EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of September 14, 1999, among Provident American Corporation, a
Pennsylvania corporation (the "Company"), and the parties who have executed this
Agreement and whose names appear on Schedule I hereto (each party listed on
Schedule I hereto is sometimes individually referred to herein as a "Purchaser"
and all such parties are sometimes collectively referred to herein as the
"Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall mean the Closing Date as defined in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.10 per share.
"Effectiveness Date" the earlier of (i) the tenth day after the Company has
received notice (written or oral) from the Commission that the Commission Staff
will not be reviewing the Registration Statement or has no further comments on
the Registration Statement, or (ii) the 90th day following the Filing Date;
provided, however, that the Effectiveness Date shall be extended to up to the
150th day following the Filing Date if the Initial Registration Statement is not
declared effective by the Commission prior to the 90th day following the Filing
Date due to delays which are solely attributable to the Commission, so long as
the Company responds as promptly as practicable, but in no event later than ten
(10) Business Days, to any comments received from the Commission.
"Effectiveness Period" has the meaning set forth in Section 2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Event" has the meaning set forth in Section 2(d) hereof.
"Filing Date" the fifth (5th) Business Day after the date that the
Commission declares effective the Company's Registration Statement on Form S-4
filed in connection with the merger or reorganization transaction involving the
Company and XxxxxxXxxx.xxx, Inc., but in no event later than March 31, 2000.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c) hereof.
"Indemnifying Party" has the meaning set forth in Section 5(c) hereof.
"Initial Registration Statement" has the meaning set forth in Section 2(a)
hereof.
"Losses" has the meaning set forth in Section 5(a) hereof.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
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"Registrable Securities" means the shares of Common Stock issued or
issuable upon (i) conversion of or with respect to the Securities, (ii) payment
of interest or any other payments in respect of the Securities, (iii) exercise
of the Warrants, and (iv) any shares of the Company's capital stock issued with
respect to (i), (ii) or (iii) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise.
"Registration Delay Payment" has the meaning set forth in Section 2(d)
hereof.
"Registration Statement" means the Initial Registration Statement and any
additional registration statements contemplated by Sections 2(a), 2(b) and 7(d),
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference in
such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities" means the Company's 2% Convertible Debentures issuable
pursuant to the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means special counsel to the Holders.
"Trading Day" means a day on which the Nasdaq (or in the event the Common
Stock is not traded on Nasdaq, such other securities market on which the Common
Stock is listed) is open for trading.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Securities and exercise of the Warrants.
"Underwritten Registration or Underwritten Offering" means a registration
in connection with which securities of the Company are sold to an underwriter
for reoffering to the public pursuant to an effective registration statement.
"Warrants" means the warrants issuable pursuant to the Purchase Agreement.
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2. Registration Requirements
(a) Filing and Effectiveness Obligations. On or prior to the Filing Date,
the Company shall prepare and file with the Commission a Registration Statement
(the "Initial Registration Statement") which shall cover all Registrable
Securities for an offering to be made on a continuous basis pursuant to a
"Shelf" registration statement under Rule 415. The Initial Registration
Statement shall be on Form S-3 or any successor form (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith, subject to the reasonable consent of the original Holders
of the Registrable Securities). The Company shall (i) not permit any securities
other than the Registrable Securities to be included in the Initial Registration
Statement and (ii) use its best efforts to cause the Initial Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event on or prior to the
Effectiveness Date, and to keep such Initial Registration Statement continuously
effective under the Securities Act until the date which is four years after the
date that such Initial Registration Statement is declared effective by the
Commission or such earlier date when all Registrable Securities covered by such
Initial Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144 as determined by counsel to the Company
pursuant to a written opinion letter, addressed to the Holders and the Company's
transfer agent to such effect (the "Effectiveness Period"). The number of shares
of Common Stock initially included in the Initial Registration Statement shall
be no less than 110% of the sum of the number of Securities and Warrants that
are then issuable upon conversion of the Securities (based on the Conversion
Price (as defined in the Securities) as would then be in effect at such time)
and the exercise of the Warrants, without regard to any limitation on the
Holder's ability to convert the Securities or exercise the Warrants.
(b) Underwritten Offering. In addition to the Initial Registration
Statement, at any time when a Registration Statement covering the Registrable
Securities is not effective (during any period in which a Registration Statement
is required to be effective pursuant to the terms hereof), if the Holders of a
majority of the Registrable Securities so elect on or after March 31, 2000, an
offering of Registrable Securities pursuant to such Registration Statement may
be effected on no more than one (1) occasion in the form of an Underwritten
Offering. In such event, and if the managing underwriters advise the Company and
such Holders in writing that in their opinion the amount of Registrable
Securities proposed to be sold in such Underwritten Offering exceeds the amount
of Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) Underwriter. If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering, provided that the Company shall consent to
the inclusion of such investment banker, which consent shall not be unreasonably
withheld. No Holder may participate in any Underwritten Offering hereunder
unless such Holder (i) agrees to sell its Registrable Securities on the basis
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provided in any underwriting agreements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such arrangements.
(d) Penalties. If (i) the Initial Registration Statement covering all the
applicable Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the Commission on or before the
Filing Date or (B) declared effective by the Commission on or before the
applicable Effectiveness Date, (ii) on any day after the Registration Statement
has been declared effective by the Commission (A) sales of all the Registrable
Securities required to be included on a Registration Statement cannot be made
pursuant to the Registration Statement (including, without limitation, because
of a failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, or to register sufficient shares of Common Stock, other than as a
result of not complying with Rule 4460(i)(1)(B) of the Nasdaq National Market),
but excluding any periods during which the Registrable Securities cannot be sold
due to any update or amendment of the Registration Statement pursuant to Section
3(b) hereof, provided that each such period shall not exceed fifteen (15)
Business Days or (B) the Common Stock is not listed or included for quotation on
the National Market System of the Nasdaq Stock Market ("Nasdaq"), the New York
Stock Exchange ("NYSE") or the American Stock Exchange (the "AMEX") after being
so listed or included for quotation or (iii) the Company shall otherwise fail to
file a Registration Statement required by Section 2(a) hereof, (each such event
specified in (i), (ii) and (iii) above, an "Event"), then, as partial relief for
the damages to any Holder by reason of any such delay in or reduction of its
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to
each Holder an amount in cash (a "Registration Delay Payment") equal to the then
outstanding principal amount of the Securities (and, in the case of Holders, the
principal amount of Securities from which such Registrable Securities were
converted) as set forth in Schedule I the Purchase Agreement (the "Aggregate
Price") multiplied by .0125 times the sum of: (i) the number of months (prorated
for partial months) after the end of the Effectiveness Date and prior to the
date the Registration Statement is declared effective by the Commission,
provided, however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Purchasers in the
Registration Statement with respect to information relating to the Purchasers,
or to the failure of the Purchasers to conduct their review of the Registration
Statement pursuant to Section 3(a), or any black-out period relating to an
update or amendment of the Registration Statement; provided, further, that with
respect to Section 2(d)(i)(B) hereof, there shall be excluded from such period
any delays which are solely attributable to the Commission during the 150-day
period following the Filing Date, so long as the Company responds as promptly as
practicable, but in no event later than ten (10) Business Days, to any comments
received from the Commission; (ii) the number of months (prorated for partial
months) that sales cannot be made pursuant to the Registration Statement after
the Registration Statement has been declared effective (including, without
limitation, when sales cannot be made by reason of the Company's failure to
properly supplement or amend the Prospectus in accordance with the terms of this
Agreement, or otherwise, but excluding when such sales cannot be made solely by
reason of any act or omission solely attributable to the Purchasers); or (iii)
the number of months (prorated for partial months) that the Common Stock is not
listed or included for quotation on the Nasdaq, NYSE or AMEX or that trading
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thereon is halted after the Registration Statement has been declared effective.
The Company shall pay any Required Registration Delay Payments to each Holder in
cash on the last Business Day of each month during which an Event has occurred
and is continuing. In the event the Company fails to make a Registration Delay
Payment within ten (10) Business Days of the date such Registration Delay
Payment is due, such Registration Delay Payment shall bear interest at the rate
of 2.0% per month (prorated for partial months) until paid in full.
Notwithstanding the foregoing, if a Purchaser elects to exercise the penalty set
forth in this Section 2(d), such Purchaser shall not be entitled to declare an
Event of Default pursuant to Section 3.1(i) of the Debenture.
(e) Form S-3 Eligibility. The Company represents and warrants that it meets
the registrant eligibility and transaction requirements for the use of Form S-3
(for primary and secondary offerings) for the registration of the sale of
Registrable Securities by the Purchasers and any other Holders and the Company
shall file all reports required to be filed by the Company with the Commission
in a timely manner so as to maintain such eligibility for the use of Form S-3.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Preparation of Registration Statement. Prepare and file with the
Commission on or prior to the Filing Date a Registration Statement on Form S-3
or its successor form (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration shall be on
another appropriate form in accordance herewith (which shall include a Plan of
Distribution substantially in the form of Exhibit A annexed hereto, unless in
connection with an Underwritten Offering) or in connection with an Underwritten
Offering hereunder, such other form agreed to by the Company and by a
majority-in-interest of Holders of Registrable Securities to be covered by such
Registration Statement), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than three (3) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by reference), the
Company shall, if reasonably practicable (i) furnish to the Holders, their
Special Counsel and any managing underwriters, copies of all such documents
proposed to be filed (including documents incorporated by reference), which
documents will be subject to the review of such Holders, their Special Counsel
and such managing underwriters, and (ii) use its best efforts to cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel or any managing underwriters shall
reasonably object, and will not request acceleration of such Registration
Statement without prior notice to such counsel, provided, however, that such
shall not form the basis for penalties under Section 2(d) hereof. The sections
of such Registration Statement covering information with respect to the Holders,
the Holder's beneficial ownership of securities of the Company or the Holders
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by each of the Holders.
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(b) Amendments. (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements as are required to be filed hereunder in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as practicable, but in no event later
than fifteen (15) Business Days, to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and as
promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented. In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement is insufficient to
cover 110% of the Registrable Securities issued or issuable upon conversion of
the Securities and exercise of the Warrants, subject to compliance with Rule
(i)(1)(D) of the Nasdaq National Market, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover 110% of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) Business Days after the necessity therefor arises (based on
the Conversion Price of the Securities and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. The provisions of Section 2(d)
above shall be applicable with respect to such obligation, with the ninety (90)
days running from the day after the date on which the Company reasonably first
determines (or reasonably should have determined) the need therefor.
(c) Notifications. Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters as promptly as possible
(and, in the case of (i)(A) below, not less than five (5) days prior to such
filing and, in the case of (i)(C) below, not later than the first Business Day
after effectiveness) and (if requested by any such Person) confirm such notice
in writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
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the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) if at any time any of
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Suspensions. Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Supplements and Post-Effective Amendments. If requested by any managing
underwriter or the Holders of a majority in interest of the Registrable
Securities to be sold in connection with an Underwritten Offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the written opinion of counsel for the Company (addressed to
counsel to the Holder), violate applicable law.
(f) Copies of Registration Statement. Furnish to each Holder, their Special
Counsel, and any managing underwriters, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Copies of Prospectus. Promptly deliver to each Holder, their Special
Counsel, and any underwriters, without charge, as many copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
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(h) Blue Sky. Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders,
any underwriters and their Special Counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Certificates. Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by applicable law and the
Purchase Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
managing underwriters or Holders may request at least two (2) Business Days
prior to any sale of Registrable Securities.
(j) Supplements and Amendments. Upon the occurrence of any event
contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Listing. Cause all Registrable Securities relating to such Registration
Statement to be listed on Nasdaq and any other securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement, subject to compliance with Rule 4460(i)(1)(D) of the
Nasdaq National Market.
(l) Underwriting Agreement. Enter into such agreements (including an
underwriting agreement in form, scope and substance as is customary in
Underwritten Offerings) and take all such other actions in connection therewith
(including those reasonably requested by any managing underwriters and the
Holders of a majority of the Registrable Securities being sold) in order to
expedite or facilitate the disposition of such Registrable Securities, and
whether or not an underwriting agreement is entered into, (i) make such
representations and warranties to such Holders and such underwriters as are
customarily made by issuers to underwriters in underwritten public offerings,
and confirm the same if and when requested; (ii) in the case of an Underwritten
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Offering obtain and deliver copies thereof to the managing underwriters, if any,
or in the case of non-Underwritten Offerings, if reasonably requested by the
selling Holders (and at the expense of such selling Holders), obtain and deliver
copies thereof to such selling Holders, of opinions of counsel to the Company
and updates thereof addressed to each such underwriter, in form, scope and
substance reasonably satisfactory to any such managing underwriters and Special
Counsel to the selling Holders covering the matters customarily covered in
opinions requested in Underwritten Offerings and such other matters as may be
reasonably requested by such Special Counsel and underwriters; (iii) immediately
prior to the effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, and, in the case of non-Underwritten Offerings, at such
time as the selling Holders may reasonably request (and at the expense of such
selling Holders), obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if required, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to each of the underwriters, if any, in form and substance
as are customary in connection with Underwritten Offerings; (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling Holders and the
underwriters, if any, than those set forth in Section 5 (or such other
provisions and procedures acceptable to the managing underwriters, if any, and
Holders of a majority of Registrable Securities participating in such
Underwritten Offering; and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Registrable Securities
being sold, their Special Counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant to clause
3(1)(i) above and to evidence compliance with any customary conditions contained
in the underwriting agreement or other agreement entered into by the Company.
(m) Due Diligence. Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such Holder, representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that if any information is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information, then prior to delivery of
such information, the Company and the Holders shall enter into a confidentiality
agreement reasonably acceptable to the Company and the Holders providing that
such information shall be kept confidential, unless (i) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities (provided, however, that the
Company shall be given notice of any such pending disclosure so that the Company
may seek a protective order); (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
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(n) Earnings Statement. Comply in all material respects with all applicable
rules and regulations of the Commission and make generally available to its
securityholders earning statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 not later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the Registration Statement, which statement shall
conform to the requirements of Rule 158.
(o) Information. The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request, and such shall not form
the basis for penalties pursuant to Section 2(d) hereof. Each Holder shall
furnish to the Company information regarding the Holder and the distribution of
he Registrable Securities as is required, in the opinion of counsel to the
Holder, by applicable law to be disclosed in the Registration Statement and
Prospectus.
The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Holder is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Holder prior to making such disclosure, and
allow the Holder, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
11
notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Securities Purchase
Agreement in connection with any sale of Registrable Securities with respect to
which an Holder has entered into a contract for sale prior to the Holder's
receipt of a notice from the Company of the happening of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) and for
which the Holder has not yet settled.
(p) Responses to the Commission. The Company agrees to respond fully and
completely to any and all comments on a Registration Statement received from the
Commission staff as promptly as possible but, for non-Underwritten Offerings, in
no event later than ten (10) Business Days of the receipt of such comments,
regardless of whether such comments are in oral or written form.
(q) Confirmation of Effectiveness. Within two (2) Business Days after a
Registration Statement which covers applicable Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that such Registration Statement
has been declared effective by the Commission in the form attached hereto as
Exhibit B.
(r) Black-out Periods. Subject to the last sentence of this Section 3(r),
the Company may by written notice require that the Holders immediately cease
sales of Registrable Securities (for a period not to exceed thirty (30)
consecutive days in any one instance and for a period not to exceed seventy-five
(75) calendar days in any twelve-month period) pursuant to a Registration
Statement at any time that (i) the Company becomes engaged in a business
activity or negotiation which is not disclosed in a Registration Statement (or
the prospectus included therein) which the Company reasonably believes must be
disclosed therein under applicable law and which the Company desires to keep
confidential for business purposes, (ii) the Company determines that a
particular disclosure so determined to be required to be disclosed therein would
be premature or would adversely affect the Company or its business or prospects
or (iii) the Registration Statement can no longer be used under the existing
12
rules and regulations promulgated under the Securities Act (each of (i), (ii) or
(iii), a "Material Condition"). The Company shall not be required to disclose to
the Holders which of the reasons specified in (i), (ii) or (iii) above is the
basis for requiring a suspension of sales due to the occurrence of a Material
Condition. The Company will use its commercially reasonable best efforts to
ensure that the use of the Registration Statement (and the prospectus included
therein) may be resumed as soon as it is practicable. The Company may not
suspend sales of Registrable Securities under a Registration Statement pursuant
to this Section 3(r) more than three times during any twelve-month period.
4. Registration Expenses
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company, other than with
regard to an Underwritten Offering and whether or not the Registration Statement
is filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with Nasdaq and each other
securities exchange or market on which Registrable Securities are required
hereunder to be listed and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the Holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, and the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required hereunder.
Notwithstanding anything contained in this Section 4 to the contrary, the
Holders shall be responsible for all fees and expenses relating to an
Underwritten.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
13
applicable law, from and against any and all joint or several losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, "Losses"), as incurred, arising out of or
relating to (i) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made),
except to the extent, but only to the extent, that such untrue statements or
omissions are based solely upon and in conformity with information regarding
such Holder furnished in writing to the Company by such Holder expressly for use
therein, which information was reasonably relied on by the Company for use
therein or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of prospectus or in any
amendment or supplement thereto (provided that the Company amended any
disclosure with respect to the method of distribution upon written notice from
the Holders that such section of the Prospectus should be revised in any way) or
(ii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of Registrable Securities. The Company shall not, however, be liable for
any Losses to any Holder with respect to any untrue or alleged untrue statement
of material fact or omission or alleged omission of material fact if such
statement or omission was made in a preliminary Prospectus and such Holder did
not receive a copy of the final Prospectus (or any amendment or supplement
thereto) at or prior to the confirmation of the sale of the Registrable
Securities in any case where such delivery is required by the Securities Act and
the untrue or alleged untrue statement of material fact or omission or alleged
omission of material fact contained in such preliminary Prospectus was corrected
in the final Prospectus (or any amendment or supplement thereto), unless the
failure to deliver such final Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 3(g) of this Agreement. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
14
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus; provided, however, that the indemnity
agreement contained in this Section 5(b) shall not apply to amounts paid in
settlement of any Losses if such settlement is effected without the prior
written consent of such Holder; provided, further, that such Holder agrees its
consent to any such settlement will not be unreasonably withheld if such Holder
will not be liable for any payments or incur any out-of-pocket expenses with
respect to such settlement. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided,
however, that the failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the reasonable
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
15
All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of a detailed written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
court of competent jurisdiction to enforce such indemnification in accordance
with its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms. In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the net proceeds received by such Holder upon sale of
the Registrable Securities pursuant to the Registration Statement giving rise to
such contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
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6. Rule 144
As long as any Holder owns Registrable Securities, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or l5(d) of the Exchange Act and to
promptly furnish the Holders with true and complete copies of all such filings.
As long as any Holder owns Registrable Securities, if the Company is not
required to file reports pursuant to Section 13(a) or l5(d) of the Exchange Act,
it will prepare and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Person to sell Underlying Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions referred to in the Purchase Agreement. Upon the request of
any Holder, the Company shall deliver to such Holder a written certification of
a duly authorized officer as to whether it has complied with such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder of any
of their obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by law
and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, except as provided herein
or in Schedule 2.1(r) of the Purchase Agreement and except as may be provided as
a result of the merger or the reorganization between the Company and
XxxxxxXxxx.xxx, Inc. (with respect to the lesser of (i) 1,000,000 shares of
Common Stock or (ii) the number of shares of Common Stock underlying
XxxxxxXxxx.xxx, Inc. warrants and options approved under the XxxxxxXxxx.xxx,
Inc. stock option plan) enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(r) of the Purchase Agreement and except as may be provided as a result of
the merger or the reorganization between the Company and XxxxxxXxxx.xxx, Inc.
(with respect to the lesser of (i) 1,000,000 shares of Common Stock or (ii) the
17
number of shares of Common Stock underlying XxxxxxXxxx.xxx, Inc. warrants and
options approved under the XxxxxxXxxx.xxx, Inc. stock option plan), neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subordinated in all respects to the rights in
full of the Holders set forth in Section 2 herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement. This Agreement,
together with the Purchase Agreement, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
(c) No Piggyback on Registrations. Except as disclosed on Schedule 2.1(r)
of the Purchase Agreement, neither the Company nor any of its securityholders
(other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statements and the Company shall not after
the date hereof enter into any agreement providing such right to any of its
securityholders, unless the right so granted is subordinated in all respects to
the rights in full of the Holders set forth herein, and is not otherwise in
conflict or inconsistent with the provisions of this Agreement.
(d) Piggy-Back Registrations. Except as provided herein if, at any time
when there is not an effective Registration Statement covering the Registrable
Securities, the Company shall determine to prepare and file with the Commission
a registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Holder of Registrable Securities written
notice of such determination and, if within ten (10) days after receipt of such
notice, any such Holder shall so request in writing, (which request shall
specify the Registrable Securities intended to be disposed of by the
Purchasers), the Company will use reasonable efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Holder, subject to piggy-back rights as set
forth on Schedule 2.1(r) to the extent requisite to permit the disposition of
the Registrable Securities so to be registered, provided that if at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Securities being
registered pursuant to this Section 7(d) for the same period as the delay in
registering such other securities. The Company shall include in such
registration statement all or any part of such Registrable Securities such
18
Holder requests to be registered; provided, however, that the Company shall not
be required to register any Registrable Securities pursuant to this Section 7(d)
that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the
case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in such registration statement, then if the Company after
consultation with the Underwriter's representative should reasonably determine
that the inclusion of such Registrable Securities would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
Registrable Securities then proposed to be sold by the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration
statement shall be reduced pro rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration) or (y) none
of the Registrable Securities of the Holders shall be included in such
registration statement if the Company, after consultation with the
underwriter(s), recommends the inclusion of none of such Registrable Securities;
in each case subject to piggy-back rights as are set forth on Schedule 2.1(r).
Notwithstanding the foregoing, the Company shall not file any registration
statement under the Securities Act (other than on Form S-4 or Form S-8) relating
to the offer and sale of any equity securities of the Company, or offer or sell
any equity securities of the Company in a transaction exempt from registration
pursuant to Regulation S under the Securities Act, until such time as the
Initial Registration Statement has been effective for a period of sixty (60)
Trading Days, which period shall be tolled if the effectiveness of the Initial
Registration Statement is suspended for any reason whatsoever.
(e) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
at least two thirds of the then outstanding Registrable Securities; provided,
however, that for the purposes of this sentence, Registrable Securities that are
owned, directly or indirectly, by the Company, or an Affiliate of the Company
are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(f) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 5:00 p.m.
eastern time where such notice is to be received), or the first Business Day
following such delivery (if received after 5:00 p.m. eastern time where such
notice is to be received) or (b) on the second Business Day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications are (i) if to the Company to Provident
American Corporation, 0000 Xxxxxx Xxxx, Xxxxxxxxxx, XX 00000, Attn: President,
fax no. (000) 000-0000, with copies to Blank Rome Xxxxxxx & XxXxxxxx LLP, One
00
Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000, Attn: Xxxxx X. Xxxxxx, fax no. (215)
000-0000 and (ii) if to any Purchaser to the address set forth on Schedule I
hereto with copies to those specified on the signature pages hereto and to Akin,
Gump, Strauss, Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attn: Xxxxx Xxxx, Esq., fax no. (000) 000-0000 or such other address as
may be designated in writing hereafter, in the same manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of the Holders
of at least 90% of the outstanding Registrable Securities. Each Holder may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement. In addition, the rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and assigns.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(i) Governing Law. The corporate laws of the Commonwealth of Pennsylvania
shall govern all issues concerning the relative rights of the Company and the
Purchasers as its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consent to process being served in any such suit, action or proceeding by
20
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
(j) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
(n) Revision of SEC Position on Warrants. In the event the rules and
regulations of the Commission or the policies of the staff of the Commission are
modified and as a result thereof the Company determines in good faith that it
may be practicable and in the interests of the Company and the Holders to
register the exercise of the Warrants so that the Warrant Shares may be freely
resold without maintaining an effective registration statement under the
Securities Act for resales, the Company and the Holders agree to cooperate in
good faith to effect such amendments to this Agreement as may be appropriate to
provide that the Company may fulfill its obligations hereunder with respect to
the Warrants and the Warrant Shares by maintaining an effective registration
statement under the Securities Act covering the exercise of the Warrants rather
than the resale of the Warrant Shares.
21
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
PROVIDENT AMERICAN CORPORATION
By:______________________________________
Name:
Title:
22
XXXXX XXXXXXX STRATEGIC GROWTH FUND, LTD.
By: Xxxxx Xxxxxxx Asset Management, LLC
By:______________________________________
Name:
Title:
XXXXX XXXXXXX STRATEGIC GROWTH FUND, L.P.
By: Xxxxx Xxxxxxx Capital, LLC
its general partner
By:______________________________________
Name:
Title:
XXXXX XXXXXXX - XXX INVESTMENTS LLC
By:______________________________________
Name:
Title:
LB I GROUP INC.
By:______________________________________
Name:
Title:
Royal Bank of Canada
By its Agent
RBC Dominion Securities
By:______________________________________
Name:
Title:
By:______________________________________
Name:
Title:
SCHEDULE I
Company
Provident American Corporation
0000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
Purchasers:
Xxxxx Xxxxxxx Strategic Growth Fund, L.P.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Xxxxx Xxxxxxx Strategic Growth Fund, Ltd.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
Xxxxx Xxxxxxx - XXX Investments LLC
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Fax: (000) 000-0000
LB I Group Inc.
c/x Xxxxxx Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attn: Xxxxx Xxxxxxxxx
Fax: (000) 000-0000
Royal Bank of Canada
by its Agent
RBC Dominion Securities
Xxx Xxxxxxx Xxxxx - 0xx Xxxxx
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000 X.X.X.
Attn: Vice President, Global Middle Office
Fax: (000) 000-0000
EXHIBIT A
PLAN OF DISTRIBUTION
The Company is registering the Registrable Securities on behalf of the
Holder. As used herein, the term Holder means the holder of the Registrable
Securities and includes donees and pledgees selling Registrable Securities
received from a named Holder after the date of this Prospectus. All costs,
expenses and fees in connection with the Initial Registration Statement of the
Registrable Securities offered hereby will be borne by the Company, excluding
legal fees of counsel to the Holders. Brokerage commissions and similar selling
expenses, if any, attributable to the sale of Registrable Securities will be
borne by the Holders. Sales of Registrable Securities may be effected by Holders
from time to time in one or more types of transactions (which may include block
transactions) on the OTC Bulletin Board, in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the Registrable Securities, through short sales of Registrable Securities, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Such transactions may or may not involve brokers
or dealers. The Holders have advised the Company that they have not entered into
any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinated broker acting in connection with the proposed sale of
Registrable Securities by the Holders.
The Holders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions,
broker-dealers or other financial institutions may engage in short sales of the
Registrable Securities or of securities convertible into or exchangeable for the
Registrable Securities in the course of hedging positions they assume with
Holders. The Holders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealers or other financial institutions of Registrable Securities
offered by this Prospectus, which Registrable Securities such broker-dealer or
other financial institution may resell pursuant to this Prospectus (as amended
or supplemented to reflect such transaction).
The Holders may effect such transactions by selling Registrable Securities
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from Holders and/or the purchasers of
Registrable Securities for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Holders and any broker-dealers that act in connection with the sale of
Registrable Securities might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the Registrable Securities sold
by them while acting as principals might be deemed to be underwriting discounts
or commissions under the Securities Act. The Company has agreed to indemnify
each Holder, and each Holder, severally and not jointly has agreed to indemnify
the Company against certain liabilities, including liabilities arising under the
Securities Act. The Holders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the
Registrable Securities against certain liabilities, including liabilities
arising under the Securities Act.
The Holders may be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act.
The Holders will be subject to the prospectus delivery requirements of the
Securities Act. The Company has informed the Holders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales in the market.
Holders also may resell all or a portion of the Registrable Securities in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
Upon the Company being notified by a Holder that any material arrangement
has been entered into with a broker-dealer for the sale of Registrable
Securities through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
o the name of each such Holder and of the participating broker-dealer(s);
o the number of Registrable Securities involved;
o the initial price at which such Registrable Securities were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to verify
the information set out or incorporated by reference in this Prospectus;
and
o other facts material to the transactions.
In addition, upon the Company being notified by a Holder that a donee or pledgee
intends to sell more than 1,000 Registrable Securities, a supplement to this
Prospectus may be filed.
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: Provident American Corporation
Ladies and Gentlemen:
We are counsel to Provident American Corporation, a Pennsylvania
corporation (the "Company"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "Purchase Agreement") entered
into by and among the Company and the buyers named therein (collectively, the
"Holders") pursuant to which the Company issued to the Holders its 2%
Convertible Debentures convertible into shares of the Company's common stock,
par value $.10 per share (the "Common Stock"), and Warrants (the "the Warrants")
to acquire shares of Common Stock. Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Debentures and exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on
_______________, 1999, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the "Registration Statement") with the Securities
and Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
