AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED
OR QUALIFIED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND ANY SUCH APPLICABLE STATE LAWS.
AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF (1) MAY, UNDER CERTAIN CIRCUMSTANCES,
BE SUBJECT TO A CERTAIN INVESTOR RIGHTS AGREEMENT OF EVEN DATE HEREWITH BETWEEN
THE ISSUER HEREOF AND INITIAL HOLDER HEREOF (THE INVESTOR RIGHTS AGREEMENT)
THAT RESTRICTS CERTAIN TRANSFERS OF SUCH SECURITIES AND (2) MAY BE SUBJECT TO
CERTAIN RIGHTS AND OBLIGATIONS PROVIDED FOR IN THAT CERTAIN REGISTRATION RIGHTS
AGREEMENT OF EVEN DATE HEREWITH BETWEEN THE ISSUER HEREOF AND THE INITIAL HOLDER
HEREOF (THE REGISTRATION RIGHTS AGREEMENT). A COPY OF SUCH
AGREEMENTS SHALL BE FURNISHED WITHOUT CHARGE BY THE ISSUER HEREOF TO THE HOLDER
HEREOF UPON WRITTEN REQUEST.
|No. 2005 - 03||Date of Issuance: May 13, 2005|
SHARES OF COMMON STOCK
IS TO CERTIFY that, for value received, Tak Investments, Inc., a Delaware corporation
(the Holder) is entitled to purchase from Healthaxis Inc., a Pennsylvania
corporation (the Company), at any time from the date of issuance
and on or before the Expiration Date, the number of shares of Common Stock of
the Company equal to 555,556 plus one (1) additional share of Common Stock for
each four (4) shares of Common Stock purchased pursuant to Warrant No. 2005-01
(or any successor instrument or instruments), up to an aggregate of 1,388,889
shares of Common Stock of the Company (as adjusted pursuant to Section 2
of this Warrant) at the Exercise Price on the terms and subject to the conditions
hereinafter set forth.
terms used herein without definition shall have the meanings set forth in Section 8
of this Warrant.
Exercise of Warrant.
Subject to the terms and conditions set forth herein, the Holder shall have
the right, at its option, to exercise this Warrant in whole or in part at any
time during the period commencing on the Issue Date and ending on the Expiration
Date. To exercise this Warrant, the Holder shall deliver to the Company (i) a
notice of exercise in the form attached hereto (the Notice of Exercise)
duly completed and
(ii) an amount in cash equal to the Exercise Price, (iii) this Warrant;
and (iv) such documentation as the Company may reasonably require in connection
with establishing an exemption from registration under federal and state securities
law for the issuance of shares of Common Stock to Holder upon the exercise hereof,
including, without limitation, an investor questionnaire, and a letter of securities
law representations and warranties concerning Holder and Holders investment
in such securities. At the option of the Holder, payment of the Exercise Price
shall be made: (A) by wire transfer of funds to an account in a bank located
in the United States designated by the Company for such purpose; (B) by
certified or official bank check payable to the order of the Company; (C) by
the method authorized by Section 1(c) hereof (if applicable); or (D) a
combination of such methods.
Upon receipt of the required deliveries, and subject to Section 1(c)
below, the Company shall, as promptly as practicable and no later than three
(3) business days after receipt of the Notice of Exercise, cause to be issued
and delivered to the Holder, subject to the terms of the Investor Rights Agreement,
a certificate or certificates representing shares of Common Stock equal in the
aggregate to the number of shares of Common Stock specified in the Notice of
Exercise. The shares of Common Stock so purchased shall be deemed to be issued
to the Holder, as the record owner of such shares as of the close of business
on the Exercise Date. The Company shall pay all reasonable expenses, taxes and
other charges payable in connection with the preparation, execution and delivery
of stock certificates pursuant to this Section 1.
Notwithstanding any provision herein to the contrary, commencing on the second
anniversary of the Issue Date, and provided that (i) the Companys Warrant
No. 2005-01 has been exercised for at least $5 million; (ii) the Companys
Common Stock does not trade, at any time during the 12-month period immediately
prior to the Exercise Date, at a daily market price greater than $3.50 per share
for twenty (20) trading days during any consecutive thirty (30) trading day
period, and (iii) the Companys average annual sales growth rate for the
two fiscal years immediately prior to the Exercise Date is less than fifteen
percent (15%), then with respect to up to 55,556 shares of Common Stock of the
Company, plus one (1) additional share of Common Stock for each forty (40) shares
of Common Stock purchased pursuant to the Companys Warrant No. 2005-01
(or any successor instrument or instruments), up to an aggregate of 138,889
shares of Common Stock of the Company, in lieu of exercising this Warrant for
cash, Holder may elect, at any time after the second anniversary of the Issue
Date, to receive Common Stock equal to the value (as determined below) of this
Warrant (or the portion thereof being exercised) by surrender of this Warrant
at the principal office of the Company, together with the form of Election to
Exercise attached as Exhibit A hereto fully executed, in which event the Company
shall issue to Holder that number of shares of Common Stock computed using the
Z x ((C-B) / C)
the number of shares of Common Stock to be issued to Holder
the aggregate number of shares of Common Stock then purchasable on a cashless
basis under this Warrant or, if only a portion of this Warrant is being
exercised on a cashless basis, the number of shares of Common Stock for
which this Warrant is being exercised on a cashless basis (at the date
of such calculation)
Market Price of one share of Common Stock (at the date of such calculation)
of this Section, the Market Price of one share of the Common Stock shall be
calculated as follows: If the Common Stock is traded on a national securities
exchange, the Nasdaq Stock Market or the over-the-counter market, the last reported
price on the date of valuation at which the Common Stock has traded on such
exchange or the Nasdaq Stock Market, or the average of the bid and asked prices
on the over-the-counter market on the date of valuation or, if no sale took
place on such date, the last date on which a sale took place. If the Common
Stock is not so traded, the Market Price of one share of the Common Stock shall
be as determined by agreement of the parties hereto, or if the parties hereto
cannot reach agreement, then such value shall be determined by appraisal by
an independent investment banking firm selected by the Company and acceptable
to Holder; provided, however, that if Holder and the Company cannot agree on
such investment banking firm, such appraised value shall be determined by an
independent investment banking firm independently selected by the agreement
of an investment banking firm selected by each of the Company and Holder. The
cost of such appraisal shall be borne by the Company.
Adjustment of Exercise Price and Number of Shares. The Exercise Price
and the number of shares of Common Stock obtainable upon exercise of this Warrant
shall be subject to adjustment from time to time as provided in this Section 2.
If the Company at any time after the Issue Date: (i) pays or makes a stock dividend
on its Common Stock in shares of Common Stock, (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, (iii) issues any shares
of Common Stock by reclassification of shares of Common Stock, or (iv) effects
a reverse stock split of Common Stock, then this Warrant shall thereafter be
exercisable for that number of shares that would have derived had the Warrant
been exercised immediately prior to the events listed in (i), (ii), (iii) or
(iv) above (and the Exercise Price thereof shall be correspondingly adjusted).
In the case of a subdivision or re-classification, any adjustment made pursuant
to this Section 2(a) shall become effective immediately after the effective
date of such subdivision or re-classification. Such adjustments shall be made
successively whenever any event listed above shall occur.
If at any time after the Issue Date, the Common Stock issuable upon the exercise
of the Warrant is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification, exchange,
substitution or otherwise, and other than a capital reorganization, merger or
consolidation (the adjustment for which is provided for in Section 2(c)), in
any such event the Holder shall have the right thereafter to exercise this Warrant
for stock into the kind and amount of stock and other securities and property
receivable in connection with such recapitalization, reclassification or other
change that it would have been entitled to receive had it exercised this Warrant
immediately prior to such recapitalization, reclassification, exchange, substitution
or other event, all subject to further adjustments as provided herein or with
respect to such other securities or property by the terms thereof (and the Exercise
Price of this Warrant shall be correspondingly adjusted).
If at any time after the Issue Date, the Common Stock is converted into other
securities or property, whether pursuant to a capital reorganization, merger,
consolidation or otherwise (other than a recapitalization, reclassification,
subdivision, exchange or substitution of shares provided for in Section 2(b)),
as a part of such transaction, provision shall be made so that the Holder shall
thereafter be entitled to receive upon exercise of this Warrant the number of
shares of stock or other securities or property to which a holder of the number
of shares of Common Stock deliverable upon conversion would have been entitled
to receive in connection with such transaction, subject to adjustment in respect
of such stock or securities by the terms thereof (and the Exercise Price of
this Warrant shall be correspondingly adjusted). To the extent applicable, appropriate
adjustment shall be made in the application of the provisions of this Section
2 with respect to the rights of the Holder after such transaction to the end
that the provisions of this Section 2 (including adjustment to the number of
shares issuable upon exercise of the Warrant and the adjustment of the Exercise
Price thereof) shall be applicable after that event and be as nearly equivalent
In case the Company shall fix a payment date for the making of a distribution
to all holders of Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the continuing corporation)
of evidences of indebtedness or assets (other than cash dividends or cash distributions
payable out of consolidated earnings or earned surplus or dividends or distributions
referred to in Section 2(a)), or subscription rights or warrants, the Exercise
Price to be in effect after such payment date shall be determined by multiplying
the Exercise Price in effect immediately prior to such payment date by a fraction,
the numerator of which shall be the total number of shares of Common Stock outstanding
multiplied by the Market Price (as defined below) per share of Common Stock
immediately prior to such payment date, less the fair market value (as determined
by the Companys Board of Directors in good faith) of said assets or evidences
of indebtedness so distributed, or of such subscription rights or warrants,
and the denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by such Market Price per share of Common Stock immediately
prior to such payment date. Market Price as of a particular date
(the Valuation Date) shall mean the following: (i) if the Common
Stock is then listed on a national stock exchange, the Market Price shall be
the closing sale price of one share of Common Stock on such exchange on the
last trading day prior to the Valuation Date, provided that if such stock has
not traded in the prior ten (10) trading sessions, the Market Price shall be
the average closing price of one share of Common Stock in the most recent ten
(10) trading sessions during which the Common Stock has traded; (ii) if the
Common Stock is then included in The Nasdaq Stock Market, Inc. (Nasdaq),
the Market Price shall be the closing sale price of one share of Common Stock
on Nasdaq on the last trading day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and the low ask
price quoted on Nasdaq as of the end of the last trading day prior to the Valuation
Date, provided that if such stock has not traded in the prior ten (10) trading
sessions, the Market Price shall be the average closing price of one share of
Common Stock in the most recent ten (10) trading sessions during which the Common
Stock has traded; (iii) if the Common Stock is then included in the Over-the-Counter
Bulletin Board, the Market Price shall be the closing sale price of one share
of Common Stock on the Over-the-Counter Bulletin Board on the last trading day
prior to the Valuation Date or, if no such closing sale price is available,
the average of the high bid and the low ask price quoted on the Over-the-Counter
Bulletin Board as of the end of the last trading day prior to the Valuation
Date, provided that if such stock has not traded in the prior ten (10) trading
sessions, the Market Price shall
be the average
closing price of one share of Common Stock in the most recent ten (10) trading
sessions during which the Common Stock has traded; and (iv) if the Common Stock
is then included in the pink sheets, the Market Price shall be the
closing sale price of one share of Common Stock on the pink sheets
on the last trading day prior to the Valuation Date or, if no such closing sale
price is available, the average of the high bid and the low ask price quoted
on the pink sheets as of the end of the last trading day prior to
the Valuation Date, provided that if such stock has not traded in the prior
ten (10) trading sessions, the Market Price shall be the average closing price
of one share of Common Stock in the most recent ten (10) trading sessions during
which the Common Stock has traded. The Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the Holder prior to the exercise
hereunder as to the Market Price of a share of Common Stock as determined by
the Board of Directors of the Company.
An adjustment to the Exercise Price shall become effective immediately after
the payment date in the case of each dividend or distribution and immediately
after the effective date of each other event which requires an adjustment.
Holder, by accepting the benefits of this Warrant, agrees that the number of
shares for which this Warrant is exercisable shall be subject to adjustment
or reduction as provided in this Section 2.
(i) Within three (3) business days of any adjustment of the number of shares
issuable upon exercise hereof, the Company shall give written notice thereof
to the Holder, setting forth in reasonable detail and certifying the calculation
of such adjustment.
The Company shall give written notice to the Holder at least fifteen (15) days
prior to the date on which any merger or reclassification provided for in Section
2(c) hereof shall take place.
Reservation. The Company shall, at all times prior to the Expiration
Date, reserve and keep available, solely for issuance and delivery upon the
exercise of this Warrant, a number of authorized shares of Common Stock equal
to the number of shares issuable from time to time upon exercise of this Warrant.
Fully Paid Stock. The Company covenants that the shares of Common Stock
represented by each and every certificate for its Common Stock to be delivered
on the exercise of the purchase rights herein shall, at the time of such delivery,
and upon such payment in full of the Exercise Price for each share of Common
Stock being exercised, be duly authorized, validly issued and outstanding and
fully paid and nonassessable.
Restrictions on Transfer. Holder, by acceptance hereof, agrees that the
transfer of this Warrant and the shares issuable upon exercise of the Warrant
are, under certain circumstances, subject to the provisions of the Investor
Partial Exercise or Purchase. If this Warrant is exercised or purchased
in part only, the Holder shall be entitled to receive a new Warrant, issued
at the Companys expense, registered in the name of the Holder evidencing
the right to purchase the aggregate number of shares of Common Stock for which
this Warrant was not exercised or purchased.
No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. In lieu
of any fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the difference between the Market
Price and the Exercise Price multiplied by such fraction.
addition to the terms defined elsewhere in this Warrant, the following terms
shall have the meanings set forth below:
Stock means the Companys common stock, par value $.10 per share.
Date means the date on which this Warrant is exercised by the Holder
pursuant to the terms hereof.
Price means $3.15 per share of Common Stock, subject to adjustment
as provided herein.
Date shall mean 5:00 p.m., Dallas, Texas time, on the fourth anniversary
of the Issue Date.
shall mean the person in whose name this Warrant is registered on the books
of the Company maintained for such purpose.
Rights Agreement means the Investor Rights Agreement, dated as of
May 13, 2005, by and among the Company and the initial Holder.
Date shall mean the date of issuance of this Warrant.
shall mean any individual, sole proprietorship, partnership, joint venture,
unincorporated organization, association, corporation, trust, institution, public
benefit corporation, entity or government.
Rights Agreement means the Registration Rights Agreement, dated as
of May 13, 2005, by and among the Company and the initial Holder.
Act shall mean the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, all as in effect from time to time.
means this Warrant and all warrants hereafter issued in exchange or substitution
for this Warrant.
Replacement Warrants. If this Warrant is mutilated, lost, stolen or destroyed,
the Company may issue a new Warrant of like date, tenor and denomination and
deliver the same in exchange and substitution for and upon surrender and cancellation
of the mutilated Warrant, or in lieu of the Warrant lost, stolen or destroyed,
upon receipt of evidence satisfactory to the Company of the loss, theft or destruction
of such Warrant.
Warrant Holder Not a Shareholder. The Holder shall not be entitled to
vote or receive dividends or be deemed the holder of the Common Stock or any
other securities that may at any time be issuable on the exercise hereof for
any purpose, nor shall anything contained herein be construed to confer upon
the Holder, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any corporate
action (whether upon any recapitalization, issuance of stock, reclassification
of stock, change of par value, or change of stock to no par value, consolidation,
merger, conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised as provided herein.
Identity of Transfer Agent. The Transfer Agent for the Common Stock is
Mellon Investor Services LLC. Upon the appointment of any subsequent transfer
agent for the Common Stock or other shares of the Companys capital stock
issuable upon the exercise of the rights of purchase represented by the Warrant,
the Company will mail to the Holder a statement setting forth the name and address
of such transfer agent.
Registration Rights. The initial Holder of this Warrant is entitled to
the benefit of certain registration rights with respect to the shares of Common
Stock issuable upon the exercise of this Warrant as provided in the Registration
Rights Agreement, and any subsequent Holder hereof shall be entitled to such
rights to the extent provided in the Registration Rights Agreement.
Notices. Except as otherwise expressly provided herein, any notices,
consents, waivers or other communications required or permitted to be given
under this Warrant must be in writing and will be deemed to have been delivered
(i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile, provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party (if received by 5:00 p.m. eastern
time (ET) where such notice is received) or the first business day
following such delivery (if received after 5:00 p.m. ET where such notice is
received); or (iii) one business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. Any communications shall be addressed (a) to the Company,
at its principal executive offices and (b) to the Holder, at the Holders
address as it appears in the records of the Company (unless otherwise indicated
by the Holder).
Severability. Whenever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective under applicable law, but if
any provision of this Warrant is held to be prohibited by or invalid under applicable
law in any jurisdiction, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating any other provision
of this Agreement.
Captions; Governing Law. The descriptive headings of the various sections
of this Warrant are for convenience only and shall not affect the meaning or
construction of the provisions hereof. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be governed by
the internal law of the Commonwealth of Pennsylvania, without giving effect
to any choice of law or conflict of law provision or rule. Any dispute, difference,
controversy or claim arising in connection with or related or incidental to
a matter arising under this Warrant shall be finally settled using the arbitration
provisions set forth in Section 10.8 of the Stock and Warrant Purchase Agreement,
dated as of February 23, 2005, between the Company and the initial Holder.
Waivers and Amendments. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing signed
by the party against whom enforcement of the same is sought.
Successors. All the covenants and provisions hereof by or for the benefit
of the Holder shall bind and inure to the benefit of its respective successors
and assigns hereunder.
Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then such action
may be taken or such right may be executed on the next succeeding day not a
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly
authorized officer and to be dated this 13th day of May, 2005.
|By:||/s/ James W. McLane|
|James W. McLane, Chief Executive Officer|
NOTICE OF EXERCISE
The Towers at Williams Square
5215 N. OConnor Blvd., Suite 800
Irving, Texas 75039
undersigned, __________________________________, pursuant to the provisions
of Warrant No. 2005-3 issued on May 13, 2005, hereby elects to purchase _____________
shares of common stock of Healthaxis Inc. covered by the Warrant described herein.
exercise of the Warrant is being carried out pursuant to: Section 1(a) of the
Warrant o or Section 1(c) of the
Warrant o (check one).