EXHIBIT 10.27
PROXYMED, INC.
PLACEMENT AGENCY AGREEMENT
Commonwealth Associates, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
June 7, 2000
Gentlemen:
This Placement Agency Agreement (the "Agency Agreement") confirms the
retention by ProxyMed, Inc., a Florida corporation (the "Company"), of
Commonwealth Associates, L. P., a New York limited partnership ("Commonwealth"
or the "Placement Agent"), to act as the exclusive sales agent, on a best
efforts basis, in connection with the private placement of the Notes and
Warrants of the Company (in each case, as defined below) on the terms set forth
below (the "Private Placement"). In addition, the Company and the Placement
Agent agree that, in lieu of or in addition to the Private Placement, the
Company may seek (exclusively through the Placement Agent hereunder) one or more
strategic or institutional investors who may invest in the Company on the same
or different terms than those set forth herein in respect of the Private
Placement (the "Strategic Investment" and, together with the Private Placement,
the "Financing").
The Company proposes to consummate a Private Placement convertible debt
financing of up to $15,000,000 to "accredited investors" (as such term is
defined in Regulation D promulgated under the Securities Act of 1933, as amended
(the "1933 Act")). The Private Placement will consist of convertible senior
secured promissory notes of the Company (the "Notes") and five-year warrants
(the "Warrants" and, together with the Notes, the "Securities") to purchase a
number of shares of common stock, par value $0.001 per share (the "Common
Stock"), of the Company equal to 50% of the number of shares of Common Stock
issuable upon conversion of the Notes (the "Warrant Shares"), at an exercise
price per share equal to the Conversion Price described below. The Private
Placement may be increased by up to an additional $7,500,000 of Securities at
the option of the Placement Agent and then an additional $7,500,000 of
Securities at the option of the Company. The Notes will be secured by all assets
of the Company and shall be senior to all other existing or future indebtedness
of the Company, subject to any pre-existing liens granted to Transamerica
Business Credit and purchase money security interests or capitalized leases. The
Notes will bear interest at the rate of 7% per annum, payable at maturity. The
maturity date shall be the earlier of (i) January 1, 2001, or (ii) the
occurrence of any default under the Redemption and Exchange Agreement, dated as
of May 4, 2000 (the "Redemption Agreement"), by and between the Company and the
holders of $13,000,000 of its $15,000,000 Series B Convertible Preferred Stock
("Series B Preferred
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Stock"), or (iii) the merger or combination of the Company wherein the existing
shareholders of the Company at the date of the closing of such transaction no
longer own at least 50% of the voting stock of the Company, or the sale of all
or substantially all of the assets of the Company or the purchase by a single
entity or person or group of affiliated entities or persons of more than 50% of
the voting stock of the Company, or (iv) as otherwise provided in the Notes.
The Notes, and any accrued interest thereon, will be convertible at any
time and from time to time, at the option of the holder, but no earlier than the
first to occur of (a) the Company obtaining shareholder approval of the issuance
of the Securities or (b) September 4, 2000, into shares of Common Stock, at a
per share price equal to the Conversion Price in lieu of repayment (the
"Conversion Shares"). As used herein, the term "Conversion Price" shall mean
$1.00, subject to anti-dilution adjustments as provided in the Notes. In the
event of a default under the Notes (as specified in the Notes) the Conversion
Price shall be decreased, if lower, to a price equal to the lesser of (i) the
lowest price at which any shares of Series B Preferred Stock may convert into
Common Stock and (ii) the lowest exercise price of the warrants issued to any
holder of Series B Preferred Stock. In addition, the principal amount of the
Notes, and any accrued interest thereon, automatically shall be convertible into
shares of a series C 7% convertible preferred stock of the Company (the "C
Preferred Shares") having the rights and preferences set forth in the Articles
of Amendment to the Articles of Incorporation of the Company in a form and
substance satisfactory to the Placement Agent, the Purchasers and the Company
(the "Series C Preferred Stock"), at a rate equal to one C Preferred Share for
every $100 of principal and accrued interest under the Notes, at such time as
the Company shall have satisfied in full all of its obligations to redeem Series
B Preferred Stock in accordance with the terms of the Redemption Agreement.
The Company will agree to register the Warrant Shares and the
Conversion Shares (whether under the C Preferred Shares or the Notes) for resale
under the 1933 Act pursuant to a registration rights agreement to be attached as
an exhibit to the Securities Purchase Agreement described below.
A minimum of $5,000,000 of Securities (the "Minimum Offering") and a
maximum of $15,000,000 of Securities (the "Maximum Offering") will be sold in
the Private Placement. The Maximum Offering may be increased by up to $7,500,000
of Securities at the option of the Placement Agent and then an additional
$7,500,000 of Securities at the option of the Company. The Securities will be
offered pursuant to those terms and conditions mutually acceptable to you and
the Company as reflected in a Confidential Private Placement Memorandum prepared
by the Company in form and substance satisfactory to you and your counsel (the
"Offering Memorandum"). The Minimum Offering will be made on a "best efforts -
all-or-none" basis and the balance of the Private Placement will be made on a
"best efforts" basis. The Securities will be offered in accordance with Section
4(2) of the 1933 Act, and Regulation D promulgated thereunder.
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The (i) Offering Memorandum, as it may be amended or supplemented from
time to time (including any documents incorporated therein by reference or
otherwise), (ii) the proposed securities purchase agreement between the Company
and each purchaser in the Private Placement (the "Securities Purchase
Agreement"), (iii) the Notes, (iv) the Warrants, and (v) each of the exhibits
which are part of the Offering Memorandum and/or the Securities Purchase
Agreement (including, but not limited to, the registration rights agreement and
the general security agreement attached as an exhibit to the Securities Purchase
Agreement), are collectively referred to herein as the "Offering Documents." The
term "Offering Documents" shall also include any similar, different or
additional offering materials, agreements and the like used in connection with
any Strategic Investment.
The Company will prepare and deliver to you a reasonable number of
copies of the Offering Documents in form and substance satisfactory to you and
your counsel.
Capitalized terms used herein, unless otherwise defined or unless the
context otherwise indicates, shall have the same meanings provided in the
Offering Documents.
1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement Agent of the Company
(subject to your right to have selected dealers ("Selected Dealers") in good
standing with the National Association of Securities Dealers ("NASD")
participate in the Financing) during the offering periods for the Financing
herein specified for the purposes of assisting the Company in finding qualified
purchasers in the Financing. The offering period for the Financing (the
"Offering Period") shall commence on the day the Offering Documents relating
thereto are first made available to you by the Company for delivery in
connection with the offering for sale of the Securities and shall continue until
the earlier to occur of: (i) the sale of the Maximum Offering; (ii) the closing
of the Minimum Offering has not occurred by June 17, 2000 (except in any case
where the Placement Agent is prepared to close on the Minimum Offering by such
date); (iii) August 28, 2000; or (iv) the date the parties mutually agree in
writing to terminate the Financing. In any event, however, the Placement Agent
shall use its best efforts to close at least $5,000,000 of gross proceeds of the
Financing by June 15, 2000, at least $5,000,000 of additional gross proceeds of
the Financing by July 31, 2000, and at least an additional $5,000,000 of gross
proceeds of the Financing by August 28, 2000. If the Minimum Offering is not
sold prior to the end of the Offering Period, the Financing will be terminated
and all funds received from Purchasers (as defined below) will be returned,
without interest and without any deduction. The day that the Offering Period
terminates is hereinafter referred to as the "Termination Date". The Termination
Date may be extended for up to thirty (30) days by mutual agreement of the
Placement Agent and the Company.
(b) Subject to the performance by the Company of all of its obligations
to be performed under this Agency Agreement and to the completeness and accuracy
of all representations and warranties of the Company contained in this Agency
Agreement, the
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Placement Agent hereby accepts such agency and agrees to use its best efforts to
assist the Company in finding qualified Purchasers (as defined below). Except as
expressly set forth herein, it is understood that the Placement Agent has no
commitment to sell the Securities. Except as expressly set forth herein, your
agency hereunder is not terminable by the Company except upon termination of the
Offering Period.
(c) Purchases of Securities shall be evidenced by the execution by the
investors (the "Purchasers") and the Company of the Securities Purchase
Agreement. The Placement Agent shall not have any obligation to independently
verify the accuracy or completeness of any information contained in the
Securities Purchase Agreement or the authenticity, sufficiency, or validity of
any check delivered by any prospective investor in payment for the Securities.
(d) The Placement Agent and/or its affiliates will be investors in the
Financing.
(e) In connection with your appointment as exclusive Placement Agent,
Commonwealth shall provide the following services to the Company: (i) advise the
Company with respect to the form and structure of the Financing; (ii) assist the
Company in developing any necessary materials; (iii) identify and make contact
with prospective financing sources; (iv) assist the Company in conducting
presentations and due diligence meetings with prospective financing sources; and
(v) provide such other financial advisory and investment banking services
required to close the Financing.
2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if any,
as follows:
(a) Securities Law Compliance. The offer, offer for sale, and sale of
the Securities have not been registered with the United States Securities and
Exchange Commission (the "SEC"). The Securities are to be offered, offered for
sale and sold in reliance upon the exemptions from the registration requirements
of Section 5 of the 1933 Act. The Company will use its best efforts to conduct
the Financing in compliance with the requirements of Regulation D of the General
Rules and Regulations under the 1933 Act, and the Company will file all
appropriate notices of offering with the SEC. The Company has prepared the
Offering Documents. During the term of the Financing, the applicable Offering
Documents will not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. If at any
time prior to the completion of the Financing or other termination of this
Agency Agreement any event shall occur as a result of which it might become
necessary to amend or supplement the Offering Documents relating thereto so that
they do not include any untrue statement of any material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances then existing, not misleading, the Company will
promptly notify you and will supply you with amendments or supplements
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correcting such statement or omission. The Company will also provide the
Placement Agent for delivery to all offerees and purchasers and their
representatives, if any, any information, documents and instruments which the
Placement Agent deems reasonably necessary to comply with applicable state and
federal law.
(b) Organization. The Company and its "Subsidiaries" (which for
purposes of this Agency Agreement means any entity in which the Company,
directly or indirectly, owns 10% of the capital stock or holds an equity or
similar interest) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power and authority to own their properties and to
carry on their business as now being conducted and as described in the Offering
Documents, to execute and deliver this Agency Agreement and to carry out the
transactions contemplated hereby. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agency Agreement, "Material Adverse
Effect" means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole, or on the transactions contemplated hereby or by
the agreements and instruments to be entered into in connection herewith, or on
the authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below). A complete list of entities in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest is set forth in Schedule 2(b) hereto.
(c) Capitalization. As of May 31, 2000, the authorized capital stock of
the Company consisted of (i) 50,000,000 shares of Common Stock, of which as of
the date hereof 19,734,429 shares are issued and outstanding, 2,258,167 shares
are issuable and reserved for issuance pursuant to the Company's stock option
and purchase plans and 967,933 shares are issuable and reserved for issuance
pursuant to securities (other than the shares of the Company's Series B
Preferred Stock, the warrants issued by the Company pursuant to the Redemption
Agreement, the warrants issued by the Company pursuant to the Securities
Purchase Agreement, dated December 23, 1999 (the "Series B Purchase Agreement"),
by and between the Company and the holders of its Series B Preferred Stock, and
shares of Common Stock issuable pursuant to any Conversion Notice (as defined in
the Company's Articles of Amendment to the Company's Articles of Incorporation
filed on December 23, 1999) delivered to the Company on or prior to the date
hereof) exercisable or exchangeable for, or convertible into, shares of Common
Stock and (ii) 2,000,000 shares of preferred stock, of which as of the date
hereof 15,000 shares are designated as Series B Preferred Stock, of which 9,310
shares are issued and outstanding. All of such outstanding shares have been and
are, or upon issuance will be, validly issued, fully paid and non-assessable.
Except as disclosed in Schedule 2(c), (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding debt securities issued by the
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Company; (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act; (v) there are no outstanding securities of
the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries; (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agency Agreement; and (vii) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement.
All prior sales of securities of the Company were either registered under the
1933 Act and applicable state securities laws or exempt from such registration,
and no security holder has any rescission rights with respect thereto.
(d) SEC Documents; Financial Statements. Since December 31, 1999, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), (all of the
foregoing filed after December 31, 1999 and prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). A complete list of the Company's SEC Documents is set forth on
Schedule 2(d). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
None of the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents (and in the Offering Memorandum) complied
as to form in all material respects with applicable accounting requirements of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied
("GAAP"), during the periods involved (except (i) as may be otherwise indicated
in such financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude footnotes or may be
condensed or summary statements), show all material liabilities, absolute or
contingent, of the Company required to be required to be recorded thereon, and
fairly present in all material respects the financial position of the Company as
of the dates
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thereof and the results of its operations and cash flows for the periods
indicated (subject, in the case of unaudited statements, to normal year-end
audit adjustments). The Company meets the requirements for the use of Form S-3
for registration of the resale of the Common Stock issuable upon exercise of the
Warrants and upon conversion of the Notes and the Series C Preferred Stock.
(e) Absence of Changes. Except as specifically disclosed in the SEC
Documents filed with the SEC prior to the date hereof, since December 31, 1999,
there have been no material adverse changes in the financial condition,
business, properties or prospects of the Company or of the Company and its
Subsidiaries, taken as a whole, other than changes referred to in subsequent SEC
Documents or the Offering Memorandum which have had a Material Adverse Effect.
Except as set forth in Schedule 2(e), the Company does not know of any fact
(other than matters of a general economic nature) which materially affects
adversely or, so far as the Company can now foresee, will materially affect
adversely the financial condition, business, properties or prospects of the
Company, or of the Company and its Subsidiaries taken as a whole, or the ability
of the Company to perform its obligations under this Agency Agreement. Since
December 31, 1999, except with respect to matters of which the Company has
notified you in writing or which have been specifically disclosed in the SEC
Documents filed with the SEC prior to the date hereof, the Company has not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the ordinary
course of business, which is material to the business of the Company, and,
except as set forth in Schedule 2(e), there has not been any change in the
capital stock of, or any incurrence of long-term debt by, the Company, or any
issuance of options, warrants or other rights to purchase the capital stock of
the Company, or any adverse change or any development involving, so far as the
Company can now reasonably foresee, a prospective adverse change in the
condition (financial or otherwise), net worth, results of operations, business,
key personnel or properties which would be material to the business or financial
condition of the Company, and the Company has not become a party to, and neither
the business nor the property of the Company has become the subject of, any
material litigation whether or not in the ordinary course of business.
(f) Title. Except as set forth in or contemplated by Schedule 2(f), the
Company has good and marketable title to all material properties and assets
owned by it, free and clear of all liens, charges, encumbrances or restrictions,
except such as are not significant or important in relation to the Company's
business; all of the material leases and subleases under which the Company is
the lessor or sublessor of properties or assets or under which the Company holds
properties or assets as lessee or sublessee are in full force and effect, and
the Company is not in default in any material respect with respect to any of the
terms or provisions of any of such leases or subleases, and no material claim
has been asserted by anyone adverse to rights of the Company as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company to continued
possession of the leased or subleased premises or assets under any such lease or
sublease. The Company owns or leases all such properties as are necessary to its
operations as described in the Offering Documents.
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(g) Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted and as discussed in the Offering Memorandum. Except
as set forth on Schedule 2(g), none of the Company's trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or are expected to expire or terminate within two years from the date of this
Agency Agreement, except where such expiration or termination would not have
either individually or in the aggregate a Material Adverse Effect. The Company
and its Subsidiaries do not have any knowledge of any infringement by the
Company or its Subsidiaries of trademarks, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
▇▇▇▇ registrations, trade secrets or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others and, except as set forth on Schedule 2(g), no claim, action or
proceeding has been made or brought against, or to the Company's knowledge, has
been threatened against, the Company or its Subsidiaries regarding trademarks,
trade name rights, patents, patent rights, inventions, copyrights, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secrets or other
infringement. Except as set forth on Schedule 2(g), the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties except where the failure to do so would not have
either individually or in the aggregate a Material Adverse Effect.
(h) Litigation. Except as set forth in or contemplated by Schedule
2(h), there is no material action, suit, investigation, customer complaint,
claim or proceeding at law or in equity by or before any court, arbitrator,
governmental instrumentality or authority or other agency now pending or, to the
knowledge of the Company, threatened against the Company (or basis therefor
known to the Company), the adverse outcome of which would be reasonably likely
to have a Material Adverse Effect. The Company is not subject to any judgment,
order, writ, injunction or decree of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign which have a Material Adverse Effect.
(i) Non-Defaults; Non-Contravention; Etc. Except as disclosed in
Schedule 2(i), neither the execution, delivery and performance of this Agency
Agreement nor the consummation by the Company of the transactions contemplated
hereby will (i) result in a violation of the Articles of Incorporation, any
articles of amendment of any outstanding series of preferred stock of the
Company or the By-laws; (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party; or (iii) result in a
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violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the principal market or exchange on which the Common Stock is traded or
listed) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in Schedule 2(i), neither the Company nor its
Subsidiaries is in violation of any term of (i) its Articles of Incorporation,
any articles of amendment of any outstanding series of preferred stock or its
By-laws or their organizational charter or by-laws, respectively, or (ii) any
statute, rule or regulation applicable to the Company or its Subsidiaries and
neither the Company nor its Subsidiaries is in default under any contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order, except for such violations or defaults which would not, individually or
in the aggregate, have a Material Adverse Effect. Except as specifically
contemplated by this Agency Agreement and except such as have been obtained as
of the date hereof, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
this Agency Agreement or the Offering Documents in accordance with the terms
hereof or thereof. The Company is not in violation of the listing requirements
of the Nasdaq National Market as in effect on the date hereof and, except as
disclosed in Schedule 2(i), has no actual knowledge of any facts which would
reasonably lead to delisting or suspension of the Common Stock by the Nasdaq
National Market in the foreseeable future.
(j) Taxes. Except as set forth in or contemplated by Schedule 2(j), the
Company has filed all Federal, state, local and foreign tax returns which are
required to be filed by it or otherwise met its disclosure obligations to the
relevant agencies and all such returns are true and correct in all material
respects. The Company has paid or adequately provided for all tax liabilities of
the Company as reflected on such returns or determined to be due on such returns
or pursuant to any assessments received by it or which it is obligated to
withhold from amounts owing to any employee, creditor or third party. There are
no unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any
such claim. The Company has properly accrued all taxes required to be accrued by
GAAP consistently applied. To the best of the Company's knowledge, the tax
returns of the Company have never been audited by any state, local or Federal
authorities. The Company has not waived any statute of limitations with respect
to taxes or agreed to any extension of time with respect to any tax assessment
or deficiency.
(k) Compliance With Laws; Licenses; Etc. The business of the Company
and its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, ordinance or regulation of any governmental entity except
for such violations the sanctions for which either individually or in the
aggregate would not have a Material Adverse Effect, and the Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would be reasonably likely to have a
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Material Adverse Effect. The Company has all material licenses and permits and
other governmental certificates, authorizations and permits and approvals
(collectively, "Licenses") required by every Federal, state and local government
or regulatory body for the operation of its business as currently conducted and
the use of its properties, except where the failure to be licensed or possess a
permit would not have a Material Adverse Effect. The Licenses are in full force
and effect and to the Company's knowledge no violations currently exist in
respect of any License and no proceeding is pending or threatened to revoke or
limit any thereof.
(l) Authorization of Agency Agreement; Enforceability; Etc. The Company
has the requisite corporate power and authority to enter into and perform its
obligations under this Agency Agreement and the Offering Documents, and the Fund
Escrow Agreement (as defined below). The execution and delivery of this Agency
Agreement and the Funds Escrow Agreement by the Company and the consummation by
it of the transactions contemplated hereby and thereby, have been duly
authorized by the Company's Board of Directors (the "Board") and no further
consent or authorization is required by the Company, its Board or its
stockholders. This Agency Agreement has been duly executed and delivered by the
Company, and this Agency Agreement constitutes the valid and binding obligations
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
(m) Authorization of Preferred Shares, Warrants Etc. Except as set
forth in or contemplated by Schedule 2(m), the issuance, sale and delivery of
the C Preferred Shares, the Notes, the Warrants, the Agent's Engagement Warrants
and the Agent's Financing Warrants (as defined herein) have been duly authorized
by all requisite corporate action of the Company. When so issued, sold and
delivered in accordance with the Offering Documents for the consideration set
forth therein, the C Preferred Shares, the Notes, the Warrants, the Agent's
Engagement Warrants and the Agent's Financing Warrants will be duly executed,
issued and delivered and will constitute valid and legal obligations of the
Company enforceable in accordance with their respective terms and, in each case,
will not be subject to preemptive or any other similar rights of the
shareholders of the Company.
(n) Authorization of Reserved Shares. Except as set forth in or
contemplated by Schedule 2(n), the issuance, sale and delivery by the Company of
the shares of Common Stock or Conversion Shares issuable upon conversion or
exercise of the Notes, the C Preferred Shares, the Warrants, the Agent's
Engagement Warrants and the Agent's Financing Warrants (collectively, the
"Reserved Shares") have been duly authorized by all requisite corporate action
of the Company, and the Reserved Shares have been duly reserved for issuance
upon exercise of all or any of the Warrants, the Agent's Engagement Warrants and
Agent's Financing Warrants and conversion of all or any of the Notes or the C
Preferred Shares and when so issued, sold, paid for and delivered for the
consideration set forth in the Offering Documents, the Reserved
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Shares will be validly issued and outstanding, fully paid and nonassessable, and
not subject to preemptive or any other similar rights of the shareholders of the
Company or others.
(o) Exemption from Registration. Assuming (i) the accuracy of the
information provided by the Purchasers in the Securities Purchase Agreement and
(ii) that the Placement Agent has complied in all material respects with its
obligations hereunder, the offer and sale of the Securities pursuant to the
terms of this Agency Agreement are exempt from the registration requirements of
the 1933 Act and the rules and regulations promulgated thereunder. The Company
is not disqualified from the exemption under Regulation D by virtue of the
disqualification contained in Rule 507 promulgated thereunder.
(p) Registration Rights. Except with respect to holders of the Series B
Preferred Stock, the Series C Preferred Stock, the Notes, the Warrants, the
Agent's Engagement Warrants and the Agent's Financing Warrants, and except as
set forth in Schedule 2(p), no person has any right to cause the Company to
effect the registration under the 1933 Act of any securities of the Company. The
Company shall grant registration rights under the 1933 Act to the Purchasers in
the Financing and/or their transferees as more fully described or contemplated
by Registration Rights Agreement.
(q) Brokers. Neither the Company nor any of its officers, directors,
employees or shareholders has employed any broker or finder in connection with
the transactions contemplated by this Agency Agreement other than the Placement
Agent.
(r) Title to Securities. When certificates representing the C Preferred
Shares, the Warrants, the Notes, the Agent's Engagement Warrants and the Agent's
Financing Warrants have been duly delivered to the Purchasers participating in
the Financing, and payment shall have been made therefor, such persons shall
receive from the Company good and marketable title to such securities free and
clear of all liens, encumbrances and claims whatsoever (with the exception of
claims arising through the acts or omissions of the purchasers and except as
arising from applicable Federal and state securities laws), and the Company
shall have paid all taxes, if any, in respect of the original issuance thereof.
(s) Right of First Refusal. No person, firm or other business entity is
a party to any agreement, contract or understanding, written or oral entitling
such party to a right of first refusal with respect to offerings by the Company.
11
3. Closing; Placement and Fees.
(a) Closing of the Financing. Provided the Minimum Offering shall have
been subscribed for and funds representing the sale thereof shall have cleared,
a closing (the "Initial Closing") shall take place at the offices of the
Placement Agent, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ within three business days
thereafter (but in no event later than five days following the Termination
Date), which closing date may be accelerated or adjourned by agreement between
the Company and the Placement Agent. At the Initial Closing, payment for the
Securities issued and sold by the Company shall be made against delivery of the
Notes and Warrants comprising such Securities. In addition, subsequent closings
of the Financing (if applicable) may be scheduled at the discretion of the
Company and Placement Agent, each of which shall be deemed a "Closing"
hereunder. The date of the last closing of the Financing is hereinafter referred
to as the "Final Closing" and the date of any closing of a Financing hereunder
referred to as a "Closing Date".
(b) Conditions to Placement Agent's Obligations. The obligations of the
Placement Agent hereunder will be subject to the accuracy of the representations
and warranties of the Company herein contained as of the date hereof and as of
each closing date of the Financing, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(i) Due Qualification or Exemption. (A) The Financing will
become qualified or be exempt from qualification under the securities laws of
the several states pursuant to paragraph 4(d) below not later than the Initial
Closing Date and (B) at the Closing Date no stop order suspending the sale of
the Securities shall have been issued, and no proceeding for that purpose shall
have been initiated or threatened;
(ii) No Material Misstatements. Neither the Blue Sky
qualification materials nor the Offering Documents, nor any supplement thereto,
will contain any untrue statement of a fact which in the opinion of the
Placement Agent is material, or omits to state a fact, which in the opinion of
the Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iii) Compliance with Agreements. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing, and the Company
shall not be in breach of the Redemption Agreement;
(iv) Corporate Action. The Company has or will have taken all
necessary corporate action, including, without limitation, obtaining the
approval of the Company's board of directors, for the execution and delivery of
this Agency Agreement, the performance by the Company of its obligations
hereunder and the Financing contemplated
12
hereby; provided, however, that the Placement Agent understands that the related
shareholder approval may not be obtained prior to the Initial Closing;
(v) Opinion of Company Counsel. At each Closing, the Placement
Agent shall receive the opinion of Holland & Knight, LLP, counsel to the
Company, substantially to the effect that:
(A) the Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the Florida, has all
requisite corporate power and authority necessary to own or hold its
respective properties and conduct its business as described in the
Company's Annual Report on Form 10-K for the year ended December 31,
1999, and is duly qualified or licensed to do business and is in good
standing as a foreign corporation in California and Indiana and in each
other jurisdiction listed on an exhibit to such opinion;
(B) the Company has all requisite corporate power and
authority to execute and deliver and perform its obligations under this
Agency Agreement and the Securities Purchase Agreement, the Notes, and
the Warrants (and each of the other documents to be entered into by the
Company in connection therewith, including, but not limited to the
Registration Rights Agreement, the General Security Agreement, and the
Intellectual Property Security Agreement) (collectively, the
"Transaction Documents"), and to consummate the transactions
contemplated hereby and thereby;
(C) each of this Agency Agreement and the other Transaction
Documents has been duly executed and delivered by the Company, and is
the valid and binding obligation of the Company, enforceable against it
in accordance with its terms, subject to any applicable bankruptcy,
insolvency or other laws affecting the rights of creditors generally
and to general equitable principles;
(D) to such counsel's knowledge, and without independent
investigation, the authorized, issued and outstanding capital stock of
the Company as of the date hereof (before giving effect to the
transactions contemplated by this Agency Agreement) is as set forth in
Schedule 2(c) or as stated in Section 2(c) hereto. To such counsel's
knowledge and without independent investigation, there are no
outstanding warrants, options, agreements, convertible securities,
preemptive rights or other commitments pursuant to which the Company
is, or may become, obligated to issue any shares of its capital stock
or other securities of the Company other than as set forth in Schedule
2(c) or as stated in Section 2(c);
(E) assuming (i) the accuracy of the information provided by
the Purchasers in Securities Purchase Agreement; and (ii) that the
Placement Agent and any applicable Selected Dealers has complied with
their obligations hereunder, the issuance and sale of the Securities
are exempt from the registration requirements set forth in Section 5 of
the 1933 Act;
13
(F) the Series C Preferred Stock, the Notes, the Warrants, the
Agent's Engagement Warrants and the Agent's Financing Warrants, and the
Common Stock conform as to legal matters in all material respects to
the statements relating thereto contained in the applicable Offering
Memorandum. (i) The shares issuable upon exercise of the Agent's
Engagement Warrants and the Agent's Financing Warrants when issued in
accordance with such warrants and upon payment of the exercise price
therefor and (ii) the shares of Common Stock and C Preferred Stock, as
the case may be, issuable upon conversion of the Notes and the Series C
Preferred Stock, when issued in accordance with the terms of such
instruments and upon payment of conversion price therefor, shall be
duly authorized, validly issued, fully paid, and nonassessable, and
shall not have been issued in violation of any preemptive rights;
(G) no consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
federal, state, local, or other governmental authority or any court or
other tribunal is required by the Company for the execution, delivery,
or performance by the Company of this Agency Agreement and the other
Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby, except the filing of a Notice of Sales
of Securities on Form D pursuant to Regulation D and such consents,
authorizations, approvals, registrations, and qualifications as may be
required under securities or "blue sky" laws in connection with the
issuance, sale, and delivery of the Securities pursuant to this Agency
Agreement. No consent of any party to any material contract, agreement,
instrument, lease, license, arrangement, or understanding which the
Company is a party, or to which any of its properties or assets are
subject, and which is attached or filed as an exhibit to either the
Annual Report on Form 10-K filed by the Company with the SEC on March
24, 2000 or the Quarterly Report on Form 10-Q filed by the Company with
the SEC on May 15, 2000 is required for the execution, delivery, or
performance of this Agency Agreement or the other Transaction Documents
by the Company, or the consummation of the transactions contemplated
hereby or thereby; and the execution, delivery and performance of this
Agency Agreement and the other Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby, will
not, to the best of such counsel's knowledge without independent
investigation, violate, result in a breach of, conflict with, or (with
or without the giving of notice or the passage of time or both) entitle
any party to terminate or call a default under any such material
contract, agreement, instrument, lease, license, arrangement, or
understanding known to us and attached or filed as an exhibit to either
the Annual Report on Form 10-K filed by the Company with the SEC on
March 24, 2000 or the Quarterly Report on Form 10-Q filed by the
Company with the SEC on May 15, 2000, or violate or result in a breach
of any term of the articles of incorporation or by-laws of the Company,
or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree known to us and material to and
binding on the Company or to which any of its operations, businesses,
properties, or assets are subject;
14
(H) to the best of such counsel's knowledge and without
independent investigation, (i) there are no claims, actions, suits,
investigations or proceedings before or by any arbitrator, court,
governmental authority or instrumentality pending or, to such counsel's
knowledge, threatened against or affecting the Company or involving the
properties of the Company which might materially and adversely affect
the business, properties or financial condition of the Company or which
might materially adversely affect the transactions or other acts
contemplated by this Agency Agreement or the validity or enforceability
of this Agency Agreement, except as set forth in or contemplated by the
Offering Documents or in Schedule 2(h); and (ii) the Company is not in
violation of, or in default with respect to, any law, rule, regulation,
order, judgment or decree, except as described in the SEC Documents and
the Offering Memorandum or such as in the aggregate do not now have and
will not in the future have a Material Adverse Effect; nor is the
Company required to take any action in order to avoid any such
violation or default; and
(I) we have participated in conferences with officers and
other representatives of the Company, representatives of the
independent public accountants for the Company and your representatives
at which the contents of the Offering Memorandum and the Offering
Documents and related matters were discussed and, although we are not
passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering
Memorandum and the other Offering Documents (except as described in
paragraphs D and F above), we advise you that, on the basis of the
foregoing (relying as to materiality upon the opinions of officers and
other representatives of the Company), no facts have come to our
attention which lead us to believe that the Offering Memorandum and
other Offering Documents as of their respective dates contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading (it being understood that we have not been requested to
and do not make any comment with respect to the financial statements
and other financial or statistical data included in the Offering
Memorandum).
(vi) Officers' Certificate. The Placement Agent shall receive
a certificate of the Company, signed by the Chief Executive Officer and Chief
Financial Officer thereof, that (i) the representations and warranties contained
in Section 2 hereof are true and accurate at such closing with the same effect
as though expressly made at such closing and (ii) the Company has complied with
its covenants and agreements set forth herein.
(vii) Shareholder Consents. The Placement Agent shall have
received copies of such duly executed waivers and consents from the holders of
the Company's outstanding securities as counsel to the Placement Agent deems
necessary or important for completion of the Financing.
15
(viii) Designation of Preferred. The Company shall have filed
an Articles of Amendment to the Articles of Incorporation of the Company for the
Series C Preferred Stock with the Secretary of State of the State of Florida.
(ix) Fund Escrow Agreement. The Placement Agent shall receive
a copy of a duly executed escrow agreement in the form previously delivered to
you regarding the deposit of funds pending the closing(s) of the Financing with
a bank or trust company reasonably acceptable to the Placement Agent (the "Fund
Escrow Agreement").
(x) Budgets. The Placement Agent shall receive two-year
quarterly operating budgets which have been reviewed and approved by the
Company's Board and the Placement Agent.
(xi) Lock-Up Agreements. The Placement Agent shall receive
agreements from each officer, director and principal shareholder of the Company
to the effect that such individual shall not sell, assign or transfer any of
their Common Stock, preferred stock or other securities of the Company for a
period of fifteen months from the Initial Closing. The lock up period for such
individuals may be extended, at the discretion of the Placement Agent, for up to
an additional twelve months. The Placement Agent shall receive agreements from
each Purchaser to the effect that such Purchaser shall not sell, assign or
transfer the Conversion Shares or the Warrant Shares sold in the Private
Placement for a period of one year from the Initial Closing. The lock up period
for such Purchasers may be extended, at the discretion of the Placement Agent,
for up to an additional twelve months.
(xii) Board of Directors; Irrevocable Proxy. By 6 PM eastern
standard time on July 7, 2000, the Board will consist of seven directors which
shall include three members designated by the Company (who shall be reasonably
acceptable to the Placement Agent), two members designated by the Placement
Agent and two members designated by the Purchasers. At least three of the
members of the Board collectively designated by the Placement Agent and the
Purchasers shall be "independent directors" (as such term is defined in Rule
4200 of the Nasdaq Stock Market). The Placement Agent shall receive the
irrevocable proxies described in Section 4(j) hereof. In the event that any of
the parties does not exercise its respective right to designate a member or
members of the Board, then the failure to do so shall not constitute a waiver of
such right and such party may then appoint any person to be an observer who
shall be entitled to attend and observe meetings of the Board and any committees
thereof (an receive notices, communications and other information provided in
connection with such meetings).
(xiii) [INTENTIONALLY OMITTED]
(xiv) O&D Insurance. The Company shall have in place and full
force and effect at least $5,000,000 of officers and directors liability
insurance.
(c) Blue Sky. Counsel to the Company will prepare and file the
necessary documents so that offers and sales of the securities to be offered in
the Financing may be made in
16
certain jurisdictions. It is understood that such filings may be based on or
rely upon: (i) the representations of each Purchaser set forth in the Securities
Purchase Agreement delivered by such Purchaser; (ii) the representations,
warranties and agreements of the Company set forth in Section 2 of this Agency
Agreement; and (iii) the representations of the Company set forth in the
certificate to be delivered at each closing pursuant to paragraph (vi) of
Section 3(b).
(d) Placement Fee and Expenses.
(i) Financing. Previously, the Company paid to the Placement
Agent a $25,000 non-refundable payment which shall be credited against the
Company's reimbursement obligations as set forth in subsection (i)(B) below. On
May 26, 2000, simultaneously with the execution of the engagement letter between
the Company and the Placement Agent, the Company paid and issued the Placement
Agent warrants (the "Agent's Engagement Warrants") to purchase 1,000,000 shares
of Common Stock at an exercise price equal to $1.00 per share. Simultaneously
with the payment for and delivery of the Notes and Warrants at the Initial
Closing (and at each subsequent Closing, if any), the Company shall (A) pay the
Placement Agent a cash fee equal to 10% of the gross proceeds resulting from the
sale of securities in the applicable Closing and (B) issue to the Placement
Agent warrants (the "Agent's Financing Warrants") to purchase shares of Common
Stock in an amount equal to 20% of the fully-diluted shares of Common Stock
issuable to the Purchasers in each applicable Closing (including upon conversion
of the Notes and exercise of the Warrants). The Company shall also reimburse the
Placement Agent for up to $150,000 of accountable expenses which represents the
maximum aggregate amount of the Placement Agent's accountable expenses,
inclusive of the Placement Agent's expenses in Section 4(b), for which the
Company shall be liable and pay all expenses in connection with the
qualification of the Securities under the securities or Blue Sky laws of the
states which the Placement Agent shall designate, including legal fees and
filing fees.
(ii) Interest. In the event that for any reason the Company
shall fail to pay to the Placement Agent all or any portion of the fees payable
hereunder when due, interest shall accrue and be payable on the unpaid cash
balance due hereunder from the date when first due through and including the
date when actually collected by the Placement Agent, at a rate equal to two
percent above the prime rate of Citibank, N.A., in New York, New York, computed
on a daily basis and adjusted as announced from time to time.
(e) Bring-Down Opinions and Certificates. If there is more than one
Closing, then at each such Closing there shall be delivered to the Placement
Agent updated opinions and certificates as described in (v) and (vi) of Section
3(b) above, respectively.
(f) No Adverse Changes. There shall not have occurred, at any time
prior to the applicable closing (i) any domestic or international event, act or
occurrence which has materially disrupted, or in the Placement Agent's opinion
will in the immediate future materially disrupt, the securities markets; (ii) a
general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the Nasdaq - Amex Stock Exchange or
17
in the over-the-counter market; (iii) any outbreak of major hostilities or other
national or international calamity; (iv) any banking moratorium declared by a
state or federal authority; (v) any moratorium declared in foreign exchange
trading by major international banks or other persons; (vi) any material
interruption in the mail service or other means of communication within the
United States; (vii) any material adverse change in the business, properties,
assets, results of operations, or financial condition of the Company; or (viii)
any change in the market for securities in general or in political, financial,
or economic conditions which, in the Placement Agent's reasonable judgment,
makes it inadvisable to proceed with the Financing.
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Financing will be used to
redeem the Company's outstanding Series B Preferred Stock as contemplated by the
Redemption Agreement and as otherwise described in the Offering Memorandum.
Except as set forth on Schedule 4(a), the Company shall not use any of the
proceeds from the Financing to repay any indebtedness of the Company (other than
trade payables in the ordinary course), including but not limited to
indebtedness to any current executive officers, directors or principal
shareholders of the Company.
(b) Expenses of Financing and Other Payments. The Company agrees to
reimburse the Placement Agent for all expenses directly incurred by the
Placement Agent in connection with the proposed Financing up to $150,000
including, but not limited to, (i) reasonable legal fees of the Placement
Agent's counsel relating to the costs of preparing the Offering Documents and
all amendments, supplements and exhibits thereto and preparing this Agency
Agreement and delivering all Placement Agent and selling documents, Notes,
Warrants and Preferred Share certificates; (ii) blue sky fees, filing fees and
the fees and disbursements of Placement Agent's counsel in connection with blue
sky matters, as and if applicable; and (iii) mailing, printing, copying,
telephone, travel, background searches, due diligence investigations, and
consulting fees or other similar expenses (the "Placement Agent Expenses").
If the Company decides not to proceed with the Financing for any reason
(other than Placement Agent's failure to close on the Financing prior to the
Termination Date) or if the Placement Agent decides not to proceed with the
Private Placement because of a material breach by the Company of its
representations, warranties, or covenants in this Agency Agreement or as a
result of material adverse changes in the affairs of the Company that adversely
impacts the marketability and sale of the Securities, the Company will be
obligated to pay the Placement Agent a financial advisory fee, at the Placement
Agent's sole discretion, of either (i) $1,000,000 in cash or (ii) 1,000,000
shares of the Company's Common Stock (which fee the Company agrees is a fair
measure of the compensation to be received by the Placement Agent under such
circumstances in respect of, among other things its advice, time and effort in
respect of the Financing), and to reimburse the Placement Agent for the
Placement Agent Expenses as set forth above within ten business days of the
occurrence or any such event. Absent bad faith, the Placement Agent shall have
no liability to the Company for any reason should the Placement
18
Agent choose not to proceed with the Financing contemplated hereby except as
otherwise provided herein.
(c) Notification. The Company shall notify the Placement Agent
immediately, and in writing, (i) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the last Closing
or the Termination Date as a result of which the Offering Documents would
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) of the receipt of any notification with respect to the
modification, rescission, withdrawal or suspension of the qualification or
registration of the Securities, or of any exemption from such registration or
qualification, in any jurisdiction. The Company will use its best efforts to
prevent the issuance of any such modification, rescission, withdrawal or
suspension and, if any such modification, rescission, withdrawal or suspension
is issued and you so request, to obtain the lifting thereof as promptly as
possible.
(d) Blue Sky. The Company will use its best efforts to qualify or
register the securities to be offered in the Financing for offering and sale
under, or establish an exemption from such qualification or registration under,
the securities or "blue sky" laws of such jurisdictions as you may reasonably
request; provided however, that the Company will not be obligated to register as
a foreign corporation or qualify as a dealer in securities in any jurisdiction
in which it is not so qualified. The Company will not consummate any sale of
securities pursuant to the Financing in any jurisdiction in which it is not so
qualified or in any manner in which such sale may not be lawfully made.
(e) Form D Filing. The Company shall: (i) file five copies of a Notice
of Sales of Securities on Form D with the SEC no later than 15 days after the
first sale of the Securities; (ii) file promptly such amendments to such Notices
on Form D as shall become necessary; and (iii) comply with any filing
requirement imposed by the laws of any state or jurisdiction in which offers and
sales are made. The Company shall furnish the Placement Agent with copies of all
such filings.
(f) Press Releases, Etc. The Company shall not, during the period
commencing on the date hereof and ending on the last to occur of (i) the
Closing; (ii) the Termination Date; or (iii) the second anniversary of the Final
Closing, issue any press release or other communication, or hold any press
conference with respect to the Company, its financial condition, results of
operations, business, properties, assets, or liabilities, without the prior
consent of the Placement Agent, which consent shall not be unreasonably
withheld, provided, however, the Company may issue any such releases which in
the reasonable opinion of counsel to the Company are required for compliance
with any governmental agency or exchange on which the Company's securities are
listed. Furthermore, the Company shall not at any time include information with
respect to the Financing or use the Placement Agent's name in any press release,
advertisement or on any website maintained by the Company without the prior
19
written consent of the Placement Agent, which consent, with respect to
information regarding the Financing only, shall not be unreasonably withheld.
(g) Executive Compensation. The compensation of the Company's executive
officers shall not increase during the three-year period following the Initial
Closing without the approval of the Compensation Committee of the Company's
Board of Directors.
(h) Restrictions on Issuances of Securities. During the period
commencing on the date hereof and ending on the later of (i) the Final Closing
or (ii) the Termination Date, the Company will not, without the prior written
consent of the Placement Agent, issue additional shares of Common Stock, other
than pursuant to the exercise of options or warrants outstanding on the date
hereof, or grant any warrants, options or other securities of the Company or the
conversion of shares of Series B Preferred Stock. If the Minimum Offering is
sold, the Company agrees that it will not, without approval of a majority of the
Board, issue additional shares of Common Stock, other than pursuant to the
exercise of options or warrants outstanding on the date hereof, or grant any
warrants, options or other securities of the Company.
(i) Budgets; Financial Statements. During the period ending on the
Initial Closing Date), any expenditures in excess of 5% outside the budgets
previously delivered to the Placement Agent pursuant to Section 3(b)(x) hereof
will be approved by a majority of the Board. During the two-year period after
the Initial Closing, the Company will use its best efforts to deliver to the
Board members monthly financial statements within 15 days after the end of each
month but, in any event, no later than 30 days after the end of each month.
(j) Board Designees; Irrevocable Proxy. In the event the Minimum
Offering is completed, the Company agrees that until such time as (i) all of the
outstanding Notes have converted into Common Stock pursuant to optional
conversion features set forth in the promissory note or (ii) at least 90% of the
outstanding C Preferred Shares have converted into Common Stock pursuant to the
terms of the mandatory conversion features set forth in the C Designation, the
Company will use its best efforts to cause the Board to have the composition set
forth in Section 3(b)(xii) hereof and the number of directors comprising the
Board shall not increase without the consent of the Placement Agent's Board
designees. The Placement Agent shall receive an irrevocable proxy from each of
the officers and directors of the Company granting the Placement Agent a proxy
to vote their shares for the election of directors solely for the purpose of
enforcing the Placement Agent's rights described in this Section 4(j). Any
director designated by the Placement Agent may be replaced at any time. In
addition, in the event that any director designated by the Placement Agent
resigns or for any reason no longer serves as a director, then the Placement
Agent shall designate a replacement for such director.
(k) Independent Auditors. During the two-year period following the
Initial Closing, the Company will not switch auditors, other than to a "Big
Five" accounting firm, without the approval of a majority of the independent
members of the Board.
20
(l) Quarterly Communications. Within 45 days after the end of each
fiscal quarter, the Company shall (i) send to the Placement Agent (x) a letter
setting forth the results of operations for the fiscal quarter and management's
analysis thereof (which delivery obligation shall be satisfied by timely filing
with the SEC the applicable quarterly report on Form 10-Q) and (y) a schedule of
all securities issuances by the Company, including the issuances of shares
pursuant to the cashless exercise provisions of any options or warrants, and
(ii) present an update on the affairs of the Company at the offices of the
Placement Agent for the investors and employees of the Placement Agent. In
addition, within 90 days after the end of each fiscal year, the Company shall
send to the Purchasers a shareholders letter in form and substance reasonably
satisfactory to the Placement Agent setting forth the results of operations for
the fiscal year and management's analysis thereof (which delivery obligation
shall be satisfied by timely filing with the SEC the applicable Annual Report on
Form 10-K).
(m) Transmittal Letters. Within five days after each closing of the
Financing, the Placement Agent shall receive copies of all letters from the
Company to the investors transmitting the securities sold in such Financing and
shall receive a letter from the Company confirming transmittal of the securities
to the investors.
(n) Committees. The Company will not create any committees of its Board
that are not composed of a majority of the independent members of the Board
unless it has received the approval of a majority of the independent members of
the Board to do so.
(o) Transfer Agent. The Company shall provide a transfer agent and
registrar in respect of its capital stock, which transfer agent and registrar
shall be reasonably acceptable to the Placement Agent.
5. Representations, Warranties and Covenants of the Placement Agent.
The Placement Agent represents, warrants and covenants to the Company as
follows:
(a) Registered Broker-Dealer Etc. The Placement Agent and any
applicable Selected Dealer is (i) a registered broker-dealer under the 1934 Act,
and (ii) a member in good standing of the NASD, and (iii) registered as a
broker-dealer in each jurisdiction in which it is required to be registered as
such in order to offer and sell the Securities in such jurisdiction. The
Placement Agent will cooperate with the Company to ensure that the offering and
sale of the Securities will comply with the requirements of Rule 506 under the
Act, including, without limitation, the general conditions contained in
Regulation D and the federal securities laws, and will follow the reasonable
advice of the Company with respect to the manner in which to offer and sell the
Units so as to ensure that the offering and sale thereof will comply with the
securities laws in any jurisdiction in which Securities are offered by the
Placement Agent.
(b) Authorization of Agency Agreement; Enforceability; Etc. The
Placement Agent has the requisite corporate power and authority to enter into
and perform its obligations under this Agency Agreement and the Fund Escrow
Agreement. The execution and delivery of this Agency Agreement and the Funds
Escrow Agreement by the Placement Agent and the
21
consummation by it of the transactions contemplated hereby and thereby, have
been duly authorized and no further consent or authorization is required. This
Agency Agreement has been duly executed and delivered by the Placement Agent,
and this Agency Agreement constitutes the valid and binding obligations of the
Placement Agent enforceable against the Placement Agent in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Placement
Agent and each selected dealer, if any, and their respective shareholders,
directors, officers, agents and controlling persons against any and all loss,
liability, claim, damage and expense whatsoever (and all actions in respect
thereof), and to reimburse the Placement Agent and such persons for reasonable
legal fees and related expenses as incurred (including, but not limited to the
costs of investigating, preparing or defending any such action or claim whether
or not in connection with litigation in which the Placement Agent is a party and
the costs of giving testimony or furnishing documents in response to a subpoena
or otherwise), caused by or arising out of (i) any untrue statement or alleged
untrue statement of a material fact contained in the Offering Documents or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading (provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement of a material fact
or alleged untrue statement or a material fact provided by the Placement Agent
in writing to the Company specifically for use in the Offering Documents), (ii)
any violation by the Company of the federal securities laws or the securities
laws of any states, or otherwise arising out of your engagement hereunder,
except in respect of any matters as to which you shall have been adjudicated to
have acted with willful misconduct or gross negligence, or (iii) any breach by
the Company of any of its representations, warranties or covenants contained in
this Agency Agreement.
(b) The Company agrees to indemnify and hold harmless the Placement
Agent and each selected dealer, if any, and their respective shareholders,
directors, officers, agents and controlling persons to the same extent as the
foregoing indemnity under paragraph (a), against any and all loss, liability,
claim, damage and expense whatsoever directly arising out of the exercise by any
person of any right under the 1933 Act or the 1934 Act or the securities or Blue
Sky laws of any state on account of violations of the representations,
warranties or agreements set forth in Section 2 hereof.
(c) The Placement Agent agrees to indemnify and hold harmless the
Company, and each shareholder, director, officer, agent and controlling person
against any and all loss, liability, claim, damage and expense whatsoever (and
all actions in respect thereof), and to reimburse the Company and such persons
for reasonable legal fees and related expenses as
22
incurred (including, but not limited to the costs of investigating, preparing or
defending any such action or claim whether or not in connection with litigation
in which the Company is a party and the costs of giving testimony or furnishing
documents in response to a subpoena or otherwise), caused by or arising out of
(i) any breach of any of the agreements, representations or warranties of the
Placement Agent contained in this Agency Agreement or (ii) any untrue statement
of a material fact in any information provided to the Company in writing by, and
relating to, the Placement Agent, expressly for use in and used in the Offering
Documents, or any omission in any information provided to the Company in writing
by, and relating to, the Placement Agent, expressly for use in and used in the
Offering Documents of any material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading (it being understood and agreed that any such information provided to
the Company in writing by, and relating to, the Placement Agent shall be set
forth in a separate letter signed by the Placement Agent and delivered to the
Company).
(d) The Placement Agent agrees to indemnify and hold harmless the
Company, and each shareholder, director, officer, agent and controlling person
to the same extent as the foregoing indemnity under paragraph (c) above, against
any and all loss, liability, claim, damage and expense whatsoever directly
arising out of the exercise by any person of any right under the 1933 Act or the
1934 Act or the securities or Blue Sky laws of any state on account of
violations of the representations, warranties or agreements set forth in Section
5 hereof.
(e) Promptly after receipt by a party (the "Indemnified Party") under
this Section of notice of the commencement of any action, the indemnified party
will, if a claim in respect thereof is to be made against one or more of the
other parties (the "Indemnifying Party") under this Section, notify in writing
the Indemnifying Party of the commencement thereof; but the omission so to
notify the Indemnifying Party will not relieve it from any liability which it
may have to the Indemnified Party otherwise than under this Section except to
the extent the defense of the claim is prejudiced. In case any such action is
brought against an Indemnified Party, and it notifies the Indemnifying Party of
the commencement thereof, the Indemnifying Party will be entitled to participate
in, and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, subject to the
provisions herein stated, with counsel reasonably satisfactory to the
Indemnified Party, and after notice from the Indemnifying Party to the
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to the Indemnified Party under this
Section for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof other than reasonable costs of
investigation (provided the Indemnifying Party has been advised in writing that
such investigation is being undertaken). The Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the Indemnifying Party if the Indemnifying Party has assumed the
defense of the action with counsel reasonably satisfactory to the Indemnified
Party; provided that the fees and expenses of such counsel shall be at the
expense of the Indemnifying Party if (i) the employment of such counsel
23
has been specifically authorized in writing by the Indemnifying Party or (ii)
the named parties to any such action (including any impleaded parties) include
both the Indemnified Party or Parties and the Indemnifying Party and, in the
reasonable judgment of counsel for the Indemnified Party, it is advisable for
the Indemnified Party or Parties to be represented by separate counsel due to an
actual conflict of interest (in which case the Indemnifying Party shall not have
the right to assume the defense of such action on behalf of an Indemnified Party
or Parties), it being understood, however, that the Indemnifying Party shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for all the Indemnified
Parties. No settlement of any action against an Indemnified Party shall be made
unless such an Indemnified Party is fully and completely released in connection
therewith.
7. Contribution.
To provide for just and equitable contribution, if (i) an Indemnified
Party makes a claim for indemnification pursuant to Section 6 but it is found in
a final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this Agency
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the 1933 Act, the
1934 Act, or otherwise, then the Company (including for this purpose any
contribution made by or on behalf of any officer, director, employee or agent
for the Company, or any controlling person of the Company), on the one hand, and
the Placement Agent and any Selected Dealers (including for this purpose any
contribution by or on behalf of an indemnified party), on the other hand, shall
contribute to the losses, liabilities, claims, damages, and expenses whatsoever
to which any of them may be subject, in such proportions as are appropriate to
reflect the relative benefits received by the Company, on the one hand, and the
Placement Agent and the Selected Dealers, on the other hand; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Placement Agent and the Selected Dealers in connection with the facts which
resulted in such losses, liabilities, claims, damages, and expenses shall also
be considered. In no case shall the Placement Agent or a Selected Dealer be
responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 3 hereof or the Selected Dealer
Agreement, as the case may be. No person guilty of a fraudulent
misrepresentation shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person, if any, who controls the Placement Agent or a Selected Dealer
within the meaning of Section 15 of the 1933 Act or Section 20(a) of the 1934
Act and each officer, director, shareholder, employee and agent of the Placement
Agent or a Selected Dealer, shall have the same rights to contribution as the
Placement Agent or the Selected Dealer, and each person, if any who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act and each officer, director, employee and agent of the Company, shall
have the same rights to contribution as the Company, subject in each case to the
provisions of this Section 7. Anything in this Section 7 to the contrary
24
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 7 is intended to supersede any right to contribution under the 1933 Act,
the 1934 Act, or otherwise.
8. Miscellaneous.
(a) Survival. Any termination of the Financing without consummation
thereof shall be without obligation on the part of any party except that the
indemnification provided in Section 6 hereof and the contribution provided in
Section 7 hereof shall survive any termination and shall survive the Final
Closing for a period of two years.
(b) Representations, Warranties and Covenants to Survive Delivery. The
respective representations, warranties, indemnities, agreements, covenants and
other statements as of the date hereof shall survive execution of this Agency
Agreement and delivery of the Securities and the termination of this Agency
Agreement for a period of two years after such respective event.
(c) No Other Beneficiaries. This Agency Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective successors
and controlling persons, and no other person, firm or corporation shall have any
third-party beneficiary or other rights hereunder.
(d) Governing Law; Resolution of Disputes. This Agency Agreement shall
be governed by and construed in accordance with the law of the State of New York
without regard to conflict of law provisions. The Placement Agent and the
Company will attempt to settle any claim or controversy arising out of this
Agency Agreement through consultation and negotiation in good faith and a spirit
of mutual cooperation. Should such attempts fail, then the dispute will be
mediated by a mutually acceptable mediator to be chosen by the Placement Agent
and the Company within 15 days after written notice from either party demanding
mediation. Neither party may unreasonably withhold consent to the selection of a
mediator, and the parties will share the costs of the mediation equally. Any
dispute which the parties cannot resolve through negotiation or mediation within
six months of the date of the initial demand for it by one of the parties may
then be submitted to binding arbitration under the rules of the American
Arbitration Associations of New York for resolution. The use of mediation will
not be construed under the doctrine of latches, waiver or estoppel to affect
adversely the rights of either party. Nothing in this paragraph will prevent
either party from resorting to judicial proceedings if (a) good faith efforts to
resolve the dispute under these procedures have been unsuccessful or (b) interim
relief from a court is necessary to prevent serious and irreparable injury.
(e) Counterparts. This Agency Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same instrument.
(f) Notices. Any communications specifically required hereunder to be
in writing, if sent to the Placement Agent, will be sent by overnight courier
providing a receipt of
25
delivery or by certified or registered mail, or by facsimile with machine
generated transmittal confirmation, to it at Commonwealth Associates, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇,
with a copy to Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇ ▇. ▇▇▇▇▇▇, III, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇, and if sent to
the Company, will be sent by overnight courier providing a receipt of delivery
or by certified or registered mail, or by facsimile with machine generated
transmittal confirmation, to it at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to
Holland & Knight LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Fax No. (▇▇▇) ▇▇▇-▇▇▇▇.
(g) Entire Agreement. This Agency Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agency
Agreement nor any term hereof may be changed, waived or terminated orally,
except by an instrument in writing signed by the party against which enforcement
of the change, waiver or termination is sought.
26
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
PROXYMED, INC.
By:
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. Blue
Title: Chairman and Interim Chief
Executive Officer
Agreed:
COMMONWEALTH ASSOCIATES, L.P.
By: Commonwealth Associates Management Company, Inc.,
its general partner
By:
-----------------------------------
Name:
Title:
27
Annex A
1. Definitions. All capitalized terms used, and not defined herein,
shall have the meanings ascribed to in the Subscription Agreement. The following
additional definitions shall apply for purposes of this Annex A:
(a) The term "Agency Warrants" means the Warrants, dated as of the date
Subscription Agreement, between the Company and Commonwealth.
(b) The term "Agency Warrant Shares" means the Agency Warrants to
purchase shares of Common Stock of the Company.
(c) The term "Company" means ProxyMed, Inc., a Florida corporation.
(d) The term "Common Stock" means shares of the Company's common stock,
par value $0.001.
(e) The term "Commonwealth" means Commonwealth Associates, L.P.
(f) The term "Conversion Shares" means the Note Conversion Shares and
the Preferred Conversion Shares, collectively.
(g) The term "Financing" means the financing extended by the
Subscribers to the Company in connection with the Subscription Agreement.
(h) The term "Holder" means a Subscriber and any transferee or assignee
thereof to whom a Subscriber assigns its rights under this Annex A to the
Subscription Agreement and who agrees to become bound by the provisions of this
Annex A in accordance with Section 8.
(i) The term "Investor Warrants" means the Warrants, dated as of the
date of the Subscription Agreement, between the Company and the respective
Subscribers.
(j) The term "Investor Warrant Shares" means the shares of Common Stock
issuable upon the exercise of the Investor Warrants.
(k) The term "LOI Warrants" means the Warrants, dated as of June 7,
2000, between the Company and Commonwealth.
(l) The term "LOI Warrant Shares" means the LOI Warrants to purchase
1,000,000 shares of Common Stock of the Company.
(m) The term "Notes" means the 7% convertible senior secured promissory
notes made by the Company in favor of the Subscribers.
(n) The term "Note Conversion Shares" means the shares of Common Stock
into which the Notes, in certain circumstances, are convertible, at the option
of the Subscribers, the terms and provisions of which are contained in the
Subscription Agreement and the Notes.
(o) The term "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a government or any department or agency thereof.
(p) The term "Preferred Conversion Shares" means the shares of Common
Stock into which the C Preferred Shares are convertible, the terms and
provisions of which are contained in the Series C Designation.
(q) The term "Redemption Warrants" means the Warrants, dated as of May
4, 2000, between the Company and Commonwealth.
(r) The term "Redemption Warrant Shares" means the Redemption Warrants
to purchase 1,000,000 shares of Common Stock of the Company.
(s) The terms "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing one or more Registration
Statements, (as defined below) or similar document in compliance with the
Securities Act of 1933, as amended (the "1933 Act"), and Rule 415 thereunder or
any successor rule providing for the offering for resale of securities on a
continuous or delayed basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement or document by the United States
Securities and Exchange Commission (the "SEC").
(t) The term "Registrable Securities" means (1) the Note Conversion
Shares, (2) the Warrant Shares issuable or issued upon exercise of the
applicable Investor Warrants, Redemption Warrants, LOI Warrants, and Agency
Warrants, (3) the Preferred Conversion Shares, and (4) any shares of common
stock issued or issuable with respect to the Warrant Shares or the Conversion
Shares, as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on the
exercises of the Investor Warrants, the Redemption Warrants, the LOI Warrants or
the Agency Warrants or conversion of Notes or Series C Preferred Stock;
provided, that any securities deemed Registrable Securities in accordance
herewith shall cease to be Registrable Securities (i) upon the sale of such
securities pursuant to a Registration Statement, (ii) upon the sale of such
securities pursuant to Rule 144 promulgated under the 1933 Act or (iii) on the
date on which such securities become eligible for sale under Rule 144(k).
- 2 -
(u) The term "Registration Statement" means a registration statement on
Form S-1 or Form S-3 or any similar or successor form then appropriate for or
applicable to the offer and sale of the Registrable Securities and filed under
the 1933 Act.
(v) The term "Subscriber(s)" means the subscribers signatory to the
Subscription Agreement.
(w) The term "Subscription Agreement" means the Subscription Agreement
between the Company and the respective Subscribers relating to the purchase of
Securities.
(x) The term "Warrant Shares" means the Investor Warrant Shares, the
Redemption Warrant Shares, the LOI Warrant Shares and the Agency Warrant Shares.
2. Registration.
(a) Right to Include Registrable Stock. If the Company proposes to
register any of its securities under the 1933 Act in connection with the public
offering of such securities solely for cash (other than a registration on Form
S-4 or Form S-8, or any successor or similar forms) (the "Offering"), it will
each such time promptly (but not later than 30 days before the anticipated date
of filing such Registration Statement) give written notice to each Holder. Upon
the written request of any of the Holders made within 15 days after the receipt
of any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such Holders and the intended method of
distribution thereof), the Company will use its reasonable best efforts to
effect the registration under the 1933 Act of all Registrable Securities which
the Company has been requested to register by any of the Holders in accordance
with the intended methods of distribution specified in such request; provided
that (i) if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company determines for
any reason not to proceed with such registration, the Company may, at its
election, give written notice of such determination to the Holders and,
thereupon, will be relieved of its obligation to register any Registrable
Securities in connection with such registration and (ii) in case of a
determination by the Company to delay registration of its securities, the
Company will be permitted to delay the registration of Registrable Securities
for the same period as the delay in registering such other securities; provided,
however, that the provisions of this Section 2 will not be deemed to limit or
otherwise restrict the rights of the Holders under Section 3.
(b) Mandatory Registration. Notwithstanding the foregoing, the Company
shall prepare and file with the SEC prior to the six month anniversary date of
the initial Closing Date of the Subscription Agreement (the "Filing Deadline") a
Registration Statement or Registration Statements (as necessary) on Form S-3
covering the resale of all of the Holders' Registrable Securities. In the event
that Form S-3 is unavailable for such a registration, the Company shall use such
other form as is available
- 3 -
for such a registration, subject to the provisions of Section 2(e). The Company
shall use its best efforts to cause such Registration Statement to be declared
effective by the SEC prior to the date that is the nine month anniversary date
of the Filing Deadline (the "Effectiveness Deadline").
(c) Priority. If the managing underwriter for a registration (other
than with respect to a Registration Statement filed pursuant to Section 2(b)
above) involving an underwritten offering advises the Company in writing that,
in its opinion, the number of securities of the Company (including Registrable
Securities) requested to be included in such registration by the holders thereof
exceeds the number of securities of the Company (the "Sale Number") which can be
sold in an orderly manner in such offering within a price range acceptable to
the Company, the Company will include (i) first, all securities of the Company
that the Company proposes to register for its own account and (ii) second, to
the extent that the number of securities of the Company to be included by the
Company is less than the Sale Number, a number of the Registrable Securities
equal to the number derived by multiplying (a) the difference between the Sale
Number and the securities proposed to be sold by the Company, and (b) a fraction
the numerator of which is the number of Registrable Securities originally
requested to be registered by the Holders and the denominator of which shall be
the aggregate number of all securities requested to be registered by all holders
of the Company's securities (other than securities being registered by the
Company itself), provided that such Registrable Securities for the account of
the Holders shall be allocated among the Holders pro rata based on the amount of
securities sought to be registered by the Holder. The Company hereby agrees that
it will not grant registration rights to any other holder that are more
favorable to such holder than the registration rights granted hereunder.
(d) Legal Counsel. Subject to Section 7 hereof, the Subscribers holding
a majority of the Registrable Securities shall have the right to select one
legal counsel to review and oversee any offering pursuant to this Section 2
("Legal Counsel"), which shall be Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP or such
other counsel as thereafter designated by the holders of [a majority] of
Registrable Securities. The Company shall reasonably cooperate with Legal
Counsel in performing the Company's obligations under the terms of this Annex A.
(e) Ineligibility of Form S-3. In the event that Form S-3 is not
available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form and (ii) undertake to register the resale
of the Registrable Securities on Form S-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of the Registration
Statement then in effect until such time as a Registration Statement on Form S-3
covering the Registrable Securities has been declared effective by the SEC.
- 4 -
(f) Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. If (i) a Registration Statement covering all the
Registrable Securities and required to be filed by the Company pursuant to the
terms of this Annex A is not (A) filed with the SEC on or before the Filing
Deadline or (B) declared effective by the SEC on or before the applicable
Effectiveness Deadline or (ii) on any day after the Registration Statement has
been declared effective by the SEC, sales of all the Registrable Securities
required to be included on such Registration Statement cannot be made pursuant
to the Registration Statement (including, without limitation, because of a
failure to keep the Registration Statement effective, to disclose such
information as is necessary for sales to be made pursuant to the Registration
Statement, to register sufficient shares of Common Stock), then, as partial
relief for the damages to any Holder by reason of any such delay in or reduction
of its ability to sell the underlying shares of Common Stock (which remedy shall
not be exclusive of any other remedies available at law or in equity), (x) each
of the exercise price of the Investor Warrants, Redemption Warrants, LOI
Warrants and Agency Warrants (as set forth in the applicable Warrants), the
Conversion Price relating to the Notes (as set forth in the Subscription
Agreement and the Notes), and the Conversion Price relating to the Series C
Preferred Stock (as set forth in the Subscription Agreement and the Series C
Designation) shall be reduced by 10% for each aggregate 30-day period (or pro
rated amounts thereof for partial 30-day periods) that (i) the Registration
Statement is not (A) filed with the SEC on or before the Filing Deadline or (B)
declared effective by the SEC following the Effectiveness Deadline and (ii)
after the Registration Statement is declared effective by the SEC, such
Registration Statement is not available for the sale of at least all of the
Registrable Securities required to be included in such Registration Statement,
(y) the number of Investor Warrant Shares, Redemption Warrant Shares, LOI
Warrant Shares, or Agency Warrant Shares, as the case may be, shall be increased
to a number determined by multiplying the number of the such applicable Warrant
Shares purchasable immediately prior to the applicable exercise price reduction
hereunder by a fraction, the numerator of which shall be the exercise price per
share in effect prior to the applicable exercise price reduction hereunder and
the denominator of which shall be the exercise price as so reduced, and (z) the
number of Note Conversion Shares or Preferred Conversion Shares, as the case may
be, shall be increased to a number determined by multiplying the number of such
Conversion Shares issuable upon conversion of the Notes or the Series C
Preferred Stock, as the case may be, immediately prior to the applicable
Conversion Price reduction hereunder by a fraction, the numerator of which shall
be the Conversion Price per share in effect prior to the applicable Conversion
Price reduction hereunder and the denominator of which shall be the applicable
Conversion Price as so reduced. Notwithstanding anything to the contrary, the
adjustments required pursuant to this Section 2(f) as a result of sales of
Registrable Securities not being able to be made pursuant to the Registration
Statement after it has been declared effective, shall not be applicable unless
and until such time as such sales have not been able to be made for a period of
more than 15 days in any 365-day period and such 15 days shall not be included
in calculating any adjustments.
- 5 -
(g) Sufficient Number of Shares Registered. In the event the number of
shares available under a Registration Statement filed pursuant to Section 2(b)
is insufficient to cover all of the Registrable Securities which such
Registration Statement is required to cover, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover at least 100% of the
Registrable Securities (based on the market price of the Common Stock on the
trading day immediately preceding the date of filing of such amendment or new
Registration Statement), in each case, as soon as practicable, but in any event
not later than fifteen (15) business days after the necessity therefor arises.
The Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if the number of Registrable Securities
issued or issuable upon conversion of the Notes or conversion of the Series C
Preferred Stock, and exercise of the Investor Warrants, Redemption Warrants, LOI
Warrants and Agency Warrants covered by such Registration Statement is greater
than the number of shares of Common Stock available for resale under the
Registration Statement to cover shares issued or issuable upon conversion of the
Notes or conversion of the Series C Preferred Stock, and exercise of the
Investor Warrants, Redemption Warrants, LOI Warrants and Agency Warrants. For
purposes of the calculation set forth in the foregoing sentence, any
restrictions on the conversion of the Notes or conversion of the Series C
Preferred Stock, and the exercise of the Investor Warrants, Redemption Warrants,
LOI Warrants and Agency Warrants shall be disregarded and such calculation shall
assume that the Notes or the Series C Preferred Stock, as the case may be, are
then convertible for shares of Common Stock at the then prevailing Conversion
Price, as applicable (as defined in the Notes, the Subscription Agreement, and
the Series C Designation) and the Investor Warrants, Redemption Warrants, LOI
Warrants or Agency Warrants, as the case may be, are then exercisable for shares
of Common Stock at the then prevailing applicable Warrant Share Price (as
defined in the applicable warrant).
3. Obligations of the Company. Whenever required under the terms of
this Annex A to effect the registration of any Registrable Securities, the
Company will, as expeditiously as possible, fulfill the following obligations:
(a) The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the Filing Deadline) and use its best efforts to cause such
Registration Statement to become effective (but in no event later than the
applicable Effectiveness Deadline). The Company will keep such Registration
Statement effective for up to one year but not, in any event, after such
securities cease being Registrable Securities (the "Registration Period"). The
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the
- 6 -
statements therein, in light of the circumstances in which they were made, not
misleading. The Company shall submit to the SEC, within three business days
after the Company learns that no review if a particular Registration Statement
will be made by the staff of the SEC or that the staff has no further comments
on the Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
48 hours after the submission of such request.
(b) The Company shall prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to the terms of
this Annex A (including pursuant to this Section 3(b)) by reason of the Company
filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous report
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Company shall have incorporated such report by reference into the Registration
Statement, if applicable, or shall file such amendments or supplements with the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement the Registration Statement.
(c) The Company shall (1) permit Legal Counsel to review and comment
upon those sections of (i) the Registration Statement as least five (5) business
days prior to its filing with the SEC, and (ii) all other Registration
Statements and all amendments and supplements to the Registration Statements,
which are applicable to the Subscribers, (except for Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any
similar or successor report and registration statements on Form S-8) at least
four (4) business days prior to their filing with the SEC and (2) not file any
document in a form to which Legal Counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
Legal Counsel, which consent shall not be unreasonably withheld. The Company
shall furnish to Legal Counsel, without charge, (i) any correspondence from the
SEC or the staff of the SEC to the Company or its representatives relating to
any Registration Statement, (ii) promptly after the same is prepared and filed
with the SEC, one copy of any Registration Statement and any amendment(s)
thereto, including financial statements and schedules and all exhibits and (iii)
upon the effectiveness of any Registration Statement, one copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto. The Company shall reasonably cooperate with Legal Counsel in performing
the Company's obligations pursuant to this Section 3.
- 7 -
(d) The Company shall furnish to each of the Holders such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the 1933 Act, and such other documents as it may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by such Holders.
(e) The Company shall use its best efforts to (i) register and qualify,
unless an exemption from registration and qualification applies, the Registrable
Securities covered by a Registration Statement under all jurisdiction's
securities or "blue sky" laws in the United States, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Holder who holds Registrable Securities of the receipt by
the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(f) As promptly as practicable after becoming aware of such event or
development, the Company shall notify Legal Counsel and each Holder in writing
of the happening of any event as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver copies of such supplement or amendment to
Legal Counsel and each Holder as they may reasonably request. The Company shall
also promptly notify Legal Counsel and each Holder in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Holder by facsimile on the same day of such effectiveness),
(ii) of any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
- 8 -
(g) The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction, however, if such an order or suspension is issued, the
Company shall obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify Legal Counsel and each Holder who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.
(h) At the reasonable request of any Holder and at the expense of such
Holder, the Company shall furnish to such Holder, on the date of the
effectiveness of the Registration Statement and thereafter from time to time on
such dates as any of the Holders may reasonably request (i) a letter, dated such
date, from the Company's independent certified public accountants in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, and (ii) an opinion, dated as
of such date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is reasonably and
customarily given in an underwritten public offering, addressed to the Holders.
(i) The Company shall either (i) cause all the Registrable Securities
covered by a Registration Statement to be listed on each securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) use its best efforts to secure
designation and quotation of all the Registrable Securities covered by the
Registration Statement on the Nasdaq National Market or The New York Stock
Exchange, Inc., or, if the Company is unsuccessful in satisfying the preceding
clause (i) or (ii), the Company shall use its best efforts to secure the
inclusion for quotation on The American Stock Exchange, Inc., or The Nasdaq
SmallCap Market, for such Registrable Securities and, without limiting the
generality of the foregoing, use its best efforts to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(i). The Holders acknowledge that the shareholder approval
relating to the Subscription Agreement and required pursuant to the listing
rules of the Nasdaq National Market may not be obtained prior to the Closing
Date.
(j) In connection with the filing of a Registration Statement, the
Company shall make documents, files, books, records, officers, directors and
employees of the Company reasonably available to any Holder, Legal Counsel and
one firm of accountants or other agents retained by the Holders and provided the
underwriters, if any, shall have agreed to be bound by the provisions of this
Section 3(j), to such underwriters (collectively the "Inspectors"), and make
such other accommodations as are reasonably
- 9 -
necessary for the Inspectors, if any, to perform a due diligence review of the
Company; provided, however, that all such information ("Confidential
Information") will be kept confidential and not utilized by the Inspectors
except as contemplated herein and except as required by law or court order. The
term "Confidential Information" does not include information that (i) is already
in possession of such other party (other than that which is subject to another
confidentiality agreement), (ii) becomes generally available to the public, or
(iii) becomes available on a non-confidential basis from a source other than the
Company. Each Holder agrees that it shall, upon learning that disclosure of such
Confidential Information is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the information
deemed confidential.
(k) The Company shall hold in confidence and not make any disclosure of
information concerning any Holder provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is required by law or court order, (iv) such information has
been made generally available to the public other than by disclosure in
violation of the terms of this Annex A or any other agreement or (v) such Holder
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning any
Holder is sought in or by a court or governmental body of competent jurisdiction
or through other means, give prompt written notice to such Holder and allow such
Holder, at the Holder's expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
(l) The Company shall cooperate with each of the Holders who hold
Registrable Securities being offered, and to the extent applicable, to
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Holders may reasonably
request and registered in such names as the Holders may request.
(m) The Company shall provide a transfer agent and registrar of all
such Registrable Securities not later than the effective date of such
Registration Statement.
(n) If requested by any Holder, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as such Holder requests to be included therein relating to the
sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be
- 10 -
sold in such offering; (ii) as soon as practicable make all required filings of
such prospectus supplement or post-effective amendment after being notified of
the matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) supplement or make amendments to any Registration Statement
if reasonably requested by any Holder of such Registrable Securities; provided,
however, the Company shall not be required to take any such action if it
reasonably believes actions requested by the Holder is contrary to any laws,
rules or regulations.
(o) The Company shall use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
(p) The Company shall make generally available to its security holders
as soon as practical, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the ▇▇▇▇ ▇▇▇) covering a twelve-month period beginning not later
than the first day of the Company's fiscal quarter next following the effective
date of the Registration Statement, provided that the Company shall be deemed to
satisfy its obligations under this Section 3(p) if it timely makes all required
filings under the 1934 Act and does not change its fiscal year.
(q) The Company shall otherwise comply with all applicable rules and
regulations of the SEC in connection with any registration hereunder.
(r) Within two (2) business days after a Registration Statement which
covers applicable Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver,
to the transfer agent for such Registrable Securities (with copies to the
Holders whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC in the form attached hereto as Exhibit A.
(s) The Company shall provide to any underwriter effecting a public
offering of Registerable Securities pursuant to a Registration Statement such
opinions, certifications, indemnifications, and take such other actions,
including, without limitation, entering into such agreements (including
underwriting agreements), as are reasonably required and appropriate and
customary in such offering transactions, to permit the Holders to make a public
offering of the Registrable Securities requested to be registered.
4. Furnish Information. The Company's obligation to cause any
Registration Statement to become effective in connection with distribution of
any Registrable Securities pursuant to the terms of this Annex A is contingent
upon each Holder, with reasonable promptness, furnishing to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of
- 11 -
disposition of such securities, as is required pursuant to Regulation S-K
promulgated under the 1933 Act, to effect the registration of the Registrable
Securities.
5. Indemnification. In the event of any registration under the terms of
this Annex A:
(a) The Company will indemnify and hold harmless each Holder and its
officers, directors, partners and affiliates (and their officers, directors and
partners), any underwriter (as defined in the ▇▇▇▇ ▇▇▇) for each Holder and each
person (and its officers, directors, partners and affiliates), if any, who
controls any Holder or underwriter within the meaning of the 1933 Act or the
1934 Act (each a "Company Indemnified Person"), against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, or the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein 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, or (iii) any violation or alleged violation by
the Company of the 1933 Act, the 1934 Act, any state securities law or any rule
or regulation promulgated under the 1933 Act, or the 1934 Act or any state
securities law, and the Company will pay to each such Company Indemnified
Person, as incurred, any legal or other expenses reasonably incurred by or on
behalf of him in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection (a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor will the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon (1) a Violation which occurs solely as the result
of the written information furnished by any Holder, underwriter or controlling
person seeking indemnification hereunder, as applicable, expressly for inclusion
in the Registration Statement or (2) with respect to any underwriter and
controlling person of such underwriter (and their respective officers and
directors), a Violation which results from the fact that there was not sent or
given to a person who bought Registrable Securities, at or prior to the written
confirmation of the sale, a copy of the final prospectus, as then amended or
supplemented, if the Company had previously furnished copies of such prospectus
hereunder and such prospectus corrected the misstatement or omission forming the
basis of the Violation.
(b) Each Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who has signed the Registration Statement,
each
- 12 -
person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act, any underwriter and any controlling person of any such underwriter
or other holder (each a "Holder Indemnified Person"), against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the 1933 Act, or the 1934 Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or action
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs solely as a
result of the written information furnished by each Holder expressly for
inclusion in the applicable Registration Statement; and such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any Holder
Indemnified Person intended to be indemnified pursuant to this subsection (b),
in connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that any Holder's liability pursuant to
this Section 5(ii) shall be limited to the amount of the net proceeds received
by such Holder from the sale of the Registrable Securities sold by it, and
further provided that the indemnity agreement contained in this subsection (b)
does not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of such
Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action (including any governmental action),
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section 5, deliver to the indemnifying party a
written notice of the commencement of such action and the indemnifying party
will have the right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly noticed, to
assume the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that an indemnified party (together with all other
indemnified parties which may be represented without conflict by one counsel)
will have the right to retain one separate counsel, with the fees and expenses
to be paid by the indemnifying party, if representation of the indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between the indemnified party and any
other party represented by such counsel in the same proceeding. If the
indemnifying party shall fail to defend the action, or conducts a defense which
is not reasonably adequate in light of the circumstances, the indemnified party
may conduct its own defense and shall be entitled to reimbursement for the costs
of such defense. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the indemnified party under
the terms of this Annex A, except to the extent that the indemnifying party is
materially prejudiced by such failure. The omission so to deliver written notice
to the indemnifying party does not relieve it of any liability that it may have
to any indemnified party otherwise than under the terms of this Annex A. No
indemnifying party under the terms of this Annex A will enter into any
settlement or consent to any entry of judgment which does not include as an
unconditional term thereof the giving by the claimant or
- 13 -
plaintiff to the indemnified party of a release from all liability in respect of
such claim or litigation.
(d) If the indemnification provided for in this Section 5 is held by a
court of competent jurisdiction to be unavailable to an indemnified party or is
insufficient to indemnify an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then the indemnifying
party, in lieu of or in addition to, as appropriate, indemnifying such
indemnified party hereunder, will contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party will be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission. The obligation of any Holder to make a contribution
pursuant to this Section 5 (d) shall be limited to the net proceeds received by
such Holder from the sale of the Registrable Securities sold by it, less any
amounts paid pursuant to Section 5(b).
(e) The obligations of the Company and each of the Holders under this
Section 5 will survive the completion of any offering of Registrable Securities
in a Registration Statement under the terms of this Annex A.
6. Contribution. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 5 to the fullest extent permitted by law; provided,
however, that: (i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation or from the Company; and (ii)
contribution by any seller of Registrable Securities shall be limited in amount
to the net amount of proceeds received by such seller from the sale of such
Registrable Securities pursuant to such Registration Statement.
7. Expenses of Registration. All expenses incurred in connection with
any registration, qualification or compliance pursuant to the terms of this
Annex A, including, without limitation, all registration, filing and
qualification fees, printing expenses, fees and disbursements of counsel for the
Company and expenses of any special audits incidental to or required by such
registration, qualification or compliance will be borne by the Company. In
addition, the Company shall reimburse the Holders for the reasonable fees and
disbursements of Legal Counsel in connection with registrations,
- 14 -
filings or qualifications pursuant to Sections 2 and 3 of this Annex A which
amount shall be limited to $10,000.
8. Assignment of Registration Rights. The rights under the terms of
this Annex A shall be automatically assignable by any Holder to any transferee
of all or any portion of Registrable Securities if: (i) such Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such securities
by the transferee or assignee is restricted under the 1933 Act and applicable
state securities laws; (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein; and (v) such transfer shall have been made in accordance with
the applicable requirements of the Financing.
9. Amendments. The terms of the Annex A may be amended, modified or
waived by agreement of the Corporation, Commonwealth and the applicable
Committees (as defined in and contemplated by the Subscription Agreement). Any
amendment or waiver effected in accordance with this Section 9 will be binding
upon each holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and the Company. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of this Annex A unless the same consideration also
is offered to all of the parties to the Subscription Agreement.
10. Miscellaneous.
(a) Specific Performance. Each of the Company, Commonwealth and the
Holders acknowledges and agrees that the breach of the terms of this Annex A by
one party would cause irreparable damage to the non-breaching parties and that
the non-breaching parties will not have an adequate remedy at law. Therefore,
the obligations of each of the Company, Commonwealth and the Holders under the
terms of this Annex A shall be enforceable by a decree of specific performance
issued by any court of competent jurisdiction, and appropriate injunctive relief
may be applied for and granted in connection therewith. Such remedies shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which any of the Company, Commonwealth or the Holders may have under
this Annex A or otherwise.
(b) Owner of Registrable Securities. A Person is deemed to be a holder
of Registrable Securities whenever such Person owns or is deemed to be owner of
record of such Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with respect to the
same Registrable
- 15 -
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.
(c) Waivers. This Annex A can be waived, only by written instrument
making specific reference to this Annex A to the Subscription Agreement signed
by the parties to the Subscription Agreement (or as otherwise permitted by the
Subscription Agreement). The waiver by any of the Company, Commonwealth or the
Holders of a breach of any provision of this Annex A shall not operate or be
construed as a further or continuing waiver of such breach or as a waiver of any
other or subsequent breach. No failure on the part of any of the Company,
Commonwealth or the Holders to exercise, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of such right, power or remedy by such party preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy. All remedies hereunder are cumulative and are not exclusive of any
other remedies provided by law.
(d) Headings; Interpretive Matters. The section headings of this Annex
A are for reference purposes only and are to be given no effect in the
construction or interpretation of this Annex A. No provision of this Annex A
will be interpreted in favor of, or against, any of the Company, Commonwealth or
the Holders by reason of the extent to which any such party or its counsel
participated in the drafting thereof or by reason of the extent to which any
such provision is inconsistent with any prior draft hereof or thereof.
(e) Rule 144 Requirements. The Company covenants that it will file the
reports required to be filed by it under the 1933 Act and the 1934 Act, and the
rules and regulations adopted by the SEC thereunder, provided, however, the
Company may delay any such filing but only pursuant to Rule 12b-25 under the
1934 Act; and it will take such further action as any Holder of Registrable
Securities may reasonably request (including, without limitation, promptly
obtaining and required legal opinions from Company counsel necessary to effect
the sale of Registrable Securities under Rule 144 and paying the related fees
and expenses of such counsel, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under the
1933 Act within the limitation of the exemptions provided by (a) Rule 144 under
the Act, as such Rule may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements. In the event of
any breach by the Company of its covenants and obligations under this Section
(j), then, as partial relief for damages to any Holder by reason of any delay or
inability to sell the underlying shares of Common Stock (which remedy shall not
be exclusive of any other remedies available at law or in equity) (x) each of
the exercise price of the Investor Warrants, Redemption Warrants, LOI Warrants
and Agency Warrants (as set forth in the applicable Warrants), the Conversion
- 16 -
Price relating to the Notes (as set forth in the Subscription Agreement and the
Notes), and the Conversion Price relating to the Series C Preferred Stock (as
set forth in the Subscription Agreement and the Series C Designation) shall be
reduced by 10% for each aggregate 30-day period (or pro rated amounts thereof
for partial 30-day periods) that the Holder is delayed from selling, or unable
to sell, Registrable Securities under Rule 144 due to (i) the Company's failure
to promptly provide the requisite legal opinion as described above or (ii) the
Company's failure to comply with the filing and other requirements under Rule
144 necessary to make such Rule available to the Holders, (y) the number of
Investor Warrant Shares, Redemption Warrant Shares, LOI Warrant Shares and
Agency Warrant Shares, as the case may be, shall be increased to a number
determined by multiplying the number of such applicable Warrant Shares
purchasable immediately prior to the applicable exercise price reduction
hereunder by a fraction, the numerator of which shall be the exercise price per
share in effect prior to the applicable exercise price reduction hereunder and
the denominator of which shall be the exercise price as so reduced, and (z) the
number of Note Conversion Shares or Preferred Conversion Shares, as the case may
be, shall be increased to a number determined by multiplying the number of such
Conversion Shares issuable upon conversion of the Notes or the Series C
Preferred Stock, as the case may be, immediately prior to the applicable
Conversion Price reduction hereunder by a fraction, the numerator of which shall
be the Conversion Price per share in effect prior to the applicable Conversion
Price reduction hereunder and the denominator of which shall be the applicable
Conversion Price as so reduced.
(f) Severability. If any provision of this Annex A is invalid or
unenforceable, the balance of this Annex A shall remain in effect.
(g) Assignment. Upon any assignment, the references in this Annex A to
any Holder shall also apply to any such assignee unless the context otherwise
requires.
(h) Consents. Except as contemplated or permitted by Section 9 of this
Annex A, all consents and other determinations to be made by the Holders
pursuant to the term of this Annex A shall be made, unless otherwise specified
in this Annex A, by Holders holding a majority of the Registrable Securities,
determined as if all the Notes then outstanding have been converted into
Registrable Securities and all the Investor Warrants, Redemption Warrants, LOI
Warrants and Agency Warrants then outstanding have been exercised for
Registrable Securities without regard for any limitations on conversion of the
Notes or exercise of the Investor Warrants, Redemption Warrants, LOI Warrants
and Agency Warrants.
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Exhibit A to Annex A
Form of Notice of Effectiveness of Registration Statement
[Transfer Agent]
Attn:
Re: ProxyMed, Inc.
Ladies and Gentlemen:
We are counsel to ProxyMed, Inc., a Florida corporation (the
"Company"), and have represented the Company in connection with that certain
Subscription Agreement (the "Subscription Agreement") entered into by and among
the Company and the Subscribers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders notes (the "Notes")
convertible into (i) shares of the Company's common stock, par value $0.001 per
share (the "Common Stock") or (ii) shares of a series C 7% convertible preferred
stock of the Company (the "Series C Preferred Stock"), and warrants (the
"Investor Warrants") to purchase shares of the Company's Common Stock. We have
also represented the Company in connection with various warrant agreements
entered into by and among the Company and Commonwealth Associates, L.P. pursuant
to which the Company issued (i) warrants dated as of May 4, 2000 (the
"Redemption Warrants") to purchase 1,000,000 shares of the Company's Common
Stock, (ii) warrants dated June 7, 2000 (the "LOI Warrants") to purchase
1,000,000 shares of the Company's Common Stock, and (iii) warrants dated June
14, 2000 (the "Agency Warrants") to purchase shares of the Company's Common
Stock. Pursuant to the Subscription Agreement, the Redemption Warrants, LOI
Warrants, and the Agency Warrants, the Company also has entered into a
Subscription Agreement and pursuant to Annex A attached, the Company agreed,
among other things, to register the Registrable Securities (as defined in Annex
A to the Subscription Agreement), including the shares of Common Stock issuable
upon conversion of the Notes, the shares of Common Stock issuable upon
conversion of the Series C Preferred Stock, and the shares of Common Stock
issuable upon exercise of the Investor Warrants, Redemption Warrants, LOI
Warrants and the Agency Warrants, under the Securities Act of 1933, as amended
(the "1933 Act"). In connection with the Company's obligations under Annex A to
the Subscription Agreement, on __________ ____, the Company filed a Registration
Statement on Form S-3 (File No. 333-___________) (the "Registration Statement")
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with the Securities and Exchange Commission (the "SEC") relating to the
Registrable Securities which names each of the Holders as a selling stockholder
thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [Enter Time
of Effectiveness] on [Enter Date of Effectiveness] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[Issuer's Counsel]
By:
cc: [List Names of Holders]
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