<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 15, 1999
PROVIDENT AMERICAN CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Pennsylvania 0-13591 23-2214195
------------------------------- ----------------------- -----------------------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation)
</TABLE>
2500 DeKalb Pike, Norristown, Pennsylvania 19404
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(Address of principal executive offices/Zip Code)
Registrant's telephone number, including area code: (610) 279-2500
Former name, former address, and former fiscal year, if changed since last
report: N/A
<PAGE>
Item 5. Other Matters.
--------------
The following information is qualified in its entirety by, and should
be read in conjunction with, the more detailed information and financial data,
including the Consolidated Financial Statements of the Provident American
Corporation ("Provident") and its subsidiaries, and the notes thereto, appearing
in Provident's reports filed with the Securities and Exchange Commission
("SEC"). Except for the historical information contained herein, this Current
Report on Form 8-K, may contain certain forward-looking statements regarding
Provident's business and prospects that are based upon numerous assumptions
about future conditions which may ultimately prove to be inaccurate and actual
events and results may materially differ from anticipated results described in
such statements. Such forward-looking statements involve risks and
uncertainties, such as historical and anticipated losses; uncertainty of future
results, new business challenges, risks associated with brand development,
competition, funding; need for additional capital, management of potential
growth; new management team, dependence on key personnel, dependence on the
Internet, dependence on strategic alliances with Internet providers, liability
for information retrieved from the Internet, uncertain acceptance of the
Internet as a medium for health insurance sales, risk capacity constrains;
reliance on internally developed systems; system development risks, dependence
on third party systems, rapid technological change, risk of system failure, A.M.
Best's insurance ratings, dependence on key suppliers of insurance products,
dependence upon third party claims administration services, changes in the
insurance industry, insurance industry factors, health care reform legislation,
government regulation and legal uncertainties, potential conflicts of interest,
risk associated with the Year 2000 and absence of dividends. Any one or a
combination of these factors could have a material adverse effect on Provident's
business, financial condition and results of operations. These forward-looking
statements represent Provident's judgment as of the date of this report.
Provident disclaims, however, any intent or obligation to update these
forward-looking statements.
The following represents only summaries of the documents referred to
under Item 7 hereof, and attached as exhibits hereto. Accordingly, this
information is qualified in its entirety by those documents. All defined terms
not otherwise defined herein are as defined in the Transaction Documents (as
defined herein), copies of which are filed as exhibits hereto.
General
- -------
On September 15, 1999 Provident American Corporation (the "Company"),
pursuant to a securities purchase agreement (the "Securities Purchase
Agreement"), completed a $27.5 million private placement transaction (the
"Transaction"). In the Transaction, the Company issued 2% coupon convertible
debentures due September 14, 2002 (the "Debentures"), convertible into 1,352,015
of the Company's common stock (the "Common Stock"), at a conversion price of
$20.34 per share (the "Conversion Price"), which represented a 15% premium over
the average of the closing price of $18.00 per share on September 13, 1999 and
$17.375 per share on September 14, 1999. As part of the Transaction, the Company
issued to the Purchasers warrants to purchase 202,802 shares of its Common Stock
at an exercise price equal to the Conversion Price ($20.34 per share) (the
"Warrants"). The Warrants have a term of five years.
2
<PAGE>
Also, as part of the Transaction the Purchasers listed on Schedule 1 to
the Securities Purchase Agreement and the Company executed a Registration Rights
Agreement. The Debentures, Warrants, Securities Purchase Agreement and
Registration Rights Agreement documents are hereinafter sometimes referred to as
the "Transaction Documents."
Securities Purchase Agreement
- -----------------------------
In addition to the terms previously summarized, the Securities Purchase
Agreement also includes warranties, representations, covenants and conditions of
closing of the parties which are typically included in agreements of this type.
The securities issued pursuant to this Transaction are exempt from the
registration requirements of the Securities Exchange Act of 1933 (the
"Securities Act"), as provided under Rule 506 and under Section 4(2) of the
Securities Act.
2% Convertible Debenture
- ------------------------
The Debentures bear interest at the rate of 2% per annum, payable in
cash or equivalent value of the Company's Common Stock, semi annually on January
1 and July 1 (the "Interest Payment Date") of each year, beginning on January 1,
2000. Accrued, unpaid and past due amounts bear interest at the rate of 15% per
annum (the "Default Rate").
Interest due on the principal (but not interest overdue for more than
five days), may be paid in shares of the Company's Common Stock calculated based
upon the average price as of the applicable Interest Payment Date. Except with
respect to overdue interest it is assumed that the Company will make all
payments of interest in Common Stock, unless the Company notifies the holder in
writing otherwise.
The Company may not issue shares of Common Stock in payment of interest
if, among other things: (i) there is an insufficient number of shares of Common
Stock to pay the interest or there is an insufficient number of shares for issue
for full conversion of all of the Debentures issued pursuant to the Securities
Purchase Agreement; (ii) the shares are not registered for resale or freely
transferable; (iii) the shares are neither listed nor quoted on the Nasdaq; (iv)
the issuance of the shares would result in the recipient beneficially owning
more than 9.99% of the issued and outstanding shares of Common Stock; and (v) an
Event of Default (as defined below) has occurred, is continuing, or will occur.
3
<PAGE>
Pursuant to the Debentures, an Event of Default is defined as one or
more of the following events: (a) a default in payment of interest or principal
on the Debentures; (b) a failure of the Company to observe or perform any of the
covenants or agreements in the Debentures, the Securities Purchase Agreement or
the Registration Rights Agreement; (c) with respect to any issuance of debt with
an outstanding principal amount of $1,000,000 or greater, a default which has
caused the holder of the debt to declare such debt to be due prior to its
maturity; (d) the entry of one or more judgments or orders against the Company
for payments in excess of $1,000,000 in the aggregate; (e) the entry of a decree
or order for relief in an involuntary case under any applicable bankruptcy,
insolvency or similar law; (f) the commencement of a voluntary case under any
applicable bankruptcy, insolvency or other similar law; (g) any representation
or warranty made by the Company in the Securities Purchase Agreement which
proves to have been incorrect in any material respect when made; (h) the Common
Stock is delisted from Nasdaq, or suspended from trading on Nasdaq; (i) the
registration statement for the shares of Common Stock issuable upon conversion
of the Debentures shall not have been declared effective by the Securities and
Exchange Commission on or before the 30th day after the Effectiveness Date (as
defined in the Registration Rights Agreement); (j) a change of control occurs
and the obligations of the Company under the Debentures are neither fully
assumed by the controlling entity nor fully discharged or accounted; (k) the
Company fails to issue shares of Common Stock after the holder delivers a notice
of conversion. Upon occurrence of an Event of Default other than an Event of
Default listed in Sections (e) and (f) listed above, the holder of the
Debentures may declare the entire principal amount of the Debentures and any
interest accrued thereon due and payable immediately.
The Conversion Price is subject to adjustment from time to time. The
adjustments include but are not limited to the following: (a) if the Company
pays a stock dividend, combines its Common Stock, or issues by reclassification
of shares of Common Stock any capital stock; (b) if the Company issues rights,
options, warrants or other securities to all of the holders of Common Stock
which allows them to acquire shares of Common Stock for no consideration or at a
price per share less than the Conversion Price; (c) if the Company distributes
to all of the holders of Common Stock evidence of the Company's 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; (d) if any event occurs that is not expressly provided for by the
above mentioned 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 holders of the Debentures.
Certain events are excluded from these adjustments.
In addition, if the Company takes certain actions while the Debentures
are outstanding, the holder has the right to amend the issuance terms in the
Debentures. These actions include the Company issuing or selling any shares of
Common Stock for a price per share less than the Conversion Price. The following
are exceptions to the anti-dilution provision: (i) securities issued in the
Transaction; (ii) shares of Common Stock issued by the Company in connection
with an Approved Stock Plan (as defined); (iii) shares of Common Stock issuable
upon the exercise of certain options or warrants; (iv) shares of Common Stock
issued as consideration for a Company acquisition; or (v) a merger or
reorganization involving HealthAxis.com, Inc. and the Company.
4
<PAGE>
In the event of a default, the Company will be required to pay a sum
comprised of the Mandatory Prepayment Amount (as defined), and the holder's
reasonable costs of collection. The Mandatory Prepayment Amount, at the holder's
option, is equal to (i) the sum of 100% of the principal amount of the Debenture
to be prepaid plus cost, interest, expenses and liquidated damages; or in the
event of certain defaults, (ii) the sum of 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 Date
immediately prior to the date the Mandatory Prepayment Amount is paid in full,
multiplied by the Per Share Market Value on the Trading Date immediately prior
to the date the Mandatory Prepayment is paid in full and all other amounts,
costs, interest, expenses and liquidated damages due in respect to the principal
amount.
Warrants
- --------
The Company issued Warrants to purchase 202,802 shares of Common Stock
at an exercise price equal to $20.34 per share, which is equivalent to the
Conversion Price. The term of the Warrants is five years and they are subject to
similar anti-dilution adjustments as are contained in the Debentures.
Registration Rights Agreement
- -----------------------------
The Company is required to file a Form S-3 Registration Statement to
cover all Registrable Securities (as defined) to be made on a continuous basis
pursuant to a "Shelf" registration statement under Rule 415 of the Securities
Act. Subject to certain limitations the registration statement should remain
effective until four years from the date the registration statement is declared
effective by the Securities and Exchange Commission. There is also a one time
Underwritten Registration obligation.
If at any time the Registrable Securities are not covered by an
effective registration statement, and the Company files a registration statement
relating to an offering of its equity securities, the Company is required to
notify the holders of Registrable Securities of the filing and will use
reasonable efforts to effect piggy-back registration of the Registrable
Securities requested to be registered by the holder, subject to certain existing
piggy-back rights.
In the event the Company does not fulfill obligations under this
agreement, it is subject to certain financial penalties.
The Company is responsible for all fees and expenses related to the
Shelf registration statement, except for the holders' legal fees other than
fees. The Purchasers are responsible for all fees and expenses relating to an
Underwritten Offering.
Other
- -----
In a separate but related transaction Alvin H. Clemens, Chairman of the
Company, among other things, has assigned to the Company options to purchase
202,802 shares of Common Stock. The net result of this assignment is that the
number of Warrants issued in the Transaction to the Purchasers is equal to the
number of options retired by Mr. Clemens. The exercise prices of the options
retired range from $3.64 to $8.75 per share and have a weighted average price
per share of $4.56 while the exercise price of the Warrants issued pursuant to
this Transaction is $20.34 per share.
5
<PAGE>
Item 7. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements of business acquired.
Not applicable.
(b) Proforma Financial Information.
Not applicable.
(c) Exhibits.
1. Securities Purchase Agreement between the Company and the Purchasers
dated September 14, 1999.
2. Registration Rights Agreement between the Company and the Purchasers
dated September 14, 1999.
3. Form of Debenture issued by the Company to the Purchasers dated
September 14, 1999.
4. Form of Warrant issued by the Company to the Purchasers dated
September 14, 1999.
5. Letter Agreement between the Company and Alvin H. Clemens dated
September 9, 1999.
6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROVIDENT AMERICAN CORPORATION
Date: September 22, 1999 By: /s/ Francis L. Gillan III
---------------------------------
Francis L. Gillan III
Chief Financial Officer and
Treasurer
7
<PAGE>
EXHIBIT 1
================================================================================
SECURITIES PURCHASE AGREEMENT
Among
PROVIDENT AMERICAN CORPORATION
and
THE PURCHASERS LISTED ON SCHEDULE I
Dated as of September 14, 1999
================================================================================
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of September 14, 1999, among Provident American Corporation, 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, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, an aggregate of $27,500,000
principal amount of 2% Convertible Debentures due September 14, 2002 (the
"Debenture"), in the form of Exhibit A annexed hereto, and warrants (the
"Warrants") to purchase the Company's common stock, par value $.10 per share
(the "Common Stock"), in the form of Exhibit B annexed hereto; and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form of Exhibit C attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE SECURITIES AND WARRANTS
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, shall purchase from the Company on the Closing Date
(as defined below), the principal amount of Debentures as set forth for such
Purchaser on Schedule I.
<PAGE>
1.2 The Closing. The closing of the purchase and sale of the Debentures
and the issuance of the Warrants (the "Closing") shall take place at the offices
of Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New
York 10022, or by transmission by facsimile and overnight courier, immediately
following the execution hereof or such later date or different location as the
parties shall agree, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party (the "Closing
Date"). At the Closing:
(i) Each Purchaser shall deliver, as directed by the Company,
its portion of the purchase price as set forth next to its name on Schedule I in
United States dollars in immediately available funds to an account or accounts
designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a Debenture,
in the form of Exhibit A hereto, representing the principal amount purchased by
such Purchaser as set forth on Schedule I hereto;
(iii) The Company shall deliver to each Purchaser a Warrant,
in the form of Exhibit B hereto, representing the right to acquire the number of
shares of Common Stock purchased by such Purchaser as set forth on Schedule I
hereto; and
(iv) The parties shall execute and deliver each of the
documents referred to in Section 4.1 hereof.
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. Except as set forth on Schedule 2.1(a), the Company has
no subsidiaries (collectively, the "Subsidiaries"). Each of the Subsidiaries
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns the majority of such entity's capital stock or
holds an equivalent equity or similar interest) is a corporation duly
incorporated, validly existing and in good standing, or subsisting, as the case
may be, under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified as a foreign corporation
to do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not, individually or in
the aggregate, (x) adversely affect the legality, validity or enforceability of
any of this Agreement or the Transaction Documents (as defined in Section
2.1(b)) or any of the transactions contemplated hereby or thereby, (y) have or
result in a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company and its Subsidiaries, taken as
a whole or (z) adversely affect the Company's ability to perform fully its
obligations under any Transaction Document (any of (x), (y) or (z), being a
"Material Adverse Effect").
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<PAGE>
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 Debenture, the Warrants and the
Registration Rights Agreement (collectively, the "Transaction Documents"), and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of this Agreement and the 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 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 and except to the extent that
stockholder approval is required pursuant to rule 4460(i)(1)(D) of the Nasdaq
National Market and where approval of the Pennsylvania Insurance Department is
required pursuant to 40 P.A. ss.999.1402, if a person directly or indirectly
owns, controls, holds with the power to vote or holds proxies representing ten
percent (10%) or more of the voting securities of the Company.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company is as set forth in Schedule 2.1(c). All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
authorized and issued, fully paid and nonassessable and were issued in
accordance with the registration or qualification provisions of the Securities
Act, or pursuant to valid exemptions therefrom. Except as disclosed in Schedule
2.1(c), (i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company, (ii) there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no outstanding debt
securities of the Company or any of its Subsidiaries, (iv) there are no
outstanding securities of the Company or any of its Subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries, (v) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the sale of the
Debentures or the issuance of the Warrants or upon the conversion of the
Debentures or the exercise of the Warrants, (vi) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement and (vii) except as specifically disclosed in the SEC
Documents (as defined in Section 2.1(k) hereof), no Person (as defined below) or
group of related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of 5% of the Common Stock.
"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
3
<PAGE>
d. Authorization, Validity and Issuance of Shares. The shares
of Common Stock issuable upon conversion of the Debentures and exercise of the
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 issued upon conversion of the Debentures (the "Debenture
Shares") and exercise of the Warrants (the "Warrant Shares") will be 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 and except to the extent that stockholder approval is
required pursuant to rule 4460(i)(1)(D) of the Nasdaq National Market and where
approval of the Pennsylvania Insurance Department is required pursuant to 40
P.A. ss.999.1402, if a person directly or indirectly owns, controls, holds with
the power to vote or holds proxies representing ten percent (10%) or more of the
voting securities of the Company. The issuance by the Company of the Debentures,
the Warrants and the Underlying Shares is exempt from registration under the
Securities Act.
e. No Conflicts. The execution, delivery and performance of
this Agreement and each of the 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) subject to obtaining the consents referred to in Section
2.1(f), 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 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")), except to the extent that stockholder approval is required pursuant
to rule 4460(i)(1)(D) of the Nasdaq National Market and where approval of the
Pennsylvania Insurance Department is required pursuant to 40 P.A. ss.999.1402,
if a person directly or indirectly owns, controls, holds with the power to vote
or holds proxies representing ten percent (10%) or more of the voting securities
of the Company, 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.
4
<PAGE>
f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), 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 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 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), (iii) any filings,
notices or registrations under applicable state securities laws and (iv) to the
extent that stockholder approval is required pursuant to rule 4460(i)(1)(D) of
the Nasdaq National Market and where approval of the Pennsylvania Insurance
Department is required pursuant to 40 P.A. ss.999.1402, if a person directly or
indirectly owns, controls, holds with the power to vote or holds proxies
representing ten percent (10%) or more of the voting securities of the Company
(together with the consents, waivers, authorizations, orders, notices and
filings referred to on Schedule 2.1(f), the "Required Approvals").
g. Litigation; Proceedings. Except as specifically set forth
on Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement or the Transaction
Documents or (ii) could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
h. No Default or Violation. Except as set forth on Schedule
2.1(h), neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or other credit agreement or instrument to
which it is a party or by which it or any of its properties or assets is bound,
(ii) is in default under or in violation of any other agreement to which it is a
party or by which its properties or assets are bound, the default or violation
of which, individually or in the aggregate, would be reasonably expected to have
a Material Adverse Effect, (iii) is in violation of any order of any court,
arbitrator or governmental body applicable to it or (iv) is in violation of any
statute, rule or regulation of any governmental authority to which it is
subject.
5
<PAGE>
i. Disclosure; Absence of Certain Changes. None of this
Agreement, the Schedules to this Agreement, the Transaction Documents, the SEC
Documents or any other written or formally presented information, report,
financial statement, exhibit, schedule or document furnished by or on behalf of
the Company in connection with the negotiation of the transactions contemplated
hereby contained, contains, or will contain at the time it was or is so
furnished any untrue statement of a material fact or omitted, omits or will omit
at such time to state any material fact necessary in order to make the
statements made herein and therein, in light of the circumstances under which
they were made, not misleading. Except as disclosed on Schedule 2.1(i) or in SEC
Documents filed on EDGAR at least five business days prior to the date hereof,
since December 31, 1998, there has been no material adverse change and no
material adverse development in the business, properties, operations or
prospects, financial condition, liabilities or results of operations of the
Company or the Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
j. Private Offering; Solicitation. The Company and all Persons
acting on its behalf have not (i) made, directly or indirectly, and will not
make, offers or sales of any securities or solicited any offers to buy any
security under circumstances that would require registration of the Debentures,
the Warrants, the Debenture Shares, the Warrant Shares or the Underlying Shares
under the Securities Act, (ii) distributed any offering materials in connection
with the offering and sale of the Debentures or the Warrants, other than the SEC
Documents, the Schedules to this Agreement, any amendments and any supplements
thereto, or (iii) solicited any offer to buy or sell the Debentures or the
Warrants by means of any form of general solicitation or advertising (as those
terms are used in Rule 502(c) of Regulation D under the Exchange Act) in a
manner which would require registration under the Securities Act. The offer,
sale and issuance of the Debentures, the Warrants, the Debenture Shares and the
Warrant Shares to the Purchasers will not be integrated with any other offer,
sale and issuance of the Company's securities (past, current, or future) under
the Securities Act or any regulations of any exchange or automated quotation
system on which any of the securities of the Company are listed or designated.
Subject to the accuracy and completeness of the representations and warranties
of the respective Purchasers contained in Section 2.2 hereof, the offer, sale
and issuance by the Company to the Purchasers of the Debentures, the Warrants
and the Underlying Shares is exempt from the registration requirements of the
Securities Act.
k. SEC Documents; Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Exchange Act. Except
as set forth on Schedule 2.1 (k), the Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act, including
pursuant to Section 13, 14 or 15(d) thereof (the foregoing materials and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein being collectively referred to herein as the "SEC Documents"), on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial year-end
audit adjustments. Neither the Company nor any of its Subsidiaries nor any of
their officers, directors, employees or agents have provided either of Royal
Bank of Canada or LB I Group Inc. with any material, non-public information. The
Company acknowledges that Royal Bank of Canada and LB I Group Inc. will be
trading in the securities of the Company in reliance on the foregoing
representation and warranty.
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l. Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate (an "Affiliate") of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
m. Broker's Fees. No fees or commissions or similar payments
with respect to the transactions contemplated by this Agreement or the
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank, other than as set
forth in Schedule 2.1(m). The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section 2.1(m) that may be due in
connection with the transactions contemplated by this Agreement and the
Transaction Documents.
n. Form S-3 Eligibility. The Company is, and at the Closing
Date will be, 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.
o. Listing and Maintenance Requirements Compliance. The
principal market on which the Common Stock is currently traded is Nasdaq. Except
as disclosed on Schedule 2.1(o), the Company has not in the three years
preceding the date hereof received notice (written or oral) from Nasdaq (or any
stock exchange, market or trading facility on which the Common Stock is or has
been listed (or on which it has been quoted)) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such market or
exchange. The Company is not aware of any facts which would reasonably lead to
delisting or suspension of the Common Stock by Nasdaq. After giving effect to
the transactions contemplated by this Agreement and the Transaction Documents,
the Company believes that it is and will be in compliance with all such
maintenance requirements.
p. Tax Status; Firpta. Except as set forth on Schedule 2.1(p),
the Company and each of the Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith (which are set forth on
Schedule 2.1(p) hereof), and has set aside on it books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company is not a "United States real property holding corporation"
within the meaning of Section 847(c)(2) of the Internal Revenue Code of 1986, as
amended.
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q. Permits. The Company and each of its Subsidiaries possess
all certificates, authorizations, licenses, easements, consents, approvals,
orders and permits necessary to own, lease and operate their respective
properties and to conduct their respective businesses as currently conducted,
free and clear of any conflicts, defaults or violations thereunder, except where
the failure to possess such permits or the existence of any conflict, default or
violation would not, individually or in the aggregate, have a Material Adverse
Effect ("Material Permits"), and, except as disclosed on Schedule 2.1 (q), there
is no proceeding pending, or, to the knowledge of the Company, threatened
relating to the revocation, modification, suspension or cancellation of any
Material Permit.
r. Registration Rights; Rights of Participation. Except as
described on Schedule 2.1(r) hereto, (i) the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (ii) no Person,
including, but not limited to, current or former stockholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the
transactions contemplated by this Agreement or any Transaction Document.
s. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged.
t. Transactions With Affiliates. Except as set forth on
Schedule 2.1(c), Schedule 2.1(t) or the SEC Documents, none of the officers,
directors, or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner, other than transactions that would not require
disclosure under Section 404 of Regulation S-K of the Securities Act and the
Exchange Act.
u. Application to Takeover Protection. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation, Bylaws
or the laws of the state of incorporation which is or could become applicable to
the Purchasers or the Transaction Documents in connection with the issuance of
the Underlying Shares. The issuance of the Underlying Shares will not trigger
any poison pill provisions of any of the Company's stockholders' rights or
similar agreements.
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v. Acknowledgement Regarding Purchasers' Purchase of
Debentures. The Company acknowledges that the Purchasers are acting solely in
the capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the Debentures. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
The Purchasers acknowledges and agrees that the Company make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.1.
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 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 Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the Debentures and the Warrants hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement
and the 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,
subject to 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. Investment Intent. Such Purchaser is acquiring the
Debentures and the Warrants for its own account and not with a present view to
or for distributing or reselling the Debentures, the Warrants, the Debenture
Shares or the Warrant Shares or any part thereof or interest therein in
violation of the Securities Act; provided, however, that by making the
representations herein, such Purchaser does not agree to hold any of the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares for any
minimum or other specific term and reserves the right to dispose of the
Debentures at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
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c. Purchaser Status. At the time such Purchaser was offered
the Debentures and the Warrants, and at the Closing Date, (i) it was and will be
an "accredited investor" as defined in Rule 501 under the Securities Act and
(ii) such Purchaser, either alone or together with its representatives, had and
will have such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Debentures and the Warrants. The Purchaser
acknowledges that ownership of ten percent (10%) or more of the Common Stock
requires approval of the Pennsylvania Insurance Department pursuant to 40 P.S.
ss.991.1402.
d. Reliance. Such Purchaser understands and acknowledges that
(i) the Debentures and the Warrants are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2 and such Purchaser hereby consents to such reliance.
e. Information. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Debentures and Warrants which have been requested by such Purchaser or its
advisors. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its representatives. Neither
such inquiries nor any other due diligence investigation conducted by Purchaser
or any of its advisors or representatives shall modify, amend or affect
Purchaser's right to rely on the Company's representations and warranties
contained in Section 2.1 above or representations and warranties of the Company
contained in any other Transaction Document. Such Purchaser understands that its
investment in the Debentures and Warrants involves a significant degree of risk.
f. Governmental Review. Such Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Debentures or Warrants.
g. Residency. Such Purchaser is a resident of the jurisdiction
set forth immediately below such Purchaser's name on Schedule II hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2. The Company
further acknowledges that the Purchasers represent, collectively, they are not
acting as a group pursuant to Rule 13-d of the Exchange Act.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares held by it,
such Purchaser understands and agrees that it may do so only pursuant to an
effective registration statement under the Securities Act, to the Company or
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pursuant to an available exemption from the registration requirements of the
Securities Act and in compliance with applicable blue sky and state securities
laws. In connection with any transfer of any Debentures, Warrants, Debenture
Shares or Warrant Shares other than pursuant to an effective registration
statement or to the Company, the Company may require the transferor thereof to
provide to the Company a written opinion of counsel experienced in the area of
United States securities laws selected by the transferor, the form and substance
of which opinion shall be customary for opinions of counsel in comparable
transactions, to the effect that such transfer does not require registration of
such transferred securities under the Securities Act and qualification under
applicable blue sky and state securities laws. Notwithstanding the foregoing,
the Company hereby consents to and agrees to affect any transfer by any
Purchaser to an Affiliate of such Purchaser, provided that the transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act. Any such transferee shall also agree in writing
to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Transaction Documents.
b. Each Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Underlying
Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES DEPARTMENT OR COMMISSION IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND APPLICABLE BLUE SKY OR
STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE BLUE SKY OR STATE
SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS THEREFROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR ANY APPLICABLE BLUE SKY
OR STATE SECURITIES LAWS.
The Underlying Shares shall not contain the legend set forth
above (or any other legend) if (i) the sale of the Underlying Shares is pursuant
to an effective Registration Statement (as defined in the Registration Rights
Agreement) under the Securities Act, (ii) if in the written opinion of counsel
to the Company experienced in the area of United States securities laws such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission) or (iii) if such Underlying Shares may be sold pursuant to Rule
144 promulgated under the Securities Act ("Rule 144"). The Company agrees that
it will provide each Purchaser, upon request, with a certificate or certificates
representing the Underlying Shares, free from such legend at such time as such
legend is no longer required hereunder. If such certificate or certificates had
previously been issued with such a legend or any other legend, the Company
shall, upon request and delivery of such certificate or certificates to the
Company by such Purchaser, reissue to such Purchaser such certificate or
certificates free of any legend.
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3.2 Stop Transfer Instruction. Except as otherwise required by law, the
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions on transfer set
forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12(g) of the Exchange Act, will 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, 14 or 15(d) of the Exchange Act and shall promptly, but in no event later
than two (2) business days after the filing thereof with the Commission, provide
the Purchasers with notice of all such filings, and will not take any action or
file any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations. The
Company further covenants that it will take such further action as any holder of
the Debentures, the Warrants, the Debenture Shares or the Warrant Shares may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Debentures, the Warrants, the Debenture Shares, or the
Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 promulgated under the
Securities Act.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall (i) qualify the Debenture Shares and the Warrant
Shares under the securities or "blue sky" laws of such jurisdictions as the
Purchasers may reasonably request (or to obtain an exemption from such
qualification) and (ii) shall continue such qualification at all times through
the resale of all Debenture Shares or Warrant Shares, but in any event not past
the third anniversary of the Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares in a
manner that would require the registration under the Securities Act of the sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares to
any Purchaser.
3.6 Listing and Reservation of Debenture Shares and Warrant Shares.
a. The Company shall (i) not later than ten (10) business days
after the Closing Date prepare and file with Nasdaq (as well as any other
national securities exchange or market on which the Common Stock is then listed)
an additional shares listing application or a letter acceptable to Nasdaq
covering and listing a number of shares of Common Stock which is at least equal
to 110% of the maximum number of Underlying Shares then issuable, assuming that
the payment of all future dividends on such shares then outstanding were made in
shares of Common Stock, (ii) take all steps necessary to cause the Underlying
Shares to be approved for listing on Nasdaq (as well as on any other national
securities exchange or market on which the Common Stock is then listed) as soon
as possible thereafter, (iii) maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all such Underlying Shares, and (iv)
provide to the Purchasers evidence of such listing. The Company shall promptly
provide to each Purchaser copies of any notices it receives from Nasdaq
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system, so long as such notice does not include material,
nonpublic information. The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 3.6(a). Notwithstanding the
above, the Purchaser acknowledges the Company's obligations hereunder are
subject to and conditioned upon compliance with Rule 4460(i)(1)(D) of the Nasdaq
National Market.
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b. The Company at all times shall reserve a sufficient number
of shares of its authorized but unissued Common Stock to provide for 110% of the
full conversion of the outstanding Debentures (including the payment of all
dividends thereon) and exercise of the outstanding Warrants. Shares of Common
Stock reserved for issuance upon conversion of the Debentures and the exercise
of the Warrants shall be allocated pro rata to each of the Purchasers in
accordance with the amount of Debentures and Warrants issued and delivered to
such Purchaser at the Closing.
3.7 Notice of Breaches.
a. The Company and each Purchaser shall give prompt written
notice to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents, as well
as any events or occurrences arising after the date hereof and prior to the
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of the Closing Date; provided such notice will
not constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the
Company shall promptly notify, provided such notification will not constitute
material non-public information, each Purchaser of any notice or claim (written
or oral) that it receives from any lender of the Company or any Subsidiary to
the effect that the consummation of the transactions contemplated hereby and by
the Registration Rights Agreement violates or would violate any written
agreement or understanding between such lender and the Company or any
Subsidiary, and the Company shall promptly furnish by facsimile to the
Purchasers a copy of any written statement in support of or relating to such
claim or notice.
c. The default by any Purchaser of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to, and shall have no effect upon, any other Purchaser or
affect the Company's obligations under this Agreement or any Transaction
Document to any non-defaulting Purchaser.
3.8 Form D. The Company agrees to file a Form D with respect to the
Debentures and Warrants as required by Rule 506 under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
3.9 Use of Proceeds. The Company shall use the proceeds from the sale
of the Debentures and the exercise of the Warrants for working capital and other
general corporate purposes, including approximately $8,300,000 to purchase
HealthAxis Common Stock from a shareholder, $14,700,000 to dispose of PILIC, a
subsidiary of the Company, and a substantial portion of the balance will be
invested in the Company's subsidiary HealthAxis.com, Inc.
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3.10 Transfer Agent Instructions. At the Closing the Company shall
issue instructions to its transfer agent (and shall issue to any subsequent
transfer agent as required), to issue certificates, registered in the name of
each such Purchaser or its respective nominee(s), for the Underlying Shares in
such amounts as specified from time to time by each Purchaser to the Company in
a form reasonably acceptable to such Purchasers (the "Transfer Agent
Instructions"). The Company warrants that no instruction other than the Transfer
Agent Instructions referred to in this Section 3.10, and stop transfer
instructions to give effect to Section 3.1 hereof (in the case of the Underlying
Shares, prior to registration of the Underlying Shares under the Securities Act)
will be given by the Company to its transfer agent and that the Debentures, the
Warrants, the Debenture Shares and the Warrant Shares shall otherwise be freely
transferable on the books and records of the Company, subject to the terms of
this Agreement and the Transaction Documents. If a Purchaser provides the
Company with an opinion of counsel, the form and substance of which opinion
shall be reasonably acceptable to counsel to the Company and customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Debentures, the Debenture Shares, the
Warrants and the Warrant Shares may be made without registration under the
Securities Act or can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold, the Company shall permit the transfer, and, in the case of the
Debenture Shares and the Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by such Purchaser and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchasers by violating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 3.10 will be
inadequate and agrees, in the event of a beach or threatened breach by the
Company of the provisions of this Section 3.10, that the Purchasers, shall be
entitled, in addition to all other available remedies, to seek an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
3.11 Press Release; Filing of Form 8-K. Subject to the provisions of
Section 6.10 hereof, prior to the opening of Nasdaq on September 16, 1999, the
Company shall issue a press release in form and substance acceptable to the
Purchasers. On or before the 5th business day following the Closing Date, the
Company shall file a Form 8-K with the Commission describing the terms of the
transaction contemplated by this Agreement and the Transaction Documents in the
form required by the Exchange Act.
3.12 Financial Information. The Company agrees to deliver the following
to each Purchaser prior to and during the Effectiveness Period (as defined in
the Registration Rights Agreement): (i) within two (2) business days after the
filing thereof with the SEC, notice of the Company's filing of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements or amendments (other than on Form S-8)
filed pursuant to the Securities Act, (ii) on the same day as the release
thereof, facsimile copies of all press releases issued by the Company or any of
its Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
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3.13 Ordinary Course Brokerage and Trading. Subject to compliance with
all applicable securities laws and Nasdaq regulations, no Purchaser shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Company's Common Stock. Notwithstanding the foregoing, Brown
Simpson Strategic Growth Fund, L.P., Brown Simpson Strategic Growth Fund, Ltd.
and Brown Simpson - ORD Investments LLC acknowledge that they shall be
prohibited from engaging in any such activities until December 13, 1999.
3.14 Best Efforts. Each of the parties hereto shall use its best
efforts to satisfy each of the conditions to be satisfied by it as provided in
Article IV of this Agreement.
3.15 Corporate Existence. Until such time as all of the Purchasers
provide the Company with written notice that they do not beneficially own any
Debentures or Warrants, the Company shall maintain its corporate existence and
shall not sell all or substantially all of the Company's assets, except in the
event of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is listed for trading on the Nasdaq, the New York
Stock Exchange or the American Stock Exchange.
3.16 Reimbursement. In the event that any Purchaser, other than by
reason of its gross negligence or willful misconduct, becomes involved in any
capacity in any action, proceeding or investigation brought by or against any
person, including shareholders of the Company, in connection with or as a result
of (a) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement or the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the Transaction Documents or any other certificate, instrument or
document hereby or thereby, or (c) any cause of action, suit or claim brought or
made against such Purchaser and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, the Company will reimburse such Purchaser for its legal and other
actual out-of-pocket expenses (including the cost of any investigation and
preparation) incurred in connection therewith. The reimbursement obligations of
the Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions to
any affiliate of the Purchasers and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Purchasers and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Purchasers and
any such affiliate and any such Person. The Company also agrees that no
15
<PAGE>
Purchaser or any Affiliates, partners, directors, agents, employees or
controlling persons of such Purchaser shall have any liability to the Company or
any Person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of this Agreement or any of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of such Purchaser, or from a breach of a representation,
warranty or covenant made herein by such Purchaser, in connection with the
transactions contemplated by this Agreement or the Registration Rights
Agreement, in which event such Purchaser, severally and not jointly, shall
reimburse the Company for its legal and other actual out-of-pocket expenses
(including the cost of any investigation and preparation) incurred in connection
therewith, up to the amount of the Purchase Price paid by such Purchaser. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of its obligations hereunder which is permissible under applicable
law.
3.17 Material Information. The Company covenants that any information
provided by the Company to Brown Simpson Strategic Growth Fund, L.P., Brown
Simpson Strategic Growth Fund, Ltd. and Brown Simpson - ORD Investments LLC, and
their agents or their counsel, which could be deemed to constitute material
non-public information, will cease to be material non-public information (either
through disclosure by the Company or otherwise) by December 13, 1999.
ARTICLE IV.
CONDITIONS
4.1 Closing Conditions.
a. Conditions Precedent to the Obligation of the Company to Sell.
The obligation of the Company to sell the Debentures and the Warrants hereunder
is subject to the satisfaction or waiver (with prior written notice to each
Purchaser) by the Company, at or before the Closing, of each of the following
conditions:
(i) Accuracy of the Purchasers' Representations and
Warranties. The representations and warranties of each Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made (except for representations and warranties that speak as of a specific
date) and as of the Closing Date;
(ii) 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; and
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
16
<PAGE>
b. Conditions Precedent to the Obligation of the Purchasers to
Purchase. The obligation of each Purchaser hereunder to acquire and pay for the
Debentures and Warrants is subject to the satisfaction or waiver (with prior
written notice to the Company and each other Purchaser) by such Purchaser, at or
before the Closing, of each of the following conditions:
(i) 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 material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date);
(ii) Performance by the Company. The Company 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 the Company at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on Nasdaq
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company);
(v) Listing of Common Stock. The Common Stock shall be listed
for trading on Nasdaq;
(vi) Required Approvals. All Required Approvals shall have
been obtained and copies thereof delivered to such Purchaser;
(vii) Shares of Common Stock. The Company shall have duly
reserved the number of Underlying Shares required by this Agreement and the
Transaction Documents to be reserved for issuance upon conversion of the
Debentures and the exercise of the Warrants;
(viii) Change of Control. No Change of Control shall have
occurred between August 1, 1999 and the Closing Date. "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 Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchasers or any of their
Affiliates, 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 those individuals who are members of the
Board of Directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions, or (iv) 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), or (iii);
17
<PAGE>
(ix) Transfer Agent Instructions. The Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been delivered
to the Company's transfer agent; and
(x) Resolutions. The Board of Directors of the Company shall
have adopted resolutions consistent with Section 2.1(b) and in a form reasonably
acceptable to each Purchaser (the "Resolutions").
c. Documents and Certificates. At the Closing, the Company shall
have delivered to the Purchasers the following in form and substance reasonably
satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the
form attached hereto as Exhibit D dated as of the Closing Date;
(ii) Debenture. A Debenture(s) representing the principal
amount of Debentures purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of such Purchaser, each
in form satisfactory to the Purchaser;
(iii) Warrant. A Warrant(s) representing the Warrants
purchased by such Purchaser as set forth next to such Purchaser's name on
Schedule I, registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and
delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the
Closing Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of the
Closing Date and confirming the compliance by the Company with the conditions
precedent set forth in this Section 4.1 as of the Closing Date;
(vi) Secretary's Certificate. A Secretary's Certificate dated
the Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of the
Certificate of Incorporation of the Company, as in effect on the Closing Date,
(B) that attached thereto is a true and complete copy of the by-laws of the
Company, as in effect on the Closing Date and (C) that attached thereto is a
true and complete copy of the Resolutions duly adopted by the Board of Directors
of the Company authorizing the execution, delivery and performance of this
Agreement and of the Transaction Documents, and that such Resolutions have not
been modified, rescinded or revoked;
(vii) Certificates of Incorporation. The Company shall have
delivered to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of such
state of incorporation as of a date within ten days of the Closing Date. The
Company shall have delivered to each of the Purchasers a copy of its Certificate
of Incorporation as certified by the Secretary of State of the Commonwealth of
Pennsylvania within two days of the Closing Date;
18
<PAGE>
(viii) Transfer Agent Letter. The Company shall have delivered
to each Purchaser a letter from the Company's transfer agent certifying the
number of shares of Common Stock outstanding as of a date within five days of
the Closing Date; and
(ix) Other Documents. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by the
Transaction Documents as the Purchasers or its counsel may reasonably request.
ARTICLE V.
MISCELLANEOUS
5.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents 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.
5.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 7:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 7:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Provident American Corporation
2500 DeKalb Pike
Norristown, Pennsylvania 19401
Telephone: (610) 279-3561
Facsimile: (610) 279-4498
Attention: Michael Ashker
19
<PAGE>
With a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Telephone: (215) 569-5514
Facsimile: (215) 569-5555
Attention: Barry Genkin
If to the Transfer Agent:
ChaseMellon
450 West 33rd Street
New York, New York 10001
Telephone: (212) 273-8016
Facsimile: 212-947-7628
Attention: Joan Crawford
If to Brown Simpson Strategic Growth Fund, Ltd. to:
152 West 57th Street, 40th Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Paul Gustus
If to Brown Simpson Strategic Growth Fund, L.P. to:
152 West 57th Street, 40th Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Paul Gustus
If to Brown Simpson - ORD Investments LLC to
152 West 57th Street, 40th Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Paul Gustus
20
<PAGE>
If to LB I Group Inc. to:
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Telephone: (212) 526-7255
Facsimile: (212) 526-2198
Attention: Steve Weinstein
If to Royal Bank of Canada to:
Royal Bank of Canada,
by its Agent
RBC Dominion Securities
One Liberty Plaza - 2nd Floor
165 Broadway
New York, New York 10006-1404 U.S.A.
Facsimile No.: 212-858-7439
Attention: Vice President, Global Middle Office
With a copy, in the case of Notice to Brown Simpson Strategic
Growth Fund, Ltd., Brown Simpson Strategic Growth Fund, L.P. or Brown Simpson -
ORD Investments LLC to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Attention: James Kaye
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
5.3 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.
21
<PAGE>
5.4 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.
5.5 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. Except as
provided in this Section 5.5, the Company may not assign this Agreement or any
rights or obligations hereunder without the prior written consent of each of the
Purchasers. The Purchasers may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Company,
provided, that any assignees must make the representations and warranties set
forth in Section 2.2 and otherwise comply with the terms of this Agreement
otherwise applicable to its assignor. This provision shall not limit a
Purchaser's right to transfer securities in accordance with all of the terms of
this Agreement or the Transaction Documents.
5.6 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.
5.7 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 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.
5.8 Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants set
forth in Section 3, and the reimbursement provisions set forth in Section 3.16,
shall survive the Closing and any conversion of the Debentures or exercise of
the Warrants regardless of any investigation made by or on behalf of the such
Purchaser or by or on behalf of the Company, except that, in the case of
representations and warranties such survival shall be limited to the period of
six (6) years following the Closing Date on which they were made or deemed to
have been made (other than with respect to any claim by a third party against
the party to this Agreement who seeks to assert a claim based on such
representations and warranties). This section shall have no effect on the
survival of the indemnification provisions of the Registration Rights Agreement.
22
<PAGE>
5.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 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
page were an original thereof.
5.10 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.
5.11 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.
5.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
23
<PAGE>
5.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
5.14 Payment Set Aside. To the extent that the Company makes a payment
or payments to the Purchasers hereunder or pursuant to the Transaction Documents
or the Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
5.15 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.
5.16 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
Brown Simpson Strategic Growth Fund an aggregate fee of $30,000 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.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
PROVIDENT AMERICAN CORPORATION
By:___________________________
Name:
Title:
<PAGE>
BROWN SIMPSON STRATEGIC
GROWTH FUND, LTD.
By: Brown Simpson Asset Management, LLC
By:___________________________
Name:
Title:
BROWN SIMPSON STRATEGIC
GROWTH FUND, L.P.
By: Brown Simpson Capital, LLC
its general partner
By:___________________________
Name:
Title:
BROWN SIMPSON - ORD INVESTMENTS LLC
By:___________________________
Name:
Title:
<PAGE>
LB I GROUP INC.
By:___________________________
Name:
Title:
<PAGE>
Royal Bank of Canada
By its Agent
RBC Dominion Securities
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
<PAGE>
Schedule I
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Amount of Debenture Shares at Warrant Shares at
Name of Purchaser Debentures at Closing Closing Date Closing Date
- ----------------- --------------------- ------------------- -----------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Brown Simpson Strategic Growth Fund, $9,000,000 442,478 66,372
Ltd.
- -------------------------------------------------------------------------------------------------------------------
Brown Simpson Strategic Growth Fund, $2,000,000 98,328 14,749
L.P.
- -------------------------------------------------------------------------------------------------------------------
Brown Simpson - ORD Investments LLC $1,500,000 73,746 11,062
- -------------------------------------------------------------------------------------------------------------------
LB I Group Inc. $10,000,000 491,642 73,746
- -------------------------------------------------------------------------------------------------------------------
Royal Bank of Canada $5,000,000 245,821 36,873
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule II
<TABLE>
<CAPTION>
Name of Purchaser Address
- ----------------- -------
<S> <C>
Brown Simpson Strategic Growth Fund, Ltd. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence: Grand Cayman, Cayman Islands
Brown Simpson Strategic Growth Fund, L.P. 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence: New York, New York
Brown Simpson - ORD Investments LLC 152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Residence: New York, New York
LB I Group Inc. c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attn: Steven Weinstein
Fax: (212) 526-2198
Residence: New York, New York
Royal Bank of Canada Royal Bank of Canada
by its Agent
RBC Dominion Securities
One Liberty Plaza - 2nd Floor
165 Broadway
New York, New York 10006-1404 U.S.A.
Attn: Vice President, Global Middle Office
Fax: (212) 858-7439
</TABLE>
<PAGE>
Exhibit A
[Form of Convertible Debenture]
<PAGE>
Exhibit B
[Form of Warrant]
<PAGE>
Exhibit C
[Registration Rights Agreement]
<PAGE>
Exhibit D
[Company's Legal Opinion]
<PAGE>
EXHIBIT 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of September 14, 1999, among Provident American Corporation, a
Pennsylvania corporation (the "Company"), and the parties who have executed this
Agreement and whose names appear on Schedule I hereto (each party listed on
Schedule I hereto is sometimes individually referred to herein as a "Purchaser"
and all such parties are sometimes collectively referred to herein as the
"Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement, dated
as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement. As used in this Agreement,
the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other government actions
to close.
"Closing Date" shall mean the Closing Date as defined in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value $.10 per share.
"Effectiveness Date" the earlier of (i) the tenth day after the Company has
received notice (written or oral) from the Commission that the Commission Staff
will not be reviewing the Registration Statement or has no further comments on
the Registration Statement, or (ii) the 90th day following the Filing Date;
provided, however, that the Effectiveness Date shall be extended to up to the
<PAGE>
150th day following the Filing Date if the Initial Registration Statement is not
declared effective by the Commission prior to the 90th day following the Filing
Date due to delays which are solely attributable to the Commission, so long as
the Company responds as promptly as practicable, but in no event later than ten
(10) Business Days, to any comments received from the Commission.
"Effectiveness Period" has the meaning set forth in Section 2(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Event" has the meaning set forth in Section 2(d) hereof.
"Filing Date" the fifth (5th) Business Day after the date that the
Commission declares effective the Company's Registration Statement on Form S-4
filed in connection with the merger or reorganization transaction involving the
Company and HealthAxis.com, Inc., but in no event later than March 31, 2000.
"Holder" or "Holders" means the holder or holders, as the case may be, from
time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 5(c) hereof.
"Indemnifying Party" has the meaning set forth in Section 5(c) hereof.
"Initial Registration Statement" has the meaning set forth in Section 2(a)
hereof.
"Losses" has the meaning set forth in Section 5(a) hereof.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.
2
<PAGE>
"Registrable Securities" means the shares of Common Stock issued or
issuable upon (i) conversion of or with respect to the Securities, (ii) payment
of interest or any other payments in respect of the Securities, (iii) exercise
of the Warrants, and (iv) any shares of the Company's capital stock issued with
respect to (i), (ii) or (iii) as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise.
"Registration Delay Payment" has the meaning set forth in Section 2(d)
hereof.
"Registration Statement" means the Initial Registration Statement and any
additional registration statements contemplated by Sections 2(a), 2(b) and 7(d),
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference in
such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities" means the Company's 2% Convertible Debentures issuable
pursuant to the Purchase Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means special counsel to the Holders.
"Trading Day" means a day on which the Nasdaq (or in the event the Common
Stock is not traded on Nasdaq, such other securities market on which the Common
Stock is listed) is open for trading.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Securities and exercise of the Warrants.
"Underwritten Registration or Underwritten Offering" means a registration
in connection with which securities of the Company are sold to an underwriter
for reoffering to the public pursuant to an effective registration statement.
"Warrants" means the warrants issuable pursuant to the Purchase Agreement.
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2. Registration Requirements
(a) Filing and Effectiveness Obligations. On or prior to the Filing Date,
the Company shall prepare and file with the Commission a Registration Statement
(the "Initial Registration Statement") which shall cover all Registrable
Securities for an offering to be made on a continuous basis pursuant to a
"Shelf" registration statement under Rule 415. The Initial Registration
Statement shall be on Form S-3 or any successor form (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith, subject to the reasonable consent of the original Holders
of the Registrable Securities). The Company shall (i) not permit any securities
other than the Registrable Securities to be included in the Initial Registration
Statement and (ii) use its best efforts to cause the Initial Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event on or prior to the
Effectiveness Date, and to keep such Initial Registration Statement continuously
effective under the Securities Act until the date which is four years after the
date that such Initial Registration Statement is declared effective by the
Commission or such earlier date when all Registrable Securities covered by such
Initial Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144 as determined by counsel to the Company
pursuant to a written opinion letter, addressed to the Holders and the Company's
transfer agent to such effect (the "Effectiveness Period"). The number of shares
of Common Stock initially included in the Initial Registration Statement shall
be no less than 110% of the sum of the number of Securities and Warrants that
are then issuable upon conversion of the Securities (based on the Conversion
Price (as defined in the Securities) as would then be in effect at such time)
and the exercise of the Warrants, without regard to any limitation on the
Holder's ability to convert the Securities or exercise the Warrants.
(b) Underwritten Offering. In addition to the Initial Registration
Statement, at any time when a Registration Statement covering the Registrable
Securities is not effective (during any period in which a Registration Statement
is required to be effective pursuant to the terms hereof), if the Holders of a
majority of the Registrable Securities so elect on or after March 31, 2000, an
offering of Registrable Securities pursuant to such Registration Statement may
be effected on no more than one (1) occasion in the form of an Underwritten
Offering. In such event, and if the managing underwriters advise the Company and
such Holders in writing that in their opinion the amount of Registrable
Securities proposed to be sold in such Underwritten Offering exceeds the amount
of Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) Underwriter. If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering, provided that the Company shall consent to
the inclusion of such investment banker, which consent shall not be unreasonably
withheld. No Holder may participate in any Underwritten Offering hereunder
unless such Holder (i) agrees to sell its Registrable Securities on the basis
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provided in any underwriting agreements approved by the Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such arrangements.
(d) Penalties. If (i) the Initial Registration Statement covering all the
applicable Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the Commission on or before the
Filing Date or (B) declared effective by the Commission on or before the
applicable Effectiveness Date, (ii) on any day after the Registration Statement
has been declared effective by the Commission (A) sales of all the Registrable
Securities required to be included on a Registration Statement cannot be made
pursuant to the Registration Statement (including, without limitation, because
of a failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, or to register sufficient shares of Common Stock, other than as a
result of not complying with Rule 4460(i)(1)(B) of the Nasdaq National Market),
but excluding any periods during which the Registrable Securities cannot be sold
due to any update or amendment of the Registration Statement pursuant to Section
3(b) hereof, provided that each such period shall not exceed fifteen (15)
Business Days or (B) the Common Stock is not listed or included for quotation on
the National Market System of the Nasdaq Stock Market ("Nasdaq"), the New York
Stock Exchange ("NYSE") or the American Stock Exchange (the "AMEX") after being
so listed or included for quotation or (iii) the Company shall otherwise fail to
file a Registration Statement required by Section 2(a) hereof, (each such event
specified in (i), (ii) and (iii) above, an "Event"), then, as partial relief for
the damages to any Holder by reason of any such delay in or reduction of its
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity), the Company shall pay to
each Holder an amount in cash (a "Registration Delay Payment") equal to the then
outstanding principal amount of the Securities (and, in the case of Holders, the
principal amount of Securities from which such Registrable Securities were
converted) as set forth in Schedule I the Purchase Agreement (the "Aggregate
Price") multiplied by .0125 times the sum of: (i) the number of months (prorated
for partial months) after the end of the Effectiveness Date and prior to the
date the Registration Statement is declared effective by the Commission,
provided, however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Purchasers in the
Registration Statement with respect to information relating to the Purchasers,
or to the failure of the Purchasers to conduct their review of the Registration
Statement pursuant to Section 3(a), or any black-out period relating to an
update or amendment of the Registration Statement; provided, further, that with
respect to Section 2(d)(i)(B) hereof, there shall be excluded from such period
any delays which are solely attributable to the Commission during the 150-day
period following the Filing Date, so long as the Company responds as promptly as
practicable, but in no event later than ten (10) Business Days, to any comments
received from the Commission; (ii) the number of months (prorated for partial
months) that sales cannot be made pursuant to the Registration Statement after
the Registration Statement has been declared effective (including, without
limitation, when sales cannot be made by reason of the Company's failure to
properly supplement or amend the Prospectus in accordance with the terms of this
Agreement, or otherwise, but excluding when such sales cannot be made solely by
reason of any act or omission solely attributable to the Purchasers); or (iii)
the number of months (prorated for partial months) that the Common Stock is not
listed or included for quotation on the Nasdaq, NYSE or AMEX or that trading
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thereon is halted after the Registration Statement has been declared effective.
The Company shall pay any Required Registration Delay Payments to each Holder in
cash on the last Business Day of each month during which an Event has occurred
and is continuing. In the event the Company fails to make a Registration Delay
Payment within ten (10) Business Days of the date such Registration Delay
Payment is due, such Registration Delay Payment shall bear interest at the rate
of 2.0% per month (prorated for partial months) until paid in full.
Notwithstanding the foregoing, if a Purchaser elects to exercise the penalty set
forth in this Section 2(d), such Purchaser shall not be entitled to declare an
Event of Default pursuant to Section 3.1(i) of the Debenture.
(e) Form S-3 Eligibility. The Company represents and warrants that it meets
the registrant eligibility and transaction requirements for the use of Form S-3
(for primary and secondary offerings) for the registration of the sale of
Registrable Securities by the Purchasers and any other Holders and the Company
shall file all reports required to be filed by the Company with the Commission
in a timely manner so as to maintain such eligibility for the use of Form S-3.
3. Registration Procedures
In connection with the Company's registration obligations hereunder, the
Company shall:
(a) Preparation of Registration Statement. Prepare and file with the
Commission on or prior to the Filing Date a Registration Statement on Form S-3
or its successor form (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3 such registration shall be on
another appropriate form in accordance herewith (which shall include a Plan of
Distribution substantially in the form of Exhibit A annexed hereto, unless in
connection with an Underwritten Offering) or in connection with an Underwritten
Offering hereunder, such other form agreed to by the Company and by a
majority-in-interest of Holders of Registrable Securities to be covered by such
Registration Statement), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than three (3) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated therein by reference), the
Company shall, if reasonably practicable (i) furnish to the Holders, their
Special Counsel and any managing underwriters, copies of all such documents
proposed to be filed (including documents incorporated by reference), which
documents will be subject to the review of such Holders, their Special Counsel
and such managing underwriters, and (ii) use its best efforts to cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel or any managing underwriters shall
reasonably object, and will not request acceleration of such Registration
Statement without prior notice to such counsel, provided, however, that such
shall not form the basis for penalties under Section 2(d) hereof. The sections
of such Registration Statement covering information with respect to the Holders,
the Holder's beneficial ownership of securities of the Company or the Holders
intended method of disposition of Registrable Securities shall conform to the
information provided to the Company by each of the Holders.
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(b) Amendments. (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements as are required to be filed hereunder in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as practicable, but in no event later
than fifteen (15) Business Days, to any comments received from the Commission
with respect to the Registration Statement or any amendment thereto and as
promptly as possible provide the Holders true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented. In the event the number of shares available under
a Registration Statement filed pursuant to this Agreement is insufficient to
cover 110% of the Registrable Securities issued or issuable upon conversion of
the Securities and exercise of the Warrants, subject to compliance with Rule
(i)(1)(D) of the Nasdaq National Market, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover 110% of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) Business Days after the necessity therefor arises (based on
the Conversion Price of the Securities and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. The provisions of Section 2(d)
above shall be applicable with respect to such obligation, with the ninety (90)
days running from the day after the date on which the Company reasonably first
determines (or reasonably should have determined) the need therefor.
(c) Notifications. Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters as promptly as possible
(and, in the case of (i)(A) below, not less than five (5) days prior to such
filing and, in the case of (i)(C) below, not later than the first Business Day
after effectiveness) and (if requested by any such Person) confirm such notice
in writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement and
(C) with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to
the Registration Statement or Prospectus or for additional information; (iii) of
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the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) if at any time any of
the representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
(d) Suspensions. Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Supplements and Post-Effective Amendments. If requested by any managing
underwriter or the Holders of a majority in interest of the Registrable
Securities to be sold in connection with an Underwritten Offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the Company reasonably agrees should
be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the written opinion of counsel for the Company (addressed to
counsel to the Holder), violate applicable law.
(f) Copies of Registration Statement. Furnish to each Holder, their Special
Counsel, and any managing underwriters, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Copies of Prospectus. Promptly deliver to each Holder, their Special
Counsel, and any underwriters, without charge, as many copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
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(h) Blue Sky. Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders,
any underwriters and their Special Counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
(i) Certificates. Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by applicable law and the
Purchase Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
managing underwriters or Holders may request at least two (2) Business Days
prior to any sale of Registrable Securities.
(j) Supplements and Amendments. Upon the occurrence of any event
contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Listing. Cause all Registrable Securities relating to such Registration
Statement to be listed on Nasdaq and any other securities exchange, quotation
system, market or over-the-counter bulletin board, if any, on which similar
securities issued by the Company are then listed as and when required pursuant
to the Purchase Agreement, subject to compliance with Rule 4460(i)(1)(D) of the
Nasdaq National Market.
(l) Underwriting Agreement. Enter into such agreements (including an
underwriting agreement in form, scope and substance as is customary in
Underwritten Offerings) and take all such other actions in connection therewith
(including those reasonably requested by any managing underwriters and the
Holders of a majority of the Registrable Securities being sold) in order to
expedite or facilitate the disposition of such Registrable Securities, and
whether or not an underwriting agreement is entered into, (i) make such
representations and warranties to such Holders and such underwriters as are
customarily made by issuers to underwriters in underwritten public offerings,
and confirm the same if and when requested; (ii) in the case of an Underwritten
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Offering obtain and deliver copies thereof to the managing underwriters, if any,
or in the case of non-Underwritten Offerings, if reasonably requested by the
selling Holders (and at the expense of such selling Holders), obtain and deliver
copies thereof to such selling Holders, of opinions of counsel to the Company
and updates thereof addressed to each such underwriter, in form, scope and
substance reasonably satisfactory to any such managing underwriters and Special
Counsel to the selling Holders covering the matters customarily covered in
opinions requested in Underwritten Offerings and such other matters as may be
reasonably requested by such Special Counsel and underwriters; (iii) immediately
prior to the effectiveness of the Registration Statement, and, in the case of an
Underwritten Offering, at the time of delivery of any Registrable Securities
sold pursuant thereto, and, in the case of non-Underwritten Offerings, at such
time as the selling Holders may reasonably request (and at the expense of such
selling Holders), obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if required, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to each of the underwriters, if any, in form and substance
as are customary in connection with Underwritten Offerings; (iv) if an
underwriting agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling Holders and the
underwriters, if any, than those set forth in Section 5 (or such other
provisions and procedures acceptable to the managing underwriters, if any, and
Holders of a majority of Registrable Securities participating in such
Underwritten Offering; and (v) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority of the Registrable Securities
being sold, their Special Counsel and any managing underwriters to evidence the
continued validity of the representations and warranties made pursuant to clause
3(1)(i) above and to evidence compliance with any customary conditions contained
in the underwriting agreement or other agreement entered into by the Company.
(m) Due Diligence. Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling Holders or underwriters, at the offices where normally kept,
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such Holder, representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that if any information is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information, then prior to delivery of
such information, the Company and the Holders shall enter into a confidentiality
agreement reasonably acceptable to the Company and the Holders providing that
such information shall be kept confidential, unless (i) disclosure of such
information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities (provided, however, that the
Company shall be given notice of any such pending disclosure so that the Company
may seek a protective order); (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law; (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person; or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.
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(n) Earnings Statement. Comply in all material respects with all applicable
rules and regulations of the Commission and make generally available to its
securityholders earning statements satisfying the provisions of Section 11(a) of
the Securities Act and Rule 158 not later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts Underwritten Offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the Company
after the effective date of the Registration Statement, which statement shall
conform to the requirements of Rule 158.
(o) Information. The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement, and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request, and such shall not form
the basis for penalties pursuant to Section 2(d) hereof. Each Holder shall
furnish to the Company information regarding the Holder and the distribution of
he Registrable Securities as is required, in the opinion of counsel to the
Holder, by applicable law to be disclosed in the Registration Statement and
Prospectus.
The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning a Holder is sought in or
by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Holder prior to making such disclosure, and
allow the Holder, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
If the Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder covenants and agrees that (i) it will not sell any Registrable
Securities under the Registration Statement until it has received copies of the
Prospectus as then amended or supplemented as contemplated in Section 3(g) and
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notice from the Company that such Registration Statement and any post-effective
amendments thereto have become effective as contemplated by Section 3(c) and
(ii) it and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to them in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi),
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Securities Purchase
Agreement in connection with any sale of Registrable Securities with respect to
which an Holder has entered into a contract for sale prior to the Holder's
receipt of a notice from the Company of the happening of any event of the kind
described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi) and for
which the Holder has not yet settled.
(p) Responses to the Commission. The Company agrees to respond fully and
completely to any and all comments on a Registration Statement received from the
Commission staff as promptly as possible but, for non-Underwritten Offerings, in
no event later than ten (10) Business Days of the receipt of such comments,
regardless of whether such comments are in oral or written form.
(q) Confirmation of Effectiveness. Within two (2) Business Days after a
Registration Statement which covers applicable Registrable Securities is ordered
effective by the Commission, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Holders whose Registrable Securities are included
in such Registration Statement) confirmation that such Registration Statement
has been declared effective by the Commission in the form attached hereto as
Exhibit B.
(r) Black-out Periods. Subject to the last sentence of this Section 3(r),
the Company may by written notice require that the Holders immediately cease
sales of Registrable Securities (for a period not to exceed thirty (30)
consecutive days in any one instance and for a period not to exceed seventy-five
(75) calendar days in any twelve-month period) pursuant to a Registration
Statement at any time that (i) the Company becomes engaged in a business
activity or negotiation which is not disclosed in a Registration Statement (or
the prospectus included therein) which the Company reasonably believes must be
disclosed therein under applicable law and which the Company desires to keep
confidential for business purposes, (ii) the Company determines that a
particular disclosure so determined to be required to be disclosed therein would
be premature or would adversely affect the Company or its business or prospects
or (iii) the Registration Statement can no longer be used under the existing
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rules and regulations promulgated under the Securities Act (each of (i), (ii) or
(iii), a "Material Condition"). The Company shall not be required to disclose to
the Holders which of the reasons specified in (i), (ii) or (iii) above is the
basis for requiring a suspension of sales due to the occurrence of a Material
Condition. The Company will use its commercially reasonable best efforts to
ensure that the use of the Registration Statement (and the prospectus included
therein) may be resumed as soon as it is practicable. The Company may not
suspend sales of Registrable Securities under a Registration Statement pursuant
to this Section 3(r) more than three times during any twelve-month period.
4. Registration Expenses
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company, other than with
regard to an Underwritten Offering and whether or not the Registration Statement
is filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with Nasdaq and each other
securities exchange or market on which Registrable Securities are required
hereunder to be listed and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the Holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and expenses
of all other Persons retained by the Company in connection with the consummation
of the transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, and the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange as required hereunder.
Notwithstanding anything contained in this Section 4 to the contrary, the
Holders shall be responsible for all fees and expenses relating to an
Underwritten.
5. Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
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applicable law, from and against any and all joint or several losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, "Losses"), as incurred, arising out of or
relating to (i) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made),
except to the extent, but only to the extent, that such untrue statements or
omissions are based solely upon and in conformity with information regarding
such Holder furnished in writing to the Company by such Holder expressly for use
therein, which information was reasonably relied on by the Company for use
therein or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of prospectus or in any
amendment or supplement thereto (provided that the Company amended any
disclosure with respect to the method of distribution upon written notice from
the Holders that such section of the Prospectus should be revised in any way) or
(ii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of Registrable Securities. The Company shall not, however, be liable for
any Losses to any Holder with respect to any untrue or alleged untrue statement
of material fact or omission or alleged omission of material fact if such
statement or omission was made in a preliminary Prospectus and such Holder did
not receive a copy of the final Prospectus (or any amendment or supplement
thereto) at or prior to the confirmation of the sale of the Registrable
Securities in any case where such delivery is required by the Securities Act and
the untrue or alleged untrue statement of material fact or omission or alleged
omission of material fact contained in such preliminary Prospectus was corrected
in the final Prospectus (or any amendment or supplement thereto), unless the
failure to deliver such final Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 3(g) of this Agreement. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
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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.
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All fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten (10)
Business Days of a detailed written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b)
is unavailable to an Indemnified Party because of a failure or refusal of a
court of competent jurisdiction to enforce such indemnification in accordance
with its terms (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses, in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying Party
or Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action, statement or
omission. The amount paid or payable by a party as a result of any Losses shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys' or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party in accordance with its terms. In no
event shall any selling Holder be required to contribute an amount under this
Section 5(d) in excess of the net proceeds received by such Holder upon sale of
the Registrable Securities pursuant to the Registration Statement giving rise to
such contribution obligation.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
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6. Rule 144
As long as any Holder owns Registrable Securities, the Company covenants to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to Section 13(a) or l5(d) of the Exchange Act and to
promptly furnish the Holders with true and complete copies of all such filings.
As long as any Holder owns Registrable Securities, if the Company is not
required to file reports pursuant to Section 13(a) or l5(d) of the Exchange Act,
it will prepare and furnish to the Holders and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any Holder may reasonably request, all to the extent required
from time to time to enable such Person to sell Underlying Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including providing
any legal opinions referred to in the Purchase Agreement. Upon the request of
any Holder, the Company shall deliver to such Holder a written certification of
a duly authorized officer as to whether it has complied with such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder of any
of their obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by law
and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, except as provided herein
or in Schedule 2.1(r) of the Purchase Agreement and except as may be provided as
a result of the merger or the reorganization between the Company and
HealthAxis.com, Inc. (with respect to the lesser of (i) 1,000,000 shares of
Common Stock or (ii) the number of shares of Common Stock underlying
HealthAxis.com, Inc. warrants and options approved under the HealthAxis.com,
Inc. stock option plan) enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Except as disclosed in Schedule
2.1(r) of the Purchase Agreement and except as may be provided as a result of
the merger or the reorganization between the Company and HealthAxis.com, Inc.
(with respect to the lesser of (i) 1,000,000 shares of Common Stock or (ii) the
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number of shares of Common Stock underlying HealthAxis.com, Inc. warrants and
options approved under the HealthAxis.com, Inc. stock option plan), neither the
Company nor any of its subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subordinated in all respects to the rights in
full of the Holders set forth in Section 2 herein, and are not otherwise in
conflict or inconsistent with the provisions of this Agreement. This Agreement,
together with the Purchase Agreement, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
(c) No Piggyback on Registrations. Except as disclosed on Schedule 2.1(r)
of the Purchase Agreement, neither the Company nor any of its securityholders
(other than the Holders in such capacity pursuant hereto) may include securities
of the Company in the Registration Statements and the Company shall not after
the date hereof enter into any agreement providing such right to any of its
securityholders, unless the right so granted is subordinated in all respects to
the rights in full of the Holders set forth herein, and is not otherwise in
conflict or inconsistent with the provisions of this Agreement.
(d) Piggy-Back Registrations. Except as provided herein if, at any time
when there is not an effective Registration Statement covering the Registrable
Securities, the Company shall determine to prepare and file with the Commission
a registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, the Company shall send to each Holder of Registrable Securities written
notice of such determination and, if within ten (10) days after receipt of such
notice, any such Holder shall so request in writing, (which request shall
specify the Registrable Securities intended to be disposed of by the
Purchasers), the Company will use reasonable efforts to effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the Holder, subject to piggy-back rights as set
forth on Schedule 2.1(r) to the extent requisite to permit the disposition of
the Registrable Securities so to be registered, provided that if at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to such Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay expenses in accordance with
Section 4 hereof), and (ii) in the case of a determination to delay registering,
shall be permitted to delay registering any Registrable Securities being
registered pursuant to this Section 7(d) for the same period as the delay in
registering such other securities. The Company shall include in such
registration statement all or any part of such Registrable Securities such
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Holder requests to be registered; provided, however, that the Company shall not
be required to register any Registrable Securities pursuant to this Section 7(d)
that are eligible for sale pursuant to Rule 144(k) of the Securities Act. In the
case of an underwritten public offering, if the managing underwriter(s) or
underwriter(s) should reasonably object to the inclusion of the Registrable
Securities in such registration statement, then if the Company after
consultation with the Underwriter's representative should reasonably determine
that the inclusion of such Registrable Securities would materially adversely
affect the offering contemplated in such registration statement, and based on
such determination recommends inclusion in such registration statement of fewer
Registrable Securities then proposed to be sold by the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration
statement shall be reduced pro rata among such Holders (based upon the number of
Registrable Securities requested to be included in the registration) or (y) none
of the Registrable Securities of the Holders shall be included in such
registration statement if the Company, after consultation with the
underwriter(s), recommends the inclusion of none of such Registrable Securities;
in each case subject to piggy-back rights as are set forth on Schedule 2.1(r).
Notwithstanding the foregoing, the Company shall not file any registration
statement under the Securities Act (other than on Form S-4 or Form S-8) relating
to the offer and sale of any equity securities of the Company, or offer or sell
any equity securities of the Company in a transaction exempt from registration
pursuant to Regulation S under the Securities Act, until such time as the
Initial Registration Statement has been effective for a period of sixty (60)
Trading Days, which period shall be tolled if the effectiveness of the Initial
Registration Statement is suspended for any reason whatsoever.
(e) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the same shall be in writing and signed by the Company and the Holders of
at least two thirds of the then outstanding Registrable Securities; provided,
however, that for the purposes of this sentence, Registrable Securities that are
owned, directly or indirectly, by the Company, or an Affiliate of the Company
are not deemed outstanding. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders and that does not directly or indirectly
affect the rights of other Holders may be given by Holders of at least a
majority of the Registrable Securities to which such waiver or consent relates;
provided, however, that the provisions of this sentence may not be amended,
modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.
(f) Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 5:00 p.m.
eastern time where such notice is to be received), or the first Business Day
following such delivery (if received after 5:00 p.m. eastern time where such
notice is to be received) or (b) on the second Business Day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications are (i) if to the Company to Provident
American Corporation, 2500 Dekalb Pike, Norristown, PA 19404, Attn: President,
fax no. (610) 279-4498, with copies to Blank Rome Comisky & McCauley LLP, One
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Logan Square, Philadelphia, PA 19103, Attn: Barry H. Genkin, fax no. (215)
988-6910 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, Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York
10022, Attn: James Kaye, Esq., fax no. (212) 872-1002 or such other address as
may be designated in writing hereafter, in the same manner, by such Person.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. The Company may not assign its
rights or obligations hereunder without the prior written consent of the Holders
of at least 90% of the outstanding Registrable Securities. Each Holder may
assign its rights hereunder in the manner and to the Persons as permitted under
the Purchase Agreement. In addition, the rights of each Holder hereunder,
including the right to have the Company register for resale Registrable
Securities in accordance with the terms of this Agreement, shall be
automatically assignable by each Holder if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
of this Agreement, and (v) such transfer shall have been made in accordance with
the applicable requirements of the Purchase Agreement. The rights to assignment
shall apply to the Holders (and to subsequent) successors and assigns.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.
(i) Governing Law. The corporate laws of the Commonwealth of Pennsylvania
shall govern all issues concerning the relative rights of the Company and the
Purchasers as its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts sitting in the
City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consent to process being served in any such suit, action or proceeding by
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mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
(j) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
(k) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(l) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(m) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate solely by reason of its holdings of such
Registrable Securities) shall not be counted in determining whether such consent
or approval was given by the Holders of such required percentage.
(n) Revision of SEC Position on Warrants. In the event the rules and
regulations of the Commission or the policies of the staff of the Commission are
modified and as a result thereof the Company determines in good faith that it
may be practicable and in the interests of the Company and the Holders to
register the exercise of the Warrants so that the Warrant Shares may be freely
resold without maintaining an effective registration statement under the
Securities Act for resales, the Company and the Holders agree to cooperate in
good faith to effect such amendments to this Agreement as may be appropriate to
provide that the Company may fulfill its obligations hereunder with respect to
the Warrants and the Warrant Shares by maintaining an effective registration
statement under the Securities Act covering the exercise of the Warrants rather
than the resale of the Warrant Shares.
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
PROVIDENT AMERICAN CORPORATION
By:______________________________________
Name:
Title:
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BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: Brown Simpson Asset Management, LLC
By:______________________________________
Name:
Title:
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By: Brown Simpson Capital, LLC
its general partner
By:______________________________________
Name:
Title:
BROWN SIMPSON - ORD INVESTMENTS LLC
By:______________________________________
Name:
Title:
LB I GROUP INC.
By:______________________________________
Name:
Title:
<PAGE>
Royal Bank of Canada
By its Agent
RBC Dominion Securities
By:______________________________________
Name:
Title:
By:______________________________________
Name:
Title:
<PAGE>
SCHEDULE I
Company
Provident American Corporation
2500 Dekalb Pike
Norristown, PA 19404
Attn: President
Fax: (610) 279-4498
Purchasers:
Brown Simpson Strategic Growth Fund, L.P.
152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Brown Simpson Strategic Growth Fund, Ltd.
152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
Brown Simpson - ORD Investments LLC
152 West 57th Street, 40th Floor
New York, New York 10019
Attn: Paul Gustus
Fax: (212) 247-1329
LB I Group Inc.
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attn: Steve Weinstein
Fax: (212) 526-2198
Royal Bank of Canada
by its Agent
RBC Dominion Securities
One Liberty Plaza - 2nd Floor
165 Broadway
New York, New York 10006-1404 U.S.A.
Attn: Vice President, Global Middle Office
Fax: (212) 858-7439
<PAGE>
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
<PAGE>
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.
<PAGE>
EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: Provident American Corporation
Ladies and Gentlemen:
We are counsel to Provident American Corporation, a Pennsylvania
corporation (the "Company"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "Purchase Agreement") entered
into by and among the Company and the buyers named therein (collectively, the
"Holders") pursuant to which the Company issued to the Holders its 2%
Convertible Debentures convertible into shares of the Company's common stock,
par value $.10 per share (the "Common Stock"), and Warrants (the "the Warrants")
to acquire shares of Common Stock. Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Debentures and exercise of the Warrants, under the
Securities Act of 1933, as amended (the "1933 Act"). In connection with the
Company's obligations under the Registration Rights Agreement, on
_______________, 1999, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the "Registration Statement") with the Securities
and Exchange Commission (the "SEC") relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
<PAGE>
EXHIBIT 3
FORM OF
2% CONVERTIBLE DEBENTURES
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.__ $ ________________
PROVIDENT AMERICAN CORPORATION
2% CONVERTIBLE DEBENTURES DUE SEPTEMBER 14, 2002
Provident American Corporation, a Pennsylvania corporation
(the "Company"), for value received hereby promises to pay to [Insert Holder] 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, 2002 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, due September 14, 2002 of the Company (the "Debenture")
referred to in the Securities Purchase Agreement (the "Purchase Agreement"),
dated as of September 14, 1999, by and among the Company and the Purchasers
listed on Schedule I thereto. 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.
<PAGE>
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 the
most recent Interest Payment Date on which interest has been paid on this
Debenture and shall be payable semi-annually on January 1 and July 1 of each
year (an "Interest Payment Date"), commencing on January 1, 2000, to the Holder
hereof until the principal amount is paid or made available for payment. The
interest so payable on any Interest Payment Date will be paid in cash or an
equivalent value of the Company's Common Stock calculated based upon the Average
Price (as defined herein) as of such Interest Payment Date, at the Company's
option, subject to certain conditions contained herein, to the Holder of this
Debenture at the close of business on the Record Date for the interest payable
on such Interest Payment 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.
2
<PAGE>
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
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 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; (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 4.7 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 Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
3
<PAGE>
"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.
"Authorization Date" has the meaning set forth in Section 4.8.
"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.
"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 merger or reorganization of the Company and HealthAxis.com, Inc.,
which is contemplated to be consummated by March 31, 2000, shall not be deemed a
"Change of Control" hereunder.
"Closing Date" has the meaning set forth in the Purchaser
Agreement
"Common Stock" means the common stock, par value $.10 per
share, of the Company.
4
<PAGE>
"Company" means Provident American Corporation.
"Converted Debentures" has the meaning set forth in Section
3.1.
"Convertible Securities" has the meaning set forth in Section
4.5(g)(i)(A).
"Conversion Date" has the meaning set forth in Section 4.4(a).
"Conversion Default" has the meaning set forth in Section 4.8.
"Conversion Default Date" has the meaning set forth in Section
4.8.
"Conversion Default Payments" has the meaning set forth in
Section 4.8.
"Conversion Price" has the meaning set forth in Section 4.2.
"Debt" of any Person means, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, (v) all obligations of such Person as
lessee under capitalized leases, (vi) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person,
provided that for purposes of determining the amount of any Debt of the type
described in this clause, if recourse with respect to such Debt is limited to
such asset, the amount of such Debt shall be limited to the fair market value of
such asset, (vii) all Debt of others guaranteed by such Person, and (viii) all
redeemable stock valued at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends.
"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.
"Excluded Securities" means (i) shares of Common Stock issued
pursuant to the terms of this Agreement, the Securities Purchase Agreement and
the Stock Purchase Warrant, (ii) shares of Common Stock deemed to have been
issued by the Company in connection with an Approved Stock Plan, (iii) 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, (iv) 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 and (v) shares of Common Stock (or options or warrants to purchase Common
Stock) issued in any merger or reorganization transaction involving the Company
and HealthAxis.com, Inc., which transaction is contemplated to be consummated by
March 31, 2000.
5
<PAGE>
"Event of Default" has the meaning set forth in Section 3.1.
"Excess Amount" has the meaning set forth in Section 4.8.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"GAAP" or "generally accepted accounting principles" means, at
the Closing Date, 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 on the Closing Date.
"Holder" means the registered holder of any Debenture.
"Incurrence" means the incurrence, creation, assumption or in
any other manner becoming liable with respect to, or the extension of the
maturity of or becoming responsible for the payment of, any Debt.
"Incur" shall have a comparable meaning.
"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.
"Issuable Maximum" has the meaning set forth in Section 4.14.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Debenture, the Company shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Mandatory Prepayment Amount" for any Debenture means, at the
option of the Holder (i) the sum of (x) 100% of the principal amount of the
Debenture to be prepaid and (y) all other amounts, costs, interest, expenses and
liquidated damages due in respect of such principal amount or (ii) in the case
of an Event of Default pursuant to Sections 3.1(i) or (k) or hereof, the sum of
(x) 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 (y) all other amounts, costs, interest, expenses and
liquidated damages due in respect of such principal amount; provided, however,
that in the event of the failure of the Company to have the Initial Registration
Statement declared effective by the Securities and Exchange Commission by the
Effectiveness Date (as defined in the Registration Rights Agreement) the
Mandatory Prepayment Amount shall be solely payable pursuant to section (i)
hereof if (a) such failure is due solely to delays caused by comments the
Company received from the Securities and Exchange Commission and (b) the Company
responds to such comments in a commercially reasonable manner within ten (10)
days after the receipt thereof and otherwise complies with the terms and
conditions of the Registration Rights Agreement.
6
<PAGE>
"Maturity Date" means the date on which the principal of a
Debenture becomes due and payable as herein provided, whether on the Stated
Maturity Date or pursuant to acceleration upon an Event of Default.
"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.
"Payment Due Date" has the meaning set forth in Section
4.5(h).
"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 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.
"Permitted Liens" means (a) Liens securing Debt to vendors of
equipment, (b) Liens listed on Schedule 2.1(s) to the Purchase Agreement, (c)
Liens incurred to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature incurred
in the ordinary course of business, (d) any Lien on property or assets of the
Company in favor of the United States of America or any state thereof, or any
instrumentality of either, to secure certain payments pursuant to any contract
or statute, (e) any Lien for taxes or assessments or other governmental charges
or levies not then due and payable (or which, if due and payable, are being
contested in good faith and for which adequate reserves are being maintained, to
the extent required by generally accepted accounting principles), (f) any title
exception, easement or other similar Lien that does not materially impair the
use of the property subject thereto in the ordinary course of business of the
Company or its Subsidiaries, (g) any Lien to secure obligations under workmen's
compensation laws or similar laws, including any Lien with respect to judgments
which are not currently dischargeable, (h) any statutory warehousemen's,
materialmen's or similar Liens for sums not then due and payable (or which, if
due and payable, are being contested in good faith and with respect to which
adequate reserves are being maintained, to the extent required by generally
accepted accounting principles and (i) any judgment or other similar Liens
arising in connection with court proceedings to the extent the attachment or
enforcement of such Liens would not result in an Event of Default hereunder.
7
<PAGE>
"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.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person under
generally accepted accounting principles.
"Purchase Agreement" means that certain Securities Purchase
Agreement dated as of September 14, 1999, 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.
"Purchasers" has the meaning ascribed thereto in the Purchase
Agreement.
"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 Registration Rights
Agreement dated as of September 14, 1999, by and among the Company and the
Purchasers.
"Reserved Amount" has the meaning set forth in Section 4.8.
"Reset Event" has the meaning set forth in Section 4.2(b).
"Securities Act" means the Securities Act of 1933, as amended.
"Stated Maturity Date" means September 14, 2002.
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"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.
"Subsequent Market" means the New York Stock Exchange,
American Stock Exchange or Nasdaq Smallcap Market.
"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.
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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 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 ("Events 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
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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 in this paragraph) contained in
this Debenture (other than the failure to issue shares of Common Stock upon
conversion because of the Company's non-compliance with applicable Nasdaq rules,
in which case Section 4.14 shall be the sole exclusive remedy of the Holder) the
Purchase Agreement 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. there shall have occurred with respect to any issue or
issues of Debt of the Company and/or one or more Subsidiaries having an
outstanding principal amount of $1,000,000 or more in the aggregate for all such
issues of all such Persons, whether such Debt now exists or shall hereafter be
created, an event of default which has caused the holder thereof to declare such
Debt to be due and payable prior to its stated maturity and such Debt has not
been discharged in full or such acceleration has not been rescinded or annulled
within twenty (20) Business Days of such acceleration; or
d. one or more judgments or orders for the payment of money
shall be rendered against the Company or any Subsidiary of the Company in excess
of $1,000,000 in the aggregate (treating any deductibles, self insurance or
retention as not so covered) which judgments or orders are not discharged and
remain outstanding for a period of thirty (30) consecutive days following entry
of the judgment or order which causes the aggregate amount described above to
exceed $1,000,000 in which period a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or
e. 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
f. 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
g. any representation or warranty made by the Company in the
Purchase Agreement shall prove to have been incorrect in any material respect
when made; or
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h. the Common Stock shall be delisted from Nasdaq (or a
Subsequent Market, if applicable) or shall be suspended from trading on Nasdaq
without resuming trading and/or being relisted thereon or on a Subsequent Market
or having such suspension lifted, as the case may be, within fifteen (15)
Business Days; or
i. a Registration Statement for the Underlying Shares shall
not have been declared effective by the Securities and Exchange Commission on or
prior to the 30th day after the Effectiveness Date (as defined in the
Registration Rights Agreement) or 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 thirty (30) consecutive days or
sixty (60) days in any twelve (12) month period, except as otherwise provided in
the Registration Rights Agreement; or
j. a Change of Control shall occur and the obligations of the
Company under this Debenture shall not have been (i) fully assumed by the
controlling entity that is a publicly traded corporation whose common stock is
listed for trading on the Nasdaq or a Subsequent Market or (ii) otherwise been
fully discharged or accounted; or
k. the Company shall fail to issue shares of Common Stock
within five (5) Trading Days after the Holder delivers a Notice of Conversion
pursuant to Section 4.2 hereof, other than the failure to issue shares of Common
Stock because the Company's non-compliance with applicable Nasdaq rules, in
which case Section 4.14 shall be the sole and exclusive remedy of Holder;
then, in each and every such case (other than an Event of Default specified in
Section 3.1(e) or 3.1(f) hereof), unless the principal 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(e) or 3.1(f) 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.
The aggregate amount payable upon an Event of Default shall be
equal to the sum of (i) the Mandatory Prepayment Amount and (ii) the Holder's
reasonable costs of collection.
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For purposes of this Section 3.1, 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. Interest shall accrue on the Mandatory Prepayment Amount hereunder from
the day after such amount is due (being the date of an Event of Default) through
the date of payment in full thereof at the Default Rate, accruing daily from the
date of conversion until such amount, plus any interest thereon, if any, is paid
in full. 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
payments of amounts due to the Holder, (i) the Holder shall return the
Debentures to the Company and (ii) in the event the Mandatory Prepayment Amount
relates to the Converted Debentures, the Holder shall return the Underlying
Shares into which such Converted Debentures were converted. 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.
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; and 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 Section, 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.
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4.2 Rights of Holders to Convert Debentures into Common Stock.
a. Subject to the requirements of Rule 4460(i)(1)(D) of the
Nasdaq National Market and upon compliance with the provisions of this Section,
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 Maturity Date, may be converted into duly
authorized, validly issued, fully-paid and nonassesable shares of Common Stock
at a price per share equal to $20.34 (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.
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 (subject to the
Company's compliance with the requirements of Rule 4460(i)(1)(D) of the Nasdaq
National Market) 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 nonassesable 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
Debentures 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. Without in any way limiting the
Holder's right to pursue other remedies, including actual damages and/or
equitable relief, the parties hereto agree that in the event that the Company
fails to deliver the shares of Common Stock required to be issued upon the
conversion of such Debenture or Debentures pursuant to this Section 4.4 within
two Trading Days after the three (3) Trading Day period referred above, the
Company shall pay to the Holder upon demand an amount of cash (at the Holder's
option) equal to the product of (w) the number of shares of Common Stock
required to be issued upon the conversion of the Debenture or Debentures, (x)
the Per Share Market Value of such shares on the Conversion Date, (y) the number
of days after such 5-day period that such shares are not delivered to the
Holder, and (z) 0.000411.
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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 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 purchases (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.
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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, 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.
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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.
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.
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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 or, in the event that the Company does not consummate its merger or
reorganization transaction with HealthAxis.com, Inc., any issuance of securities
or distributions to HealthAxis.com, 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 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 any merger or reorganization transaction
involving the Company and HealthAxis.com, Inc., which is contemplated to be
consummated by March 31, 2000.
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.
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<PAGE>
(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
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.
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(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% of the
outstanding shares of the Common Stock following such conversion.] [RCB ONLY:
4.9% of any class of voting securities of the Company and 24.9% of the total
capital securities of the Company following such conversion. In addition, to the
extent the limitations set forth in the preceding sentence are exceeded, Royal
Bank of Canada will not sell, transfer, otherwise dispose of these Debentures
unless the shares of Common Stock resulting from the conversion of such
Debentures are to be first sold, transferred or otherwise disposed of in (A) a
widely dispersed public distribution, (B) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of the
Company (including, for purposes of such determination, shares of Common Stock
issuable upon conversion of shares of these Debentures), (C) an assignment to a
single party (e.g., a broker or investment banker) for the purpose of conducting
a widely dispersed public distribution on the transferor's behalf, or (D) any
other manner approved by the Federal Reserve Board.] 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), subject to the requirements of Rule 4460(i)(1)(D) of the Nasdaq
National Market, provided approval is obtained, if required, pursuant to 40 P.S.
ss.991.1402.
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<PAGE>
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
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 (a "Conversion Default"), subject to Section
4.15, the Company shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of this
Debenture which the Holder included in its Conversion Notice and which exceeds
the amount which is then convertible into available shares of Common Stock (the
"Excess Amount") shall, notwithstanding anything to the contrary contained
herein, not be convertible into Common Stock in accordance with the terms hereof
until the date additional shares of Common Stock are authorized by the Company
to permit such conversion at which time, if the Holder elects to proceed with
such conversion, by written notice to the Company within twenty (20) Business
Days after the Authorization Notice Date (as defined below) the Conversion Price
in respect thereof shall be the lesser of (i) the Conversion Price on the
Conversion Default Date (as defined below) and (ii) the lowest Per Share Market
Value on any date after the Conversion Default Date and prior to that date which
is five (5) Business Days after the Company provides the Holder with written
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notice that additional shares of Common Stock have been authorized by the
Company to permit such conversion in respect thereof (the "Authorization Notice
Date"). In addition, the Company shall pay to the Holder payments ("Conversion
Default Payments") for a Conversion Default equal to the product of (x) the
Excess Amount, (y) .20, and (z) (N/365), where N equals the number of days from
the day the holder submits a Notice of conversion giving rise to a Conversion
Default (the "Conversion Default Date") to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of the Excess Amount. The Company shall use its best efforts
to authorize a sufficient number of shares of Common Stock as soon as
practicable following the earlier of (i) such time that the Holder notifies the
Company or that the Company otherwise becomes aware that there are or likely
will be insufficient authorized and unissued shares to allow full conversion
thereof and (ii) a Conversion Default. The Company shall send notice to the
Holder of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash to the Holder by the fifth (5th) Business Day of the month
following the month in which it has accrued. Nothing herein shall limit the
Holder's right to pursue actual damages (to the extent in excess of the
conversion Default Payments) for the Company's failure to maintain a sufficient
number of authorized shares of Common Stock, and each Holder shall have the
right to pursue all remedies available at law or in equity (including degree of
specific performance and/or injunctive relief).
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.
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<PAGE>
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 Provident American Corporation,
2500 Dekalb Pike, Norristown, PA 19404 Attn: President, fax no. (610) 279-4498
with copies to Blank Rome Comisky & McCauley LLP, One Logan Square,
Philadelphia, PA 19103, Attn: Barry Genkin, fax no. (215) 988-6910 and (ii) if
to any Holder to the address set forth on Schedule II to the Purchase Agreement
with copies to Akin, Gump, Strauss, Hauer & Feld, L.L.P., 590 Madison Avenue,
New York, New York 10022, Attn: James Kaye, fax no. (212) 872-1002 or such other
address as may be designated in writing hereafter, in the same manner, by such
Person.
4.13 Limitations on Liens. The Company will not and will not
permit any of its Subsidiaries to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any Liens of any kind, other than Permitted
Liens, on or with respect to any of its property or assets now owned or
hereafter acquired or any interest therein or any income or profits therefrom.
4.14 Nasdaq Limitation. If on any date (the "Determination
Date") (a) the Common Stock is listed for trading on Nasdaq or the Nasdaq
SmallCap Market, (b) the Conversion Price then in effect is such that the
aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of the then outstanding principal amount of the Debentures as
if all such Debentures were converted on such Determination Date (without regard
to any limitations on conversions) and as payment of interest thereon, as would
equal or exceed 20% of the number of shares of the Common Stock outstanding
immediately prior to the Closing Date (the "Issuable Maximum"), and (c) the
Company shall not have previously obtained the vote of the shareholders of the
Company (the "Shareholder Approval"), if any, as may be required by the
applicable rules and regulations of Nasdaq (or any successor entity) to approve
the issuance of shares of Common Stock in excess of the Issuable Maximum in a
private placement whereby shares of Common Stock are deemed to have been issued
at a price that is less than the greater of book value or fair market value of
the Common Stock, then with respect to the aggregate principal amount of the
Debentures then held by the Holders for which a conversion in accordance with
the Conversion Price would result in an issuance of shares of Common Stock in
excess of such Holder's pro rata allocation (as described below) of the Issuable
Maximum (the "Excess Principal"), the Company may elect to prepay cash to the
Holders in an amount equal to the Mandatory Prepayment Amount. Any such election
by the Company must be made in writing to the Holders within two (2) Trading
Days after the first such Determination Date and the payment of such Mandatory
Prepayment Amount applicable to such prepayment must be made in full to the
Holders with ten (10) Business Days after the date such notice is delivered. If
the Company does not deliver timely a notice of its election to prepay under
this Section or shall, if it shall have delivered such a notice, fail to pay the
prepayment amount hereunder within ten (10) Business Days thereafter, then each
Holder shall have
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<PAGE>
the option by written notice to the Company, to, if applicable, declare any such
notice given by the Company, if given, to be null and void and require the
Company to either: (i) use its best efforts to obtain the Shareholder Approval
applicable to such issuance as soon as is possible, but in any event not later
than the 60th day after such request unless the Company has previously used its
best efforts to, but has failed to, obtain such approval (provided, that if the
Company shall fail to obtain the Shareholder Approval during such 60-day period,
the Holder may demand the cash payment set forth in Section 4.14(ii) herein) or
(ii) pay cash to such Holder, within five (5) Business Days of such Holder's
notice, in an amount equal to the Mandatory Prepayment Amount for such Holder's
portion of the Excess Principal. The payment of the Mandatory Prepayment Amount
to each Holder pursuant to this Section shall be determined on a pro rata basis
upon the principal amount of the Debentures held by such Holder on the
Determination Date which is in excess of the pro rata allocation of the Issuable
Maximum. If the Company fails to pay the Mandatory Prepayment Amount in full
pursuant to this Section within five (5) Business Days after the date payable,
the Company will pay interest thereon at a rate of 10% per annum to the
converting Holder, accruing interest daily from the date of conversion until
such amount, plus all such interest thereon, if any, is paid in full. Until the
Company has received the Shareholder Approval no Holder of the Debentures shall
be issued, upon conversion of Debentures, shares of Common Stock in an amount
greater than such Holder's allocated portion of the Issuable Maximum pursuant to
Section 4.15. In no event shall the Company be required to issue shares of
Common Stock upon conversion of the Debentures if such issuance would violate
the rules of Nasdaq.
4.15 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. 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.
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<PAGE>
5.2 Miscellaneous. 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 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.
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;
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<PAGE>
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;
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.
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5.6 Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
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.
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IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed as of this 14th day of September, 1999.
PROVIDENT AMERICAN CORPORATION
By _________________________________
Name:
Title:
<PAGE>
EXHIBIT A
PROVIDENT AMERICAN CORPORATION
CONVERSION NOTICE
Reference is made to the Debenture issued by Provident American Corporation (the
"Debenture"). 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):________________
<PAGE>
EXHIBIT 4
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.
September 14, 1999
________shares Warrant No. _____
FORM OF
PROVIDENT AMERICAN CORPORATION
STOCK PURCHASE WARRANT
Registered Owner: [Insert Registered Owner]
This certifies that, for value received, Provident American Corporation, 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.
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"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.
"Change of Control" has the meaning set forth in Section 4.1(b)(viii) of
the Purchase Agreement.
"Closing" and "Closing Date" have the meanings set forth in Section 1.2 of
the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par value
$.10 per share.
"Company" means Provident American Corporation, a Pennsylvania corporation.
"Convertible Securities" has the meaning assigned to it in Section
7(h)(i)(A) hereof.
"Determination Date" has the meaning assigned to it in Section 8 hereof.
"Excess Amount" has the meaning assigned to it in Section 8 hereof.
"Excluded Securities" means (i) shares of Common Stock issued pursuant to
the terms of this Agreement, the Securities Purchase Agreement and the Stock
Purchase Warrant, (ii) shares of Common Stock (including options and warrants)
deemed to have been issued by the Company in connection with an Approved Stock
Plan, (iii) 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, (iv) 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 and
(v) shares of Common Stock (or options or warrants to purchase Common Stock)
issued in any merger or reorganization transaction involving the Company and
HealthAxis.com, Inc., which transaction is contemplated to be consummated by
March 31, 2000.
"Exercise Period" has the meaning assigned to it the Section 5 hereof.
"Exercise Price" has the meaning assigned to it in Section 4 hereof
"Issuable Maximum" has the meaning assigned to it in Section 8 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
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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.
"Prepayment Amount" has the meaning assigned to it in Section 8 hereof.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated September 14, 1999, among the Company and the Purchasers.
"Purchaser" has the meaning set forth in the Purchase Agreement.
"Redemption Event" has the meaning assigned to it in Section 7(f) hereof.
"Redemption Right" has the meaning assigned to it in Section 7(f) hereof.
"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 Registration Rights
Agreement, dated September 14, 1999, among the Company and the Purchasers.
"Shareholder Approval" has the meaning assigned to it in Section 8 hereof.
"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.
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.
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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 [insert the
product of .15 and the number of Conversion Shares that the Registered Owner is
entitled to pursuant to the Purchase Agreement], 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 $20.34 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, 2004 (5 years less 1 day) (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.
b. Commencing ninety (90) days from the Filing Date (as defined in the
Registration Rights Agreement), 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
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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
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.
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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 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
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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
(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
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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 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.
(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
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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 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.
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(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 HealthAxis.com, Inc., any issuance of securities or
distributions to HealthAxis.com, 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 HealthAxis.com, Inc., which is
contemplated to close by March 31, 2000.
8. Nasdaq Limitation. If on any date (the "Determination Date") (a) the
Common Stock is listed for trading on Nasdaq or the Nasdaq SmallCap Market, (b)
the Exercise Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon exercise in full of the then
outstanding Warrants if all such Warrants were exercised on such Determination
Date (without regard to any limitations on exercise) would equal or exceed 20%
of the number of shares of the Common Stock outstanding immediately prior to
such exercise date (the "Issuable Maximum"), and (c) the Company shall not have
previously obtained any vote of the shareholders of the Company owning a
majority of the outstanding Common Stock (the "Shareholder Approval"), if any,
as may be required by the applicable rules and regulations of Nasdaq (or any
successor entity) to approve the issuance of shares of Common Stock in excess of
the Issuable Maximum in a private placement whereby shares of Common Stock are
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deemed to have been issued at a price that is less than the greater of book
value or fair market value of the Common Stock, then with respect to the
aggregate number of shares of Common Stock issuable upon the exercise of the
Warrants then held by the Registered Owners for which an exercise in accordance
with the Exercise Price would result in an issuance of shares of Common Stock in
excess of such Registered Owner's pro rata allocation (as described below) of
the Issuable Maximum (the "Excess Amount"), the Company may elect to pay cash to
the Registered Owners in an amount equal to the product of the Average Price on
the Determination Date multiplied by the number of shares of Common Stock that
would be issued upon the exercise of the Warrants resulting in the Excess Amount
(the "Prepayment Amount"). Any such election by the Company must be made in
writing to the Registered Owners within two (2) Trading Days after the first
such Determination Date and the payment of such Prepayment Amount applicable to
such Prepayment Amount shall be made in full to the Registered Owners with ten
(10) Business Days after the date such notice is delivered. If the Company does
not deliver timely a notice of its election to prepay under this section or
shall, if it shall have delivered such a notice, fail to pay the Prepayment
Amount hereunder within ten (10) Business Days thereafter, then each Registered
Owner shall have the option by written notice to the Company, to, if applicable,
declare any such notice given by the Company, if given, to be null and void and
require the Company to either: (i) use its best efforts to obtain the
Shareholder Approval applicable to such issuance as soon as is possible, but in
any event not later than the 60th day after such request unless the Company has
previously used its best efforts to, but has failed to, obtain such approval
(provided, that if the Company shall fail to obtain the Shareholder Approval
during such 60-day period, the Registered Owner may demand the cash payment set
forth in Section 8(ii)) herein, or (ii) pay cash to such Registered Owner,
within five (5) Business Days of such Registered Owner's notice, in an amount
equal to the Prepayment Amount for such Registered Owner's portion of the Excess
Amount. The payment of the Prepayment Amount to each Registered Owner pursuant
to this section shall be determined on a pro rata basis upon the number of
shares of Common Stock issuable upon the exercise of the Warrants held by such
Registered Owner on the Determination Date which is in excess of the pro rata
allocation of the Issuable Maximum. If the Company fails to pay the Prepayment
Amount in full pursuant to this Section 8 within five (5) Business Days after
the date payable, the Company will pay interest thereon at a rate of 10% per
annum to the exercising Registered Owner, accruing interest daily from the date
of conversion until such amount, plus all such interest thereon, if any, is paid
in full. Until the Company has received the Shareholder Approval no Registered
Owner of the Warrants shall be issued, upon exercise of the Warrants, shares of
Common Stock in an amount greater than such Registered Owner's allocated portion
of the Issuable Maximum.
In no event shall the Company be required to issue shares of Common Stock
upon exercise of the Warrants if such issuance would violate the rules of
Nasdaq.
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% of the outstanding shares of the Common Stock following such
exercise] [RBC Only: 4.9% of any class of voting securities of the Company and
24.9% of the total capital securities of the Company following such conversion.
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In addition, to the extent the limitations set forth in the preceding sentence
are exceeded, Royal Bank of Canada will not sell, transfer, otherwise dispose of
these Debentures unless the shares of Common Stock resulting from the conversion
of such Debentures are to be first sold, transferred or otherwise disposed of in
(A) a widely dispersed public distribution, (B) a private placement in which no
one party acquires the right to purchase in excess of 2% of the voting shares of
the Company (including, for purposes of such determination, shares of Common
Stock issuable upon conversion of shares of these Debentures), (C) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
conducting a widely dispersed public distribution on the transferor's behalf, or
(D) any other manner approved by the Federal Reserve Board.] 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), provided approval is obtained, if
required, pursuant to 40 P.S. ss.991.1402.
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,
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or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications are (i) if to the Company to Provident
American Corporation, 2500 Dekalb Pike, Norristown, PA 19404, Attn: President,
fax no. (610) 279-4498, with copies to Blank Rome Comisky & McCauley LLP, One
Logan Square, Philadelphia, PA 19103, Attn: Barry H. Genkin, fax no. (215)
988-6910 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, Hauer
& Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, Attn: James Kaye,
fax no. (212) 872-1002 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,
avoid or seek to avoid the observance or performance of any of the terms to be
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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.
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
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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.
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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.
PROVIDENT AMERICAN CORPORATION
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT A
Warrant Exercise Form
TO: PROVIDENT AMERICAN CORPORATION
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Provident American Corporation,
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.
<PAGE>
EXHIBIT 5
Alvin H. Clemens
907 Exeter Court
Villanova, PA 19085
September 9, 1999
Mr. Michael Ashker
President
Provident American Corporation
2500 DeKalb Pike
Norristown, PA 19404
Dear Michael:
This letter is intended to constitute a legally binding letter of intent
expressing the good faith understanding between Alvin H. Clemens and Provident
American Corporation. The obligations herein are conditioned upon the completion
of the sale by Provident American Corporation (the "Company") of an aggregate of
up to $43,000,000 principal amount of 2% Convertible Debentures due September,
2002 (the "Debenture") at a closing to be held on or before September 15, 1999
(the "Transaction").
The parties expect to embody their understanding in a definitive agreement
to be executed by the parties. Until such a definitive agreement is negotiated
and executed, the following provisions shall apply and shall be binding between
the parties.
The Company agrees to pay Mr. Alvin H. Clemens a purchase price of $650,000
in consideration of Mr. Clemens selling the interests below and taking the
actions set forth as follows at the closing of the Transaction:
1. The assignment of the Company of all right, title and interest in and to
an Agreement to Grant Options to Purchase up to 3,300,000 shares of
Series A Preferred Stock which has been referred to as the "Reload
Options".
2. The agreement to convert 550,000 shares of Series A Preferred Stock into
Common Stock, $.10 par value, of the Company, and into no other class of
security of the company.
3. The assignment to the Company of all right, title, and interest in and
to that number of any option owned by Mr. Clemens which is equal to the
number of shares of Common Stock issuable upon the exercise of the
Warrant issued in the Transaction (but in no event to exceed options to
purchase 300,000 shares of Common Stock).
4. The amendment of the Option to Purchase 500,000 Preferred Shares of the
Company (which by reason of a stock dividend is now 550,000 shares), to
eliminate the right to convert the option shares into any class of
securities of the Company other than into shares of the Company's Common
Stock, $.10 par value (which will eliminate the right to convert into
the four (4) vote Class A common shares).
Very truly yours,
Alvin H. Clemens
Agreed and accepted this ____ day of September, 1999.
By: __________________________________________
Provident American Corporation
