Exhibit 10.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of July 31, 2002, 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 "HOLDER" and all such
parties are sometimes collectively referred to herein as the "HOLDERS").
This Agreement is made pursuant to the Exchange Agreement,
dated as of the date hereof among the Company and the Holders (the "EXCHANGE
AGREEMENT").
The Company and the Holders hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given to such terms in the Exchange Agreement, or the
Certificate of Designation (as defined below), as the case may be. 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" has the meaning set forth in Section 2(d).
"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.
"CERTIFICATE OF DESIGNATION" means the Series A Certificate of
Designation.
"CLOSING DATE" means the Closing Date, as defined in the
Exchange Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's Common Stock, par value
$.10 per share.
"EFFECTIVENESS DATE" means the earlier of: (i) ten days after
the Company has received notice (written or oral) from the Commission that the
Commission's staff will not be reviewing the Registration Statement or has no
further comments on the Registration Statement or (ii) 150 days following the
Closing Date.
"EFFECTIVENESS PERIOD" has the meaning set forth in Section
2(a) hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EVENT" has the meaning set forth in Section 2(d) hereof.
"FILING DATE" means the date on which the Initial Registration
Statement is filed with the Commission, which shall be as soon as practicable
after the Closing Date, but in no event later than the 30th day following the
Closing Date.
"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.
"MAJORITY HOLDERS" means the Holders of at least sixty (60%)
percent of the then outstanding Registrable Securities.
"MAXIMUM AMOUNT" means that number of shares of Common Stock
which is equal to 110% of the maximum number of Underlying Shares then issuable
upon conversion of the Securities (taking into account any adjustments to be
made pursuant to Section 7 of the Certificate of Designations attached as
Exhibit A to the Exchange Agreement known to the Company at the time the
Registration Statement is filed), assuming from time to time that the payment of
all future dividends on such shares then outstanding during the succeeding
twelve (12) months are made in shares of Common Stock (and, in calculating the
number of shares issuable with respect to such dividends on any particular date
of determination, assuming fifty percent (50%) of the Average Price of the last
Trading Day of the Company's preceding fiscal quarter (as such terms are defined
in the Certificate of Designation)).
"NASDAQ" has the meaning set forth in Section 2(d).
"NYSE" has the meaning set forth in Section 2(d).
"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.
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"PROCEEDING" means any 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.
"REGISTRABLE SECURITIES" means: (i) the shares of Common Stock
issued or issuable upon conversion of or with respect to the Securities, (ii)
the shares of Common Stock issued or issuable upon payment of dividends or any
other payments in respect of the Securities (to the extent includable within the
definition of "Maximum Amount") and (iii) any shares of the Company's capital
stock issued with respect to (i) or (ii) as a result of any stock split, stock
dividend, recapitalization, exchange, anti-dilution adjustment or similar event
or otherwise.
"REGISTRATION DELAY PAYMENT" has the meaning set forth in
Section 2(d) hereof.
"REGISTRATION STATEMENT" means the Initial Registration
Statement and any additional registration statements contemplated by Sections
2(a), 2(b) and 6(d), including (in each case) the Prospectus, amendments and
supplements to such Registration Statement or Prospectus, including
pre-effective and post-effective amendments, all exhibits thereto, and all
material incorporated by reference in such Registration Statement.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"RULE 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"RULE 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such rule.
"SECURITIES" means the Company's Series A Convertible
Preferred Stock issuable pursuant to the Exchange Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIAL COUNSEL" means one special counsel to the Holders.
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"TRADING DAY" means a day on which Nasdaq (or in the event the
Common Stock is not listed or quoted on Nasdaq, such other securities market on
which the Common Stock is listed or quoted) is open for trading.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of the Securities.
"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, whether on a firm commitment or best efforts basis.
2. Registration Requirements
(a) Filing and Effectiveness Obligations. On or prior to the
Filing Date, the Company shall prepare and file with the Commission a
Registration Statement (the "INITIAL REGISTRATION STATEMENT") which shall cover
all Registrable Securities for an offering to be made on a continuous basis
pursuant to a "shelf" registration statement under Rule 415. The Initial
Registration Statement shall be on Form S-3 or any successor form (except if the
Company is not then eligible to register the Registrable Securities for resale
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith, subject to the reasonable consent of the Majority
Holders). The Company shall: (i) not permit any securities other than the
Registrable Securities to be included in the Initial Registration Statement,
(ii) use its best efforts to cause the Initial Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
Filing Date, but in any event on or prior to the Effectiveness Date and (iii)
keep such Initial Registration Statement continuously effective under the
Securities Act (subject to the exclusion relating to updates, supplements and
amendments in Section 2(d) and subject to Section 3(r)) for a period, with
respect to each Holder's Registrable Securities, extending from the
Effectiveness Date until the earlier of the date which is two (2) years after
the Effectiveness Date or such earlier date when all Registrable Securities held
by a given Holder 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 to such effect, addressed to the Holders and the
Company's transfer agent (the "EFFECTIVENESS PERIOD"). Once the Company is no
longer required to keep the Initial Registration Statement effective with
respect to the Registrable Securities of a given Holder, the Company shall have
no further obligations hereunder with respect to the registration for resale of
such shares of Registrable Securities and such shares shall no longer be deemed
"Registrable Securities" hereunder.
The number of shares of Common Stock included in the Initial
Registration Statement shall be no less than the Maximum Amount, without regard
to any limitation on the Holder's ability to convert the Securities.
(b) Underwritten Offering. In addition to the Initial
Registration Statement, at any time when a Registration Statement covering the
Registrable Securities is not effective (during any period in which a
Registration Statement is otherwise required to be effective pursuant to the
terms hereof), if the Majority Holders so elect on or after July 31, 2003, an
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offering of Registrable Securities pursuant to such Registration Statement may
be effected on no more than one (1) occasion in the form of an Underwritten
Offering. In such event, and if the managing underwriters advise the Company and
such Holders in writing that in their opinion the amount of Registrable
Securities proposed to be sold in such Underwritten Offering exceeds the amount
of Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) Underwriter. If any of the Registrable Securities are to
be sold in an Underwritten Offering, the investment banker in interest that will
administer such offering shall be selected by the Holders of a majority of the
Registrable Securities included in such offering. 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.
(d) Penalties.
(i) If: (A) the Initial Registration Statement covering all of the
applicable Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (1) filed with the Commission on or before the
Filing Date or (2) declared effective by the Commission on or before the
Effectiveness Date, (B) on any day after any Registration Statement has been
declared effective by the Commission (1) sales of all the Registrable Securities
required to be included on any Registration Statement cannot be made pursuant to
such Registration Statement (including, without limitation, because of a failure
to keep such Registration Statement effective, to disclose such information as
is necessary for sales to be made pursuant to such Registration Statement or to
register sufficient shares of Common Stock), but excluding any periods up to
thirty (30) calendar days during which Registrable Securities cannot be sold due
to any update, supplement or amendment of such Registration Statement or the
related Prospectus pursuant to Section 3(b) hereof, and excluding any black-out
period declared by the Company pursuant to Section 3(r) hereof, or (2) the
Common Stock is not listed or included for quotation on The Nasdaq Stock Market
("NASDAQ"), the American Stock Exchange ("AMEX"), The New York Stock Exchange
("NYSE") or the OTC Bulletin Board after being so listed or included for
quotation (any such event specified in (A) or (B) above, an "EVENT"), then, as
partial relief for the damages to any Holder by reason of any such Event (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each Holder an amount in cash (a "REGISTRATION
DELAY PAYMENT") equal to: (a) the aggregate Stated Value of the then outstanding
Securities that are convertible into Registrable Securities, multiplied by (b)
one hundredths (.010) and (c) the number of months (prorated for partial months)
that such Event has occurred and is continuing. The Company shall pay any
Registration Delay Payment in cash to each Holder of Securities convertible into
Registrable Securities on the last Business Day of each month during which an
Event has occurred and is continuing. In the event that the Company fails to
make a Registration Delay Payment within ten (10) Business Days of the date such
Registration Delay Payment is due, then such Registration Delay Payment shall
bear interest at the rate of 2.0% per month (prorated for partial months) until
paid in full.
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(ii) In addition to the foregoing, in the event that the Initial
Registration Statement is not initially declared effective under the Securities
Act on or before the first anniversary of the Closing Date (a "SUPPLEMENTAL
EVENT"), then the Company shall pay to each Holder, in addition to the
Registration Delay Payment, an amount in cash (a "SUPPLEMENTAL DELAY PAYMENT")
equal to: (a) the aggregate Stated Value of the then outstanding Securities that
are convertible into Registrable Securities, multiplied by (b) one hundredths
(.010) and (c) the number of months (prorated for partial months) that such
Supplemental Event has occurred and is continuing. The Company shall pay any
Supplemental Delay Payment in cash to each Holder of Securities convertible into
Registrable Securities on the last Business Day of each month during which a
Supplemental Event has occurred and is continuing. In the event that the Company
fails to make a Supplemental Delay Payment within ten (10) Business Days of the
date such Supplemental Delay Payment is due, then (1) such Supplemental Delay
Payment shall bear interest at the rate of 2.0% per month (prorated for partial
months) until paid in full and (2) subject to the limitations on the adjustment
of the Conversion Price (as defined in the Certificate of Designation) contained
in the Certificate of Designation, the Conversion Price shall be adjusted
downward at the rate of $0.01 for each day after the Supplemental Delay Payment
is due until such Supplemental Delay Payment and all related interest is paid in
full.
(e) Form S-3 Eligibility. The Company represents and warrants that it
meets the registrant eligibility and transaction requirements for the use of
Form S-3 (for primary and secondary offerings) for the registration of the sale
of Registrable Securities by the Holders and the Company shall file all reports
required to be filed by the Company with the Commission in a timely manner so as
to maintain such eligibility for the use of Form S-3.
3. Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Preparation of Registration Statement. Prepare and file
with the Commission on or prior to the Filing Date a Registration Statement on
Form S-3 or its successor form (or if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, such registration
shall be on another appropriate form in accordance herewith, which shall include
a Plan of Distribution substantially in the form of Exhibit A annexed hereto,
unless in connection with an Underwritten Offering) or in connection with an
Underwritten Offering hereunder, such other form agreed to by the Company and by
a majority-in-interest of Holders of Registrable Securities to be covered by
such Registration Statement (except if otherwise directed by the Majority
Holders), and cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than three (3)
Business Days prior to the filing of the Registration Statement or any related
Prospectus or any amendment or supplement thereto (including any document that
would be incorporated therein by reference), the Company shall, if reasonably
practicable: (i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such documents proposed to be filed (including
documents incorporated by reference), which documents will be subject to the
review of such Holders, their Special Counsel and such managing underwriters and
(ii) 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.
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The Company shall not file the Registration Statement or any such Prospectus or
any amendments or supplements thereto to which the Majority Holders, 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) Prepare and file with the Commission any
amendments, including post-effective amendments, to the Registration Statement
as may be necessary to keep the Registration Statement continuously effective
for the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements as are required to be filed hereunder in
order to register all of the Registrable Securities for resale under the
Securities Act, (ii) cause the related Prospectus to be amended or supplemented
by any required Prospectus supplement, and as so amended or supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) promulgated
under the Securities Act, (iii) respond as promptly as possible to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and as promptly as practicable, but in no event later than ten
(10) Business Days, provide the Holders true and complete copies of all
correspondence to and from 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 of the
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 that the number of shares available
under a Registration Statement filed pursuant to this Agreement is insufficient
to cover the Maximum Amount, 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 the Maximum Amount, in each case as soon as
practicable, but in any event within twenty (20) Business Days after the
necessity therefor arises (based on the then applicable 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
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the Commission's issuance of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceeding for that purpose, (iv) that 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 Company's receipt 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 (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 and (vii) the beginning and end of a black-out period
pursuant to Section 3(r).
(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 Holders), 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 managing underwriters, without charge, as many
copies of the Prospectus or Prospectuses (including each form of prospectus) and
each amendment or supplement thereto as such Persons may reasonably request; and
the Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
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(h) Blue Sky. Prior to any public offering of Registrable
Securities, use its best efforts to register or qualify or cooperate with the
selling Holders, any underwriters and their Special Counsel in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or subject
the Company to any material tax in any such jurisdiction where it is not then so
subject.
(i) Certificates. Cooperate with the Holders and any managing
underwriters to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by
applicable law and the Exchange 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 any 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 or 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 Exchange Agreement.
(l) Underwriting Agreement and Related Documents. 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
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the managing underwriters, if any, or in the case of non-Underwritten Offerings,
if reasonably requested by the 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 a Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, and, in the case of non-Underwritten Offerings, at such
time as the selling Holders may reasonably request (and at the expense of the
selling Holders), obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
Company's independent certified public accountants (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 hereof (or such other
provisions and procedures acceptable to the managing underwriters, if any, and
the 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
(i) above and to evidence compliance with any customary conditions contained in
the underwriting agreement or any 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 and 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 a 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
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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 security holders 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 3-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 statements shall conform to the requirements of Rule 158.
(o) Information. The Company may require each selling Holder
to furnish to the Company information regarding such Holder and the distribution
of such Registrable Securities as is required by law to be disclosed in the
Registration Statement and the Company may exclude from such registration the
Registrable Securities of any such Holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
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
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comply with the prospectus delivery requirements of the Securities Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi) such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing by the
Company that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Exchange Agreement in
connection with any sale of Registrable Securities with respect to which a
Holder has entered into a contract for sale prior to the Holder's receipt of a
notice from the Company of the happening of any event of the kind described in
Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) and for which the
Holder has not yet settled.
(p) Responses to the Commission. The Company agrees to respond
fully and completely to any and all comments on a Registration Statement
received from the Commission staff as promptly as possible but, for
non-Underwritten Offerings, in no event later than ten (10) Business Days of the
receipt of such comments, regardless of whether such comments are in oral or
written form.
(q) Confirmation of Effectiveness. Within two (2) Business
Days after a Registration Statement which covers applicable Registrable
Securities is ordered effective by the Commission, the Company shall deliver,
and shall cause legal counsel for the Company to deliver, to the transfer agent
for such Registrable Securities (with copies to the Holders whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the Commission in the form
attached hereto as Exhibit B.
(r) Black-out Periods. Subject to the last sentence of this
Section 3(r), the Company may by written notice require that the Holders
immediately cease sales of Registrable Securities for a period not to exceed
thirty (30) calendar days in any twelve-month period (provided, however, that
the 30-day period shall be extended to a forty-five (45) day period in the event
that the Company is required to submit financial statements pursuant to Item 7
of Form 8-K (or any successor form) in connection with an acquisition or
disposition of significant assets), pursuant to a Registration Statement at any
time that: (i) the Company becomes engaged in a business activity or negotiation
which is not disclosed in a Registration Statement (or the prospectus included
therein) which the Company reasonably believes must be disclosed therein under
applicable law and which the Company desires to keep confidential for business
purposes, (ii) the Company determines that a particular disclosure so determined
to be required to be disclosed therein would be premature or would adversely
affect the Company or its business or prospects or (iii) the Registration
Statement can no longer be used under the existing rules and regulations
promulgated under the Securities Act (each of (i), (ii) or (iii), a "MATERIAL
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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
shall 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 (exclusive of any suspension
relating to a Sales Transaction, as described below).
Notwithstanding the foregoing, in the event the Company is engaged in
substantive discussions with a third party relating to a transaction described
in Section 4.b (xii) of the Certificate of Designation (a "Sale Transaction"),
the Company shall provide notice to such effect to the Holders prior to
executing any letter of intent, term sheet or similar written instrument setting
forth the proposed terms of such Sales Transaction. In the event of the
Company's provision of such notice, the Holders shall select a representative
who shall represent the interests of the Holders in subsequent negotiations
relating to the Sale Transaction (the "Representative"), which Representative
shall be Xxxxxxxx X. Xxxx unless the Majority Holders otherwise provide. Pending
the closing of the Sale Transaction, the Company may by written notice require
that Holders not engage in sales of Registrable Securities pursuant to a
Registration Statement and, until such time as the Holders of more than forty
percent (40%) of the Securities then outstanding provide written notice to the
Company that they would not approve the Sale Transaction as then currently
contemplated (which notice may be provided at any time prior to such time as the
Holders of sixty percent (60%) or more of the then outstanding Securities vote
to approve a Sales Transaction or otherwise grant irrevocable proxies to such
effect) (the "Rejection Notice"), the black-out relating to sales of Registrable
Securities shall continue. In the event the Company receives a Rejection Notice,
it shall take all actions necessary to ensure that the Holders can sell the
Registrable Securities pursuant to the Registration Statement as soon as
possible, but in all cases within three (3) Business Days after delivery of the
Rejection Notice (the "Transition Period"). The Holders agree that prior to the
expiration of the Transition Period, a black-out relating to a Sale Transaction
shall not be subject to any of the time period restrictions set forth in this
Section 3(r), and shall not otherwise give rise to any penalties described in
Section 2(d) of this Agreement.
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,
whether or not pursuant to a Registration Statement and whether or not any
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to such Registration Statement. The
fees and expenses referred to in the foregoing sentence shall include, without
limitation (a) all registration and filing fees (including, without limitation,
reasonable fees and expenses (i) incurred 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 (ii) incurred in
connection with 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
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underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (b) 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), (c) messenger, telephone and delivery expenses, (d)
fees and disbursements of counsel for the Company, (e) Securities Act liability
insurance, if the Company so desires such insurance and (f) 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 (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors 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 allegedly untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, any form of prospectus or in any amendment or supplement thereto or
in any preliminary Prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which they
were made) not misleading, 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 upon
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
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way), (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 and (iii) any costs of enforcing the Company's
indemnification obligations under this Section 5(a). The Company shall not,
however, be liable for any Losses to any Holder (a) with respect to any untrue
or allegedly 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, or (b) in the event that notwithstanding the fact that the
Company advised the Holder in writing pursuant to Section 3(r) hereof that sales
of Registrable Securities cannot be made under a Registration Statement because
of non-public Company developments that the Company reasonably believes must be
disclosed in the Registration Statement under applicable law (a "Non-Public
Development"), the Holder nonetheless sells Registrable Securities and a
judgment is entered by a court or administrative tribunal against the Holder for
xxxxxxx xxxxxxx under the federal securities laws on the basis of the Holder's
sale of such Registrable Securities while in the possession of the Non-Public
Development.
The Company shall promptly notify the Holders of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement or the other
Transaction Documents.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees of the Company, 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 in writing by such Holder to the Company specifically for inclusion
in the Registration Statement, any Prospectus or any form of 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, which
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consent shall not be unreasonably withheld; 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 shall promptly 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: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses, (ii) 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
(iii) 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, but
not limited to, 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 5(c)) shall be paid to the Indemnified Party,
as incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis, regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided,
however, that the Indemnifying Party may require such
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Indemnified Party to undertake to reimburse all such fees and expenses to the
extent that there is a final judicial determination that such Indemnified Party
is not entitled to indemnification hereunder.
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) hereof is unavailable to an Indemnified Party because of the
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 any Losses in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and such 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 allegedly 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) hereof, any reasonable attorneys'
or other reasonable fees or expenses incurred by such party in connection with
(i) any Proceeding to the extent that such party would have been indemnified for
such fees or expenses if the indemnification provided for in this Section 5 was
available to such party in accordance with its terms and (ii) enforcing any
rights under this Section 5. 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 such Holder's 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 5 are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
6. 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
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provisions of this Agreement and hereby further agree 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, 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(c) of the Exchange Agreement, neither the
Company nor any of its Subsidiaries is currently a party to 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 Majority Holders, 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 hereof and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.
This Agreement and the Exchange Agreement contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
(c) No Piggyback on Registrations. Except as disclosed on
Schedule 2.1(c) of the Exchange Agreement, neither the Company nor any of its
security holders (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 security holders, unless the rights so granted are subordinated in
all respects to the rights in full of the Holders set forth herein, and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.
(d) Piggy-Back Registrations. Except as otherwise provided in
this Section 6(d), if at any time when there is not an effective Registration
Statement covering the Registrable Securities, and the Company decides 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-equivalent forms 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 decision 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 Holders), 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 such Holder, to the extent required
to permit the disposition of the Registrable Securities to be so registered;
provided, however, 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 decide for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
decision to such Holder and,
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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 6(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 that such
Holder requests to be registered; provided, however, that the Company shall not
be required to register any Registrable Securities pursuant to this Section 6(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) reasonably object to the inclusion of the Registrable Securities
in such registration statement, then if the Company, after consultation with the
Underwriter's representative, reasonably determines that the inclusion of such
Registrable Securities would materially adversely affect the offering
contemplated by such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer Registrable
Securities then proposed to be sold by the Holders, then (x) the number of
Registrable Securities of the Holders included in such registration statement
shall be reduced pro rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration) or (y) none
of the Registrable Securities of the Holders shall be included in such
registration statement if the Company, after consultation with the
underwriter(s), recommends the inclusion of none of such Registrable Securities;
provided, however, that if securities are being offered for the account of other
persons or entities as well as the Company, such reduction shall not represent a
greater fraction of the number of Registrable Securities intended to be offered
by the Holders than the fraction of similar reductions imposed on such other
persons or entities (other than the Company). 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 or any
Additional Registration Statement, as the case may be, has been effective for a
period of sixty (60) Trading Days, which period shall be tolled if the
effectiveness of the Initial Registration Statement or any Additional
Registration Statement, as the case may be, 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 Majority Holders; 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 the Majority Holders 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. Any amendment or waiver effected in
accordance with this Section shall be binding upon each Holder, each future
Holder and the Company. Upon effectiveness of each such amendment or
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waiver, the Company shall promptly give written notice thereof to the Holders
who have not previously consented thereto in writing.
(f) Notices. Any notices, consents, waivers or other
communications 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:
If to the Company:
Healthaxis, Inc.
The Towers at Xxxxxxxx Square
0000 X. X'Xxxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Chief Financial Officer
With a copy to (which copy shall not constitute notice):
Xxxxx Xxxxxxx & Xxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx X. XxXxxxxx
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If to the Transfer Agent:
Mellon Investor Services LLC
00 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Client Service Manager
If to Xxxxx Xxxxxxx Partners I, Ltd. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxx
With a copy, in the case of notice to Xxxxx Xxxxxxx Partners
I, Ltd. (which copy shall not constitute notice), to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxx
If to Xxxxx Xxxxxxx - XXX Investments LLC to:
c/o OTA Limited Partnership
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
If to LBI Group Inc. to:
c/x Xxxxxx Brothers, Inc.
3 World Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx
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If to UICI to:
UICI
0000 XxXxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxx
Executive Vice President and General Counsel
If to The Pennsylvania State University to:
The Pennsylvania State University
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
Each party shall provide written notice to the other party of
any change in address or facsimile number in accordance with the provisions
hereof.
(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 hereto 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 Majority Holders. Each Holder may assign its rights hereunder in
the manner and to the Persons as permitted under the Exchange Agreement. In
addition, the rights of each Holder hereunder, including the right to have the
Company register Registrable Securities for resale 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 assignee 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 or (v) such transfer is made in accordance with
the applicable requirements of the Exchange 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
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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 Holders 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 or 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT THAT IT MAY HAVE TO, 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.
(j) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, then 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 terms, provisions, covenants and restrictions 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 of the Company solely by
reason of its holdings of such Registrable Securities) shall not be counted in
-23-
determining whether such consent or approval was given by the Holders of such
required percentage.
(n) Aggregation of Stock. All Registrable Shares held or
acquired by an Affiliate will be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
(o) Construction. In the event of any inconsistency or
ambiguity between the terms of this Agreement and the terms of the Certificate
of Designation, the terms of the Certificate of Designation shall control and
govern any construction hereof or thereof.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
HEALTHAXIS INC.
By: /s/ XXXX X. XXXXXXXXX
------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Chief Financial Officer
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PURCHASERS: XXXXX XXXXXXX PARTNERS I, LTD.
By: /s/ XXXXXXXX X. XXXX
-------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Attorney-in-fact
XXXXX XXXXXXX - XXX INVESTMENTS LLC
OTADE LLC Successor to above
By: /s/ XXXXXXX X. XXXXX
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: General Counsel
LBI GROUP INC.
By: /s/ XXXXX X. XXXXXX
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
UICI
By: /s/ XXXXX X. XXXX
-------------------------------
Name: Xxxxx X. Xxxx
Title: Executive Vice President and
General Counsel
THE PENNSYLVANIA STATE UNIVERSITY
By: /s/ XXXX X. XXXXXXX, XX.
-------------------------------
Name: Xxxx X. Xxxxxxx, Xx.
Title: Chief Investment Officer
SCHEDULE I
Xxxxx Xxxxxxx Partners I, Ltd.:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxxx X. Xxxx
Fax: (000) 000-0000
Residence: Grand Cayman, Cayman Islands
Xxxxx Xxxxxxx - XXX Investments LLC
c/o OTA Limited Partnership
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
Residence: Purchase, NY
LBI Group Inc.
c/x Xxxxxx Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attention: Xxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
Residence: New York, NY
UICI
Suite 200
0000 XxXxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxx
Fax: (000) 000-0000
Residence: Dallas, Texas
The Pennsylvania State University
000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
Residence: University Park, PA
Schedule I
EXHIBIT A
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the
selling stockholders. All costs, expenses and fees in connection with the
registration of the shares offered by this prospectus will be borne by our
company, other than brokerage commissions and similar selling expenses, if any,
attributable to the sale of shares of common stock, which will be borne by the
selling stockholders. Sales of shares of common stock may be effected by selling
stockholders from time to time in one or more types of transactions (which may
include block transactions) on Nasdaq, in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the shares of common stock, through short sales of shares of common stock, 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 selling stockholders have advised us 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
shares of common stock by the selling stockholders.
The selling stockholders 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 shares of common stock or of securities convertible into or
exchangeable for the shares of common stock in the course of hedging positions
they assume with the selling stockholders. The selling stockholders 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 the shares of common stock offered by this prospectus,
which the broker-dealer or other financial institution may resell pursuant to
this prospectus (as amended or supplemented to reflect such transaction).
The selling stockholders may make these transactions by
selling shares of common stock directly to purchasers or to or through
broker-dealers, which may act as agents or principals. These broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
selling stockholders and/or the purchasers of shares of common stock for whom
these 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 selling stockholders and any broker-dealers that act in
connection with the sale of shares of common stock are "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
these broker-dealers or any profit on the resale of the shares of common stock
sold by them while acting as principals might be deemed to be underwriting
discounts or commissions under the Securities Act. The selling stockholders may
agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares of common stock against certain
liabilities, including liabilities arising under the Securities Act.
A-1
Because the selling stockholders are "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the Securities Act. Our
company has informed the selling stockholders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales in the market. In addition, our company has made copies of this prospectus
available to the selling stockholders and has informed them of the need for
delivery of copies of this prospectus to purchasers at or prior to the time of
any sale of the shares offered hereby.
The selling stockholders also may resell all or a portion of
the shares of common stock in open market transactions in reliance upon Rule 144
under the Securities Act, provided that they meet the criteria and conform to
the requirements of Rule 144.
Upon our company being notified by a selling stockholder that
a material arrangement has been entered into with a broker-dealer for the sale
of shares of common stock 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:
- the name of each selling stockholder and of the
participating broker-dealer(s);
- the number of shares of common stock involved;
- the initial price at which shares of common stock were
sold;
- the commissions paid or discounts or concessions
allowed to the broker-dealer(s), where applicable;
- that the broker-dealer(s) did not conduct any
investigation to verify the information set out or
incorporated by reference in this prospectus; and
- other facts material to the transactions.
In addition, upon our company being notified by a selling stockholder
that a donee or pledgee intends to sell more than 500 shares of common stock, a
supplement to this prospectus will be filed.
A-2
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Mellon Investor Services LLC Overpeck Centre 00 Xxxxxxxxxx Xxxx Xxxxxxxxxx Xxxx,
Xxx Xxxxxx 00000 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 Exchange
Agreement (the "EXCHANGE AGREEMENT") entered into by and among the Company and
the buyers named therein (collectively, the "HOLDERS") pursuant to which the
Company issued to the Holders shares of its Series A Preferred Stock (the
"SECURITIES") convertible into shares of the Company's common stock, par value
$.10 per share (the "COMMON STOCK"). Pursuant to the Exchange Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Securities, under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on _______________, 200___, 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 Securities 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 Securities Act
pursuant to the Registration Statement.
Very truly yours,
Xxxxx Liddell & Xxxx LLP
By: __________________________________
cc: [LIST NAMES OF HOLDERS]
B-1
