Exhibit 10.2
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EXCHANGE AGREEMENT
Among
HEALTHAXIS INC.
and
THE HOLDERS LISTED ON SCHEDULE I
Dated as of July 31, 2002
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EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "Agreement") is dated as of July
31, 2002 among Healthaxis Inc., a Pennsylvania corporation (the "Company"), and
the various persons identified and listed on Schedule I hereto (each referred to
herein as a "Holder" and, collectively, the "Holders.")
WHEREAS, the Company and the Holders are parties to that
certain Securities Purchase Agreement dated as of September 14, 1999, as amended
on September 28, 2000 (the "Purchase Agreement") relating to the purchase and
sale of an aggregate of $27,500,000 principal amount of 2% Convertible
Debentures due September 14, 2005 (the "Debentures") and warrants (the
"Warrants") to purchase the Company's common stock, par value $.10 per share
(the "Common Stock");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to (i) issue to the Holders, and the Holders
desire to acquire by exchange, an aggregate of 23,500 shares of the Company's
Series A Convertible Preferred Stock, par value $1.00 per share, stated value
$1,000 per share, initial conversion price $2.625 (the "Preferred Stock") and
(ii) pay to the Holders an aggregate of $4,000,000, together with accrued but
unpaid interest relating to Debentures in the principal amount of $4,000,000
(the "Payment").
WHEREAS, as consideration for the issuance of the Preferred
Stock and the Payment, the Company desires to accept from the applicable
Holders, and the applicable Holders desire to tender and exchange, an aggregate
of $27,500,000 principal amount of the Debentures;
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement by and among the Company and the Holders (the "Registration
Rights Agreement"), substantially in the forms of Exhibit B attached hereto,
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws; and
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Holders hereby agree
as follows:
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ARTICLE I.
EXCHANGE
1.1 Exchange
On the Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and deliver to each
Holder and each Holder, severally and not jointly, shall (i) acquire from the
Company the number of shares of Preferred Stock as set forth next to such
Holder's name on Schedule I and (ii) receive from the Company its respective
portion of the Payment as set forth next to such Holder's name on Schedule I. In
exchange for the Preferred Stock and the Payment set forth on Schedule I, the
Holders shall tender to the Company for cancellation the aggregate amount of
Debentures as set forth next to such Holder's name on Schedule II.
1.2 Closing.
The Closing. The closing of the exchange of the Preferred
Stock (the "Closing") shall take place at the offices of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, or by
transmission by facsimile and overnight courier, immediately following the
execution hereof or such later date or different location as the parties shall
agree, but not prior to the date that the conditions set forth in Section 4.1
have been satisfied or waived by the appropriate party (the "Closing Date"). At
the Closing:
a. Each Holder shall deliver and tender, as directed by the
Company, all documents representing the amount of Debentures as set forth next
to its name on Schedule II;
b. The Company shall deliver to each Holder a certificate
evidencing the number of shares of Preferred Stock received by such Holder as
set forth on Schedule I hereto, the Preferred Stock shall have the respective
rights, preferences, limitations and privileges set forth in Exhibit A attached
hereto, which shall be incorporated into a Certificate of Designation of Rights,
Preferences and Limitations to be approved by the Holders and the Company's
Board of Directors and filed on or before the Closing with the Secretary of
State of Pennsylvania (the "Certificate of Designation"); and
c. The parties shall execute and deliver each of the documents
referred to in Section 4.1.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company.
The Company hereby makes the following representations and warranties to
each of the Holders:
a. Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of
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Pennsylvania, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
Except as set forth on Schedule 2.1(a), the Company has no subsidiaries (each a
"Subsidiary" and collectively, the "Subsidiaries"). Each of the Subsidiaries
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns the majority of such entity's capital stock or
holds an equivalent equity or similar interest) is a corporation, limited
liability company or limited partnership duly formed, validly existing and in
good standing, or subsisting, as the case may be, under the laws of the
jurisdiction of its incorporation or formation (as applicable), with the full
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing as a foreign entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not, individually or in the aggregate: (i) adversely affect the
legality, validity or enforceability of this Agreement or any of the other
Transaction Documents (as defined in Section 2.1(b) hereof) or any of the
transactions contemplated hereby or thereby, (ii) have or result in a material
adverse effect on the business, results of operations, assets or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole
or (iii) impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), being a
"Material Adverse Effect").
b. Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the Certificate of Designation and the
Registration Rights Agreement (collectively, the "Transaction Documents"), and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and each of the other Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action and no
further action is required by the Company, the Board of Directors or the
Company's stockholders in connection therewith. The Company has full corporate
power and authority to issue, sell and deliver the Preferred Stock and the
Underlying Shares (as defined below), pursuant to this Agreement and the other
Transaction Documents. This Agreement and each of the other Transaction
Documents has been duly executed by the Company and, when delivered in
accordance with the terms hereof or thereof, will 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
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application, and
except that rights to indemnification and contribution may be limited by federal
or state securities laws or public policy relating thereto.
c. Capitalization. As of the date hereof, the authorized and
issued capital stock of the Company and each of the Subsidiaries and the
ownership of each of the Subsidiaries is as set forth in Schedule 2.1(c). All of
such outstanding shares of capital stock have been, or upon issuance will be,
duly authorized and validly issued, fully paid and nonassessable and were issued
in accordance with the registration or qualification provisions of the
Securities Act, or pursuant to valid exemptions therefrom. Except as disclosed
in Schedule 2.1(c): (i) no shares of
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the Company's capital stock are subject to preemptive rights or any other
similar rights or any liens, claims or encumbrances suffered or permitted by the
Company, nor is any holder of the Common Stock entitled to preemptive, right of
first refusal or similar rights arising out of any agreement or understanding
with the Company, including, without limitation, the Transaction Documents, (ii)
there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable or exercisable for, or giving any Person (as
defined below) any right to subscribe for or acquire, any shares of capital
stock of the Company or any of the Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of the Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of the Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, any shares of capital
stock of the Company or any of the Subsidiaries, (iii) there are no outstanding
debt securities, or other form of material debt, of the Company or any of the
Subsidiaries, (iv) there are no contracts, commitments, understandings,
agreements or arrangements under which the Company or any of the Subsidiaries is
obligated to register the sale of any of their securities under the Securities
Act (except the Registration Rights Agreement), (v) there are no outstanding
securities of the Company or any of the Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings, agreements or arrangements by which the Company or any of the
Subsidiaries is or may become bound to redeem a security of the Company or any
of the Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the shares of Preferred Stock or upon the conversion of the Preferred Stock,
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements, or any similar plan or agreement and (viii) except as set
forth in filings made with the Securities and Exchange Commission (the
"Commission"), to the Company's and each Subsidiary's knowledge, no Person (as
defined below) or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or has the right to acquire by agreement with or
by obligation binding upon the Company, beneficial ownership of in excess of 5%
of the Common Stock. Any Person with any right (other than the Holders) to
purchase securities of the Company that would be triggered as a result of the
transactions contemplated under this Agreement has waived such rights. As used
in this Agreement, "Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
d. Authorization, Validity and Issuance of Shares. The shares
of Preferred Stock have been duly authorized and, when issued in accordance with
this Agreement, will be duly and validly issued, fully paid and nonassessable,
and will be free and clear of all liens, charges, restrictions, claims and
encumbrances, other than liens, charges, restrictions, claims and encumbrances
that were created by the Holders and restrictions on transfer imposed by this
Agreement or the other Transaction Documents, the Securities Act of 1933, as
amended (the "Securities Act") and applicable state securities laws. The shares
of Common Stock issuable upon conversion of the Preferred Stock, together with
the number of shares of Common Stock issuable as dividends on the shares of
Preferred Stock (collectively, the "Underlying Shares"),
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have been duly reserved for issuance, and, when so issued, will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of all
liens, charges, restrictions, claims and encumbrances, other than rights created
by this Agreement or the other Transaction Documents.
e. No Conflicts. The Company's execution, delivery and
performance of this Agreement and each of the other Transaction Documents and
the Company's consummation of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not: (i)
conflict with or violate any provision of the Company's Articles of
Incorporation as amended and in effect on the Closing Date (the "Articles of
Incorporation"), the Company's bylaws, as in effect on the Closing Date (the
"Bylaws") or other organizational documents of the Company or any of the
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f) hereof, conflict with, or constitute a breach or a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to other Persons any rights of termination, amendment, acceleration or
cancellation of, any contract, agreement, indenture, understanding, note, lease,
evidence of indebtedness, patent, license or other instrument to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or any
Subsidiary is subject (including Federal and state securities laws and
regulations and the rules and regulations of The Nasdaq Stock Market ("Nasdaq"))
applicable to the Company or any of the Subsidiaries, or by which any material
property or asset of the Company or any Subsidiary is bound or affected, except
where such conflict has not resulted or would reasonably result, individually or
in the aggregate, in a Material Adverse Effect or (iv) result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon the Company or any Subsidiary, or upon any property or asset of
the Company or any Subsidiary.
f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self-regulatory agency, or other Person in
connection with the Company's execution, delivery and performance of this
Agreement or the other Transaction Documents, other than: (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement,
(ii) the application(s) or any letter(s) acceptable to Nasdaq for the listing or
quoting of the Underlying Shares with Nasdaq (and with any other national
securities exchange or market on which the Common Stock is then traded, listed
or quoted), (iii) the filing of a Form D with the Commission and any filings,
notices or registrations under applicable state securities laws and (iv) the
approval of the Board and the filing of the applicable Certificate of
Designation with the Secretary of State of Pennsylvania, which approval and
filing shall be effected on or prior to the Closing Date (together with the
consents, waivers, authorizations, orders, notices and filings referred to on
Schedule 2.1(f), the "Required Approvals").
g. Litigation; Proceedings. Except as specifically set forth
on Schedule 2.1(g), there is no action, suit, claim, notice of violation,
proceeding or investigation or inquiry
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(including, without limitation, any inquiry as to the Company's qualification to
hold or to receive any license or permit), pending or, to the knowledge of the
Company or any of the Subsidiaries, threatened against or affecting the Company
or any of the Subsidiaries or any of their respective properties or assets
before or by any court, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) which has or reasonably
could be expected to have a Material Adverse Effect, and there is no basis for
any of the foregoing. There is no action, suit, proceeding or investigation by
the Company pending or threatened against others.
h. No Default or Violation. Except as set forth on Schedule
2.1(h), neither the Company nor any Subsidiary is in: (i) default under or in
violation of any agreement, contract, license, understanding, evidence of
indebtedness, note, indenture, instrument, commitment, plan, arrangement or any
other agreement or instrument to which it is a party or by which it or any of
its properties or assets is bound, which default or violation has or reasonably
could be expected to have a Material Adverse Effect, (ii) default or violation
of any order, writ, judgment, injunction or decree of any court, arbitrator or
federal, state, municipal or other governmental body, department, commission,
board, bureau, agency or instrumentality, domestic or foreign, applicable to it,
which default or violation has or reasonably could be expected to have a
Material Adverse Effect, (iii) violation of any law, statute, ordinance, rule or
regulation of any governmental authority to which it is subject, which violation
has or reasonably could be expected to have a Material Adverse Effect, (iv)
violation of any of the provisions of their respective certificates of
incorporation, bylaws or other charter documents such that any right of a holder
of the Preferred Stock would be affected or (v) default under or in violation of
any of the listing or quotation requirements of Nasdaq as in effect on the
Closing Date.
i. Disclosure; Absence of Certain Changes. None of this
Agreement, the Schedules to this Agreement, the other Transaction Documents or
any other written or formally presented information, report, financial
statement, exhibit, schedule or document furnished by or on behalf of the
Company or any of the Subsidiaries to the Holders or their counsel in connection
with the negotiation of the transactions contemplated by this Agreement or any
of the other Transaction Documents contained, contains, or will contain at the
time it was or is so furnished any untrue statement of a material fact or
omitted, omits or will omit at such time to state any material fact necessary in
order to make the statements made herein and therein, in light of the
circumstances under which they were made, not misleading. Except as contemplated
by the Transaction Documents or that certain Termination Agreement dated June
11, 2002 by and between the Company and UICI (the "UICI Termination Agreement"),
or on Schedule 2.1(i) or in SEC Documents filed on EDGAR at least five (5)
business days prior to the date hereof, since January 1, 2002, no event has
occurred or exists (or is contemplated to occur) (i) which is not reflected in
the Company's financial statements and which has or reasonably could be expected
to have a Material Adverse Effect or (ii) which 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
Commission relating to an issuance and sale of securities by the Company and
which has not been publicly disclosed. 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 the Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
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j. Private Offering; Solicitation. The Company and, to the
knowledge of the Company, all Persons acting on its behalf have not (i) made,
directly or indirectly, and will not make, offers or sales of any securities or
solicited, and will not solicit, any offers to buy any security under
circumstances that would require registration of the Preferred Stock, or the
Underlying Shares or the issuance of such securities under the Securities Act,
(ii) distributed any offering materials in connection with the offering and sale
of the Preferred Stock, other than the SEC Documents, the Schedules to this
Agreement, and any amendments or supplements thereto or (iii) solicited any
offer to buy or sell the Preferred Stock by means of any form of general
solicitation or advertising (as those terms are used in Rule 502(c) of
Regulation D under the Exchange Act) in a manner which would require
registration under the Securities Act. The offer, issuance and sale of the
Preferred Stock and the Underlying Shares to the Holders will not be integrated
with any other offer, sale and issuance of the Company's securities (past or
current) in violation of the Securities Act or any regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed, quoted or designated or for purposes of any stockholder approval
provision applicable to the Company or its securities. Subject to the accuracy
and completeness of the representations and warranties of the respective Holders
contained in Section 2.2 hereof, the Company's offer, issuance and sale to the
Holders of the Preferred Stock and the Underlying Shares is exempt from the
registration requirements of the Securities Act.
k. SEC Documents; Financial Statements. The Common Stock is
registered pursuant to Section 12(g) of the Exchange Act. Except as set forth on
Schedule 2.1(k), since January 1, 2001, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
including pursuant to Sections 13, 14 or 15(d) thereof (the foregoing materials
and all exhibits included therein and financial statements and schedules thereto
and documents (other than exhibits to such documents) incorporated by reference
therein being collectively referred to herein as the "SEC Documents"), on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except with respect to the Transaction Documents
and the UICI Termination Agreement, all agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject and which are required to be filed as exhibits to the SEC
Documents have been filed as exhibits to the SEC Documents as required and
neither the Company nor any Subsidiary nor, to the Company's knowledge, any
other party is in breach of any such agreement. As of their respective dates,
the Company's financial statements included in the SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present
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in all material respects the Company's financial position as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial
year-end audit adjustments.
l. Investment Company. The Company is not, and is not
controlled by or under common control with an Affiliate of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
m. Broker's Fees. No fees or commissions or similar payments
with respect to the transactions contemplated by this Agreement and the other
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank, other than as set
forth in Schedule 2.1(m). The Holders shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section 2.1(m) that may be due in connection
with the transactions contemplated by this Agreement and the other Transaction
Documents.
n. Form S-3 Eligibility. The Company is, and at the Closing
Date will be, eligible to register securities (including the Underlying Shares)
for resale with the Commission on Form S-3 (or any successor form) promulgated
under the Securities Act.
o. Listing and Maintenance Requirements Compliance. The
principal market on which the Common Stock is currently traded is Nasdaq. Except
as disclosed on Schedule 2.1(o), the Company has not in the three (3) years
preceding the date hereof received notice (written or oral) from Nasdaq (or any
stock exchange, market or trading facility on which the Common Stock is or has
been listed or quoted), to the effect that the Company is not in compliance with
the listing or maintenance requirements of such market or exchange. Except as
disclosed on Schedule 2.1(o), the Company is not aware of any facts which would
reasonably lead to delisting or suspension of the Common Stock by Nasdaq. After
giving effect to the transactions contemplated by this Agreement and the other
Transaction Documents, and except as disclosed on Schedule 2.1(o), the Company
believes that it is and will be in compliance with all such maintenance
requirements.
p. Tax Status; Firpta. Except as set forth on Schedule 2.1(p),
the Company and each of the Subsidiaries have 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 the Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and have
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith (which are set forth on
Schedule 2.1(p) hereof), and have set aside on their books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes
that have not been reserved on the Company's books in any material amount
claimed to be due from the Company or any of the Subsidiaries by the taxing
authority of any jurisdiction, and the Company knows of no basis for any such
claim. The Company is not a "United States real property
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holding corporation" within the meaning of Section 897(c)(2) of the Internal
Revenue Code of 1986, as amended.
q. Permits. The Company and each of the Subsidiaries possess
all certificates, authorizations, licenses, easements, consents, approvals,
orders, registrations, franchises, exemptions, permits and other authorizations
necessary to own, lease and operate their respective properties and to conduct
their respective businesses as currently conducted except where the failure to
possess such certificates, authorizations, licenses, easements, consents,
approvals, orders, registrations, franchises, exemptions, permits and other
authorizations would not, individually or in the aggregate, have a Material
Adverse Effect (the "Material Permits"), and, except as disclosed on Schedule
2.1(q), there is no proceeding pending, or, to the knowledge of the Company or
any Subsidiary, threatened, relating to the revocation, modification, suspension
or cancellation of any Material Permit. The Company and each of the Subsidiaries
has been operating each of their respective businesses pursuant to and in
compliance with the terms of the Material Permits, except where the failure to
so operate their respective businesses would not have a Material Adverse Effect.
All of the Material Permits have been validly issued and are in full force and
effect without further consent or approval of any Person. Neither the Company
nor any of the Subsidiaries is in conflict with or default or violation of any
Material Permit, except where any such conflict or default would not have a
Material Adverse Effect.
r. Insurance. The Company and each of the 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 the
Subsidiaries are engaged.
s. Transactions With Affiliates. Except as set forth in the
SEC Documents or on Schedule 2.1(s), and other than the granting of stock
options and documents disclosed on Schedule 2.1(c), none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real property 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 Person in which any officer, director or any such employee
has a substantial interest or is an officer, director, trustee or partner.
t. Application to Takeover Protection. The Company and the
Board have taken all necessary action, if any, in order to render inapplicable
any (i) control share acquisition, business combination or other similar
anti-takeover provision under the Articles of Incorporation, Bylaws or the laws
of the Company's state of incorporation or (ii) poison pill provision of any of
the Company's stockholders' rights or similar agreements, which is or could
become applicable to the Holders or the Transaction Documents as a result of the
transactions contemplated by this Agreement and the other Transaction Documents.
u. Acknowledgement Regarding Holders' Purchase of Preferred
Stock. The Company acknowledges and agrees that the Holders are acting solely in
the capacity of arm's length holders with respect to this Agreement and the
other Transaction Documents and the
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transactions contemplated hereby and thereby. The Company further acknowledges
that no Holder is acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby and
any statement made by any Holder or any of their respective representatives or
agents in connection with this Agreement and the other Transaction Documents and
the transactions contemplated hereby and thereby is not advice or a
recommendation and is merely incidental to the Holders' purchase of the
Preferred Stock. The Company further represents to each Holder that the
Company's decision to enter into this Agreement and the other Transaction
Documents has been based solely on the independent evaluation of the Company and
its representatives.
v. Intellectual Property Rights. The Company and the
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trademark applications, trade names and service marks, whether or not
registered, and all patents, patent applications, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and intellectual
property rights (collectively, "Intellectual Property Rights") which are
necessary for use in connection with their respective businesses as now
conducted and as described in the SEC Documents. Except as set forth on Schedule
2.1(v), none of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within two (2) years from the
date of this Agreement. Neither the Company nor any of the Subsidiaries has
infringed upon or is infringing upon any of the Intellectual Property Rights of
any Person and, except as set forth on Schedule 2.1(v), there is no claim,
action or proceeding which has been made or brought or alleged against, or to
the Company's knowledge, is being made, brought or threatened against, the
Company or any of the Subsidiaries regarding the infringement of any of the
Company's Intellectual Property Rights, and the Company and the Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing, except where any of the foregoing would not have a Material Adverse
Effect. The Company and the Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual
properties.
w. Internal Accounting Controls. The Company and each of the
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 United States generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorizations 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.
x. Acknowledgement of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock of the issuance
of the Underlying Shares upon conversion of the Preferred Stock. The Company
further acknowledges that its obligation to issue the Underlying Shares upon
conversion of the Preferred Stock in accordance with this Agreement and the
Certificates of Designation is absolute and unconditional, regardless of the
10
dilutive effect that such issuance may have on the ownership interests of the
Company's other stockholders.
y. Solvency. The Company (both before and after giving effect
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.
z. Seniority. No class of equity securities of the Company is
pari passu or senior to the Preferred Stock in right of payment, whether upon
liquidation, dissolution or otherwise, or with respect to dividends, redemption,
conversion or voting.
aa. Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Holders relating to the terms and
conditions of the transactions contemplated by the Transaction Documents, except
as set forth in the Transaction Documents and the UICI Termination Agreement.
bb. Absence of Claims. The Company does not currently have
under consideration, and is not otherwise currently aware of, any claims, causes
of action, damages or demands whatsoever that it or any of its officers,
directors, partners or Affiliates (as such term is defined in the Series A
Certificate of Designation) may have against any of the Holders or any of their
respective predecessors, successors, officers, directors, partners, employees,
agents, insurers, representatives or Affiliates, whether legal, equitable or
administrative, or fixed or contingent.
2.2 Representations and Warranties of the Holders. Each of the
Holders, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Holder is a corporation or a
limited duration company or a limited liability company or limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The exchange by such
Holder for a portion of the Payment and the shares of Preferred Stock hereunder
has been duly authorized by all necessary action on the part of such Holder.
Each of this Agreement and the Registration Rights Agreement has been duly
executed and delivered by such Holder and constitutes the valid and legally
binding obligation of such Holder, enforceable against such Holder in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to
11
general principles of equity, and except that rights to indemnification and
contribution may be limited by federal or state securities laws or public policy
relating thereto.
b. Investment Intent. Such Holder is acquiring the shares of
Preferred Stock and the Underlying Shares for its own account and not with a
present view to or for distributing or reselling the shares of Preferred Stock
or the Underlying Shares or any part thereof or interest therein in violation of
the Securities Act and, if such Holder is not an individual, such Holder
represents that it has not been formed for the specific purpose of acquiring the
Preferred Stock; provided, however, that by making the representations herein,
such Holder does not agree to hold any of the shares of Preferred Stock or the
Underlying Shares for any minimum or other specific term and reserves the right
to dispose of the shares of Preferred Stock or the Underlying Shares at any time
in accordance with or pursuant to a registration statement or an exemption under
the Securities Act.
c. Holder Status. At the time such Holder was offered the
Preferred Stock and, at the Closing Date, (i) it was and will be an "accredited
investor" as defined in Rule 501 under the Securities Act and (ii) such Holder,
either alone or together with its representatives, had and will have such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Preferred Stock and the Underlying Shares.
d. Reliance. Such Holder understands and acknowledges that (i)
the Preferred Stock and the Underlying Shares are being delivered to such Holder
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2 and such Holder hereby consents to such reliance.
e. Information. Such Holder 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 exchange of the
Preferred Stock which such Holder considers necessary or appropriate and which
have been requested by such Holder or its advisors. Such Holder and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Holder or any of its advisors or representatives shall modify,
amend or affect Holder's right to rely on the Company's representations and
warranties contained in Section 2.1 above or representations and warranties of
the Company contained in any other Transaction Document. Such Holder understands
that its investment in the Preferred Stock involves a significant degree of
risk.
f. Governmental Review. Such Holder understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Preferred
Stock.
g. Residency. Such Holder is a resident of the jurisdiction
set forth immediately below such Holder's name on Schedule II hereto.
12
h. Current Holdings. Such Holder is currently a stockholder of
the Company.
i. Investment Experience. Such Holder has experience as an
investor in securities of companies similar to the stage of development of the
Company and acknowledges that it can bear the economic risk of its investment in
the Preferred Stock or the Underlying Shares issuable upon conversion of the
Preferred Stock, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of this investment
in the Preferred Stock.
j. Absence of Claims. Such Holder does not currently have
under consideration, and is not otherwise currently aware of, any claims, causes
of action, damages or demands whatsoever that it or any of its officers,
directors, partners or Affiliates (as such term is defined in the Series A
Certificate of Designation) may have against the Company or its Subsidiaries or
any of their respective predecessors, successors, officers, directors, partners,
employees, agents, insurers, representatives or Affiliates, whether legal,
equitable or administrative, or fixed or contingent.
The Company acknowledges and agrees that the Holders make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Holder should decide to dispose of the Preferred
Stock or the Underlying Shares held by it, such Holder understands and agrees
that it may do so only pursuant to an effective registration statement under the
Securities Act, to the Company or pursuant to an available exemption from the
registration requirements of the Securities Act or Rule 144 promulgated under
the Securities Act ("Rule 144"). In connection with any transfer of any
Preferred Stock or Underlying Shares other than pursuant to an effective
registration statement, Rule 144 or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions and reasonably acceptable to the
Company, to the effect that such transfer does not require registration of such
transferred securities under the Securities Act; provided, however, that if the
Preferred Stock or Underlying Shares may be sold pursuant to Rule 144(k), no
written opinion of counsel shall be required from the Holder if such Holder
provides reasonable assurances that such security can be sold pursuant to Rule
144(k). Notwithstanding the foregoing, the Company hereby consents to and agrees
to register any transfer by any Holder to an Affiliate (as defined in the
Certificates of Designation) of such Holder, provided that the transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act. Any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Holder
under
13
this Agreement and the Transaction Documents. If a Holder provides the Company
with an opinion of counsel, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions and reasonably
acceptable to the Company, to the effect that a public sale, assignment or
transfer of the Preferred Stock and the Underlying Shares may be made without
registration under the Securities Act or the Holder provides the Company with
reasonable assurances that the Preferred Stock and/or the Underlying Shares can
be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Underlying
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Holder and without
any restrictive legend. Notwithstanding the foregoing or anything else contained
herein to the contrary, the securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
b. Each Holder agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Preferred Stock
and the Underlying Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE.
ACCORDINGLY, THE SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AS DETERMINED PURSUANT TO AN OPINION OF
COUNSEL FOR THE CORPORATION THAT THE PROPOSED TRANSACTION WILL
BE EXEMPT FROM REGISTRATION.
Neither the Preferred Stock nor the Underlying Shares shall
contain the legend set forth above (or any other legend) (i) if in the written
opinion of counsel to the Company experienced in the area of United States
securities laws such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission), (ii) if such Preferred Stock or Underlying Shares
may be sold pursuant to Rule 144(k) or (iii) if such shares are registered for
resale under the Securities Act. The Company agrees that it will provide each
Holder, upon request, with a certificate or certificates representing shares of
Preferred Stock or Underlying Shares, free from such legend at such time as such
legend is no longer required hereunder. If such certificate or certificates had
previously been issued with such a legend or any other legend, the Company
shall, upon request and upon the delivery of the legended certificate(s),
reissue such certificate or certificates free of any legend.
3.2 Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions on transfer set forth in Section 3.1.
14
3.3 Furnishing of Information. As long as any Holder owns the
Preferred Stock or the Underlying Shares, the Company will cause the Common
Stock to continue at all times to be registered under Section 12 of the Exchange
Act, will timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the Closing Date pursuant to Section 13, 14 or 15(d) of the Exchange Act
and, unless filed by EDGAR, promptly furnish, but in no event later than two (2)
business days after the filing thereof with the Commission, the Holders with
true and complete copies of all such filings, and will not take any action or
file any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations. As
long as any Holder owns the Preferred Stock or the Underlying Shares, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d) of
the Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act,
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company also agrees
that prior to and during the Effectiveness Period (as defined in the
Registration Rights Agreement) it will make available or give to the Holders all
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. The Company further covenants that it will take such
further action as any Holder of the Preferred Stock or the Underlying Shares may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Preferred Stock or the Underlying Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including delivering the legal
opinion referenced in Section 3.1(b) hereof. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall: (a) qualify the Underlying Shares under the
securities or "blue sky" laws of such jurisdictions as the Holders may request
(or to obtain an exemption from such qualification), (ii) shall provide evidence
to each Holder of any such action so taken on or prior to the Closing Date and
(iii) shall continue such qualification at all times through the resale of all
of the Underlying Shares, but in any event not past the third anniversary of the
Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or exchange of the Preferred Stock or the Underlying Shares in a manner
that would require the registration under the Securities Act of the sale of the
Preferred Stock or the Underlying Shares to any Holder, or to issue securities
in such circumstances that is likely to result in such offering being integrated
with the exchange of the Preferred Stock and Underlying Shares in such manner
that stockholder approval would be required pursuant to any stockholder approval
provision applicable to the Company or its securities.
15
3.6 Listing and Reservation of Underlying Shares.
a. The Company shall (i) not later than ten (10) business days
after the Closing Date prepare and file with Nasdaq (as well as any other
national securities exchange or market on which the Common Stock is then listed)
a Notification Form: Listing of Additional Shares or such other listing
applications or letters acceptable to Nasdaq covering a number of shares of
Common Stock which is at least equal to 100% of the maximum number of Underlying
Shares then issuable (the "Application"), (ii) take all steps necessary to cause
the Application for the Underlying Shares to be accepted by Nasdaq (as well as
on any other national securities exchange or market on which the Common Stock is
then listed) as soon as possible thereafter, (iii) so long as any shares of
Common Stock shall be so listed, shall not revoke the Application for the
Underlying Shares, and (iv) upon request provide to the Holders evidence of the
Application as accepted by Nasdaq. Prior to the effectiveness of any
registration statement filed to register the resale of the Underlying Shares,
the Company shall promptly provide to each Holder copies of any notices it
receives from Nasdaq regarding the continued eligibility of the Common Stock for
listing on such automated quotation system so long as such notice does not
contain any material, nonpublic information. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section
3.6(a).
b. The number of shares of Common Stock included in the
Initial Registration Statement (as defined in the Registration Rights Agreement)
shall be equal to the Maximum Amount (as defined in the Registration Rights
Agreement).
c. The Company at all times shall reserve a sufficient number
of shares of its authorized but unissued Common Stock to provide for 110% of the
maximum number of Underlying Shares. Shares of Common Stock reserved for
issuance upon conversion of the shares of Preferred Stock shall be allocated pro
rata to each of the Holders in accordance with the number of shares of Preferred
Stock issued and delivered to such Holder at the Closing. If at any time the
number of shares of Common Stock authorized and reserved for issuance is
insufficient to cover 100% of the number of Underlying Shares issued and
issuable upon conversion of the shares of Preferred Stock (including the payment
of all dividends thereon) (based on the Conversion Price (as defined in the
Certificates of Designation)) of the shares of Preferred Stock in effect from
time to time without regard to any limitation on conversions, the Company will
promptly take all corporate action necessary to authorize and reserve 110% of
such shares, including, without limitation, calling a special meeting of
stockholders to authorize additional shares to meet the Company's obligations
under this Section 3.6(c), in the case of an insufficient number of authorized
shares, and using best efforts to obtain stockholder approval of an increase in
such authorized number of shares and taking actions pursuant to Section 3(b) of
the Registration Rights Agreement.
16
3.7 Notice of Breaches.
a. The Company and each Holder shall give prompt written
notice to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents, as well
as any events or occurrences arising after the date hereof and prior to the
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of the Closing Date; provided such notice will
not constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the
Company shall promptly notify, provided such notification will not constitute
material non-public information, each Holder of any notice or claim (written or
oral) that it receives from any lender of the Company or any Subsidiary to the
effect that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Holders a copy of any written
statement in support of or relating to such claim or notice.
c. The default by any Holder of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to any other Holder and, except with respect to the
accuracy of each Holder's representations and warranties and the obligation of
each Holder to tender for cancellation the Debentures that it holds to the
Company at Closing, the default by any Holder of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not affect the Company's obligations under this Agreement or any
Transaction Document to any non-defaulting Holder.
3.8 Form D. The Company agrees to file a Form D with respect to
the Preferred Stock as required by Rule 506 under Regulation D and to provide a
copy thereof to each Holder promptly after such filing.
3.9 Transfer Agent Instructions. On the Closing Date the Company
shall issue irrevocable instructions to its transfer agent (and shall issue to
any subsequent transfer agent as required), to issue certificates, registered in
the name of each Holder or its respective nominee(s), for the Underlying Shares
in such amounts as specified from time to time by each Holder to the Company in
a form acceptable to such Holders (the "Irrevocable Transfer Agent
Instructions"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 3.9, and
stop transfer instructions to give effect to Section 3.1 hereof prior to
registration of the Underlying Shares under the Securities Act, will be given by
the Company to its transfer agent and that the Preferred Stock and the
Underlying Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Documents. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders by violating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
17
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 3.9 will be inadequate and agrees, in the event of a beach or
threatened breach by the Company of the provisions of this Section 3.9, that the
Holders shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer without the necessity of showing economic loss and without any bond
or other security being required.
3.10 Press Release; Filing of Form 8-K. Subject to the provisions
of Section 6.11 hereof, prior to the opening of Nasdaq on August 1, 2002, the
Company shall issue a press release disclosing the transaction contemplated
hereby in form and substance acceptable to the Holders. On or before the 5th
business day following the Closing Date, the Company shall file a Current Report
on Form 8-K with the Commission describing the terms of the transaction
contemplated by this Agreement and the Transaction Documents in the form
required by the Exchange Act.
3.11 Ordinary Course Brokerage and Trading. Subject to compliance
with all applicable securities laws and Nasdaq regulations, no Holder shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Common Stock; provided, however, that the Holder engaged in
such activities shall not then be in possession of material, non-public
information with respect to the Company.
3.12 Best Efforts. Each of the parties hereto shall use its best
efforts to satisfy each of the conditions to be satisfied by it as provided in
Article IV of this Agreement.
3.13 Material Information. The Company covenants that any
information provided by the Company to the Holders and their agents or counsel
which could be deemed to constitute material non-public information will cease
to be material non-public information (either through disclosure by the Company
or otherwise) on such date as the Company files its Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2002.
3.14 Preferred Stock Characterization. In the event of any
determination as to whether the Preferred Stock constitutes debt or equity of
the Company, it is hereby declared that it is the mutual intention of the
Company and the Holders that the Preferred Stock be deemed equity of the
Company. In the event that notwithstanding the foregoing expressed intention, it
is determined that the Preferred Stock constitutes debt of the Company, then the
Company and the Holders do hereby agree to negotiate in good faith any
amendments to the Certificate or other Transaction Documents that are necessary
to render the Preferred Stock being deemed equity of the Company, provided that
any such changes shall ultimately be made in the sole discretion of the Holders
of not less than sixty percent (60%) of the then outstanding shares of Preferred
Stock.
18
ARTICLE IV.
CONDITIONS
4.1 Closing.
a. Conditions Precedent to the Obligation of the Company to
Deliver the Shares of Preferred Stock. The obligation of the Company to deliver
the Payment and the shares of Preferred Stock is subject to the satisfaction or
waiver (with prior written notice to each Holder) by the Company, at or before
the Closing Date of each of the following conditions:
(i) Accuracy of the Holders' Representations and
Warranties. The representations and warranties of each Holder in this Agreement
shall be true and correct in all material respects as of the date when made and
as of the Closing;
(ii) Performance by the Holders. Each Holder
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Holder at or before the Closing;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents;
(iv) UICI Termination. The UICI Termination
Agreement shall have been executed and delivered by the Company and UICI, and
the Company shall have received the cash consideration provided for therein; and
(v) Listing of Underlying Shares. The
Underlying Shares shall be listed for trading on the Nasdaq.
b. Conditions Precedent to the Obligation of the Holders to
Exchange the Debentures at the Closing. The obligation of each Holder hereunder
to exchange its Debentures for the shares of Preferred Stock at the Closing is
subject to the satisfaction or waiver by such Holder, at or before the Closing
Date, of each of the following conditions:
(i) Accuracy of the Company's Representations
and Warranties. The representations and warranties of the Company set forth in
this Agreement shall be true and correct in all respects as of the date when
made and as of the Closing Date, unless such representations and warranties of
the Company are specifically made as of the specific dates provided in Section
2.1 of this Agreement;
(ii) Performance by the Company. The Company
shall have performed, satisfied and complied in all respects with all covenants,
agreements and conditions
19
required by this Agreement to be performed, satisfied or complied with by the
Company at or before the Closing Date, including, but not limited to, tendering
the Payment to the Holders;
(iii) All Proceedings to be Satisfactory. All
corporate and other proceedings to be taken by the Company in connection with
the transactions contemplated hereby and by the other Transaction Documents and
all documents incident thereto shall be satisfactory in form and substance to
the Holders and their counsel and the Holders and their counsel shall have
received all counterpart originals or certified or other copies of such
documents as they may reasonably request;
(iv) No Injunction. No statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement and the Transaction Documents;
(v) No Suspensions of Trading in Common Stock.
The trading in the Common Stock shall not have been suspended by the Commission,
or Nasdaq (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);
(vi) Listing of Underlying Shares. The
Underlying Shares shall be listed for trading on the Nasdaq;
(vii) Required Approvals. The Company shall have
obtained all consents, waivers, authorizations and approvals from any third
parties necessary to the consummation of the transaction contemplated hereby,
and copies thereof shall have been delivered to the Holders;
(viii) Shares of Common Stock. The Company shall
have duly reserved the number of Underlying Shares issuable upon the conversion
of the shares of Preferred Stock acquired by the Holders on the Closing Date;
(ix) Adverse Changes. Since the date of the
financial statements included in the Company's Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, whichever is more recent, last filed prior to the
date of this Agreement, no event which had a Material Adverse Effect shall have
occurred (for purposes hereof, changes in the market price of the Common Stock
as compared to the market generally may be considered as a factor in determining
whether there has occurred an event which has had a Material Adverse Effect);
(x) Litigation. No litigation shall have been
instituted or threatened against the Company which would reasonably be expected
to, individually or in the aggregate, have had a Material Adverse Effect;
(xi) Change of Control. No Change of Control
shall have occurred since the date of this Agreement. "Change of Control" means
the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Holders or any of their
20
Affiliates, of in excess of 33.33% of the voting securities of the Company, (ii)
a replacement of more than one-half of the members of the Company's Board of
Directors that is not approved by those individuals who are members of the Board
of Directors on the date hereof in one or a series of related transactions,
(iii) the merger of the Company with or into another entity, (iv) the
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (v) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii), (iii) or (iv);
(xii) Transfer Agent Instructions. The
Irrevocable Transfer Agent Instructions, in a form acceptable to the Holders,
shall have been delivered to and acknowledged in writing by the Company's
transfer agent with a copy forwarded to each Holder;
(xiii) Series A Certificate of Designation. The
Series A Certificate of Designation shall have been filed with the Secretary of
State of Pennsylvania;
(xiv) Resolutions. The Board of Directors of the
Company shall have adopted resolutions consistent with Section 2.1(b) and in a
form reasonably acceptable to each Holder (the "Resolutions"); and
(xv) Qualification Under State Securities Laws.
All registrations, qualifications, permits and approvals required under
applicable state securities laws shall have been obtained for the lawful
execution, delivery and performance of this Agreement and each of the other
Transaction Documents, and also for the offer, sale, issuance and delivery of
the Preferred Stock to be purchased hereunder.
c. Documents and Certificates. At the Closing, the Holders
shall have delivered to the Company, the amount of Debentures as set forth next
to such Holder's name on Schedule II.
d. Documents and Certificates. At the Closing, the Company
shall have delivered to the Holders the following in form and substance
reasonably satisfactory to the Holders:
(i) Preferred Stock Certificate. A Preferred
Stock Certificate(s) representing the number of shares of Preferred Stock
exchanged for by such Holder as set forth next to such Holder's name on Schedule
I, registered in the name of such Holder, each in form satisfactory to the
Holder;
(ii) Registration Rights. The Company shall have
executed and delivered the Registration Rights Agreement;
(iii) Officer's Certificate. An Officer's
Certificate dated the Closing Date and signed by an executive officer of the
Company confirming the accuracy of the Company's representations and warranties
as of such Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in Section 4.1(b) and this Section 4.1(d) as of
the Closing Date;
21
(iv) Secretary's Certificate. A Secretary's
Certificate dated the Closing Date and signed by the Secretary or Assistant
Secretary of the Company certifying (A) that attached thereto is a true and
complete copy of the Articles of Incorporation of the Company, as in effect on
the Closing Date, (B) that attached thereto is a true and complete copy of the
by-laws of the Company, as in effect on the Closing Date and (C) that attached
thereto is a true and complete copy of the Resolutions duly adopted by the Board
of Directors of the Company authorizing the execution, delivery and performance
of this Agreement and of the Transaction Documents, and that such Resolutions
have not been modified, rescinded or revoked;
(v) Opinion. An opinion of the Company's
principal legal counsel, as well as an opinion of the Company's Pennsylvania
legal counsel, substantially in the forms attached hereto as Exhibit C, dated as
of the Closing Date;
(vi) Governmental Certificates. The Company
shall have delivered to each of the Holders a copy of a certificate evidencing
the existence and good standing of the Company and each Subsidiary in each such
entity's state of formation issued by the appropriate governmental authority of
such state of formation as of a date within ten (10) days of the Closing Date.
The Company shall have delivered to each of the Holders a copy of its Articles
of Incorporation as certified by the Secretary of State of the State of
Pennsylvania within ten (10) days of the Closing Date; and
(vii) Other Documents. The Company shall have
delivered to each Holder such other documents relating to the transactions
contemplated by the Transaction Documents as the Holder or its counsel may
reasonably request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification.
a. The Company shall defend, protect, indemnify and hold
harmless each Holder, its past and present Affiliates and their successors and
assigns (in accordance with the provisions of Section 6.6 hereof), each other
holder of the Underlying Shares and all of their stockholders, officers,
directors, partners, members, 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, proceedings, costs (as
incurred), penalties, fees (including legal fees and expenses), 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 interest and penalties and any fees (including legal
fees) and expenses incurred in enforcing the Company's indemnification
obligations under this Section 5.1(a) (the "Indemnified Liabilities"), incurred
by any Indemnitee as a result of, or arising out of, or relating to: (i) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in the other Transaction Documents, or any other
certificate, instrument or
22
document contemplated hereby or thereby, (ii) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or the other
Transaction Documents, or any other certificate, instrument or document
contemplated hereby or thereby or (iii) any cause of action, suit or claim
brought or made or threatened, other than by the Company, against such
Indemnitee and arising out of or resulting from (A) the execution, delivery,
registration, performance or enforcement of this Agreement or the other
Transaction Documents, (B) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the
Preferred Stock or (C) solely the status of such Holders or holder of the
Preferred Stock or the Underlying Shares as an investor in the Company. The
Company's indemnification obligations under this Section 5.1(a) shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliate of any Holder and any
partners, directors, agents, members, employees and controlling Persons (if
any), as the case may be, of any Holder and any such Affiliate, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Holders and any such Affiliate and
any such Person. The Company also agrees that neither the Holders nor any such
Affiliates, partners, directors, agents, members, employees or controlling
Persons of the Holders and any such Affiliates shall have any liability to the
Company or any Person asserting claims on behalf of or in right of the Company
in connection with or as a result of the consummation of this Agreement or any
of the Transaction Documents except to the extent that any losses, claims,
damages, liabilities or expenses incurred by the Company result from the gross
negligence or willful misconduct of such Holder or entity in connection with the
transactions contemplated by this Agreement or the Transaction Documents. 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 that is permissible under
applicable law.
b. All fees and expenses (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend any proceeding initiated against an Indemnitee in a manner not
inconsistent with this Section or in enforcing the Company's indemnification
obligation) of the Indemnitees shall be paid to the Indemnitees as incurred,
within ten (10) business days of written notice thereof to the Company, which
notice shall be delivered no more frequently than on a monthly basis, regardless
of whether it is ultimately determined that an Indemnitee is not entitled to
indemnification hereunder; provided, however, that the Company may require such
Indemnitee to undertake to reimburse all such fees and expenses to the extent it
is finally judicially determined that such Indemnitee is not entitled to
indemnification hereunder.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits
and Schedules hereto and the other Transaction Documents contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters. In the event of any inconsistency or ambiguity between the
terms of this Agreement and the terms of
23
the Series A Certificate of Designation, the terms of the Series A Certificate
of Designation shall control and govern any construction hereof or thereof.
6.2 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party (if received by 5:00 p.m.
eastern time ("ET") where such notice is received) or the first business day
following such delivery (if received after 5:00 p.m. ET where such notice is
received); or (iii) one business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company:
Healthaxis Inc.
The Towers at Williams Square
5215 N. O'Connor Blvd., Suite 800
Irving, Texas 75039
Telephone: (972) 443-5000
Facsimile: (972) 556-0572
Attention: Chief Financial Officer
With a copy to:
Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-6776
Telephone: (214) 740-8000
Facsimile: (214) 740-8800
Attention: John B. McKnight
If to the Transfer Agent:
Mellon Investor Services LLC
44 Wall Street, 6th Floor
New York, New York 10005
Telephone: (917) 320-6254
Facsimile: (917) 320-6318
Attention: Client Service Manager
24
If to Brown Simpson Partners I, Ltd. to:
152 West 57th Street, 21st Floor
New York, New York 10029
Telephone: (212) 247-8200
Facsimile: (212) 247-1329
Attention: Mitchell D. Kaye
If to Brown Simpson - ORD Investments LLC to:
c/o OTA Limited Partnership
1 Manhattanville Road
Purchase, NY 10577
Telephone: (914) 460-4013
Facsimile: (914) 694-5831
Attention: Vinny Digeso
If to LBI Group Inc. to:
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Telephone: (212) 526-7255
Facsimile: (212) 526-2198
Attention: Steve Weinstein
If to UICI to:
UICI
4001 McEwen Drive, Suite 200
Dallas, Texas 75244
Telephone: (972) 392-6719
Facsimile: (972) 392-6717
Attention: Glenn W. Reed
Executive Vice President and General Counsel
If to The Pennsylvania State University to:
The Pennsylvania State University
103 Innovation Boulevard, Suite 212
University Park, PA 16802
Telephone: (814) 863-9150
Facsimile: (814) 863-9160
Attention: David E. Branigan
25
With a copy, in the case of Notice to Brown Simpson Partners
I, Ltd. [or Brown Simpson - ORD Investments LLC] to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Attention: James Kaye
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
6.3 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Holders of not less than sixty percent
(60%) of the then outstanding shares of Preferred Stock or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. Notwithstanding
the foregoing, no such amendment shall be effective to the extent that it
applies to less than all of the holders of the shares of Preferred Stock
outstanding. The Company shall not offer or pay any consideration to a Holder
for consenting to such an amendment or waiver unless the same consideration is
offered to each Holder and the same consideration is paid to each Holder that
consents to such amendment or waiver.
6.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.5 References. References herein to Sections are to Sections of
this Agreement, unless otherwise expressly provided.
6.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each of the Holders. The Holders
may assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Company, provided, that any assignees must execute
and deliver to the Company an instrument expressly making the representations
and warranties set forth in Section 2.2 and agrees to become a party hereto;
further that, prior to the Closing Date, the Holders may assign this Agreement
its rights and rights or obligations hereunder only to an Affiliate of such
Holder. This provision shall not limit a Holder's right to transfer securities
in accordance with all of the terms of this Agreement or the Transaction
Documents.
26
6.7 No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the nonexclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.9 Survival. The representations and warranties of the Company
and the Holders contained in Sections 2.1 and 2.2, the agreements and covenants
set forth in Section 3, and the indemnification provisions set forth in Section
5, shall survive the Closing and any conversion of the shares of Preferred Stock
or exercise of the Warrants regardless of any investigation made by or on behalf
of the such Holder or by or on behalf of the Company, except that, in the case
of representations and warranties such survival shall be limited to the period
of six (6) years following the Closing Date on which they were made or deemed to
have been made (other than with respect to any claim by a third party against
the party to this Agreement who seeks to assert a claim based on such
representations and warranties). This section shall have no effect on the
survival of the indemnification provisions of the Registration Rights Agreement.
6.10 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.11 Publicity. The Company and the Holders shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
27
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Holders without
each such Holder's prior consent, except to the extent required by law and in
the initial press release with respect to the transactions contemplated hereby.
The Holders and their affiliated companies shall, without further cost, have the
right to use in its advertising, marketing or other similar materials all or
parts of the Company's press releases that focus on the transactions forming the
subject matter of this Agreement or which make reference to such transactions.
The Holder understand that this grant by the Company only waives objections that
the Company might have to the use of such materials by the Holders and in no way
constitutes a representation by the Company that references in such materials to
the activities of third-parties have been cleared or constitute a fair use.
6.12 Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
6.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Holders
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Holders (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
6.14 Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of the other Holders hereunder, and no Holder shall be responsible
in any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holder as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the Transaction Documents, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.
6.15 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Holders hereunder or pursuant to the Transaction
Documents or the Holders enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be
28
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
6.16 Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.17 Fees and Expenses. Except as set forth in the Registration
Rights Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, that on the Closing Date, the Company
shall reimburse the Holders for $35,000 of the legal fees and expenses of Akin,
Gump, Strauss, Hauer & Feld, L.L.P., incurred in connection with negotiating and
preparing this Agreement and the other Transaction Documents and consummating
the transactions contemplated hereby and thereby. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Preferred Stock and upon conversion thereof, the Underlying Shares.
29
IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
HEALTHAXIS INC.
By: /s/ JOHN M. CARRADINE
-------------------------------------------------
Name: John M. Carradine
Title: Chief Financial Officer
BROWN SIMPSON PARTNERS I, LTD.
By: /s/ MITCHELL D. KAYE
-------------------------------------------------
Name: Mitchell D. Kaye
Title: Attorney-in-Fact
BROWN SIMPSON - ORD INVESTMENTS LLC
OTAPE LLC SUCCESSOR TO ABOVE
By: /s/ RICHARD M. CAYNE
-------------------------------------------------
Name: Richard M. Cayne
Title: General Counsel
LBI GROUP INC.
By: /s/ KEVIN R. GENIRS
-------------------------------------------------
Name: Kevin R. Genirs
Title: Vice President
UICI
By: /s/ GLENN W. REED
-------------------------------------------------
Name: Glenn W. Reed
Title: Executive Vice President and General Counsel
THE PENNSYLVANIA STATE UNIVERSITY
By: /s/ JOHN C. POMEROY, JR.
-------------------------------------------------
Name: John C. Pomeroy, Jr.
Title: Chief Investment Officer
SCHEDULE I
- ---------------------------------------------------------------------------------------------------------------------
Number of shares of Portion of Payment
Preferred Stock at Tendered Accrued Interest
Name of Holder Closing Date at Closing Tendered at Closing
- -------------- ------------ ---------- -------------------
- ---------------------------------------------------------------------------------------------------------------------
Brown Simpson Partners I, Ltd. 10,824 $ 1,842,425 $ 3,129.60
Brown Simpson - ORD Investments 1,282 $ 218,180 $ 370.61
LLC
LBI Group Inc. 8,546 $ 1,454,545 $ 2,470.73
UICI 1,424 $ 242,425 $ 411.79
The Pennsylvania State University 1,424 $ 242,425 $ 411.79
----- -------------- -------------
TOTAL 23,500 $ 4,000,000 $ 6,794.52
====== ============== =============
SCHEDULE II
Principal
Amount of Debentures
Name of and Address of Holder Exchanged
----------------------------- ---------
Brown Simpson Partners I, Ltd.: $12,666,666.67
152 West 57th Street, 21st Floor
New York, New York 10019
Attn: Mitchell D. Kaye
Fax: (212) 247-1329
Residence: Grand Cayman, Cayman Islands
Brown Simpson - ORD Investments LLC $ 1,500,000.00
c/o OTA Limited Partnership
1 Manhattanville Road
Purchase, NY 10577
Attention: Vinny Digeso
Facsimile: (914) 694-5831
Residence: Purchase, NY
LBI Group Inc. $10,000,000.00
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attention: Steve Weinstein
Facsimile: (212) 526-2198
Residence: New York, NY
UICI $ 1,666,666.67
Suite 200
4001 McEwen Drive
Dallas, Texas 75244
Attn: Glenn W. Reed
Fax: (972) 392-6717
Residence: Dallas, Texas
The Pennsylvania State University $ 1,666,666.66
103 Innovation Boulevard, Suite 212
University Park, PA 16802
Attention: David E. Branigan
Facsimile: (814) 863-9160
Residence: University Park, PA
Exhibit A
[Form of Certificate of Designation]
Exhibit B
[Form of Registration Rights Agreement]
Exhibit C
[Forms of Legal Opinion]