Execution Copy
AMENDMENT TO
SECURITIES PURCHASE AGREEMENT
THIS AMENDMENT TO SECURITIES PURCHASE AGREEMENT (this
"Agreement") is dated as of September 28, 2000, among HealthAxis Inc., a
Pennsylvania corporation (the "Company"), and the various purchasers identified
and listed on Schedule I hereto (each referred to herein as a "Purchaser" and,
collectively, the "Purchasers").
WHEREAS, pursuant to a Securities Purchase Agreement, dated as
of September 14, 1999, by and among the Company and the purchasers named therein
(the "Purchase Agreement"), the Company issued and sold to certain of the
Purchasers an aggregate of $27,500,000 principal amount of 2% Convertible
Debentures due September 14, 2002 (each, a "Debenture" and collectively, the
"Debentures"), and warrants (each, a "Warrant" and collectively, the "Warrants")
to purchase the Company's common stock, par value $.10 per share (the "Common
Stock");
WHEREAS, pursuant to a debenture purchase agreement, dated
even date herewith, by and among the Company and the purchasers named therein,
certain of the Purchasers have agreed to purchase the Debenture issued to Royal
Bank of Canada in connection with the Purchase Agreement;
WHEREAS, contemporaneously with the execution and delivery of
the Purchase Agreement, the parties entered into a Registration Rights Agreement
(the "Registration Rights Agreement"), pursuant to which the Company agreed to
provide certain registration rights under the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations promulgated thereunder,
with respect to the Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants;
WHEREAS, the Company is currently negotiating an amendment to
the merger agreement (the "Merger Agreement") to be executed in connection with
the merger or reorganization transaction involving the Company and
XxxxxxXxxx.xxx, Inc., pursuant to which each share of common stock of
XxxxxxXxxx.xxx, Inc. shall be exchangeable for between 1.308 to 1.38 shares
shares of Common Stock of the Company (as finally determined be the investment
bankers advising the Company) (the "Reorganization"); and
WHEREAS, the parties hereto now desire, upon the effectiveness
of the Reorganization, to amend and restate the Debentures, the Warrants and the
Registration Rights Agreement; and
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
ARTICLE I.
SURRENDER AND EXCHANGE OF THE DEBENTURES AND WARRANTS
1.1 Closing Date. Subject to the terms and conditions set forth herein, the
closing (the "Closing") of the surrender and exchange of the Debentures and
Warrants and the amendment of the Registration Rights Agreement, as contemplated
by this Agreement, shall take place at the offices of Akin, Gump, Strauss, Xxxxx
& Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or by transmission
by facsimile and/or overnight courier, on or prior to the fifth (5th) business
day following the date that the majority of the shareholders of the Company
shall have approved the Reorganization, but not prior to the date that the
conditions set forth in Article III have been satisfied or waived by the
appropriate party (such date, the "Closing Date").
1.2 Surrender and Exchange of the Debenture. On the Closing Date the
Company shall deliver to each of the Purchasers (severally and not jointly) a
revised debenture in the form of Exhibit A annexed hereto (the "Revised
Debenture"), in the identical principal amount as the Debenture currently held
by each such Purchaser (as set forth on Schedule 1 annexed hereto), and each
such Purchaser shall surrender to the Company the Debenture held by such
Purchaser in exchange for such Revised Debenture. For the avoidance of doubt, no
Purchaser shall surrender its Debenture prior to the Closing Date.
1.3 Surrender and Exchange of the Warrant. On the Closing Date the Company
shall deliver to each of the Purchasers (severally and not jointly) a revised
warrant in the form of Exhibit B annexed hereto (the "Revised Warrant"), which
shall entitle such Purchaser to purchase the number of shares of Common Stock
which may be purchased pursuant to the Warrant currently held by each such
Purchaser (as set forth on Schedule 1 annexed hereto), and each such Purchaser
shall surrender to the Company the Warrant it currently holds in exchange for
such Revised Warrant. For the avoidance of doubt, no Purchaser shall surrender
its Warrant prior to the Closing Date.
1.4 Execution of the Amended and Restated Registration Rights Agreement. On
the Closing Date the parties hereto shall execute and deliver to each other the
Amended and Restated Registration Rights Agreement, in the form of Exhibit C
annexed hereto (the "Amended Registration Rights Agreement" and, together with
the Revised Debenture and the Revised Warrant, the "Revised Transaction
Documents"). For the avoidance of doubt, the parties hereto shall not execute
the Amended Registration Rights Agreement prior to the Closing Date.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to each of the
Purchasers:
a. Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted.
b. Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Revised Transaction Documents, and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of this Agreement and the Revised Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action and no
further action is required by the Company, its Board of Directors or its
stockholders. Each of this Agreement and the Revised Transaction Documents has
been duly executed by the Company and when delivered in accordance with the
terms hereof, assuming due authorization, execution and delivery by the other
parties thereto, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws (including insurance
related laws and regulations) relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application, except that rights to indemnification and contribution
may be limited by Federal or state securities laws or public policy relating
thereto.
c. Authorization, Validity and Issuance of Shares; Integration. The
shares of Common Stock issuable upon conversion of the Revised Debentures and
exercise of the Revised Warrants (collectively, the "Underlying Shares") are and
will at all times hereafter continue to be duly authorized and reserved for
issuance and the shares of Common Stock to be issued upon conversion of the
Revised Debentures (the "Debenture Shares") and exercise of the Revised Warrants
(the "Warrant Shares") will be, when issued, validly issued, fully paid and
non-assessable, free and clear of all liens, encumbrances and Company rights of
first refusal, other than liens and encumbrances created by the Purchasers
(collectively, "Liens") and will not be subject to any preemptive or similar
rights, except for Liens or preemptive or similar rights which have been waived.
The issuance by the Company of the Revised Debentures, the Revised Warrants and
the Underlying Shares is exempt from registration under the Securities Act. The
transactions contemplated by this Agreement and the Revised Transaction
Documents will not be integrated with any other offer, sale or issuance of the
Company's securities (past, current or future) under the Securities Act or any
regulates of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated.
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d. No Conflicts. The execution, delivery and performance of this
Agreement and each of the Revised Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not (i)
conflict with or violate any provision of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation") and the Company's Bylaws, as in effect on the date hereof
(the "Bylaws") or other organizational documents of the Company or any of the
Subsidiaries, (ii) conflict with, or constitute a breach or a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, or instrument (evidencing a
Company or Subsidiary debt or otherwise) to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected which, individually or in the aggregate, would be reasonably
expected to have, either individually or in the aggregate, a material adverse
effect on the results of operations, assets, prospects or financial condition of
the Company (a "Material Adverse Effect"), or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or any Subsidiary is
subject (including Federal and state securities laws and regulations and the
rules and regulations of the National Market System of Nasdaq Stock Market
("Nasdaq")), or by which any material property or asset of the Company or any
Subsidiary is bound or affected which, individually or in the aggregate, would
be reasonably expected to have a Material Adverse Effect.
e. Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority, regulatory or self regulatory
agency, or other Person in connection with the execution, delivery and
performance by the Company of this Agreement or the Revised Transaction
Documents, other than (i) the filing of a registration statement with the
Commission, which shall be filed in accordance with and in the time periods set
forth in the Amended Registration Rights Agreement, (ii) the application(s) or
any letter(s) acceptable to Nasdaq for the listing of the Underlying Shares with
Nasdaq (and with any other national securities exchange or market on which the
Common Stock is then listed) and (iii) any filings, notices or registrations
under applicable state securities laws.
f. Registration Statement. The Initial Registration Statement filed
with the Commission pursuant to the terms of the Registration Rights Agreement
(as such terms are defined therein) has not been withdrawn by the Company, and
the Company is either (i) able to amend such Initial Registration Statement to
cover the Underlying Shares and file such amended Initial Registration Statement
with the Commission or (ii) eligible to register securities (including the
Underlying Shares) for resale with the Commission under Form S-3 (or any
successor form) promulgated under the Securities Act.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser is a corporation or a
limited duration company or a limited liability company or limited partnership
duly formed, validly existing and
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in good standing under the laws of the jurisdiction of its incorporation or
formation with the requisite power and authority, corporate or otherwise, to
enter into and to consummate the transactions contemplated hereby and by the
Revised Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The transactions contemplated hereunder have been duly
authorized by all necessary action on the part of such Purchaser. Each of this
Agreement and the Amended Registration Rights Agreement has been duly executed
and delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
b. No Conflicts. The execution, delivery and performance of this
Agreement by such Purchaser and the consummation by such Purchaser of the
transactions contemplated hereby do not and will not (i) conflict with or
violate any provision of such Purchaser's organizational documents, as in effect
on the date hereof, or (ii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which such Purchaser is subject.
c. Consents and Approvals. Such Purchaser is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self regulatory agency, or other Person in
connection with the execution, delivery and performance by such Purchaser of
this Agreement.
ARTICLE III.
CLOSING CONDITIONS
3.1 Conditions Precedent to the Obligations of the Company. The obligation
of the Company to effect the transactions contemplated hereunder at the Closing
is subject to the satisfaction or waiver (with prior written notice to each
Purchaser) by the Company, on the Closing Date, of each of the following
conditions:
a. Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser set forth in this Agreement
shall be true and correct in all respects as of the date when made and as of the
Closing Date; and
b. Performance by the Purchasers. Each Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by such Purchaser at or prior to the Closing Date.
3.2 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to effect the transactions contemplated hereunder
at the Closing is subject to the
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satisfaction or waiver (with prior written notice to the Company and each other
Purchaser) by such Purchaser, on the Closing Date, of each of the following
conditions:
a. Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all respects as of the date when made and as of the
Closing Date;
b. Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date; and
c. Reorganization. The Securities and Exchange Commission (the
"Commission") shall have declared effective the Form S-4 filed in connection
with the Reorganization (the "Form S-4"), the Form S-4 shall then be in effect,
and the majority of the shareholders of the Company shall have approved the
Reorganization on or prior to the Reorganization Effectiveness Deadline (as
defined in Section 4.2 hereof).
ARTICLE IV.
WAIVER AND SUSPENSION OF DEFAULTS
4.1 Suspension and Waiver of Defaults. Upon the execution of this
Agreement, each Purchaser agrees, subject to Section 4.2 hereof, (a) to
conditionally waive any and all past or current defaults or violations
(collectively, "Current Defaults") of the Company arising under the Debenture
issued to such Purchaser and/or the Registration Rights Agreement, as the case
may be, (b) to prospectively waive any and all defaults or violations of the
Company arising under such Debenture and/or the Registration Rights Agreement,
as the case may be, occurring or which may occur on and after the date hereof to
and including the Closing Date (collectively, "Future Defaults"), and (c) to
suspend enforcement of, to forbear from taking any action or making any claim,
and to not take any action or make any claim with respect to, any Current
Default or Future Default from and after the date hereof to and including the
Closing Date. Each Purchaser further agrees, upon the Closing of the
transactions contemplated hereunder (pursuant to the terms and conditions
hereof), (a) to forever waive any and all Current Defaults and Future Defaults
arising under such Purchaser's Debenture and/or the Registration Rights
Agreement, as the case may be, and (b) to forever suspend enforcement of,
forbear from taking any action or making any claim, and to not take any action
or make any claim with respect to, any such Current Defaults or Future Defaults.
4.2 Reinstatement of Defaults. Notwithstanding the foregoing, if (i) the
Company and XxxxxxXxxx.xxx, Inc. fail to execute the Merger Agreement, as
amended and restated, by October 2, 2000, (ii) the majority of the shareholders
of the Company do not approve the Reorganization on or prior to March 31, 2001
(such date, the "Reorganization Effectiveness Deadline") or (iii) the
Reorganization is otherwise suspended, terminated or publicly abandoned on or
prior to the Reorganization Effectiveness Deadline, then the agreement of the
Purchasers to suspend the Company's defaults and violations pursuant to Section
4.1 hereof, and the
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obligations of the Purchasers to surrender the Debentures and the Warrants
pursuant to Article I hereof, shall be null and void and of no further force or
effect. In such event the Company shall be liable for any and all penalties,
damages and liabilities owing or payable to each Purchaser in connection with
any and all such defaults or violations of the Company under the Debenture
and/or the Registration Rights Agreement, as the case may be, whether occurring
before or after the date hereof, which penalties, damages and liabilities shall
accrue from the first date of default or violation thereof; provided, however,
that each Purchaser agrees that (a) the issuance of indebtedness in an amount of
up to (i) $2,100,000, in respect of current or future extensions of credit and
(ii) $1,400,000, in respect of past advances, in each case owing to
XxxxxxXxxx.xxx, Inc. by the Company, do not and will not constitute an Event of
Default (as defined in the Debenture) under such Purchaser's Debenture and (b)
any liens granted in connection with such current or future extensions of
credit, in an amount not to exceed $2,100,000, do not and will not constitute an
Event of Default under such Purchaser's Debenture.
ARTICLE V.
OTHER AGREEMENTS
5.1 Covenants of the Company and the Purchasers. Each of the continuing
covenants and agreements of the Company, on the one hand, and each of the
Purchasers, on the other hand, set forth in the Purchase Agreement shall remain
in full force and effect in accordance with the terms thereof, except that it is
agreed by the Company and each of the Purchasers that clause (ii) of Section
3.15 of the Purchase Agreement is hereby deleted and omitted in its entirety,
and provided, further, that nothing hereunder shall be deemed a reaffirmation on
the part of the Company or any Purchaser of any representation or warranty made
in the Purchase Agreement.
5.2 Sale of Capital Stock. The Company shall not sell any shares of its
Capital Stock (as such term is defined in the Revised Debenture) or any shares
of the Capital Stock of XxxxxxXxxx.xxx, Inc. on or prior to the Closing Date
without the prior written consent of the Purchasers representing more than 50%
of the principal amount of the Revised Debentures; provided, however, that
nothing hereunder shall prohibit the Company from pledging up to 566,666 shares
of Common Stock of XxxxxxXxxx.xxx, Inc. to secure indebtedness of the Company to
be issued in accordance with the terms of that certain agreement, dated as of
September 28, 2000, between the Company and XxxxxxXxxx.xxx, Inc.
5.3 Consummation of Reorganization. The Company shall (i) amend and file
with the Commission the Form S-4 on or prior to October 31, 2000 (ii) use its
commercially reasonable best efforts to promptly respond to any comments
received from the Commission with respect to the Form S-4 and (iii) assuming
that the Commission has declared the Form S-4 effective, hold, on or prior the
Reorganization Effectiveness Deadline, a special meeting of its shareholders in
order to approve the Reorganization.
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ARTICLE VI.
MISCELLANEOUS
6.1 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
6.2 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom a waiver of any such provision is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. The Company shall not
offer or pay any consideration to a Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to each Purchaser
and the same consideration is paid to each Purchaser which consents to such
amendment or waiver.
6.3 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.4 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns and, in
the case of the Company, any entity succeeding to the Company by merger or
acquisition of all or substantially all the assets of the Company. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of each of the Purchasers. Any Purchaser may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company.
6.5 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.6 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and
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sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
6.7 Publicity. The Company and the Purchasers shall consult with each other
in issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and neither party shall issue any such
press release or otherwise make any such public statement without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement. The Company shall not publicly
or otherwise disclose the names of any of the Purchasers without each such
Purchaser's prior written consent. The Purchasers and their affiliated companies
shall, without further cost, have the right to use in its advertising, marketing
or other similar materials, the Company's logo and trademarks and all or parts
of the Company's press releases that focus on the Transaction forming the
subject matter of this Agreement or which make reference to the Transaction. The
Purchasers understand that this grant by the Company only waives objections that
the Company might have to the use of such materials by the Purchasers and in no
way constitutes a representation by the Company that references in such
materials to the activities of third-parties have been cleared or constitute a
fair use.
6.8 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
6.9 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.10 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, however, that the Company shall pay
Xxxxx Xxxxxxx Partners I Ltd. an aggregate fee of $10,000 at the Closing. The
Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Debenture Shares and the Warrant Shares pursuant hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
the Securities Purchase Agreement to be duly executed by their respective
authorized persons as of the date first indicated above.
HEALTHAXIS INC.
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President and Chief Executive Officer
EXHIBIT A
---------
FORM OF 2% CONVERTIBLE DEBENTURE
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES OR BLUE SKY LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS.
No.________ $__________
HEALTHAXIS INC.
2% CONVERTIBLE DEBENTURES
HealthAxis Inc., a Pennsylvania corporation (the "Company"),
for value received hereby promises to pay to _________ or its registered assigns
("Holder") the principal sum of _______________ Dollars ($_______) at the
Company's office or agency for said purpose in New York, New York on September
14, 2005, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts at the last address of the Holder (as defined herein) last appearing on
the Register (as defined herein).
This Debenture is one of a duly authorized issue of 2%
Convertible Debentures of the Company due on September 14, 2005 (the
"Debenture"), which are (a) referred to in the Amendment to the Securities
Purchase Agreement (the "Purchase Agreement Amendment"), dated as of September
28, 2000, by and among the Company and the Purchasers listed on Schedule I
thereto and (b) issued in substitution of the 2% Convertible Debentures due
September 14, 2002 originally issued by the Company pursuant to the Securities
Purchase Agreement dated as of September 14, 1999. The Debentures are subject to
the terms and conditions of the Purchase Agreement. The Company agrees to issue
from time to time replacement Debentures in the form hereof to facilitate any
transfers and assignments as are made consistent with the terms hereof and of
the Purchase Agreement. In addition, after delivery of an indemnity in form and
substance reasonably satisfactory to the Company, the Company also agrees to
issue replacement Debentures for securities which have been lost, stolen,
mutilated or destroyed as set forth below.
The Company shall keep at its principal office a register (the
"Register") in which shall be entered the names and addresses of the registered
holders of the Debentures and
particulars of the respective Debentures held by them and of all transfers of
such Debentures. References to the "Holder" or "Holders" shall mean the Person
listed in the Register as the payee of any Debenture unless the payee shall have
presented such Debenture to the Company for transfer and the transferee shall
have been entered in the Register as a subsequent holder, in which case the term
shall mean such subsequent holder. The ownership of the Debentures shall be
proven by the Register, absent manifest error. For the purpose of paying
interest and principal on the Debentures, the Company shall be entitled to rely
on the names and addresses in the Register.
No provision of this Debenture shall alter or impair the
obligations of the Company to pay the principal of and interest on this
Debenture at the place, times, rate, and in the currency, herein prescribed.
The principal of this Debenture shall bear interest at the
rate of 2% per annum (the "Interest Rate") which shall accrue daily from July 1,
2000 and shall be payable semi-annually to the Holder hereof on January 1 and
July 1 of each year (an "Interest Payment Date"), commencing on [January 1,
2001], until the principal amount is paid or made available for payment. The
interest so payable on any Interest Payment Date will be paid, at the Company's
option, in cash or an equivalent value of the Company's Common Stock calculated
based upon the Average Price (as defined herein) as of the applicable Record
Date, subject to certain conditions contained herein, to the Holder of this
Debenture at the close of business on the applicable Record Date. The "Record
Date" for any interest payment is the close of business on December 15 or June
15, as the case may be, whether or not a Business Day, immediately preceding the
Interest Payment Date on which such Interest is payable.
Any amounts that have become due and payable hereunder and
remain unpaid by the Company after expiration of any applicable grace period for
such payment provided herein shall accrue interest thereafter until payment in
full of such amount at the rate of fifteen percent (15%) (the "Default Rate")
per annum and shall be payable upon demand by the Holder.
Interest, whether at the Interest Rate or the Default Rate,
will be computed on the basis of a fraction, the denominator of which is 365 (or
366 for any leap year) and the numerator of which is the actual number of days
elapsed from the date such interest begins to accrue, in the case of the
Interest Rate, or becomes due and payable, in the case of the Default Rate.
Each of the Interest Rate and the Default Rate shall be
effective both before and after any judgment may be rendered in a court of
competent jurisdiction, provided, however, that if either the Interest Rate or
Default Rate is deemed to be in excess of the amount permitted to be charged by
the Company under applicable laws, the Holder shall be entitled to collect an
Interest Rate or Default Rate, as the case may be, only at the highest rate
permitted by law, and any interest collected by the Holder in excess of such
lawful amount shall be deemed a payment in reduction of the principal amount
then outstanding under this Debenture and shall be so applied.
The principal of, and interest on, this Debenture are payable
in coin or currency of the United States of America as at the time of payment is
legal tender for payment of public or private debts, at the last address of the
Holder last appearing on the Register (in the case of interest, as of the Record
Date), except that interest due on the principal amount, (but not interest
2
overdue for more than five days), may, at the Company's option be paid in shares
of Common Stock calculated based upon the Average Price (as defined herein) as
of the applicable Interest Payment Date. Except with respect to interest overdue
for more than five (5) days, it shall be assumed that the Company shall elect to
make all payments of interest in Common Stock unless the Company shall have
given written notice to each Holder not less than five (5) days prior to the
applicable Interest Payment Date of its intention to pay such interest in cash.
Notwithstanding anything to the contrary contained herein, the Company may not
issue shares of Common Stock in payment of the interest due on principal if: (i)
the number of shares of Common Stock at the time authorized, unissued and
unreserved for all other purposes is insufficient to pay interest hereunder in
shares of Common Stock or there is an insufficient number of authorized shares
of Common Stock reserved (pursuant to Section 3.6(b) of the Purchase Agreement)
for issue for full conversion of all of the Debentures issued pursuant to the
Purchase Agreement Amendment; (ii) such shares are not either registered for
resale pursuant to the Registration Statement (as defined in the Registration
Rights Agreement (as defined herein)) or freely transferable without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act, as
determined by counsel to the Company pursuant to a written opinion letter
addressed and in form and substance reasonably acceptable to the Holder and the
transfer agent for such shares, subject to receipt by the Company and such
counsel of a representation from such Holder that it is not an Affiliate of the
Company for purposes of Rule 144 promulgated under the Securities Act; (iii)
such shares are not listed or quoted on the Nasdaq (as defined herein) or a
Subsequent Market (as defined herein); (iv) the issuance of such shares would
result in the recipient thereof beneficially owning more than 9.99% of the
issued and outstanding shares of Common Stock as determined in accordance with
Section 4.6 hereof; or (v) an Event of Default has occurred and is continuing or
an event that, with the passage of time or giving of notice or both would
constitute an Event of Default, has occurred and is continuing.
ARTICLE I
DEFINITIONS
1.1 Certain Terms Defined. The following terms (except as
otherwise expressly provided or unless the context otherwise clearly requires)
for all purposes of this Debenture shall have the respective meanings specified
below. All accounting terms used herein and not expressly defined shall have the
meanings given to them in accordance with generally accepted accounting
principles (as defined herein). Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Purchase Agreement. The terms
defined in this Section 1.1 include the plural as well as the singular.
"Acceleration Notice" has the meaning set forth in Section
3.1.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the purposes of this definition, "control" when
used with respect to any Person means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such
3
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" shall mean a nationally recognized or major
regional investment banking firm or firm of independent certified public
accountants of recognized standing.
"Approved Stock Plan" means any contract, plan or agreement
which has been approved by the Board of Directors of the Company, or committee
thereof, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant, or any business or strategic partner
deemed important to the operations of the Company, the primary purpose of which
is other than to raise capital for the Company.
"Average Price" on any date means (x) the sum of the Per Share
Market Value for the ten (10) Trading Days immediately preceding such date minus
(y) the highest and lowest Per Share Market Value during the ten (10) Trading
Days immediately preceding such date, divided by (z) eight (8).
"Board of Directors" means either the Board of Directors of
the Company or any committee of such Board duly authorized to act hereunder.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock whether now outstanding or issued after the Original
Issue Date, including, without limitation, all common stock and all Preferred
Stock of such Person.
"Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Section 13(d)(3) of the Exchange Act) of in excess of 51% of
the voting securities of the Company, (ii) a replacement of more than one-half
of the members of the Company's Board of Directors which is not approved by a
majority of those individuals who are members of the Board of Directors on the
date hereof, or their duly elected successors who are directors immediately
prior to such transaction, in one or a series of related transactions, (iii) the
merger of the Company with or into another entity, unless following such
transaction, the Holders of the Company's securities continue to hold at least
51% of such securities following such transaction, (iv) the consolidation or
sale of all or substantially all of the assets of the Company in one or a series
of related transactions, or (v) the execution by the Company of an agreement to
which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii), (iii) or (iv). Notwithstanding the
foregoing, the Reorganization shall not be deemed a "Change of Control"
hereunder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.10 per
share, of the Company.
"Company" means HealthAxis Inc.
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"Conversion Date" has the meaning set forth in Section 4.4(a).
"Conversion Price" has the meaning set forth in Section 4.2.
"Convertible Securities" has the meaning set forth in Section
4.5(g)(i)(A).
"Debenture" or "Debentures" has the meaning set forth in the
second paragraph hereof.
"Debenture Shares" means the shares of Common Stock issuable
upon conversion of the Debentures.
"Default Rate" has the meaning set forth in the sixth
paragraph hereof.
"Event of Default" has the meaning set forth in Section 3.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Excluded Securities" means (i) the Underlying Shares, (ii)
the shares of Common Stock issuable upon exercise of the warrants issued to
Royal Bank of Canada in connection with the transactions contemplated by the
Purchase Agreement Amendment, (iii) shares of Common Stock deemed to have been
issued by the Company in connection with an Approved Stock Plan, (iv) shares of
Common Stock (including options and warrants) issuable upon the exercise of any
options or warrants outstanding on the date hereof and listed in Schedule 2.1(c)
of the Purchase Agreement, (v) shares of Common Stock issued or deemed to have
been issued as consideration for an acquisition by the Company of a division,
assets or business (or stock constituting any portion thereof) from another
person, (vi) shares of Common Stock (or options or warrants to purchase Common
Stock) issued in the Reorganization and (vii) shares of Common Stock, or options
or warrants to purchase Common Stock, issued to a strategic investor in
connection with a strategic commercial agreement approved by the Company's Board
of Directors, if and only if such shares of Common Stock, or such options or
warrants to purchase such Common Stock, are sold, granted, issued, issuable,
exercisable or convertible, as the case may be, at a price per share which is
greater than or equal to $3.00.
"GAAP" or "generally accepted accounting principles" means
United States generally accepted accounting principles, consistently applied, as
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, that are applicable to the
circumstances as of the date of determination; provided, however, that, except
as otherwise specifically provided, all calculations made for purposes of
determining compliance with the terms of the provisions of this Agreement shall
utilize GAAP in effect at the time of preparation of, and in accordance with the
GAAP used to prepare, the historical financial statements of the Company as of
the Original Issue Date.
"Holder" means the registered holder of any Debenture.
5
"Interest Payment Date" has the meaning set forth in the fifth
paragraph hereof.
"Interest Rate" has the meaning set forth in the fifth
paragraph hereof.
"Mandatory Prepayment Amount" for any Debenture means, at the
option of the Holder (a) the sum of (i) 100% of the principal amount of the
Debenture to be prepaid and (ii) all other amounts, costs, interest, expenses
and liquidated damages due in respect of such principal amount, or (b) in the
case of an Event of Default pursuant to Sections 3.1(f) or 3.1(h) hereof, the
sum of (i) the principal amount of the Debenture to be prepaid, plus all accrued
and unpaid interest thereon, divided by either of the lesser of the Conversion
Price or the Average Price on the Trading Day immediately prior to the date the
Mandatory Prepayment Amount is paid in full, multiplied by the Per Share Market
Value on the Trading Day immediately prior to the date the Mandatory Prepayment
Amount is paid in full, and (ii) all other amounts, costs, interest, expenses
and liquidated damages due in respect of such principal amount; provided,
however, that in the event of an Event of Default pursuant to Section 3.1(f)(B),
the Mandatory Prepayment Amount shall be solely payable pursuant to clause (a)
hereof if (i) such failure is due solely to delays caused by comments the
Company received from the Securities and Exchange Commission, (ii) the Company
responds to such comments as promptly as practicable, but in no event later that
ten (10) Business Days after receipt thereof, and (iii) otherwise complies with
the terms and conditions of the Registration Rights Agreement.
"Nasdaq" means the Nasdaq National Market.
"Notice of Conversion" has the meaning set forth in Section
4.2.
"Options" has the meaning set forth in Section 4.5(g)(i)(A).
"Original Issue Date" of any Debenture (or portion thereof)
means the earlier of (i) the date of such Debenture and (ii) the date of any
Debenture (or portion thereof) for which such security was issued (directly or
indirectly) on registration of transfer, exchange or substitution.
"Per Share Market Value" means (i) on any particular date the
closing bid price per share of the Common Stock on such date (as reported by
Bloomberg Information Services, Inc., or any successor reporting service) on
Nasdaq or, if the Common Stock is not then quoted on Nasdaq, any Subsequent
Market on which the Common Stock is then listed or if there is no such price on
such date, then the closing bid price on such exchange or quotation system on
the date nearest preceding such date or (ii) if the Common Stock is not listed
then on Nasdaq or any Subsequent Market, the closing bid price for a share of
Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to
its functions of reporting prices) at the close of business on such date, or
(iii) if the Common Stock is not then publicly traded the fair market value of a
share of Common Stock as determined by an Appraiser selected in good faith by
the holder of this Debenture; provided, however, that the Company, after receipt
of the determination by such Appraiser, shall have the right to select in good
faith an additional Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Appraiser; and provided,
further
6
that all determinations of the Per Share Market Value shall be appropriately
adjusted for any stock dividends, stock splits or other similar transactions
during such period.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's preferred or preference stock whether now outstanding or issued
after the date of this Debenture, and includes, without limitation, all classes
and series of preferred or preference stock.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of September 4, 1999, by and among the Company and the purchasers set
forth therein, as amended by the Purchase Agreement Amendment.
"Purchase Agreement Amendment" means the Amendment to the
Purchase Agreement, dated September 28, 2000, by and among the Company and the
Purchasers.
"Purchase Price" means, with respect to any security, the
purchase price paid to the Company upon issuance of such security.
"Purchaser" has the meaning ascribed thereto in the Purchase
Agreement Amendment.
"Record Date" has the meaning set forth in the fifth paragraph
hereof.
"Register" has the meaning set forth in the third paragraph
hereof.
"Registration Rights Agreement" means that Amended and
Restated Registration Rights Agreement dated as of _____________, 200_, by and
among the Company and the Purchasers.
"Registration Statement" has the meaning ascribed thereto in
the Registration Rights Agreement.
"Reorganization" means the merger or reorganization
transaction involving the Company and XxxxxxXxxx.xxx, Inc., pursuant to which
each share of common stock of XxxxxxXxxx.xxx, Inc. was exchangeable for shares
of Common Stock of the Company.
"Reserved Amount" has the meaning set forth in Section 4.8.
"Securities Act" means the Securities Act of 1933, as amended.
"Stated Maturity Date" means September 14, 2005.
"Subsequent Market" means the New York Stock Exchange,
American Stock Exchange or Nasdaq Smallcap Market.
7
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of the Capital Stock or other
ownership interests having ordinary voting power to elect a majority of the
Board of Directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Trading Day" means a day on which the Common Stock is traded
on Nasdaq or, if the Common Stock is not then designated on Nasdaq, on such
Subsequent Market on which the Common Stock is then listed or quoted.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Debentures and exercise of the Warrants.
"Valuation Event" has the meaning set forth in Section
4.5(g)(i)(D)(I).
"Warrants" has the meaning set forth in the Purchase
Agreement.
ARTICLE II
PAYMENT; THE SECURITIES
2.1 Payment of Principal and Interest. The Company covenants
and agrees that it will duly and punctually pay or cause to be paid the
principal and interest on overdue principal (in the case of interest accrued, at
the Default Rate, to the extent enforceable under applicable law), with respect
to each of the Debentures at the place or places, at the respective times and in
the manner provided in the Debentures.
2.2 Mutilated, Defaced, Destroyed, Lost and Stolen Debentures.
In case any Debenture shall become mutilated, defaced or be apparently
destroyed, lost or stolen, the Company shall execute and deliver a new
Debenture, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Debenture. In every case the applicant
for a substitute Debenture shall furnish to the Company such security or
indemnity as it may reasonably require to indemnify and defend and to save it
harmless and, in every case of destruction, loss or theft evidence to the
Company's satisfaction of the apparent destruction, loss or theft of such
Debenture and of the ownership thereof.
Upon the issuance of any substitute Debenture, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith. In case any Debenture which has matured or is about to mature, or has
been called for redemption in full, or is being surrendered for conversion in
full shall become mutilated or defaced or be apparently destroyed, lost or
stolen, the Company may, instead of issuing a substitute Debenture, with the
holder's consent, pay or authorize the payment or conversion of the same
(without surrender thereof except in the case of a mutilated or defaced
Debenture), if the applicant for such payment shall furnish to the Company such
security or indemnity as it may reasonably require to save it harmless from all
risks, however remote, and, in every case of apparent destruction, loss or
theft, the applicant shall
8
also furnish to the Company evidence to the Company's reasonable satisfaction of
the apparent destruction, loss or theft of such Debenture and of the ownership
thereof.
Every substitute Debenture issued pursuant to the provisions
of this Section by virtue of the fact that any Debenture is apparently
destroyed, lost or stolen shall constitute an additional contractual obligation
of the Company, whether or not the apparently destroyed, lost or stolen
Debenture shall be at any time enforceable by anyone and shall be entitled to
all the benefits of (but shall be subject to all the limitations of rights set
forth in) this Debenture equally and proportionately with any and all other
Debentures duly authenticated and delivered hereunder. All Debentures shall be
held and owned upon the express condition that, to the extent permitted by law,
the foregoing provisions are exclusive with respect to the replacement or
payment or conversion of mutilated, defaced, or apparently destroyed, lost or
stolen Debentures and shall preclude any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement or payment of negotiable instruments or other
securities without their surrender.
2.3 Cancellation of Debentures; Destruction Thereof. All
Debentures surrendered for payment, redemption, registration of transfer or
exchange shall be delivered to the Company for cancellation, and no Debentures
shall be issued in lieu thereof except as expressly permitted by any of the
provisions of this Debenture. The Company shall destroy canceled Debentures held
by it and deliver a certificate of destruction to the Holder, if requested. If
the Company shall acquire any of the Debentures, such acquisition alone shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Debentures unless and until such indebtedness is satisfied.
ARTICLE III
DEFAULTS
3.1 Event of Default Defined; Acceleration of Maturity; Waiver
of Default. In case one or more of the following events (each, an "Event of
Default") (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:
a. default in the payment of (i) interest on any of the
Debentures, which default shall not have been cured within fifteen (15) Business
Days following the applicable Interest Payment Date, or (ii) the principal of
any Debenture, with respect to each of (i) and (ii) as and when the same shall
become due and payable either at maturity, upon any redemption or conversion or
otherwise; or
b. failure on the part of the Company to duly observe or
perform any other of the covenants or agreements on the part of the Company (or
the making by the Company of any announcement, statement or threat that it does
not intend to honor the obligations described
9
in this paragraph) contained in this Debenture, the Purchase Agreement, the
Purchases Agreement Amendment or the Registration Rights Agreement for a period
of ten (10) Business Days (other than with respect to an announcement, statement
or threat) after the earlier of (x) the date on which any officer of the Company
shall have obtained actual knowledge of such failure (or such announcement,
statement or threat) or (y) the date on which written notice thereof has been
given to the Company by the Holder; or
c. a court having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Company or any of its Subsidiaries
in an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the Company
or any of its Subsidiaries or for any substantial part of the property of the
Company or any of its Subsidiaries or ordering the winding up or liquidation of
the affairs of the Company or any of its Subsidiaries, and such decree or order
shall remain unstayed and in effect for a period of sixty (60) consecutive days;
or
d. the Company or any of its Subsidiaries shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of the Company or any of its Subsidiaries or for any
substantial part of the property of the Company or any of its Subsidiaries, or
the Company or any of its Subsidiaries shall make any general assignment for the
benefit of creditors; or
e. any representation or warranty made by the Company
in the Purchase Agreement or Purchase Agreement Amendment shall prove to have
been incorrect in any material respect when made; or
f. (A) a Registration Statement on Form S-3 for the Underlying
Shares (which has been filed by the Company) shall not have been amended to,
among other items, include the Underlying Shares issuable hereunder, and filed
with the Commission on or prior to the earlier of (i) twenty (20) Business Days
following the date that a majority of the shareholders of the Company approve
the Reorganization or (ii) April 27, 2001, or (B) the Company shall fail to
respond as promptly as practicable, but in no event later that ten (10) Business
Days, to any comments received from the Commission regarding such Registration
Statement, as amended, or (C) after its initial effectiveness, such Registration
Statement lapses in effect or sales of all of the Registrable Securities (as
defined in the Registration Rights Agreement) otherwise cannot be made
thereunder (whether by reason of the Company's failure to amend or supplement
the prospectus included therein in accordance with the Registration Rights
Agreement or otherwise) for more than forty-five (45) consecutive days or ninety
(90) calendar days in any twelve (12) month period, except as otherwise provided
in the Registration Rights Agreement and except as a result of a Change of
Control transaction with a privately-held company which does not otherwise
result in an Event of Default; or
g. a Change of Control shall occur and the obligations
of the Company under this Debenture shall not have been fully assumed by the
controlling entity or otherwise discharged or accounted for; or
10
h. the Company fails to use its reasonable best efforts to
cause its transfer agent to promptly deliver shares of Common Stock after the
Holder delivers a Notice of Conversion pursuant to Section 4.2 hereof;
then, in each and every such case (other than an Event of Default specified in
Section 3.1(c) or 3.1(d) hereof), unless the principal hereof shall have already
become due and payable, by notice in writing to the Company (the "Acceleration
Notice"), a Holder may declare the entire principal amount of the Debentures
owned by such Holder and any interest accrued thereon (and, in lieu thereof, the
aggregate amounts described below) to be due and payable immediately, and upon
any such declaration the same shall become immediately due and payable. If an
Event of Default specified in Section 3.1(b) or 3.1(c) occurs, the principal of,
and any accrued interest on, the Debentures (and, in lieu thereof, the aggregate
amounts described below) shall become and be immediately due and payable without
any declaration or other act on the part of any Holder.
With respect to any Event of Default set forth in this Section
3.1, the aggregate amount payable upon such Event of Default shall be equal to
the sum of (i) the Mandatory Prepayment Amount and (ii) the Holder's reasonable
costs of collection. For purposes hereof, the principal amount of the Debentures
shall be treated as outstanding until such date as the Holder shall have been
issued Underlying Shares upon a conversion (or attempted conversion) thereof or
such principal amount of the Debenture has been repaid by the Company to the
Holder. Interest shall accrue daily on the Mandatory Prepayment Amount hereunder
at the Default Rate, from the day after such amount is due (being the date of an
Event of Default) through the date of payment in full thereof (including any
interest payments thereon). Payment of the Mandatory Prepayment Amount pursuant
to this Section 3.1 shall be in addition to any other amounts that may be due to
the Holder pursuant to this Debenture. Within five (5) Business Days of receipt
by the Holder of payment in full of the amount due to the Holder hereunder, the
Holder shall return the Debenture to the Company. In the event of acceleration
relating to the occurrence of an Event of Default the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or other notice
of any kind, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Any demand for payment may be
rescinded and annulled by the Holder at any time prior to payment hereunder. No
such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
Upon delivery of any Acceleration Notice to the Company, the
Company shall provide a copy of such notice to the other Holders, if any, within
one (1) Business Day of the Company's receipt thereof. Failure to deliver such
notice shall not affect the validity of the notice delivered by the Holders in
accordance with the provisions referred to above.
3.2 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default. No right or remedy herein conferred upon or reserved to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
11
No delay or omission of the Holders to exercise any right or
power accruing upon any Event of Default occurring and continuing as aforesaid
shall impair any such right or power or shall be construed to be a waiver of any
such Event of Default or an acquiescence therein; every power and remedy given
by the Debentures or by law may be exercised from time to time, and as often as
shall be deemed expedient, by the Holders.
ARTICLE IV
EXCHANGE; CONVERSION
4.1 Right of Holders to Exchange Debentures. Subject to and
upon compliance with the provisions of this Debenture, this Debenture is
exchangeable for an equal principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same; provided,
however, that no exchanges shall be made for Debentures in denominations of less
than $200,000. No service charge will be made for such registration of transfer
or exchange.
4.2 Rights of Holders to Convert Debentures into Common Stock.
a. Subject to and upon compliance with the provisions of this
Debenture, all or any portion of the principal amount of this Debenture, or any
portion thereof (and any accrued but unpaid interest thereon), at any time from
the date hereof to the close of business on the Stated Maturity Date, may be
converted into duly authorized, validly issued, fully-paid and nonassessable
shares of Common Stock at a price per share equal to $9.00 (the "Conversion
Price").
b. If an adjustment in the Conversion Price and, if
applicable, a change in the securities or other property issuable upon
conversion has taken place pursuant to Article III or IV hereof, then the
conversion described in Section 4.2(a) shall be at the applicable Conversion
Price and in such securities or other property as so adjusted. The Holder
desiring to make a conversion shall deliver to the Company, at any time during
usual business hours at the Company's offices, or, at the Purchaser's option, to
the Company's transfer agent, during its usual business hours, a written notice
of election to convert as provided in the form attached hereto as Exhibit A (a
"Notice of Conversion"), accompanied, if required, by this Debenture or the
Debentures, the principal amount of which is to be converted.
4.3 Adjustment for Dividends. No payment or adjustment will be
made for dividends on any Common Stock except as provided herein. On conversion
of all or any portion or this Debenture, any accrued and unpaid interest
attributable to the portion of the principal amount of this Debenture being so
converted shall not be canceled, extinguished or forfeited, but rather shall be
paid in full to the Holder thereof, at the option of the Company (i) by the
payment of an amount of shares of Common Stock valued at the Average Price equal
thereto or (ii) by cash payment of such amount. If the Holder converts more than
one Debenture at the same time, the number of shares of Common Stock issuable
upon the conversion shall be based on the total principal amount of the
Debentures converted.
12
4.4 Issuance of Shares Upon Conversion.
a. As promptly as practicable, but in any event no later than
three (3) Trading Days after delivery of a Notice of Conversion and, if
required, the surrender, as herein provided, of any Debenture or securities for
conversion, the Company shall deliver or cause to be delivered to, or upon the
written order of, the holder of the Debenture or securities so surrendered a
certificate or certificates representing the number of duly authorized, validly
issued, fully-paid and nonassessable shares of Common Stock, into which such
Debenture or Debentures may be converted in accordance with the provisions of
this Article IV. Such conversion shall be deemed to have been made at the time
and on the date the Notice of Conversion is delivered to the Company (the
"Conversion Date"), provided, that, if required, the Debenture or Debentures
being converted shall promptly be delivered to the Company. The rights of the
Holder of such Debenture or Debentures as a Holder (subject to the Company's
satisfaction of its obligations hereunder with respect to such conversion) shall
cease as of the Conversion Date with respect to the converted portion of such
Debenture, and the Person or Persons entitled to receive the shares of Common
Stock upon conversion of such Debenture or Debentures shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such time, and such conversion shall be at the Conversion Price in
effect at such time. Subject to paragraph 4.4(b), in the case of any Debenture
which is converted in part only, upon such conversion the Company shall execute
and deliver to the holder thereof, as requested by such holder, a new Debenture
or securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of such Debenture.
b. Notwithstanding anything to the contrary set forth herein,
upon conversion of a Debenture in accordance with the terms thereof, the Holder
shall not be required to physically surrender the Debenture to the Company
unless the entire unpaid principal amount of the Debenture is so converted. The
Holder and the Company shall maintain records showing the principal amount so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of the Debenture upon each such conversion. In the event of
any dispute or discrepancy, such records of the Company shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of the Debenture is converted as aforesaid, the Holder may not
transfer the Debenture unless the Holder first physically surrenders the
Debenture to the Company, whereupon the Company shall forthwith issue and
deliver upon the order of the Holder a new Debenture of like tenor, registered
as the Holder (upon payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid principal amount of
the Debenture. The Holder and any assignee, by acceptance of the Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of a Debenture, the unpaid and unconverted
principal amount of such Debenture represented by such Debenture may be less
than the amount stated on the face thereof.
c. In lieu of delivering physical certificates representing
the Debenture Shares, provided the Company's transfer agent is participating in
the Depositary Trust Company Fast Automated Debentures Transfer program, upon
request of the Holder and in compliance with the provisions of Sections 4.1, 4.2
and 4.4, the Company shall use its best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion of
the Debenture to the Holder by crediting the account of the Holder's Prime
Broker
13
with DTC through its Deposit Withdrawal Agent Commission system. The time period
for delivery described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
d. In addition to any other rights available to the Holder, if
the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 4.4(a), including for purposes hereof, any shares of Common
Stock to be issued on the Conversion Date on account of accrued but unpaid
interest hereunder, by the third (3rd) trading day after the Conversion Date,
and if after such third (3rd) trading day the Holder is required to purchase (in
an open market transaction or otherwise) Common Stock to deliver in satisfaction
of a sale by such Holder of the Underlying Shares which the Holder was entitled
to receive upon such conversion (a "Buy-In"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to or elected by the
Holder) the amount by which (x) the Holder's total purchase price (including
brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the
product of (1) the aggregate number of shares of Common Stock that such Holder
was entitled to receive from the conversion at issue multiplied by (2) the Per
Share Market Value on the Conversion Date and (B) at the option of the Holder,
either return the Debentures for which such conversion was not honored or
deliver to such Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its conversion and delivery
obligations under Section 4.4(a). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted conversion of Debentures with respect to which the market price of
the Underlying Shares on the date of conversion totaled $10,000, under clause
(A) of the immediately preceding sentence the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
4.5 Adjustment of Conversion Price. In addition to any
adjustment to the Conversion Price provided elsewhere in this Debenture, the
Conversion Price in effect at any time shall be subject to adjustment from time
to time upon the happening of certain events, as follows:
a. Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Company, at any time while this Debenture is outstanding,
(a) shall pay a stock dividend on its Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine outstanding
shares of Common Stock into a smaller number of shares, or (d) issue by
reclassification of shares of Common Stock any shares of Capital Stock of the
Company, the Conversion Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding before such event and the denominator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
after such event. Any adjustment made pursuant to this paragraph 4.5(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
b. Rights; Options; Warrants or Other Securities. If the
Company, at any time while this Debenture is outstanding, shall fix a record
date for the issuance of rights,
14
options, warrants or other securities to all of the holders of Common Stock
entitling them to subscribe for or purchase, convert to, exchange for or
otherwise acquire shares of Common Stock for no consideration or at a price per
share less than the Conversion Price, the Conversion Price shall be multiplied
by a fraction, the denominator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights, options, warrants or other securities plus the number of additional
shares of Common Stock offered for subscription, purchase, conversion, exchange
or acquisition, as the case may be, and the numerator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
on the date of issuance of such rights, options, warrants or other securities
plus the number of shares which the aggregate offering price of the total number
of shares so offered would purchase at the Conversion Price. Such adjustment
shall be made whenever such rights, options, warrants or other securities are
issued, and shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants.
However, upon the expiration of any rights, options, warrants or other
securities to purchase Common Stock the issuance of which resulted in an
adjustment in the Conversion Price pursuant to this Section 4.5(b), if any such
rights, options, warrants or other securities shall expire and all or any
portion thereof shall not have been exercised, the Conversion Price shall
immediately upon such expiration be re-computed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Conversion Price made pursuant to the
provisions of Section 4.5(g) after the issuance of such rights, options,
warrants or other securities) had the adjustment of the Conversion Price made
upon the issuance of such rights, warrants, options or other securities been
made on the basis of the issuance of only that number of shares of Common Stock
(if any) actually purchased upon the exercise of such rights, options, warrants
or other securities actually exercised.
c. Subscription Rights. If the Company, at any time while this
Debenture is outstanding, shall fix a record date for the distribution to all of
the holders of Common Stock evidence of its indebtedness or assets or rights,
options, warrants or other securities entitling them to subscribe for, purchase,
convert to, exchange for or to otherwise acquire any security (excluding those
referred to in Sections 4.5(a) and (b) above), then in each such case the
Conversion Price at which the Debenture shall thereafter be exercisable shall be
determined by multiplying the Conversion Price in effect immediately prior to
the record date fixed for determination of shareholders entitled to receive such
distribution by a fraction, the denominator of which shall be the Per Share
Market Value of Common Stock determined as of the record date mentioned above,
and the numerator of which shall be such Per Share Market Value of the Common
Stock on such record date less the then fair market value at such record date of
the portion of such assets or evidence of indebtedness so distributed applicable
to one outstanding share of Common Stock as determined by the Board of Directors
in good faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value shall
be determined by an Appraiser selected in good faith by the Holder; and
provided, further, that the Company, after receipt of the determination by such
Appraiser shall have the right to select an additional Appraiser meeting the
same qualifications, in good faith, in which case the fair market value shall be
equal to the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
15
d. Rounding. All calculations under this Section 4.5 shall be
made to the nearest cent or the nearest l/l00th of a share, as the case may be.
e. Notice of Adjustment. Whenever the Conversion Price is
adjusted pursuant to paragraphs 4.5(a), (b), (c), (f) or (g) the Company shall
promptly deliver to the Holder a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
f. Certain Events. If any issuance of securities or
distributions that would adversely affect the rights of the Holder occurs which
is similar to those in paragraphs 4.5(a), (b), (c) and (g), but is not expressly
provided for by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights or other rights with equity
features), then the Company's Board of Directors will make an appropriate
adjustment in the Conversion Price so as to protect the rights of the Holder, or
assigns, of this Debenture; provided, however, that no such adjustment will
increase the Conversion Price as otherwise determined pursuant to this Section
4.5. Additionally, notwithstanding anything to the contrary contained in this
Agreement, no adjustment shall be made to the Conversion Price resulting from
the Reorganization.
g. Modification of Issuance Terms. If the Company, at any time
while this Debenture is outstanding, takes any of the actions described in this
Section 4.5(g), the Holder shall have the right to amend this Debenture as set
forth below:
(i) Issuance of Common Stock. If at any time while
this Debenture is outstanding the Company issues or sells, or is deemed
to have issued or sold, any shares of Common Stock (other than any
Excluded Securities), for a consideration per share less than the
Conversion Price in effect immediately prior to such issuance or sale,
then the Holder shall have the option to amend the issuance terms of
the Common Stock issued upon conversion of the Debenture so that the
issuance terms are equivalent to the issuance terms of such offering.
For the purpose of this Section 4.5(g), the following shall be
applicable:
(A) Issuance of Options. If at any time
while this Debenture is outstanding the Company in any manner
grants, issues or sells any rights, options, warrants, options
to subscribe for or to purchase Common Stock or any stock or
other securities convertible into or exchangeable for Common
Stock (other than any Excluded Securities) (such rights,
warrants or options being herein called "Options" and such
convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for
which Common Stock is issuable upon the exercise of such
Options or upon conversion or exchange of such Convertible
Securities is less than the Conversion Price in effect
immediately prior to such grant, then the Holder shall have
the option to amend the issuance terms of the Common Stock
issued upon conversion of the Debentures so that the issuance
terms are equivalent to the issuance terms of such Options.
16
(B) Issuance of Convertible Securities. If
at any time while this Debenture is outstanding the Company in
any manner issues or sells any Convertible Securities (other
than any Excluded Securities) and the price per share for
which Common Stock is issuable upon such conversion or
exchange is less than the Conversion Price in effect
immediately prior to issuance or sale, then the Holder shall
have the option to amend the issuance terms of the Common
Stock issued upon conversion of the Debentures so that the
issuance terms are equivalent to the issuance terms of such
Convertible Securities.
(C) Change in Option Price or Rate of
Conversion. If there is a change at any time in (i) the
Purchase Price provided for in any Options (other than
Excluded Securities), (ii) the additional consideration, if
any, payable upon the issue, conversion or exchange of any
Convertible Securities or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Stock, then immediately after such change in option
price or rate of conversion the Conversion Price in effect at
the time of such change shall be readjusted to the Conversion
Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided
for such changed Purchase Price, additional consideration or
changed conversion rate, as the case may be, at the time
initially granted, issued or sold; provided that no adjustment
shall be made if such adjustment would result in an increase
of the Conversion Price then in effect.
(D) Effect on Conversion Price of Certain
Events. For purposes of determining the adjusted Conversion
Price under this Section 4.5(g)(i), the following shall be
applicable:
(I) Calculation of Consideration
Received. If any Common Stock, Options or Convertible
Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received
by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold
for a consideration other than cash, the amount of
the consideration other than cash received by the
Company will be the fair value of such consideration,
except where such consideration consists of
securities, in which case the amount of consideration
received by the Company in respect of such securities
will be the Average Price on the Trading Day
immediately preceding the date of receipt. In case
any Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity
in connection with any merger in which the Company is
the surviving entity the amount of consideration
therefor will be deemed to be the fair value of such
portion of the net assets and business of the
non-surviving entity as is attributable to such
Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration
other than cash or securities will be determined
jointly by the Company and the Holders of Debentures
representing a majority of the aggregate principal
17
amount of Debentures then outstanding. If such
parties are unable to reach agreement within ten (10)
days after the occurrence of an event requiring
valuation (the "Valuation Event"), the fair value of
such consideration will be determined within
forty-eight (48) hours of the tenth (10th) day
following the Valuation Event by an Appraiser
selected in good faith by the Company and agreed upon
by the Holders of Debentures representing a majority
of the aggregate principal amount of Debentures then
outstanding. The determination of such Appraiser
shall be binding upon all parties absent manifest
error.
(II) Integrated Transactions. In
case any Option is issued in connection with the
issue or sale of other securities of the Company,
together comprising one integrated transaction in
which no specific consideration is allocated to such
Options by the parties thereto, the Options will be
deemed to have been issued for an aggregate
consideration of $.10.
(III) Treasury Shares. The number of
shares of Common Stock outstanding at any given time
does not include shares owned or held by or for the
account of the Company, and the disposition of any
shares so owned or held will be considered an issue
or sale of Common Stock.
(IV) Record Date. If the Company
takes a record of the holders of Common Stock for the
purpose of entitling them (1) to receive a dividend
or other distribution payable in Common Stock,
Options or in Convertible Securities or (2) to
subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the
making of such other distribution or the date of the
granting of such right of subscription or purchase,
as the case may be.
4.6 Restriction on Conversion by Either the Holder or the
Company. Notwithstanding anything herein to the contrary, in no event shall any
Holder or the Company have the right or be required to convert any or all of the
aggregate principal amount and interest accrued thereon of this Debenture if, as
a result of such conversion, the aggregate number of shares of Common Stock
beneficially owned by such Holder and its Affiliates would exceed [9.99] [4.99]%
of the outstanding shares of Common Stock following such conversion. For
purposes of this Section 4.6, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act. The provisions of this
Section 4.6 may be waived by a Holder as to itself (and solely as to itself)
upon not less than 65 days prior written notice to the Company, and the
provisions of this Section 4.6 shall continue to apply until such 65th day (or
later, if stated in the notice of waiver).
4.7 Officer's Certificate. Whenever the number of shares
purchasable upon conversion shall be adjusted as required by the provisions of
Section 4.5, the Company shall forthwith file in the custody of its Secretary or
an Assistant Secretary at its principal office and with its stock transfer
18
agent, if any, an officer's certificate showing the adjusted number of shares
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment and the manner of computing such adjustment. Each such
officer's certificate shall be signed by the chairman, president or chief
financial officer of the Company and by the secretary or any assistant secretary
of the Company. Each such officer's certificate shall be made available at all
reasonable times for inspection by any holder of the Debentures and the Company
shall, forthwith after each such adjustment, deliver a copy of such certificate
to the each of the Holders.
4.8 Reservation of Shares. The Company covenants that it will
at all times reserve and keep available out of its authorized shares of Common
Stock, free from preemptive rights, solely for the purpose of issue upon
conversion of the Debentures as herein provided, such number of shares of the
Common Stock as shall then be issuable upon the conversion of all outstanding
Debentures into Common Stock in accordance with Section 3.6(b) of the Purchase
Agreement (the "Reserved Amount"). The Company covenants that all shares of the
Common Stock issued upon conversion of the Debenture which shall be so issuable
shall, when issued, be duly and validly issued and fully paid and
non-assessable. If, at any time a Holder of this Debenture submits a Notice of
Conversion, and the Company does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article IV, subject to Section 4.15 hereof, the Company
shall issue to the Holder all of the shares of Common Stock which are then
available to effect such conversion.
4.9 Compliance With Governmental Requirements. The Company
covenants that if any shares of Common Stock required to be reserved for
purposes of conversion of Debentures hereunder require registration with or
approval of any governmental authority under any Federal or state law, or any
national securities exchange, before such shares may be issued upon conversion,
the Company will use its best efforts to cause such shares to be duly registered
or approved, as the case may be.
4.10 Fractional Shares. Upon a conversion hereunder, the
Company shall not be required to issue stock certificates representing fractions
of shares of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the Per Share
Market Value at such time. If the Company elects not, or is unable, to make such
a cash payment, the holder shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
4.11 Payment of Tax Upon Issue or Transfer. The issuance of
certificates for shares of the Common Stock on conversion of the Debentures
shall be made without charge to the Holders thereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder
of such Debentures so converted and the Company shall not be required to issue
or deliver such certificates unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has been
paid.
19
4.12 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. EST where such notice is to be received), or the first Business Day
following such delivery (if received after 5:00 p.m. EST 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 HealthAxis Inc., 0000 Xxxxxx
Xxxx, Xxxxxxxxxx, XX 00000 Attn: President, fax no. (000) 000-0000 with copies
to Blank Rome Xxxxxxx & XxXxxxxx LLP, Xxx Xxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000,
Attn: Xxxxx Xxxxxx, fax no. (000) 000-0000 and (ii) if to any Holder to the
address set forth on Schedule II to the Purchase Agreement with copies to Akin,
Gump, Strauss, Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attn: Xxxxx Xxxx, fax no. (000) 000-0000 or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
4.13 Allocation of Reserved Amount. The Reserved Amount shall
be allocated pro rata among the Purchasers based on the principal amount of
Debentures issued to each Purchaser pursuant to the Purchase Agreement
Amendment. Each increase to the Reserved Amount shall be allocated pro rata
among the Purchasers based on the principal amount of Debentures held by each
Purchaser at the time of the increase in the Reserved Amount. In the event a
Purchaser shall sell or otherwise transfer any of such Purchaser's Debentures,
each transferee shall be allocated a pro rata portion of such transferor's
Reserved Amount. Any portion of the Reserved Amount which remains allocated to
any person or entity which does not hold any Debentures shall be allocated to
the remaining Purchasers, pro rata, based on the principal amount of such
Debentures then held by such Purchasers.
ARTICLE V
MISCELLANEOUS
5.1 Modification of Debentures. This Debenture may be modified
without prior notice to any Holder upon the written consent of the Company and
the Holders of more than 90% of the principal amount of the Debentures then
outstanding. The Holders of more than 90% of the principal amount of the
Debentures then outstanding may waive compliance by the Company with any
provision of this Debenture without prior notice to any Holder. However, without
the consent of each Holder affected, an amendment, supplement or waiver may not
(1) reduce the amount of Debentures whose Holders must consent to an amendment,
supplement or waiver, (2) reduce the principal amount of or extend the fixed
maturity of any Debenture or (3) make any Debenture payable in money or property
other than as stated in the Debentures.
5.2 Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial. This Debenture shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof. Each party hereby irrevocably submits to
20
the nonexclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. The parties hereto, including all guarantors or endorsers, hereby
waive presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Debenture, except as specifically provided herein, and assent to extensions of
the time of payment, or forbearance or other indulgence without notice. Any
Holder of this Debenture by acceptance of this Debenture agrees to be bound by
the provisions of this Debenture, which are expressly binding on such Holder.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
5.3 Rank. Except as expressly provided herein, no provision of
this Debenture shall alter or impair the obligation of the Company to pay the
principal of, and interest and liquidated damages (if any) on, this Debenture at
the time, place, and rate, and in the coin or currency (or, as provided herein,
in Common Stock), herein prescribed. This Debenture is a direct obligation of
the Company. Except as otherwise provided herein, the Company may not
voluntarily prepay the outstanding principal amount of the Debenture.
5.4 Debentures Owned by Company Deemed Not Outstanding. In
determining whether the holders of the requisite aggregate principal amount of
Debentures have concurred in any direction, consent or waiver under this
Debenture, Debentures which are owned by the Company or any other obligor on the
Debentures or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any other obligor
on the Debentures shall be disregarded and deemed not to be outstanding for the
purpose of any such determination; provided that any Debentures owned by the
Purchasers shall be deemed outstanding for purposes of making such a
determination. Debentures so owned which have been pledged in good faith may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Company the pledgee's right so to act with respect to such Debentures and that
the pledgee is not the Company or any other obligor upon the Debentures or any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Debentures.
5.5 Notice to Holder Prior to Taking Certain Types of Action;
Reclassification, Etc. In case:
a. the Company shall authorize the issuance, at any
time from and after the Original Issue Date, to all holders of any class or
series of its Capital Stock, of rights or warrants to subscribe for or purchase
shares of its capital stock or of any other right;
b. the Company shall authorize, at any time from and
after the Original Issue Date, the distribution to all holders of any class or
series of its Capital Stock, of evidences of its indebtedness or assets;
21
c. the Company shall declare a dividend (or other
distribution) on its Common Stock or the Company shall declare a special
nonrecurring dividend on or a redemption of its Common Stock;
d. of any subdivision, combination or reclassification
of any class or series of Capital Stock of the Company at any time from and
after the Original Issue Date or of any consolidation or merger to which the
Company is a party and for which approval by the shareholders of the Company is
required, or of the sale or transfer of all or substantially all of the assets
of the Company or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
e. of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be delivered to the Holder, at least 10 days
prior to the applicable record date hereinafter specified, a written notice
stating (i) the date as of which the holders of record of such class or series
of Capital Stock are to be entitled to receive any such rights, warrants or
distribution are to be determined, or (ii) the date on which any such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action is expected to
become effective, and the date as of which it is expected that holders of record
of such class or series of Capital Stock record shall be entitled to exchange
their stock for securities or other property, if any, deliverable upon such
subdivision, combination, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation, winding up or other action.
The failure to give the notice required by this Section 5.5 or
any defect therein shall not affect the legality or validity of any
distribution, right, warrant, subdivision, combination, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
other action, or the vote upon any of the foregoing.
In the event of any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder shall have the right
thereafter, which must be exercised within ten (10) Business Days of receiving
written notice of such reclassification or conversion, to convert the principal
amount of (and any accrued by unpaid interest on) this Debenture into the
securities, cash or property receivable upon or deemed to be held by holders of
Common Stock following such reclassification or compulsory share exchange, and
the Holder shall be entitled upon such event to receive such amount of
securities, cash or property as a holder of the number of shares of Common Stock
into which the principal amount (and any accrued but unpaid interest thereon) of
this Debenture could have been converted immediately prior to such event would
have received.
5.6 Effect of Headings. The Section headings herein
are for convenience only and shall not affect the construction hereof.
22
5.7 No Rights as Stockholder. This Debenture shall not entitle
the Holder to any rights as a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions,
unless and to the extent converted into shares of Common Stock in accordance
with the terms hereof.
5.8 Failure or Indulgence Not Waiver. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privileges. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
23
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed as of this ___ day of ____________, 200_.
HEALTHAXIS INC.
By ________________________________
Name:
Title:
EXHIBIT A
HEALTHAXIS INC.
CONVERSION NOTICE
Reference is made to the Debenture (the "Debenture") issued by HealthAxis Inc.
In accordance with and pursuant to the Debenture, the undersigned hereby
irrevocably elects to convert the principal amount of the Debenture, indicated
below into shares of Common Stock, par value $.10 per share (the "Common
Stock"), of the Company, by tendering the Debenture specified below as of the
date specified below.
Date of Conversion: ____________________________________________________________
Aggregate Principal Amount to be converted:_____________________________________
Debenture number(s) of Debenture to be converted:_______________________________
Please confirm the following information:
Conversion Price: ___________________
Number of shares of Common Stock to be issued:__________
Please issue the Common Stock into which the Debenture is being converted and,
if applicable, any check drawn on an account of the Company in the following
name and to the following address:
Issue to:___________________________________________
Facsimile Number:___________________________________
Authorization: By:__________________________________
Name:
Title:
Dated: ____________
Account Number (if electronic book entry transfer):_____________________________
Transaction Code Number (if electronic book entry transfer):____________________
EXHIBIT B
FORM OF WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR QUALIFIED
UNDER APPLICABLE OR STATE SECURITIES BLUE SKY LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
______________, 200_
______ shares Warrant No. ______
HEALTHAXIS INC.
STOCK PURCHASE WARRANT
Registered Owner: ___________
This certifies that, for value received, HealthAxis Inc., a
Pennsylvania corporation, the ("Company") grants the following rights to the
Registered Owner, or assigns, of this Warrant:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms 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 of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Appraiser" shall mean a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing.
"Approved Stock Plan" means any contract, plan or agreement which has
been approved by the Board of Directors of the Company, or committee thereof
pursuant to which the Company's securities may be issued to any employee,
officer, director or consultant, or any business or strategic partner deemed
important to the operations of the Company, the primary purpose of which is
other than to raise capital for the Company.
"Average Price" on any date means (x) the sum of the Per Share Market
Value for the ten (10) Trading Days immediately preceding such date minus (y)
the highest and lowest Per Share Market Value during the ten (10) Trading Days
immediately preceding such date, divided by (z) eight (8).
"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" means the closing of the transactions contemplated by the
Purchase Agreement Amendment.
"Closing Date" shall mean _____________, 200_.
"Common Stock" means the shares of the Company's Common Stock, par
value $.10 per share.
"Company" means HealthAxis Inc., a Pennsylvania corporation.
"Convertible Securities" has the meaning assigned to it in Section
7(h)(i)(A) hereof.
"Excluded Securities" means (i) the Underlying Shares, (ii) the shares
of Common Stock issuable upon exercise of the warrants issued to Royal Bank of
Canada in connection with the transactions contemplated by the Purchase
Agreement Amendment, (iii) shares of Common Stock (including options and
warrants) deemed to have been issued by the Company in connection with an
Approved Stock Plan, (iv) shares of Common Stock issuable upon the exercise of
any options or warrants outstanding on the date hereof and listed in Schedule
2.1(c) of the Purchase Agreement, (v) shares of Common Stock issued or deemed to
have been issued as consideration for an acquisition by the Company of a
division, assets or business (or stock constituting any portion thereof) from
another person, (vi) shares of Common Stock (or options or warrants to purchase
Common Stock) issued in any merger or reorganization transaction involving the
Company and XxxxxxXxxx.xxx, Inc., which transaction is contemplated to be
consummated by March 31, 2001 and (vii) shares of Common Stock, or options or
warrants to purchase Common Stock, issued to a strategic investor in connection
with a strategic commercial agreement approved by the Company's Board of
Directors, if and only if such shares of Common Stock, or such options or
warrants to purchase such Common Stock, are sold, granted, issued, issuable,
exercisable or convertible, as the case may be, at a price per share which is
greater than or equal to $3.00.
"Exercise Period" has the meaning assigned to it the Section 5 hereof.
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"Exercise Price" has the meaning assigned to it in Section 4 hereof
"Options" has the meaning assigned to it in Section 7(h)(i)(A) hereof.
"Per Share Market Value" means on any particular date (i) the closing
bid price per share of the Common Stock on such date on the National Market
System of the Nasdaq Stock Market or other registered national stock exchange on
which the Common Stock is then listed or if there is no such price on such date,
then the closing bid price on such exchange or quotation system on the date
nearest preceding such date, or (ii) if the Common Stock is not listed then on
the National Market System of the Nasdaq Stock Market or any registered national
stock exchange, the closing bid price for a share of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (iii) if the Common
Stock is not then publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the holder of this
Warrant; provided, however, that the Company, after receipt of the determination
by such Appraiser, shall have the right to select, in good faith, an additional
Appraiser, in which case the fair market value shall be equal to the average of
the determinations by each such Appraiser; and provided, further that all
determinations of the Per Share Market Value shall be appropriately adjusted for
any stock dividends, stock splits or other similar transactions during such
period.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated as of September 14, 1999, by and among the Company and the Purchasers, as
amended by the Purchase Agreement Amendment.
"Purchase Agreement Amendment" means that certain Amendment to the
Purchase Agreement, dated as of September 28, 2000, by and among the Company and
the purchasers thereto.
"Purchaser" has the meaning set forth in the Purchase Agreement.
"Registered Owner" means the person identified on the face of this
Warrant as the registered owner hereof or such other person as shown on the
records of the Company as being the registered owner of this Warrant or their
assigns.
"Registration Rights Agreement" means that certain Amended and Restated
Registration Rights Agreement, dated ____________, 200_, among the Company and
the purchasers thereto.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"Underlying Shares" has the meaning assigned to it in Section 2.1(d) of
the Purchase Agreement.
"Warrant(s)" means the warrants issuable at the Closing.
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2. Issue. Upon tender (as defined in Section 6 hereof) to the Company, the
Company, within three (3) Business Days of the date thereof, shall issue to the
Registered Owner, or assigns, up to the number of shares specified in Section 3
hereof of fully paid and nonassessable shares of Common Stock that the
Registered Owner, or assigns, is otherwise entitled to purchase.
3. Number of Shares. The total number of shares of Common Stock that the
Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant (the "Warrant Shares") is _____ shares, subject to
adjustment from time to time as to the number and kind of securities for which
this Warrant is exercisable, all as set forth in Section 7 hereof. The Company
shall at all times reserve and hold available out of its authorized and unissued
shares of Common Stock or other securities, as the case may be, sufficient
shares of Common Stock to satisfy all conversion and purchase rights represented
by outstanding convertible securities, options and warrants, including this
Warrant. The Company covenants and agrees that all shares of Common Stock or
other securities, as the case may be, that may be issued upon the exercise of
this Warrant shall, upon issuance, be duly and validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the
purchase and the issuance of the shares, and shall not have any legend or
restrictions on resale, expect as required by the Purchase Agreement.
4. Exercise Price. The initial per share exercise price of this Warrant,
representing the price per share at which the shares of stock issuable upon
exercise of this Warrant may be purchased, is $3.01 subject to adjustment from
time to time pursuant to the provisions of Section 7 hereof (the "Exercise
Price").
5. Exercise Period. This Warrant may be exercised from the Closing Date up
to and including September 13, 2005 (the "Exercise Period"). If not exercised
during this period, this Warrant and all rights granted under this Warrant
shall expire and lapse.
6. Tender; Issuance of Certificates.
a. This Warrant may be exercised, in whole or in part, by (i)
actual delivery of (a) the Exercise Price in cash, (b) a duly executed
Warrant Exercise Form, a copy of which is attached to this Warrant as
Exhibit A, properly executed by the Registered Owner, or assigns, of
this Warrant, and (c) by surrender of this Warrant, or (ii) if the
resale of the Warrant Shares by the Registered Owner is not then
registered pursuant to an effective registration statement under the
Securities Act, delivery to the Company of a written notice of an
election to effect a "Cashless Exercise" (as defined below) for the
Warrant Shares specified in the Warrant Exercise Form. The Warrant
Shares so purchased shall be deemed to be issued to the Registered
Owner as of the close of business on the date on which this Warrant
shall have been surrendered, the completed Warrant Exercise Form shall
have been delivered and payment shall have been made for such shares as
set forth above. The payment and Warrant Exercise Form must be
delivered to the registered office of the Company either in person or
as set for in Section 13 hereof.
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b. Commencing upon the earlier of (i) ninety (90) days from
the Filing Date (as defined in the Registration Rights Agreement), or
(ii) August 1, 2001, if, and only if, at the time of exercise of this
Warrant, the Warrant Shares are not saleable pursuant to an effective
registration statement, then in addition to the exercise of all or a
part of this Warrant by payment of the Exercise Price in cash as
provided above, and in lieu of such payment, the Registered Owner shall
have the right to effect a cashless exercise (a "Cashless Exercise").
In the event of a Cashless Exercise the Registered Owner may exercise
this Warrant in whole or in part by surrendering this Warrant in
exchange for the number of shares of Common Stock equal to the product
of (x) the number of shares as to which this Warrant is being exercised
multiplied by (y) a fraction, the numerator of which is the Per Share
Market Value of the Common Stock less the Exercise Price then in effect
and the denominator of which is the Per Share Market Value (in each
case adjusted for fractional shares as herein provided).
c. In lieu of physical delivery of the Warrant, provided the
Company's transfer agent is participating in the Depositary Trust
Company ("DTC") Fast Automated Securities Transfer ("FAST") program,
upon request of the Registered Owner and in compliance with the
provisions hereof, the Company shall use its best efforts to cause its
transfer agent to electronically transmit the Warrant Shares to the
Registered Owner by crediting the account of the Registered Owner's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system. The time period for delivery described herein shall apply to
the electronic transmittals described herein.
d. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in the Warrant
Exercise Form, and any cash payments due under Section 15 hereof shall
be delivered to the Registered Owner within a reasonable time, not
exceeding three (3) Business Days, after this Warrant shall have been
so exercised. The certificates so delivered shall be in such
denominations as may be requested by the Registered Owner and shall be
registered in the name of the Registered Owner or such other name as
shall be designated by such Registered Owner. If this Warrant shall
have been exercised only in part, then, unless this Warrant has
expired, the Company shall, at its expense, at the time of delivery of
such certificates, deliver to the Registered Owner a new Warrant
representing the number of shares with respect to which this Warrant
shall not then have been exercised.
7. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits; Reverse Common
Stock Splits. If the Company, at any time while this Warrant is
outstanding, (a) shall pay a stock dividend on its Common Stock, (b)
subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller
number of shares or (d) issue by reclassification of shares of Common
Stock any shares of capital stock of the Company, then (i) the
Exercise Price shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and the
denominator of which shall be the number of shares of Common Stock
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outstanding after such event and (ii) the number of Warrant Shares
shall be multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event and the denominator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event. Any adjustment made pursuant to this
paragraph 7(a) shall become effective immediately after the record date
for the determination of shareholders entitled to receive such dividend
or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
re-classification.
b. Rights; Options; Warrants or Other Securities. If the
Company, at any time while this Warrant is outstanding, shall fix a
record date for the issuance of rights, options, warrants or other
securities to all of the holders of Common Stock entitling them to
subscribe for or purchase, convert to, exchange for or otherwise
acquire shares of Common Stock for no consideration or at a price per
share less than the Exercise Price, the Exercise Price shall be
multiplied by a fraction, the denominator of which shall be the number
of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights, options, warrants
or other securities plus the number of additional shares of Common
Stock offered for subscription, purchase, conversion, exchange or
acquisition, as the case may be, and the numerator of which shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights, options,
warrants or other securities plus the number of shares which the
aggregate offering price of the total number of shares so offered would
purchase at the Exercise Price. Such adjustment shall be made whenever
such rights, options, warrants or other securities are issued, and
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights, options,
warrants or other securities. However, upon the expiration of any
rights, options, warrants or other securities to purchase Common Stock
the issuance of which resulted in an adjustment in the Exercise Price
pursuant to this Section 7(b), if any such rights, options, warrants or
other securities shall expire and all or any portion thereof shall not
have been exercised, the Exercise Price shall immediately upon such
expiration be re-computed and effective immediately upon such
expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Exercise Price made pursuant to
the provisions of Section 7(h) after the issuance of such rights,
options, warrants or other securities) had the adjustment of the
Exercise Price made upon the issuance of such rights, warrants, options
or other securities been made on the basis of the issuance of only that
number of shares of Common Stock (if any) actually purchased upon the
exercise of such rights, options, warrants or other securities actually
exercised.
c. Subscription Rights. If the Company, at any time while this
Warrant is outstanding, shall fix a record date for the distribution to
all of the holders of Common Stock evidence of its indebtedness or
assets or rights, options, warrants or other security entitling them to
subscribe for or purchase, convert to, exchange for or otherwise
acquire any security (excluding those referred to in paragraphs 7(a)
and (b) above), then in each such case the Exercise Price at which the
Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of shareholders entitled to receive
such distribution by a fraction, the denominator of which shall be the
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Per Share Market Value of Common Stock determined as of the record date
mentioned above, and the numerator of which shall be such Per Share
Market Value of the Common Stock on such record date less the then fair
market value at such record date of the portion of such assets or
evidence of indebtedness so distributed applicable to one outstanding
share of Common Stock as determined by the Board of Directors in good
faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market
value shall be determined by an Appraiser selected in good faith by the
Registered Owner of the Warrant; and provided, further, that the
Company, after receipt of the determination by such Appraiser shall
have the right to select in good faith an additional Appraiser
meeting the same qualifications in which case the fair market value
shall be equal to the average of the determinations by each such
Appraiser. Such adjustment shall be made whenever any such distribution
is made and shall become effective immediately after the record date
mentioned above.
d. Rounding. All calculations under this Section 7 shall be
made to the nearest cent or the nearest l/l00th of a share, as the case
may be.
e. Notice of Adjustment. Whenever the Exercise Price is
adjusted pursuant to paragraphs 7(a), (b), (c) or (h) the Company shall
promptly deliver to the Registered Owner a notice setting forth the
Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
f. Increase in Exercise Price. In no event shall any provision
in this Section 7 cause the Exercise Price to be greater than the
Exercise Price on the date of issuance of this Warrant.
g. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to the
holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of
any rights; or
(iv) the approval of any shareholders of the Company
shall be required in connection with any reclassification of
the Common Stock of the Company, any consolidation or merger
to which the Company is a party, any sale or transfer of all
or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
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(v) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of exercise of this Warrant, and shall cause to be delivered to the
Registered Owner, at least 10 Business Days prior to the applicable record or
effective date hereinafter specified, a notice (provided such notice shall not
include any material non-public information) stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
h. Modification of Issuance Terms. If the Company, at
any time while this Warrant is outstanding, takes any of the
actions described in this Section 7(h), then the Holder
shall have the right to amend this Warrant as set forth below:
(i) Issuance of Common Stock. If at any time while
this Warrant is outstanding the Company issues or sells, or is
deemed to have issued or sold, any shares of Common Stock
(other than any Excluded Securities) for a consideration per
share less than the Exercise Price in effect immediately prior
to such issuance or sale, then the Holder shall have the
option to amend the issuance terms of the Common Stock issued
upon exercise of this Warrant so that the issuance terms are
equivalent to the issuance terms of such offering. For the
purpose of determining the adjusted Exercise Price under this
Section 7(h)(i), the following shall be applicable:
(A) Issuance of Options. If at any time while this
Warrant is outstanding the Company in any manner grants,
issues or sells any rights, options, warrants, options to
subscribe for or to purchase Common Stock or any stock or
other securities convertible into or exchangeable for Common
Stock (other than any Excluded Securities) (such rights,
option or warrants being herein called "Options" and such
convertible or exchangeable stock or securities being herein
called "Convertible Securities") and the price per share for
which Common Stock is issuable upon the exercise of such
Options or upon conversion or exchange of such Convertible
Securities is less than the Exercise Price in effect
immediately prior to such exercise, conversion or exchange,
the Holder shall have the option to amend the issuance terms
of the Common Stock issued upon exercise of this Warrant so
that the issuance terms are equivalent to the issuance terms
of such Options.
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(B) Issuance of Convertible Securities. If at any
time while this Warrant is outstanding the Company in any
manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon such
conversion or exchange (other than any Excluded Securities) is
less than the Exercise Price in effect immediately prior to
issuance or sale, then the Holder shall have the option of
amend the issuance terms of the Common Stock issued upon
exercise of this Warrant so that the issuance terms are
equivalent to the issuance terms of such Convertible
Securities.
(C) Change in Option Price or Rate of Conversion. If
there is a change at any time in (i) the purchase price
provided for in any Options (other than Excluded Securities) ,
(ii) the additional consideration, if any, payable upon the
issuance, conversion or exchange of any Convertible Securities
or (iii) the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock, then the
Exercise Price in effect at the time of such change shall be
readjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold;
provided that no adjustment shall be made if such adjustment
would result in an increase of the Exercise Price then in
effect.
(D) Effect on Exercise Price of Certain Events. For
purposes of determining the adjusted Exercise Price under
this Section 7(h)(i), the following shall be applicable:
(I) Calculation of Consideration Received.
If any Common Stock, Options or Convertible
Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received
therefor will be deemed to be the net amount received
by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold
for a consideration other than cash, the amount of
the consideration other than cash received by the
Company will be the fair value of such consideration,
except where such consideration consists of
securities, in which case the amount of consideration
received by the Company will be the Average Price on
the Trading Day immediately preceding the date of
receipt thereof. In case any Common Stock, Options or
Convertible Securities are issued to the owners of
the non-surviving entity in connection with any
merger in which the Company is the surviving entity,
the amount of consideration therefor will be deemed
to be the fair value of such portion of the net
assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair
value of any consideration other than cash or
securities will be determined jointly by the Company
and the registered owners of a majority of the
Underlying Shares and Warrants then outstanding. If
such parties are unable to reach agreement within ten
(10) days after the occurrence of an event requiring
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valuation (the "Valuation Event"), the fair value
of such consideration will be determined within
forty-eight (48) hours of the tenth
(10th) day following the Valuation Event by an
Appraiser selected in good faith by the Company and
agreed upon in good faith by the holders of a
majority of the Underlying Shares and the Warrants
then outstanding. The determination of such Appraiser
shall be binding upon all parties absent manifest
error.
(II) Integrated Transactions. In case any
Option is issued in connection with the issue or sale
of other securities of the Company, together
comprising one integrated transaction in which no
specific consideration is allocated to such Options
by the parties thereto, the Options will be deemed to
have been issued for an aggregate consideration of
$.10.
(III) Treasury Shares. The number of shares
of Common Stock outstanding at any given time does
not include shares owned or held by or for the
account of the Company, and the disposition of any
shares so owned or held will be considered an issue
or sale of Common Stock.
(IV) Record Date. If the Company takes a
record of the holders of Common Stock for the purpose
of entitling them (1) to receive a dividend or other
distribution payable in Common Stock, Options or in
Convertible Securities or (2) to subscribe for or
purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to
be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of
such other distribution or the date of the granting
of such right of subscription or purchase, as the
case may be.
(V) Certain Events. If any event that would
adversely affect the rights of the Registered Owner
of this Warrant occurs but is not expressly provided
for by Section 7 hereof (including, without
limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with
equity features or, in the event that the Company
does not consummate its merger or reorganization
transaction with XxxxxxXxxx.xxx, Inc., any issuance
of securities or distributions to XxxxxxXxxx.xxx,
Inc. shareholders that would adversely affect the
rights of the Holder hereunder), then the Company's
Board of Directors will make an appropriate
adjustment in the Exercise Price so as to protect the
rights of the Registered Owner of this Warrant;
provided, however, that no such adjustment will
increase the Exercise Price as otherwise determined
pursuant to this Section 7(h). Additionally,
notwithstanding anything to the contrary set forth
herein, no adjustment shall be made to the Exercise
Price upon the consummation of the merger or
reorganization transaction involving the Company and
XxxxxxXxxx.xxx, Inc., which transaction is
contemplated to be consummated by March 31, 2001.
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8. Intentionally Omitted.
9. Restriction on Conversion by Either the Registered Owner or the Company.
Notwithstanding anything herein to the contrary, in no event shall any
Registered Owner or the Company have the right or be required to exercise this
Warrant if as a result of such conversion the aggregate number of shares of
Common Stock beneficially owned by such Registered Owner and its Affiliates
would exceed [9.99] [4.99]% of the outstanding shares of the Common Stock
following such exercise. For purposes of this Section 9, beneficial ownership
shall be calculated in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended. The provisions of this Section 9 may be waived by a
Registered Owner as to itself (and solely as to itself) upon not less than 65
days prior written notice to the Company, and the provisions of this Section 9
shall continue to apply until such 65th day (or later, if stated in the notice
of waiver).
10. Officer's Certificate. Whenever the number of shares purchasable upon
exercise shall be adjusted as required by the provisions of Section 6, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price, number of shares or
other securities determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment and the manner of computing such
adjustment. Each such officer's certificate shall be signed by the chairman,
president or chief financial officer of the Company and by the secretary or any
assistant secretary of the Company. Each such officer's certificate shall be
made available at all reasonable times for inspection by any Registered Owner of
the Warrants and the Company shall, forthwith after each such adjustment,
deliver a copy of such certificate to the each of the Registered Owners.
11. Registration Rights. The Company will undertake the registration of the
Common Stock into which such Warrants are exercisable at such times and upon
such terms pursuant to the provisions of the Registration Rights Agreement.
12. Reservation of Underlying Shares. The Company covenants that it will at
all times reserve and keep available out of its authorized shares of Common
Stock, free from preemptive rights, solely for the purpose of issue upon
exercise of the Warrants as herein provided, such number of shares of the Common
Stock as shall then be issuable upon the exercise of all outstanding Warrants
into Common Stock. The Company covenants that all shares of the Common Stock
issued upon exercise of the Warrant which shall be so issuable shall, when
issued, be duly and validly issued and fully paid and non-assessable.
13. 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,
11
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications are (i) if to the Company to HealthAxis Inc.,
0000 Xxxxxx Xxxx, Xxxxxxxxxx, XX 00000, Attn: President, fax no. (000) 000-0000,
with copies to Blank Rome Xxxxxxx & XxXxxxxx LLP, Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, XX 00000, Attn: Xxxxx X. Xxxxxx, fax no. (000) 000-0000 and (ii)
if to the Registered Owner to the address set forth on Schedule II to the
Purchase Agreement, with copies to Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.,
000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn: Xxxxx Xxxx, fax no. (212)
000-0000 or such other address as may be designated in writing hereafter, in the
same manner, by such person.
14. Compliance With Governmental Requirements. The Company covenants that
if any shares of Common Stock required to be reserved for purposes of exercise
of Warrants hereunder require registration with or approval of any governmental
authority under any Federal or state law, or any national securities exchange,
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved, as the case may
be.
15. Fractional Shares. Upon any exercise hereunder, the Company shall not
be required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Registered Owner shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
16. Payment of Tax Upon Issue of Transfer. The issuance of certificates for
shares of the Common Stock upon exercise of the Warrants shall be made without
charge to the Registered Owners thereof for any documentary stamp or similar
taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon exercise in a name other than that of the
Registered Owner of such Warrant so exercised and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
17. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
18. No Rights as Stockholder. This Warrant shall not entitle the Registered
Owner to any rights as a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive notice of, or to attend, meetings of stockholders or any other
proceedings of the Company, unless and to the extent converted into shares of
Common Stock in accordance with the terms hereof.
19. Certain Actions Prohibited. The Company will not, by amendment of its
charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
12
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
20. Shareholder Rights Plan. Notwithstanding the foregoing, in the event
that the Company shall distribute "poison pill" rights pursuant to a "poison
pill" shareholder rights plan (the "Rights"), the Company shall, in lieu of
making any adjustment pursuant to Section 6 hereof, make proper provision so
that each Registered Owner who exercises a Warrant after the record date for
such distribution and prior to the expiration or redemption of the Rights shall
be entitled to receive upon such exercise, in addition to the shares of Common
Stock issuable upon such exercise, a number of Rights to be determined as
follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
a number of shares of Common Stock equal to the number of shares of Common Stock
issuable upon such exercise at the time of such exercise would be entitled in
accordance with the terms and provisions of and applicable to the Rights; and
(ii) if such exercise occurs after the Distribution Date, the same number of
Rights to which a holder of the number of shares into which the Warrant to
exercised was exercisable immediately prior to the Distribution Date would have
been entitled on the Distribution Date in accordance with the terms and
provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
21. Successors and Assigns. This Warrant shall be binding upon and inure to
the benefit of the Registered Owners and its assigns, and shall be binding upon
any entity succeeding to the Company by merger or acquisition of all or
substantially all the assets of the Company. The Company may not assign this
Warrant or any rights or obligations except as provided in this Section 21. The
Registered Owner may assign this Warrant without the prior written consent of
the Company, subject to the provisions and restrictions on transfer set forth
herein.
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22. Governing Law. This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Warrant and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
14
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first set forth above.
HEALTHAXIS INC.
By:________________________
Name:______________________
Title:_____________________
EXHIBIT A
Warrant Exercise Form
---------------------
TO: HEALTHAXIS INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of HealthAxis Inc., pursuant to Warrant
No. ___ heretofore issued to ___________________ on ____________, ____ ; (2)
encloses either (a) a cash payment of $__________ or (b) a Warrant representing
_____ shares of Common Stock valued at the Per Share Market Price of $ _____ on
________, ____, for these shares at a price of $____ per share (as adjusted
pursuant to the provisions of the Warrant); and (3) requests that a certificate
for the shares be issued in the name of the undersigned and delivered to the
undersigned at the address specified below.
Date: _____________________________
Investor Name: _____________________________
Taxpayer Identification Number: _____________________________
By: _____________________________
Printed Name: _____________________________
Title: _____________________________
Address: _____________________________
Cashless Exercise (Y or N): _______
Note: The above signature should correspond exactly with the
name on the face of this Warrant Certificate or with the name
of assignee appearing in assignment form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
EXHIBIT C
---------
FORM OF AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Amended and Restated Registration Rights Agreement (this
"Agreement") is made and entered into as of _____________, 200_, among
HealthAxis Inc., 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").
WHEREAS, the Purchasers and the Company are parties to a
Registration Rights Agreement, dated as of September 14, 1999 (the "Prior
Registration Rights Agreement"), pursuant to the Securities Purchase Agreement,
dated as of September 14, 1999 among the Company and the purchasers set forth
therein (the "Purchase Agreement");
WHEREAS, the parties have entered into an amendment to the
Purchase Agreement, dated as of September 28, 2000 (the "Purchase Agreement
Amendment"); and
WHEREAS, in connection with the transactions contemplated by
the Purchase Agreement Amendment, and pursuant to Section 7(e) of the Prior
Registration Rights Agreement, the parties now wish to amend and restate the
terms of the Prior Registration Rights Agreement.
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein, 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 amended by the
Purchase Agreement Amendment. 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.
"AMEX" means the American Stock Exchange.
"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.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$.10 per share.
"Effectiveness Period" has the meaning set forth in Section
2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the earlier of (i) the twentieth (20th)
Business Day following the date that the majority of the shareholders of the
Company approve the Reorganization or (ii) April 27, 2001.
"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.
"Nasdaq" means the National Market System of the Nasdaq Stock
Market.
"NYSE" means New York Stock Exchange.
"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) conversion of or with respect to any of the Company's 2% Convertible
Debentures, as amended, initially issued pursuant to the Purchase Agreement and
not otherwise deemed a Security hereunder, (iii) payment of interest or any
other payments in respect of the Securities, (iv) exercise of the Warrants, and
(v) issuance of any shares of the Company's capital stock issued with respect to
clauses (i), (ii), (iii) or (iv) hereof as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise.
"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.
"Reorganization" means the merger or reorganization
transaction involving the Company and XxxxxxXxxx.xxx, Inc., which transaction is
contemplated to be consummated by March 31, 2001.
"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
issued in connection with the Purchase Agreement Amendment.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means the 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.
3
"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 issued to the Purchasers in
connection with the Purchase Agreement Amendment.
2. Registration Requirements
(a) Filing and Effectiveness Obligations. In connection with
the Purchase Agreement the Company has previously filed with the Commission a
Registration Statement on Form S-3 (the "Initial Registration Statement"), which
Initial Registration Statement covers all Registrable Securities required to be
included therein (as of the time of filing thereof) for an offering to be made
on a continuous basis pursuant to a "Shelf" registration statement under Rule
415. On or prior to the Filing Date, the Company shall file with the Commission
an amendment to the Initial Registration Statement to include not less than 110%
of the sum of the Registrable Securities of the Holders, determined on the date
of filing thereof. The Company shall use its best efforts to (i) cause the
Initial Registration Statement, as so amended, to be declared effective under
the Securities Act as promptly as practicable after the filing thereof and (ii)
keep such Initial Registration Statement continuously effective under the
Securities Act (except as provided in Section 3(r) hereof or as otherwise
provided herein) until the earlier of (a) the date which is four years after the
date that such Initial Registration Statement is declared effective by the
Commission or (b) such 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"); provided, however,
that the Company shall not be required to keep the Initial Registration
Statement effective under the Securities Act if the Company becomes ineligible
to do so due to a Change of Control transaction with a privately-held company
which does not otherwise result in an Event of Default pursuant to the
Securities (as such terms are defined therein).
(b) Underwritten Offering. 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 September 1, 2001, an offering of Registrable Securities
pursuant to a 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.
4
(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 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.
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 (i) on or prior to the Filing Date, the Initial Registration
Statement, as amended, which shall include a Plan of Distribution substantially
in the form of Exhibit A annexed hereto, and cause the Initial Registration
Statement to become effective and remain effective as provided herein or (ii) as
expeditiously as possible in connection with an Underwritten Offering, a
Registration Statement covering the amount of Registrable Securities determined
pursuant to Section 2(b) hereof, and cause such Registration Statement to become
effective and remain effective for up to 120 days or, if earlier, until the
Holders have completed the distribution related thereto; provided, however, that
not less than three (3) Business Days prior to the filing of the Initial
Registration Statement, any subsequent 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. 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.
(b) Amendments. (i) Promptly 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 (except as provided in Section 3(r) hereof or as
5
otherwise provided herein) during 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 ten (10) 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 held by the Holders,
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 such 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.
(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 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.
6
(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.
(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.
7
(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 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
8
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.
(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.
9
(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. 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 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
10
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 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 received from the Commission staff
on the Initial Registration Statement, as amended, or any subsequently filed
Registration Statement, 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 pursuant to a Registration
Statement, for a period not to exceed forty-five (45) consecutive days in any
one instance and for a period not to exceed ninety (90) calendar days in any
twelve-month period (provided, however, that the 45-day period shall be extended
to a sixty (60) consecutive day period in the event that the Company is required
to submit financial statements pursuant to Item 7 of From 8-K (or any successor
form) in connection with an acquisition or disposition of significant assets),
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
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.
11
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 of the
Company, (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 Offering.
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 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
12
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
13
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.
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).
14
(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.
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
15
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 Reorganization (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 Reorganization (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) 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, as amended by the Purchase
Agreement Amendment, contains 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.
16
(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
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
17
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 HealthAxis
Inc., 0000 Xxxxxx Xxxx, Xxxxxxxxxx, XX 00000, Attn: President, fax no. (610)
000-0000, with copies to Blank Rome Comisky & XxXxxxxx LLP, Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, XX 00000, Attn: Xxxxx X. Xxxxxx, fax no. (000) 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
18
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 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.
19
(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.
(o) Entire Agreement. This Agreement, along with the Exhibits
and Schedules hereto, amends and restates the Prior Registration Rights
Agreement in its entirety and, together with the Purchase Agreement Amendment
and the other documents delivered in connection therewith, constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof.
20
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Registration Rights Agreement as of the date first written above.
HEALTHAXIS INC.
By:_________________________________
Name:
Title:
Purchasers
By ________________________________
Name:
Title:
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: HealthAxis Inc.
Ladies and Gentlemen:
We are counsel to HealthAxis Inc., a Pennsylvania corporation (the
"Company"), and have represented the Company in connection with that certain
Amendment to Securities Purchase Agreement (the "Purchase Agreement Amendment")
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
"Warrants") to acquire shares of Common Stock. Pursuant to the Purchase
Agreement Amendment, the Company also has entered into an Amended and Restated
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]
