right to purchase shares has accrued hereunder, the Warrant
Certificates may be exercised by written notice to the Company in the form
attached to the Warrant Certificates, which specifies an exercise date (the
"Date of Exercise"), accompanied by full payment for the shares by wire transfer
or certified or official bank check or the equivalent thereof acceptable to
Company. Upon the initial exercise of a Warrant Certificate, FHS and the Company
shall execute and enter into the Stockholders Agreement attached hereto as
Exhibit B (the "Stockholders Agreement").
At the time of delivery, the Company shall, without stock transfer tax
to the holder of the Warrant Certificate ("Holder"), deliver to the Holder (or
to such other person as the Holder directs) at the principal office of the
Company, or such other place as shall be mutually agreed upon, a certificate or
certificates for such shares, provided, however, that the time of delivery may
be postponed by the Company for such period as may be required for it with
reasonable diligence to comply with any requirements of law. The Company at the
time of exercise will require in addition that the registered owner of the
shares deliver an executed copy of the Stockholder Agreement, an investment
representation in form acceptable to the Company, and the Company will place a
legend on the certificate for such Common Stock restricting the transfer of
same. At no time shall the Company have any obligation or duty to register under
the Securities Act of 1933 (the "1933 Act") the Common Stock issuable upon
exercise of a Warrant Certificate.
Section 4. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES. The
Exercise Price and number of shares of Common Stock purchasable pursuant to the
exercise of the Warrant Certificates shall be subject to adjustment from time to
time as follows:
(a) Adjustment for Combinations or Consolidations of Common Stock. In
the event the Company, at any time or from time to time after the date hereof,
effects a subdivision or capital reorganization of its outstanding Common Stock
for a greater or lesser number of shares, then and in each such event the Total
Exercise Number and the Exercise Price shall be adjusted proportionately such
that FHS is entitled to purchase the same percentage of all shares of the
Company's outstanding capital stock then issued and issuable for the same
aggregate consideration as such Holder was entitled to purchase immediately
prior to such event.
(b) Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time after the date hereof shall pay a
dividend payable in Common Stock of the Company, or otherwise make a
distribution of Common Stock to its stockholders, then the Exercise Price shall
be adjusted, from and after the record date of such dividend or the date of such
distribution, to that price determined by multiplying the Exercise Price by a
fraction,
(i) the numerator of which shall be the total number of shares
of capital stock issued and outstanding or deemed to be issued
and outstanding immediately prior to the time of such issuance
or the close of business on such record date; and
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(ii) the denominator of which shall be the number of shares of
capital stock issued and outstanding or deemed to be issued
and outstanding immediately prior to the time of such issuance
or the close of business on such record date plus the number
of shares of capital stock to be issued;
provided, however, that if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Exercise Price shall be recomputed accordingly as of
the close of business on such record date and thereafter the Exercise Price
shall be adjusted pursuant to this Section 4(b) as of the time of actual payment
of such dividend or distribution. FHS shall thereafter be entitled to purchase,
at the Exercise Price resulting from such adjustment, the number of shares of
Common Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(c) Number of Shares. Upon any adjustment of the Exercise Price
pursuant to Section 4(b) hereof, FHS shall thereafter (until another such
adjustment) be entitled to purchase, at the new Exercise Price, the number of
shares, calculated to the nearest full share, obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the new Exercise Price resulting from such
adjustment.
Section 5. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The Company
shall at all times reserve and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock, solely for the purposes of
effecting the exercise of all outstanding Warrant Certificates, the full number
of shares of Common Stock issuable upon the exercise of all outstanding Warrant
Certificates. For the purpose of this Section 5, the full number of shares of
Common Stock issuable upon the exercise of all outstanding Warrant Certificates
shall be computed as if at the time of computation of such number of shares of
Common Stock all outstanding Warrant Certificates were held by a single holder.
The Company shall from time to time, in accordance with applicable law, increase
the authorized amount of its Common Stock if at any time the authorized amount
of its Common Stock remaining unissued shall not be sufficient to permit the
exercise of all Warrant Certificates at the time outstanding.
Section 6. TRANSFERABILITY.
(a) The Warrant Certificates are not transferable by FHS except to the
Company, affiliates of FHS or an FHS Successor (as defined in the Services
Agreement). Any permitted transfer of a Warrant Certificate shall be recorded on
the books of the Company upon receipt by the Company of a notice of transfer in
the form attached hereto as Exhibit B, at its principal offices and the payment
to the Company of all transfer taxes and other governmental charges imposed on
such transfer. The shares of Common Stock purchased by FHS are not transferable
except as provided in the Stockholders Agreement.
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(b) Unless and until otherwise permitted by this Section and the
Stockholders Agreement, each certificate representing Common Stock initially
issued upon the exercise of each Warrant Certificate (a "Stock Certificate"),
and each certificate for Common Stock issued to any subsequent transferee of any
such certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY BE
REOFFERED AND SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCKHOLDERS AGREEMENT
BETWEEN THE COMPANY AND FOUNDATION HEALTH SYSTEMS, INC., DATED
AS OF ______________, A COPY OF WHICH MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE."
Prior to any permitted transfer of a Warrant Certificate or
any Stock Certificate, the holder thereof shall furnish, at the expense of such
holder, to the Company an opinion of counsel, reasonably satisfactory in form
and substance to the Company, to the effect that such transfer is exempt from
registration under the Securities Act. Upon any exercise of any Warrant
Certificate for shares of Common Stock to be registered in the name of a person
other than FHS, FHS shall furnish, at the expense of FHS, to the Company an
opinion of the General Counsel of FHS, reasonably satisfactory in form and
substance to the Company, to the effect that the issuance of the shares of
Common Stock to such other person upon exercise of the Warrant is exempt from
registration under the Securities Act.
Section 7. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional share of stock upon any exercise of a Warrant Certificate. As
to any final fraction of a share that FHS would otherwise be entitled to
purchase upon exercise of a Warrant Certificate, the Company shall, if it does
not issue a fractional share, pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Exercise Price per share
of Common Stock.
Section 8. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. In the
event of loss, theft or destruction of a Warrant Certificate, the Company will
make and deliver a new Warrant Certificate of like tenor, in lieu of such
Warrant Certificate, upon receipt by the Company of evidence reasonably
satisfactory to it of such loss, theft, or destruction and indemnity or security
reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expense incidental thereto. In the case of mutilation of a Warrant
Certificate and upon surrender and cancellation of such Warrant Certificate, the
Company will make and deliver a new Warrant Certificate of like tenor, in lieu
of such Warrant Certificate.
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Section 9. RIGHTS PRIOR TO EXERCISE OF WARRANT CERTIFICATES. Prior to
the exercise of a Warrant Certificate, FHS shall not be entitled to any rights
of a stockholder of the Company with respect to the Common Stock for which such
Warrant Certificate may then be exercisable, including without limitation the
right to vote, to receive dividends or other distributions or to exercise any
preemptive rights and shall not be entitled to receive any notice of any
proceedings of the Company except as provided herein.
Section 10. AUTHORIZATION AND ISSUANCE. The Company represents and
warrants to FHS that it has the corporate power and authority to issue the
Warrant Certificates; this Warrant Agreement has been duly authorized, executed
and delivered and the Warrant Certificates, when delivered, will be duly and
validly issued, fully paid and nonassessable; the issuance of the Warrant
Certificates, and the shares of Common Stock issuable upon their exercise, are
not prohibited or restricted by the Certificate of Incorporation or Bylaws of
the Company or any material agreement to which the Company is a party; except
for those agreements for which the Company has received the requisite consents
or waivers; and the shares of Common Stock issuable upon exercise of the Warrant
Certificates, when issued upon exercise of the Warrant Certificates pursuant to
the terms hereof, will be duly and validly issued, fully paid and nonassessable.
Section 11. REPRESENTATIONS AND COVENANTS OF FHS. This Warrant
Agreement has been entered into by the Company in reliance upon the following
representations and covenants of FHS:
(a) Investment Purpose. The right to acquire the Common Stock issuable
upon exercise of FHS's rights contained herein will be acquired for investment
and not with a view to the sale or distribution of any part thereof, and FHS has
no present intention of selling or engaging in any public distribution of the
same except pursuant to a registration or exemption.
(b) Private Issue. FHS understands (i) that the Common Stock issuable
upon exercise of the Warrant Certificates is not registered under the 1933 Act
or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 11.
(c) Financial Risk. FHS has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment, and has the ability to bear the economic risks of its investment.
(d) Risk of No Registration. FHS understands that if the Company does
not register with the Securities and Exchange Commission pursuant to Section 11
of the 1933 Act, or file reports pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the 1933 Act is not in effect when it desires to sell the
Common Stock issuable upon exercise of the right to purchase, it may be required
to hold such securities for an indefinite period. FHS also understands that any
sale of its rights to purchase Common Stock which might be made by it in
reliance upon Rule 144 under the 1933 Act may be made only in accordance with
the terms and conditions of that Rule.
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(e) Stockholders Agreement. Prior to the exercise of any Warrant
Certificate, FHS agrees to, and to cause any permitted transferee to, enter
into, execute and perform the Stockholders Agreement.
Section 12. GENERAL.
(a) Expenses. Each party shall bear and pay all costs and expenses
incurred by them respecting the transactions contemplated herein and all
investigations and proceedings in connection therewith, including, without
limitation, fees, commissions or expenses of their respective counsel,
accountants and financial advisors.
(b) Notice. Any notice required to be given pursuant to the terms and
provisions of this Agreement shall be in writing and shall be sent by certified
mail, return receipt requested, or by overnight delivery service, or facsimile
transmission confirmed by telephone and followed by overnight delivery to the
parties at the addresses below or such other address as shall be specified by
the parties by like notice
to the Company at:
Advance Paradigm, Inc.
Attn: Vice President - Legal Affairs
000 X. Xxxx Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Fax No.: 214/000-0000
and to FHS at:
Foundation Health Systems, Inc.
Attn: President, Specialty Services
00000 Xxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Notice so given shall, in the case of notice so given by mail,
be deemed to be given and received on the fourth calendar day after posting, in
the case of notice so given by express delivery service, on the date of actual
delivery and, in the case of notice so given by facsimile transmission or
personal delivery, on the date of actual transmission or personal delivery, as
the case may be.
(c) Binding Nature and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their successors and assigns.
Neither party may assign this Agreement without the prior written consent of the
other; provided, however, that either party
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may transfer or assign its rights and obligations under this Agreement, to any
affiliate, and provided further that no such assignment shall have the effect of
releasing such party from any of its obligations under this Agreement.
(d) Headings and Interpretation. The headings of the various sections
of this Agreement are inserted for convenience only and do not, expressly or by
implication, limit, define or extend the specific terms of the section so
designated.
(e) Governing Law. The validity, enforceability, and interpretation of
this Agreement shall be determined and governed by the internal laws of the
State of Texas (and not the law of conflicts).
(f) Entire Agreement. This Agreement contains all the terms and
conditions agreed upon by the parties, and supersedes all prior understandings,
writings, proposals, representations, or communications, oral or written, of the
parties hereto.
(g) Authority. Company and FHS warrant that each has full power and
authority to enter into and perform this Agreement, and the person signing this
Agreement on behalf of each party certifies that such person has been properly
authorized and empowered to enter into this Agreement on behalf of such party.
(h) Non-Waiver. The failure of either party to insist, in any one or
more instances, upon performance of any of the terms, covenants or conditions of
this Agreement shall not be construed as a waiver or a relinquishment of any
right or claim granted or arising hereunder or of the future performance of any
such term, covenant, or condition, and such failure shall in no way affect the
validity of this Agreement or the rights and obligations of the parties
hereunder.
(i) Survival. Should any part, term or condition of this Agreement be
declared illegal or unenforceable or in conflict with any other laws, the
remaining provisions shall be valid and not affected thereby.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
(k) Further Assurances. From time to time upon request and without
further consideration, the parties hereto shall, and shall cause their
subsidiaries and affiliates, to execute, deliver or acknowledge such documents
and do such further acts as the other party hereto may reasonably require to
effectuate its obligations contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their proper and duly authorized officers on the date
first above written. By executing the Agreement, the undersigned individuals
hereby warrant and represent that they have read this Agreement in its entirety
and agree to all its terms.
ADVANCE PARADIGM, INC.
By:
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Xxxxx X. Xxxxxxx
Chairman of the Board and Chief Executive Officer
FOUNDATION HEALTH SYSTEMS, INC.
By:
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Name:
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Title:
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