EXECUTION COPY
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT ("Agreement") is made as of the 13th day
of November, 1998, by and among Provident American Corporation, a Pennsylvania
corporation (the "Company"), and the individuals and entities named in Schedule
I hereto (each, a "Purchaser," and, collectively, the "Purchasers"). The parties
hereby agree as follows:
1. Sale and Purchase of Shares.
1.1 Sale and Purchase. Subject to the terms and conditions of this
Agreement, the Company will issue and sell to the Purchasers, and the Purchasers
will purchase from the Company an aggregate of eight hundred fifty-seven
thousand one hundred forty-three (857,143) shares of the Company's Common Stock,
par value $.10 per share (the "Shares"). The number of such Shares to be
purchased by each Purchaser hereunder is set forth opposite such Purchaser's
name on Schedule I.
1.2 Certain Terms.
(a) The term "to the Company's knowledge" or "to the knowledge of
the Company," or words of similar import, shall mean the actual knowledge of an
officer of the Company, and the term "to the Company's best knowledge" "to the
best knowledge of the Company," or words of similar import, shall mean the
actual knowledge of an officer of the Company after conducting such due
diligence as may be reasonable under the circumstances, but which reasonable due
diligence shall not require any investigation beyond a review of the books and
records of the Company and discussions with officers, directors and employees of
the Company.
(b) The terms "combined" and "combining", when used with respect to
the Company's financial statements, mean the inclusion in the financial
statements of those companies which are wholly owned or controlled by the
Company.
(c) The term "Subsidiary" shall mean any corporation or company
listed as a Subsidiary of the Company in Exhibit 22 to the Company's Annual
Reports on Form 10-K filed with the Securities and Exchange Commission for the
fiscal year ended December 31, 1997.
2. Closing Date; Delivery; Use of Proceeds.
2.1 Closing Date. Subject to the satisfaction of the terms and
conditions hereof, the purchase and sale of the Shares to be purchased and sold
pursuant to Section 1.1 shall be held immediately following the execution and
delivery of this agreement by the parties hereto. Such time is hereinafter
referred to as the "Closing" and the date of the Closing is hereinafter referred
to as the "Closing Date."
2.2 Deliveries by the Company and the Purchasers.
(a) Delivery by the Company. At the Closing the Company shall
deliver to each Purchaser, each of the following:
(i) A duly executed certificate or certificates evidencing the
Shares to be purchased hereunder by such Purchaser; and
(ii) All documents required by Section 5.1 not previously
delivered to such Purchaser.
(b) Delivery by the Purchasers. At the Closing, the Purchasers
shall (i) pay to the Company, by means of wire transfer, representing
immediately available funds, an amount equal to $3,000,000, representing the
aggregate purchase price payable by the Purchasers for the Shares to be
purchased hereunder by the Purchasers and (ii) deliver to the Company the
opinion of Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, counsel to Lynx Private Equity Partners I, LLC, a limited
liability company formed and existing under the laws of the State of California,
one of the Purchasers ("Lynx"), substantially in the form attached hereto as
Schedule 2.2(b). The portion of such aggregate purchase price for the Shares to
be paid by each Purchaser is set forth opposite such Purchaser's name on
Schedule I.
2.3 Use of Proceeds. The Company shall use the proceeds from the sale
of the Shares to be purchased hereunder by the Purchasers to purchase, directly
or indirectly through an investment vehicle of the Company's choosing,
$3,000,000 worth of the capital stock of ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. ("HealthAxis")
directly or through a wholly-owned subsidiary of the Company as part of the
American Online ("AOL") funding round. Each Purchaser understands and agrees
that HealthAxis may apply an amount, not to exceed $531,000, of the proceeds of
the issuance and sale of its capital stock to repay advances heretofore made to
it by Provident Indemnity Life Insurance Company ("PILIC"), one of the
Subsidiaries of the Company, and that the balance of such proceeds will be used
by HealthAxis for its general corporate business.
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Purchaser as follows:
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3.1 Organization and Good Standing.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and is
duly qualified or authorized to do business in each jurisdiction in which it
conducts business, or owns property, except where the failure so to qualify
would not in the aggregate have a material adverse effect on the Company and the
Subsidiaries, taken as a whole.
(b) Each of PILIC and Provident American Life and Health Insurance
Company ("PALHIC") is an insurance company duly organized and existing under the
laws of the Commonwealth of Pennsylvania.
3.2 Capitalization.
(a) Immediately prior to the Closing, the Company's authorized
capital stock will consist of 50,000,000 shares of Common Stock, par value $.10
per share ("Voting Common Stock"), of which 10,200,735 shares will be issued and
outstanding, 20,000,000 shares of Class A Common Stock, par value $.10 per
share, of which no shares will be outstanding, and 20,000,000 shares of
Preferred Stock, par value $1.00 per share. The Company's Preferred Stock may be
issued by the Company's Board from time to time in series, and such Board is
authorized to fix the number of shares in each series of Preferred Stock and to
establish all designations, the relative rights (including any conversion
rights), preferences and limitations of the shares in each such series,
including the number of shares in such series, the dividend rate, redemption
provisions, the terms and conditions applicable to any conversion privilege,
amount payable on liquidation, provisions concerning the voting of the shares of
such series, and generally the other rights and privileges, and any
qualifications, limitations or restrictions of such rights and privileges of
such series. The Company's Board of Directors has authorized the issuance of two
series of Preferred Stock, the Series A Preferred Shares and Series B Cumulative
Convertible Preferred Stock (the "Series B Preferred Shares"), the relative
rights (including any conversion rights), preferences and limitations of the
shares in each such series of Preferred Stock are set forth in Schedule 3.2(a).
The Company's Board of Directors has authorized the issuance of up to 4,500,000
Series A Preferred Shares, 580,250 of which will be issued and outstanding prior
to the Closing and 426,250 Series B Preferred Shares, none of which will be
issued and outstanding prior to the Closing. At the Closing, 857,143 Shares to
be purchased hereunder by the Purchasers will be issued and there will be
outstanding 11,057,878 shares of Voting Common Stock. At the time of the
Closing, all such issued and outstanding shares of Voting Common Stock and
Series A Preferred Shares will have been duly and validly authorized and issued,
will be fully paid and nonassessable, and will have been issued in full
compliance with all applicable laws, rules, regulations and ordinances.
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(b) The numbers of authorized, issued and outstanding shares of
capital stock of each Subsidiary are set forth on Schedule 3.2(b). All such
issued and outstanding shares are duly and validly authorized and issued, fully
paid and nonassessable, and were issued in full compliance with all applicable
laws, rules, regulations and ordinances. The Company is the owner, beneficially
and of record, of all of the issued and outstanding stock of each of the
Subsidiaries, free and clear of any liens, encumbrances, pledges, security
interests, restrictions, prior assignments or claims of any nature whatsoever.
(c) Except for rights created by this Agreement or as listed on
Schedule 3.2(c), there exist no (A) outstanding options, warrants or rights to
purchase or subscribe for any equity securities or other ownership interests of
the Company or any of the Subsidiaries, (B) obligations of the Company or any of
the Subsidiaries, whether absolute or contingent, to issue any shares of equity
securities or other ownership interests, or (C) indebtedness or securities
directly or indirectly convertible into any equity securities of the Company or
any of the Subsidiaries. No person is entitled to any preemptive or similar
right with respect to the issuance of any equity securities of the Company
except for rights of the Purchasers created by this Agreement and as set forth
in Schedule 3.2(c).
3.3 Authorization. The Company has full corporate power and authority
to enter into this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement is a valid and
binding agreement of the Company, enforceable in accordance with its terms
except (a) as the same may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws of general application relating to or affecting
creditors' rights, including, without limitation, the effect of statutory or
other laws regarding fraudulent conveyances and preferential transfers, and (b)
for the limitations imposed by general principles of equity. The foregoing
exceptions set forth in subsections (a) and (b) of this Section 3.3 are
hereinafter referred to as the "Enforceability Exceptions."
3.4 Consents and Approvals. Except as disclosed on Schedule 3.4, all
prior consents, approvals and authorizations of any governmental or regulatory
authority (domestic or foreign) or any other person (either governmental or
private) required in connection with the execution and delivery by the Company
of this Agreement or the consummation of the transactions contemplated hereby
have been obtained, made and satisfied.
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3.5 Financial Information.
(a) The Company has furnished to the Purchasers an unaudited
combined and combining balance sheet as of June 30, 1998, and the related
unaudited statements of operations, changes in shareholders' equity and cash
flows for the period ended June 30, 1998 of the Company and the Subsidiaries
(the "Financials"). The Financials have been prepared from the books and records
of the Company and the Subsidiaries and, to the knowledge of the Company,
present fairly the combined financial condition and the combined statement of
operations and retained earnings of the Company and the Subsidiaries at and as
of June 30, 1998 in accordance with generally accepted accounting principles
consistently applied ("GAAP") except that required footnote disclosures may be
omitted.
(b) The Company has heretofore furnished to the Purchasers audited
combined and combining balance sheets of the Company as of December 31, 1995,
1996 and 1997 and the related audited statements of operations, changes in
shareholders' equity and cash flows prepared in accordance with GAAP for the
years ended December 31, 1995, 1996 and 1997.
(c) The Company has heretofore furnished to the Purchasers a draft
of the financial statements for the Company, PILIC and PALHIC for the period
ended September 30, 1998.
3.6 Company Reports. The Company has previously furnished to the
Purchasers true and complete copies of its Annual Reports on Form 10-K filed
with the Securities and Exchange Commission (the "SEC") for each of its five
fiscal years ended December 31, 1993 through 1997, as the same may have been
amended, and a true and complete copy of its Quarterly Report on Form 10-Q filed
with the SEC for the six months ended June 30, 1998 (the "Company Reports").
3.7 Labor and Employment Agreements. Schedule 3.7 sets forth a complete
and correct list of each employment, profit sharing, deferred compensation,
bonus, pension, retainer, consulting, retirement, health, welfare, or incentive
plan or contract between the Company or any Subsidiary and any senior management
employee or independent consultant.
3.8 Brokerage Fees. No person or entity is entitled to any brokerage or
finder's fee or other commission from the Company or any Subsidiary in respect
of this Agreement or the transactions contemplated hereby.
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3.9 Disclosure. To the best knowledge of the Company, the information
provided by the Company in this Agreement, including, without limitation, the
Schedules hereto, and in any other writing pursuant hereto does not and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein or necessary to make the statements and
facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore
delivered or made available by the Company to the Purchasers pursuant hereto
were complete and accurate records of such documents.
3.10 Corporate Books. The corporate minute books of the Company and
each Subsidiary are complete in all material respects, each of the minutes
contained therein accurately reflect the transactions that occurred at the
meeting for which the minutes were taken, the meetings of directors or
stockholders referred to in the minutes were duly called and held or held by
telephone means or unanimous written consent, and, to the Company's best
knowledge, the signatures contained on all documents in the minute books are the
true signatures of the persons purporting to have signed the same.
3.11 HealthAxis Common Shares Held By Company. The Company is the
record holder and beneficial owner of 13,125,000 shares of the Common Stock, par
value $.10 per share, of ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the "HealthAxis Common Shares"),
all of which have been duly authorized and issued, are fully paid and
non-assessable, and are held by the Company free from any liens and
encumbrances. The Purchasers are aware that ▇▇▇▇▇▇▇▇▇▇.▇▇▇. Inc. and America
Online are on the date hereof in close negotiations on an agreement pursuant to
which ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. will issue and sell certain shares of its capital
stock to America Online. The Company has advised the Purchasers that
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. is in default of the Interactive Marketing Agreement
between ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. and America Online dated February 1, 1998, as
amended, and certain other material agreement relative to the business of
▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
4. Representations and Warranties of the Purchasers. Each Purchaser
represents and warrants to the Company as follows:
4.1 Acquisition of Securities. This Agreement is made with such
Purchaser in reliance upon such Purchaser's representation to the Company, which
by such Purchaser's execution of this Agreement such Purchaser hereby confirms,
that the Shares to be received by such Purchaser will be acquired for investment
for such Purchaser's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that such Purchaser has
no present intention of selling, granting any participation in, or otherwise
distributing the same, and such Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or commitment
providing for the disposition thereof.
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4.2 No Registration. Such Purchaser understands and acknowledges that
the offering of the Shares pursuant to this Agreement will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
any other applicable blue sky or state securities law on the grounds that the
offering and sale of Shares to such Purchaser contemplated by this Agreement are
exempt from registration pursuant to Section 4(2) of the Act and exempt from
qualification pursuant to comparable available exceptions in various states, and
that the Company's reliance upon such exemptions is predicated upon such
Purchaser's representations set forth in this Agreement. Such Purchaser is
purchasing the Shares to be received by such Purchaser hereunder without being
furnished any offering literature, prospectus or business plan other than as
specifically mentioned herein. Such Purchaser acknowledges and understands that
the Shares to be received by such Purchaser hereunder must be held indefinitely
unless such Shares are subsequently registered under the Act and other
applicable blue sky and state securities laws or an exemption from such
registration is available.
4.3 Investment. Such Purchaser is acquiring the Shares to be received
by such Purchaser hereunder for investment for its own account and not with a
view to, or for resale in connection with, any distribution of such Shares. Such
Purchaser understands that the Shares to be received by such Purchaser hereunder
have not been registered under the Securities Act, or under any state securities
or "Blue Sky" laws, and, as a result, are subject to substantial restrictions on
transfer. Such Purchaser acknowledges that the Shares to be received by such
Purchaser hereunder must be held indefinitely unless subsequently registered
under the Securities Act and any applicable state securities or "Blue Sky" laws,
or exemptions from registration under the Securities Act and such laws are
available; provided, however, that by making the representation herein, such
Purchaser does not agree to hold any of the Shares to be received by such
Purchaser hereunder for any minimum or other specific term and reserve the right
to dispose of such Shares at any time in accordance with or pursuant to a
registration statement or an exemption from registration under the Securities
Act and any applicable state securities or "Blue Sky" laws. Such Purchaser
confirms that in making the decision to purchase Shares to be received by such
Purchaser hereunder it has relied on the Terms Sheet attached hereto as Exhibit
4.3 and has been given the opportunity to ask questions of and to receive
answers from the Company concerning the information set forth in the Terms Sheet
and to review financial statements of the Company, and to obtain any additional
information which the Company possesses or can acquire without unreasonable
effort or expense as is necessary to verify the accuracy of the information
furnished in the Terms Sheet.
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4.4 Understanding. Such Purchaser understands that if the Company does
not register the Shares to be received by such Purchaser hereunder with the
Securities and Exchange Commission ("SEC") pursuant to Section 12 or become
subject to Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") or supply information pursuant to Rule 15c2-11 thereunder or if a
registration statement covering such Shares (or a filing pursuant to the
exemption from registration under Regulation A of the Act covering such Shares)
under the Act is not in effect when it desires to sell such Shares, such
Purchaser may be required to hold such Shares for an indeterminate period during
which time such Shares would be subject to substantial transfer restrictions.
4.5 High Degree of Risk. Such Purchaser understands that the Shares to
be received by such Purchaser hereunder are highly speculative in nature and
their purchase involves a high degree of risk. Such Purchaser confirms that it
is (i) able to bear the economic risk of the investment in the Company, (ii)
able to hold the Shares to be received by such Purchaser hereunder for an
indefinite period of time, and (iii) can afford a complete loss of the
investment.
4.6 Authorization. Such Purchaser has full power and authority to enter
into this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement is a valid and binding
agreement of such Purchaser, enforceable in accordance with its terms, subject
to the Enforceability Exceptions.
4.7 Brokerage Fees. No person or entity is entitled to any brokerage or
finder's fee or other commission from such Purchaser in respect of this
Agreement or the transactions contemplated hereby.
4.8 Accredited Investor. Such Purchaser and each member of Lynx is an
"accredited investor" within the meaning of Section 2(a)(15) of the Securities
Act.
4.9 Consents and Approvals. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate, result in a breach of any of the terms or provisions of, constitute a
default (or an event which, with the giving of notice or the passage of time or
both, would constitute a default) under, result in the acceleration of any
indebtedness under or performance required by, result in any right of
termination of, increase any amounts payable under, decrease any amounts
receivable under, change any other rights pursuant to, or conflict with, any
material agreement, indenture or other instrument to which such Purchaser is a
party or by which any of its properties are bound, or any judgment, decree,
order or award of any court, governmental body or arbitrator (domestic or
foreign) applicable to such Purchaser. No consent, approval or authorization of,
or declaration, filing or registration with, or payment of any material tax,
fee, fine or penalty to, any governmental or regulatory authority (domestic or
foreign) including the Pennsylvania Department of Insurance, or any other person
(either governmental or private), is required in connection with the execution,
delivery and performance of this Agreement by such Purchaser.
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5. Conditions.
5.1 Conditions to Closing.
(a) Conditions to Purchaser Obligations. The obligation of each
Purchaser to purchase the Shares at the Closing is subject to the fulfillment on
or prior to the Closing Date of the following conditions, any of which may be
waived in accordance with the provisions of Section 11.1 hereof:
(i) Representations and Warranties Correct: Performance of
Obligations. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct when made, and shall be true
and correct on the Closing Date with the same force and effect as if
they had been made on and as of said date; and the Company shall have
performed all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing Date.
(ii) Opinion of Company's Counsel. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇▇▇▇, counsel to the Company, shall have delivered an opinion
addressed to the Purchasers, dated the Closing Date, substantially in
the form attached hereto as Schedule 5.1(a)(ii).
(iii) Consents and Waivers. The Company shall have obtained any
and all consents, permits, orders, approvals and waivers necessary or
appropriate for consummation of the transactions contemplated by this
Agreement, including all authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States
or of any state that are required in connection with the lawful
issuance and sale of the Shares pursuant to the terms of this
Agreement.
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(iv) Legal Investment. At the time of the Closing, the sale and
purchase of the Shares hereunder shall be legally permitted by all laws
and regulations to which the Company and the Purchasers are subject.
(v) Compliance Certificate. The Company shall have delivered a
Certificate, executed by the Chairman and Chief Executive Officer and
the Secretary of the Company, dated the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (i) , (iii) and
(iv) of this Section 5.1(a).
(vi) Documents. All documents and instruments incident to the
transactions contemplated hereby shall be reasonably satisfactory in
substance and form to the Purchasers and Purchasers' counsel.
(b) Conditions to Company Obligations. The Company's obligation to
sell and issue the Shares at the Closing is subject to the fulfillment on or
prior to the Closing Date of the following conditions, any of which may be
waived by the Company in accordance with the provisions of Section 11.1 hereof:
(i) Representations and Warranties Correct. The representations
and warranties made by each of the Purchasers in Section 4 hereof shall
be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on
and as of said date.
(ii) Payments by Purchasers. The payment by the Purchasers
required by Section 2.2 (b) shall have been made.
(iii) Opinion of Lynx's Counsel. Shartsis, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
LLP, ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, counsel
to Lynx, shall have delivered an opinion addressed to the Company,
dated the Closing Date, substantially in the form attached hereto as
Schedule 2.2(b).
(iv) Legal Investment. At the time of the closing the sale and
purchase of the Shares hereunder shall be legally permitted by all laws
and regulations to which the Company and the Purchasers are subject,
including, without limitation, the Securities Act of 1933 and the
Pennsylvania Securities Act (collectively, the "Securities Laws").
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(v) Information. The Purchasers will supply to the Company any
and all information necessary to complete a Form D under the Securities
Act of 1933 and any equivalent forms under other Securities Laws.
(vi) Compliance certificate. The Purchasers shall have
delivered a Certificate, dated the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (i) and (iv) of
this Section 5.1(b).
(vi) Documents. All documents and instruments incident to the
transactions contemplated hereby shall be reasonably satisfactory in
substance and form to the Company and the Company's counsel.
6. Affirmative Covenants of the Company. The Company hereby covenants
and agrees as follows until the date at which no Purchaser is a holder of any of
the Shares to be received by the Purchasers hereunder:
6.1 Financial Information and Inspection Right. The Company will
furnish the following reports to each Purchaser who is a holder of any of the
Shares to be received by the Purchasers hereunder until the date at which such
Purchaser is no longer a holder of any of the Shares:
(a) within thirty (30) days after the Corporation has filed its
Annual Report on Form 10-K with the Securities and Exchange Commission for a
calendar year which does not end before such date, a combined balance sheet as
of the end of such fiscal year and the related audited statements of operations,
changes in shareholders equity and cash flows for the year then ended, of the
Company and the Subsidiaries (the "Annual Financial Statements") and the
auditor's management letter to the Company's Board of Directors, which financial
statements shall be prepared in accordance with GAAP;
(b) as soon as practicable after the end of each of the first three
fiscal quarters, and in any event within sixty (60) days thereafter, an
unaudited combined and combining balance sheet as at the end of the fiscal
quarter then ended, and a related unaudited combined and combining statement of
operations, changes in shareholders' equity and cash flows for the quarter then
ended and for the portion of the fiscal year through such date, for the Company
and the Subsidiaries including a comparison thereof to the Company's annual
budget and operating plan with management's discussion and analysis of variances
therefrom; and
(c) within thirty (30) days of their filing with state insurance
regulatory authorities, all Annual and Quarterly Convention Statements of the
Subsidiaries which are insurance companies, prepared in accordance with
statutory accounting principles consistently applied in accordance with past
practices.
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6.2 Access.
(a) Upon reasonable notice the Company shall permit authorized
representatives of any Purchaser, during normal business hours, to have
reasonable access to all properties, books, records, contracts and documents of
the Company and the Subsidiaries (other than such information as may be subject
to attorney-client or other recognized privilege) and to discuss the business
and finances of the Company or the Subsidiaries with the directors, officers and
senior employees of the Company and the Subsidiaries.
(b) Each Purchaser understands and agrees that the information,
documents and instruments delivered to such Purchaser hereunder or to which such
Purchaser has access are of a confidential and proprietary nature. Each
Purchaser agrees that it will maintain, and Lynx agrees to take commercially
reasonable efforts to cause its members to maintain, the confidentiality of all
such confidential information, documents or instruments delivered to it by the
Company or to which it has access, and that it will not, and Lynx will make
commercially reasonable efforts to cause its members to not, disclose any of
such information, documents or instruments to third parties, and Lynx will
disclose such information, documents and instruments to its members so long as
such parties maintain the confidentiality of such information. Each Purchaser
recognizes that any breach of this Section 6.2(c) would result in irreparable
harm to the Company and its Subsidiaries and that therefore the Company shall be
entitled to an injunction to prohibit any such breach or anticipated breach,
without the necessity of posting a bond, cash or otherwise, in addition to all
other legal or equitable remedies available to the Company.
6.3 Accounts and Records. The Company will keep true records and books
of account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance with
reasonable business practices consistent with prior periods.
6.4 Maintenance of Corporate Existence, etc. The Company shall use
commercially reasonable efforts to maintain in full force and effect its
corporate existence, rights and franchises.
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6.5 Board Representation. At the Annual Meeting of the stockholders of
the Company to be held following the Closing and continuing until December 31,
1999, the Company shall cause the nomination of, and support for election, as a
director of the Company, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, and one other qualified individual to
be designated by the Purchasers holding a majority of the Shares to be received
by the Purchasers hereunder prior to the mailing of the Notice to Stockholders
of such Annual Meeting. By acknowledging and accepting this Agreement, until
December 31, 1999, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ agrees to vote all shares of the Company's
stock entitled to vote held by him from time to time in favor of the election to
membership on the Company's Board of Directors of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and the other
person designated by the Purchasers as aforesaid.
7. Negative Covenants of the Company.
7.1 Negative Covenants.
(a) Without the prior written consent of the Purchasers who are
holders of any of the Shares to be received by the Purchasers hereunder, until
the date at which no Purchaser is a holder of any of such Shares, the Company
shall not:
(i) amend its Articles of Incorporation or By-Laws in any way
which would affect the rights and preferences of parties then owning
the Shares;
(ii) engage in any material transaction with any Insider which
is other than on an arms length basis and/or may have a material
adverse effect on the Company and the Subsidiaries, taken as a whole
("Insider" shall mean any person who is (A) an officer of the Company,
(B) a director of the Company, (C) a stockholder of the Company owning
5% or more of the total number of shares of the Common Stock of the
Company, or (D) or any person who bears a familial or common control
relationship with a person described in (A), (B) or (C) above); or
(iii) authorize or issue any new or existing class of equity
securities or rights to acquire such securities which would adversely
affect the relative voting rights and authority of the Shares.
(b) In the event the Company or any of its Subsidiaries shall
engage in violation of the provisions of Section 7.1(a)(ii), the Company shall
not thereby be deemed to be in default of its obligations hereunder unless it
shall fail to take all corrective actions necessary to bring itself or the
relevant Subsidiary, as the case may be, into full compliance with such
provisions prior to the expiration of thirty (30) days after any Purchaser gives
of written notice to the Company of the violation, such notice to contain a
brief description of the violation and a reference to the 30-day cure period
provided for by this paragraph (b).
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7.2 RESERVED
8. Legends: Restrictions on Transfer.
8.1 Legend on Securities. All certificates representing the Shares
shall bear a legend to the following effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN TAKEN
WITHOUT A VIEW TO THE DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT
AND THE RULES AND REGULATIONS THEREUNDER AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THE CORPORATION WILL NOT TRANSFER
SUCH SHARES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE
CORPORATION THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN
COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH
TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES LAWS. IN
ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN PROVISIONS OF A SHARE PURCHASE AGREEMENT DATED NOVEMBER 12,
1998 WHICH RESTRICTS THE ABILITY OF THE HOLDER HEREOF TO TRANSFER SUCH
SECURITIES."
and any other legends required by applicable state blue sky or
other laws.
9. Registration Rights. Each Purchaser shall have the right to register
its Registrable Securities (as hereinafter defined) in accordance with the
following provisions.
9.1 Definitions. As used in this Section 9, the following terms shall
have the following meanings:
"Business Day" shall mean any day except a Saturday, Sunday or other
day on which commercial banks in the City of Norristown, Pennsylvania are
authorized by law or executive order to close.
- 14 -
"Commission" shall mean the Securities and Exchange Commission and any
successor commission or agency having similar powers.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated pursuant thereto.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Registrable Securities" shall mean the Shares purchased hereunder by
such Purchaser; provided, however, that such securities shall cease to be
Registrable Securities if and when (A) a registration statement with respect to
the disposition of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of pursuant to such
effective registration statement, (B) such securities shall have been otherwise
transferred, if new certificates or other evidences of ownership for such
securities not bearing a legend restricting further transfer and not subject to
any stop transfer order or other restrictions on transfer shall have been
delivered by the Company, and subsequent disposition of such securities shall
not require registration or qualification of such securities under the
Securities Act, or (C) such securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with its obligations under this Section
9, including, without limitation, all Commission and stock exchange or NASD
registration and filing fees and expenses, fees and expenses of compliance with
applicable state securities or "blue sky" laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with "blue sky" qualifications of the Registrable Securities), printing
expenses, messenger and delivery expenses, the fees and expenses incurred in
connection with the listing of the securities to be registered in a public
offering on each securities exchange or national market system on which such
securities are to be so listed and, following such initial public offering, the
fees and expenses incurred in connection with the listing of such securities to
be registered on each securities exchange or national market system on which
such securities are listed, fees and disbursements of counsel for the Company
and all independent certified public accountants (including the expenses of any
annual audit and "cold comfort" letters required by or incident to such
- 15 -
performance and compliance), the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (including the fees and
expenses of any "qualified independent underwriter" required by the NASD), the
reasonable fees of one counsel retained in connection with each such
registration by the holders of a majority of the Registrable Securities being
registered, the reasonable fees and expenses of any special experts retained by
the Company in connection with such registration, and fees and expenses of other
persons retained by the Company (but not including any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of Registrable
Securities by holders of such Registrable Securities).
"Rule 144 Securities" are Registrable Securities which are of a class
which is registered under Section 12 of the Exchange Act and which may be
publicly sold pursuant to the provisions of Rule 144 under the Securities Act.
9.2 Immediate Registration.
(a) Registration Statement. Within forty-five (45) days after
Company's receipt of the report of the Company's independent public accountants
on the review of the Company's financial statements for the Company's fiscal
year ending December 31, 1998, the Company will prepare and file with the
Commission a registration statement on an appropriate form under the Securities
Act with respect to the Registrable Securities. The Company will use
commercially reasonable efforts to cause such registration statement to become
effective no later than 120 days after the Company's receipt of the report of
the Company's independent public accountants on the review of the Company's
financial statements for the Company's fiscal year ending December 31, 1998.
(b) Registration Expenses. The Company shall pay all Registration
Expenses in connection with the registration to which each Purchaser is entitled
pursuant to this Section 9.2. However, each Purchaser shall pay, or its proceeds
shall be subject to reduction for, all underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of such
Purchaser's Registrable Securities pursuant to this Section 9.2.
(c) Effective Registration Statement. A registration pursuant to
this Section 9.2 shall not be deemed to have been effected unless the
registration statement relating thereto (i) has become effective under the
Securities Act and any of the Registrable Securities of the Purchaser included
in such registration have actually been sold thereunder, and (ii) has remained
effective for a period of at least 180 days (or shorter period in which all
Registrable Securities of the Purchaser included in such registration have
- 16 -
actually been sold thereunder); provided, however, that if after any
registration statement pursuant to this Section 9.2 becomes effective (i) such
registration statement is subject to any stop order, injunction or other order
or requirement of the Commission or other governmental agency or court solely
due to the actions or omissions to act of the Company and (ii) less than 70% of
the Registrable Securities of the Purchaser included in such registration have
been sold thereunder, such registration statement shall not be included as the
registration to which such Purchaser is entitled pursuant to Section 9.2(a).
(d) Selection of Underwriters. If the registration pursuant to this
Section 9.2 is in the form of an underwritten offering, the Company shall have
the right to select the investment banker and manager or co-managers that will
administer the offering, subject to the consent of the Purchasers, which consent
shall not be unreasonably withheld. The Company will review and consider
recommendations concerning selection of underwriters and method of distribution
prepared and offered by any Purchaser.
(e) Pro Rata Participation in Registrations. If a registration
pursuant to Section 9.2 involves an underwritten offering and the managing
underwriter shall advise the Company that, in its view, the number of equity
securities requested to be included in such registration exceeds the largest
number of securities which can be sold without having an adverse effect on such
offering, including the price at which such securities can be sold, the number
of Registrable Securities held by the Purchasers included by the Company in such
registration shall be reduced to the largest number of securities which, in the
opinion of the managing underwriter, can be sold without having an adverse
effect on such offering, including the price at which such securities can be
sold.
9.3 Registration Procedures. In connection with any offering
of Registrable Securities registered pursuant to this Section 9, the Company
shall:
(a) Prepare, file and effect such registration with the Commission
in accordance with Section 9.2 hereof; provided that before filing with the
Commission a registration statement or prospectus or any amendments or
supplements thereto, the Company will (i) furnish to counsel for each Purchaser
copies of all such documents proposed to be filed for said counsel's review and
comment and (ii) notify the Purchasers of any stop order issued or threatened by
the Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
- 17 -
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than 180 days or such shorter period which will terminate
when all Registrable Securities covered by such registration statement have been
sold (but not before the expiration of the 90 day period referred to in Section
4(3) of the Securities Act and Rule 174, or any successor thereto, if
applicable), and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement.
(c) Furnish to each Purchaser and each underwriter, if any, of
Registrable securities covered by such registration statement such number of
copies of such registration statement, each amendment and supplement thereto (in
each case including all exhibits thereto), and the prospectus included in such
registration statement (including each preliminary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as a
Purchaser may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Purchaser.
(d) Use commercially reasonable efforts to register or qualify such
Registrable Securities under such other state securities or "blue sky" laws of
such jurisdictions as any Purchaser, and underwriter, if any, of Registrable
Securities covered by such registration statement reasonably requests and do any
and all other acts and things which may be reasonably necessary or advisable to
enable such Purchaser and each underwriter, if any, to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
Purchaser; provided that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 9.4(d), (ii) subject itself to taxation
in any such jurisdiction or (iii) consent to general service of process in any
jurisdiction.
(e) Use commercially reasonable efforts to cause the Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable the Purchaser
to consummate the disposition of such Registrable Securities.
- 18 -
(f) As soon as practicable notify each Purchaser owning Registrable
Securities covered by a registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event which comes to the Company's attention if as a result of
such event the prospectus included in such registration statement contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which made, and the Company will promptly
prepare and furnish to such Purchaser a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchaser of such Registrable
Securities, such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which made.
(g) Cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
be listed.
(h) Enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as any Purchaser or
the underwriters retained by such Purchaser, if any, reasonably request in order
to expedite or facilitate the disposition of such Registrable Securities.
(i) Make available for inspection by any Purchaser owning
Registrable Securities covered by such registration statement, any underwriter
participating in any disposition pursuant to such registration statement, and
any attorney, accountant or other agent retained by such Purchaser or
underwriter (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company and its Subsidiaries
(collectively, "Records"), if any, as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company's and
its Subsidiaries' officers, directors and employees to supply all information
and respond to all inquiries reasonably requested by any such Inspector in
connection with such registration statement.
(j) Use commercially reasonable efforts to obtain a "cold comfort"
letter from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by "cold comfort" letters
as any Purchaser owning Registrable Securities covered by such registration
statement may reasonably request.
(k) Otherwise use its commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission.
- 19 -
It shall be a condition precedent to the obligation of the Company to
take any action with respect to Registrable Securities held by any Purchaser
that such Purchaser shall furnish to the Company such information regarding such
Registrable Securities and the intended method of disposition thereof as the
Company shall reasonably request and as shall be required in connection with the
action taken by the Company.
Each Purchaser, as holder of Registrable Securities, agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 9.4(f) hereof, such Purchaser will forthwith discontinue
disposition of Registrable Securities until such Purchaser's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 9.4(f)
hereof, and, if so directed by the Company, such Purchaser will deliver to the
Company (at the Company's expense) all copies (including, without limitation,
any and all drafts), other than permanent file copies, then in such Purchaser's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event that the Company shall give any
such notice, the period mentioned in Section 9.4(b) hereof shall be extended by
the greater of (i) three months or (ii) the number of days during the period
from and including the date of the giving of such notice pursuant to Section 9.4
(f) hereof to and including the date when each holder of Registrable Securities
covered by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 9.4(f) hereof.
Each Purchaser agrees, if reasonably requested by the Company's
underwriter with regard to an underwritten public sale of Registrable
Securities, not to sell or otherwise transfer or dispose of any Registrable
Securities held by such Purchaser during the period (not to exceed one hundred
eighty (180) days) following the effective date of a registration statement,
provided that (i) such agreement shall only apply to the first such registration
statement of the Company including Voting Common Stock (or other securities) to
be sold on its behalf to the public in an underwritten offering, and (ii) all
officers and directors of the Company enter into similar agreements. Such
agreements shall be in writing and in a form satisfactory to the Company and
such underwriter. The Company may impose stop-transfer instructions with respect
to the Registrable Securities subject to the foregoing restriction until the end
of said period.
- 20 -
9.5 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act pursuant
to this Agreement, the Company will indemnify and hold harmless, to the full
extent permitted by law, each Purchaser, its respective directors and officers,
members, general partners, limited partners and managing directors, each other
person who participates as an underwriter in the offering or sale of such
securities and each other person, if any, who controls, is controlled by or is
under common control with the Purchaser or any such underwriter within the
meaning of the Securities Act (and directors, officers, controlling persons,
members, partners and managing directors of any of the foregoing), against any
and all losses, claims, damages or liabilities, joint or several, and expenses
(including any amounts paid in any settlement effected with the Company's
consent, which consent will not be unreasonably withheld) to which such
Purchaser, any such director or officer or member or general or limited partner
or managing director or any such underwriter or controlling, controlled or
commonly controlled person may become subject under the Securities Act, state
securities or "blue sky" laws, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) or
expenses arise out of or are based upon (i) any untrue statement of any material
fact contained, on the effective date thereof, in any registration statement
under which such securities were registered under the Securities Act, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereof, (ii) any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances under which made, or (iii) any violation by the
Company of any federal, state or common law rule or regulation applicable to the
Company and relating to action required of or inaction by the Company in
connection with any such registration. To the extent permitted by law, the
Company shall reimburse each such Purchaser, and each such director, officer,
member, general partner, limited partner, managing director or underwriter and
each such controlling, controlled or commonly controlled person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending such loss, claim, liability, action or proceeding, provided, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission made in such registration statement or amendment or
supplement thereto or in any such preliminary, final or summary prospectus in
reliance upon and in conformity with written information furnished to the
Company for use in the preparation thereof; and, provided further, that the
Company shall not be liable to any Purchaser, any person who participates
- 21 -
as an underwriter in the offering or sale of Registrable Securities, if any, or
any other person, if any, who controls such underwriter within the meaning of
the Securities Act, pursuant to this Section with respect to any preliminary
prospectus or the final prospectus or the final prospectus as amended or
supplemented as the case may be, to the extent that any such loss, claim, damage
or liability of such underwriter or controlling person results from the fact
that such underwriter sold Registrable Securities to a person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the final prospectus or of the final prospectus as then amended or
supplemented, whichever is most recent, if the Company has previously furnished
copies thereof to such underwriter and such final prospectus, as then amended or
supplemented, had corrected any such misstatement or omission. The indemnity
provided for herein shall remain in full force and effect regardless of any
investigation made by or on behalf of a Purchaser or any such director, officer,
member, general partner, limited partner, managing director, underwriter or any
such underwriter or controlling, controlled or commonly controlled person and
shall survive the transfer of such securities by such Purchaser.
(b) Indemnification by Purchaser and Underwriters. The Company will
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with the provisions hereof, that the
Company shall have received an undertaking reasonably satisfactory to it from
the Purchaser owning Registrable Securities covered by such registration
statement or any underwriter, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in paragraph (a) above) the Company and its
directors, officers, controlling persons, underwriters and all other prospective
sellers and their respective directors, officers, members, general and limited
partners, managing directors, and their respective controlling persons with
respect to any statement in or omission from such registration statement, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company or its
representatives by such Purchaser or underwriter for use in the preparation of
such registration statement, preliminary, final or summary prospectus or
amendment or supplement, or a document incorporated by reference into any of the
foregoing. To the extent permitted by law, such Purchaser and underwriter shall
reimburse (in the same manner and to the same extent and subject to the same
limitations as set forth in paragraph (a) above) the Company and its directors,
officers and controlling persons for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending such loss, claim,
liability, action or proceeding (as referred to in paragraph (a) above). Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of such holders, underwriters or any
of their respective directors, officers, members, general or limited partners,
managing directors or controlling persons and shall survive the transfer of such
securities by such holder, provided, however, that such Purchaser shall not be
liable in the aggregate for any amounts exceeding the product of the sale price
per Registrable Security and the number of Registrable Securities being sold
pursuant to such registration statement or prospectus by such Purchaser.
- 22 -
(c) Notice of Claims, Etc. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, promptly give written
notice to the indemnifying party of the commencement of such action, provided
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under the preceding
subsections of this Section, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in the opinion of counsel, a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party will be entitled to participate
in and, jointly with any other indemnifying party similarly notified, to assume
the defense thereof to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof, unless in the opinion of counsel, a conflict of
interest between such indemnified and indemnifying parties arises in respect of
such claim after the assumption of the defense thereof, and the indemnifying
party will not be subject to any liability for any settlement made without its
consent (which consent shall not be unreasonably withheld). No indemnifying
party will consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation. An indemnifying party who is not entitled to, or
elects to, assume the defense of a claim will not be obligated to pay the fees
and expenses of more than one counsel in any single jurisdiction for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
opinion of counsel, a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels as may be reasonably necessary.
Notwithstanding anything to the contrary set forth herein, and without limiting
any of the rights set forth above, in any event any party will have the right to
retain, at its own expense, counsel with respect to the defense of a claim.
- 23 -
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subsections of this Section (with appropriate
modifications) shall be given by the Company and to each Purchaser with respect
to any required registration or other qualification of securities under any
federal or state law or regulation or governmental authority other than the
Securities Act.
(e) Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section is for any reason held to be unenforceable although applicable in
accordance with its terms, the Company, each Purchaser owning Registrable
Securities covered by a registration statement and the underwriters shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by the Company,
such Purchaser and the underwriters, in such proportions that the underwriters
are responsible for that portion represented by the percentage that the
underwriting discount appearing on the cover page of the prospectus bears to the
initial public offering price appearing thereon and the Company and such
Purchasers are responsible for the balance; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. As between the Company and the
Purchasers owning Registrable Securities covered by a registration statement,
such parties shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement in
such proportion as shall be appropriate to reflect (i) the relative benefits
received by the Company, on the one hand, and such Purchasers on the other hand,
from the offering of the Registrable Securities and any other securities
included in such offering, and (ii) the relative fault of the Company, on the
one hand, and such Purchasers, on the other, with respect to the statements or
omissions which resulted in such loss, liability, claim, damage or expense, or
action in respect thereof, as well as any other relevant equitable
- 24 -
considerations. The relative benefits received by the Company, on the one hand,
and each of such Purchasers on the other hand, with respect to such offering
shall be deemed to be in the same proportion as the sum of the total purchase
price paid to the Company in respect of the Registrable Securities plus the
total net proceeds from the offering of any securities included in such offering
(before deducting expenses) received by the Company bears to the amount by which
the total net proceeds from the offering of Registrable Securities (before
deducting expenses) received by such Purchaser exceeds the purchase price paid
to the Company in respect of the Registrable Securities, and in each case the
net proceeds received from such offering shall be determined as set forth on the
table to the cover page of the prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or such Purchaser,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and each Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section were to be determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. Notwithstanding anything to the contrary
contained herein, the Company and each Purchaser agree, that any contribution
required to be made by such Purchaser pursuant to this Section 9.5(e) shall not
exceed the net proceeds from the offering of Registrable Securities (before
deducting expenses) received by such Purchaser with respect to such offering.
For purposes of this Section, each person, if any, who controls such Purchaser
or an underwriter within the meaning of Section 15 of the Securities Act shall
have the same rights to contribution as such Purchaser or underwriter, and each
director of the Company, each officer of the Company who signed the registration
statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act shall have the same rights to contribution
as the Company.
10. Additional Agreements.
10.1 HealthAxis Common Shares. Prior to the earliest to occur of (a)
the sale by PILIC of all of the outstanding shares of the capital stock of
PALHIC to Central Reserve Life Insurance Company ("Central Reserve") following
the consummation of the other related transactions described in a letter
agreement dated November 11, 1998, by and among the Company, PILIC and Central
Life (such sale and other transactions being referred to hereinafter in this
Section 10 as the "Central Reserve Transactions") on or before ▇▇▇▇▇ ▇▇, ▇▇▇▇,
(▇) the lapse of the "Exchange Right" described in Section 10.2 at the close of
business on April 30, 1999, or if such April 30th is not a business day in
Norristown, Pennsylvania, on the next day thereafter which is a business day in
Norristown, Pennsylvania, or (c) the close of business on the date that there
shall be no Shares outstanding, the Company shall not transfer or assign any of
the HealthAxis Common Shares held by it on the Closing Date, and the Company
shall keep and maintain such HealthAxis Common Shares free of any liens and
encumbrances of any nature whatsoever other than the rights of the Purchasers
hereunder.
- 25 -
10.2 Exchange Right. In the event Central Reserve, PILIC and the
Company shall fail to consummate the Central Reserve Transactions on or before
March 31, 1999, or in the event the Company and/or Central Reserve shall make
public announcement of the termination of the Central Reserve Transactions at
any time prior to March 31, 1999, each Purchaser then owning any of the Shares
received hereunder shall have the right (the "Exchange Right") to exchange all
or part of such Shares, for that number of HealthAxis Common Shares as shall be
determined by multiplying two and one-quarter (23) times the number of the
Shares to be exchanged. A Purchaser may exercise its Exchange Right by (a)
giving written notice to the Company on or prior to April 15, 1999, of such
Purchaser's intention to exercise the Exchange Right, specifying the number of
Shares to be exchanged and (b) surrendering to the Company at its principal
office the certificate or certificates for the Shares to be exchanged endorsed
to the Company or accompanied by duly executed instruments of transfer to the
Company of the Shares to be exchanged prior to the close of business on April
30, 1999, or if such April 30th is not a business day in Norristown,
Pennsylvania, on the next day thereafter which is a business day in Norristown,
Pennsylvania. If and to the extent that a Purchaser shall fail or refuse to
exercise the Exchange Right in respect of all or part of the Shares in the
manner provided aforesaid, such Exchange Right shall lapse and be of no further
force or effect after the close of business on April 30, 1999, or if such April
30th is not a business day in Norristown, Pennsylvania, on the next day
thereafter which is a business day in Norristown, Pennsylvania.
10.3 Delivery of HealthAxis Common Shares. Upon surrender to
it by a Purchaser of the certificate or certificates for the Shares to be
exchanged endorsed to the Company or accompanied by duly executed instruments of
transfer to the Company in connection with such Purchaser's exercise of its
Exchange Right pursuant to Section 10.2, the Company shall deliver a certificate
or certificates for the number of HealthAxis Common Shares to which such
Purchaser is entitled, duly endorsed to the Purchaser, or order, or accompanied
by duly executed instruments of transfer to such Purchaser, or order.
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11. Miscellaneous.
11.1 Modifications, Amendments and Waivers. The Company and the
Purchasers may by written agreement:
(a) Extend the time for the performance of any of the obligations
or other acts of the parties hereto;
(b) Waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement;
(c) Waive compliance with any of the covenants and agreements
contained in this Agreement; or
(d) Amend or supplement any of the provisions of this Agreement.
11.2 Governing Law; Jurisdiction. This Agreement shall be governed by,
and construed and enforced in accordance with, the internal law, and not the law
pertaining to conflicts or choice of law, of the State of Pennsylvania. Each of
the Company and each Purchaser hereby agrees that all actions or proceedings
initiated by it and arising directly or indirectly out of this Agreement shall
be litigated in the United States District Court for the Eastern District of
Pennsylvania. In any such action, the Company and each Purchaser agrees that
service of such Summons and Complaint or other process or papers may be made by
registered or certified mail addressed to the Company and any such Purchaser, as
applicable, at the address to which notices are to be sent pursuant to this
Agreement. Each of the Company and each Purchaser waives, to the extent
permitted by applicable law, any claim that Pennsylvania is an inconvenient
forum or an improper forum based on lack of venue. Should the Company or any
Purchaser, as applicable, after being so served, fail to appear or answer to any
summons, complaint, process or papers so served within the number of days
prescribed by law after the mailing thereof, the Company or the Purchaser, as
applicable, shall be deemed in default and an order and/or judgment may be
entered against the Company or such Purchaser, as applicable, as demanded or
prayed for in such summons, complaint, process or papers.
11.3 Survival and Remedies. The representations and warranties made by
the Company herein shall survive the Closing, notwithstanding any investigation
made by any Purchaser, until the earlier of the date on which no Shares are
owned by any Purchaser. The covenants and agreements made herein shall survive
the Closing. All statements as to factual matters contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant hereto or
in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder as of the date of such
certificate or instrument.
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11.4 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
11.5 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement among
the parties with regard to the subject matter hereof and thereof.
11.6 Notices. All notices and other communication required or permitted
hereunder shall be effective upon receipt and shall be in writing and delivered
personally, by facsimile transmission, by overnight delivery service or by
certified or registered mail, postage prepaid, addressed (a) if to a Purchaser,
at such Purchaser's address set forth below its name on Schedule I hereto, or at
such other address as such Purchaser shall have furnished to the Company in
writing, (b) if to the Company, at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or at such other address as the Company shall
have furnished to each Purchaser in writing.
11.7 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
11.8 Expenses. At the Closing, the Company will pay all fees, expenses
and disbursements incurred by the Purchasers in connection with the preparation,
negotiation and execution of this Agreement, including, but not limited to, the
fees, expenses and disbursements of ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special
counsel for the Purchasers. Otherwise, all parties hereto shall pay their own
expenses in connection with the preparation, negotiation and execution of this
Agreement.
11.9 Titles and Subtitles. The titles of the Sections of this Agreement
are for convenience of reference only and are not to be considered in construing
this Agreement.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.
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11.11 Construction of Agreement. None of the parties hereto or their
respective counsel shall be deemed to have drafted this Agreement for purposes
of construing the terms hereof. The language in all parts of this Agreement
shall in all cases be construed according to its fair meaning, and not strictly
for or against any party hereto.
11.12 Termination of Agreement. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing either
(i) by unanimous written consent of the parties hereto or (ii) by any party
hereto if the Closing shall not have occurred prior to the close of business on
December 1, 1998.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE COMPANY:
PROVIDENT AMERICAN CORPORATION
By:__________________________
Name:
Title:
THE PURCHASERS:
LYNX PRIVATE EQUITY PARTNERS I, LLC __________________
▇▇▇▇▇ ▇▇▇▇▇
By:______________________
Name:
Title:
___________________
▇▇▇▇▇ ▇▇▇▇▇▇▇
Delaware Charter Guarantee Trust,
as Trustee for ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ INTERHOTEL COMPANY, LTD.
By: _______________________ By:____________________
▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title:
Acknowledged and agreed to
this 13th day of November, 1998
_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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STATE OF CALIFORNIA)
s.s.:
COUNTY OF )
On this the ____ day of November, 1998, before me, the undersigned, a
Notary Public in and of the State of California, personally appeared ▇▇▇▇▇
▇▇▇▇▇, to me known to be the person described in and who executed the foregoing
Share Purchase Agreement and duly acknowledged that he executed the same.
-------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
s.s.:
COUNTY OF NASSAU )
On this the ____ day of November, 1998, before me, the undersigned, a
Notary Public in and of the State of New York, personally appeared ▇▇▇▇▇
▇▇▇▇▇▇▇, to me known to be the person described in and who executed the
foregoing Share Purchase Agreement and duly acknowledged that he executed the
same.
-------------------------
NOTARY PUBLIC
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Schedule I
to
Share Purchase Agreement
Name and Address
of
Purchaser Number of Shares
---------------- ----------------
Lynx Private Equity Partners I, LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 250,000
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 207,143
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ 34,571
Delaware Charter Guarantee Trust,
as Trustee for ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇.. ▇▇.▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ 8,286
Interhotel Company, Ltd. 357,143
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