Contract
Exhibit 2
THIS WARRANT
AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
OR QUALIFIED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND ANY SUCH APPLICABLE STATE LAWS.
THIS WARRANT
AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF (1) ARE SUBJECT TO A CERTAIN
INVESTOR RIGHTS AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE ISSUER HEREOF AND
INITIAL HOLDER HEREOF (THE “INVESTOR RIGHTS AGREEMENT”) THAT
RESTRICTS CERTAIN TRANSFERS OF SUCH SECURITIES AND (2) MAY BE SUBJECT TO CERTAIN
RIGHTS AND OBLIGATIONS PROVIDED FOR IN THAT CERTAIN REGISTRATION RIGHTS AGREEMENT
OF EVEN DATE HEREWITH BETWEEN THE ISSUER HEREOF AND THE INITIAL HOLDER HEREOF
(THE “REGISTRATION RIGHTS AGREEMENT”). A COPY OF SUCH AGREEMENTS
SHALL BE FURNISHED WITHOUT CHARGE BY THE ISSUER HEREOF TO THE HOLDER HEREOF
UPON WRITTEN REQUEST.
| Xx. 0000 - 00 | Xxxx xx Xxxxxxxx: May 13, 2005 |
WARRANT
TO PURCHASE
SHARES OF COMMON STOCK
OF
HEALTHAXIS INC.
THIS
IS TO CERTIFY that, for value received, Tak Investments, Inc., a Delaware corporation
(the “Holder”) is entitled to purchase from Healthaxis Inc., a Pennsylvania
corporation (the “Company”), and the Company is entitled to
require that the Holder purchase at any time from the date of issuance and on
or before the Expiration Date, up to 3,333,333 shares of Common Stock of the
Company (as adjusted pursuant to Section 2 of this Warrant) at the Exercise
Price on the terms and subject to the conditions hereinafter set forth.
Capitalized
terms used herein without definition shall have the meanings set forth in Section 8
of this Warrant.
1.
Exercise of Warrant; Company Put Rights.
(a)
Subject to the terms and conditions set forth herein, the Holder shall have
the right, at the Holder’s option, to exercise this Warrant, in whole or
in part, up to an aggregate of 2,222,222 shares of Common Stock, at any time
during the period commencing on the Issue Date and ending on the Expiration
Date. To exercise this Warrant, the Holder shall deliver to the Company (i) a
notice of exercise in the form attached hereto (the “Notice of Exercise”)
duly completed and executed, (ii) an amount in cash equal to the Exercise
Price, (iii) this Warrant; and (iv) such documentation as the Company
may
reasonably
require in connection with establishing an exemption from registration under
federal and state securities law for the issuance of shares of Common Stock
to Holder upon the exercise hereof, including, without limitation, an investor
questionnaire, and a letter of securities law representations and warranties
concerning Holder and Holder’s investment in such securities. At the option
of the Holder, payment of the Exercise Price shall be made: (A) by wire
transfer of funds to an account in a bank located in the United States designated
by the Company for such purpose; (B) by certified or official bank check
payable to the order of the Company; or (C) a combination of such methods.
(b)
Upon receipt of the required deliveries, the Company shall, as promptly as practicable
and no later than three (3) business days after receipt of the Notice of Exercise,
cause to be issued and delivered to the Holder, subject to the terms of the
Investor Rights Agreement, a certificate or certificates representing shares
of Common Stock equal in the aggregate to the number of shares of Common Stock
specified in the Notice of Exercise. The shares of Common Stock so purchased
shall be deemed to be issued to the Holder, as the record owner of such shares,
as of the close of business on the Exercise Date. The Company shall pay all
reasonable expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of stock certificates pursuant to this Section 1.
(c)
Subject to the terms and conditions otherwise set forth herein, the Company
shall have the right, at its option, to compel the exercise of this Warrant,
in whole or in part and from time to time:
(i)
with respect to not more than 2,222,222 shares of Common Stock, at any time
during the period commencing six months after the Issue Date and ending on the
Expiration Date if, and only if:
(A)
at the time of the exercise of this Warrant, there are no actions, suits, proceedings,
claims, complaints, disputes, arbitrations or investigations (collectively,
“Litigation”) pending or, to the knowledge of the Company or any of
its subsidiaries, threatened, at law, in equity, in arbitration or before any
governmental authority against the Company or any of its subsidiaries, such
that a loss contingency in excess of $1,000,000 is required or could reasonably
be anticipated to be required (provided, that any such amount shall be exclusive
of any amounts reasonably expected to be paid by any insurance company on the
Company’s or any Company subsidiary’s behalf);
(B)
the Company shall use the proceeds of such compelled exercise of this Warrant
pursuant to this Section 1(c)(i) exclusively to effectuate, in whole or in part,
in whole or in part, an acquisition of another entity or for another business
purpose (in either case, a “Permitted Business Purpose”), in either
case as approved by the Board of Directors of the Company;
(C)
at the time of the exercise of this Warrant, the Company is not the subject
of, and has not been the subject of, any voluntary or involuntary bankruptcy,
receivership or other insolvency proceedings and has not entered into an assignment
or other arrangement for the benefits of its creditors; and
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(D)
the Board of Directors of the Company, including the director designee(s) of
the initial Holder (to the extent any such designee(s) serve on the Board of
Directors at the time of the consideration of the Permitted Business Purpose
by the Board of Directors), unanimously agrees to compel the exercise of this
Warrant;
(ii)
with respect to not more than an additional 1,111,111 shares of Common Stock,
at any time during the period commencing on the Issue Date and ending on the
Expiration Date if, and only if:
(A)
at the time of the exercise of this Warrant, there is no Litigation pending
or, to the knowledge of the Company or any of its subsidiaries, threatened,
at law, in equity, in arbitration or before any governmental authority against
the Company or any of its subsidiaries, such that a loss contingency in excess
of $1,000,000 is required or could reasonably be anticipated to be required
(provided, that any such amount shall be exclusive of any amounts reasonably
expected to be paid by any insurance company on the Company’s or any Company
subsidiary’s behalf);
(B)
the Company shall use the proceeds of such compelled exercise of this Warrant
pursuant to this Section 1(c)(ii) exclusively to effectuate, in whole or in
part, a Permitted Business Purpose as approved by the Board of Directors;
(C)
at the time of the exercise of this Warrant, the Company is not the subject
of, and has not been the subject of, any voluntary or involuntary bankruptcy,
receivership or other insolvency proceedings and has not entered into an assignment
or other arrangement for the benefits of its creditors; and
(D)
the Board of Directors of the Company, including the director designee(s) of
the initial Holder (to the extent any such designee(s) serve on the Board of
Directors at the time of the consideration of the Permitted Business Purpose
by the Board of Directors), unanimously agrees to compel the exercise of this
Warrant.
In the event
of the Company’s election to exercise all or a portion of its rights pursuant
to this Section 1(c), the Holder shall deliver, within 5 business days of its
receipt of the notice specified above, to the Company the Exercise Price, the
Warrant, such documentation with respect to the establishment of an exemption
from registration under federal and state securities laws for the issuance of
shares of Common Stock to Holder, and the Company shall promptly thereafter
deliver to the Holder the shares of Common Stock with respect to which this
Warrant is exercised. The Company shall, as promptly as practicable and no later
than three (3) business days after receipt of the Exercise Price, cause to be
issued and delivered to the Holder, subject to the terms of the Investor Rights
Agreement, a certificate or certificates representing shares of Common Stock
equal in the aggregate to the number of shares of Common Stock specified in
the Notice of Exercise. Such shares of Common Stock shall be deemed to be issued
on the Exercise Date. At the option of Holder, payment of the Exercise Price
shall be made: (A) by wire transfer of funds to an account in a bank located
in the United States designated by the Company for that purpose; (B) by certified
or official bank check payable to the order of the Company; or (C) a combination
of such methods.
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2.
Adjustment of Exercise Price and Number of Shares. The Exercise Price
and the number of shares of Common Stock obtainable upon exercise of this Warrant
shall be subject to adjustment from time to time as provided in this Section 2.
(a)
If the Company at any time after the Issue Date: (i) pays or makes a stock dividend
on its Common Stock in shares of Common Stock, (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) issues any shares
of Common Stock by reclassification of shares of Common Stock, or (iv) effects
a reverse stock split of Common Stock, then this Warrant shall thereafter be
exercisable for that number of shares that would have derived had the Warrant
been exercised immediately prior to the events listed in (i), (ii), (iii) or
(iv) above (and the Exercise Price thereof shall be correspondingly adjusted).
In the case of a subdivision or re-classification, any adjustment made pursuant
to this Section 2(a) shall become effective immediately after the effective
date of such subdivision or re-classification. Such adjustments shall be made
successively whenever any event listed above shall occur.
(b)
If at any time after the Issue Date, the Common Stock issuable upon the exercise
of the Warrant is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification, exchange,
substitution or otherwise, and other than a capital reorganization, merger or
consolidation (the adjustment for which is provided for in Section 2(c)), in
any such event the Holder shall have the right thereafter to exercise this Warrant
for stock into the kind and amount of stock and other securities and property
receivable in connection with such recapitalization, reclassification or other
change that it would have been entitled to receive had it exercised this Warrant
immediately prior to such recapitalization, reclassification, exchange, substitution
or other event, all subject to further adjustments as provided herein or with
respect to such other securities or property by the terms thereof (and the Exercise
Price of this Warrant shall be correspondingly adjusted).
(c)
If at any time after the Issue Date, the Common Stock is converted into other
securities or property, whether pursuant to a capital reorganization, merger,
consolidation or otherwise (other than a recapitalization, reclassification,
subdivision, exchange or substitution of shares provided for in Section 2(b)),
as a part of such transaction, provision shall be made so that the Holder shall
thereafter be entitled to receive upon exercise of this Warrant the number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock deliverable upon conversion would have been entitled
to receive in connection with such transaction, subject to adjustment in respect
of such stock or securities by the terms thereof (and the Exercise Price of
this Warrant shall be correspondingly adjusted). To the extent applicable, appropriate
adjustment shall be made in the application of the provisions of this Section
2 with respect to the rights of the Holder after such transaction to the end
that the provisions of this Section 2 (including adjustment to the number of
shares issuable upon exercise of the Warrant and the adjustment of the Exercise
Price thereof) shall be applicable after that event and be as nearly equivalent
as practicable.
(d)
In case the Company shall fix a payment date for the making of a distribution
to all holders of Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing corporation)
of evidences of indebtedness or assets (other than cash dividends or cash distributions
payable out of consolidated earnings or earned surplus or dividends or distributions
referred to in Section 2(a)), or subscription rights or
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warrants,
the Exercise Price to be in effect after such payment date shall be determined
by multiplying the Exercise Price in effect immediately prior to such payment
date by a fraction, the numerator of which shall be the total number of shares
of Common Stock outstanding multiplied by the Market Price (as defined below)
per share of Common Stock immediately prior to such payment date, less the fair
market value (as determined by the Company’s Board of Directors in good
faith) of said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the total
number of shares of Common Stock outstanding multiplied by such Market Price
per share of Common Stock immediately prior to such payment date. “Market
Price” as of a particular date (the “Valuation Date”) shall mean
the following: (i) if the Common Stock is then listed on a national stock exchange,
the Market Price shall be the closing sale price of one share of Common Stock
on such exchange on the last trading day prior to the Valuation Date, provided
that if such stock has not traded in the prior ten (10) trading sessions, the
Market Price shall be the average closing price of one share of Common Stock
in the most recent ten (10) trading sessions during which the Common Stock has
traded; (ii) if the Common Stock is then included in The Nasdaq Stock Market,
Inc. (“Nasdaq”), the Market Price shall be the closing sale price
of one share of Common Stock on Nasdaq on the last trading day prior to the
Valuation Date or, if no such closing sale price is available, the average of
the high bid and the low ask price quoted on Nasdaq as of the end of the last
trading day prior to the Valuation Date, provided that if such stock has not
traded in the prior ten (10) trading sessions, the Market Price shall be the
average closing price of one share of Common Stock in the most recent ten (10)
trading sessions during which the Common Stock has traded; (iii) if the Common
Stock is then included in the Over-the-Counter Bulletin Board, the Market Price
shall be the closing sale price of one share of Common Stock on the Over-the-Counter
Bulletin Board on the last trading day prior to the Valuation Date or, if no
such closing sale price is available, the average of the high bid and the low
ask price quoted on the Over-the-Counter Bulletin Board as of the end of the
last trading day prior to the Valuation Date, provided that if such stock has
not traded in the prior ten (10) trading sessions, the Market Price shall be
the average closing price of one share of Common Stock in the most recent ten
(10) trading sessions during which the Common Stock has traded; and (iv) if
the Common Stock is then included in the “pink sheets,” the Market
Price shall be the closing sale price of one share of Common Stock on the “pink
sheets” on the last trading day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and the low ask
price quoted on the “pink sheets” as of the end of the last trading
day prior to the Valuation Date, provided that if such stock has not traded
in the prior ten (10) trading sessions, the Market Price shall be the average
closing price of one share of Common Stock in the most recent ten (10) trading
sessions during which the Common Stock has traded. The Board of Directors of
the Company shall respond promptly, in writing, to an inquiry by the Holder
prior to the exercise hereunder as to the Market Price of a share of Common
Stock as determined by the Board of Directors of the Company.
(e)
An adjustment to the Exercise Price shall become effective immediately after
the payment date in the case of each dividend or distribution and immediately
after the effective date of each other event which requires an adjustment.
(f)
Holder, by accepting the benefits of this Warrant, agrees that the number of
shares for which this Warrant is exercisable shall be subject to adjustment
or reduction as provided in this Section 2.
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(g)
(i) Within three (3) business days of any adjustment of the number of shares
issuable upon exercise hereof, the Company shall give written notice thereof
to the Holder, setting forth in reasonable detail and certifying the calculation
of such adjustment.
(ii)
The Company shall give written notice to the Holder at least fifteen (15) days
prior to the date on which any merger or reclassification provided for in Section
2(c) hereof shall take place.
3.
Reservation. The Company shall, at all times prior to the Expiration
Date, reserve and keep available, solely for issuance and delivery upon the
exercise of this Warrant, a number of authorized shares of Common Stock equal
to the number of shares issuable from time to time upon exercise of this Warrant.
4.
Fully Paid Stock. The Company covenants that the shares of Common Stock
represented by each and every certificate for its Common Stock to be delivered
on the exercise of the purchase rights herein shall, at the time of such delivery,
and upon such payment in full of the Exercise Price for each share of Common
Stock being exercised,be duly authorized, validly issued and outstanding and
fully paid and nonassessable.
5.
Restrictions on Transfer. Holder, by acceptance hereof, agrees that the
transfer of this Warrant and the shares issuable upon exercise of the Warrant
are subject to the provisions of the Investor Rights Agreement, and that this
Warrant and the shares issuable upon exercise of the Warrant and the holders
thereof shall be entitled to all rights and benefits accorded thereto and subject
to all the restrictions and obligations imposed thereon in the Investor Rights
Agreement.
6.
Partial Exercise or Purchase. If this Warrant is exercised or purchased
in part only, the Holder shall be entitled to receive a new Warrant, issued
at the Company’s expense, registered in the name of the Holder evidencing
the right to purchase the aggregate number of shares of Common Stock for which
this Warrant was not exercised or purchased.
7.
No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu
of any fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the difference between the Market
Price and the Exercise Price multiplied by such fraction.
8.
Definitions.
In
addition to the terms defined elsewhere in this Warrant, the following terms
shall have the meanings set forth below:
“Common
Stock” means the Company’s common stock, par value $.10 per share.
“Exercise
Date” means the date on which this Warrant is exercised by the Holder
pursuant to the terms hereof.
“Exercise
Price” means $2.25 per share of Common Stock, subject to adjustment
as provided herein.
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“Expiration
Date” shall mean 5:00 p.m., Dallas, Texas time, on the second anniversary
of the effective date of registration pursuant to the Securities Act of the
shares of Common Stock issued or issuable upon exercise of this Warrant.
“Holder”
shall mean the person in whose name this Warrant is registered on the books
of the Company maintained for such purpose.
“Investor
Rights Agreement” means the Investor Rights Agreement, dated as of
May 13, 2005, by and among the Company and the initial Holder.
“Issue
Date” shall mean the date of issuance of this Warrant.
“Person”
shall mean any individual, sole proprietorship, partnership, joint venture,
unincorporated organization, association, corporation, trust, institution, public
benefit corporation, entity or government.
“Registration
Rights Agreement” means the Registration Rights Agreement, dated as
of May 13, 2005, by and among the Company and the initial Holder.
“Securities
Act” shall mean the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, all as in effect from time to time.
“Warrant”
means this Warrant and all warrants hereafter issued in exchange or substitution
for this Warrant.
9.
Replacement Warrants. If this Warrant is mutilated, lost, stolen or destroyed,
the Company may issue a new Warrant of like date, tenor and denomination and
deliver the same in exchange and substitution for and upon surrender and cancellation
of the mutilated Warrant, or in lieu of the Warrant lost, stolen or destroyed,
upon receipt of evidence satisfactory to the Company of the loss, theft or destruction
of such Warrant.
10.
Warrant Holder Not a Shareholder. The Holder shall not be entitled to
vote or receive dividends or be deemed the holder of the Common Stock or any
other securities that may at any time be issuable on the exercise hereof for
any purpose, nor shall anything contained herein be construed to confer upon
the Holder, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any corporate
action (whether upon any recapitalization, issuance of stock, reclassification
of stock, change of par value, or change of stock to no par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.
11.
Identity of Transfer Agent. The Transfer Agent for the Common Stock is
Mellon Investor Services LLC. Upon the appointment of any subsequent transfer
agent for the Common Stock or other shares of the Company’s capital stock
issuable upon the exercise of the rights of purchase represented by the Warrant,
the Company will mail to the Holder a statement setting forth the name and address
of such transfer agent.
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12.
Registration Rights. The initial Holder of this Warrant is entitled to
the benefit of certain registration rights with respect to the shares of Common
Stock issuable upon the exercise of this Warrant as provided in the Registration
Rights Agreement, and any subsequent Holder hereof shall be entitled to such
rights to the extent provided in the Registration Rights Agreement.
13.
Notices. Except as otherwise expressly provided herein, any notices,
consents, waivers or other communications required or permitted to be given
under this Warrant 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 5:00 p.m. eastern
time (“ET”) where such notice is received) or the first business day
following such delivery (if received after 5:00 p.m. ET 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. Any communications shall be addressed (a) to the Company,
at its principal executive offices and (b) to the Holder, at the Holder’s
address as it appears in the records of the Company (unless otherwise indicated
by the Holder).
14.
Severability. Whenever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective under applicable law, but if
any provision of this Warrant is held to be prohibited by or invalid under applicable
law in any jurisdiction, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating any other provision
of this Agreement.
15.
Captions; Governing Law. The descriptive headings of the various sections
of this Warrant are for convenience only and shall not affect the meaning or
construction of the provisions hereof. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be governed by
the internal law of the Commonwealth of Pennsylvania, without giving effect
to any choice of law or conflict of law provision or rule. Any dispute, difference,
controversy or claim arising in connection with or related or incidental to
a matter arising under this Warrant shall be finally settled using the arbitration
provisions set forth in Section 10.8 of the Stock and Warrant Purchase Agreement,
dated as of February 23, 2005, between the Company and the initial Holder.
16.
Waivers and Amendments. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing signed
by the party against whom enforcement of the same is sought.
17.
Successors. All the covenants and provisions hereof by or for the benefit
of the Holder shall bind and inure to the benefit of its respective successors
and assigns hereunder.
18.
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then such action
may be taken or such right may be executed on the next succeeding day not a
legal holiday.
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IN
WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly
authorized officers and to be dated this 13th day of May, 2005.
| HEALTHAXIS INC. | |||
| By: | /s/ Xxxxx X. XxXxxx | ||
| |
|||
| Xxxxx X. XxXxxx, Chief Executive Officer | |||
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NOTICE OF EXERCISE
Healthaxis
Inc.
The Towers at Xxxxxxxx Square
0000 X. X’Xxxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
The
undersigned, __________________________________, pursuant to the provisions
of Warrant No. 2005-1 issued on May 13, 2005, hereby elects to purchase _____________
shares of common stock of Healthaxis Inc. covered by the Warrant described herein.
Dated: _________________
| Signature: | ||
| |
||
| Address: | ||
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