UNITED STATES
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):
DECEMBER 23, 1999
PROXYMED, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 0-22052 65-0202059
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2555 DAVIE ROAD, SUITE 110, FT. LAUDERDALE, FLORIDA 33317-7424
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (954) 473-1001
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ITEM 5. OTHER EVENTS.
On December 23, 1999, ProxyMed issued 15,000 shares of Series B
Convertible Preferred Stock and related Warrants in a private placement to
institutional investors. ProxyMed estimates the net proceeds of the offering,
after expenses, to be approximately $14,200,000. The Series B Convertible
Preferred Stock is subject to the terms and conditions of the Articles of
Amendment attached hereto as Exhibit 3.3. The Warrants are subject to the terms
and conditions of the form of Warrant attached hereto as Exhibit 4.1. Pursuant
to a Registration Rights Agreement attached as Exhibit 4.2, ProxyMed has agreed
to prepare and file with the Securities and Exchange Commission a registration
statement covering the resale of the shares of Common Stock issuable pursuant to
the terms of the Series B Preferred Stock and related Warrants. The terms of the
private placement are more fully set forth in the Securities Purchase Agreement
attached hereto as Exhibit 10.24.
ITEM 7. FINANCIAL STATEMENTS. PRO FORM FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit 3.3 - Articles of Amendment to Articles of
Incorporation of ProxyMed.
Exhibit 4.1 - Form of Warrant to Purchase Common Stock of
ProxyMed, dated December 23, 1999, issued to
certain investors.
Exhibit 4.2 - Registration Rights Agreement, dated as of
December 23, 1999, by and among ProxyMed and
the investors named therein.
Exhibit 10.24 - Securities Purchase Agreement, dated as of
December 23, 1999, by and among ProxyMed and
the investors listed on the Schedule of
Buyers attached thereto.
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SIGNATURES
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.
PROXYMED, INC.
Date: December 27, 1999 /s/ Bennett Marks
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Bennett Marks, Executive Vice President
and Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
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Exhibit 3.3 - Articles of Amendment to Articles of
Incorporation of ProxyMed.
Exhibit 4.1 - Form of Warrant to Purchase Common Stock of
ProxyMed, dated December 23, 1999, issued to
certain investors.
Exhibit 4.2 - Registration Rights Agreement, dated as of
December 23, 1999, by and among ProxyMed and
the investors named therein.
Exhibit 10.24 - Securities Purchase Agreement, dated as of
December 23, 1999, by and among ProxyMed and
the investors listed on the Schedule of
Buyers attached thereto.
EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
PROXYMED, INC.
Pursuant to the provisions of Sections 607.1006 and 607.0602 of the
Florida Business Corporation Act, the corporation adopts the following articles
of amendment to its articles of incorporation by the board of directors on
December 23, 1999:
FIRST:
ARTICLE 3
Article 3 of the Articles of Incorporation of the Company is hereby
amended by inserting the following words at the end of such article:
SERIES B CONVERTIBLE PREFERRED STOCK:
The Corporation is authorized to issue a Series of its Preferred Shares
consisting of 15,000 Preferred Shares having a stated value of One Thousand
Dollars ($1,000) per share and par value $.01 per share, to be designated as the
Series B Convertible Preferred Stock (the "PREFERRED SHARES"). The rights,
privileges and preferences of the Series B Convertible Preferred Stock, and the
limitations and restrictions thereon, are as follows:
(1) DESIGNATION, AMOUNT AND DIVIDENDS. The designation of this
series, which consists of 15,000 shares of Preferred Stock, is the Series B
Convertible Preferred Stock and the stated value shall be One Thousand Dollars
($1,000) per share (the "STATED VALUE"). The holders of the Preferred Shares
shall be entitled to receive dividends ("DIVIDENDS") at a rate of 6.0% per
annum, which shall be cumulative, accrue daily from the Issuance Date (as
defined below) and be payable on the last day of each Calendar Quarter (as
defined below) beginning on the earlier of (i) the last day of the Calendar
Quarter in which the Registration Statement (as defined below) is declared
effective by the SEC (as defined below) and (ii) March 31, 2000 (each a
"DIVIDEND DATE"). If a Dividend Date is not a Business Day (as defined below)
then the Dividend shall be due and payable on the Business Day immediately
following the Dividend Date. Dividends shall be payable in shares of Common
Stock (as defined below) ("DIVIDEND SHARES") or, at the option of the Company,
in cash, provided that the Dividends which accrued during any period shall be
payable in cash only if the Company provides written notice ("DIVIDEND ELECTION
NOTICE") to each holder of Preferred Shares at least ten (10) Business Days
prior to the Dividend Date. Dividends to be paid in shares of Common Stock shall
be paid in a number of fully paid and nonassessable shares (rounded to the
nearest whole share in accordance with Section 2(b)) of Common Stock equal
to the quotient of (a) the Additional Amount (as defined below) divided by (b)
the Applicable Daily Price (as defined below) on the date which is two (2)
trading days immediately prior to the applicable Dividend Date. Notwithstanding
the foregoing, the Company shall not be entitled to pay Dividends in shares of
Common Stock and shall be required to pay such Dividends in cash if (a) any
event constituting a Triggering Event (as defined in Section 3(b) or a Liquidity
Default (as defined in Section 3(g)), or an event that with the passage of time
and without being cured would constitute a Triggering Event or a Liquidity, has
occurred and is continuing on the date of the Company's Dividend Election Notice
or on the
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Dividend Date, unless otherwise consented to in writing by the holder
of Preferred Shares entitled to receive such Dividend or (b) the Registration
Statement (as defined below) is not effective and available for the resale of
all of the Registrable Securities (as defined in the Registration Rights
Agreement), including, without limitation, the Dividend Shares, on the date of
the Company's Dividend Election Notice or on the Dividend Date. Any accrued and
unpaid Dividends which are not paid within five (5) Business Days of such
accrued and unpaid dividends' Dividend Date shall bear interest at the rate of
18.0% per annum from such Dividend Date until the same is paid in full (the
"DEFAULT INTEREST").
(2) CONVERSION OF PREFERRED SHARES. Preferred Shares shall be
convertible into shares of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK"), on the terms and conditions set forth in this
Section 2.
(a) CERTAIN DEFINED TERMS. For purposes of these
Articles of Amendment, the following terms shall have the following meanings:
(i) "ADDITIONAL AMOUNT" means, on a per share
basis, the sum of (A) unpaid Default Interest through the date of determination
plus (B) the result of the following formula: (0.06)(N/365)($1,000).
(ii) "APPROVED STOCK PLAN" shall mean any
employee benefit plan which has been approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, officer, director or consultant for services provided to the Company.
(iii) "APPLICABLE DAILY PRICE" means, as of any
date, 93% of the lowest Closing Sale Price of the Common Stock during the three
(3) consecutive trading days ending on and including such date of determination.
(iv) "BUSINESS DAY" means any day other than
Saturday, Sunday or other day on which commercial banks in the city of New York
are authorized or required by law to remain closed.
(v) "CALENDAR QUARTER" means each of the period
beginning on and including January 1 and ending on and including March 31, the
period beginning on and including April 1 and ending on and including June 30,
the period beginning on and including July 1 and ending on and including
September 30, and the period beginning on and including October 1 and ending on
and including December 31.
(vi) "CLOSING SALE PRICE" means, for any security
as of any date, the last closing trade price for such security on the Principal
Market (as defined below) as reported by Bloomberg Financial Markets
("BLOOMBERG"), or if the Principal Market begins to operate on an extended hours
basis, and does not designate the closing trade price, then the last trade price
at 4:00 p.m. Eastern Time as reported by Bloomberg, or if the foregoing do not
apply, the last closing trade price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no last closing trade price is reported for such security by
Bloomberg, the last closing ask price of such security as reported by Bloomberg,
or, if no last closing ask price is reported for such security by Bloomberg, the
average of the lowest ask price and lowest bid price of any market makers for
such security as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the Closing Sale Price cannot be calculated for such security on such
date on any of the foregoing bases, the Closing Sale Price of such security on
such date shall be the fair market value as mutually determined by the Company
and the holders of the Preferred Shares. If the Company and the holders of
Preferred Shares are unable to agree upon the fair market value of the Common
Stock, then such dispute shall be resolved pursuant to Section
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2(d)(iii) below. All such determinations shall be appropriately adjusted for any
stock dividend, stock split or other similar transaction during such period.
(vii) "CONVERSION AMOUNT" means the sum of (1)
the Additional Amount (as defined above), and (2) $1,000.
(viii) "CONVERSION PRICE" means, as of any
Conversion Date (as defined below) or other date of determination, the
Applicable Daily Price; provided that in no event shall the Conversion Price
exceed the Fixed Conversion Price (as defined below), each in effect as of such
date and subject to adjustment as provided herein; and further provided, that a
Conversion Notice (as defined in Section 2(d)(i)) which is delivered to the
Company prior to 4:00 p.m. Eastern Time on a given date shall, solely for the
purposes of calculating the Conversion Price pursuant to this Section
2(a)(viii), be deemed to have been given after 4:00 p.m. Eastern Time on the
trading date immediately preceding the date such notice was delivered to the
Company.
(ix) "CONVERTIBLE SECURITIES" means any stock or
securities (other than Options) directly or indirectly convertible into or
exchangeable for Common Stock.
(x) "EXCLUDED SECURITIES" means options to
purchase shares of Common Stock, provided (A) such options are issued after the
Issuance Date to employees or consultants of the Company within 30 days of such
employee or consultant starting their employment or consultation with the
Company, (B) such options are approved by the Board of Directors of the Company
or an appropriately designated committee of the Board of Directors and (C) the
exercise price of such options is not less than the market price of the Common
Stock on the date of issuance of such options.
(xi) "FIXED CONVERSION PRICE" means, with respect
to any Preferred Share, as of any Conversion Date or other date of determination
(A) prior to and including the date which is ten trading days after the date
which is one (1) year after the Issuance Date, 180% of the Closing Sale Price on
the Issuance Date and (B) after the date which is ten trading days after the
date which is one (1) year after the Issuance Date, the lower of (I) the Fixed
Conversion Price in effect on the date which is ten trading days after the date
which is one (1) year after the Issuance Date and (II) 125% of the arithmetic
average of the Closing Sale Price of the Common Stock on the 10 consecutive
trading days immediately following the date which is one (1) year after the
Issuance Date, in each case subject to adjustment as provided herein.
(xii) "ISSUANCE DATE" means, with respect to each
Preferred Share, the date of issuance of the applicable Preferred Share.
(xiii) "MATURITY DATE" means the date which is
two (2) years after the Issuance Date, unless extended pursuant to Section
2(d)(vii).
(xiv) "N" means the number of days from, but
excluding, the last Dividend Date with respect to which dividends, along with
any Default Interest, have been paid by the Company on the applicable Preferred
Share, or the Issuance Date if no Dividend Date has occurred, through and
including the Conversion Date, the Maturity Date or other date of determination
for such Preferred Share, as the case may be, for which such determination is
being made.
(xv) "OPTIONS" means any rights, warrants or
options to subscribe for or purchase Common Stock or Convertible Securities.
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(xvi) "PERSON" means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xvii) "PRINCIPAL MARKET" means the Nasdaq
National Market, or if the Common Stock is not traded on the Nasdaq National
Market, then the principal securities exchange or trading market for the Common
Stock.
(xviii) "REGISTRATION RIGHTS AGREEMENT" means
that certain registration rights agreement between the Company and the initial
holders of the Preferred Shares relating to the filing of a registration
statement covering the resale of the shares of Common Stock issuable upon
conversion of the Preferred Shares and exercise of the Warrants.
(xix) "SECURITIES PURCHASE AGREEMENT" means that
certain securities purchase agreement between the Company and the initial
holders of the Preferred Shares.
(xx) "WARRANTS" means the warrants to purchase
shares of Common Stock issued by the Company pursuant to the Securities Purchase
Agreement.
(b) HOLDER'S CONVERSION RIGHT; MANDATORY CONVERSION.
Subject to the provisions of Sections 5 and 8, at any time or times on
or after the Issuance Date (as defined below), any holder of Preferred
Shares shall be entitled to convert any whole or fractional number of
Preferred Shares into fully paid and nonassessable shares of Common
Stock in accordance with Section 2(d) at the Conversion Rate (as
defined below). If any Preferred Shares remain outstanding on the
Maturity Date, then, pursuant to Section 2(d)(vii), all such Preferred
Shares shall be converted at the Conversion Rate as of such date in
accordance with Section 2(d) or redeemed by the Company. The Company
shall not issue any fraction of a share of Common Stock upon any
conversion. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one Preferred Share by a holder
thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of a fraction of a share of
Common Stock. If, after the aforementioned aggregation, the issuance
would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up or
down to the nearest whole share.
(c) CONVERSION. The number of shares of Common Stock
issuable upon conversion of each Preferred Share pursuant to Section
2(b) shall be determined according to the following formula (the
"CONVERSION RATE"):
CONVERSION AMOUNT
Conversion Price
(d) MECHANICS OF CONVERSION. The conversion of
Preferred Shares shall be conducted in the following manner:
(i) HOLDER'S DELIVERY REQUIREMENTS. To convert
Preferred Shares into shares of Common Stock on any date (the "CONVERSION
DATE"), the holder thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 11:59 p.m., Eastern Time on such date, a
copy of an executed notice of conversion in the form described in Section 24
(the "CONVERSION NOTICE") to the Company with a copy thereof to the Company's
designated transfer agent (the "TRANSFER AGENT") and (B) if required by Section
2(d)(viii), surrender to a common carrier for delivery to the Transfer Agent as
soon as practicable following such date the original certificates representing
the
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Preferred Shares being converted (or an indemnification undertaking with
respect to such shares in the case of their loss, theft or destruction) (the
"PREFERRED STOCK CERTIFICATES").
(ii) COMPANY'S RESPONSE. Upon receipt by the
Company of a copy of a Conversion Notice, the Company shall (1) as soon as
practicable, but in no event later than within one (1) Business Day, send, via
facsimile, a confirmation of receipt of such Conversion Notice to such holder
and the Transfer Agent, which confirmation shall constitute an instruction to
the Transfer Agent to process such Conversion Notice in accordance with the
terms herein and (2) on or before the second (2nd) Business Day following the
date of receipt by the Company of such Conversion Notice (the "SHARE DELIVERY
DATE"), (A) issue and deliver to the address as specified in the Conversion
Notice, a certificate, registered in the name of the holder or its designee, for
the number of shares of Common Stock to which the holder shall be entitled, or
(B) provided the Transfer Agent is participating in The Depository Trust Company
("DTC") Fast Automated Securities Transfer Program, upon the request of the
holder, credit such aggregate number of shares of Common Stock to which the
holder shall be entitled to the holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system. If the number of
Preferred Shares represented by the Preferred Stock Certificate(s) submitted for
conversion, as may be required pursuant to Section 2(d)(viii), is greater than
the number of Preferred Shares being converted, then the Company shall, as soon
as practicable and in no event later than three Business Days after receipt of
the Preferred Stock Certificate(s) (the "PREFERRED STOCK DELIVERY DATE") and at
its own expense, issue and deliver to the holder a new Preferred Stock
Certificate representing the number of Preferred Shares not converted.
(iii) DISPUTE RESOLUTION. In the case of a
dispute as to the determination of the Closing Sale Price or the arithmetic
calculation of the Conversion Rate, the Company shall instruct the Transfer
Agent to issue to the holder the number of shares of Common Stock that is not
disputed and shall transmit an explanation of the disputed determinations or
arithmetic calculations to the holder via facsimile within one (1) Business Day
of receipt of such holder's Conversion Notice. If such holder and the Company
are unable to agree upon the determination of the Closing Sale Price or
arithmetic calculation of the Conversion Rate within two (2) Business Days of
such disputed determination or arithmetic calculation being transmitted to the
holder, then the Company shall within one (1) Business Day submit via facsimile
(A) the disputed determination of the Closing Sale Price to an independent,
reputable investment bank selected by the Company and approved by the holders of
a majority of the Preferred Shares then outstanding or (B) the disputed
arithmetic calculation of the Conversion Rate to the Company's independent,
outside accountant. The Company shall cause the investment bank or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment bank's or accountant's determination or
calculation, as the case may be, shall be binding upon all parties absent error.
(iv) RECORD HOLDER. The person or persons
entitled to receive the shares of Common Stock issuable upon a conversion of
Preferred Shares shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on the Conversion Date.
(v) COMPANY'S FAILURE TO TIMELY CONVERT.
(A) CASH DAMAGES. If (I) within five (5)
Business Days after the Company's receipt of the facsimile copy of a Conversion
Notice the Company shall fail to issue and deliver a certificate to a holder or
credit such holder's balance account with DTC for the number of shares of Common
Stock to which such holder is entitled upon such holder's conversion of
Preferred Shares or (II) within five (5) Business Days of the Company's receipt
of a Preferred Stock Certificate the Company shall fail to issue and deliver a
new Preferred Stock Certificate representing the number of Preferred Shares to
which such holder is entitled pursuant to Section 2(d)(ii), then in addition to
all other
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available remedies which such holder may pursue hereunder and under the
Securities Purchase Agreement (including indemnification pursuant to Section 8
thereof), the Company shall pay additional damages to such holder for each day
after the Share Delivery Date such conversion is not timely effected and/or each
day after the Preferred Stock Delivery Date such Preferred Stock Certificate is
not delivered in an amount equal to 0.5% of the product of (I) the sum of the
number of shares of Common Stock not issued to the holder on or prior to the
Share Delivery Date and to which such holder is entitled and, in the event the
Company has failed to deliver a Preferred Stock Certificate to the holder on or
prior to the Preferred Stock Delivery Date, the number of shares of Common Stock
issuable upon conversion of the Preferred Shares represented by such Preferred
Stock Certificate as of the Preferred Stock Delivery Date and (II) the Closing
Sale Price of the Common Stock on the Share Delivery Date, in the case of the
failure to deliver Common Stock, or the Preferred Stock Delivery Date, in the
case of failure to deliver a Preferred Stock Certificate. If the Company fails
to pay the additional damages set forth in this Section 2(d)(v) within five
Business Days of the date incurred, then the holder entitled to such payments
shall have the right at any time, so long as the Company continues to fail to
make such payments, to require the Company, upon written notice, to immediately
issue, in lieu of such cash damages, the number of shares of Common Stock equal
to the quotient of (X) the aggregate amount of the damages payments described
herein divided by (Y) the Conversion Price in effect on such Conversion Date as
specified by the holder in the Conversion Notice.
(B) VOID CONVERSION NOTICE; ADJUSTMENT OF
CONVERSION PRICE. If for any reason a holder has not received all of the shares
of Common Stock prior to the tenth (10th) Business Day after the Share Delivery
Date with respect to a conversion of Preferred Shares, then the holder, upon
written notice to the Company, may void its Conversion Notice with respect to,
and retain or have returned, as the case may be, any Preferred Shares that have
not been converted pursuant to such holder's Conversion Notice; provided that
the voiding of a holder's Conversion Notice shall not effect the Company's
obligations to make any payments which have accrued prior to the date of such
notice pursuant to Section 2(d)(v)(A) or otherwise. Thereafter, the Fixed
Conversion Price of any Preferred Shares returned or retained by the holder for
failure to timely convert shall be adjusted to the lesser of (I) the Fixed
Conversion Price as in effect on the date on which the holder voided the
Conversion Notice and (II) the lowest Closing Sale Price during the period
beginning on the Conversion Date and ending on the date such holder voided the
Conversion Notice, subject to further adjustment as provided in these Articles
of Amendment.
(C) CONVERSION FAILURE. If for any reason a
holder has not received all of the shares of Common Stock prior to the tenth
(10th) Business Day after the Share Delivery Date with respect to a conversion
of Preferred Shares (a "CONVERSION FAILURE"), then the holder, upon written
notice to the Company, may require that the Company redeem all Preferred Shares
held by such holder, including the Preferred Shares previously submitted for
conversion and with respect to which the Company has not delivered shares of
Common Stock, in accordance with Section 3.
(vi) PRO RATA CONVERSION. In the event the
Company receives a Conversion Notice from more than one holder of Preferred
Shares for the same Conversion Date and the Company can convert some, but not
all, of such Preferred Shares, the Company shall convert from each holder of
Preferred Shares electing to have Preferred Shares converted at such time a pro
rata amount of such holder's Preferred Shares submitted for conversion based on
the number of Preferred Shares submitted for conversion on such date by such
holder relative to the number of Preferred Shares submitted for conversion on
such date.
(vii) MANDATORY CONVERSION OR REDEMPTION AT
MATURITY AT COMPANY'S OPTION. If any Preferred Shares remain outstanding on the
Maturity Date, then all such Preferred Shares, at the Company's option, either
(i) shall be converted at the Maturity Date Conversion Price (as defined below)
for such Preferred Shares as of such date without the holders of such Preferred
Shares being required to give
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a Conversion Notice on the Maturity Date (a "MATURITY DATE MANDATORY
CONVERSION"), or (ii) shall be redeemed as of such date for an amount in cash
per Preferred Share (the "MATURITY DATE REDEMPTION PRICE") equal to the
Liquidation Preference (as defined in Section 12) (a "MATURITY DATE MANDATORY
REDEMPTION"). The Company shall be deemed to have elected a Maturity Date
Mandatory Conversion unless it delivers written notice to each holder of
Preferred Shares at least 35 Business Days prior to the Maturity Date of its
election to effect a Maturity Date Mandatory Redemption. If the Company elects a
Maturity Date Mandatory Redemption, then on the Maturity Date the Company shall
pay to each holder of Preferred Shares outstanding on the Maturity Date, by wire
transfer of immediately available funds, an amount per Preferred Share equal to
the Maturity Date Redemption Price. If the Company elects a Maturity Date
Mandatory Redemption and fails to redeem all of the Preferred Shares outstanding
on the Maturity Date by payment of the Maturity Date Redemption Price, then in
addition to any remedy such holder of Preferred Shares may have under these
Articles of Amendment, the Securities Purchase Agreement and the Registration
Rights Agreement, (X) the applicable Maturity Date Redemption Price payable in
respect of such unredeemed Preferred Shares shall bear interest at the rate of
2.0% per month, prorated for partial months, until paid in full, and (Y) any
holder of Preferred Shares shall have the option to require the Company to
convert any or all of such holder's Preferred Shares that the Company elected to
redeem under this Section 2(d)(vii) and for which the Maturity Date Redemption
Price (together with any interest thereon) has not been paid into the number of
shares of Common Stock such holder would have received if such holder had
converted such Preferred Shares at a conversion price equal to the lesser of (I)
the Applicable Daily Price on the Maturity Date and (II) the Fixed Conversion
Price on the Maturity Date. Promptly following the Maturity Date, all holders of
Preferred Shares shall surrender all Preferred Stock Certificates, duly endorsed
for cancellation, to the Company or the Transfer Agent. If the Company has
elected a Maturity Date Mandatory Conversion, has failed to give notice to elect
a Maturity Date Mandatory Redemption at least 35 Business Days prior to the
Maturity Date or has failed to pay the Maturity Date Redemption Price in a
timely manner as described above, then the Maturity Date shall be extended for
any Preferred Shares for as long as (A) the conversion of such Preferred Shares
would violate the provisions of Section 5, (B) a Triggering Event or a Liquidity
Default (other than as described in Section 3(g)(vii) or Section 3(g)(viii))
shall have occurred and be continuing, or (C) an event shall have occurred and
be continuing which with the passage of time and the failure to cure would
result in a Triggering Event or a Liquidity Default (other than as described in
Section 3(g)(vii) or Section 3(g)(viii)). For purposes of this Section
2(d)(vii), "MATURITY DATE CONVERSION PRICE" means 95% of the arithmetic average
of the Closing Sale Prices of the Common Stock on the 30 consecutive trading
days immediately preceding the Maturity Date.
(viii) BOOK-ENTRY. Notwithstanding anything to
the contrary set forth herein, upon conversion of Preferred Shares in accordance
with the terms hereof, the holder thereof shall not be required to physically
surrender the certificate representing the Preferred Shares to the Company
unless the full number of Preferred Shares represented by the certificate are
being converted. The holder and the Company shall maintain records showing the
number of Preferred Shares 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 certificate representing
the Preferred Shares 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 Preferred
Shares represented by a certificate are converted as aforesaid, the holder may
not transfer the certificate representing the Preferred Shares unless the holder
first physically surrenders the certificate representing the Preferred Shares to
the Company, whereupon the Company will forthwith issue and deliver upon the
order of the holder a new certificate of like tenor, registered as the holder
may request, representing in the aggregate the remaining number of Preferred
Shares represented by such certificate. The holder and any assignee, by
acceptance of a certificate, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of any Preferred Shares, the
number of Preferred Shares represented by such certificate may be less
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than the number of Preferred Shares stated on the face thereof. Each certificate
for Preferred Shares shall bear the following legend:
ANY TRANSFEREE OF THIS CERTIFICATE SHOULD CAREFULLY REVIEW THE
TERMS OF THE COMPANY'S ARTICLES OF AMENDMENT RELATING TO THE
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE, INCLUDING
SECTION 2(d)(viii) THEREOF. THE NUMBER OF PREFERRED SHARES
REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF
PREFERRED SHARES STATED ON THE FACE HEREOF PURSUANT TO SECTION
2(d)(viii) OF THE ARTICLES OF AMENDMENT RELATING TO THE
PREFERRED SHARES REPRESENTED BY THIS CERTIFICATE.
(e) TAXES. The Company shall pay any and all taxes
that may be payable with respect to the issuance and delivery of Common
Stock upon the conversion of Preferred Shares.
(f) ADJUSTMENTS TO CONVERSION PRICE. The Conversion
Price will be subject to adjustment from time to time as provided in
this Section 2(f).
(i) ADJUSTMENT OF FIXED CONVERSION PRICE UPON
SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Fixed Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time combines
(by combination, reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the Fixed
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
(ii) HOLDER'S RIGHT OF ALTERNATIVE CONVERSION
PRICE FOLLOWING ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any manner
issues or sells Convertible Securities or Options that are convertible into or
exchangeable for Common Stock at a price which varies or may vary with the
market price of the Common Stock, including by way of one or more reset(s) to a
fixed price (each of the formulations for such variable price being herein
referred to as, a "VARIABLE PRICE"), and such Variable Price is not calculated
using the same formula used to calculate the Applicable Daily Price in effect
immediately prior to the time of such issue or sale, the Company shall provide
written notice thereof via facsimile and overnight courier to each holder of the
Preferred Shares ("VARIABLE NOTICE") on the date of issuance of such Convertible
Securities or Options. If a holder of the Preferred Shares then outstanding
provides written notice to the Company via facsimile and overnight courier (the
"VARIABLE PRICE ELECTION NOTICE") within 10 Business Days of receiving a
Variable Notice that such holder desires to replace the Applicable Daily Price
then in effect with the Variable Price described in such Variable Notice, then,
from and after the date of the Company's receipt of the Variable Price Election
Notice, the Applicable Daily Price will automatically be replaced with the
Variable Price for the Preferred Shares held by such holder. In the event that a
holder of Preferred Shares delivers a Conversion Notice after the Company's
issuance of Convertible Securities with a Variable Price but before such
holder's receipt of the Company's Variable Notice, then such holder shall have
the option by written notice to the Company to rescind such Conversion Notice or
to have the Conversion Price be equal to such Variable Price for the conversion
effected by such Conversion Notice.
(iii) OTHER EVENTS. If any event occurs of the
type contemplated by the provisions of this Section 2(f) but not expressly
provided for by such provisions (including, without limitation, the granting of
stock
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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 Preferred
Shares; provided that no such adjustment will increase the Conversion Price as
otherwise determined pursuant to this Section 2(f).
(iv) NOTICES.
(A) Immediately upon any adjustment of the
Conversion Price pursuant to this Section 2(f), the Company will give written
notice thereof to each holder of Preferred Shares, setting forth in reasonable
detail, and certifying, the calculation of such adjustment.
(B) The Company will give written notice to
each holder of Preferred Shares at least ten (10) Business Days prior to the
date on which the Company closes its books or takes a record (I) with respect to
any dividend or distribution upon the Common Stock, (II) with respect to any pro
rata subscription offer to holders of Common Stock or (III) for determining
rights to vote with respect to any Organic Change (as defined in Section 4(a)),
dissolution or liquidation, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
holder.
(C) The Company will also give written
notice to each holder of Preferred Shares at least ten (10) Business Days prior
to the date on which any Organic Change, dissolution or liquidation will take
place, provided that such information shall be made known to the public prior to
or in conjunction with such notice being provided to such holder.
(3) COMPANY DEFAULTS.
(a) REDEMPTION OPTION UPON TRIGGERING EVENT. In
addition to all other rights of the holders of Preferred Shares
contained herein, after a Triggering Event (as defined below), each
holder of Preferred Shares shall have the right, at such holder's
option, to require the Company to redeem all or a portion of such
holder's Preferred Shares at a price per Preferred Share equal to the
greater of (i) 125% of the Liquidation Preference and (ii) the product
of (A) the Conversion Rate in effect at such time as such holder
delivers a Notice of Redemption Upon Triggering Event (as defined
below) and (B) the Closing Sale Price of the Common Stock on the
trading day immediately preceding such Trigger Event on which the
Principal Market is open for trading (the "REDEMPTION PRICE").
(b) "TRIGGERING EVENT". A "TRIGGERING EVENT" shall be
deemed to have occurred at such time as any of the following events:
(i) the Company's notice or the Transfer Agent's
notice, at the Company's direction, to any holder of Preferred Shares, including
by way of public announcement, at any time, of its intention not to comply with
a request for conversion of any Preferred Shares into shares of Common Stock
that is tendered in accordance with the provisions of these Articles of
Amendment;
(ii) a Conversion Failure (as defined in Section
2(d)(v)(C));
(iii) upon the Company's receipt of a Conversion
Notice, the Company shall not be obligated to issue shares of Common Stock upon
such Conversion due to the provisions of Section 16; or
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(iv) the Company shall have failed to make any
Liquidity Default Daily Payment (as defined in Section 3(h)) in a timely manner
in accordance with Section 3(h).
(c) MECHANICS OF REDEMPTION UPON TRIGGERING EVENT.
Within one (1) Business Day after the occurrence of a Triggering Event,
the Company shall deliver written notice thereof via facsimile and
overnight courier ("NOTICE OF TRIGGERING EVENT") to each holder of
Preferred Shares. In addition, within one (1) Business Day after the
occurrence of a Triggering Event described in Section 3(b)(iii), the
Company shall notify each holder of Preferred Shares by facsimile of
the Company's irrevocable election to either (i) redeem all Preferred
Shares submitted for redemption pursuant to Section 3(c) based on the
Triggering Event described in Section 3(b)(iii), or (ii) to delist from
the Primary Market within five Business Days of the occurrence of such
Triggering Event described in Section 3(b)(iii) so that the Exchange
Cap no longer applies and is of no force or effect after such fifth
Business Day. If the Company elects to delist the Common Stock from the
Primary Market pursuant to the preceding sentence but fails to delist
the Common Stock from the Primary Market such that the Exchange Cap no
longer applies and is of no force or effect on or prior to such fifth
Business Day, then the Company shall be deemed to have irrevocably
elected to redeem all Preferred Shares submitted for redemption
pursuant to Section 3(c) based on the Triggering Event described in
Section 3(b)(iii). Except as otherwise described in the two preceding
sentences, at any time after the earlier of a holder's receipt of a
Notice of Triggering Event and such holder becoming aware of a
Triggering Event, any holder of Preferred Shares then outstanding may
require the Company to redeem up to all of such holder's Preferred
Shares by delivering written notice thereof via facsimile and overnight
courier ("NOTICE OF REDEMPTION UPON TRIGGERING EVENT") to the Company,
which Notice of Redemption Upon Triggering Event shall indicate the
number of Preferred Shares that such holder is electing to redeem.
(d) PAYMENT OF REDEMPTION PRICE. Upon the Company's
receipt of a Notice(s) of Redemption Upon Triggering Event from any
holder of Preferred Shares, the Company shall immediately notify each
holder of Preferred Shares by facsimile of the Company's receipt of
such notice(s). The Company shall deliver the applicable Redemption
Price to a holder which delivers a Notice of Redemption Upon Triggering
Event within five Business Days after the Company's receipt of a Notice
of Redemption Upon Triggering Event; provided that, if required by
Section 2(d)(viii), a holder's Preferred Stock Certificates shall have
been delivered to the Transfer Agent. If the Company is unable to
redeem all of the Preferred Shares submitted for redemption, the
Company shall (i) redeem a pro rata amount from each holder of
Preferred Shares based on the number of Preferred Shares submitted for
redemption by such holder relative to the total number of Preferred
Shares submitted for redemption by all holders of Preferred Shares and
(ii) in addition to any remedy such holder of Preferred Shares may have
under these Articles of Amendment and the Securities Purchase
Agreement, pay to each holder interest at the rate of 2.0% per month
(prorated for partial months) in respect of each unredeemed Preferred
Share until paid in full.
(e) VOID REDEMPTION. In the event that the Company
does not pay the Redemption Price within the time period set forth in
Section 3(d), at any time thereafter and until the Company pays such
unpaid applicable Redemption Price in full, a holder of Preferred
Shares shall have the option (the "VOID REDEMPTION OPTION") to, in lieu
of redemption, require the Company to promptly return to such holder
any or all of the Preferred Shares that were submitted for redemption
by such holder under this Section 3 and for which the applicable
Redemption Price (together with any interest thereon) has not been
paid, by sending written notice thereof to the Company via facsimile
(the "VOID REDEMPTION NOTICE"). Upon the Company's receipt of such Void
Redemption Notice, (i) the Notice of Redemption Upon Triggering Event
shall be null and void with respect to those Preferred Shares subject
to the Void Redemption Notice, (ii) the Company shall immediately
return any Preferred Shares subject to the Void Redemption Notice, and
(iii) the Conversion Price of such returned Preferred
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Shares shall be adjusted to the lesser of (A) the Conversion Price as
in effect on the date on which the Void Redemption Notice is delivered
to the Company and (B) the lowest Closing Sale Price of the Common
Stock during the period beginning on the date on which the Notice of
Redemption Upon Triggering Event is delivered to the Company and ending
on the date on which the Void Redemption Notice is delivered to the
Company.
(f) DISPUTES; MISCELLANEOUS. In the event of a
dispute as to the determination of the arithmetic calculation of the
Redemption Price, such dispute shall be resolved pursuant to Section
2(d)(iii) above with the term "Redemption Price" being substituted for
the term "Conversion Rate". A holder's delivery of a Void Redemption
Notice and exercise of its rights following such notice shall not
effect the Company's obligations to make any payments which have
accrued prior to the date of such notice. In the event of a redemption
pursuant to this Section 3 of less than all of the Preferred Shares
represented by a particular Preferred Stock Certificate, the Company
shall promptly cause to be issued and delivered to the holder of such
Preferred Shares a preferred stock certificate representing the
remaining Preferred Shares which have not been redeemed.
(g) LIQUIDITY DEFAULTS. A "LIQUIDITY DEFAULT" shall
be deemed to have occurred at such time as any of the following events:
(i) the failure of the applicable Registration
Statement to be declared effective by the Securities and Exchange Commission
(the "SEC") on or prior to the date that is 10 days after the applicable
Effectiveness Deadline (as defined in the Registration Rights Agreement);
(ii) the failure of the applicable Registration
Statement to be declared effective by the SEC on or prior to the date that is 40
days after the applicable Effectiveness Deadline;
(iii) while the Registration Statement is
required to be maintained effective pursuant to the terms of the Registration
Rights Agreement, the effectiveness of the Registration Statement lapses for any
reason (including, without limitation, the issuance of a stop order) or is
unavailable to the holder of the Preferred Shares for sale of all of the
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of five consecutive trading days or for
more than an aggregate of 10 trading days in any 365-day period;
(iv) the suspension from trading or failure of
the Common Stock to be listed on the Nasdaq National Market or The New York
Stock Exchange, Inc. for a period of five (5) consecutive trading days or for
more than an aggregate of 10 trading days in any 365-day period;
(v) the Company breaches any representation,
warranty, covenant or other term or condition of the Securities Purchase
Agreement, the Registration Rights Agreement, the Warrants, these Articles of
Amendment or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated thereby and hereby,
except to the extent that such breach would not have a Material Adverse Effect
(as defined in Section 3(a) of the Securities Purchase Agreement) and except, in
the case of a breach of a covenant which is curable, only if such breach
continues for a period of at least 10 days;
(vi) the Company fails to receive the Stockholder
Approval (as defined in Section 4(g) of the Securities Purchase Agreement) on or
before the Stockholder Meeting Deadline (as defined in Section 4(g) of the
Securities Purchase Agreement);
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<PAGE>
(vii) the consolidation, merger or other business
combination of the Company with or into another Person (other than (A) a
consolidation, merger or other business combination in which holders of the
Company's voting power immediately prior to the transaction continue after the
transaction to hold, directly or indirectly, the voting power of the surviving
entity or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (B) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company); or
(viii) a purchase, tender or exchange offer made
to and accepted by the holders of more than 50% of the outstanding shares of
Common Stock.
As soon as practicable but in no event later than one (1) day after the
occurrence of a Liquidity Default, the Company shall deliver written notice
thereof via facsimile and overnight courier (a "COMPANY'S LIQUIDITY DEFAULT
NOTICE") to each holder of Preferred Shares.
(h) RIGHTS OF THE HOLDERS OF THE PREFERRED SHARES
UPON THE OCCURRENCE OF A LIQUIDITY DEFAULT. In addition to any other remedies
the holders of the Preferred Shares may have at law or in equity, if a Liquidity
Default occurs then:
(i) if the Liquidity Default is pursuant to
clause (i), (iii), (iv), (v), (vi), (vii) or (viii) of Section 3(g),
then on each day during the period beginning on and including the first
day following the occurrence of such Liquidity Default and ending on
and including the date on which such Liquidity Default is cured, in the
case of a Liquidity Default described in clause (i), (iii), (iv), (v)
or (vi) of Section 3(g), or the date on which there is announced the
consummation, termination or abandonment of such Liquidity Default, in
the case of a Liquidity Default described in clause (vii) or (viii) of
Section 3(g), the Company shall pay to each holder of Preferred Shares
an amount in cash per Preferred Share equal to one percent (1%) of the
Liquidation Preference of such Preferred Share (each such payment, a
"LIQUIDITY DEFAULT DAILY PAYMENT"), provided, however, that the Company
shall not be obligated to make a Liquidity Default Daily Payment to any
holder of Preferred Shares for more than 15 days in any 365-day period;
and
(ii) (A) if the Liquidity Default is pursuant to
Section 3(g)(ii), then immediately upon the occurrence of such a
Liquidity Default (and from time to time as applicable), the Fixed
Conversion Price of the Preferred Shares shall be permanently adjusted
(subject to further adjustment pursuant to these Articles of Amendment
subsequent to such adjustment) to equal the lesser of (I) the Fixed
Conversion Price in effect for such Preferred Shares on the date which
is 40 days after the applicable Effectiveness Deadline or (II) the
product of (a) 0.68 multiplied by (b) the lowest Applicable Daily Price
during the period beginning on and including the date which is 10 days
after the applicable Effectiveness Deadline and ending on and including
(x) on any date prior to the date the Registration Statement is
declared effective by the SEC, the Conversion Date or other date of
determination with respect to which the determination is being made
with respect to this Section 3(h)(ii)(A) and (y) on any date on or
after the date the Registration Statement is declared effective by the
SEC, the date the Registration Statement was declared effective by the
SEC;
(B) if the Liquidity Default is pursuant to
clause (iii), (iv), (v) or (vi) of Section 3(g), then immediately upon
the occurrence of such a Liquidity Default (and from time to time as
applicable), the Fixed Conversion Price of the Preferred Shares shall
be permanently adjusted (subject to further adjustment pursuant to
these Articles of Amendment subsequent to such adjustment) to equal the
lesser of (I) the Fixed Conversion Price in effect for such Preferred
Shares on the date of the initial occurrence of such Liquidity Default
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or (II) the product of (a) 0.68 multiplied by (b) the lowest Applicable
Daily Price during the period beginning on and including the date of
the initial occurrence of such Liquidity Default and ending on and
including (x) on any date prior to the date on which the Company cures
such Liquidity Default and delivers written notice to each holder of
Preferred Shares stating that such Liquidity Default has been cured,
the Conversion Date or other date of determination with respect to
which the determination is being made with respect to this Section
3(h)(ii)(B) and (y) on any date on or after the date on which the
Company cures such Liquidity Default and delivers written notice to
each holder of Preferred Shares stating that such Liquidity Default has
been cured, the date on which the Company cured such Liquidity Default
and delivered written notice to each holder of Preferred Shares stating
that such Liquidity Default had been cured; and
(C) if the Liquidity Default is pursuant to
Section 3(g)(vii) or Section 3(g)(viii), then immediately upon the
occurrence of such a Liquidity Default (and from time to time as
applicable), the Fixed Conversion Price of the Preferred Shares shall
be permanently adjusted (subject to further adjustment pursuant to
these Articles of Amendment subsequent to such adjustment) to equal the
lesser of (I) the Fixed Conversion Price in effect for such Preferred
Shares on the date of the occurrence of such Liquidity Default or (II)
the product of (a) 0.68 multiplied by (b) the lowest Applicable Daily
Price during the period beginning on and including the fifth (5th)
trading day immediately preceding the date of the announcement of a
proposed, pending or intended event that if consummated would
constitute a Liquidity Default described in Section 3(g)(vii) or
Section 3(g)(viii) and ending on and including (x) on any date prior to
the date which is 10 trading days after the date of the public
announcement of the consummation, termination or abandonment of such
proposed, pending or intended event that if consummated would
constitute a Liquidity Event described in Section 3(g)(vii) or Section
3(g)(viii), the Conversion Date or other date of determination with
respect to which the determination is being made with respect to this
Section 3(h)(ii)(C) and (y) on any date on or after the date which is
10 trading days after the date of the public announcement of the
consummation, termination or abandonment of such proposed, pending or
intended event that if consummated would constitute a Liquidity Event
described in Section 3(g)(vii) or Section 3(g)(viii), the date which is
10 trading days after the date of the public announcement of the
consummation, termination or abandonment of such proposed, pending or
intended event that if consummated would constitute a Liquidity Event
described in Section 3(g)(vii) or Section 3(g)(viii) (provided that
such 10 trading day period will be extended by one trading day for each
day on which there is no closing sales price or closing trade price
reported by Bloomberg or no bid prices of any market makers reported by
the National Quotation Bureau, Inc. in the "pink sheets" for the
Company's securities).
(4) OTHER RIGHTS OF HOLDERS.
(a) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER OR SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "ORGANIC CHANGE." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "ACQUIRING ENTITY") a written agreement (in form and substance
reasonably satisfactory to the holders of at least two-thirds (2/3) of the
Preferred Shares then outstanding) to deliver to each holder of Preferred Shares
in exchange for such shares, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to the Preferred
Shares, including, without limitation, having a stated value and liquidation
preference equal to the Stated Value and the Liquidation Preference of the
Preferred Shares held by such holder, and reasonably satisfactory to
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the holders of at least two-thirds (2/3) of the Preferred Shares then
outstanding. Prior to the consummation of any other Organic Change, the Company
shall make appropriate provision (in form and substance reasonably satisfactory
to the holders of a majority of the Preferred Shares then outstanding) to insure
that each of the holders of the Preferred Shares will thereafter have the right
to acquire and receive in lieu of or in addition to (as the case may be) the
shares of Common Stock immediately theretofore acquirable and receivable upon
the conversion of such holder's Preferred Shares such shares of stock,
securities or assets that would have been issued or payable in such Organic
Change with respect to or in exchange for the number of shares of Common Stock
which would have been acquirable and receivable upon the conversion of such
holder's Preferred Shares as of the date of such Organic Change (without taking
into account any limitations or restrictions on the convertibility of the
Preferred Shares).
(b) OPTIONAL REDEMPTION UPON SALE OF ASSETS. In
addition to the rights of the holders of Preferred Shares under Section 4(a),
upon a Sale of Assets (as defined below) of the Company each holder of Preferred
Shares shall have the right, at such holder's option, to require the Company to
redeem all or a portion of such holder's Preferred Shares at a price per
Preferred Share equal to 107% of the Liquidation Preference ("SALE OF ASSETS
REDEMPTION PRICE"). No sooner than 20 days nor later than 10 days prior to the
consummation of a Sale of Assets, but not prior to the public announcement of
such Sale of Assets, the Company shall deliver written notice thereof via
facsimile and overnight courier (a "NOTICE OF SALE OF ASSETS") to each holder of
Preferred Shares. At any time during the period beginning after receipt of a
Notice of Sale of Assets (or, in the event a Notice of Sale of Assets is not
delivered at least 10 days prior to a Sale of Assets, at any time on or after
the date which is 10 days prior to a Sale of Assets) and ending on the date of
such Sale of Assets, any holder of the Preferred Shares then outstanding may
require the Company to redeem all or a portion of the holder's Preferred Shares
then outstanding by delivering written notice thereof via facsimile and
overnight courier (a "NOTICE OF REDEMPTION UPON SALE OF ASSETS") to the Company,
which Notice of Redemption Upon Sale of Assets shall indicate (i) the number of
Preferred Shares that such holder is submitting for redemption, and (ii) the
applicable Sale of Assets Redemption Price, as calculated pursuant to this
Section 4(b). Upon the Company's receipt of a Notice(s) of Redemption Upon Sale
of Assets from any holder of Preferred Shares, the Company shall promptly, but
in no event later than one (1) Business Day following such receipt, notify each
holder of Preferred Shares by facsimile of the Company's receipt of such
Notice(s) of Redemption Upon Sale of Assets. The Company shall deliver the
applicable Sale of Assets Redemption Price simultaneously with the consummation
of the Sale of Assets; provided that, if required by Section 2(d)(viii), a
holder's Preferred Stock Certificates shall have been so delivered to the
Company. Payments provided for in this Section 4(b) shall have priority to
payments to other stockholders in connection with a Sale of Assets. For purposes
of this Section 4(b), "SALE OF ASSETS" means the sale or transfer of all or
substantially all of the Company's assets or the Company's subsidiaries' assets,
take as a whole.
(c) PURCHASE RIGHTS. If at any time the Company
grants, issues or sells any Options, Convertible Securities or rights to
purchase stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "PURCHASE RIGHTS"), then the holders
of Preferred Shares will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Preferred Shares (without taking into account
any limitations or restrictions on the convertibility of the Preferred Shares)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(5) LIMITATION ON BENEFICIAL OWNERSHIP. The Company shall not
effect any conversion of Preferred Shares and no holder of Preferred Shares
shall have the right to convert Preferred Shares in excess of that number of
Preferred Shares which, upon giving effect to such conversion, would cause the
aggregate number of shares of Common
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Stock beneficially owned by such holder and its affiliates to exceed 4.99% of
the total outstanding shares of Common Stock following such conversion. For
purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by such holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Preferred
Shares with respect to which the determination of such proviso is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (i) conversion of the remaining, nonconverted Preferred Shares beneficially
owned by the holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any warrants or convertible preferred stock)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the holder and its affiliates. Except as
set forth in the preceding sentence, for purposes of this Section 5, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended. For purposes of this Section 5, in determining
the number of outstanding shares of Common Stock a holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company's most
recent Form 10-Q, Form 10-K or other public filing with the SEC, as the case may
be, (2) a more recent public announcement by the Company, or (3) any other
notice by the Company or its transfer agent setting forth the number of shares
of Common Stock outstanding. Upon the written request of any holder, the Company
shall promptly, but in no event later than one (1) Business Day following the
receipt of such notice, confirm in writing to any such holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to conversions of
Preferred Shares and exercise of Warrants (as defined below) by such holder and
its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.
(6) REDEMPTION AT THE COMPANY'S ELECTION. At any time or times during
the period beginning on the date the Registration Statement is declared
effective by the SEC and ending on and including the date which is one (1) year
after the Issuance Date, the Company shall have the right, in its sole
discretion, to require that some or all of the outstanding Preferred Shares be
redeemed ("REDEMPTION AT COMPANY'S ELECTION"), for consideration per Preferred
Share equal to 107% of the Conversion Amount for such Preferred Share (the
"COMPANY'S ELECTION REDEMPTION PRICE"); provided that the Conditions to
Redemption at the Company's Election (as set forth below) are satisfied as of
the Company's Election Redemption Date (as defined below). The Company may
exercise its right to Redemption at Company's Election only by providing each
holder of Preferred Shares written notice ("NOTICE OF REDEMPTION AT COMPANY'S
ELECTION") at least 10 Business Days but not more than 20 Business Days prior to
the date of consummation of such redemption ("COMPANY'S ELECTION REDEMPTION
DATE"). If the Company elects to require redemption of some, but not all, of the
Preferred Shares then outstanding, the Company shall require redemption of the
pro rata amount from each holder of such Preferred Shares based on the number of
Preferred Shares purchased by such holder relative to the total number of
Preferred Shares purchased on the Issuance Date (such amount with respect to
each holder being referred to herein as its "PRO RATA REDEMPTION AMOUNT"). The
Company's Notice of Redemption at Company's Election shall indicate (x) the
aggregate number of Preferred Shares the Company has elected to redeem from all
holders of Preferred Shares, (y) the date selected by the Company for the
Company's Election Redemption Date, and (z) each holder's Pro Rata Redemption
Amount of the Preferred Shares selected for redemption. If the Company has
exercised its right of Redemption at Company's Election and the conditions of
this Section 6, including the Conditions to Redemption at Company's Election,
have been satisfied, then each holder's Pro Rata Redemption Amount of the
Preferred Shares selected for redemption which remain outstanding on the
Company's Election Redemption Date shall be redeemed as of the Company's
Election Redemption Date by payment by the Company to each such holder of
Preferred Shares of the Company's Election Redemption Price. If required by
Section 2(d)(viii), all such holders of the Preferred Shares being redeemed
shall thereupon and within two (2) Business Days after the Company's Election
Redemption Date, or such earlier date as the Company and each such holder of
Preferred Shares mutually agree, surrender all Preferred Shares being redeemed
on such date to the Company. If the Company fails to pay the full Company's
Election Redemption Price on the Company's Election Redemption Date with respect
to a Preferred Share selected for redemption, then the Redemption at Company's
Election shall
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be null and void with respect to such Preferred Share and the Holder shall be
entitled to all the rights of a holder of outstanding Preferred Shares.
"CONDITIONS TO REDEMPTION AT THE COMPANY'S ELECTION" means the following
conditions: (i) during the period beginning on the Issuance Date and ending on
and including the Company's Election Redemption Date, the Company shall have
delivered Conversion Shares upon conversion of the Preferred Shares to the
holders of the Preferred Shares on a timely basis as set forth in Section
2(d)(ii); (ii) on each day during the period beginning 30 days prior to the date
of Notice of Redemption at Company's Election and ending on and including the
Company's Election Redemption Date the Registration Statement shall be effective
and available for the sale of at least all of the Registrable Securities (as
defined in the Registration Rights Agreement); (iii) on each day during the
period beginning 30 days prior to the date of Notice of Redemption at Company's
Election and ending on and including the Company's Election Redemption Date, the
Common Stock is designated for quotation on the Nasdaq National Market or listed
on The New York Stock Exchange, Inc. and is not suspended from trading
(excluding suspensions of not more than one day resulting from business
announcements by the Company); (iv) during the period beginning on and including
the Issuance Date and ending on and including the Company's Election Redemption
Date, there shall not have occurred a Triggering Event or a Liquidity Default or
an event that with the passage of time and without being cured would constitute
a Triggering Event or a Liquidity Default; (v) during the period beginning on
the Issuance Date and ending on and including the Company's Election Redemption
Date, there shall not have occurred the consummation of a Sale of Assets or a
Liquidity Default described in Section 3(g)(vii) or Section 3(g)(viii) or the
public announcement of a pending, proposed or intended Sale of Assets or
Liquidity Default described in Section 3(g)(vii) or Section 3(g)(viii); (vi) the
Company otherwise shall have been in compliance in all material respects with
these Articles of Amendment, the Securities Purchase Agreement, the Warrants and
the Registration Rights Agreement and shall not have breached in any material
respect any provision of these Articles of Amendment, the Securities Purchase
Agreement, the Warrants or the Registration Rights Agreement; (vii) the Company
shall not have delivered a Notice of Redemption at Company's Election and the
Company's Election Redemption Date shall not occur during a Company's Mandatory
Conversion Period (as defined in Section 7); (viii) the Company's Election
Redemption Date is not later than the date which is one (1) year after the
Issuance Date; and (ix) if the Company's Election Redemption Date occurs after
the Stockholder Meeting Deadline, then the Company shall have received the
Stockholder Approval. Notwithstanding the above, but subject to Section 5 and
Section 8, any holder of Preferred Shares may convert any Preferred Shares
(including Preferred Shares selected for redemption) into Common Stock pursuant
to Section 2 on or prior to the date immediately preceding the Company's
Election Redemption Date. If the Company fails to timely pay any Company's
Election Redemption Price in accordance with this Section 6, then the Company
shall not be permitted to submit another Notice of Redemption at Company's
Election without the prior written consent of the holders of at least two-thirds
(2/3) of the Preferred Shares then outstanding.
(7) CONVERSION AT THE COMPANY'S ELECTION. On any date during the period
beginning on the date which is 20 Business Days after the Registration Statement
has been declared effective by the SEC and ending on and including the date
which is one (1) year after the Issuance Date, the Company shall have the right,
in its sole discretion, to require that some or all of the outstanding Preferred
Shares be converted ("COMPANY'S CONVERSION ELECTION") at the applicable
Conversion Rate; provided that the Conditions to Conversion at the Company's
Election (as set forth below) are satisfied as of the Company's Election
Conversion Date (as defined below). The Company shall exercise its right to
Company's Conversion Election by providing each holder of Preferred Shares
written notice ("COMPANY'S CONVERSION ELECTION NOTICE") on such date by
facsimile and overnight courier. The date on which each of such holders of the
Preferred Shares actually receives the Company's Conversion Election Notice is
referred to herein as the "COMPANY'S CONVERSION ELECTION NOTICE DATE." If the
Company elects to require conversion of some, but not all, of such Preferred
Shares then outstanding, the Company shall require conversion of the pro rata
amount from each holder of such Preferred Shares based on the number of
Preferred Shares purchased by such holder relative to the total number of
Preferred Shares purchased on the Issuance Date (such amount with respect to
each holder of such Preferred Shares being referred to herein as its "PRO RATA
CONVERSION AMOUNT"). The Company's Conversion Election Notice shall indicate (x)
the
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aggregate number of such Preferred Shares the Company has selected for
conversion, (y) the date selected by the Company for conversion ("COMPANY'S
ELECTION CONVERSION DATE"), which date shall be not less than 10 Business Days
or more than 60 Business Days after the Company's Conversion Election Notice
Date, and (z) each holder's Pro Rata Conversion Amount. Subject to the
satisfaction of all the conditions of this Section 7 and provided that the
Company does not deliver a Company's Mandatory Conversion Period Termination
Notice (in the manner described below) with an effective date prior to the
applicable Company's Election Conversion Date and except to the extent
restricted by Section 5, on the Company's Election Conversion Date each holder
of Preferred Shares selected for conversion will be deemed to have submitted a
Conversion Notice in accordance with Section 2(d)(i) for a number of Preferred
Shares equal to the result of (a) such holder's Pro Rata Conversion Amount,
minus (b) the number of such Preferred Shares converted by such holder during
the Company's Mandatory Conversion Period (as defined below); provided, however,
in no event shall any holder of Preferred Shares be required to convert a number
of Preferred Shares during any Company's Mandatory Conversion Period into a
number of shares of Common Stock in excess of such holder's pro rata portion
(determined in the same manner as the Pro Rata Conversion Amount above) of 15%
of the aggregate trading volume of the Common Stock on the Principal Market (as
reported by Bloomberg) during the Company's Mandatory Conversion Period,
provided, however, if the Principal Market modifies the method by which it
calculates or reports the trading volume, then such percentage will be modified
accordingly. The Company may terminate a Conversion at Company's Election prior
to the Company's Election Conversion Date with respect to any Preferred Shares
not submitted for conversion prior to the effective date of such termination by
delivering written notice ("COMPANY'S MANDATORY CONVERSION PERIOD TERMINATION
NOTICE") to each holder of Preferred Shares at least five Business Days prior to
the effective date of such termination, provided that the Company has not
previously delivered two Company's Mandatory Conversion Period Termination
Notices. "CONDITIONS TO CONVERSION AT THE COMPANY'S ELECTION" means the
following conditions: (i) on each day during the period beginning on and
including the date the Registration Statement is declared effective by the SEC
and ending on and including the Company's Election Conversion Date, the
Registration Statement which includes the Registrable Securities relating to the
Preferred Shares selected for conversion shall be effective and available for
the sale of no less than all the Registrable Securities required to be included
in such Registration Statement; (ii) on each day during the period beginning on
the Issuance Date and ending on and including the Company's Election Conversion
Date, the Common Stock is designated for quotation on the Nasdaq National Market
or listed on The New York Stock Exchange, Inc. and shall not have been suspended
from trading on such exchanges nor shall delisting or suspension by such
exchanges (other than suspensions of not more than one day and occurring prior
to the Company's Conversion Election Notice Date due to business announcements
by the Company) have been threatened either (A) in writing by such exchanges or
(B) by falling below the minimum listing maintenance requirements of such
exchanges; (iii) during the period beginning on the Issuance Date and ending on
and including the Company's Election Conversion Date, there shall not have
occurred (A) an event constituting a Sale of Assets or a Triggering Event or a
Liquidity Default, (B) an event that with the passage of time and without being
cured would constitute a Triggering Event or a Liquidity Default, or (C) the
public announcement of a pending, proposed or intended Sale of Assets or
Liquidity Default described in Section 3(g)(vii) or Section 3(g)(viii); (iv) the
aggregate number of Preferred Shares selected for conversion by the Company as
reflected in the Company's Conversion Election Notice is at least 500; (v)
during the period beginning on the Issuance Date and ending on and including the
Company's Election Conversion Date, the Company shall have delivered shares of
Common Stock upon conversion of the Preferred Shares and upon exercise of the
Warrants to the holders on a timely basis as set forth in Section 2(d)(ii)
hereof and Sections 2(a) and 2(b) of the Warrants, respectively; (vi) the
Company otherwise shall have been in compliance in all material respects with
these Articles of Amendment, the Securities Purchase Agreement, the Warrants and
the Registration Rights Agreement and shall not have breached in any material
respect any provision of these Articles of Amendment, the Securities Purchase
Agreement, the Warrants or the Registration Rights Agreement; (vii) the Company
shall not have delivered a Company's Conversion Election Notice during any
Company's Mandatory Conversion Period; (viii) the Company's Election Conversion
Date is not later than the date which is one (1) year after the Issuance Date;
and (ix) if the Company's Election Conversion Date occurs after the Stockholder
Meeting Deadline, then the Company shall have received the Stockholder
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Approval. "COMPANY'S MANDATORY CONVERSION PERIOD" means, with respect to any
Company's Conversion Election, the period beginning on and including the
Company's Conversion Election Notice Date and ending on and including the
earlier of (i) the Company's Election Conversion Date and (ii) the effective
date of the Company's Mandatory Conversion Period Termination Notice, which
effective date shall not be fewer than five Business Days after the receipt of
such notice by each holder of Preferred Shares.
(8) RESTRICTIONS ON CONVERSIONS. The right of a holder of Preferred
Shares to convert Preferred Shares pursuant to Section 2(b) shall be limited as
set forth below. Subject to the exceptions described below, without the prior
consent of the Company, no holder of Preferred Shares shall be entitled to
convert any Preferred Shares during the period beginning on the Issuance Date
and ending on and including the date which is one year after the Issuance Date.
Notwithstanding the foregoing, the conversion restrictions set forth in this
Section 8 shall not apply: (a) during a Company's Mandatory Conversion Period,
but only with respect to the number of Preferred Shares set forth in a Company's
Election Conversion Notice for such holder with respect to such Company
Mandatory Conversion Period; (b) on and after any date on which the Common Stock
is not listed or quoted on the Nasdaq National Market or The New York Stock
Exchange, Inc. or has been suspended from trading on any such exchange
(excluding suspensions of not more than one day resulting from business
announcements by the Company), or any such delisting or suspension is threatened
or pending either (I) in writing by such exchanges or (II) by falling below the
minimum listing maintenance requirements of such exchanges; (c) on or after any
date on which there shall have occurred an event constituting a Sale of Assets
or a Triggering Event or a Liquidity Default or an event that with the passage
of time and without being cured would constitute a Triggering Event or a
Liquidity Default; (d) on or after any date on which there shall have been an
announcement of a pending, proposed or intended Sale of Assets or Liquidity
Default described in Section 3(g)(vii) or Section 3(g)(viii); (e) on or after
any date on which the Company issues or sells or is deemed to have issued or
sold any Convertible Securities or Options that are convertible into or
exercisable or exchangeable for shares of Common Stock at a conversion or
exercise price which varies or may vary with the market price of the Common
Stock, including by way of one or more reset(s) to a fixed price; (f) on or
after any date on which the Company fails to pay the Company's Election
Redemption Price for any Preferred Shares in a timely manner in accordance with
a Redemption at Company's Election pursuant to Section 6; (g) on or after the
date the Company issues or sells any shares of Common Stock or any Convertible
Securities or Options (other than Excluded Securities or upon conversion of the
Preferred Shares or exercise of the Warrants or in connection with any Approved
Stock Plan or shares of Common Stock issuable pursuant to warrants or options
outstanding prior to the Issuance Date, provided such warrants or options are
not amended in any material respect after the Issuance Date), with respect to a
number of Preferred Shares representing an aggregate Conversion Amount equal to
the lesser of (I) each holder's pro rata portion (determined in the same manner
as Pro Rata Conversion Amount in Section 7) of the consideration received by the
Company in connection with such issuance or sale and (II) the aggregate
Conversion Amount represented by such holder's Preferred Shares; (h) at any time
after the first date after the Issuance Date on which the Closing Sale Price of
the Common Stock is less than $4.21 (equitably adjusted for stock splits, stock
dividends, stock combinations and other similar transactions) for any 10 trading
days during the 15 consecutive trading days immediately preceding such date of
determination; (i) with respect to any conversion of Preferred Shares at a price
equal to the Fixed Conversion Price then in effect; (j) on or after the first
date on which the Company fails to comply with its obligations under Section
4(m) of the Securities Purchase Agreement; or (k) on or after the Stockholder
Meeting Deadline if the Company fails to receive the Stockholder Approval (as
defined in Section 4(g) of the Securities Purchase Agreement) on or before the
Stockholder Meeting Deadline.
(9) REDEMPTION AT THE COMPANY'S ELECTION UPON A QUALIFIED OFFERING. At
any time after the date which is one (1) year after the Issuance Date, the
Company shall have the right, in its sole discretion, to require that all of the
outstanding Preferred Shares be redeemed ("COMPANY'S OFFERING REDEMPTION")
concurrent with the closing of a Qualified Offering (as defined below); provided
that the Conditions to a Company's Offering Redemption (as set forth below) are
satisfied as of the Company's Offering Redemption Date (as defined below). The
redemption price per Preferred
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Share upon a Company's Offering Redemption shall be equal to the Company's
Offering Redemption Price (as defined below). The Company shall exercise its
right to Company's Offering Redemption by providing each holder of Preferred
Shares written notice ("NOTICE OF COMPANY'S OFFERING REDEMPTION") at least 20
days prior to the Company's Offering Redemption Date, but in no event prior to
the filing of the registration statement for the Qualified Offering. The Notice
of Company's Offering Redemption shall indicate the anticipated Company's
Redemption Date and the name of the managing underwriters of the proposed
Qualified Offering. The date of the consummation of the Company's Offering
Redemption (the "COMPANY'S OFFERING REDEMPTION DATE") shall be the date of the
closing of the Qualified Offering. If the Company has exercised its right of
Company's Offering Redemption and the conditions to such Company's Offering
Redemption have been satisfied, then all Preferred Shares outstanding at the
time of the consummation of the Qualified Offering shall be redeemed as of the
Company's Offering Redemption Date by payment by the Company to each holder of
Preferred Shares then outstanding of the Company's Offering Redemption Price
concurrent with the closing of the Qualified Offering. All holders of Preferred
Shares shall thereupon and within two (2) Business Days after the Company's
Offering Redemption Date, or such earlier date as the Company and each holder of
Preferred Shares mutually agree, surrender all outstanding Preferred Stock
Certificates, duly endorsed for cancellation, to the Company. If the Company
fails to pay the full Company's Offering Redemption Price with respect to any
Preferred Shares concurrently with the closing of the Qualified Offering, then
the Company's Offering Redemption shall be null and void with respect to such
Preferred Shares and the holder of such Preferred Shares shall be entitled to
all the rights of a holder of outstanding Preferred Shares set forth in these
Articles of Amendment. "CONDITIONS TO COMPANY'S OFFERING REDEMPTION" means the
following conditions: (i) on each day during the period beginning 30 days prior
to the date of the Company's Notice of Company's Offering Redemption and ending
on and including the Company's Offering Redemption Date, no Grace Period shall
be in effect and the Registration Statement shall be effective and available for
the sale of no less than all of the Registrable Securities (as defined in the
Registration Rights Agreement) that may then be issued upon conversion of the
Preferred Shares in accordance with the terms hereof; (ii) on each day during
the period beginning 30 days prior to the date of the Company's Notice of
Company's Offering Redemption and ending on and including the Company's Offering
Redemption Date, the Common Stock is designated for quotation on the Nasdaq
National Market or The New York Stock Exchange, Inc. and is not suspended from
trading; (iii) the Company shall have received the Stockholder Approval on or
prior to the Stockholder Meeting Deadline; (iv) during the period beginning on
the Issuance Date and ending on and including the Company's Offering Redemption
Date, there shall not have occurred (A) an event constituting a Sale of Assets
or a Triggering Event or a Liquidity Default or (B) an event that with the
passage of time and without being cured would constitute a Triggering Event or a
Liquidity Default; and (v) the Company has satisfied its obligations in all
material respects and is not in default in any material respect under these
Articles of Amendment, the Securities Purchase Agreement, the Warrants and the
Registration Rights Agreement. Notwithstanding the above, any holder of
Preferred Shares may convert such shares (including Preferred Shares selected
for redemption) into Common Stock pursuant to Section 2(a) on or prior to the
date immediately preceding the Company's Offering Redemption Date. For purposes
of this Section 9, "QUALIFIED OFFERING" means a firm commitment, underwritten
public offering of Common Stock by the Company which (a) is an offering which
generates aggregate gross proceeds to the Company (as reflected in the
preliminary prospectus and the final prospectus for such offering) of at least
$15,000,000 and (b) is completed at a price per share to the public of at least
$15.00 (subject to adjustment for stock splits, stock dividends, stock
combinations and other similar transactions) as reflected in the preliminary
prospectus and the final prospectus for such Qualified Offering. For purposes of
this Section 9, "COMPANY'S OFFERING REDEMPTION PRICE" means the greater of (a)
the product of (i) the Liquidation Preference, multiplied by (ii) the lesser of
(A) 1.15 and (B) the sum of (I) 1.07, plus (II) the product of (x) 0.12,
multiplied by (y) the quotient of (1) the number of days during the period
beginning on, but excluding, the date which is one year after the Issuance Date
and ending on and including the Company's Offering Redemption Date, divided by
(2) 365, (b) the product of (i) the Conversion Rate in effect on the date
immediately preceding the Company's Offering Redemption Date and (ii) the
Closing Sale Price of the Common Stock on the trading day immediately preceding
the Company's Offering Redemption Date on which the Principal Market is open for
trading, and (c) the product of (i) the Conversion Rate in effect
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on the date immediately preceding the Company's Offering Redemption Date and
(ii) the price per share to the public of the Common Stock as reflected in the
final prospectus for such Qualified Offering.
(10) RESERVATION OF SHARES. The Company shall, so long as any of the
Preferred Shares are outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversions of the Preferred Shares, such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Preferred Shares then outstanding; provided that the
number of shares of Common Stock so reserved shall at no time be less than 200%
of the number of shares of Common Stock for which the Preferred Shares are at
any time convertible (without regard to any limitations on conversions). The
initial number of shares of Common Stock reserved for conversions of the
Preferred Shares and each increase in the number of shares so reserved shall be
allocated pro rata among the holders of the Preferred Shares based on the number
of Preferred Shares held by each holder at the time of issuance of the Preferred
Shares or increase in the number of reserved shares, as the case may be. In the
event a holder shall sell or otherwise transfer any of such holder's Preferred
Shares, each transferee shall be allocated a pro rata portion of the number of
reserved shares of Common Stock reserved for such transferor. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any
Preferred Shares shall be allocated to the remaining holders of Preferred
Shares, pro rata based on the number of Preferred Shares then held by such
holders.
(11) VOTING RIGHTS. Holders of Preferred Shares shall have no voting
rights, except as required by law, including but not limited to the Florida
Business Corporation Act, and as expressly provided in these Articles of
Amendment.
(12) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the holders of the Preferred Shares shall be entitled to receive in cash out of
the assets of the Company, whether from capital or from earnings available for
distribution to its stockholders (the "LIQUIDATION FUNDS"), before any amount
shall be paid to the holders of any of the capital stock of the Company of any
class junior in rank to the Preferred Shares in respect of the preferences as to
distributions and payments on the liquidation, dissolution and winding up of the
Company, an amount per Preferred Share equal to the sum of (i) the Stated Value
and (ii) the Additional Amount for such Preferred Share (such sum being referred
to as the "LIQUIDATION PREFERENCE"); provided that, if the Liquidation Funds are
insufficient to pay the full amount due to the holders of Preferred Shares and
holders of shares of other classes or series of preferred stock of the Company
that are of equal rank with the Preferred Shares as to payments of Liquidation
Funds (the "PARI PASSU SHARES"), then each holder of Preferred Shares and Pari
Passu Shares shall receive a percentage of the Liquidation Funds equal to the
full amount of Liquidation Funds payable to such holder as a liquidation
preference, in accordance with their respective Articles of Amendment, as a
percentage of the full amount of Liquidation Funds payable to all holders of
Preferred Shares and Pari Passu Shares. The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or into any
other Person, nor the sale or transfer by the Company of less than substantially
all of its assets, shall, for the purposes hereof, be deemed to be a
liquidation, dissolution or winding up of the Company.
(13) PREFERRED RANK. All shares of Common Stock shall be of junior rank
to all Preferred Shares with respect to the preferences as to distributions and
payments upon the liquidation, dissolution and winding up of the Company. The
rights of the shares of Common Stock shall be subject to the preferences and
relative rights of the Preferred Shares. Without the prior express written
consent of the holders of not less than two-thirds (2/3) of the then outstanding
Preferred Shares, the Company shall not hereafter authorize or issue additional
or other capital stock that is of senior or equal rank to the Preferred Shares
in respect of the preferences as to distributions and payments upon the
liquidation, dissolution and winding up of the Company. Without the prior
express written consent of the holders of not less than two-thirds (2/3) of the
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then outstanding Preferred Shares, the Company shall not hereafter authorize or
make any amendment to the Company's Articles of Incorporation or bylaws, or file
any resolution of the board of directors of the Company with the Secretary of
State of the State of Florida or enter into any agreement containing any
provisions, which would adversely affect or otherwise impair the rights or
relative priority of the holders of the Preferred Shares relative to the holders
of the Common Stock or the holders of any other class of capital stock. In the
event of the merger or consolidation of the Company with or into another
corporation, the Preferred Shares shall maintain their relative powers,
designations and preferences provided for herein and no merger shall result
inconsistent therewith.
(14) PARTICIPATION. Subject to the rights of the holders, if any, of
the Pari Passu Shares, the holders of the Preferred Shares shall, as holders of
Preferred Stock, be entitled to such dividends paid and distributions made to
the holders of Common Stock to the same extent as if such holders of Preferred
Shares had converted the Preferred Shares into Common Stock (without regard to
any limitations on conversion herein or elsewhere) and had held such shares of
Common Stock on the record date for such dividends and distributions. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
(15) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until all of the
Preferred Shares have been converted or redeemed as provided herein, the Company
shall not, directly or indirectly, redeem, or declare or pay any cash dividend
or distribution on, its capital stock (other than the Preferred Shares) without
the prior express written consent of the holders of not less than two-thirds
(2/3) of the then outstanding Preferred Shares.
(16) LIMITATION ON NUMBER OF CONVERSION SHARES. The Company shall not
be obligated to issue any shares of Common Stock upon conversion of the
Preferred Shares if the issuance of such shares of Common Stock would exceed
that number of shares of Common Stock which the Company may issue upon
conversion of the Preferred Shares (the "EXCHANGE CAP") without breaching the
Company's obligations under the rules or regulations of the Principal Market, or
the market or exchange where the Common Stock is then traded, except that such
limitation shall not apply in the event that the Company (a) obtains the
approval of its stockholders as required by the applicable rules of the
Principal Market (or any successor rule or regulation) for issuances of Common
Stock in excess of such amount, (b) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the holders of a majority of the Preferred Shares
then outstanding or (c) the required number of the holders of the Preferred
Shares have exercised their rights pursuant to Section 4(c) to have the Company
remove the Common Stock from the Principal Market. Until such approval or
written opinion is obtained or such action has been taken by the required number
of holders of Preferred Shares, no purchaser of Preferred Shares pursuant to the
Securities Purchase Agreement (the "PURCHASERS") shall be issued, upon
conversion of Preferred Shares, shares of Common Stock in an amount greater than
the product of (i) the Exchange Cap amount multiplied by (ii) a fraction, the
numerator of which is the number of Preferred Shares issued to such Purchaser
pursuant to the Securities Purchase Agreement and the denominator of which is
the aggregate amount of all the Preferred Shares issued to the Purchasers
pursuant to the Securities Purchase Agreement (the "CAP ALLOCATION AMOUNT"). In
the event that any Purchaser shall sell or otherwise transfer any of such
Purchaser's Preferred Shares, the transferee shall be allocated a pro rata
portion of such Purchaser's Cap Allocation Amount. In the event that any holder
of Preferred Shares shall convert all of such holder's Preferred Shares into a
number of shares of Common Stock which, in the aggregate, is less than such
holder's Cap Allocation Amount, then the difference between such holder's Cap
Allocation Amount and the number of shares of Common Stock actually issued to
such holder shall be allocated to the respective Cap Allocation Amounts of the
remaining holders of Preferred Shares on a pro rata basis in proportion to the
number of Preferred Shares then held by each such holder.
(17) VOTE TO CHANGE THE TERMS OF OR ISSUE ADDITIONAL PREFERRED SHARES.
The affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting, of the holders of not less than two-thirds (2/3)
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of the then outstanding Preferred Shares, shall be required for (a) any change
to these Articles of Amendment or the Company's Articles of Incorporation which
would amend, alter, change or repeal any of the powers, designations,
preferences and rights of the Preferred Shares and (b) the issuance of Preferred
Shares other than pursuant to the Securities Purchase Agreement.
(18) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Preferred Stock Certificates representing the Preferred
Shares, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new preferred stock
certificate(s) of like tenor and date; provided, however, the Company shall not
be obligated to re-issue preferred stock certificates if the holder
contemporaneously requests the Company to convert such Preferred Shares into
Common Stock.
(19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in these Articles of Amendment shall be
cumulative and in addition to all other remedies available under these Articles
of Amendment, at law or in equity (including a decree of specific performance
and/or other injunctive relief). No remedy contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy. Nothing
herein shall limit a holder's right to pursue actual damages for any failure by
the Company to comply with the terms of these Articles of Amendment . The
Company covenants to each holder of Preferred Shares that there shall be no
characterization concerning this instrument other than as expressly provided
herein. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holders of the Preferred Shares and
that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holders of the Preferred Shares shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
(20) SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific
provision contained in these Articles of Amendment shall limit or modify any
more general provision contained herein. These Articles of Amendment shall be
deemed to be jointly drafted by the Company and all Buyers and shall not be
construed against any person as the drafter hereof.
(21) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of a holder of Preferred Shares 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 privilege.
(22) NOTICE. Whenever notice is required to be given under these
Articles of Amendment, unless otherwise provided herein, such notice shall be
given in accordance with Section 9(f) of the Securities Purchase Agreement.
(23) TRANSFER OF PREFERRED SHARES. A holder of Preferred Shares may
assign some or all of its rights hereunder or the Preferred Shares held by such
holder without the consent of the Company.
(24) FORM OF CONVERSION NOTICE. Each Conversion Notice to be delivered
by a holder of Preferred Shares shall be in the following form:
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------------------------------------------
PROXYMED, INC.
CONVERSION NOTICE
Reference is made to the Articles of Amendment to the Articles of Incorporation
of ProxyMed, Inc. for its Series B Convertible Preferred Stock (the "ARTICLES OF
AMENDMENT"). In accordance with and pursuant to the Articles of Amendment, the
undersigned hereby elects to convert the number of shares of Series B
Convertible Preferred Stock (the "PREFERRED SHARES") of ProxyMed, Inc., a
Florida corporation (the "COMPANY"), indicated below into shares of Common
Stock, par value $0.001 per share (the "COMMON STOCK"), of the Company, as of
the date specified below.
Date of Conversion:____________________________________________________
Number of Preferred Shares to be converted:____________________________
Stock certificate no(s). of Preferred Shares 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 Preferred Shares are 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:
Title:
Dated:__________________________________________
Account Number (if electronic book entry transfer):___________________
Transaction Code Number (if electronic book entry transfer):___________
[NOTE TO HOLDER -- THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
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ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs North American Transfer Company to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
___________ ___, 1999 from the Company and acknowledged and agreed to by North
American Transfer Company.
PROXYMED, INC.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Company has caused these Articles of Amendment
to be signed on behalf of the Company as of the 23rd day of December, 1999.
PROXYMED, INC.
By: /s/ Harold S. Blue
------------------------------------------
Name: Harold S. Blue
----------------------------------------
Title: Chairman of the Board
---------------------------------------
EXHIBIT 4.1
FORM OF WARRANT
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THIS WARRANT MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT.
PROXYMED, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.:____________________ Number of Shares:______________
Date of Issuance: _____________ __, _____
ProxyMed, Inc., a Florida corporation (the "COMPANY"), hereby certifies that,
for Ten United States Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
____________________, the registered holder hereof or its permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time or times on or after the date
hereof, but not after 11:59 P.M. Eastern Time on the Expiration Date (as defined
herein) ___________________ (________) [INSERT 53.333 SHARES OF COMMON STOCK FOR
EACH PREFERRED SHARE] fully paid nonassessable shares of Common Stock (as
defined herein) of the Company (the "WARRANT SHARES") at the purchase price per
share provided in Section 1(b) below; provided, however, that in no event shall
the holder be entitled to exercise this Warrant for a number of Warrant Shares
in excess of that number of Warrant Shares which, upon giving effect to such
exercise, would cause the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For purposes of
the foregoing proviso, the aggregate number of shares of Common Stock
beneficially owned by the holder and its affiliates shall include the number of
shares of Common Stock issuable upon exercise of this Warrant with respect to
which the determination of such proviso is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) exercise of the remaining,
unexercised Warrants beneficially owned by the holder and its affiliates and
(ii) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company beneficially owned by the holder and its
affiliates (including, without limitation, any convertible notes or preferred
stock) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock a holder may rely on the number of outstanding shares of
Common Stock as reflected in (1) the Company's most recent Form 10-Q, Form 10-K
or other public filing with the Securities and Exchange Commission, as the case
may be, (2) a more recent public announcement by the Company or (3) any other
notice by the Company or its transfer agent setting forth the number of shares
of Common Stock outstanding. Upon the written request of any holder, the Company
shall promptly, but in no event later than one (1) Business Day following the
receipt of such notice, confirm in writing to any
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such holder the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to conversions of Preferred Shares and exercise of Warrants (as
defined below) by such holder and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.
Section 1.
(a) SECURITIES PURCHASE AGREEMENT. This Warrant is one of the
Warrants (the "PREFERRED SHARE WARRANTS") issued pursuant to Section 1 of that
certain Securities Purchase Agreement dated as of December 23, 1999, among the
Company and the Buyers referred to therein (the "SECURITIES PURCHASE
AGREEMENT").
(b) DEFINITIONS. The following words and terms as used in this
Warrant shall have the following meanings:
(i) "APPROVED STOCK PLAN" shall mean any employee benefit
plan which has been approved by the Board of Directors of the Company, pursuant
to which the Company's securities may be issued to any employee, officer,
director or consultant for services provided to the Company.
(ii) "ARTICLES OF AMENDMENT" means the Company's Articles
of Amendment to its Articles of Incorporation for the Company's Series B
Convertible Preferred Stock.
(iii) "BUSINESS DAY" means any day other than Saturday,
Sunday or any other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.
(iv) "CLOSING SALE PRICE" means, for any security as of
any date, the last closing trade price for such security on the Principal Market
(as defined below) as reported by Bloomberg Financial Markets ("BLOOMBERG"), or
if the Principal Market begins to operate on an extended hours basis, and does
not designate the closing trade price, then the last trade price at 4:00 p.m.
Eastern Time as reported by Bloomberg, or, if the foregoing do not apply, the
last closing trade price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
last closing trade price is reported for such security by Bloomberg, the last
closing ask price of such security as reported by Bloomberg, or, if no last
closing ask price is reported for such security by Bloomberg, the average of the
lowest ask price and lowest bid price of any market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Closing Sale Price cannot be calculated for such security on such date on any of
the foregoing bases, the Closing Sale Price of such security on such date shall
be the fair market value as mutually determined by the Company and the holder of
this Warrant. If the Company and the holder of this Warrant are unable to agree
upon the fair market value of the Common Stock, then such dispute shall be
resolved pursuant to Section 2(a) below with the term "Closing Sale Price" being
substituted for the term "Market Price." All such determinations to be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.
(v) "COMMON STOCK" means (i) the Company's common stock,
par value $0.001 per share, and (ii) any capital stock into which such Common
Stock shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.
(vi) "CONVERTIBLE SECURITIES" means any stock or
securities (other than Options) directly or indirectly convertible into or
exchangeable for Common Stock.
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<PAGE>
(vii) "EXPIRATION DATE" means the date three (3) years
after the Issuance Date of this Warrant or, if such date falls on a Saturday,
Sunday or other day on which banks are required or authorized to be closed in
the City of New York or the State of New York or on which trading does not take
place on the principal exchange or automated quotation system on which the
Common Stock is traded (a "HOLIDAY"), the next date that is not a Holiday.
(viii) "ISSUANCE DATE" means, with respect to each
Warrant, the date of issuance of the applicable Warrant.
(ix) "MARKET PRICE" means, with respect to any security
for any date of determination, that price which shall be computed as the
arithmetic average of the Closing Sale Prices for such security on each of the
10 consecutive trading days immediately preceding such date of determination
(all such determinations to be appropriately adjusted for any stock dividend,
stock split or similar transaction during the pricing period).
(x) "OPTIONS" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.
(xi) "OTHER SECURITIES" means (i) those options and
warrants of the Company issued prior to, and outstanding on, the date of
issuance of this Warrant, (ii) the shares of Common Stock issued upon exercise
of such options and warrants, provided such options and warrants are not amended
in any material way after the issuance date of this Warrant, (iii) the Preferred
Shares, (iv) the shares of Common Stock issued upon conversion of the Preferred
Shares or the Preferred Share Warrants, and (v) options to purchase shares of
Common Stock, provided (a) such options are issued after the date of this
Warrant to employees or consultants of the Company within 30 days of such
employee or consultant starting their employment or consultation with the
Company, (b) such options are approved by the board of directors of the Company
or an appropriately designated committee thereof and (c) the exercise price of
such options is not less than the market price of the Common Stock on the date
of issuance of such options.
(xii) "PERSON" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xiii) "PREFERRED SHARES" means the shares of the
Company's Series B Convertible Preferred Shares issued pursuant to the
Securities Purchase Agreement.
(xiv) "PRINCIPAL MARKET" means the Nasdaq National Market
or if the Common Stock is not traded on the Nasdaq National Market, then the
principal securities exchange or trading market for the Common Stock.
(xv) "REGISTRATION RIGHTS AGREEMENT" means that Agreement
dated December 23, 1999 by and among the Company and the Buyers referred to
therein.
(xvi) "SECURITIES ACT" means the Securities Act of 1933,
as amended.
(xvii) "WARRANT" means this Warrant and all Warrants
issued in exchange, transfer or replacement hereof.
(xviii) "WARRANT EXERCISE PRICE" shall be equal to, with
respect to any Warrant Share, $12.05, subject to adjustment as hereinafter
provided.
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<PAGE>
(xix) "WEIGHTED AVERAGE PRICE" means, for any security as
of any date, the dollar volume-weighted average price for such security on the
Principal Market (as reported by Bloomberg through its "VOLUME AT PRICE"
function), or, if the foregoing does not apply, the dollar volume-weighted
average price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no dollar
volume-weighted average price is reported for such security by Bloomberg, the
average of the bid prices of each of the market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc. If the
Weighted Average Price cannot be calculated for such security on such date on
any of the foregoing bases, the Weighted Average Price of such security on such
date shall be the fair market value as mutually determined by the Company and
the holders of the Preferred Shares. If the Company and the holders of the
Preferred Shares are unable to agree upon the fair market value of the Common
Stock, then such dispute shall be resolved pursuant to Section 2(a) below. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split or other similar transaction during such period.
(c) OTHER DEFINITIONAL PROVISIONS.
(i) Except as otherwise specified herein, all references
herein (A) to the Company shall be deemed to include the Company's successors
and (B) to any applicable law defined or referred to herein, shall be deemed
references to such applicable law as the same may have been or may be amended or
supplemented from time to time.
(ii) When used in this Warrant, the words "HEREIN,"
"HEREOF," and "HEREUNDER," and words of similar import, shall refer to this
Warrant as a whole and not to any provision of this Warrant, and the words
"SECTION," "SCHEDULE," and "EXHIBIT" shall refer to Sections of, and Schedules
and Exhibits to, this Warrant unless otherwise specified.
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number includes the plural,
and vice versa.
Section 2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, this Warrant
may be exercised by the holder hereof then registered on the books of the
Company, in whole or in part, at any time on any Business Day on or after the
opening of business on the date hereof and prior to 11:59 P.M. Eastern Time on
the Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as EXHIBIT A hereto (the "EXERCISE NOTICE"), of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) (A) payment to the Company of an
amount equal to the applicable Warrant Exercise Price multiplied by the number
of Warrant Shares as to which this Warrant is being exercised (the "AGGREGATE
EXERCISE PRICE") in cash or wire transfer of immediately available funds or (B)
by notifying the Company that this Warrant is being exercised pursuant to a
Cashless Exercise (as defined in Section 2(f)) and (iii) the surrender to a
common carrier for overnight delivery to the Company, as soon as practicable
following such date, of this Warrant (or an indemnification undertaking with
respect to this Warrant in the case of its loss, theft or destruction). In the
event of any exercise of the rights represented by this Warrant in compliance
with this Section 2(a), the Company shall on the second Business Day following
the date of receipt of the Exercise Notice, the Aggregate Exercise Price (or
notice of a Cashless Exercise) and this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) (the "EXERCISE DELIVERY DOCUMENTS"), credit such aggregate number
of shares of Common Stock to which the holder shall be entitled to the holder's
or its designee's balance account with The Depository Trust Company; provided,
however, if the holder who submitted the Exercise Notice requested physical
delivery of any or all of the Warrant Shares, then the
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<PAGE>
Company shall, on or before the second Business Day following receipt of the
Exercise Delivery Documents issue and surrender to a common carrier for
overnight delivery to the address specified in the Exercise Notice, a
certificate, registered in the name of the holder, for the number of shares of
Common Stock to which the holder shall be entitled pursuant to such request.
Upon delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (ii)(A) above or notification to the Company of a Cashless Exercise
referred to in Section 2(f), the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of this Warrant as required by clause (iii) above or the
certificates evidencing such Warrant Shares. In the case of a dispute as to the
determination of the Warrant Exercise Price or the Market Price of a security or
the arithmetic calculation of the Warrant Shares, the Company shall promptly
issue to the holder the number of shares of Common Stock that is not disputed
and shall transmit an explanation of the disputed determinations or arithmetic
calculations to the holder via facsimile within one Business Day of receipt of
the holder's subscription notice. If the holder and the Company are unable to
agree upon the determination of the Warrant Exercise Price or the Market Price
or arithmetic calculation of the Warrant Shares within two (2) Business Days of
such disputed determination or arithmetic calculation being transmitted to the
holder, then the Company shall within one (1) Business Day transmit via
facsimile (i) the disputed determination of the Warrant Exercise Price or the
Market Price to an independent, reputable investment banking firm or (ii) the
disputed arithmetic calculation of the Warrant Shares to its independent,
outside accountant. The Company shall cause the investment banking firm or the
accountant, as the case may be, to perform the determinations or calculations
and notify the Company and the holder of the results no later than forty-eight
(48) hours from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(b) Unless the rights represented by this Warrant shall have
expired or shall have been fully exercised, the Company shall, as soon as
practicable and in no event later than five (5) Business Days after any exercise
and at its own expense, issue a new Warrant identical in all respects to this
Warrant except it shall represent rights to purchase the number of Warrant
Shares purchasable immediately prior to such exercise under this Warrant, less
the number of Warrant Shares with respect to which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon
the exercise of this Warrant, but rather the number of shares of Common Stock
issued upon exercise of this Warrant shall be rounded up or down to the nearest
whole number.
(d) If the Company shall fail for any reason or for no reason
to issue to the holder within five (5) Business Days of receipt of the Exercise
Delivery Documents, a certificate for the number of shares of Common Stock to
which the holder is entitled or to credit the holder's balance account with The
Depository Trust Company for such number of shares of Common Stock to which the
holder is entitled upon the holder's exercise of this Warrant, the Company
shall, in addition to any other remedies under this Warrant or the Securities
Purchase Agreement or otherwise available to such holder, including any
indemnification under Section 8 of the Securities Purchase Agreement, pay as
additional damages in cash to such holder on each day the issuance of such
Common Stock certificate is not timely effected an amount equal to 0.5% of the
product of (A) the sum of the number of shares of Common Stock not issued to the
holder on a timely basis and to which the holder is entitled, and (B) the
average of the Closing Sale Price of the Common Stock for the three consecutive
trading days immediately preceding the last possible date which the Company
could have issued such Common Stock to the holder without violating this Section
2.
(e) If within seven (7) Business Days after the Company's
receipt of the Exercise Delivery Documents, the Company fails to deliver a new
Warrant to the holder for the number of shares of Common Stock to which such
holder is entitled pursuant to Section 2(b) hereof, then, in addition to any
other available remedies under this Warrant or the Securities Purchase Agreement
including indemnification pursuant to Section 8 thereof or otherwise available
to
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such holder, the Company shall pay as additional damages in cash to such
holder on each day after such seventh (7th) Business Day that such delivery of
such new Warrant is not timely effected an amount equal to 0.5% of the product
of (A) the number of shares of Common Stock represented by the portion of this
Warrant which is not being exercised and (B) the average of the Closing Sale
Prices of the Common Stock for the three consecutive trading days immediately
preceding the last possible date which the Company could have issued such
Warrant to the holder without violating this Section 2.
(f) If, despite the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, the Warrant Shares to
be issued are not registered and available for resale pursuant to a registration
statement (including during an Allowable Grace Period (as defined in the
Registration Rights Agreement)) in accordance with the Registration Rights
Agreement, then notwithstanding anything contained herein to the contrary, the
holder of this Warrant may, at its election exercised in its sole discretion,
exercise this Warrant in whole or in part and, in lieu of making the cash
payment otherwise contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive upon such
exercise the "Net Number" of shares of Common Stock determined according to the
following formula (a "CASHLESS EXERCISE"):
Net Number = (A X B) - (A X C)
-----------------
B
For purposes of the foregoing formula:
A= the total number of shares with respect to which
this Warrant is then being exercised.
B= the Closing Sale Price of the Common Stock on the
date immediately preceding the date of the
subscription notice.
C= the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such
exercise.
Section 3. COVENANTS AS TO COMMON STOCK. The Company hereby covenants
and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution
for or replacement of this Warrant will upon issuance be, duly authorized and
validly issued.
(b) All Warrant Shares which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.
(c) During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.
(d) The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to
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time issuable upon the exercise of this Warrant; and the Company shall so list
on each national securities exchange or automated quotation system, as the case
may be, and shall maintain such listing of, any other shares of capital stock of
the Company issuable upon the exercise of this Warrant if and so long as any
shares of the same class shall be listed on such national securities exchange or
automated quotation system.
(e) The Company will not, by amendment of its Articles of
Incorporation 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
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. No impairment of the designations, preferences and rights of the
Preferred Shares contained in the Company's Articles of Amendment or any waiver
thereof which has an adverse effect on the rights granted hereunder shall be
given effect until the Company has taken appropriate action (satisfactory to the
holders of Preferred Share Warrants representing at least two-thirds (2/3) of
the shares of Common Stock issuable upon the exercise of such Preferred Share
Warrants then outstanding) to avoid such adverse effect with respect to 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 Warrant 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.
Section 4. TAXES. The Company shall pay any and all taxes which may be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company. Notwithstanding this
Section 5, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.
Section 6. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any of
the Warrant Shares for any minimum or other specific term and reserves the right
to dispose of this Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. The holder of this Warrant further represents, by acceptance hereof, that,
as of this date, such holder is an "accredited investor" as such term is defined
in Rule 501(a)(1) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "ACCREDITED INVESTOR"). Upon exercise of
this Warrant, other than pursuant to a Cashless Exercise, the holder shall, if
requested by
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the Company, confirm in writing, in a form satisfactory to the Company, that the
Warrant Shares so purchased are being acquired solely for the holder's own
account and not as a nominee for any other party, for investment, and not with a
view toward distribution or resale and that such holder is an Accredited
Investor. If such holder cannot make such representations because they would be
factually incorrect, it shall be a condition to such holder's exercise of this
Warrant, other than pursuant to a Cashless Exercise, that the Company receive
such other representations as the Company considers reasonably necessary to
assure the Company that the issuance of its securities upon exercise of this
Warrant shall not violate any United States or state securities laws. The
Company shall not be penalized or disadvantaged by a holder's inability to
exercise this Warrant due to such holder's inability to make the required
representations in connection with the exercise of this Warrant, other than
pursuant to a Cashless Exercise.
Section 7. OWNERSHIP AND TRANSFER.
(a) The Company shall maintain at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant and the rights granted hereunder shall be
assignable by the holder hereof without the consent of the Company.
(c) The Company is obligated to register the Warrant Shares
for resale under the Securities Act pursuant to the Registration Rights
Agreement and the initial holder of this Warrant (and certain assignees thereof)
is entitled to the registration rights in respect of the Warrant Shares as set
forth in the Registration Rights Agreement.
Section 8. ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES.
The Warrant Exercise Price and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be adjusted from time to time as follows:
(a) ADJUSTMENT OF WARRANT EXERCISE PRICE AND NUMBER OF SHARES
UPON ISSUANCE OF COMMON STOCK. If and whenever on or after the date of issuance
of this Warrant, the Company issues or sells, or is deemed to have issued or
sold, any shares of Common Stock (other than shares of Common Stock which are
issued or deemed to have been issued by the Company in connection with an
Approved Stock Plan or upon the issuance, exercise or conversion of the Other
Securities) for a consideration per share less than a price (the "APPLICABLE
PRICE") equal to the Warrant Exercise Price in effect immediately prior to such
issuance or sale, then immediately after such issue or sale the Warrant Exercise
Price then in effect shall be reduced to an amount equal to such consideration
per share. Upon each such adjustment of the Warrant Exercise Price hereunder,
the number of shares of Common Stock acquirable upon exercise of this Warrant
shall be adjusted to the number of shares determined by multiplying the Warrant
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock acquirable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the Warrant
Exercise Price resulting from such adjustment.
(b) EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Warrant Exercise Price under Section 8(a)
above, the following shall be applicable:
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<PAGE>
(i) ISSUANCE OF OPTIONS. If the Company in any manner
grants any Options and the lowest price per share for which one share of Common
Stock is issuable upon the exercise of any such Option or upon conversion or
exchange of any Convertible Securities issuable upon exercise of any such Option
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the granting or sale of such Option for such price per share. For
purposes of this Section 8(b)(i), the "lowest price per share for which one
share of Common Stock is issuable upon exercise of such Options or upon
conversion or exchange of such Convertible Securities" shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to any one share of Common Stock upon the granting or sale
of the Option, upon exercise of the Option and upon conversion or exchange of
any Convertible Security issuable upon exercise of such Option. No further
adjustment of the Warrant Exercise Price shall be made upon the actual issuance
of such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities and the lowest
price per share for which one share of Common Stock is issuable upon the
conversion or exchange thereof is less than the Applicable Price, then such
share of Common Stock shall be deemed to be outstanding and to have been issued
and sold by the Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section 8(b)(ii),
the "lowest price per share for which one share of Common Stock is issuable upon
the conversion or exchange" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to one
share of Common Stock upon the issuance or sale of the Convertible Security and
upon conversion or exchange of such Convertible Security. No further adjustment
of the Warrant Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issue or sale of such Convertible Securities is made upon exercise of
any Options for which adjustment of the Warrant Exercise Price had been or is to
be made pursuant to other provisions of this Section 8(b), no further adjustment
of the Warrant Exercise Price shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR RATE OF CONVERSION.
If the purchase price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock changes at any time, the Warrant Exercise Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities 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 and the number of shares of Common Stock
acquirable hereunder shall be correspondingly readjusted. For purposes of this
Section 8(b)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change. No adjustment pursuant to this Section 8(b) shall be made if such
adjustment would result in an increase of the Warrant Exercise Price then in
effect.
(c) EFFECT ON WARRANT EXERCISE PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Warrant Exercise Price under Sections 8(a)
and 8(b), 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. If any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash, the amount of such consideration received
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<PAGE>
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 Market Price of such securities on the date
of receipt of such securities. If 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 Preferred Share Warrants representing
at least two-thirds (2/3) of the shares of Common Stock obtainable upon exercise
of the Preferred Share 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 five Business Days after the tenth (10th) day following the
Valuation Event by an independent, reputable appraiser jointly selected by the
Company and the holders of Preferred Share Warrants representing at least
two-thirds (2/3) of the shares of Common Stock obtainable upon exercise of the
Preferred Share Warrants then outstanding. The determination of such appraiser
shall be final and binding upon all parties and the fees and expenses of such
appraiser shall be borne jointly by the Company and the holders of Preferred
Share Warrants.
(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 within three (3) Business Days of receiving a request that the
Company's Board of Directors allocate the consideration received in such
integrated transaction to have been issued for a consideration of $0.01 unless,
within such three (3) Business Day period, the Company's Board of Directors has
provided written notice to each holder of the Preferred Share Warrants that the
Company has allocated such consideration.
(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 unless such shares are
cancelled.
(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.
(d) ADJUSTMENT OF WARRANT EXERCISE PRICE UPON SUBDIVISION OR
COMBINATION OF COMMON STOCK. If the Company at any time after the date of
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, any Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased. If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, any Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased. Any adjustment under this Section 8(d) shall become effective at the
close of business on the date the subdivision or combination becomes effective.
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<PAGE>
(e) DISTRIBUTION OF ASSETS. If the Company shall declare or
make any dividend or other distribution of its assets (or rights to acquire its
assets) to holders of Common Stock, by way of return of capital or otherwise
(including, without limitation, any distribution of cash, stock or other
securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement or other similar transaction) (a
"DISTRIBUTION"), at any time after the issuance of this Warrant, then, in each
such case:
(i) any Warrant Exercise Price in effect immediately
prior to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution shall be reduced,
effective as of the close of business on such record date, to a price determined
by multiplying such Warrant Exercise Price by a fraction of which (A) the
numerator shall be the Closing Sale Price of the Common Stock on the trading day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company's Board of Directors) applicable to one
share of Common Stock, and (B) the denominator shall be the Closing Sale Price
of the Common Stock on the trading day immediately preceding such record date;
and
(ii) either (A) the number of Warrant Shares
obtainable upon exercise of this Warrant shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination of
holders of Common Stock entitled to receive the Distribution multiplied by the
reciprocal of the fraction set forth in the immediately preceding clause (i), or
(B) in the event that the Distribution is of common stock of a company whose
common stock is traded on a national securities exchange or a national automated
quotation system, then the holder of this Warrant shall receive an additional
warrant to purchase Common Stock, the terms of which shall be identical to those
of this Warrant, except that such warrant shall be exercisable into the amount
of the assets that would have been payable to the holder of this Warrant
pursuant to the Distribution had the holder exercised this Warrant immediately
prior to such record date and with an exercise price equal to the amount by
which the exercise price of this Warrant was decreased with respect to the
Distribution pursuant to the terms of the immediately preceding clause (i).
(f) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Warrant Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Preferred Share Warrants; provided that no such adjustment pursuant to this
Section 8(f) will increase the Warrant Exercise Price or decrease the number of
shares of Common Stock obtainable as otherwise determined pursuant to this
Section 8.
(g) ONE YEAR ADJUSTMENT OF WARRANT EXERCISE PRICE. If on the
first day after the thirtieth trading day after the date which is one (1) year
after the Issuance Date (the "ONE YEAR ADJUSTMENT DATE") the arithmetic average
of the Weighted Average Prices of the Common Stock on the 30 consecutive trading
days immediately preceding such date (appropriately adjusted for any stock
dividend, stock split or similar transaction during the pricing period) (the
"ONE YEAR ADJUSTED PRICE") is less than the Warrant Exercise Price in effect on
the date immediately preceding the One Year Adjustment Date, then from and after
the One Year Adjustment Date the Warrant Exercise Price shall be equal to the
One Year Adjusted Price of the Common Stock on the One Year Adjustment Date,
subject to further adjustment as provided in this Warrant. Upon such adjustment
of the Warrant Exercise Price hereunder, the number of shares of Common Stock
acquirable upon exercise of this Warrant shall be adjusted to the number of
shares determined by multiplying the Warrant Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Warrant Exercise Price resulting from
such adjustment.
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<PAGE>
(h) NOTICES.
(i) Immediately upon any adjustment of a Warrant
Exercise Price, the Company will give written notice thereof to the holder of
this Warrant, setting forth in reasonable detail, and certifying, the
calculation of such adjustment.
(ii) The Company will give written notice to the
holder of this Warrant at least ten (10) days prior to the date on which the
Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any pro rata
subscription offer to holders of Common Stock or (C) for determining rights to
vote with respect to any Organic Change (as defined below), dissolution or
liquidation, provided that such information shall be made known to the public
prior to or in conjunction with such notice being provided to such holder.
(iii) The Company will also give written notice to
the holder of this Warrant at least ten (10) days prior to the date on which any
Organic Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.
Section 9. PURCHASE RIGHTS; REORGANIZATION, RECLASSIFICATION,
CONSOLIDATION, MERGER OR SALE.
(a) In addition to any adjustments pursuant to Section 8
above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"PURCHASE RIGHTS"), then the holder of this Warrant will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction in each case which is effected in such a
way that holders of Common Stock are entitled to receive (either directly or
upon subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "ORGANIC CHANGE." Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "ACQUIRING ENTITY") a written agreement (in form and substance
reasonably satisfactory to the holders of Preferred Share Warrants representing
at least two-thirds (2/3) of the shares of Common Stock obtainable upon exercise
of the Preferred Share Warrants then outstanding) to deliver to each holder of
Preferred Share Warrants in exchange for such Warrants, a security of the
Acquiring Entity evidenced by a written instrument substantially similar in form
and substance to this Warrant and reasonably satisfactory to the holders of
two-thirds (2/3) of the Preferred Share Warrants then outstanding (including, an
adjusted warrant exercise price equal to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and exercisable
for a corresponding number of shares of Common Stock acquirable and receivable
upon exercise of the Preferred Share Warrants (without regard to any limitations
or exercise), if the value so reflected is less than any Warrant Exercise Price
in effect immediately prior to such consolidation, merger or sale). Prior to the
consummation of any other Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the holders of
Preferred Share Warrants representing at least two-thirds (2/3) of the shares of
Common Stock obtainable upon exercise of the Preferred Share Warrants then
outstanding) to insure that each of the
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<PAGE>
holders of the Preferred Share Warrants will thereafter have the right to
acquire and receive in lieu of or in addition to (as the case may be) the shares
of Common Stock immediately theretofore acquirable and receivable upon the
exercise of such holder's Preferred Share Warrants (without regard to any
limitations or exercise), such shares of stock, securities or assets that would
have been issued or payable in such Organic Change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the exercise of such holder's Warrant as of the
date of such Organic Change (without taking into account any limitations or
restrictions on the exerciseability of this Warrant).
Section 10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on
receipt of an indemnification undertaking (or, in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section 11. NOTICE. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); 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:
ProxyMed, Inc.
2555 Davie Road, Suite 110
Fort Lauderdale, Florida 33317
Telephone: (954) 473-1001
Facsimile: (954) 473-0620
Attention: Chief Executive Officer and Chief Legal Officer
With a copy to:
Greenberg Traurig
Metlife Building
200 Park Avenue, 15th Floor
New York, New York 10166
Telephone: 212-801-9200
Facsimile: 212-801-6400
Attention: Spencer G. Feldman, Esq.
If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Buyers to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant. Each party shall provide five days'
prior written notice to the other party of any change in address or facsimile
number. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
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<PAGE>
Section 12. DATE. The date of this Warrant is December __, 1999. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7(c) shall continue in full force
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.
Section 13. AMENDMENT AND WAIVER. Except as otherwise provided herein,
the provisions of the Preferred Share Warrants may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the written
consent of the holders of Preferred Share Warrants representing at least
two-thirds (2/3) of the shares of Common Stock obtainable upon exercise of the
Preferred Share Warrants then outstanding; provided that no such action may
increase the Warrant Exercise Price of the Preferred Share Warrants or decrease
the number of shares or class of stock obtainable upon exercise of any Preferred
Share Warrants without the written consent of the holder of such Preferred Share
Warrant.
Section 14. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Florida shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York, or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
___________________, its ____________________________, as of the ___ day of
____________, ______.
PROXYMED, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
<PAGE>
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
PROXYMED, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Common Stock ("WARRANT SHARES") of ProxyMed,
Inc., a Florida corporation (the "COMPANY"), evidenced by the attached Warrant
(the "WARRANT"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of
the Warrant Exercise Price shall be made as:
_____ a "CASH EXERCISE" with respect to _____ Warrant Shares; and/or
_____ a "CASHLESS EXERCISE" with respect to _____ Warrant Shares
(to the extent permitted by the terms of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the sum of $___________________ to
the Company in accordance with the terms of the Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
________________________________
Name of Registered Holder
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT B TO WARRANT
FORM OF WARRANT POWER
FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of ProxyMed, Inc., a Florida
corporation, represented by warrant certificate no. _____, standing in the name
of the undersigned on the books of said corporation. The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.
Dated: _________, ____
_________________________________________
By:______________________________________
Its:_____________________________________
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of December
23, 1999, by and among ProxyMed, Inc., a Florida corporation, with headquarters
located at 2555 Davie Road, Suite 110, Fort Lauderdale, Florida 33317 (the
"COMPANY"), and the undersigned Buyers (individually a "BUYER" and collectively
the "BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and among the parties hereto (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (i) 15,000 shares
of the Company's Series B Convertible Preferred Stock, par value $0.01 per share
(the "PREFERRED SHARES"), which will be convertible into shares (as converted,
the "CONVERSION SHARES") of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK"), in accordance with the terms of the Company's
Articles of Amendment of its Articles of Incorporation for the Series B
Convertible Preferred Stock (the "ARTICLES OF AMENDMENT"), and (ii) warrants to
purchase shares of Common Stock (the "WARRANTS" and, as exercised, the "WARRANT
SHARES").
B. To induce the Buyers to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 ACT"), and
applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9.
b. "PERSON" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a government or any department or agency thereof.
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for the offering for
resale of securities on a continuous or delayed basis ("RULE 415"), and the
declaration
<PAGE>
or ordering of effectiveness of such Registration Statement(s) by the United
States Securities and Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means (i) the Conversion Shares
issued or issuable upon conversion of the Preferred Shares, (ii) the Dividend
Shares (as defined in the Articles of Amendment) relating to the Preferred
Shares, (iii) Warrant Shares issued or issuable upon exercise of the Warrants,
and (iv) any shares of capital stock issued or issuable with respect to the
Conversion Shares, the Preferred Shares, the Dividend Shares relating to the
Preferred Shares, the Warrant Shares or the Warrants as a result of any stock
split, stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversions of the Preferred Shares or
exercises of Warrants.
e. "REGISTRATION STATEMENT" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Registrable Securities.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, as
soon as practicable, but in no event later than the date which is 40 days after
the Closing Date (as defined in the Securities Purchase Agreement) (the "FILING
DEADLINE"), file with the SEC a Registration Statement or Registration
Statements (as necessary) on Form S-3 covering the resale of all of the
Registrable Securities. In the event that Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available for such a
registration, subject to the provisions of Section 2(d). Any first Registration
Statement prepared pursuant hereto shall register for resale at least that
number of shares of Common Stock equal to the sum of (y) the product of (i) 2
and (ii) the number of Conversion Shares issuable upon conversion of the
Preferred Shares (without regard to any limitations on conversions) as of the
date immediately preceding the date the Registration Statement is initially
filed with the SEC, subject to adjustment as provided in Section 3(b), plus (z)
100% of the number of Warrant Shares issuable upon exercise of the Warrants
(without regard to any limitations on exercise) as of the date immediately
preceding the date the Registration Statement is initially filed with the SEC,
subject to adjustment as provided in Section 3(b). The Company shall cause such
Registration Statement to be declared effective by the SEC as soon as possible,
but in no event later than the date which is 120 days after the Closing Date
(the "EFFECTIVENESS DEADLINE").
b. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. In the event that an Investor sells or otherwise transfers any of such
Investor's Registrable Securities, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement.
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c. LEGAL COUNSEL. Subject to Section 5 hereof, the Buyers
holding a majority of the Registrable Securities shall have the right to select
one legal counsel to review and oversee any offering pursuant to this Section 2
("LEGAL COUNSEL"), which shall be Katten Muchin & Zavis or such other counsel as
thereafter designated by the holders of a majority of Registrable Securities.
The Company shall reasonably cooperate with Legal Counsel in performing the
Company's obligations under this Agreement.
d. INELIGIBILITY FOR FORM S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form and (ii) undertake to register the resale
of the Registrable Securities on Form S-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of the Registration
Statement then in effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by the SEC.
e. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN
EFFECTIVENESS OF REGISTRATION STATEMENT. If (i) a Registration Statement
covering all the Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the SEC on or before the
applicable Filing Deadline or (B) declared effective by the SEC on or before the
applicable Effectiveness Deadline or (ii) on any day after the Registration
Statement has been declared effective by the SEC, sales of all the Registrable
Securities required to be included on such 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, to register sufficient shares of Common Stock), 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 underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each holder of Preferred Shares an amount in cash per
Preferred Share held equal to the product of (i) $1,000 multiplied by (ii) the
sum of (A) .02, if the Registration Statement is not filed by the Filing
Deadline, plus (B) .02, if the Registration Statement is not declared effective
by the Effectiveness Deadline, plus, (C) the product of (I) .00067 multiplied by
(II) the sum of (x) the number of days after the Filing Deadline that such
Registration Statement is not filed with the SEC, plus (y) the number of days
after the Effectiveness Deadline that the Registration Statement is not declared
effective by the SEC, plus (z) the number of days after the Registration
Statement has been declared effective by the SEC that such Registration
Statement is not available for the sale of at least all the Registrable
Securities required to be included on such Registration Statement. The payments
to which a holder shall be entitled pursuant to this Section 2(e) are referred
to herein as "REGISTRATION DELAY PAYMENTS." Registration Delay Payments shall be
paid on the earlier of (I) the last day of the calendar month during which such
Registration Delay Payments are incurred and (II) the third business day after
the event or failure giving rise to the Registration Delayed Payments is cured.
In the event the Company fails to make Registration Delay Payments in a timely
manner, such Registration Delay Payments shall bear interest at the rate of 2.0%
per month (prorated for partial months) until paid in full.
f. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) is insufficient to cover all of the Registrable Securities which
such Registration Statement is required to cover or an Investor's
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allocated portion of the Registrable Securities pursuant to Section 2(b), the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so as
to cover at least 200% of the Registrable Securities (based on the market price
of the Common Stock on the trading day immediately preceding the date of filing
of such amendment or new Registration Statement), in each case, as soon as
practicable, but in any event not later than fifteen (15) business days after
the necessity therefor arises. The Company shall cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if the number of Registrable Securities
issued or issuable upon conversion of the Preferred Shares and exercise of the
Warrants covered by such Registration Statement is greater than the sum of (a)
the quotient determined by dividing (i) the number of shares of Common Stock
available for resale under the Registration Statement to cover shares issued or
issuable upon conversion of the Preferred Shares by (ii) 1.3 and (b) the number
of shares of Common Stock available for resale under the Registration Statement
to cover shares issued or issuable upon exercise of the Warrants. For purposes
of the calculation set forth in the foregoing sentence, any restrictions on the
convertibility of the Preferred Shares or exercise of the Warrants shall be
disregarded and such calculation shall assume that the Preferred Shares are then
convertible into, and the Warrants are then exercisable for, shares of Common
Stock at the then prevailing Conversion Rate (as defined in the Articles of
Amendment) or Exercise Price (as defined in the Warrants), respectively.
3. RELATED OBLIGATIONS.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a) or 2(f), the Company will effect
the registration of the Registrable Securities in accordance with the intended
method of disposition thereof and, pursuant thereto, the Company shall have the
following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the applicable Registrable Securities
(but in no event later than the Filing Deadline) and cause such Registration
Statement relating to the Registrable Securities to become effective as soon as
practicable after such filing (but in no event later than the applicable
Effectiveness Deadline). The Company shall keep each Registration Statement
effective pursuant to Rule 415 at all times until the earlier of (i) the date as
of which the Investors may sell all of the Registrable Securities covered by
such Registration Statement without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) or (ii) the date on which
the Investors shall have sold all the Registrable Securities covered by such
Registration Statement (the "REGISTRATION PERIOD"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading. The Company shall submit to the SEC, within three business days
after the Company learns that no review of a particular Registration Statement
will be made by the staff of the SEC or that the staff has no further comments
on the Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
48 hours after the submission of such request.
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b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the 1933 Act, as may be necessary to keep such Registration
Statement effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 ACT"), the Company shall have incorporated such
report by reference into the Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement the Registration Statement.
c. The Company shall (a) permit Legal Counsel to review and
comment upon those sections of (i) the Registration Statement at least five (5)
business days prior to its filing with the SEC, and (ii) all other Registration
Statements and all amendments and supplements to all Registration Statements,
which are applicable to the Buyers (except for Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any similar or
successor report and registration statements on Form S-8) at least four (4)
business days prior to the their filing with the SEC and (b) not file any
document in a form to which Legal Counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
Legal Counsel, which consent shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) any correspondence from the
SEC or the staff of the SEC to the Company or its representatives relating to
any Registration Statement, (ii) promptly after the same is prepared and filed
with the SEC, one copy of any Registration Statement and any amendment(s)
thereto, including financial statements and schedules and all exhibits and (iii)
upon the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel in performing
the Company's obligations pursuant to this Section 3.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, and all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
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e. The Company shall (i) register and qualify, unless an
exemption from registration and qualification applies, the Registrable
Securities covered by a Registration Statement under all jurisdiction's
securities or "blue sky" laws in the United States, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change in the Company's Certificate of Incorporation or
by-laws that the Company's board of directors determines in good faith to be
contrary to the best interests of the Company and its shareholders, (x) qualify
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(e), (y) subject itself to general taxation in any
such jurisdiction, or (z) file a general consent to service of process in any
such jurisdiction. The Company shall promptly notify Legal Counsel and each
Investor who holds Registrable Securities of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification
of any of the Registrable Securities for sale under the securities or "blue sky"
laws of any jurisdiction in the United States or its receipt of actual notice of
the initiation or threat of any proceeding for such purpose.
f. As promptly as practicable after becoming aware of such
event or development, the Company shall notify Legal Counsel and each Investor
in writing of the happening of any event as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission 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 (provided that in no
event shall such notice contain any material, nonpublic information), and
promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of such
supplement or amendment to Legal Counsel and each Investor (or such other number
of copies as Legal Counsel or such Investor may reasonably request). The Company
shall also promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile on the same day of such effectiveness),
(ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
g. The Company shall prevent the issuance of any stop order or
other suspension of effectiveness of a Registration Statement, or the suspension
of the qualification of any of the Registrable Securities for sale in any
jurisdiction, however, if such an order or suspension is issued, the Company
shall obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
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h. At the reasonable request of any Investor and at the
expense of such Investor, the Company shall furnish to such Investor, on the
date of the effectiveness of the Registration Statement and thereafter from time
to time on such dates as an Investor may reasonably request (i) a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the Investors.
i. The Company shall make available for inspection, at the
expense of the Investor acting pursuant to this Section 3(i), by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
retained by the Investors (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree, and each Investor hereby
agrees, to hold in strict confidence and shall not make any disclosure (except
to an Investor) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements with the Company with respect
thereto, substantially in the form of this Section 3(i). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor 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 final,
non-appealable order from a court or governmental body of competent
jurisdiction, (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement, or (v) such Investor consents to the form and content of any such
disclosure. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
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k. The Company shall either (i) cause all the Registrable
Securities covered by a Registration Statement to be listed on each securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) secure designation and
quotation of all the Registrable Securities covered by the Registration
Statement on the Nasdaq National Market or The New York Stock Exchange, Inc.,
or, if the Company is unsuccessful in satisfying the preceding clause (i) or
(ii), the Company shall secure the inclusion for quotation on The American Stock
Exchange, Inc., or The Nasdaq SmallCap Market, for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered, and to the extent applicable, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.
m. The Company shall provide a transfer agent and registrar of
all such Registrable Securities not later than the effective date of such
Registration Statement.
n. If requested by an Investor, the Company shall (i) as soon
as practicable incorporate in a prospectus supplement or post-effective
amendment such information as an Investor requests to be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any
other terms of the offering of the Registrable Securities to be sold in such
offering; (ii) as soon as practicable make all required filings of such
prospectus supplement or post-effective amendment after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if reasonably requested by an Investor of such Registrable Securities.
o. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
p. The Company shall make generally available to its security
holders as soon as practical, but not later than 90 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement, provided that the
Company shall be deemed to satisfy its obligations under this Section 3(p) if it
timely makes all required filings under the 1934 Act and does not change its
fiscal year.
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q. The Company shall otherwise comply with all applicable
rules and regulations of the SEC in connection with any registration hereunder.
r. Within two (2) business days after a Registration Statement
which covers applicable Registrable Securities is ordered effective by the SEC,
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 Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as EXHIBIT A.
s. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
t. Notwithstanding anything to the contrary in Section 3(f),
at any time after the applicable Registration Statement has been declared
effective by the SEC, the Company may delay the disclosure of material
non-public information concerning the Company the disclosure of which at the
time is not, in the good faith opinion of the Board of Directors of the Company
and its counsel, in the best interest of the Company and, in the opinion of
counsel to the Company, otherwise required (a "GRACE PERIOD"); provided, that
the Company shall promptly (i) notify the Investors in writing of the existence
of material non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material
non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which the
Grace Period ends; and, provided further, that no Grace Period shall exceed 15
consecutive days and during any 365 day period such Grace Periods shall not
exceed an aggregate of 30 days (an "ALLOWABLE GRACE PERIOD"). For purposes of
determining the length of a Grace Period above, the Grace Period shall begin on
and include the date the holders receive the notice referred to in clause (i)
and shall end on and include the later of the date the holders receive the
notice referred to in clause (ii) and the date referred to in such notice. The
provisions of 3(g) hereof shall not be applicable during the period of any
Allowable Grace Period. Upon expiration of the Grace Period, the Company shall
again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material non-public information is
no longer applicable.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) business days prior to the first
anticipated filing date of a Registration Statement, the Company shall notify
each Investor in writing of the information the Company reasonably requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in such Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request. Each Investor shall use its best efforts
to respond to the Company's written request for information within seven (7)
business days of such Investor's receipt of such request. If any delay in the
filing of the Registration Statement results solely from an Investor's failure
to respond within such period, then solely with respect to such Investor such
delay shall not constitute a default under or breach of this Agreement by the
Company and no penalties
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shall accrue under this Agreement, the Securities Purchase Agreement or the
Articles of Amendment for the number of days caused by such delay.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g),
Section 3(t) or the first sentence of Section 3(f), such Investor will
immediately discontinue disposition of Registrable Securities pursuant to any
Registration Statement(s) covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of
notice that no supplement or amendment is required or that a Grace Period has
ended. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g), Section 3(t) or the first sentence of Section 3(f) and for which
the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees
shall be paid by the Company. In addition, the Company shall reimburse the
Investors for the reasonable fees and disbursements of Legal Counsel in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 of this Agreement which amount shall be limited to $10,000.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the Securities Exchange Act of 1934, as amended (the "1934 ACT") (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts
paid in settlement or expenses, joint or several, (collectively, "CLAIMS")
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether
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or not an indemnified party is or may be a party thereto ("INDEMNIFIED
DAMAGES"), to which any of them may become subject insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("BLUE SKY FILING"), or the omission
or alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject to Section
6(c), the Company shall reimburse the Investors and each such controlling
person, promptly as such expenses are incurred and are due and payable, for any
legal fees or disbursements or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified
Person arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto; (ii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company, if such prospectus was timely made available by the Company
pursuant to Section 3(d); and (iii) shall not apply to amounts paid in
settlement of any Claim, if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) with respect to any
prospectus shall not inure to the benefit of an Indemnified Person if the untrue
statement or omission of material fact contained in the prospectus was corrected
in the prospectus and a new prospectus was delivered to each Investor prior to
such Investor's first use of the prospectus.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each an "INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to which
any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such
11
<PAGE>
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding a majority in interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense of any
such action or Claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the
12
<PAGE>
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.
d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in amount to the net amount of proceeds received by
such seller from the sale of such Registrable Securities pursuant to such
Registration Statement.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required by the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents as may be necessary
to qualify
13
<PAGE>
under Rule 144, and (iii) such other information as may be reasonably requested
to permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of
Registrable Securities if: (i) the Investor 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) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein; and (v)
such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least two-thirds (2/3) of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of this
Agreement unless the same consideration also is offered to all of the parties to
this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
b. 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); 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:
14
<PAGE>
ProxyMed, Inc.
2555 Davie Road, Suite 110
Fort Lauderdale, Florida 33317
Telephone: (954) 473-1001
Facsimile: (954) 473-0620
Attention: Chief Executive Officer and Chief Legal Officer
With a copy to:
Greenberg Traurig
Metlife Building
200 Park Avenue, 15th Floor
New York, New York 10166
Telephone: 212-801-9200
Facsimile: 212-801-6400
Attention: Spencer G. Feldman, Esq.
If to Legal Counsel:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Telephone: 312-902-5200
Facsimile: 312-902-1061
Attention: Robert J. Brantman, Esq.
If to a Buyer, to its address and facsimile number on the Schedule of Buyers
attached hereto, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers or to such other address and/or facsimile number and/or to
the attention of such other person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a
nationally recognized overnight delivery service in accordance with clause (i),
(ii) or (iii) above, respectively.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction
15
<PAGE>
other than the State of New York. Each party hereby irrevocably submits to the
non-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 brought
in an inconvenient forum or that the venue of 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.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. 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.
e. This Agreement, the Securities Purchase Agreement, the
Warrants and the Articles of Amendment constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement, the Securities Purchase
Agreement, the Warrants and the Articles of Amendment supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. 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.
j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by Investors holding a majority of the Registrable
Securities, determined as if all of the Preferred Shares and the Warrants
16
<PAGE>
then outstanding have been converted into or exercised for Registrable
Securities without regard to any limitations on conversion of the Preferred
Shares or exercise of the Warrants.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
l. 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.
* * * * *
17
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYER:
PROXYMED, INC. HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By: /s/ Bennett Marks By: /s/ James F. O'Brien, Jr.
-------------------------- ---------------------------
Name: Bennett Marks Name: James F. O'Brien, Jr.
- ------------------------------ Its: Managing Member
Its: EVP-Finance
-------------------------
FISHER CAPITAL LTD.
By: /s/ Daniel J. Hopkins
----------------------------
Name: Daniel J. Hopkins
Its: Authorized Signatory
WINGATE CAPITAL LTD.
By: /s/ Daniel J. Hopkins
-----------------------------
Name: Daniel J. Hopkins
Its: Authorized Signatory
18
<PAGE>
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT - P. 2 OF 2]
LEONARDO, L.P.
By: ANGELO, GORDON & CO., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
---------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
ROYAL BANK OF CANADA
By: RBC DOMINION SECURITIES
CORPORATION
Its: Agent
By: /s/ Mark A. Standish
---------------------------------------
Name: Mark A. Standish
-------------------------------------
Its: Vice President & Director
--------------------------------------
AND
By: /s/ Roger A. Blissett
---------------------------------------
Name: Roger A. Blissett
-------------------------------------
Its: Vice President, Deputy General Counsel
--------------------------------------
19
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
ATTN:_________________________
Re: PROXYMED, INC.
Ladies and Gentlemen:
We are counsel to ProxyMed, Inc., a Florida 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 shares of its Series B
Convertible Preferred Stock, par value $0.01 per share (the "PREFERRED SHARES")
convertible into shares of the Company's common stock, par value $0.001 per
share (the "COMMON STOCK"), and the related Warrants (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
Preferred Shares and upon 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 ____________ ____, 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]
By:______________________________________________
cc: [LIST NAMES OF HOLDERS]
EXHIBIT 10.24
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of December
23, 1999, by and among ProxyMed, Inc., a Florida corporation, with headquarters
located at 2555 Davie Road, Suite 110, Fort Lauderdale, Florida 33317 (the
"COMPANY"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized a new series of its Preferred Stock, par
value $0.01 per share, which shall be called the Company's Series B Convertible
Preferred Stock (the "PREFERRED STOCK"), which shall be convertible into shares
of the Company's common stock, par value $0.001 per share (the "COMMON STOCK")
(as converted, the "CONVERSION SHARES"), in accordance with the terms of the
Company's Articles of Amendment to the Company's Articles of Incorporation in
the form attached hereto as EXHIBIT A (the "ARTICLES OF AMENDMENT");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, (i) an aggregate of 15,000 shares of the Preferred Stock (the
"PREFERRED SHARES") in the respective amounts set forth opposite each Buyer's
name on the Schedule of Buyers, and (ii) warrants (the "WARRANTS") to purchase
up to 53.333 shares of Common Stock (as exercised collectively, the "WARRANT
SHARES") for each Preferred Share purchased by such Buyer on the Closing Date
(as defined below) (in the respective amounts set forth opposite each Buyer's
name on the Schedule of Buyers), such Warrants to be substantially in the form
attached hereto as EXHIBIT B;
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as EXHIBIT C (the "REGISTRATION RIGHTS
AGREEMENT") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. PURCHASE OF PREFERRED SHARES. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7, the Company shall issue
and sell to the Buyers and the Buyers severally agree to purchase from the
Company 15,000 Preferred Shares, along with the related Warrants (the
"CLOSING"). The purchase price (the "PURCHASE PRICE") of each Preferred Share
and the related Warrants at the Closing shall be an aggregate of $1,000.
"BUSINESS DAY" means any day other than Saturday, Sunday or other day on which
commercial banks in the city of New York are authorized or required by law to
remain closed.
b. THE CLOSING DATE. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m., Eastern Time, within one (1) Business Day
following the date hereof, subject to satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 6 and 7 (or such later date as is mutually
agreed to by the Company and the
<PAGE>
Buyer). The Closing shall occur on the Closing Date at the offices of Katten
Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois
60661-3693.
c. FORM OF PAYMENT. On the Closing Date (i) each Buyer shall
pay the Purchase Price to the Company for the Preferred Shares and the related
Warrants to be issued and sold to such Buyer by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer stock certificates (in the
denominations as such Buyer shall request) (the "STOCK CERTIFICATES")
representing such number of the Preferred Shares which such Buyer is then
purchasing along with the related Warrants, duly executed on behalf of the
Company and registered in the name of such Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. INVESTMENT PURPOSE. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred Shares,
will acquire the Conversion Shares then issuable and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares issuable upon exercise thereof (the
Preferred Shares, the Warrants, the Conversion Shares and the Warrant Shares,
collectively are referred to herein as the "SECURITIES"), for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. INFORMATION. Such Buyer 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 Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
2
<PAGE>
f. TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably satisfactory to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("RULE 144"); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder. Notwithstanding the
foregoing, the Securities may be pledged in connection with a bona fide margin
account or other loan secured by the Securities.
g. LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and the Warrants and, until
such time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, SUCH SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in a form reasonably satisfactory to the Company, to the
effect that a public sale, assignment or transfer of such Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that such Securities can be sold pursuant to
Rule 144. Such Buyer acknowledges, covenants and agrees to sell Securities
represented by a certificate(s) from which the legend has been removed, only
pursuant to (i) a registration statement effective under the 1933 Act, or (ii)
advice of counsel to such holder that such sale is exempt from the registration
requirements of Section 5 of the 1933 Act.
h. AUTHORIZATION; ENFORCEMENT. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements
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of such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. RESIDENCY. Such Buyer is a resident of that jurisdiction
specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns 10% of the capital stock or holds an
equity or similar interest) are corporations duly organized and validly existing
in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authorization to own
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a Material Adverse Effect. As used in this
Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse effect on the
business, properties, assets, operations, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
below) or the Articles of Amendment. A complete list of entities in which the
Company, directly or indirectly, owns capital stock or holds an equity or
similar interest is set forth in SCHEDULE 3(A).
b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 5), the Warrants and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "TRANSACTION DOCUMENTS"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the execution and
filing of the Articles of Amendment by the Company and the consummation by it of
the transactions contemplated hereby and thereby, including without limitation
the issuance of the Preferred Shares and the Warrants and the reservation for
issuance and the issuance of the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise thereof, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, (iii) the
Transaction Documents have been duly executed and delivered by the Company, and
(iv) this Agreement and the Registration Rights Agreement and, when executed and
delivered, the other Transaction Documents, constitute the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
c. CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 50,000,000 shares of Common Stock, of which as of the date
hereof 18,316,402 shares are issued and outstanding, 2,682,700 shares are
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and 1,124,727 shares are issuable and reserved for issuance
pursuant to securities (other than the Preferred Shares and the Warrants)
exercisable
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or exchangeable for, or convertible into, shares of Common Stock and (ii)
2,000,000 shares of preferred stock, of which as of the date hereof, no shares
are issued and outstanding. All of such outstanding shares have been and are, or
upon issuance will be, validly issued, fully paid and nonassessable. Except as
disclosed in SCHEDULE 3(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
debt securities issued by the Company; (iii) 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, 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; (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement); (v) 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; (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement; and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation,
as amended and as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issuance thereof and (iii) entitled to the
rights and preferences set forth in the Articles of Amendment. At least
3,600,000 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and exercise
of the Warrants. Upon conversion or exercise in accordance with the Articles of
Amendment or the Warrants, as the case may be, the Conversion Shares and the
Warrant Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock. The
issuance by the Company of the Securities is exempt from registration under the
1933 Act. The issuance by the Company of the Preferred Shares and the Warrants
is being made in reliance upon the exemption from registration set forth in Rule
506 of Regulation D under the 1933 Act and is only being made to "accredited
investors" that meet the requirements of Rule 501(a) of Regulation D and similar
exemptions under state law.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(E), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Articles of
Amendment and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the reservation for issuance
and issuance of the Conversion Shares and the Warrant Shares) will not (i)
result in a violation of the Articles of Incorporation, any articles of
amendment of any outstanding series of preferred stock of the Company or the
By-laws; (ii) conflict with, or constitute 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 or instrument to which the Company or any of its
Subsidiaries is a party; or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and
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regulations and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed) applicable to the Company or any of
its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in SCHEDULE 3(E), neither
the Company nor its Subsidiaries is in violation of any term of (i) its Articles
of Incorporation, any articles of amendment of any outstanding series of
preferred stock or its By-laws or their organizational charter or by-laws,
respectively, or (ii) any statute, rule or regulation applicable to the Company
or its Subsidiaries and neither the Company nor its Subsidiaries is in default
under any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order, except for such violations or defaults which would
not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance or regulation of any
governmental entity except for such violations the sanctions for which either
individually or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and except such as have
been obtained as of the date hereof, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or the Articles of Amendment in
accordance with the terms hereof or thereof. Except as disclosed in SCHEDULE
3(E), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and such consents shall have
been obtained prior to the Closing. The Company and its Subsidiaries are unaware
of any facts or circumstances which might reasonably be expected to give rise to
any of the foregoing. The Company is not in violation of the listing
requirements of the Nasdaq National Market as in effect on the date hereof and
on the Closing Date and has no actual knowledge of any facts which would
reasonably lead to delisting or suspension of the Common Stock by the Nasdaq
National Market in the foreseeable future.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31,
1997, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act, (all of the foregoing filed after December 31,
1997 and prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC DOCUMENTS"). A
complete list of the Company's SEC Documents is set forth on SCHEDULE 3(F). As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. None of the SEC
Documents, at the time they were filed with the SEC, 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 of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Neither the Company nor any of its Subsidiaries nor any of their
officers, directors, employees or agents have provided the Buyers with any
material, nonpublic information. The Company meets the requirements for the use
of Form S-3 for registration of the resale of the Registrable Securities (as
defined in the Registration Rights Agreement) by each Buyer.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE
3(G), since December 31, 1998 there has been no material adverse change and no
material adverse development in the business, properties, operations,
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financial condition, liabilities, results of operations or prospects of the
Company or its Subsidiaries, taken as a whole. 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 that its creditors intend to initiate involuntary bankruptcy
proceedings or any knowledge of any fact which would reasonably lead a creditor
to do so.
h. ABSENCE OF LITIGATION. Except as disclosed in SCHEDULE
3(H), there is no action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as expressly set forth
in SCHEDULE 3(H). Except as set forth in SCHEDULE 3(H), to the knowledge of the
Company none of the directors or officers of the Company have been involved in
securities related litigation during the past five years.
i. ACKNOWLEDGMENT REGARDING THE BUYER'S PURCHASE OF PREFERRED
SHARES. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the Articles of Amendment and the transactions contemplated
thereby. The Company further acknowledges that none of the Buyers is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the Articles of Amendment and the
transactions contemplated thereby and any advice given by any of the Buyers or
any of their respective representatives or agents in connection with the
Transaction Documents and the Articles of Amendment and the transactions
contemplated thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. Except for the issuance of the Preferred Shares and Warrants
contemplated by this Agreement, no event, liability, development or circumstance
has occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly disclosed.
k. NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Securities.
l. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the Nasdaq National Market, nor will the
Company or any of its Subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union, neither the
Company nor any of its Subsidiaries is
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a party to a collective bargaining agreement, and the Company and its
Subsidiaries believe that their relations with their employees are good. No
executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the
Company's Board of Directors that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company and the Company
does not expect to terminate any such officer during the six months following
the date of this Agreement.
n. INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on SCHEDULE 3(N), none of the
Company's trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement, except where such
expiration or termination would not have either individually or in the aggregate
a Material Adverse Effect. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademarks,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secrets or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
SCHEDULE 3(N), no claim, action or proceeding has been made or brought against,
or to the Company's knowledge, has been threatened against, the Company or its
Subsidiaries regarding trademarks, trade name rights, patents, patent rights,
inventions, copyrights, licenses, service names, service marks, service mark
registrations, trade secrets or other infringement. Except as set forth on
SCHEDULE 3(N), the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties except where
the failure to do so would not have either individually or in the aggregate a
Material Adverse Effect.
o. REGULATORY PERMITS. Except where the absence of which would
not have a Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses. Neither the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
p. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
q. TAX STATUS. Except as set forth in SCHEDULE 3(Q), the
Company and each of its 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 and for which the
Company has set aside on its books
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provision 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.
r. TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth on SCHEDULE 3(R) or in the SEC Documents filed at least ten days prior to
the date hereof and other than the grant or exercise of stock options disclosed
on SCHEDULE 3(C), none of the officers or directors of the Company and, to the
Company's knowledge, none of the 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 other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
s. DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares will increase in certain circumstances. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with this Agreement and the Articles of Amendment and its
obligation to issue the Warrant Shares in accordance with this Agreement and the
Warrants is, in each case, absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
t. APPLICATION OF TAKEOVER PROTECTIONS. 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, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyers as
a result of the Buyers and the Company fulfilling their obligations under the
Transaction Documents and the Articles of Amendment, including, without
limitation, the Company's issuance of the Securities and the Buyers' ownership
of the Securities.
u. RIGHTS AGREEMENT. As of the date hereof, the Company has
not adopted a shareholder rights plan or similar arrangement relating to
accumulation of beneficial ownership of Common Stock or a change in control of
the Company.
v. YEAR 2000 COMPLIANCE. The Company has initiated a review
and assessment of all areas within its and each Subsidiary's business and
operations that could be materially adversely affected by the "YEAR 2000
PROBLEM" (that is, the risk that computer applications used by the Company or
any of the Subsidiaries may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999). Based on the foregoing, the Company believes that the
computer applications that are currently being used by its or any Subsidiary's
business and operations are reasonably expected to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 other
than those applications whose inability to properly perform date-sensitive
functions would not have, either individually or in the aggregate, a Material
Adverse Effect.
w. TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(W) or such
as do not materially affect the value of such property and do not interfere with
the use
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made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
x. 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. Neither the Company nor any such Subsidiaries has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its Subsidiaries,
taken as a whole.
y. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i)
are in compliance in all material respects with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, except where the
failure to receive such permits, licenses or approvals would not, individually
or in the aggregate, have a Material Adverse Effect and (iii) are in compliance
in all material respects with all terms and conditions of any such permit,
license or approval, except where the failure to be in compliance or receive
such permits, licenses or approvals would not, individually or in the aggregate,
have a Material Adverse Effect.
z. NO OTHER AGREEMENTS. The Company has not, directly or
indirectly, made any agreements with any Buyer relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
aa. NO MATERIALLY ADVERSE CONTRACTS. Except as specifically
disclosed in the SEC Documents, or as set forth in SCHEDULE 3(AA), neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to have a Material Adverse Effect. Except as specifically disclosed in the SEC
Documents, or as set forth in SCHEDULE 3(AA), neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best efforts to
satisfy timely each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. FORM D AND BLUE SKY. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for, or obtain exemption for
the Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating to
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the offer and sale of the Securities required under applicable securities or
"Blue Sky" laws of the states of the United States following the Closing Date.
c. REPORTING STATUS. Until the earlier of (i) the date which
is one year after the date on which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto) and (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and the Warrant Shares and (B) none of
the Preferred Shares or Warrants is outstanding (the "REPORTING PERIOD"), the
Company shall file all reports required to be filed with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in SCHEDULE 4(D).
e. FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor (as defined in the Registration Rights Agreement)
during the Reporting Period: (i) unless filed and available through the SEC's
EDGAR system, within two (2) Business Days after the filing thereof with the
SEC, a copy 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 (other
than on Form S-8) or amendments thereto filed pursuant to the 1933 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 (or the day after, if released
through a recognized wire service) 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.
f. RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the sum of (A) 200% of the number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares and (B) 100%
of the number of shares of Common Stock needed to provide for the issuance of
the Warrant Shares (without regard to any limitations on conversions or exercise
thereof).
g. PROXY STATEMENT. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which
meeting shall occur on or before the earlier of (A) the date which is 60 days
after the Proxy Statement Triggering Date (as defined below) and (B) July 10,
2000 (the "STOCKHOLDER MEETING DEADLINE"), a proxy statement, which has been
previously reviewed by the Buyers and a counsel of their choice, soliciting each
such stockholder's affirmative vote at such stockholder meeting for approval of
the Company's issuance of all of the Securities as described in this Agreement
(such affirmative vote being referred to as the "STOCKHOLDER APPROVAL"), and the
Company shall use its best efforts to (i) solicit its stockholders' approval of
such issuance of the Securities and (ii) cause the Board of Directors of the
Company to recommend to the stockholders that they approve such proposal. If the
Company fails to hold a meeting of its stockholders by the Stockholder Meeting
Deadline, then, as partial relief (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
holder of Preferred Shares an amount in cash per Preferred Share (based on the
number of Preferred Shares held by each holder) equal to the product of (i)
$1,000; multiplied by (ii) 0.02; multiplied by (iii) the quotient of (x) the
number of days after the Stockholder Meeting Deadline that a meeting of the
Company's stockholders is not held, divided by (y) 30. The Company shall make
the payments referred to in the immediately preceding sentence within five days
of the earlier of (I) the holding of the meeting of the Company's stockholders,
the failure of which resulted in the requirement to make such payments, and (II)
the last day of each 30-day period beginning on the Stockholder Meeting
Deadline. In
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the event the Company fails to make such payments in a timely manner, such
payments shall bear interest at the rate of 2.0% per month (pro rated for
partial months) until paid in full. "PROXY STATEMENT TRIGGERING DATE" shall mean
the first date after the date of this Agreement on which during the five
consecutive trading days ending on and including such date of determination
there are three trading days on which the sum of (A) the number of shares of
Common Stock previously issued upon conversion of any Preferred Shares and (B)
the number of shares of Common Stock issuable upon conversion of all the
outstanding Preferred Shares based on the Conversion Price in effect on the date
of such determination (without regard to any limitation upon the conversion of
any Preferred Shares), equals or exceeds 15% of the number of shares of Common
Stock issued and outstanding immediately prior to the Closing Date.
h. LISTING. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation system
(including the Nasdaq National Market), if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents and the Articles of Amendment. The Company shall
maintain the Common Stock's authorization for listing on the Nasdaq National
Market or The New York Stock Exchange, Inc.("NYSE"). Neither the Company nor any
of its Subsidiaries shall take any action which may result in the delisting or
suspension of the Common Stock on the Nasdaq National Market or NYSE (other than
to switch listings from the Nasdaq National Market to NYSE). The Company shall
promptly, and in no event later than the following Business Day, offer to
provide to each Buyer copies of any notices it receives from the Nasdaq National
Market or NYSE regarding the continued eligibility of the Common Stock for
listing on such automated quotation system or securities exchange, but only if
such notices shall not contain any material nonpublic information. The Company
shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4(h).
i. EXPENSES. Subject to Section 9(l) below, at the Closing,
the Company shall pay an expense allowance of $50,000 to the Buyers, which
amount shall be withheld by the Buyers from the Purchase Price.
j. TRANSACTIONS WITH AFFILIATES. So long as (i) any Preferred
Shares or Warrants are outstanding or (ii) any Buyer owns Conversion Shares or
Warrant Shares with a market value of at least $500,000, the Company shall not,
and shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, persons who were officers or directors at any
time during the previous two years, stockholders who beneficially own 5% or more
of the Common Stock, or Affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "RELATED
PARTY"), except for (a) customary employment arrangements and benefit programs
on reasonable terms, (b) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company or
(c) any agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been obtainable
from a person other than such Related Party. For purposes hereof, any director
who is also an officer of the Company or any Subsidiary of the Company shall not
be a disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "CONTROL" or
"CONTROLS" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
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k. FILING OF FORM 8-K. On or before the second Business Day
following the Closing Date, the Company shall file a Form 8-K with the SEC
describing the terms of the transaction contemplated by the Transaction
Documents and consummated at the Closing, in the form required by the 1934 Act.
l. CORPORATE EXISTENCE. So long as any Buyer beneficially owns
any Preferred Shares 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 National Market or NYSE.
m. MANDATORY CONVERSION OR REDEMPTION. On or before the date
which is 183 days after the Closing Date, the Company (i) shall deliver to the
Buyers one or more Company's Conversion Election Notices or Notices of
Redemption at Company's Election (as each such term is defined in the Articles
of Amendment) for the conversion or redemption, respectively, of an aggregate of
at least 4,500 Preferred Shares, subject to the satisfaction of the conditions
set forth in Sections 7 and 6, respectively, of the Articles of Amendment, (ii)
shall comply with its obligations under Sections 7 and 6 of the Articles of
Amendment with respect to the Company's Conversion Election Notices and Notices
of Redemption at Company's Election, respectively, referred to in the preceding
clause (i), and (iii) the Company shall not have delivered any Company's
Mandatory Conversion Period Termination Notice with respect to a Company's
Conversion Election Notice referred to in clause (i) above. On or before the
date which is 274 days after the Closing Date, the Company (A) shall deliver to
the Buyers one or more Company's Conversion Election Notices or Notices of
Redemption at Company's Election for the conversion or redemption, respectively,
of a cumulative total of at least 9,000 Preferred Shares, subject to the
satisfaction of the conditions set forth in Sections 7 and 6, respectively, of
the Articles of Amendment, (B) shall comply with its obligations under Sections
7 and 6 of the Articles of Amendment with respect to the Company's Conversion
Election Notices and Notices of Redemption at Company's Election, respectively,
referred to in the preceding clause (A), and (C) the Company shall not have
delivered any Company's Mandatory Conversion Period Termination Notice with
respect to a Company's Conversion Election Notice referred to in clause (A)
above. Notwithstanding the above, for every day that the Company is unable to
issue shares of Common Stock to a holder of Preferred Shares as a result of the
limitation contained in Section 5 of the Articles of Amendment, the deadlines
contained in the first two sentences of this Section 4(m) shall be extended
solely with respect to such holder by one (1) day for each day the Company is
unable to issue shares of Common Stock to such holder as a result of the
limitation contained in Section 5 of the Articles of Amendment.
n. RESTRICTION ON SHORT SALES. Each Buyer agrees that, subject
to the exceptions described below, during the period beginning on the Closing
Date and ending on the earlier of (i) the first date on which such Buyer no
longer holds any Preferred Shares and (ii) the date which is one (1) year after
the Closing Date, neither such Buyer nor any of its affiliates shall engage,
directly or indirectly, in any transaction constituting a "short sale" (as
defined in Rule 3b-3 of the 1934 Act) of the Common Stock (collectively, "SHORT
SALES"); provided, however, that each Buyer and its affiliates are entitled to
engage in transactions which constitute Short Sales to the extent that following
such transaction the aggregate short position of such Buyer and its affiliates
does not exceed the sum of (a) the number of shares of Common Stock equal to the
aggregate number of shares of Common Stock which such Buyer and its affiliates
have the right to acquire upon exercise of the Warrants held by such Buyer and
its affiliates (without regard to any limitations on exercises of the Warrants),
plus (b) during the period beginning on and including the first day of a
Company's Mandatory Conversion Period (as defined in Section 7 of the Articles
of Amendment) and ending on and including the date which is the last day of such
Company's Mandatory Conversion Period, that number of shares of Common Stock
equal to the quotient of (i) the Conversion Amount with respect to the number of
Preferred Shares set forth in a Company's Conversion
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Election Notice (as defined in Section 7 of the Articles of Amendment) for such
Buyer and its affiliates with respect to such Company's Mandatory Conversion
Period, divided by (ii) the lowest Conversion Price (as defined in the Articles
of Amendment) during the period beginning on and including the first day of such
Company's Mandatory Conversion Period and ending on and including the last
trading day of such Company's Mandatory Conversion Period. Notwithstanding the
foregoing, if the Buyer is an international financial institution subject to
substantive banking regulation, then the affiliates of such Buyer shall not be
subject to the restrictions set forth in this Section 4(n) solely to the extent
that such affiliates are acting in the capacity of a broker/dealer in executing
unsolicited third party transactions. Notwithstanding the foregoing, the
restriction on Short Sales set forth in the first sentence of this Section 4(n)
shall not apply (a) on and after the first date on which there shall have
occurred a Triggering Event (as defined in Section 3(b) of the Articles of
Amendment) or a Liquidity Default (as defined in Section 3(g) of the Articles of
Amendment) or an event that with the passage of time and without being cured
would constitute a Triggering Event or a Liquidity Default; (b) on or after the
date on which there shall have occurred a Sale of Assets (as defined in Section
4(b) of the Articles of Amendment) or a Liquidity Default described in Section
3(g)(vii) or Section 3(g)(viii) of the Articles of Amendment or announcement by
the Company (or in the case of a hostile tender offer or similar situation, by
the person making such offer) of a pending, proposed or intended Sale of Assets
or a Liquidity Default described in Section 3(g)(vii) or Section 3(g)(viii) of
the Articles of Amendment; (c) on and after the first date on which the Closing
Sale Price of the Common Stock is less than $4.21 (equitably adjusted for stock
splits, stock dividends, stock combinations and other similar transactions) for
any ten (10) trading days during the fifteen (15) consecutive trading days
immediately preceding such date of determination; (d) on or after the date on
which the Company issues or sells or is deemed to have issued or sold any
Convertible Securities or Options (each as defined in the Articles of Amendment)
that are convertible into or exercisable or exchangeable for shares of Common
Stock at a conversion or exercise price which varies or may vary with the market
price of the Common Stock, including by way of one or more reset(s) to a fixed
price; (e) with respect to a Short Sale so long as such Buyer delivers a
Conversion Notice (as defined in the Articles of Amendment) within two (2)
Business Days of such Short Sale entitling such Buyer to receive a number of
shares of Common Stock at least equal to the number of shares of Common Stock
sold in such Short Sale; (f) with respect to any transaction involving options
on the Common Stock; (g) on or after any date on which the Company fails to pay
the Company's Election Redemption Price (as defined in Section 6 of the Articles
of Amendment) in a timely manner in accordance with a Redemption at Company's
Election pursuant to Section 6 of the Articles of Amendment; (h) on or after the
first date on which the Company fails to comply with its obligations under
Section 4(m); or (i) on or after the Stockholder Meeting Deadline if the Company
fails to receive the Stockholder Approval on or prior to the Stockholder Meeting
Deadline.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion of the Preferred Shares or
exercise of the Warrants (in the form attached hereto as EXHIBIT E, the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS") unless such issuance is prohibited by
Section 5 or Section 16 of the Articles of Amendment. Prior to registration of
the Conversion Shares and the Warrant Shares under the 1933 Act, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares and the Warrant Shares, prior to registration of the
Conversion Shares and the Warrant Shares under the 1933 Act) will be given by
the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided
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in this Agreement and the Registration Rights Agreement. If a Buyer provides the
Company with an opinion of counsel, in a form reasonably satisfactory to the
Company, that registration of a resale by such Buyer of any of such Securities
is not required under the 1933 Act or such Buyer provides the Company with
reasonable assurances that the Securities can be sold pursuant to Rule 144, the
Company shall permit the transfer, and, in the case of the Conversion 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 Buyer
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 would be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyers shall be entitled, in addition to all other available
remedies, to an 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.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares and the Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of this Agreement and
the Registration Rights Agreement and delivered the same to the
Company.
(ii) Such Buyer shall have delivered to the Company the
Purchase Price (less the amounts withheld pursuant to Section 4(i)) for
the Preferred Shares and the related Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer
contained herein shall be true and correct 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), and
such Buyer shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Buyer at
or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Preferred Shares and the Warrants at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for such Buyer's sole benefit and may be waived by
such Buyer at any time in its sole discretion by providing the Company and each
Buyer with prior written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
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(ii) The Articles of Amendment shall have been filed with the
Secretary of State of the State of Florida, and a copy thereof
certified by the Secretary of State of the State of Florida shall have
been delivered to such Buyer.
(iii) The Common Stock shall be designated for quotation on
the Nasdaq National Market or listed on NYSE and shall not have been
suspended from trading on or delisted from such exchanges nor shall
delisting or suspension by such exchanges have been threatened either
(A) in writing by such exchanges or (B) by falling below the minimum
listing maintenance requirements of such exchanges. The Company shall
have complied with the listing requirements of the Nasdaq National
Market for the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise of the Preferred Shares and the related
Warrants, as the case may be.
(iv) The representations and warranties of the Company
contained herein shall be true and correct 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) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents or the Articles of Amendment to be performed, satisfied or
complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as such Buyer may
reasonably request, including, without limitation, an update as of the
Closing Date regarding the representation contained in Section 3(c)
above.
(v) Such Buyer shall have received the opinion of Greenberg
Traurig dated as of the Closing Date, in substantially the form of
EXHIBIT D, attached hereto.
(vi) The Company shall have executed and delivered to such
Buyer the Stock Certificates for the Preferred Shares and the Warrants
being purchased by such Buyer at the Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "RESOLUTIONS").
(viii) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Preferred Shares and exercise of the
Warrants, at least 3,600,000 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form
of EXHIBIT E attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer 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.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of the Closing Date, certifying as to
(A) the Resolutions, (B) the Articles of Incorporation and (C) the
By-laws, each as in effect at the Closing Date.
(xii) The Company shall have delivered to such Buyer a
certified copy of its Articles of Incorporation as certified by the
Secretary of State of the State of Florida within ten days of the
Closing Date.
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(xiii) The Company shall have delivered to such Buyer 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.
(xiv) The Company shall have delivered to the Buyers such
other documents relating to the transactions contemplated by the
Transaction Documents as the Buyers or their counsel may reasonably
request.
8. INDEMNIFICATION. In consideration of each Buyer's execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents and the Articles of Amendment, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of the
Securities and all of their stockholders, officers, directors, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or Articles of Amendment 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 the
Transaction Documents or the Articles of Amendment or any other certificate,
instrument or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee (other than a
cause of action, suit or claim which is (x) brought or made by the Company and
(y) is not a shareholder derivative suit) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction
Documents or the Articles of Amendment, (ii) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities or (iii) solely the status of such Buyer or holder of
the Securities as an investor in the Company. 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 each of
the Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws
of the State of Florida shall govern all issues concerning the relative rights
of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-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 brought in an inconvenient forum or that the
venue of 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
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TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which 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 parties; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein. This Agreement and the instruments referenced herein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
Buyers which purchased at least two-thirds (2/3) of the Preferred Shares on the
Closing Date, or their assigns or, if prior to the Closing Date, the Buyers
listed on the Schedule of Buyers as being obligated to purchase at least
two-thirds (2/3) of the Preferred Shares. No provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Preferred Shares or Warrants
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Articles of Amendment unless the same consideration
also is offered to all of the parties to the Transaction Documents or holders of
the Preferred Shares, as the case may be.
f. 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); or (iii) one (1) 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:
ProxyMed, Inc.
2555 Davie Road, Suite 110
Fort Lauderdale, Florida 33317
Telephone: (954) 473-1001
Facsimile: (954) 473-0620
Attention: Chief Executive Officer and Chief Legal Officer
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With a copy to:
Greenberg Traurig
Metlife Building
200 Park Avenue, 15th Floor
New York, New York 10166
Telephone: 212-801-9200
Facsimile: 212-801-6400
Attention: Spencer G. Feldman, Esq.
If to the Transfer Agent:
North American Transfer Company
147 West Merrick Road
Freeport, New York 11520
Telephone: (516) 379-8501
Facsimile: (516) 379-8525
Attention: Mildred Rostolter
If to a Buyer, to it at the address and facsimile number set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or at such other address and/or facsimile number
and/or to the attention of such other person(s) as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communications, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder, including by
merger or consolidation, without the prior written consent of the Buyers which
purchased at least two-thirds (2/3) of the Preferred Shares on the Closing Date,
or their assigns. The rights under this Agreement are assignable by a Buyer
without the consent of the Company; provided, however, that any such assignment
shall not release such Buyer from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents
or the Articles of Amendment, Buyers shall be entitled to pledge the Securities
in connection with a bona fide margin account or other loan secured by the
Securities.
h. 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.
i. SURVIVAL. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in
19
<PAGE>
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. PUBLICITY. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as the Company reasonably believes, after consulting with its counsel, to be
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. 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.
l. TERMINATION. In the event that the Closing shall not have
occurred with respect to a Buyer on or before one (1) Business Day after the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse a
non-breaching Buyer for expenses up to the amount described in Section 4(i)
above.
m. PLACEMENT AGENT. The Company acknowledges that it has
engaged J.C. Bradford & Co. as a placement agent in connection with the sale of
the Preferred Shares and the Warrants. The Company shall be responsible for the
payment of any placement agent's fees or brokers' commissions relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorneys' fees and out of pocket expenses) arising in
connection with any such claim.
n. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. REMEDIES. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Articles of Amendment and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to the Registration
Rights Agreement, the Articles of Amendment or the Warrants or such Buyer
enforces or exercises its 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 to be fraudulent or preferential, set
20
<PAGE>
aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company or to 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.
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
PROXYMED, INC. HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By: /s/ Bennett Marks
-------------------------------
Name: Bennett Marks
-------------------------
Title: EVP-Finance By: /s/ James F. O'Brien, Jr.
------------------------ --------------------------
James F. O'Brien, Jr.
Managing Member
FISHER CAPITAL LTD.
By: /s/ Daniel J. Hopkins
--------------------------
Name: Daniel J. Hopkins
Its: Authorized Signatory
WINGATE CAPITAL LTD.
By: /s/ Daniel J. Hopkins
--------------------------
Name: Daniel J. Hopkins
Its: Authorized Signatory
<PAGE>
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT - P. 2 OF 2]
LEONARDO, L.P.
By: ANGELO, GORDON & CO., L.P.
Its: General Partner
By: /s/ Michael L. Gordon
----------------------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
ROYAL BANK OF CANADA
By: RBC DOMINION SECURITIES
CORPORATION
Its: Agent
By: /s/ Mark A. Standish
----------------------------------------
Name: Mark A. Standish
------------------------------------
Its: Vice President & Director
-------------------------------------
AND
By: /s/ Roger A. Blissett
-------------------------------------------
Name: Roger A. Blissett
-------------------------------------
Its: Vice President, Deputy General Counsel
--------------------------------------
<PAGE>
SCHEDULE OF BUYERS
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
INVESTOR ADDRESS PREFERRED WARRANT INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER SHARES SHARES AND FACSIMILE NUMBER
- ---------------------- -------------------------------- --------- --------- ------------------------------------
<S> <C> <C> <C> <C>
HFTP Investment L.L.C. c/o Promethean Asset Management, 2,000 106,667 Promethean Investment Group, L.L.C.
L.L.C. 750 Lexington Avenue, 22nd Floor
750 Lexington Avenue, 22nd Floor New York, New York 10022
New York, New York 10022 Attn: James F. O'Brien, Jr.
Attn: James F. O'Brien, Jr. John M. Floegel
John M. Floegel Telephone: 212-702-5200
Telephone: 212-702-5200 Facsimile: 212-758-9334
Facsimile: 212-758-9334
Residence: New York Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
Attn: Robert J. Brantman, Esq.
Telephone: 312-902-5200
Facsimile: 312-902-1061
Fisher Capital Ltd. c/o Citadel Investment Group, 2,480 132,267 Katten Muchin & Zavis
L.L.C. 525 W. Monroe Street, Suite 1600
225 West Washington Street Chicago, Illinois 60661-3693
Chicago, Illinois 60606 Attention: Robert J. Brantman, Esq.
Attention: Daniel Hopkins Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 696-2100
Residence: Illinois
Wingate Capital Ltd. c/o Citadel Investment Group, 1,520 81,066 Katten Muchin & Zavis
L.L.C. 525 W. Monroe Street, Suite 1600
225 West Washington Street Chicago, Illinois 60661-3693
Chicago, Illinois 60606 Attention: Robert J. Brantman, Esq.
Attention: Daniel Hopkins Facsimile: (312) 902-1061
Facsimile: (312) 338-0780 Telephone: (312) 902-5200
Telephone: (312) 696-2100
Residence: Illinois
Leonardo, L.P. c/o Angelo, Gordon & Co., L.P. 5,000 266,667 Angelo, Gordon & Co., L.P.
245 Park Avenue - 26th Floor 245 Park Avenue - 26th Floor
New York, New York 10167 New York, New York 10167
Attention: Gary Wolf or Ari Attention: Gary Wolf or Ari Storch
Storch Facsimile: (212) 867-6449
Facsimile: (212) 867-6449 Telephone: (212) 692-2035
Telephone: (212) 692-2035
Residence: Cayman Islands
Royal Bank of Canada Royal Bank of Canada 4,000 213,333 Royal Bank of Canada
c/o RBC Dominion Securities c/o RBC Dominion Securities Corporation
Corporation One Liberty Plaza
One Liberty Plaza 165 Broadway
165 Broadway New York, New York 10006
New York, New York 10006 Attention: Kevin A. Felix
Attention: Kevin A. Felix Facsimile: (212) 858-7437
Facsimile: (212) 858-7437 Telephone: (212) 858-7384
Telephone: (212) 858-7384
</TABLE>
