EXHIBIT 4.2
WARRANT AGREEMENT
WARRANT AGREEMENT (this "Warrant Agreement"), dated as of September 14,
1999, between AMERICA ONLINE, INC., a Delaware corporation ("AOL"), and
CAREINSITE, INC., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the parties hereto are also parties to a Subscription Agreement,
dated as of the date hereof (the "Subscription Agreement"), pursuant to which
AOL has agreed to purchase 100 shares of the Company's Series A Convertible
Redeemable Preferred Stock (the "Series A Preferred Stock") and has been granted
an option to purchase an additional 100 shares of the Series A Preferred Stock
on the first anniversary of the date of the Subscription Agreement and (b) an
Interactive Marketing Agreement, dated as of the date hereof (the "Interactive
Marketing Agreement"); and
WHEREAS, each share of Series A Preferred Stock is convertible at the
option of the holder thereof into (a) a number of the Conversion Shares (as
defined in and determined in accordance with the form of Certificate of
Designation for the Series A Preferred Stock attached as Annex A to the
Subscription Agreement (the "Certificate of Designation")) and (b) a warrant to
purchase the same number of shares of Common Stock (as defined below) as the
number of Conversion Shares into which the share of Series A Preferred Stock is
converted and otherwise having the terms and conditions specified in this
Warrant Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, and intending to be legally bound hereby,
AOL and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Warrant Agreement, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued or issuable (whether upon the exercise of warrants, Convertible
Securities or otherwise) by the Company after the Effective Date, other than (a)
Warrant Stock and (b) shares of Common Stock
issued or issuable pursuant to evidences of indebtedness, shares of stock,
warrants, rights or other securities entered into or issued before conversion of
the Series A Preferred Stock.
"Adverse Market Effect" shall have the meaning set forth in Section
6.3(a).
"Affiliate" shall mean with respect to any person or entity, any other
person or entity directly or indirectly controlling, controlled by or under
direct or indirect common control with such person or entity. For purposes of
this definition, the term Acontrol" (including correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
"AOL" shall have the meaning set forth in the Preamble hereof.
"Applicable Warrant Price" shall mean the Conversion Price (as defined in
the Certificate of Designation) of the Series A Preferred Stock at the time at
which it is converted pursuant to its terms.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Certificate of Designation" shall have the meaning set forth in the
Recitals hereof.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
the Common Stock, par value $.01 per share, of the Company, and any capital
stock into which such Common Stock may thereafter be changed, and shall also
include (a) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of Common Stock upon any
reclassification thereof which is also not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption and (b) shares of Common Stock of any successor or acquiring
corporation (as defined in Section 4.7) received by or distributed to the
holders of Common Stock of the Company in the circumstances contemplated by
Section 4.7; provided, however, that this shall not include any shares of Common
Stock acquired by the exercise of the Warrants.
"Company" shall have the meaning set forth in the Preamble hereof.
"Convertible Securities" shall mean evidences of indebtedness, shares of
stock, warrants, rights or other securities entered into or issued after
conversion of the Series A Preferred Stock which are exercisable, convertible or
exchangeable (including, but not limited to, Options), with
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or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or the happening of a specified event or both.
"Current Market Price" shall mean, in respect of any share of Common Stock
on any date herein specified, the lower of (a) the average of the daily market
prices for 15 consecutive Business Days commencing twenty-five (25) days before
such date and (b) the daily market price on the most recent Business Day prior
to such date. The daily market price for each such Business Day shall be the
last reported sale price on such day on the principal stock exchange on which
such Common Stock is then listed or admitted to trading or, if the Common Stock
is not so listed or admitted, the last reported sale price on such day on the
National Association of Securities Dealers, Inc. Automated Quotation National
Market System ("NASDAQ") or any other over-the-counter market or trading
facility on which such Common Stock is then listed; provided, however, that if
no sale takes place on such day on any such exchange, market or trading
facility, the average of the last reported closing bid and ask prices on such
day as officially quoted on such exchange, market or trading facility shall be
the daily market price for such Business Day; provided further that if the
Common Stock is not listed or admitted to trade on a stock exchange and is not
quoted on NASDAQ, or any other over-the-counter market or trading facility, the
Current Market Price shall be the Fair Market Value.
"Cut-Back Event" shall have the meaning set forth in Section 6.3(a).
"Demand Registration" shall have the meaning set forth in Section 6.2.
"Effective Date" shall mean the date of the initial issuance of shares of
Series A Preferred Stock.
"Exercise Period" shall mean the period from and including the date that
all of the Company's outstanding Series A Preferred Stock has been converted,
pursuant to its terms, into Common Stock until the Expiration Date.
"Expiration Date" shall mean the eighth anniversary of the Effective Date.
"Fair Market Value" shall mean, in respect of a share of Common Stock on
any date herein specified, the fair value as determined in good faith by the
Board of Directors of the Company.
"Holder" shall mean the Person in whose name a Warrant is registered on
the books of the Company maintained for such purpose.
"Incidental Registration" shall have the meaning set forth in Section
6.3(a).
"Liquidation Excess" shall have the meaning set forth in Section 4.5.
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"Interactive Marketing Agreement" shall have the meaning set forth in the
Recitals hereof.
"Majority Holders" shall mean the Holders entitled to receive in excess of
fifty percent (50%) of the aggregate number of shares of Common Stock then
purchasable upon exercise of the Warrants, whether or not then exercisable.
"NASDAQ" shall have the meaning set forth in the paragraph hereof
defining "Current Market Price."
"Option" means any right, warrant or option to subscribe for or purchase
shares of Common Stock.
"Other Property" shall have the meaning set forth in Section 4.7.
"Outstanding" shall mean, when used with reference to the Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or its subsidiaries, and all shares issuable in respect
of outstanding scrip or any certificates evidencing fractional interests in
shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof) and other
organizations, whether or not legal entities.
"Register" shall have the meaning set forth in Section 2.1.
"Registrable Shares" shall mean shares of Common Stock issued or issuable
upon the exercise of the Warrants, until the earliest to occur of (i) the sale
of all such shares by the Holder (pursuant to a registration statement or
otherwise) or (ii) such shares being tradable pursuant to Rule 144(k) under the
Securities Act (or any similar provision then in effect).
"Registration Period" shall have the meaning set forth in Section 6.2.
"Selling Shareholders" shall mean Persons holding Common Stock of the
Company and entitled to register such Common Stock under the Securities Act
pursuant to registration rights agreements with the Company, other than holders
of Registrable Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
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"Series A Preferred Stock" shall have the meaning set forth in the
Recitals hereof.
"Subscription Agreement" shall have the meaning set forth in the Recitals
hereof.
"Warrants" shall mean the Warrants issued pursuant to this Agreement and
all Warrants issued upon the partial exercise, transfer, division or combination
of, or in substitution for, any thereof. All Warrants shall at all times be
identical as to terms and conditions and date, except as to the number of shares
of Common Stock for which they may be exercised.
"Warrant Price" shall mean an amount equal to (a) the number of shares of
Common Stock being purchased upon exercise of a Warrant pursuant to Section 2.2
multiplied by (b) the Applicable Warrant Price.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
Holder upon the exercise of Warrants; provided that if under the terms hereof
there shall be a change such that the securities purchasable hereunder shall be
issued by an entity (other than the Company) or there shall be a change in the
type or class of securities purchasable hereunder, then the term shall mean the
securities issued or issuable upon the exercise of the rights granted hereunder.
ARTICLE II
REGISTRATION; EXERCISE OF THE WARRANTS;
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Registration; Warrant Certificate. (a) Upon conversion of the Series A
Preferred Stock, the Company shall register the Warrants, upon records to be
maintained by the Company for that purpose (the "Register"), in the name of the
Holder of such Warrants. The Register shall include the Holder's name, address
(as provided to the Company by the Holder), the number of Warrants registered in
such Holder's name, and any other information pertaining to the Warrants or the
Holder that the Board of Directors of the Company reasonably deems appropriate.
The Company may deem and treat the registered Holder of the Warrants as the
absolute owner thereof for the purpose of any exercise thereof or any
distribution to the Holder thereof, and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
(b) Upon conversion of the Series A Preferred Stock, the Company
shall deliver to the Holder of the Warrants a certificate evidencing such
Warrants substantially in a form to be mutually agreed upon and attached to this
Warrant Agreement as soon as practicable following the date hereof.
2.2 Manner of Exercise. (a) Each Warrant may be exercised for all or any
part of the number of shares of Common Stock purchasable thereunder at any time
during the Exercise Period.
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(b) In order to exercise a Warrant, in whole or in part, the Holder
shall deliver to the Company at the office designated by the Company pursuant to
Section 11.8, (i) a written notice of the Holder's election to exercise such
Warrant, which notice shall specify the number of shares of Common Stock to be
purchased, (ii) payment of the Warrant Price in the manner provided below, and
(iii) the certificate evidencing such Warrant. Such notice shall be
substantially in the form of the subscription form appearing attached as Exhibit
A to the form of Warrant certificate attached hereto, duly executed by the
Holder or its agent or attorney duly authorized in writing. Upon receipt
thereof, the Company shall, as promptly as practicable, execute or cause to be
executed and deliver or cause to be delivered to the Holder a certificate or
certificates evidencing the aggregate number of full shares of Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share, as hereinafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as the Holder shall request in the notice and shall be registered
in the name of the Holder. A Warrant shall be deemed to have been exercised and
such certificate or certificates shall be deemed to have been issued and the
Holder shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the notice, together with the cash or check or checks,
if any, and the certificate evidencing such Warrant, are received by the Company
as described above and all taxes required to be paid by the Holder, if any,
prior to the issuance of such shares, have been paid. If a Warrant shall have
been exercised in part, the Company shall, at the time of delivery of the
certificate or certificates evidencing Warrant Stock, deliver to the Holder a
new Warrant certificate evidencing the rights of the Holder to purchase the
unpurchased shares of Common Stock called for by such Warrant or, at the sole
discretion of the Company, appropriate notation may be made on the certificate
evidencing such Warrant and the same returned to the Holder. The issuance of
Warrant Stock shall be made without charge to the Holder for any issuance tax
with respect thereto or any other cost incurred by the Company in connection
with the exercise of Warrants and the related issuance of Warrant Stock;
provided the Holder provides the Company or its agent with any report, document
or certificate required by applicable law in order to avoid the imposition of
such taxes or other costs. Notwithstanding any provision herein to the contrary,
the Company shall not be required to register shares in the name of any Person
who acquired a Warrant (or part thereof) or any Warrant Stock otherwise than in
accordance with this Warrant Agreement. Payment of the Warrant Price with
respect to an exercise of Warrants shall be made in same-day funds by certified
or official bank check, or wire transfer.
2.3 Payment of Taxes. The Company shall pay all stock transfer taxes and
similar governmental charges that may be imposed with respect to the issuance of
Warrant Stock upon the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax or other charge imposed in connection with
any transfer of any Warrant or the issuance or delivery of certificates for
shares of Warrant Stock or other securities in respect of the shares of Warrant
Stock upon the exercise of Warrants, to a person or entity other than a then
existing Holder of Warrants; provided further that the Company shall not be
required to pay any income or other similar tax levied on any Holder of
Warrants.
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2.4 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of a Warrant. As to any fraction
of a share which the Holder of a Warrant, the rights under which are exercised
in the same transaction, would otherwise be entitled to purchase upon such
exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price on
the date of notice of exercise. Payment of such amount shall be made in cash or
by check payable to the order of the Holder at the time of delivery of any
certificate or certificates arising upon such exercise.
2.5 Restrictive Legend. Each certificate for Warrant Stock issued upon the
exercise of a Warrant, and each certificate for Warrant 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 SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS EITHER
(1) SUCH SHARES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR (2) AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND LEGAL COUNSEL OF THE HOLDER OF SUCH SHARES (WHICH COUNSEL IS
REASONABLY SATISFACTORY TO THE COMPANY) PROVIDES AN OPINION TO SUCH EFFECT
TO THE COMPANY."
The Company shall, upon the request of any holder of a stock certificate bearing
the foregoing legend and the surrender of such certificate, issue a new stock
certificate without such legend if such holder shall have delivered to the
Company a legal opinion reasonably satisfactory to the Company to the effect
that the restrictions set forth herein are no longer required or necessary under
the Securities Act or any applicable state law.
2.6 Representations and Warranties. The Company represents and warrants to
AOL as follows:
(a) Due Authority. The execution and delivery of this Warrant
Agreement by the Company, the performance by the Company of its obligations
hereunder, and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all requisite action on the part of the
Company. This Warrant Agreement has been duly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by the other
parties hereto) this Warrant Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
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(b) No Conflict. Except for any applicable filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
expiration or termination of any waiting period thereunder (and any extension
thereof), the execution, delivery and performance of this Warrant Agreement by
the Company do not and will not (a) violate, conflict with or result in the
breach of any provision of its Certificate of Incorporation or By-laws, (b)
conflict with or violate any law, governmental regulation or governmental order
applicable to it or any of its assets, properties or businesses or (c) conflict
with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any encumbrance on any of the Company's assets or properties
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
the Company is a party or by which any of its assets or properties is bound or
affected; except to the extent that any conflict under (b) or (c) above would
not have a material adverse effect on the financial condition, business or
operations of the Company and its subsidiaries taken as a whole or prevent or
materially delay the consummation of the transactions contemplated by this
Warrant Agreement.
ARTICLE III
TRANSFERS
The Warrants and all rights (including, without limitation, all rights
under Article VI) thereunder and hereunder are non-transferable, and may not be
sold, transferred, pledged, hypothecated, or assigned without the prior written
consent of the Company (which may be withheld in the Company's sole discretion),
except for a transfer of all or part of the Warrants held by a Holder (i) to a
majority owned Affiliate of the Holder or (ii) in connection with the
distribution of all of the assets of the Holder pursuant to a liquidation,
dissolution or winding up of the affairs of the Holder, or the sale of all or
substantially all of the Holder's assets or a merger or consolidation of the
Holder where the Holder is not the surviving entity; provided, however, in no
event (other than, in the case the Holder is AOL, in connection with a sale of
all or substantially all of AOL's assets or a merger or consolidation of AOL
where AOL is not the surviving entity) may a Holder make any transfer to a
competitor of the Company. Any such prohibited transfer made without the
Company's consent shall be void ab initio. Any permitted transferee shall agree
to be bound by all provisions of this Warrant Agreement.
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ARTICLE IV
ADJUSTMENTS
The number of shares of Common Stock for which a Warrant is exercisable,
or the price at which such shares may be purchased upon exercise of a Warrant,
shall be subject to adjustment from time to time as set forth in this Article IV
for events occurring after conversion of the Series A Preferred Stock. The
Company shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Article IV as soon as practicable following the
occurrence of such event, which notice shall state the exercise price resulting
from such adjustment and/or the increase or decrease, if any, in the number of
shares of Common Stock or other stock or property issuable upon the exercise of
a Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
4.1 Stock Dividends, Subdivisions and Combinations. If, at any time after
the conversion of the Series A Preferred Stock, the Company shall:
(a) pay a dividend or make a distribution on its Common Stock in
Additional Shares of Common Stock (this adjustment will be deemed to occur
immediately after the record date);
(b) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then (i) the number of shares of Common Stock for which each Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which a Warrant is exercisable immediately
prior to the occurrence of such event would own or be entitled to receive after
the happening of such event, and (ii) the Applicable Warrant Price shall be
adjusted to equal (A) the Applicable Warrant Price multiplied by the number of
shares of Common Stock for which a Warrant is exercisable immediately prior to
the adjustment divided by (B) the number of shares of Common Stock for which a
Warrant is exercisable immediately after such adjustment.
4.2 Issuance of Additional Shares of Common Stock. (a) If, at any time
after the conversion of the Series A Preferred Stock, the Company shall (except
as hereinafter provided in Section 4.2(b)) issue or sell any Additional Shares
of Common Stock and such Additional Shares of Common Stock are issued or sold
for no consideration or for consideration in an amount per additional share of
Common Stock less than the Fair Market Value, then the Applicable Warrant Price
shall be reduced to a price determined by multiplying (i) the Applicable Warrant
Price by (ii) a fraction, (A) the numerator of which is the sum of (1) the
number of shares of Common
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Stock Outstanding immediately prior to such issuance or sale, plus (2) an amount
equal to the quotient arrived at by dividing the aggregate consideration, if
any, received by the Company upon such issuance or sale, by the Fair Market
Value per share of the shares so issued or sold, and (B) the denominator of
which is the number of shares of Common Stock Outstanding immediately after such
issuance or sale.
(b) The provisions of Section 4.2(a) shall not apply to any issuance
of Additional Shares of Common Stock for which an adjustment is provided under
Section 4.1 or 4.7. No adjustment of the number of shares of Common Stock for
which a Warrant shall be exercisable or the Applicable Warrant Price shall be
made under Section 4.2(a) upon the issuance of any Additional Shares of Common
Stock which are issued pursuant to the exercise, conversion or exchange of any
Convertible Securities.
4.3 Issuance of Convertible Securities. If, at any time after the
conversion of the Series A Preferred Stock, the Company shall issue or sell any
Convertible Securities, and the price per share for which Common Stock is
initially issuable upon the exercise, conversion or exchange of such Convertible
Securities shall be less than the Fair Market Value in effect immediately prior
to the time of such issue or sale of Convertible Securities, then the Applicable
Warrant Price shall be adjusted as provided in Section 4.2(a) on the basis that
(a) the maximum number of Additional Shares of Common Stock issuable pursuant to
all such Convertible Securities shall be deemed to have been issued and
outstanding, (b) the price per share for such Additional Shares of Common Stock
shall be deemed to be the lowest possible price per share in any range of prices
per share at which such Additional Shares of Common Stock are available to such
holders, and (c) the Company shall have received all of the consideration
payable therefor, if any, as of the date of the actual issuance of such
Convertible Securities. No further adjustments of the Applicable Warrant Price
shall be made upon the actual issue of Additional Shares of Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
4.4 Superseding Adjustment. If, at any time after any adjustment of the
number of shares of Common Stock for which a Warrant is exercisable and/or the
Applicable Warrant Price shall have been made pursuant to Section 4.3 as the
result of any issuance of Convertible Securities, and either
(a) the right of exercise, conversion or exchange for such
Convertible Securities shall expire and all or a portion of such rights with
respect to all or a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to such Convertible Securities shall be increased,
then such previous adjustment shall be rescinded and annulled and the Additional
Shares of Common Stock which were deemed to have been issued by virtue of the
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have
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been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such Convertible Securities on the then outstanding
Warrants, but not on any then outstanding Warrant Stock, on the basis of
(c) treating the number of Additional Shares of Common Stock
theretofore actually issued or issuable pursuant to the previous exercise,
conversion or exchange, as having been issued on the date or dates of any such
exercise, conversion or exchange and for the consideration actually received and
receivable therefor, and
(d) treating any such Convertible Securities which then remain
outstanding as having been granted or issued immediately after the time of such
increase of the consideration per share for which shares of Common Stock are
issuable under such Convertible Securities.
4.5 Liquidation; Dissolution. If, after the conversion of the Series A
Preferred Stock, the Company shall dissolve, liquidate or wind up its affairs,
the Holder shall have the right, but not the obligation, to exercise the
Warrants effective as of the date of such dissolution, liquidation or winding
up; provided that written notice of such intent to exercise is delivered to the
Company within ten (10) business days of the date that the Holder receives
written notice of the Company's intent to dissolve, liquidate or wind up its
affairs; provided, further, that if the amount that would be received by the
Holder upon exercise of the Warrants, effective as of such dissolution,
liquidation or winding up, is greater than the Warrant Price (such difference
being hereinafter referred to as the "Liquidation Excess"), the Holder shall,
upon such exercise, be entitled to receive such Liquidation Excess upon such
dissolution, liquidation or winding up and, in such case, shall not be obligated
to tender to the Company such Warrant Price.
4.6 Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which each Warrant is exercisable provided
for in this Article IV;
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Company therefor shall be the
amount of the cash received by the Company therefor, or, if such Additional
Shares of Common Stock or Convertible Securities are offered by the Company for
subscription, the subscription price, or, if such Additional Shares of Common
Stock or Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the public offering price (in any such
case subtracting any amounts paid or receivable for accrued interest or accrued
dividends, but not subtracting any compensation, discounts or expenses paid or
incurred by the Company for and in the underwriting of, or otherwise in
connection with, the issuance thereof). To the extent that such issuance shall
be for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
fair value of such consideration at the time of such issuance as determined in
good faith by the Board of Directors of the Company. The consideration for any
Additional Shares of Common Stock issuable
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pursuant to the terms of any Convertible Securities shall be the consideration,
if any, received by the Company for issuing such Convertible Securities, plus
the consideration paid or payable to the Company in respect of the subscription
for or purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of such Convertible Securities. In case of the issuance at any time of
any Additional Shares of Common Stock or Convertible Securities in payment or
satisfaction of any dividends upon any class of stock other than Common Stock,
the Company shall be deemed to have received for such Additional Shares of
Common Stock or Convertible Securities consideration equal to the amount of such
dividend so paid or satisfied.
(b) When Adjustments Are Made. The adjustments required by this
Article IV shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which each Warrant is exercisable or of the Applicable Warrant
Price that would otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided for in
Section 4.1) up to, but not beyond, the date of exercise if such adjustment
either by itself or with other adjustments not previously made adds or subtracts
less than one percent (1%) of the shares of Common Stock for which each Warrant
is exercisable or of the Applicable Warrant Price immediately prior to the
making of such adjustment. Any adjustment representing a change of less than
such minimum amount (except as aforesaid) which is postponed shall be carried
forward and made as soon as such adjustment, together with other adjustments
required by this Article IV and not previously made, would result in a minimum
adjustment, but in no event later than the date of exercise of a Warrant. For
the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Article IV, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled. The adjustments pursuant to this Article IV shall not
apply to: (i) any Convertible Securities which are issued to officers,
directors, employees, or consultants of the Company pursuant to a bona fide plan
or plans adopted in good faith by the Board of Directors of the Company; (ii)
any Additional Shares of Common Stock issued to such officers, directors,
employees, or consultants of the Company upon the exchange, conversion or
exercise of the Convertible Securities described in the immediately preceding
clause (i); (iii) Additional Shares of Common Stock, Convertible Securities and
other securities issued in connection with investments in, acquisitions of, or
mergers, combinations or other strategic relationships with,
12
other companies, provided, however, if such issuance is to an Affiliate of the
Company, the Board of Directors of the Company shall have determined in good
faith that such issuance was made on fair and reasonable terms no less favorable
to the Company than could be obtained in a comparable arm's length transaction
with a Person that is not an Affiliate of the Company; (iv) Additional Shares of
Common Stock issued in a bona fide public offering pursuant to a firm commitment
underwriting or sales at the market pursuant to a continuous offering stock
program; (v) Additional Shares of Common Stock issued in any private placement
or other transaction exempt from the registration requirements of the Securities
Act pursuant to a firm commitment underwriting; (vi) rights to purchase
Additional Shares of Common Stock or issuance of Additional Shares of Common
Stock pursuant to a dividend reinvestment plan or other plan hereafter adopted
for the reinvestment of dividends or interest; (vii) a change in the par value
or no par value of the Common Stock (other than as a consequence of an event
described in Section 4.1(b), 4.1(c) or 4.7) for which an adjustment to the
number of Shares of Common Stock for which each Warrant is exercisable is
required pursuant to such Section 4.1(b), 4.1(c) or 4.7; (viii) non-stock
dividends or distributions paid by the Company, except to the extent otherwise
provided in Section 4.9; or (ix) any event or circumstance that occurred at or
prior to the Conversion Time (as defined in the Certificate of Designation) of
the Series A Preferred Stock and any other event or circumstance for which an
adjustment in the Conversion Price (as defined in the Certificate of
Designation) or the number of Conversion Shares (as defined in the Certificate
of Designation) of the Series A Preferred Stock was made. In addition, to the
extent that the Warrants become exercisable for cash, no interest shall accrue
on such cash.
4.7 Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets. In case the Company shall, after the conversion of the Series A
Preferred Stock, reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another corporation (where the Company is not
the surviving corporation, a reverse triangular merger in which the Company is
the surviving entity but the shares of the Company's Capital Stock outstanding
immediately prior to the merger are converted, by virtue of the merger, into
other property, whether in the form of cash, securities or otherwise, or where
there is a change in or distribution with respect to the Common Stock of the
Company), or sell, transfer or otherwise dispose of all or substantially all its
property, assets or business to another Person and, pursuant to the terms of
such reorganization, reclassification, merger, consolidation or disposition of
assets, shares of Common Stock of any successor or acquiring corporation or of
the Company (as applicable), or any cash, shares of stock or other securities or
property of any nature whatsoever (including, warrants or other subscription or
purchase rights) in addition to or in lieu of Common Stock of the successor or
acquiring corporation or of the Company (as applicable) ("Other Property"), are
to be received by or distributed to the holders of Common Stock of the Company,
then the Holder shall have the right thereafter to receive, upon exercise of
such Warrant, the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and Other
Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which such Warrant is exercisable
immediately prior to such event; provided, however, that this Section 4.7 shall
not apply to the extent any action causes an
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adjustment to be made pursuant to Section 4.1, 4.2, 4.3 or 4.5 hereof. In case
of any such reorganization, reclassification, merger, consolidation or
disposition of assets after the conversion of the Series A Preferred Stock, the
successor or acquiring corporation (if other than the Company) shall expressly
assume the due and punctual observance and performance of each and every
covenant and condition of this Warrant Agreement and the Warrants to be
performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined in good faith by resolution of the Board of Directors of the Company)
in order to provide for adjustments of shares of the Common Stock for which this
Warrant is exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Article IV. For purposes of this Section 4.7,
"Common Stock of any successor or acquiring corporation" shall include stock of
such corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable for any such
stock, either immediately or upon the arrival of a specified date or the
happening of a specified event and any warrants or other rights to subscribe for
or purchase any such stock. The foregoing provisions of this Section 4.7 shall
similarly apply to successive reorganizations, reclassifications, mergers,
consolidations or dispositions of assets after the conversion of the Series A
Preferred Stock and to the stock or securities of any other corporation that are
at the time receivable by the Holders upon the exercise of Warrants.
4.8 Reclassifications. If, after the conversion of the Series A Preferred
Stock, the Company changes any of the securities as to which purchase rights
under the Warrants exist into the same or a different number of securities of
any other class or classes, each Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under such Warrant immediately prior to such reclassification or
other change and the Applicable Warrant Price therefore shall be appropriately
adjusted.
4.9 Extraordinary Dividends. If, after the conversion of the Series A
Preferred Stock, the Company declares and pays an extraordinary dividend (i.e.,
a dividend that is inconsistent with the Company's dividend policy adopted by
the Board of Directors of the Company other than a customary initial dividend),
and the failure thereupon to make any adjustment pursuant to this Article IV
would not fairly protect the purchase rights represented by the Warrants in
accordance with the essential intent and principles hereof, then, in such case,
the Company shall appoint a firm of independent certified public accountants of
recognized national standing (which may be the regular independent auditors of
the Company) or independent investment banking firm of recognized national
standing, which shall give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this Article
IV, necessary to preserve, without dilution, the purchase rights represented by
the Warrants. Upon receipt of such opinion, the Company will promptly mail a
copy thereof to the Holders of the Warrants and shall make the adjustment, if
any, described therein.
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4.10 Other Notices. In case at any time after the conversion of the
Series A Preferred Stock:
(a) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with another corporation (other than a subsidiary of the Company in which the
Company is the surviving or continuing corporation and no change occurs in the
Company's Common Stock), or sale of all or substantially all of its assets to
another corporation;
(b) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or winding up
of the Company; or
(c) the Company shall declare any non-cash dividend on its Common
Stock;
then, in any one or more of said cases, the Company shall give written notice,
addressed to the Holders at the respective addresses of such Holders as shown on
the Register, of the date (or, if not then known, a reasonable approximation
thereof by the Company) on which such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment
for the benefit of creditors, winding up or other action or dividend, as the
case may be, shall take place. Such notice shall also specify (or, if not then
known, reasonably approximate) the date as of which the holders of Common Stock
of record shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment
for the benefit of creditors, winding up, or other action, or the date of such
dividend, as the case may be. Such notice shall be mailed to the Holders at
least twenty days prior to the record date for such action in the case of any
action described in Subsection (a) or Subsection (c) above, and in the case of
any action described in Subsection (b) above, at least twenty days prior to the
day on which the action described is to take place and at least twenty days
prior to the record date for determining holders of Common Stock entitled to
receive securities and/or other property in connection with such action.
As soon as practicable following any adjustment of the Applicable
Warrant Price and/or the number of shares of Common Stock purchasable upon
exercise of each Warrant, a certificate, signed by (i) the Company's President
or Chief Financial Officer, or (ii) any independent firm of certified public
accountants, or investment banking firm, in either case of recognized national
standing, which the Company selects at its own expense, setting forth in
reasonable detail the events requiring the adjustment and the method by which
such adjustment was calculated, shall be mailed to the Holders and shall specify
the adjusted Applicable Warrant Price and/or the number of shares of Common
Stock purchasable upon exercise of each Warrant after giving effect to the
adjustment.
4.11 No Impairment. The Company shall not, by amendment of its charter or
bylaws or through any reorganization, recapitalization, transfer of assets,
consolidation, merger,
15
dissolution, issuance or sale of securities or any other voluntary action, seek
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but shall at all times in good faith assist
in the carrying out of all the provisions of this Article IV.
ARTICLE V
COVENANTS
The Company covenants that the Company shall at all times reserve and keep
available for issue upon the exercise of the Warrants such number of its
authorized and unissued shares of Common Stock as will be sufficient to permit
such exercise in full. All shares of Common Stock which shall be so issuable,
when issued upon exercise of the Warrants and payment therefor in accordance
with the terms of the Warrants, shall be duly and validly issued and fully paid
and nonassessable, and not subject to preemptive rights.
ARTICLE VI
DEMAND AND INCIDENTAL REGISTRATION OF REGISTRABLE
SHARES
6.1 Registration. Neither the Warrants nor the Registrable Shares have
been registered under the Securities Act or applicable state securities laws.
National represents that it is acquiring any Warrants to be issued to it for its
own account and not with a view to the distribution thereof, and agrees not to
sell, transfer, pledge or hypothecate any Warrants or any Registrable Shares
unless a registration statement is effective for such Warrants or Registrable
Shares under the Securities Act or in the opinion of AOL's counsel, which
counsel must be acceptable to the Company (a copy of which opinion shall be
delivered to the Company), such transaction is exempt from the registration
requirements of the Securities Act and applicable state securities laws).
6.2 Demand Registration. At any time after commencement of the Exercise
Period, holders of not less than fifty percent (50%) of the then total number of
Registrable Shares, as to which Warrants have been exercised or are then
exercisable, may make a written request for registration under the Securities
Act of all or part of their Registrable Shares (a "Demand Registration") for the
public disposition of such Registrable Shares. The Company shall, as soon as
reasonably practicable after receipt of such written request, notify all other
holders of Registrable Shares, as to which Warrants have been exercised or are
then exercisable, of the Company's receipt of such written request, and offer
such holders the opportunity to include their Registrable Shares, as to which
Warrants have been exercised or are then exercisable, in such Demand
Registration. The Company shall then use its reasonable best efforts to register
under the Securities Act the Registrable Shares proposed to be sold by such
holders and to keep such Demand Registration open for ninety (90) days (the
"Registration Period"); provided, however,
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that the Company shall not be obligated (i) to effect a Demand Registration
covering less than fifty percent (50%) of the then total number of Registrable
Shares, (ii) to effect more than two (2) Demand Registrations under this Section
6.2 or (iii) to effect the second Demand Registration within one (1) year after
the effective date of the Registration Statement effected in response to the
initial Demand Registration; provided that if the Registrable Shares proposed to
be sold by such holders were not sold pursuant to such a Demand Registration,
other than because such holders elected not to sell their Registrable Shares,
the holders of any number of Registrable Shares shall be entitled to make a
written request for an additional Demand Registration in accordance with the
procedures of this Section 6.2 until such Registrable Shares initially proposed
to be sold by such holders have been sold and notwithstanding the immediately
preceding proviso, the Company shall be obligated to effect such an additional
Demand Registration in accordance with the procedures of this Section 6.2 so
long as such request is not made within six (6) months of the withdrawal or
termination of the Demand Registration relating to the unsold Registrable
Shares; and provided further that each Demand Registration shall be subject to
the provisions of Section 6.4 hereof. A request for a Demand Registration will
specify the number of Registrable Shares proposed to be sold.
6.3 Incidental Registration. (a) If the Company proposes to register under
the Securities Act any Common Stock of any Selling Shareholder for sale to the
public pursuant to a firm commitment underwriting (other than on a registration
statement on Form S-4 or S-8 under the Securities Act), the Company will give
written notice at such time to all holders of Registrable Shares as to which
Warrants have been exercised or are then exercisable of its intention to do so.
Upon the written request of any such holder, given within thirty (30) days after
receipt of any such notice by the Company, to register any of its Registrable
Shares, the Company will use its reasonable best efforts to cause the
Registrable Shares as to which registration shall have been so requested, to be
included in the securities to be covered by such registration statement (the
"Incidental Registration"), all to the extent requisite to permit the sale or
other disposition by the holder (in accordance with its written request) of such
Registrable Shares so registered; provided, however, that nothing herein shall
prevent the Company from abandoning or delaying any such registration at any
time; and provided, further, that the Incidental Registration shall be subject
to the provisions of Sections 6.3(b) and Section 6.4 to the extent indicated
therein. Any request by a holder pursuant to this Section 6.3 to register
Registrable Shares shall specify the number of Registrable Shares to be included
in the underwriting and that such Registrable Shares are to be included in the
underwriting on the same terms and conditions as the shares of Common Stock
otherwise being sold through underwriters under such registration. If the
managing underwriter or underwriters shall advise the Company in writing that,
in the view of such underwriters, such holders of Registrable Shares shall have
requested the registration of a number of Registrable Shares that exceeds the
maximum number of Shares that can be sold without having a material adverse
effect on the marketing of the Common Stock to be sold under such registration
statement, including the price at which such Common Stock can be sold (an
"Adverse Market Effect"), the Company shall not be required to register Shares
in excess of such maximum number, subject to the provisions of Section 6.3(b) (a
"Cut-Back Event").
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(b) In the event of a Cut-Back Event arising in connection with an
Incidental Registration, then the Company shall include in such registration (i)
first, all of the Common Stock proposed to be sold by the Company and such
Selling Shareholder(s) initiating such registration, and (ii) second, the number
of shares of Common Stock of the Company validly requested by all other Selling
Shareholders and holders of Registrable Shares to be included in such
registration that, in the opinion of the underwriters, can be sold without
having an Adverse Market Effect, such amount to be allocated among all such
other Selling Shareholders and holders of Registrable Shares pro rata on the
basis of the respective number of shares of Common Stock each such other Selling
Shareholder and holder of Registrable Shares has requested to be included in
such registration.
6.4 Discretion. Notwithstanding any other provision hereof to the
contrary,
(a) the Company shall be entitled, in its reasonable discretion, to
elect, once with respect to each Demand Registration which it may be requested
to effect hereunder, to delay the filing or effectiveness of a registration
statement pursuant to Section 6.2 for up to one hundred and twenty (120) days
from the date of the request therefor under Section 6.2, so long as the Board of
Directors of the Company shall have determined in good faith prior to effecting
such delay that such delay would be in the best interests of the Company,
(b) the Company shall have the right to select the managing
underwriter or underwriters for any offer or sale of the Registrable Shares
pursuant to Sections 6.2 or 6.3; provided, however, that the holders of a
majority of the Registrable Shares participating in the Demand Registration
shall have the right to approve such underwriters, such approval not to be
unreasonably withheld or delayed,
(c) in connection with a Demand Registration, the holders of
Registrable Shares shall consult with the Company with respect to the method of
sale of such Registrable Shares; and in any event, such holders shall use their
best efforts to the effect that the sale of such Shares shall not have a
material adverse effect on the market price of the Common Stock,
(d) the Company shall pay all out-of-pocket expenses incident to the
Company's effectuation of a Demand Registration, including without limitation,
all registration and filing fees (including filing fees with respect to the
National Association of Securities Dealers, Inc.), all fees and expenses of
complying with state securities or "blue sky," laws, all printing expenses, all
listing fees, all registrars' and transfer agents' fees, the fees and
disbursements of counsel for the Company and of its independent certified public
accountants, including the expenses of any special audits and/or "comfort"
letters required by or incident to such performance and compliance; but
excluding the fees and disbursements of counsel to the sellers of the
Registrable Shares, underwriting discounts and commissions, and applicable
transfer taxes, if any, which shall be borne by the sellers of the Registrable
Shares being registered in all cases, and
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(e) such holders agree to cooperate fully to facilitate the Demand
Registration, and offer and sale of Registrable Shares covered thereby,
including completing selling shareholder questionnaires, entering into customary
underwriting and other agreements, and furnishing information for inclusion in
any prospectus.
6.5 Payment of Exercise Price. The Company acknowledges that the
Holder may desire to make cash payment of the Warrant Price with net proceeds
received from the sale of the Warrant Stock. Accordingly, the Company agrees
that the Holder shall be entitled to exercise the Warrant concurrent with the
sale of the Warrant Stock and have the net proceeds applied directly to payment
in full of the Warrant Price.
ARTICLE VII
REGISTRATION PROCEDURES
If the Company is required by the provisions hereof to use commercially
reasonable efforts to effect the registration of any Registrable Shares under
the Securities Act, the Company will:
(a) furnish to each seller of Registrable Shares and to any
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the intended disposition
of the Registrable Shares covered by such registration statement;
(b) use commercially reasonable efforts (i) to register or qualify
the Registrable Shares covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the sellers of
Registrable Shares or, in the case of an underwritten public offering, the
managing underwriter, reasonably shall request, (ii) to prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements, and take such other actions, as may be necessary to maintain such
registration and qualification in effect at all times for the period of
distribution contemplated thereby and (iii) to take such further action as may
be necessary or advisable to enable the disposition of the Registrable Shares in
such jurisdictions, provided that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(c) use commercially reasonable efforts to list the Registrable
Shares covered by such registration statement with any securities exchange on
which the Common Stock of the Company is then listed, or, if the Common Stock is
not then listed on a national securities exchange, use its best efforts to
facilitate the reporting of the Common Stock on NASDAQ;
(d) notify each seller of Registrable Shares and each underwriter
under such registration statement, at any time when a prospectus relating
thereto is required to be delivered
19
under the Securities Act, of the happening of any event of which the Company has
knowledge as a result of which the prospectus contained in such registration
statement, as then in effect, includes any untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing and promptly amend or supplement such registration statement to correct
any such untrue statement or omission;
(e) notify each seller of Registrable Shares of the issuance by the
Commission of any stop order suspending the effectiveness of the registration
statement or the initiation of any proceedings for that purpose and make every
reasonable effort to prevent the issuance of any stop order and, if any stop
order is issued, to obtain the lifting thereof at the earliest possible time;
(f) if the offering is an underwritten offering, enter into a
written agreement with the managing underwriter selected in the manner herein
provided in such form and containing such provisions as are usual and customary
in the securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature, including without
limitation, customary indemnification and contribution provisions;
(g) make available for inspection by each seller of Registrable
Shares at such seller's expense, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(h) provide a transfer agent and registrar, which may be a single
entity, for the Registrable Shares not later than the effective date of the
registration statement; and
(i) take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any legend restricting the
sale or transfer of such securities) evidencing the Registrable Shares to be
sold pursuant to the registration statement and to enable such certificates to
be in such denominations and registered in such names as the investors or any
underwriters may reasonably request.
In connection with any registration hereunder, the sellers of Registrable
Shares will furnish to the Company in writing such information with respect to
themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
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ARTICLE VIII
INDEMNIFICATION AND CONTRIBUTION
8.1 Indemnification by Company. In the event of a registration of any of
the Registrable Shares under the Securities Act pursuant to the terms of this
Agreement, the Company will indemnify and hold harmless and pay and reimburse,
each seller of such Registrable Shares thereunder, each underwriter of such
Registrable Shares thereunder, each officer, director, employee and agent of
each seller and each underwriter and each other person, if any, who controls
such seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, as and, when incurred,
to which such seller, underwriter, officer, director, employee, agent or
controlling person may become subject under the Securities Act or otherwise
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Registrable Shares were registered under the Securities Act pursuant
hereto or any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
any violation or alleged violation of the Securities Act or any state securities
or blue sky laws and will reimburse each such seller, underwriter officer,
director, employee, agent and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided that the Company will
not be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon the Company's reliance on an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such seller, any such
underwriter or any such controlling person in writing specifically for use in
such registration statement or prospectus. Notwithstanding the foregoing, the
indemnity provided in this Section 8.1 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or expense if such
settlement is effected without the consent of such indemnifying party (which
consent shall not be unreasonably withheld or delayed).
8.2 Indemnification of Company. In the event of a registration of any of
the Registrable Shares under the Securities Act pursuant to this Agreement each
seller of such Registrable Shares thereunder, severally and not jointly, will
indemnify and hold harmless the Company, each person, if any, who controls the
Company within the meaning of the Securities Act, each officer of the Company
who signs the registration statement, each director of the Company, each
underwriter and each person who controls any underwriter within the meaning of
the Securities Act, against all losses, claims, damages or liabilities, joint or
several, as and when incurred, to which the Company or such officer, director,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon reliance on any untrue statement
or alleged untrue statement of any material fact contained in the registration
statement under which such Registrable Shares were registered under the
Securities Act pursuant hereto or
21
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, that such seller will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such seller, as such, furnished in
writing to the Company by such seller specifically for use in such registration
statement or prospectus, and provided, that the liability of each seller
hereunder shall be limited to the proceeds received by such seller from the sale
of Registrable Shares covered by such registration statement. Notwithstanding
the foregoing, the indemnity provided in this Section 8.2 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or expense
if such settlement is effected without the consent of such indemnifying party
(which consent shall not be unreasonably withheld or delayed).
8.3 Notice of Action. Promptly after receipt by an indemnified party
hereunder of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to such indemnified party other than under this
Article VIII and shall only relieve it from any liability which it may have to
such indemnified party under this Article VIII if and to the extent the
indemnifying party is materially prejudiced by such omission. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Article VIII for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided that if
the defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
based upon written advice of its counsel that there may be reasonable defenses
available to it which are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.
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8.4 Contribution. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i) any
holder of Registrable Shares exercising rights under this Warrant Agreement or
any controlling person of any holder, makes a claim for indemnification pursuant
to this Article VIII but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Article VIII provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any holder
or any such controlling person in circumstances for which indemnification is
provided under this Article VIII; then, and in each such case, the Company and
holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that holder is responsible for the portion represented by the percentage that
the public offering price of its Registrable Shares offered by the registration
statement bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided that, in any such case, (a) no holder will be required to
contribute any amount in excess of the public offering price of all such
Registrable Shares offered by it pursuant to such registration statement and (b)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
ARTICLE IX
LOSS OR MUTILATION
Upon receipt by the Company from the Holder of evidence reasonably
satisfactory to the Company of the ownership of and the loss, theft, destruction
or mutilation of a certificate evidencing a Warrant or Warrants and indemnity
reasonably satisfactory to the Company and in case of mutilation upon surrender
and cancellation thereof, the Company will execute and deliver in lieu thereof a
new certificate evidencing such Warrant or Warrants to the Holder; provided,
however, in the case of mutilation, no indemnity shall be required if the
certificate evidencing such Warrant or Warrants in identifiable form is
surrendered to the Company for cancellation.
ARTICLE X
NO STOCK RIGHTS
No Holder of a Warrant, as such, shall be entitled to vote or be deemed
the holder of Common Stock or any other securities of the Company which may at
any time be issuable on the exercise thereof, nor shall anything contained
herein be construed to confer upon the Holder of a Warrant, as such, the rights
of a stockholder of the Company or the right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, to exercise any
preemptive right, to receive notice of
23
meetings or other actions affecting stockholders (except as provided herein), or
to receive dividends or subscription rights or otherwise (except as provided
herein), until the exercise of such Warrant shall have occurred.
ARTICLE XI
MISCELLANEOUS
11.1 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall give
rise to any liability of such Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
11.2 Nonwaiver; Cumulative Remedies. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder or the Company
shall operate as a waiver of such right or otherwise prejudice the rights,
powers or remedies of the Holder or the Company. No single or partial waiver by
the Holder or the Company of any provision of this Warrant Agreement or of any
breach or default hereunder or thereunder or of any right or remedy shall
operate as a waiver of any other provision, breach, default right or remedy or
of the same provision, breach, default right or remedy on a future occasion. The
rights and remedies provided in this Warrant Agreement are cumulative and are in
addition to all rights and remedies which the Holder or the Company may have in
law or in equity or by statute or otherwise.
11.3 Severability. If any term or other provision of this Warrant
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Warrant Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Warrant Agreement is
not affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Warrant Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Warrant Agreement be consummated as originally
contemplated to the fullest extent possible.
11.4 Entire Agreement. This Warrant Agreement, together with the
Subscription Agreement, constitutes the entire agreement of the parties hereto
and thereto with respect to the subject matter hereof and thereof and supersedes
all prior agreements and undertakings, both written and oral, with respect to
the subject matter hereof and thereof.
11.5 Amendment. This Warrant Agreement may not be modified or amended
except by written agreement of the Company and the Holder.
24
11.6 Headings. The headings of the Sections of this Warrant Agreement are
for the convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant Agreement.
11.7 Meanings. Whenever used in this Warrant Agreement, any noun or
pronoun shall be deemed to include both the singular and plural and to cover all
genders; and the words "herein," "hereof" and "hereunder" and words of similar
import shall refer to this instrument as a whole, including any amendments
hereto.
11.8 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 11.8):
(a) if to the Company:
CareInsite, Inc.
River Drive Center 2
000 Xxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: General Counsel
(b) if to AOL:
America Online, Inc.
00000 XXX Xxx
Xxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: General Counsel
11.9 Successors and Assigns. This Warrant Agreement shall be binding upon
and inure solely to the benefit of the parties hereto and their permitted
assigns and successors.
11.10 Survival of Rights and Duties. This Warrant Agreement shall
terminate and be of no further force and effect on the earliest of (a) the
Conversion Notice Deadline (as defined in the Certificate of Designation) if a
timely Conversion Notice (as defined in the Certificate of Designation) has not
by that time been delivered to the Company in accordance with the provisions of
the Certificate of Designation, (b) 5:00 P.M., New York City time, on the last
day of the Exercise Period, (c) the date on which all of the Warrants have been
exercised or (d) the termination of the Subscription Agreement if such
termination occurs prior to the Effective Date;
25
provided, however, that the provisions of Section 2.3 and Articles VI, VII and
VIII (if any Warrants were exercised), and Article XI shall continue in full
force and effect after such termination date.
11.11 Governing Law. This Warrant Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
11.12 Counterparts. This Warrant Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of this Warrant Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Warrant Agreement.
11.13 Waiver of Jury Trial. Each of the parties hereto irrevocably and
unconditionally waives trial by jury in any legal action or proceeding relating
to this Warrant Agreement or the transactions contemplated hereby and for any
counterclaim therein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
26
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed.
CAREINSITE, INC.
By:/s/ Xxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
General Counsel
AMERICA ONLINE, INC.
By:/s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President-Business Affairs
ANNEX I TO THE
WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
Incorporated under the Laws of
the State of Delaware
No. ___ CAREINSITE, INC. ____ Warrants
Warrants to Purchase Shares of Common Stock, Par Value $0.01 Per Share
THIS CERTIFIES THAT-____________, or registered assigns (the
"Registered Owner") is the registered owner of the number of Warrants set forth
above (the "Warrants"). Each Warrant entitles the Registered Owner thereof to
purchase one share of the Common Stock, par value $0.01 per share (the "Common
Stock") of CareInsite, Inc. (the "Corporation") at the Warrant Price (as defined
in that certain Warrant Agreement dated September 14, 1999 between the
Corporation and the America Online, Inc. (the "Warrant Agreement")), subject to
the terms and conditions as more particularly set forth in the Warrant
Agreement.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by its duly authorized officers this day of _________,
_____.
________________________________ ________________________________
Chairman of the Board, President Treasurer, Assistant Treasurer,
or Vice President Secretary or Assistant Secretary
THE WARRANTS EVIDENCED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK TO BE ISSUED UPON CONVERSION OF SUCH WARRANTS HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS EITHER (1) SUCH
WARRANTS OR SHARES ARE REGISTERED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS OR (2) AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND LEGAL COUNSEL OF THE HOLDER OF
SUCH WARRANTS OR SHARES (WHICH
COUNSEL IS REASONABLY SATISFACTORY TO THE COMPANY) PROVIDES AN
OPINION TO SUCH EFFECT TO THE COMPANY.
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN A WARRANT
AGREEMENT DATED AS OF SEPTEMBER 14, 1999, BETWEEN THE
CORPORATION AND AMERICA ONLINE, INC. AS IT MAY BE AMENDED FROM
TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER OF
THE WARRANTS EVIDENCED BY THIS CERTIFICATE WILL BE MADE ON THE
BOOKS OF THE COMPANY UNLESS AND UNTIL SUCH RESTRICTIONS SHALL
HAVE BEEN COMPLIED WITH.
FOR VALUE RECEIVED,_________________________________ does hereby
sell, assign and transfer unto___________________________________________
(Please print or type name and address of assignee)
__________________________________ Warrants evidenced by the within Certificate,
and does hereby irrevocably constitute and appoint ________________ attorney to
transfer the said Warrants on the books of the within-named Corporation, with
full power of substitution in the premises.
Dated __________________________.
In presence of: _____________________________________________
________________________________
EXHIBIT A TO THE
WARRANT AGREEMENT
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner ("Subscriber") of the Warrants evidenced by the
Warrant Certificate No. __ (the "Warrant Certificate") hereby irrevocably
exercises _________ Warrants for the purchase of shares of Common Stock, par
value $0.01 per share ("Common Stock") of CAREINSITE, INC. (the "Company"), and
herewith makes payment therefor in the amount of $______, all at the price and
on the terms and conditions specified in the Warrant Agreement dated September
14, 1999 between the Company and America Online, Inc. (the "Warrant Agreement")
and requests that a certificate (or ___ certificates in denominations of shares)
for the shares of Common Stock hereby purchased (and any securities or Other
Property issuable upon such exercise) be issued in the name of and delivered to
Subscriber and, if the number of Warrants being exercised is less than the
number of Warrants represented by the Warrant Certificate of Common Stock
issuable as provided in this Warrant, that a new certificate for the balance of
such Warrants hereunder be delivered to Subscriber in accordance with the
provisions of the Warrant Agreement.
Subscriber hereby represents and warrants as follows:
(a) The Common Stock to be acquired hereunder is being
acquired by Subscriber for investment purposes only
solely for its own account, and not with a view to, or
in connection with, the distribution thereof in
violation of securities laws.
(b) Subscriber understands that the Common Stock has not
been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or under applicable
state securities laws. Subscriber understands and
agrees further that the Common Stock must be held
indefinitely unless it is subsequently registered under
the Securities Act or an exemption from registration
under the Securities Act and applicable state
securities laws covering the sale of the Common Stock
is available. Subscriber understands that legends
stating that the Common Stock have not been registered
under the Securities Act, and setting out or referring
to any other restrictions on transferability and sale
of the Common Stock, will be placed on any and all
documents evidencing the Common Stock.
(c) Subscriber is aware that:
(i) Investment in the Company involves a high
degree of risk, lack of liquidity and
substantial restrictions on transferability
of the Common Stock; and
(ii) No federal or state agency has made any
finding or determination as to the fairness
for investment by the public, nor has made
any recommendation or endorsement, of the
Common Stock.
(d) Subscriber, either directly or indirectly, has
sufficient financial resources available to support the
loss of all of its investment in the Company, and has
no need for liquidity in its investment in the Company.
(e) Subscriber, either itself or through its advisers, is
sophisticated and experienced in investment matters,
and, as a result, Subscriber is in a position to
evaluate an investment in the Company.
(f) Subscriber has been furnished any materials Subscriber
has requested relating to the Company and the Common
Stock, and Subscriber has been afforded the opportunity
to ask questions of the officers of the Company
concerning the Company and the Common Stock.
(g) Subscriber is an "accredited investor" as that term is
defined in Rule 501 (a) of Regulation D under the
Securities Act. (Subscriber should strike this
subparagraph (g) in its entirety if not an "accredited
investor.")
(h) Subscriber, if not an accredited investor, hereby
represents and affirms that (i) Subscriber has a net
worth exceeding ten (10) times Subscriber's investment,
or (ii) Subscriber has either alone or with
Subscriber's professional advisor the capacity to
protect Subscriber's interests in connection with this
transaction, or (iii) Subscriber is able to bear the
economic risk of the investment
A-2
_______________________________________
(Name of Registered Owner)
_______________________________________
(Signature of Registered Owner)
_______________________________________
(Street Address)
_______________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with
the name as written upon the face of the Warrant Certificate
in every particular, without alteration or enlargement or any
change whatsoever.
A-3
