EXHIBIT 1
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SECURITIES PURCHASE AGREEMENT
Among
PROVIDENT AMERICAN CORPORATION
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of September 14, 1999
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of September 14, 1999, among Provident American Corporation, a Pennsylvania
corporation (the "Company"), and the various purchasers identified and listed on
Schedule I hereto (each referred to herein as a "Purchaser" and, collectively,
the "Purchasers")
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, an aggregate of $27,500,000
principal amount of 2% Convertible Debentures due September 14, 2002 (the
"Debenture"), in the form of Exhibit A annexed hereto, and warrants (the
"Warrants") to purchase the Company's common stock, par value $.10 per share
(the "Common Stock"), in the form of Exhibit B annexed hereto; and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form of Exhibit C attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE SECURITIES AND WARRANTS
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, shall purchase from the Company on the Closing Date
(as defined below), the principal amount of Debentures as set forth for such
Purchaser on Schedule I.
1.2 The Closing. The closing of the purchase and sale of the Debentures
and the issuance of the Warrants (the "Closing") shall take place at the offices
of Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or by transmission by facsimile and overnight courier, immediately
following the execution hereof or such later date or different location as the
parties shall agree, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party (the "Closing
Date"). At the Closing:
(i) Each Purchaser shall deliver, as directed by the Company,
its portion of the purchase price as set forth next to its name on Schedule I in
United States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a Debenture,
in the form of Exhibit A hereto, representing the principal amount purchased by
such Purchaser as set forth on Schedule I hereto;
(iii) The Company shall deliver to each Purchaser a Warrant,
in the form of Exhibit B hereto, representing the right to acquire the number of
shares of Common Stock purchased by such Purchaser as set forth on Schedule I
hereto; and
(iv) The parties shall execute and deliver each of the
documents referred to in Section 4.1 hereof.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to each of the
Purchasers:
a. Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Except as set forth on Schedule 2.1(a), the Company has
no subsidiaries (collectively, the "Subsidiaries"). Each of the Subsidiaries
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns the majority of such entity's capital stock or
holds an equivalent equity or similar interest) is a corporation duly
incorporated, validly existing and in good standing, or subsisting, as the case
may be, under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or in
the aggregate, (x) adversely affect the legality, validity or enforceability of
any of this Agreement or the Transaction Documents (as defined in Section
2.1(b)) or any of the transactions contemplated hereby or thereby, (y) have or
result in a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company and its Subsidiaries, taken as
a whole or (z) adversely affect the Company's ability to perform fully its
obligations under any Transaction Document (any of (x), (y) or (z), being a
"Material Adverse Effect").
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b. Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Debenture, the Warrants and the
Registration Rights Agreement (collectively, the "Transaction Documents"), and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of this Agreement and the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no
further action is required by the Company, its Board of Directors or its
stockholders. Each of this Agreement and the Transaction Documents has been duly
executed by the Company and when delivered in accordance with the terms hereof,
assuming due authorization, execution and delivery by the other parties thereto,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws (including insurance related laws and regulations)
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application, except that
rights to indemnification and contribution may be limited by Federal or state
securities laws or public policy relating thereto and except to the extent that
stockholder approval is required pursuant to rule 4460(i)(1)(D) of the Nasdaq
National Market and where approval of the Pennsylvania Insurance Department is
required pursuant to 40 P.A. ss.999.1402, if a person directly or indirectly
owns, controls, holds with the power to vote or holds proxies representing ten
percent (10%) or more of the voting securities of the Company.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company is as set forth in Schedule 2.1(c). All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
authorized and issued, fully paid and nonassessable and were issued in
accordance with the registration or qualification provisions of the Securities
Act, or pursuant to valid exemptions therefrom. Except as disclosed in Schedule
2.1(c), (i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company, (ii) there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no outstanding debt
securities of the Company or any of its Subsidiaries, (iv) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (v) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the sale of the
Debentures or the issuance of the Warrants or upon the conversion of the
Debentures or the exercise of the Warrants, (vi) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement and (vii) except as specifically disclosed in the SEC
Documents (as defined in Section 2.1(k) hereof), no Person (as defined below) or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of 5% of the Common Stock.
"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
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d. Authorization, Validity and Issuance of Shares. The shares
of Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants (collectively, the "Underlying Shares") are and will at all times
hereafter continue to be duly authorized and reserved for issuance and the
shares of Common Stock issued upon conversion of the Debentures (the "Debenture
Shares") and exercise of the Warrants (the "Warrant Shares") will be validly
issued, fully paid and non-assessable, free and clear of all liens, encumbrances
and Company rights of first refusal, other than liens and encumbrances created
by the Purchasers (collectively, "Liens") and will not be subject to any
preemptive or similar rights, except for Liens or preemptive or similar rights
which have been waived and except to the extent that stockholder approval is
required pursuant to rule 4460(i)(1)(D) of the Nasdaq National Market and where
approval of the Pennsylvania Insurance Department is required pursuant to 40
P.A. ss.999.1402, if a person directly or indirectly owns, controls, holds with
the power to vote or holds proxies representing ten percent (10%) or more of the
voting securities of the Company. The issuance by the Company of the Debentures,
the Warrants and the Underlying Shares is exempt from registration under the
Securities Act.
e. No Conflicts. The execution, delivery and performance of
this Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not (i)
conflict with or violate any provision of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation") and the Company's Bylaws, as in effect on the date hereof
(the "Bylaws") or other organizational documents of the Company or any of the
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a breach or a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture, patent, or instrument (evidencing a Company or
Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or
affected which, individually or in the aggregate, would be reasonably expected
to have a Material Adverse Effect, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or any Subsidiary is
subject (including Federal and state securities laws and regulations and the
rules and regulations of the National Market System of Nasdaq Stock Market
("Nasdaq")), except to the extent that stockholder approval is required pursuant
to rule 4460(i)(1)(D) of the Nasdaq National Market and where approval of the
Pennsylvania Insurance Department is required pursuant to 40 P.A. ss.999.1402,
if a person directly or indirectly owns, controls, holds with the power to vote
or holds proxies representing ten percent (10%) or more of the voting securities
of the Company, or by which any material property or asset of the Company or any
Subsidiary is bound or affected which, individually or in the aggregate, would
be reasonably expected to have a Material Adverse Effect.
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f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by the Company of this
Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement,
(ii) the application(s) or any letter(s) acceptable to Nasdaq for the listing of
the Underlying Shares with Nasdaq (and with any other national securities
exchange or market on which the Common Stock is then listed), (iii) any filings,
notices or registrations under applicable state securities laws and (iv) to the
extent that stockholder approval is required pursuant to rule 4460(i)(1)(D) of
the Nasdaq National Market and where approval of the Pennsylvania Insurance
Department is required pursuant to 40 P.A. ss.999.1402, if a person directly or
indirectly owns, controls, holds with the power to vote or holds proxies
representing ten percent (10%) or more of the voting securities of the Company
(together with the consents, waivers, authorizations, orders, notices and
filings referred to on Schedule 2.1(f), the "Required Approvals").
g. Litigation; Proceedings. Except as specifically set forth
on Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement or the Transaction
Documents or (ii) could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
h. No Default or Violation. Except as set forth on Schedule
2.1(h), neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or other credit agreement or instrument to
which it is a party or by which it or any of its properties or assets is bound,
(ii) is in default under or in violation of any other agreement to which it is a
party or by which its properties or assets are bound, the default or violation
of which, individually or in the aggregate, would be reasonably expected to have
a Material Adverse Effect, (iii) is in violation of any order of any court,
arbitrator or governmental body applicable to it or (iv) is in violation of any
statute, rule or regulation of any governmental authority to which it is
subject.
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i. Disclosure; Absence of Certain Changes. None of this
Agreement, the Schedules to this Agreement, the Transaction Documents, the SEC
Documents or any other written or formally presented information, report,
financial statement, exhibit, schedule or document furnished by or on behalf of
the Company in connection with the negotiation of the transactions contemplated
hereby contained, contains, or will contain at the time it was or is so
furnished any untrue statement of a material fact or omitted, omits or will omit
at such time to state any material fact necessary in order to make the
statements made herein and therein, in light of the circumstances under which
they were made, not misleading. Except as disclosed on Schedule 2.1(i) or in SEC
Documents filed on XXXXX at least five business days prior to the date hereof,
since December 31, 1998, there has been no material adverse change and no
material adverse development in the business, properties, operations or
prospects, financial condition, liabilities or results of operations of the
Company or the Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
j. Private Offering; Solicitation. The Company and all Persons
acting on its behalf have not (i) made, directly or indirectly, and will not
make, offers or sales of any securities or solicited any offers to buy any
security under circumstances that would require registration of the Debentures,
the Warrants, the Debenture Shares, the Warrant Shares or the Underlying Shares
under the Securities Act, (ii) distributed any offering materials in connection
with the offering and sale of the Debentures or the Warrants, other than the SEC
Documents, the Schedules to this Agreement, any amendments and any supplements
thereto, or (iii) solicited any offer to buy or sell the Debentures or the
Warrants by means of any form of general solicitation or advertising (as those
terms are used in Rule 502(c) of Regulation D under the Exchange Act) in a
manner which would require registration under the Securities Act. The offer,
sale and issuance of the Debentures, the Warrants, the Debenture Shares and the
Warrant Shares to the Purchasers will not be integrated with any other offer,
sale and issuance of the Company's securities (past, current, or future) under
the Securities Act or any regulations of any exchange or automated quotation
system on which any of the securities of the Company are listed or designated.
Subject to the accuracy and completeness of the representations and warranties
of the respective Purchasers contained in Section 2.2 hereof, the offer, sale
and issuance by the Company to the Purchasers of the Debentures, the Warrants
and the Underlying Shares is exempt from the registration requirements of the
Securities Act.
k. SEC Documents; Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Exchange Act. Except
as set forth on Schedule 2.1 (k), the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act, including
pursuant to Section 13, 14 or 15(d) thereof (the foregoing materials and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein being collectively referred to herein as the "SEC Documents"), on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial year-end
audit adjustments. Neither the Company nor any of its Subsidiaries nor any of
their officers, directors, employees or agents have provided either of Royal
Bank of Canada or LB I Group Inc. with any material, non-public information. The
Company acknowledges that Royal Bank of Canada and LB I Group Inc. will be
trading in the securities of the Company in reliance on the foregoing
representation and warranty.
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l. Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate (an "Affiliate") of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
m. Broker's Fees. No fees or commissions or similar payments
with respect to the transactions contemplated by this Agreement or the
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank, other than as set
forth in Schedule 2.1(m). The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section 2.1(m) that may be due in
connection with the transactions contemplated by this Agreement and the
Transaction Documents.
n. Form S-3 Eligibility. The Company is, and at the Closing
Date will be, eligible to register securities (including the Underlying Shares)
for resale with the Commission under Form S-3 (or any successor form)
promulgated under the Securities Act.
o. Listing and Maintenance Requirements Compliance. The
principal market on which the Common Stock is currently traded is Nasdaq. Except
as disclosed on Schedule 2.1(o), the Company has not in the three years
preceding the date hereof received notice (written or oral) from Nasdaq (or any
stock exchange, market or trading facility on which the Common Stock is or has
been listed (or on which it has been quoted)) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company believes that it is and will be in compliance with all such
maintenance requirements.
p. Tax Status; Firpta. Except as set forth on Schedule 2.1(p),
the Company and each of the Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith (which are set forth on
Schedule 2.1(p) hereof), and has set aside on it books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company is not a "United States real property holding corporation"
within the meaning of Section 847(c)(2) of the Internal Revenue Code of 1986, as
amended.
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q. Permits. The Company and each of its Subsidiaries possess
all certificates, authorizations, licenses, easements, consents, approvals,
orders and permits necessary to own, lease and operate their respective
properties and to conduct their respective businesses as currently conducted,
free and clear of any conflicts, defaults or violations thereunder, except where
the failure to possess such permits or the existence of any conflict, default or
violation would not, individually or in the aggregate, have a Material Adverse
Effect ("Material Permits"), and, except as disclosed on Schedule 2.1 (q), there
is no proceeding pending, or, to the knowledge of the Company, threatened
relating to the revocation, modification, suspension or cancellation of any
Material Permit.
r. Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(r) hereto, (i) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction Document.
s. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged.
t. Transactions With Affiliates. Except as set forth on
Schedule 2.1(c), Schedule 2.1(t) or the SEC Documents, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, other than transactions that would not require
disclosure under Section 404 of Regulation S-K of the Securities Act and the
Exchange Act.
u. Application to Takeover Protection. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation, Bylaws
or the laws of the state of incorporation which is or could become applicable to
the Purchasers or the Transaction Documents in connection with the issuance of
the Underlying Shares. The issuance of the Underlying Shares will not trigger
any poison pill provisions of any of the Company's stockholders' rights or
similar agreements.
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v. Acknowledgement Regarding Purchasers' Purchase of
Debentures. The Company acknowledges that the Purchasers are acting solely in
the capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the Debentures. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
The Purchasers acknowledges and agrees that the Company make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.1.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser is a corporation or
a limited duration company or a limited liability company or limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the Debentures and the Warrants hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed and delivered by
such Purchaser and constitutes the valid and legally binding obligation of such
Purchaser, enforceable against such Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
b. Investment Intent. Such Purchaser is acquiring the
Debentures and the Warrants for its own account and not with a present view to
or for distributing or reselling the Debentures, the Warrants, the Debenture
Shares or the Warrant Shares or any part thereof or interest therein in
violation of the Securities Act; provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares for any
minimum or other specific term and reserves the right to dispose of the
Debentures at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
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c. Purchaser Status. At the time such Purchaser was offered
the Debentures and the Warrants, and at the Closing Date, (i) it was and will be
an "accredited investor" as defined in Rule 501 under the Securities Act and
(ii) such Purchaser, either alone or together with its representatives, had and
will have such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Debentures and the Warrants. The Purchaser
acknowledges that ownership of ten percent (10%) or more of the Common Stock
requires approval of the Pennsylvania Insurance Department pursuant to 40 P.S.
ss.991.1402.
d. Reliance. Such Purchaser understands and acknowledges that
(i) the Debentures and the Warrants are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2 and such Purchaser hereby consents to such reliance.
e. Information. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Debentures and Warrants which have been requested by such Purchaser or its
advisors. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its representatives. Neither
such inquiries nor any other due diligence investigation conducted by Purchaser
or any of its advisors or representatives shall modify, amend or affect
Purchaser's right to rely on the Company's representations and warranties
contained in Section 2.1 above or representations and warranties of the Company
contained in any other Transaction Document. Such Purchaser understands that its
investment in the Debentures and Warrants involves a significant degree of risk.
f. Governmental Review. Such Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Debentures or Warrants.
g. Residency. Such Purchaser is a resident of the jurisdiction
set forth immediately below such Purchaser's name on Schedule II hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2. The Company
further acknowledges that the Purchasers represent, collectively, they are not
acting as a group pursuant to Rule 13-d of the Exchange Act.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares held by it,
such Purchaser understands and agrees that it may do so only pursuant to an
effective registration statement under the Securities Act, to the Company or
10
pursuant to an available exemption from the registration requirements of the
Securities Act and in compliance with applicable blue sky and state securities
laws. In connection with any transfer of any Debentures, Warrants, Debenture
Shares or Warrant Shares other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor thereof to
provide to the Company a written opinion of counsel experienced in the area of
United States securities laws selected by the transferor, the form and substance
of which opinion shall be customary for opinions of counsel in comparable
transactions, to the effect that such transfer does not require registration of
such transferred securities under the Securities Act and qualification under
applicable blue sky and state securities laws. Notwithstanding the foregoing,
the Company hereby consents to and agrees to affect any transfer by any
Purchaser to an Affiliate of such Purchaser, provided that the transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act. Any such transferee shall also agree in writing
to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Transaction Documents.
b. Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Underlying
Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES DEPARTMENT OR COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND APPLICABLE BLUE SKY OR
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY OR STATE
SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS THEREFROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR ANY APPLICABLE BLUE SKY
OR STATE SECURITIES LAWS.
The Underlying Shares shall not contain the legend set forth
above (or any other legend) if (i) the sale of the Underlying Shares is pursuant
to an effective Registration Statement (as defined in the Registration Rights
Agreement) under the Securities Act, (ii) if in the written opinion of counsel
to the Company experienced in the area of United States securities laws such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission) or (iii) if such Underlying Shares may be sold pursuant to Rule
144 promulgated under the Securities Act ("Rule 144"). The Company agrees that
it will provide each Purchaser, upon request, with a certificate or certificates
representing the Underlying Shares, free from such legend at such time as such
legend is no longer required hereunder. If such certificate or certificates had
previously been issued with such a legend or any other legend, the Company
shall, upon request and delivery of such certificate or certificates to the
Company by such Purchaser, reissue to such Purchaser such certificate or
certificates free of any legend.
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3.2 Stop Transfer Instruction. Except as otherwise required by law, the
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions on transfer set
forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12(g) of the Exchange Act, will timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13, 14 or 15(d) of the Exchange Act and shall promptly, but in no event later
than two (2) business days after the filing thereof with the Commission, provide
the Purchasers with notice of all such filings, and will not take any action or
file any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations. The
Company further covenants that it will take such further action as any holder of
the Debentures, the Warrants, the Debenture Shares or the Warrant Shares may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Debentures, the Warrants, the Debenture Shares, or the
Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall (i) qualify the Debenture Shares and the Warrant
Shares under the securities or "blue sky" laws of such jurisdictions as the
Purchasers may reasonably request (or to obtain an exemption from such
qualification) and (ii) shall continue such qualification at all times through
the resale of all Debenture Shares or Warrant Shares, but in any event not past
the third anniversary of the Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares in a
manner that would require the registration under the Securities Act of the sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares to
any Purchaser.
3.6 Listing and Reservation of Debenture Shares and Warrant Shares.
a. The Company shall (i) not later than ten (10) business days
after the Closing Date prepare and file with Nasdaq (as well as any other
national securities exchange or market on which the Common Stock is then listed)
an additional shares listing application or a letter acceptable to Nasdaq
covering and listing a number of shares of Common Stock which is at least equal
to 110% of the maximum number of Underlying Shares then issuable, assuming that
the payment of all future dividends on such shares then outstanding were made in
shares of Common Stock, (ii) take all steps necessary to cause the Underlying
Shares to be approved for listing on Nasdaq (as well as on any other national
securities exchange or market on which the Common Stock is then listed) as soon
as possible thereafter, (iii) maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all such Underlying Shares, and (iv)
provide to the Purchasers evidence of such listing. The Company shall promptly
provide to each Purchaser copies of any notices it receives from Nasdaq
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system, so long as such notice does not include material,
nonpublic information. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 3.6(a). Notwithstanding the
above, the Purchaser acknowledges the Company's obligations hereunder are
subject to and conditioned upon compliance with Rule 4460(i)(1)(D) of the Nasdaq
National Market.
12
b. The Company at all times shall reserve a sufficient number
of shares of its authorized but unissued Common Stock to provide for 110% of the
full conversion of the outstanding Debentures (including the payment of all
dividends thereon) and exercise of the outstanding Warrants. Shares of Common
Stock reserved for issuance upon conversion of the Debentures and the exercise
of the Warrants shall be allocated pro rata to each of the Purchasers in
accordance with the amount of Debentures and Warrants issued and delivered to
such Purchaser at the Closing.
3.7 Notice of Breaches.
a. The Company and each Purchaser shall give prompt written
notice to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents, as well
as any events or occurrences arising after the date hereof and prior to the
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of the Closing Date; provided such notice will
not constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the
Company shall promptly notify, provided such notification will not constitute
material non-public information, each Purchaser of any notice or claim (written
or oral) that it receives from any lender of the Company or any Subsidiary to
the effect that the consummation of the transactions contemplated hereby and by
the Registration Rights Agreement violates or would violate any written
agreement or understanding between such lender and the Company or any
Subsidiary, and the Company shall promptly furnish by facsimile to the
Purchasers a copy of any written statement in support of or relating to such
claim or notice.
c. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.
3.8 Form D. The Company agrees to file a Form D with respect to the
Debentures and Warrants as required by Rule 506 under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
3.9 Use of Proceeds. The Company shall use the proceeds from the sale
of the Debentures and the exercise of the Warrants for working capital and other
general corporate purposes, including approximately $8,300,000 to purchase
HealthAxis Common Stock from a shareholder, $14,700,000 to dispose of PILIC, a
subsidiary of the Company, and a substantial portion of the balance will be
invested in the Company's subsidiary XxxxxxXxxx.xxx, Inc.
13
3.10 Transfer Agent Instructions. At the Closing the Company shall
issue instructions to its transfer agent (and shall issue to any subsequent
transfer agent as required), to issue certificates, registered in the name of
each such Purchaser or its respective nominee(s), for the Underlying Shares in
such amounts as specified from time to time by each Purchaser to the Company in
a form reasonably acceptable to such Purchasers (the "Transfer Agent
Instructions"). The Company warrants that no instruction other than the Transfer
Agent Instructions referred to in this Section 3.10, and stop transfer
instructions to give effect to Section 3.1 hereof (in the case of the Underlying
Shares, prior to registration of the Underlying Shares under the Securities Act)
will be given by the Company to its transfer agent and that the Debentures, the
Warrants, the Debenture Shares and the Warrant Shares shall otherwise be freely
transferable on the books and records of the Company, subject to the terms of
this Agreement and the Transaction Documents. If a Purchaser provides the
Company with an opinion of counsel, the form and substance of which opinion
shall be reasonably acceptable to counsel to the Company and customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Debentures, the Debenture Shares, the
Warrants and the Warrant Shares may be made without registration under the
Securities Act or can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the
Debenture Shares and the Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchasers by violating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 3.10 will be
inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.10, that the Purchasers, shall be
entitled, in addition to all other available remedies, to seek an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
3.11 Press Release; Filing of Form 8-K. Subject to the provisions of
Section 6.10 hereof, prior to the opening of Nasdaq on September 16, 1999, the
Company shall issue a press release in form and substance acceptable to the
Purchasers. On or before the 5th business day following the Closing Date, the
Company shall file a Form 8-K with the Commission describing the terms of the
transaction contemplated by this Agreement and the Transaction Documents in the
form required by the Exchange Act.
3.12 Financial Information. The Company agrees to deliver the following
to each Purchaser prior to and during the Effectiveness Period (as defined in
the Registration Rights Agreement): (i) within two (2) business days after the
filing thereof with the SEC, notice of the Company's filing of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements or amendments (other than on Form S-8)
filed pursuant to the Securities Act, (ii) on the same day as the release
thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
14
3.13 Ordinary Course Brokerage and Trading. Subject to compliance with
all applicable securities laws and Nasdaq regulations, no Purchaser shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Company's Common Stock. Notwithstanding the foregoing, Xxxxx
Xxxxxxx Strategic Growth Fund, L.P., Xxxxx Xxxxxxx Strategic Growth Fund, Ltd.
and Xxxxx Xxxxxxx - XXX Investments LLC acknowledge that they shall be
prohibited from engaging in any such activities until December 13, 1999.
3.14 Best Efforts. Each of the parties hereto shall use its best
efforts to satisfy each of the conditions to be satisfied by it as provided in
Article IV of this Agreement.
3.15 Corporate Existence. Until such time as all of the Purchasers
provide the Company with written notice that they do not beneficially own any
Debentures or Warrants, the Company shall maintain its corporate existence and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is listed for trading on the Nasdaq, the New York
Stock Exchange or the American Stock Exchange.
3.16 Reimbursement. In the event that any Purchaser, other than by
reason of its gross negligence or willful misconduct, becomes involved in any
capacity in any action, proceeding or investigation brought by or against any
person, including shareholders of the Company, in connection with or as a result
of (a) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement or the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the Transaction Documents or any other certificate, instrument or
document hereby or thereby, or (c) any cause of action, suit or claim brought or
made against such Purchaser and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, the Company will reimburse such Purchaser for its legal and other
actual out-of-pocket expenses (including the cost of any investigation and
preparation) incurred in connection therewith. The reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliate of the Purchasers and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
any such affiliate and any such Person. The Company also agrees that no
15
Purchaser or any Affiliates, partners, directors, agents, employees or
controlling persons of such Purchaser shall have any liability to the Company or
any Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of this Agreement or any of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of such Purchaser, or from a breach of a representation,
warranty or covenant made herein by such Purchaser, in connection with the
transactions contemplated by this Agreement or the Registration Rights
Agreement, in which event such Purchaser, severally and not jointly, shall
reimburse the Company for its legal and other actual out-of-pocket expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, up to the amount of the Purchase Price paid by such Purchaser. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of its obligations hereunder which is permissible under applicable
law.
3.17 Material Information. The Company covenants that any information
provided by the Company to Xxxxx Xxxxxxx Strategic Growth Fund, L.P., Xxxxx
Xxxxxxx Strategic Growth Fund, Ltd. and Xxxxx Xxxxxxx - XXX Investments LLC, and
their agents or their counsel, which could be deemed to constitute material
non-public information, will cease to be material non-public information (either
through disclosure by the Company or otherwise) by December 13, 1999.
ARTICLE IV.
CONDITIONS
4.1 Closing Conditions.
a. Conditions Precedent to the Obligation of the Company to Sell.
The obligation of the Company to sell the Debentures and the Warrants hereunder
is subject to the satisfaction or waiver (with prior written notice to each
Purchaser) by the Company, at or before the Closing, of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made (except for representations and warranties that speak as of a specific
date) and as of the Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing; and
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
16
b. Conditions Precedent to the Obligation of the Purchasers to
Purchase. The obligation of each Purchaser hereunder to acquire and pay for the
Debentures and Warrants is subject to the satisfaction or waiver (with prior
written notice to the Company and each other Purchaser) by such Purchaser, at or
before the Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company set forth in this Agreement
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date);
(ii) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on Nasdaq
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company);
(v) Listing of Common Stock. The Common Stock shall be listed
for trading on Nasdaq;
(vi) Required Approvals. All Required Approvals shall have
been obtained and copies thereof delivered to such Purchaser;
(vii) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved for issuance upon conversion of the
Debentures and the exercise of the Warrants;
(viii) Change of Control. No Change of Control shall have
occurred between August 1, 1999 and the Closing Date. "Change of Control" means
the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchasers or any of their
Affiliates, of in excess of 51% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's Board of
Directors which is not approved by those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions, or (iv) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii), or (iii);
17
(ix) Transfer Agent Instructions. The Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been delivered
to the Company's transfer agent; and
(x) Resolutions. The Board of Directors of the Company shall
have adopted resolutions consistent with Section 2.1(b) and in a form reasonably
acceptable to each Purchaser (the "Resolutions").
c. Documents and Certificates. At the Closing, the Company shall
have delivered to the Purchasers the following in form and substance reasonably
satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the
form attached hereto as Exhibit D dated as of the Closing Date;
(ii) Debenture. A Debenture(s) representing the principal
amount of Debentures purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of such Purchaser, each
in form satisfactory to the Purchaser;
(iii) Warrant. A Warrant(s) representing the Warrants
purchased by such Purchaser as set forth next to such Purchaser's name on
Schedule I, registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and
delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the
Closing Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of the
Closing Date and confirming the compliance by the Company with the conditions
precedent set forth in this Section 4.1 as of the Closing Date;
(vi) Secretary's Certificate. A Secretary's Certificate dated
the Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Closing Date,
(B) that attached thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Closing Date and (C) that attached thereto is a
true and complete copy of the Resolutions duly adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement and of the Transaction Documents, and that such Resolutions have not
been modified, rescinded or revoked;
(vii) Certificates of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within ten days of the Closing Date. The
Company shall have delivered to each of the Purchasers a copy of its Certificate
of Incorporation as certified by the Secretary of State of the Commonwealth of
Pennsylvania within two days of the Closing Date;
18
(viii) Transfer Agent Letter. The Company shall have delivered
to each Purchaser a letter from the Company's transfer agent certifying the
number of shares of Common Stock outstanding as of a date within five days of
the Closing Date; and
(ix) Other Documents. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
ARTICLE V.
MISCELLANEOUS
5.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
5.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 7:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 7:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Provident American Corporation
0000 XxXxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
19
With a copy to:
Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
If to the Transfer Agent:
ChaseMellon
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxxxxx
If to Xxxxx Xxxxxxx Strategic Growth Fund, Ltd. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
If to Xxxxx Xxxxxxx Strategic Growth Fund, L.P. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
If to Xxxxx Xxxxxxx - XXX Investments LLC to
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
20
If to LB I Group Inc. to:
c/x Xxxxxx Brothers, Inc.
3 World Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx
If to Royal Bank of Canada to:
Royal Bank of Canada,
by its Agent
RBC Dominion Securities
Xxx Xxxxxxx Xxxxx - 0xx Xxxxx
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 X.X.X.
Facsimile No.: 000-000-0000
Attention: Vice President, Global Middle Office
With a copy, in the case of Notice to Xxxxx Xxxxxxx Strategic
Growth Fund, Ltd., Xxxxx Xxxxxxx Strategic Growth Fund, L.P. or Xxxxx Xxxxxxx -
XXX Investments LLC to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
5.3 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and each of the Purchasers or, in the case of a waiver, by
the party against whom a waiver of any such provision is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. The Company shall not
offer or pay any consideration to a Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to each Purchaser
and the same consideration is paid to each Purchaser which consents to such
amendment or waiver.
21
5.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and, in the case of the Company, any entity succeeding to the Company by merger
or acquisition of all or substantially all the assets of the Company. Except as
provided in this Section 5.5, the Company may not assign this Agreement or any
rights or obligations hereunder without the prior written consent of each of the
Purchasers. The Purchasers may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company,
provided, that any assignees must make the representations and warranties set
forth in Section 2.2 and otherwise comply with the terms of this Agreement
otherwise applicable to its assignor. This provision shall not limit a
Purchaser's right to transfer securities in accordance with all of the terms of
this Agreement or the Transaction Documents.
5.6 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.7 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
5.8 Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants set
forth in Section 3, and the reimbursement provisions set forth in Section 3.16,
shall survive the Closing and any conversion of the Debentures or exercise of
the Warrants regardless of any investigation made by or on behalf of the such
Purchaser or by or on behalf of the Company, except that, in the case of
representations and warranties such survival shall be limited to the period of
six (6) years following the Closing Date on which they were made or deemed to
have been made (other than with respect to any claim by a third party against
the party to this Agreement who seeks to assert a claim based on such
representations and warranties). This section shall have no effect on the
survival of the indemnification provisions of the Registration Rights Agreement.
22
5.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.10 Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent. The Purchasers and their
affiliated companies shall, without further cost, have the right to use in its
advertising, marketing or other similar materials, the Company's logo and
trademarks and all or parts of the Company's press releases that focus on the
Transaction forming the subject matter of this Agreement or which make reference
to the Transaction. The Purchasers understand that this grant by the Company
only waives objections that the Company might have to the use of such materials
by the Purchasers and in no way constitutes a representation by the Company that
references in such materials to the activities of third-parties have been
cleared or constitute a fair use.
5.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
5.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
23
5.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
5.14 Payment Set Aside. To the extent that the Company makes a payment
or payments to the Purchasers hereunder or pursuant to the Transaction Documents
or the Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
5.15 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
5.16 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, however, that the Company shall pay
Xxxxx Xxxxxxx Strategic Growth Fund an aggregate fee of $30,000 at the Closing.
The Company shall pay all stamp and other taxes and duties levied in connection
with the issuance of the Debenture Shares and the Warrant Shares pursuant
hereto.
24
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
PROVIDENT AMERICAN CORPORATION
By:___________________________
Name:
Title:
XXXXX XXXXXXX STRATEGIC
GROWTH FUND, LTD.
By: Xxxxx Xxxxxxx Asset Management, LLC
By:___________________________
Name:
Title:
XXXXX XXXXXXX STRATEGIC
GROWTH FUND, L.P.
By: Xxxxx Xxxxxxx Capital, LLC
its general partner
By:___________________________
Name:
Title:
XXXXX XXXXXXX - XXX INVESTMENTS LLC
By:___________________________
Name:
Title:
LB I GROUP INC.
By:___________________________
Name:
Title:
Royal Bank of Canada
By its Agent
RBC Dominion Securities
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
Schedule I
-------------------------------------------------------------------------------------------------------------------
Principal Amount of Debenture Shares at Warrant Shares at
Name of Purchaser Debentures at Closing Closing Date Closing Date
----------------- --------------------- ------------------- -----------------
-------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxx Strategic Growth Fund, $9,000,000 442,478 66,372
Ltd.
-------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxx Strategic Growth Fund, $2,000,000 98,328 14,749
L.P.
-------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxx - XXX Investments LLC $1,500,000 73,746 11,062
-------------------------------------------------------------------------------------------------------------------
LB I Group Inc. $10,000,000 491,642 73,746
-------------------------------------------------------------------------------------------------------------------
Royal Bank of Canada $5,000,000 245,821 36,873
-------------------------------------------------------------------------------------------------------------------
Schedule II
Name of Purchaser Address
----------------- -------
Xxxxx Xxxxxxx Strategic Growth Fund, Ltd. 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Residence: Grand Cayman, Cayman Islands
Xxxxx Xxxxxxx Strategic Growth Fund, L.P. 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Residence: New York, New York
Xxxxx Xxxxxxx - XXX Investments LLC 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Residence: New York, New York
LB I Group Inc. c/x Xxxxxx Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attn: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
Residence: New York, New York
Royal Bank of Canada Royal Bank of Canada
by its Agent
RBC Dominion Securities
Xxx Xxxxxxx Xxxxx - 0xx Xxxxx
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 X.X.X.
Attn: Vice President, Global Middle Office
Fax: (000) 000-0000
Exhibit A
[Form of Convertible Debenture]
Exhibit B
[Form of Warrant]
Exhibit C
[Registration Rights Agreement]
Exhibit D
[Company's Legal Opinion]
