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SHAREHOLDERS' AGREEMENT
among
UNIVERSAL AMERICAN FINANCIAL CORP.
and
THE SHAREHOLDERS NAMED HEREIN
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Dated as of July 30, 1999
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SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of July 30, 1999, among
Universal American Financial Corp., a New York corporation (the "Company"),
Capital Z Financial Services Fund II, L.P., a Bermuda limited partnership
("Capital Z"), Xxxxxxx X. Xxxxxxx ("Xxxxxxx"), UAFC, L.P., a Delaware limited
partnership ("UAFCLP"), AAM Capital Partners ("AAM"), L.P. and Chase Equity
Associates, L.P. ("Chase" and, together with AAM and UAFCLP, the "AAM
Investors"), and the persons identified as "UA Shareholders" on Schedule I
hereto (the "UA Shareholders").
WHEREAS, the holders of the shares of Series C Convertible
Preferred Stock, par value $1.00 per share, of the Company (the "Series C
Preferred"), including the AAM Investors, Xxxxxxx and UAFCLP, have converted
their shares of Series C Preferred into shares of common stock, par value $0.01
per share (the "Common Stock") of the Company, pursuant to the terms of the
Series C Preferred;
WHEREAS, the AAM Investors have converted their shares of Series
D-1 Convertible Preferred Stock, par value $1.00 per share (the "Series D-1
Preferred"), of the Company and shares of Series D-2 Convertible Preferred
Stock, par value $1.00 per share (the "Series D-2 Preferred"), of the Company,
pursuant to the terms of the Series D-1 Preferred and the Series D-2 Preferred;
WHEREAS, as of the date hereof, each of Capital Z, Xxxxxxx, the
AAM Investors and the UA Shareholders own the shares of Common Stock set forth
beside its name on Schedule I hereto; and
WHEREAS, the parties hereto wish to restrict the transfer of the
Shares (as hereinafter defined) and to provide for certain other rights and
obligations, on the terms and subject to the conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
agreements set forth herein, the adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:
"AAM Director" has the meaning assigned to such term in Section
6.3.
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"Affiliate" means, as to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise. The terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Xxxxxxx Directors" has the meaning assigned to such term in
Section 6.3.
"Board of Directors" means the Board of Directors of the Company.
"Bona Fide Offer" has the meaning assigned to such term in Section
3.1.2.
"Bring Along Notice" has the meaning assigned to such term in
Section 3.3.
"Bring Along Shareholders" has the meaning assigned to such term
in Section 3.3.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Capital Z Directors" has the meaning assigned to such term in
Section 6.3.
"Charter Documents" means the Certificate of Incorporation, as
amended, and By-laws, as amended, of the Company as in effect on the date
hereof. Copies of the Certificate of Incorporation, as amended, and By-laws, as
amended, are attached hereto as Exhibits A and B, respectively.
"Closing Date" has the meaning assigned to such term in Section
3.4.
"Closing Price" shall mean, with respect to each share of Common
Stock for any day, (a) the last reported sale price regular way or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices regular way, in either
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case as reported on the principal national securities exchange on which such
Common Stock is listed or admitted for trading or (b) if such Common Stock is
not listed or admitted for trading on any national securities exchange, the last
reported sale price or, in case no such sale takes place on such day, the
average of the highest reported bid and the lowest reported asked quotation for
such Common Stock, in either case as reported on NASDAQ or a similar service if
NASDAQ is no longer reporting such information.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" has the meaning assigned to such term in the first
"whereas" clause.
"Condition of the Company" means the assets, business, properties,
operations or financial condition of the Company and its subsidiaries, taken as
a whole.
"Contractual Obligations" means, as to any Person, any obligations
under any agreement, undertaking, contract, indenture, mortgage, deed of trust
or other instrument to which such Person is a party or by which it or any of its
property is bound or under any security issued by such Person.
"Current Market Price" shall mean, with respect to shares of
Common Stock on any date, the average of the daily Closing Prices per share of
Common Stock for the 10 consecutive trading days commencing 15 days before such
date.
"Eligible Shareholders" has the meaning assigned to such term in
Section 3.1.1.
"Excess Offered Securities" has the meaning assigned to such term
in Section 3.1.2.
"Family Members" has the meaning assigned to such term in Section
2.2.
"First Offer" has the meaning assigned to such term in Section
3.1.1.
"First Offer Notice" has the meaning assigned to such term in
Section 3.1.2.
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"GAAP" means generally accepted accounting principles in the
United States in effect from time to time.
"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof, and an entity
exercising executive, legislative, judicial, regulatory or administrative
functions of any of the foregoing.
"Independent Director" has the meaning assigned to such term in
Section 6.3.
"Involuntary Transfer" means any involuntary transfer, proceeding
or action by or in which a Shareholder shall be deprived or divested of any
right, title or interest in or to any of the Shares, including, without
limitation, any seizure under levy of attachment or execution, any transfer in
connection with bankruptcy (whether pursuant to the filing of a voluntary or an
involuntary petition under the United States Bankruptcy Code of 1978, or any
modifications or revisions thereto) or other court proceeding to a debtor in
possession, trustee in bankruptcy or receiver or other officer or agency, any
transfer to a state or to a public officer or agency pursuant to any statute
pertaining to escheat or abandoned property, and any involuntary transfer
pursuant to a final decree of a court in a divorce action, but not including any
transfer occurring pursuant to a merger or consolidation of the Company or a
transfer pursuant to Section 3.3.
"Interested Director" has the meaning assigned to such term in
Section 6.8.
"Involuntary Transferee" has the meaning assigned to such term in
Section 3.6.1.
"Liens" has the meaning assigned to such term in Section 3.4.
"NASDAQ" means The Nasdaq Stock Market, Inc.
"NYBCL" means the Business Corporation Law of the State of New
York.
"Offered Shares" has the meaning assigned to such term in Section
3.1.1.
"Option Period" has the meaning assigned to such term in Section
3.1.3.
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"Outstanding Common Stock" means all issued and outstanding shares
of Common Stock (including any capital stock into which the Common Stock is
reclassified or reconstituted) and all securities (including Contractual
Obligations) of the Company that are convertible into or exchangeable or
exercisable for shares of Common Stock (regardless of whether such securities
are at the time convertible, exchangeable or exercisable), assuming that such
securities have been converted, exchanged or exercised at the rate such
securities are (or would be, but for the lapse of time) so convertible,
exchangeable or exercisable.
"Participating Shareholders" has the meaning assigned to such term
in Section 3.2.1.
"Permitted Transferee" has the meaning assigned to such term in
Section 2.2.
"Person" means any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, Governmental Authority or other entity of any
kind, and shall include any successor (by merger or otherwise) of any such
entity.
"Pro Rata Amount" has the meaning assigned to such term in Section
3.1.2.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof, among the Company, Capital Z, Xxxxxxx, the Wand
Investors and the AAM Investors.
"Regulated Shareholder" means any Shareholder that is subject to
the provisions of Regulation Y of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Part 225 (or any successor to such Regulation).
"Regulatory Problem" means any set of facts or circumstances
wherein it has been asserted by any governmental regulatory agency (or a
Regulated Shareholder reasonably believes that there is a risk of such
assertion) that such Regulated Shareholder is not entitled to acquire, own, hold
or control, or exercise any significant right (including the right to vote) with
respect to any securities of the Company.
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"Requirements of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule, regulation or determination
of an arbitrator or a court or other Governmental Authority, in each case (i)
applicable or binding upon such Person or any of its properties or to which such
Person or any of its properties is subject or (ii) pertaining to any or all of
the transactions contemplated herein.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Selling Shareholder" has the meaning assigned to such term in
Section 3.1.1.
"Shareholders" means, collectively or singularly, Capital Z,
Xxxxxxx, the Wand Investors, the AAM Investors and the UA Shareholders, and any
transferee who has agreed to be bound by the terms and conditions of this
Agreement in accordance with Section 5. For purposes of this Agreement, Shares
owned by Xxxxxxx will be deemed to include Shares owned of record by Xxxxxxx and
his wife, Xxxxx X. Xxxxxxx, and Shares owned of record by the following trusts
and other entities:
Xxxxxxx X. Xxxxxxx C/F Xxxxxxxx X. Xxxxxxx UGMA NY
Xxxxxxx X. Xxxxxxx C/F Xxxxx X. Xxxxxxx UGMA NY
Xxxx Acquisition, LLC
Xxxxxxx Associates Limited Partnership (but only to the extent
such Shares are beneficially owned by Xxxxxxx X. Xxxxxxx,
Xxxxx X. Xxxxxxx and NMRB Corp.)
"Shareholders' Meeting" has the meaning assigned to such term in
Section 6.1.
"Share Purchase Agreement" means the Share Purchase Agreement,
dated as of December 31, 1998 and amended on July 2, 1999, between the Company
and Capital Z.
"Shares" means, with respect to each Shareholder or all
Shareholders, all shares, whether now owned or hereafter acquired, of Common
Stock (including any capital stock into which the Common Stock is reclassified
or reconstituted) and all securities (including Contractual Obligations) of the
Company that are convertible into or
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exchangeable or exercisable for shares of Common Stock (regardless of whether
such securities are at the time convertible, exchangeable or exercisable), in
each case that are beneficially owned, directly or indirectly, by such
Shareholder or all Shareholders.
"Third Party Buyer" has the meaning assigned to such term in
Section 3.1.1.
"Third Party Sale" has the meaning assigned to such term in
Section 3.2.1.
"Transaction Agreements" means, collectively, this Agreement, the
Share Purchase Agreement and the Registration Rights Agreement.
"transfer" has the meaning assigned to such term in Section 2.1.
"Transferred Shares" has the meaning assigned to such term in
Section 3.6.1.
"Written Consent" has the meaning assigned to such term in Section
6.1.
2. Restrictions on Transfer of Shares.
2.1 Limitation on Transfer. During the term of this Agreement,
no Shareholder shall sell, give, assign, hypothecate, pledge, encumber, grant a
security interest in or otherwise dispose of (whether by operation of law or
otherwise) (each a "transfer") any Shares or any right, title or interest
therein or thereto, except for (i) transfers pursuant to a registered public
offering of Common Stock and (ii) transfers effected in accordance with the
other provisions of this Agreement. Any attempt to transfer any Shares or any
rights thereunder in violation of the preceding sentence shall be null and void
ab initio and the Company shall refuse to register any such transfer.
2.2 Permitted Transferees. (a) At any time, any Shareholder
may, without the consent of the other Shareholders but subject to Sections
2.2(b) and Article 5, transfer Shares (i) with respect to a Shareholder who is
an individual, to a member of such Shareholder's immediate family, which shall
include her or his parents, spouse or former spouse, siblings, children
(including sons-in-law, daughters-in-law and adopted children) or grandchildren
("Family Members"), or a trust, corporation or partnership, all of the
beneficial interests in which shall be held by such Shareholder or
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one or more Family Members of such Shareholder; provided, however, that during
the period any such trust, corporation or partnership holds any right, title or
interest in any Shares, no Person other than such Shareholder or one or more
Family Members of such Shareholder may be or become beneficiaries, Shareholders
or limited or general partners thereof; (ii) with respect to a Shareholder that
is not an individual, to (A) any corporation, partnership or other entity which
is an Affiliate of such Shareholder or (B) any general or limited partners of
such Shareholder or Affiliate of such Shareholder (the Persons referred to in
the preceding clauses (i) and (ii) are herein each referred to as a "Permitted
Transferee").
(b) If any Shareholder desires to transfer all or any
portion of its, her or his Shares to a Permitted Transferee under this Section
2.2, such Shareholder shall give notice to the Company (and the Company shall
give notice to the other Shareholders) of its, her or his intention to make such
transfer not less than 15 days prior to effecting such transfer, which notice
shall state the name and address of each Permitted Transferee to whom such
transfer is proposed and the number of Shares proposed to be transferred to such
Permitted Transferee.
2.3 Xxxxxxx Transfers; Donations to Charity. Notwithstanding
any provision of this Agreement to the contrary, from the date hereof through
the third anniversary of the date hereof, so long as Xxxxxxx is an employee of
the Company, neither Xxxxxxx nor any of his Permitted Transferees shall transfer
in any given year to any Person (other than Xxxxxxx or his Permitted
Transferees) more than 3.0% of the Shares owned by Xxxxxxx on the date hereof.
In addition, at any time after the date hereof, Xxxxxxx may transfer in any
given year up to 2.5% of the Shares owned by him on the date hereof to
charitable institutions.
3. Right of First Offer, Tag Along and Bring Along.
3.1 Proposed Voluntary Transfer.
3.1.1 First Offer. If any Shareholder (a "Selling
Shareholder") desires to transfer all or any portion of its or his Shares (the
"Offered Shares") to any Person (other than a Permitted Transferee) (a "Third
Party Buyer," which term may include another Shareholder), such Selling
Shareholder shall first offer (the "First Offer") to sell the Offered Shares to
Xxxxxxx and Capital Z (the "Eligible Shareholders"); provided, however, that the
Selling Shareholder shall not be obligated to make such an offer (i) in
connection with the pledge or other encumbrance of Shares to a bank or other
financial institution pursuant to Article 4, or, in the case of Xxxxxxx, in
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connection with a donation of Shares to a charitable institution pursuant to
Section 2.3, (ii) if the Selling Shareholder elects to deliver a Bring-Along
Notice (as defined below) pursuant to Section 3.3, or (iii) subject to Section
2.3, if the transfer of a Selling Shareholder of Offered Shares would involve
(A) the transfer of less than 1% of the Outstanding Common Stock or (B) when
aggregated with all transfers pursuant to this Section 3.1 by such Selling
Shareholder and its Permitted Transferees, the transfer of less than 2.5% of the
Outstanding Common Stock.
3.1.2 Notice. The Selling Shareholder shall send written
notice of the First Offer (the "First Offer Notice") to the Company and the
Eligible Shareholders, which First Offer Notice shall state that the Selling
Shareholder proposes to effect a transfer of its Shares, the number of Shares
proposed to be transferred, and the terms and conditions of the First Offer. If
the First Offer Notice is delivered by the Selling Shareholder in connection
with the receipt by the Selling Shareholder of a bona fide written offer to
purchase Shares from a Third Party Buyer (a "Bona Fide Offer"), the First Offer
Notice shall include a copy of such offer. Upon receipt of the First Offer
Notice, the Eligible Shareholders (including any Shareholder participating in a
Bona Fide Offer) shall be entitled to purchase all (but not less than all) of
the Offered Shares upon the terms and conditions set forth in the First Offer
Notice. Each Eligible Shareholder electing to purchase Offered Shares
(including, without limitation, Shares that the other Eligible Shareholders have
a right to purchase but do not purchase under this Section 3.1) shall be
entitled to purchase its Pro Rata Amount (as defined below) of the Offered
Shares. The "Pro Rata Amount" of any Eligible Shareholder electing to purchase
Offered Shares shall be the ratio of the total number of Shares that such
Eligible Shareholder then owns to the number of Shares that all Eligible
Shareholders that elect to purchase the Offered Shares then own (including such
Eligible Shareholder's Shares); provided, however, that if any Eligible
Shareholder does not fully subscribe for the number or amount of Offered Shares
it is entitled to purchase, then each other participating Eligible Shareholder
shall have the right to purchase that percentage of the Offered Shares not so
subscribed for (the "Excess Offered Securities"), determined by dividing (i) the
total number of Shares then owned by such fully participating Eligible
Shareholder by (ii) the total number of shares then owned by all fully
participating Eligible Shareholders who elect to purchase the Excess Offered
Securities.
3.1.3 Option Period. The right of First Offer may only be
exercised by the Eligible Shareholders by delivery of written notice of exercise
to the Selling Shareholder (with a copy to the other Eligible Shareholders)
within 15 days after receipt of the First Offer Notice (the "Option Period"). If
any Eligible Shareholder shall
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fail to respond to the Selling Shareholder within the Option Period, such
failure shall be deemed to be a waiver of its, her or his rights under Section
3.
3.2 Tag Along.
3.2.1 Right to Participate. If the sale or transfer by a
Selling Shareholder of Common Stock would, when aggregated with all prior sales
or transfers by such Selling Shareholder and its Permitted Transferees, result
in the sale of 25% or more of the Outstanding Common Stock, and the Eligible
Shareholders do not, during the Option Period, elect pursuant to Section 3.1 to
purchase all of the Offered Shares, then each Shareholder (including any
Shareholder that is the Selling Shareholder) shall have the right, in connection
with any transfer of the Offered Shares to a Third Party Buyer within the time
specified in Section 3.5 (the "Third Party Sale"), to sell to such Third Party
Buyer upon the terms set forth in the First Offer Notice (including the amount
of per Share consideration, subject to appropriate adjustment in the case of
warrants, options and other securities that are convertible into or exchangeable
or exercisable for shares of Common Stock that have not yet been converted,
exchanged or exercised), that number of Shares equal to the product of (i) the
Shares owned by such Shareholder multiplied by (ii) a percentage calculated by
dividing the aggregate number of Shares proposed to be sold in the Third Party
Sale by the total number of Shares owned by such Shareholder and the other
Shareholders (including the Shareholder that is a Selling Shareholder)
participating in the Third Party Sale (collectively, the "Participating
Shareholders"). If one or more Shareholders who have the right to participate in
the Third Party Sale elect not to include the number of Shares which such
Shareholders would be permitted to include in the Third Party Sale, each
Participating Shareholder may elect to sell in the Third Party Sale a number of
additional Shares owned by such Participating Shareholders equal to such
Participating Shareholder's pro rata portion of the number of such Shares that
are not included in the Third Party Sale, based on the relative number of Shares
then owned by each Participating Shareholder.
3.2.2 Exercise of Options. The option of an Eligible
Shareholder under Section 3.2.1 shall be exercisable by delivering written
notice of the exercise thereof, prior to the expiration of the tenth day after
the Option Period, to the Selling Shareholder with a copy to the Company and the
other Shareholders. Such notice shall state, as appropriate, (a) the number of
Shares held by such Shareholder, and (b) the number of Shares that such
Shareholder desires to sell pursuant to Section 3.2.1. The failure of a
Shareholder to respond within ten (10) days after the expiration of the Option
Period to the Selling Shareholder shall be deemed to be a waiver of its, her or
his rights
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under Section 3.2.1.
3.3 Bring Along. If one or more Selling Shareholders that, in
the aggregate, own more than 51% of the Outstanding Common Stock (which Selling
Shareholders must include one or more Shareholders other than Capital Z and its
Permitted Transferees) receives a Bona Fide Offer from a Third Party Buyer to
purchase at least 50% of the Outstanding Common Stock, such Selling Shareholders
may send written notice (the "Bring Along Notice") to the other Shareholders
(the "Bring Along Shareholders") (with a copy to the Company) notifying them
that the other Shareholders will be required to transfer Shares in such sale or
other transaction. Upon delivery of the Bring Along Notice, each Bring Along
Shareholder shall be obligated to transfer in the transaction contemplated by
the Bring-Along Notice, the number of Shares determined in accordance with the
next sentence, on the same terms and conditions as the Selling Shareholders
(including the amount of per Share consideration, subject to appropriate
adjustment in the case of warrants, options and other securities that are
convertible into or exchangeable or exercisable for shares of Common Stock that
have not yet been converted, exchanged or exercised). Each Selling Shareholder
and Bring Along Shareholder shall sell in the transaction contemplated by the
Bring Along Notice that number of Shares equal to the product of (i) the number
of Shares to be sold to the Third Party Buyer multiplied by (ii) a percentage
calculated by dividing (x) the number of Shares owned by such Selling
Shareholder or Bring Along Shareholder, as the case may be, by (y) the total
number of Shares owned by all Selling Shareholders and Bring Along Shareholders.
Each such Shareholder shall (a) take all actions (including executing documents)
in connection with the consummation of the proposed transaction as may
reasonably be requested of it by the Selling Shareholders, and (b) appoint the
Selling Shareholders as its attorneys-in-fact to do the same on its behalf. If a
contract with respect to the transaction contemplated by the Bona Fide Offer has
not been entered into within 90 days of receipt of the Bring Along Notice, the
obligations of the Shareholders under this Section 3.3 shall terminate with
respect to the transaction specified in the Bring-Along Notice, and the Selling
Shareholders may not cause such Shareholders to sell pursuant to this Section
3.3 without again complying with all of the provisions of this Section 3.3.
Notwithstanding the foregoing, no Shareholder shall be required to transfer
Shares in a sale or other transaction contemplated in this Section 3.3 if the
price at which the Selling Shareholders propose to sell their Shares is below
the Fair Market Value (calculated in accordance with Section 3.6.2) of such
Shares; provided, that in no event shall the Selling Shareholders be obligated
to make the other Shareholders a First Offer.
3.4 Sale to the Purchasing Eligible Shareholders. The closing
of the
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purchase of Offered Shares subscribed to by the purchasing Eligible Shareholders
under Section 3.1 shall be held at the principal office of the Company at 11:00
a.m., local time, on the 30th day following delivery of the First Offer Notice
(the "Closing Date") or at such other time and place as the parties to the
transaction may agree. Notwithstanding the foregoing, the Closing Date may be
extended, at the option of the Eligible Shareholders, for such reasonable period
of time as shall be necessary to obtain requisite governmental or regulatory
approvals in respect of such purchase and sale, including the expiration of any
applicable waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act, as amended, or any other applicable governmental or regulatory provision
limiting or regulating investments in any equities; provided, however, such
extension shall not exceed 30 days. At such closing, the Selling Shareholders
shall deliver to the purchasing Eligible Shareholders certificates representing
the Offered Shares, duly endorsed with a signature guarantee for transfer and
accompanied by all requisite transfer taxes, if any, and such Offered Shares
shall be free and clear of any liens, claims, options, charges, encumbrances or
rights ("Liens") (other than those arising hereunder), and the Selling
Shareholders shall so represent and warrant, and each shall further represent
and warrant that it is the bene ficial and record owner of such Offered Shares.
Each purchasing Eligible Shareholder shall, at the closing, deliver to the
Selling Shareholders payment in full in immediately available funds for the
Offered Shares purchased by it. At such closing, all of the parties to the
transaction shall execute such additional documents as are otherwise necessary
or appropriate.
3.5 Sale to Third Party Buyer. Unless the Eligible Shareholders
elect to purchase all of the Offered Shares pursuant to Section 3.1, (i) each
Selling Shareholder may sell its or his Offered Shares or (ii) if Section 3.2
applies, all Participating Shareholders may sell such portions of their Shares
as can be sold under Section 3.2.1, in either case (i) or (ii), to the Third
Party Buyer upon the terms and conditions stated in the First Offer Notice;
provided, however, that such sale is bona fide and made prior to or within 60
days after the proposed Closing Date. Notwithstanding the foregoing, the Closing
Date may be extended, at the option of the Selling Shareholder, for such
reasonable period of time as shall be necessary to obtain requisite governmental
or regulatory approvals in respect of such purchase and sale, including the
expiration of any applicable waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act, as amended, or any other applicable governmental or
regulatory provision limiting or regulating investments in any equities;
provided, however, such extension shall not exceed 60 days. If such sale is not
consummated prior to or on the Closing Date (extended as provided above, if
applicable) for any reason, then the restrictions provided for herein shall
again become effective, and no transfer of such Offered Shares may be
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made thereafter (other than to a Permitted Transferee) by the Selling
Shareholders without again offering the same to the Eligible Shareholders in
accordance with this Section 3.
3.6 Involuntary Transfers.
3.6.1 Rights of First Offer upon Involuntary Transfer. If
an Involuntary Transfer of any Shares (the "Transferred Shares") owned by any of
the Shareholders shall occur, the Eligible Shareholders shall have the same
rights as specified in Section 3.1 with respect to such Transferred Shares as if
the Involuntary Transfer had been a proposed voluntary transfer by a Selling
Shareholder, except that (a) the Option Period shall be a period of 15 days from
the date of receipt by the Company and the Eligible Shareholders of notice of
the Involuntary Transfer, (b) the Closing Date shall be 90 days after the
expiration of the Option Period, (c) such rights shall be exercised by notice to
the transferee of such Transferred Shares (the "Involuntary Transferee") rather
than to the Shareholder who suffered or will suffer the Involuntary Transfer and
(d) the purchase price per Transferred Share shall be agreed to between the
Involuntary Transferee and the purchasing Eligible Shareholders; provided,
however, that if such parties fail to agree as to such purchase price, the
purchase price shall be the fair market value thereof as determined in
accordance with Section 3.6.2.
3.6.2 Fair Market Value. If the Common Stock is listed or
admitted for trading on any national securities exchange or quoted on NASDAQ or
a similar service, the fair market value of the Transferred Shares shall be the
Current Market Price. If the Common Stock is not listed or admitted for trading
on any national securities exchange or quoted on NASDAQ or a similar service,
the fair market value of the Transferred Shares shall be determined in
accordance with the remaining provisions of this Section 3.6.2 by a panel of
three independent appraisers, which shall be recognized investment banking firms
or recognized experts experienced in the valuation of corporations. Within 15
days after the notice to the Involuntary Transferee with respect to the exercise
of the right to purchase the Transferred Shares, the Involuntary Transferee and
the Board of Directors of the Company shall each designate one such appraiser
that is willing and able to conduct such determination. If either the
Involuntary Transferee or the Board of Directors fails to make such designation
within such period, the other party that has made the designation shall have the
right to make the designation on its behalf. The two appraisers designated
shall, within a period of 15 days after the designation of the second appraiser,
agree to designate a third appraiser. The three appraisers shall conduct their
determination as promptly as practicable, and the fair
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market value of the Transferred Shares shall be the average of the determination
of the two appraisers that are closer to each other than to the determination of
the third appraiser, which third determination shall be discarded. Such
determination shall be final and binding on the Involuntary Transferee and the
purchasing Eligible Shareholders.
3.6.3 Closing. The closing of any purchase under this
Section 3.6 shall be held at the principal office of the Company at 11:00 a.m.,
local time, on the Closing Date or at such other time and place as the parties
to the transaction may agree. At such closing, the Involuntary Transferee shall
deliver to the purchasing Eligible Shareholders certificates, if applicable, or
other instruments or documents representing the Transferred Shares being
purchased under this Section 3.6, duly endorsed with a signature guarantee for
transfer and such Transferred Shares shall be free and clear of any Lien
arising through the action or inaction of the Involuntary Transferee. Each
purchasing Eligible Shareholder shall deliver to the Selling Shareholder at the
closing payment in full in immediately available funds for such Transferred
Shares. At such closing, all of the parties to the transaction shall execute
such additional documents as are otherwise necessary or appropriate.
3.6.4 General. In the event that the provisions of this
Section 3.6 shall be held to be unenforceable with respect to any particular
Involuntary Transfer, the Eligible Shareholders shall have the rights specified
in Section 3.1 with respect to any transfer by an Involuntary Transferee subject
to a Bona Fide Offer from a Third Party Buyer for such Shares, and each
Shareholder agrees that any Involuntary Transfer shall be subject to such
rights, in which case the Involuntary Transferee shall be deemed to be the
Selling Shareholder for purposes of Section 3.1 of this Agreement and shall be
bound by the provisions of Section 3.1 and the other provisions of this
Agreement, except that the requirement for the absence of Liens and giving of
representations shall be limited to those required by an Involuntary Transferee
under Section 3.6.3.
4. Pledges and Other Encumbrances. No Shareholder shall hypothecate,
pledge, grant a security interest in or otherwise encumber any of its Shares
unless (i) such Shareholder shall give notice to the Company and the other
Shareholders of its intention to encumber its Shares not less than 15 days prior
to effecting such transaction, which notice shall state the name and address of
the proposed pledgee or other beneficiary (which shall be a bank or other
financial institution acceptable to the Company) and the number of Shares
proposed to be encumbered; and (ii) the proposed pledgee or other beneficiary
shall execute an agreement acknowledging its familiarity
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with the terms of this Agreement and agreeing to be bound by the terms hereof in
the event of any sale, by or following foreclosure or otherwise, of such Shares,
or in the event of any proposal or waiver that would permit the retention of
such Shares in satisfaction of the secured obligation, or in the event of any
exercise of any rights (including voting rights) of such Shares, by such pledgee
or other beneficiary.
5. All Transfers in Compliance with Law and Subject to this
Agreement; Substitution of Transferee. Notwithstanding any other provision of
this Agreement, no transfer may be made under Section 2.2, and no transfer of 5%
or more of the Outstanding Common Stock may be made pursuant to Section 3 to a
Third Party Buyer in a privately negotiated transaction, unless each transferee
of Shares has agreed in writing to be bound by the terms and conditions of this
Agreement to the same extent and in the same manner as the Shareholder
transferring such Shares. All transfers of Shares shall comply in all respects
with the applicable provisions of this Agreement and with applicable federal and
state securities laws including, without limitation, the Securities Act. Upon
becoming a party to this Agreement, a transferee shall enjoy the same rights and
be subject to the same obligations as its predecessor hereunder, except that the
rights of such Shareholder under Section 6 are not transferable except as
specifically provided in Section 6.3.
6. Governance.
6.1 General. From and after the execution of this Agreement,
each Shareholder shall vote its Shares, at any regular or special meeting of
Shareholders of the Company (each a "Shareholders' Meeting"), or in any written
consent executed in lieu of such a meeting of Shareholders (a "Written
Consent"), and shall take all other actions necessary to give effect to the
agreements contained in this Agreement and to ensure that the Charter Documents
do not at any time hereafter conflict in any respect with the provisions of this
Agreement. In addition, each Shareholder shall vote its Shares at any
Shareholders' Meeting, or act by Written Consent with respect to such Shares,
upon any matter submitted for action by the Company's Shareholders, or with
respect to which such Shareholder may vote or act by Written Consent, in
conformity with the specific terms and provisions of this Agreement and the
Charter Documents.
6.2 Shareholders' Actions. In order to effectuate the
provisions of this Section 6, each Shareholder hereby agrees that, when any
action or vote is required to be taken by such Shareholder pursuant to this
Agreement, such Shareholder shall use its reasonable best efforts to call, or
cause the appropriate officers and directors of the
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Company to call, a Shareholders' Meeting or to execute or cause to be executed a
Written Consent pursuant to Section 615 of the NYBCL to effectuate such
Shareholder action. Further, each Shareholder shall use its reasonable best
efforts to cause the Board of Directors to adopt, either at a meeting of the
Board of Directors or by unanimous written consent of the Board of Directors
pursuant to Section 708 of the NYBCL, all the resolutions necessary to
effectuate the provisions of this Agreement.
6.3 Election of Directors. Each Shareholder shall vote its
Shares at any Shareholders' Meeting, or act by Written Consent with respect to
such Shares, and take all other actions necessary to ensure that the number of
directors constituting the entire Board of Directors shall be 9, as provided for
below. Subject to Section 6.5, each Shareholder shall vote its Shares at any
Shareholders' Meeting called for the purpose of filling the positions on the
Board of Directors, or in any Written Consent executed for such purpose, in
favor of the election to the Board of Directors of the following individuals:
(a) four individuals, who shall be designated by Capital
Z (the "Capital Z Directors");
(b) two individuals, who shall satisfy the criteria for
treatment as an "independent director" under the rules of any stock exchange on
which securities of the Company are listed (including NASDAQ), who shall be
designated by the Company (the "Independent Director");
(c) two individuals, who shall be designated by Xxxxxxx
Xxxxxxx (the "Xxxxxxx Directors");
(d) one individual, who shall be designated jointly by
the AAM Investors (the "AAM Director").
On the date hereof, the Capital Z Directors shall be Xxxxxx Spass, Xxxxxxx
Xxxxxx, Xxxxx Xxxxxxx and one additional director to be designated by Capital Z,
the Independent Directors shall be Xxxxxx Xxxxxx and Xxx XxXxxxxxxx, the Xxxxxxx
Directors shall be Xxxxxxx Xxxxxxx and Judge Xxxxxxx Xxxxxxx and the AAM
Director shall be Xxxxxxx Xxxx.
The rights of the Shareholders to designate directors pursuant to this Section
6.3 are not transferable except to Permitted Transferees; provided, however,
that Capital Z and its
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Permitted Transferees may assign the right to designate one or more Capital Z
Directors to any Third Party Buyer which acquires from Capital Z or its
Permitted Transferees in one or more privately negotiated transactions Shares
representing 10% or more of the Outstanding Common Stock.
6.4 Removal and Replacement. Any Shareholder that nominated a
director pursuant to Section 6.3 shall be entitled at any time and for any
reason (or for no reason), by notice to the other Shareholders and the Company,
to designate such director for removal. Upon delivery of any such notice, each
Shareholder shall, as soon as practicable thereafter and in any event prior to
the transaction of any other business by the Shareholders or the Board of
Directors, use its reasonable best efforts to cause the Board of Directors (or,
if a Shareholder vote is required pursuant to Section 706 of the NYBCL, vote its
Shares (including by Written Consent)), to remove such Director designated for
removal, and to elect a director or directors designated to fill the resulting
vacancy or vacancies, in the manner contemplated by Section 6.3. If, at any
time, a vacancy is created on the Board of Directors by reason of the death or
resignation of any Capital Z Director, the Independent Director, either Xxxxxxx
Director, the Wand Director or the AAM Director, each Shareholder shall use its
reasonable best efforts to cause the Board of Directors, as soon as practicable
thereafter and in any event prior to the transaction of business by the Board of
Directors in respect of any matter requiring supermajority or special approval
pursuant to Section 6.7 or 6.8, to vote to elect to the Board of Directors the
individual designated to fill such vacancy in the manner contemplated by Section
6.3.
6.5 Adjustment of Board Representation. The composition of the
Board of Directors described in Section 6.3 shall be subject to adjustment as
follows:
(a) If Capital Z and its Permitted Transferees cease to
own 50% or more of the Outstanding Common Stock, then Capital Z and its
Permitted Transferees collectively will have the right to designate a number of
directors equal to such proportion of the total number of directors as
corresponds to the proportion of the Outstanding Common Stock then owned by
Capital Z and its Permitted Transferees, subject to clause (c) below.
(b) Xxxxxxx shall continue to have the right to
designate two directors for so long (but only for so long) as he continues to
serve as President and Chief Executive Officer of the Company.
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(c) From and after the date that any Shareholder
(together with its Permitted Transferees) does not own 10% of the Outstanding
Common Stock, such Shareholder shall no longer be entitled to designate any
directors; provided, however, that (i) if Xxxxxxx no longer serves as President
and Chief Executive Officer of the Company, he shall nevertheless continue to be
entitled to designate one director for so long as he owns (together with his
Permitted Transferees) at least 75% of the Shares owned by him on the date
hereof and (ii) the AAM Investors (and their Permitted Transferees) shall
continue to have the right to designate one director for so long as the AAM
Investors and their Permitted Transferees continue to own at least 90% of the
Shares owned by them on the date hereof.
6.6 Board Committees. The Shareholders shall cause the Company
to maintain in the By-laws of the Company a provision requiring the Board of
Directors to have an audit committee and a compensation committee. If Capital Z
continues to hold at least 10% of the Outstanding Common Stock, Capital Z shall
be entitled to appoint a member of all board committees. Each Shareholder agrees
that it will not take, cause to be taken or approve any action (including, but
not limited to, any amendment of the Certificate of Incorporation, as amended,
of the Company) that would be inconsistent with the first sentence of this
Section 6.6.
6.7 Supermajority Approvals. The Shareholders agree that they
will not vote their Shares to approve any of the following actions if such
action has not been specifically approved or ratified at a meeting of the Board
of Directors by the affirmative vote of not less than 66*% of the total number
of directors:
(a) entering into (A) any merger or consolidation in
which either the Company or a material Subsidiary is a constituent corporation
or its securities are being issued and the shareholders following such
transaction do not own, directly or indirectly, in the aggregate a majority of
the shares or equity securities of the surviving corporation of any such merger
or consolidation entitled to elect members of the Board of Directors, (B) the
sale of all or substantially all of the Company's assets or properties in a
single transaction or in a series of related transactions, or (C) the sale,
lease, exchange or other disposition of any shares of a material Subsidiary or
all or substantially all assets of any material Subsidiary;
(b) changing the authorized number of directors;
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(c) amending or modifying the Charter Documents;
(d) electing or removing any of the President, Chief
Financial Officer or other executive officers, and amending or modifying of the
Employment Agreement, dated July 30, 1999, between the Company and Xxxxxxx;
(e) voluntarily dissolving or winding-up the Company or
any material Subsidiary or filing with respect to the Company or any material
Subsidiary a voluntary petition in bankruptcy or for reorganization or for the
adoption of any plan or arrangement with creditors or an admission seeking the
relief therein provided under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors; and
(f) approving any dividend or other distribution in
respect of the Common Stock.
6.8 Transactions with Affiliates. Without the approval of a
majority of the Company's Board of Directors (excluding directors nominated by
an Interested Shareholder (as defined below)), the Company shall not, and shall
not permit any subsidiary to, (a) enter into (or call a default under, amend in
any material respect or grant any waiver with respect to any material matter
under) any transaction or agreement with any Shareholder or any Affiliate of
such Shareholder (the "Interested Shareholders") or (b) purchase any selling,
general, management or administrative services from a Shareholder or an
Affiliate of a Shareholder; provided, however, that nothing contained in this
Section 6.8 shall prohibit the Company from performing its obligations under any
existing agreements between the Company and any Interested Shareholder or any
Affiliate of an Interested Shareholder as in effect on the date hereof and
described on Schedule 6.8; and provided, further, that any such renewal,
extension, modification or amendment of any such existing agreements shall
require approval of the Board of Directors (excluding directors nominated by an
Interested Shareholder).
6.9 Reimbursement of Director Expenses. Each Director shall be
entitled to receive from the Company reimbursement for reasonable out-of-pocket
expenses (including travel related expenses), if any, incurred in connection
with the performance of his or her duties as a director. Nothing contained in
this Section 6.9 shall preclude any member of the Board of Directors from
serving the Company or its subsidiaries in any other capacity and receiving
proper compensation therefor.
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6.10 Liability Insurance. The Company shall, and each
Shareholder shall use reasonable efforts to cause the Board of Directors to
cause the Company to, maintain a directors' liability insurance policy that is
reasonably acceptable to a majority of the Directors.
6.11 Limitation on Merger. Each Shareholder agrees that for a
period of two years from the date of this Agreement, it will not vote its Shares
to approve a merger of the Company in which the shareholders of the Company are
to receive consideration in cash or other property instead of shares in the
surviving entity, unless such merger has been approved at a meeting of the Board
of Directors by the requisite majority, including the affirmative vote of the
Xxxxxxx Directors.
7. Stock Certificate Legend. A copy of this Agreement shall be filed
with the Secretary of the Company and kept with the records of the Company. Each
certificate representing Shares now held or hereafter acquired by any
Shareholder shall, for as long as this Agreement is effective, bear legends
substantially in the following forms:
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A "TRANSFER") AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE
SHAREHOLDERS' AGREEMENT, DATED AS OF JULY 30, 1999, AMONG THE COMPANY AND
THE SHAREHOLDERS NAMED THEREIN, A COPY OF WHICH MAY BE INSPECTED AT THE
COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL NOT REGISTER THE TRANSFER OF
SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER
HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF SUCH SHAREHOLDERS'
AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. SUCH SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
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REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
8. Other Agreements. The Company hereby covenants and agrees with
each Shareholder, as follows:
8.1 Financial Statements and Other Information. The Company
shall deliver to each Shareholder:
(a) promptly upon their becoming available, a copy of
(i) all regular or special reports, registration statements and amendments to
the foregoing which the Company files with the Commission or any securities
exchange, (ii) all reports, proxy statements, financial statements and other
information distributed by the Company to its stockholders, bondholders or the
financial community generally, and (iii) all accountants' management letters
pertaining to, all other reports submitted by accountants in connection with any
audit of, and all other material reports from outside accountants with respect
to, the Company or any of its subsidiaries; and
(b) such other financial, operating or other data or
other information of or relating to the Company or any of its Subsidiaries as
any Shareholder reasonably may request.
8.2 Books and Records. The Company shall, and shall cause its
subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company and each of its subsidiaries in accordance with GAAP.
8.3 Regulatory Compliance Cooperation. If, at any time, a
Regulated Shareholder notifies the Company that it has or would have a
Regulatory Problem, the Company agrees to use its reasonable best efforts to
accommodate any reasonable request of such Regulated Shareholder which may
assist in eliminating such Regulatory Problem, including, but not limited to,
the authorization and issuance to such Regulated Shareholder of shares of a
class of non-voting stock.
9. Confidentiality. All the financial statements, reports or other
information provided to any Shareholder pursuant to Section 8.1 hereof shall be
deemed to be confidential information of the Company; provided, however, that
information shall be deemed not to be confidential information of the Company if
such information (i) is
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generally available to the public or becomes generally available to the public
other than as a result of a disclosure by the Shareholder receiving such
information or its officers, employees, agents or counsel or (ii) was or becomes
available to the Shareholder receiving such information prior to its disclosure
to such Shareholder pursuant to Section 8.1 hereof, provided that the
Shareholder had no reasonable basis for concluding that such information was
made available in violation of a confidentiality agreement with the Company.
Each Shareholder agrees to use reasonable efforts to prevent the disclosure of
such confidential information to any other person (excluding its officers,
employees, agents or counsel who require access to such information), except (a)
as may be necessary in connection with a request by a Governmental Authority
having or claiming jurisdiction over such Shareholder, or (b) in connection with
the enforcement of such Shareholder's rights hereunder or under the Charter
Documents or Transaction Agreements. Without limiting the generality of the
foregoing, the Company may require any Shareholder receiving any confidential
information of the Company to enter into a separate confidentiality and
non-disclosure agreement, in form and substance reasonably satisfactory to the
Company and such Shareholder.
10. Specific Performance. The parties hereto intend that each of them
have the right to seek damages or specific performance in the event that any
other party hereto fails to perform such other party's obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the plaintiff party has an
adequate remedy at law.
11. Miscellaneous.
11.1 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been given or
made if in writing and delivered personally, sent by commercial carrier or
registered or certified mail (postage prepaid, return receipt requested) or
transmitted by facsimile with automated receipt confirmation to the parties at
the following addresses and numbers:
If to the Company, to:
Universal American Financial Corp.
Xxx Xxxxxxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000
Fax: (000) 000-0000
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Attention: Xxxxxxx X. Xxxxxxx
with copies to:
Harnett Xxxxxxx & Xxxxx, P.A.
NationsBank Tower
000 X. Xxxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxx Xxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Judge Xxxxxxx Xxxxxxx
and
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
If to Capital Z, to:
Capital Z Partners, L.P.
Xxx Xxxxx Xxxxxxxxx Xxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
If to Xxxxxxx, to:
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Universal American Financial Corp.
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000-0000
Fax: (000) 000-0000
with a copy to:
Harnett Xxxxxxx & Xxxxx, P.A.
NationsBank Tower
000 X. Xxxxxxxx Xxxx Xxxx
Xxxxx 000
Xxxx Xxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Judge Xxxxxxx Xxxxxxx
If to the AAM Investors, to:
AAM Capital Partners, L.P.
00 Xxxxx XxXxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
with a copy to:
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
If to any other Shareholder, at the address that such Shareholder
shall have furnished to the Company in writing in the manner set forth herein.
Any Shareholder may designate another notice address by giving
notice to
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the other parties in the manner provided above.
11.2 Amendment and Waiver.
(a) No failure or delay on the part of any party hereto
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the parties
hereto at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by any party hereto from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by each Shareholder that is or would be adversely affected
by any such amendment, supplement, modification, waiver or consent and (ii) only
in the specific instance and for the specific purpose for which made or given.
Notwithstanding the foregoing, the observance of any terms of this Agreement
which benefit only the Eligible Shareholders may be waived by Eligible
Shareholders holding a majority of the Shares owned by all Eligible
Shareholders.
11.3 Headings; Agreements. The headings contained in this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement. The term "Agreement" for purposes of representations and warranties
hereunder shall be deemed to include the Exhibits hereto to be executed and
delivered by parties relevant thereto.
11.4 Publicity. So long as this Agreement is in effect, except
as required by law, regulation or stock exchange requirements, the parties
hereto shall not, and shall cause their affiliates not to, issue or cause the
publication of any press release or other announcement with respect to the
contents of this Agreement or the other agreements contemplated hereby without
the consent of the other party, which consent shall not be unreasonably withheld
or delayed.
11.5 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of
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any such provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired, unless the provisions held invalid, illegal or
unenforceable shall substantially impair the benefits of the remaining
provisions hereof.
11.6 Entire Agreement. This Agreement (including all Exhibits
hereto) constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them. This
Agreement, together with the exhibits hereto, supersedes all prior agreements
and understandings on the subject matter hereof, including, without limitation,
the Shareholders Agreement, dated as of December 30, 1994, as amended, among the
Company and Wand/Universal Investments L.P., and the Shareholders Agreement,
dated April 25, 1997, as amended, among the Company, AAM Capital Partners, L.P.
and the other parties named therein, all of which are being terminated effective
as of the date of this Agreement. Notwithstanding anything to the contrary
stated herein, Section 5.a.ii of the 1998 Stock Purchase Agreement, dated
December 31, 1998, among the Company, UAFC, L.P., Chase Equity Associates, L.P.
and AAM Capital Partners, L.P. shall terminate effective as of the date of this
Agreement.
11.7 Term of Agreement. This Agreement shall become effective
upon the execution hereof and shall continue in effect until the termination of
this Agreement by written agreement of all Shareholders; provided, however, that
this Agreement shall cease to be effective in respect of any Shareholder which
ceases to own at least 1% of the Outstanding Common Stock.
11.8 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns (including, in the case of any party
hereto that is an individual, the heirs, estate and personal representatives of
such party). This Agreement is not assignable except by operation of law or in
compliance with Section 2.2 and 5 and the last sentence of Section 6.3.
11.9 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
11.10 Governing Law. The validity and interpretation of this
Agreement shall be governed by the laws of the State of New York, without
reference to the conflict
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of laws principles thereof which might indicate the applicability of the laws of
any other jurisdiction.
11.11 Third Party Beneficiaries. This Agreement is not intended
to confer upon any other person any rights or remedies hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered as of the date first written above.
UNIVERSAL AMERICAN FINANCIAL CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive Officer
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P., general partner
By: Capital Z Partners Ltd., its general partner
By: /s/ Xxxxxxx Xxxxxx
------------------------------
Xxxxxxx Xxxxxx
Senior Vice President
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx
XXXXXXX TRUST f.b.o. HARNETT FAMILY
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Xxxxxxx X. Xxxxxxx
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Trustee
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UAFC, L.P.
By: VWA, L.L.C., general partner
By: Veed Corp., managing member
By: /s/ Xxxxxxx X. Xxxx
----------------------
Xxxxxxx X. Xxxx
President
AAM CAPITAL PARTNERS, L.P.
By: AAM Partners, L.P., general partner
By: AAM Investment Banking Group, Ltd.,
general partner
By: /s/ Xxxxxxx X. Xxxx
----------------------
Xxxxxxx X. Xxxx
Managing Partner
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners, general partner
By: /s/ Xxxxxxx Xxxxxx
----------------------
Xxxxxxx Xxxxxx
General Partner
32
TABLE OF CONTENTS
1. Definitions.............................................................................1
2. Restrictions on Transfer of Shares......................................................6
2.1 Limitation on Transfer...................................................6
2.2 Permitted Transferees....................................................6
2.3 Xxxxxxx Transfers; Donations to Charity..................................7
3. Right of First Offer, Tag Along and Bring Along.........................................7
3.1 Proposed Voluntary Transfer..............................................7
3.1.1 First Offer.....................................................7
3.1.2 Notice..........................................................7
3.1.3 Option Period...................................................8
3.2 Tag Along................................................................8
3.2.1 Right to Participate............................................8
3.2.2 Exercise of Options.............................................9
3.3 Bring Along..............................................................9
3.4 Sale to the Purchasing Eligible Shareholders............................10
3.5 Sale to Third Party Buyer...............................................10
3.6 Involuntary Transfers...................................................11
3.6.1 Rights of First Offer upon Involuntary Transfer................11
3.6.2 Fair Market Value..............................................11
3.6.3 Closing........................................................11
3.6.4 General........................................................12
4. Pledges and Other Encumbrances.........................................................12
5. All Transfers in Compliance with Law and Subject to this Agreement;
Substitution of Transferee.............................................................12
6. Governance.............................................................................13
6.1 General.................................................................13
6.2 Shareholders' Actions...................................................13
6.3 Election of Directors...................................................13
6.4 Removal and Replacement.................................................14
6.5 Adjustment of Board Representation......................................14
33
6.6 Board Committees........................................................15
6.7 Supermajority Approvals.................................................15
6.8 Transactions with Affiliates............................................16
6.9 Reimbursement of Director Expenses......................................16
6.10 Liability Insurance.....................................................16
6.11 Limitation on Merger....................................................16
34
7. Stock Certificate Legend...............................................................17
8. Other Agreements.......................................................................17
8.1 Financial Statements and Other Information..............................17
8.2 Books and Records.......................................................18
9. Confidentiality........................................................................18
10. Specific Performance...................................................................18
11. Miscellaneous..........................................................................19
11.1 Notices.................................................................19
11.2 Amendment and Waiver....................................................21
11.3 Headings; Agreements....................................................21
11.4 Publicity...............................................................21
11.5 Severability............................................................21
11.6 Entire Agreement........................................................22
11.7 Term of Agreement.......................................................22
11.8 Assignment..............................................................22
11.9 Counterparts............................................................22
11.10 Governing Law...........................................................22
11.11 Third Party Beneficiaries...............................................22
Schedule 1 Ownership of Shares
Schedule 6.8 Affiliate Transactions
Exhibit A Certificate of Incorporation
Exhibit B By-laws
35
SCHEDULE I
UA Shareholders
1. Xxxxxxx Trust f.b.o. Harnett Family
36
SCHEDULE 6.8
Affiliate Transactions
1. Retainer Agreement with Harnett, Xxxxxxx & Xxxxx, PA, of which
Xxxxxxx Xxxxxxx, a director, is an officer and shareholder.
2. Consulting arrangements with Barco Associates, Inc., a company
wholly owned by Xxxxxx Xxxxxxx, and Xxxxxx Xxxxxx Associates Inc., a company
wholly-owned by Xxxxxx Xxxxxx, Messrs. Xxxxxxx and Xxxxxx being directors of the
Company, and Xxxxxxx Xxxxxxx, director of American Progressive.
3. Financial advisory contract with WAND Partners, Inc., an affiliate
of WAND/Universal Investments L.P.I. and WAND/Universal Investments X.X.XX.
4. Investment advisory contract with Asset Allocation and Management
Company, LLC, AAM Convertibles, Inc. and AAM Advisors, Inc., all of which are
affiliates of AAM Capital Partners L.P. ("AAM").
5. Actuarial service agreements with Xxxxx and Xxxxx, which is an
affiliate of AAM.
6. As part of his compensation, Xxxxxx Xxxxxxx receives 12 1/2% of
the net profits pre-tax income of Quincy Coverage Corp.
37
EXHIBIT A
Certificate of Incorporation
This Exhibit A is incorporated by reference to Annex D of the Proxy Statement
which is attached as Exhibit B to this Form 8-K.
38
UNIVERSAL AMERICAN FINANCIAL CORP.
AMENDED AND RESTATED BY-LAWS
Effective July 30, 1999
Incorporated under the Laws of the
State of New York
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UNIVERSAL AMERICAN FINANCIAL CORP.
**********
AMENDED AND RESTATED
BY-LAWS
**********
ARTICLE I
OFFICES
Section 1. The principal office of the corporation shall be
located in the Village of Rye Brook, County of Westchester, and State of New
York. The corporation may also have offices at such other places within or
without the State of New York as the Board may from time to time determine or
the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election
of directors shall be held at the principal office of the corporation or at such
other place within or without the State of New York as the Board of Directors
shall authorize and stated in the notice of the meeting. Meetings of
stockholders for any other purpose may be held at such time and place, within or
without the State of New York, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held on
the second Tuesday of April if not a legal holiday, and if a legal holiday, then
on the next secular day following, at 10:00 A.M., or at
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such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting at which they shall elect a
Board of Directors, and transact such other business as may properly be brought
before the meeting.
Section 3. Written notice of the annual meeting stating the
place, date and hour of the meeting shall be given to each stockholder entitled
to vote at such meeting not less than ten nor more than sixty days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the Chairman of the Board or the
president and shall be called by the Chairman of the Board or the president or
secretary at the request in writing of a majority of the Board of Directors, or
at the request of stockholders owning fifty (50%) percent of the entire capital
stock of the corporation issued and outstanding and entitled to vote. Such
request shall state the purpose or purposes of the proposed meeting.
Section 6. Written notice of a special meeting stating the
place, date and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be given not less than ten nor more than sixty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
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Section 8. The holders of fifty percent of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
ARTICLE III
DIRECTORS
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Section 1. The number of directors which shall constitute the
whole Board shall be not less than one (1) nor more than ten (10). Within the
limit above specified, the number of directors shall be determined by resolution
of the Board of Directors or by the stockholders at the annual meeting. The
directors shall be elected at the annual meeting of the stockholders, except as
provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified. Directors need not be
stockholders.
Section 2. Each director shall serve until his successor shall
have been duly elected and qualified, unless he shall resign, become
disqualified, disabled or shall otherwise be removed. Whenever a vacancy occurs
on the Board of Directors, a majority of the remaining directors have the power
to fill the vacancy by electing a successor director to fill that portion of the
unexpired term resulting from the vacancy.
Directors elected, whether by the Board of Directors or by the
stockholders, to fill a vacancy, subject to the foregoing, shall hold office for
a term expiring at the next annual meeting.
Section 3. The business of the corporation shall be managed by
its Board of Directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by statute or by the certificate
of incorporation or by these by-laws directed or required to be exercised or
done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of New
York.
Section 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the
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time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all the directors.
Section 6. Regular meetings of the Board of Directors may be
held without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 7. Special meetings of the Board may be called by the
chairman of the Board, president or a majority (50%) of the directors then in
office on five days' notice (or a shorter period, if waived by all members of
the Board) to each director, either personally or by mail or by telegram;
special meetings shall be called by the chairman of the Board or the president
or the secretary in like manner and on like notice on the written request of two
directors.
Section 8. Except as provided in the next sentence, at all
meetings of the Board, a majority of the directors currently in office shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. To the extent that the
Certificate of Incorporation requires more than a majority for the transaction
of business, seven (7) of the directors shall constitute a quorum. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 10. Without the approval of a majority of the Board of
Directors (excluding directors nominated by an Interested Stockholder (as
defined below)), the corporation shall not, and shall
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not permit any subsidiary to, (a) enter into (or call a default under, amend in
any material respect, or grant any waiver with respect to any material matter
under) any transaction or agreement with any stockholder or any affiliate of
such stockholder (the "Interested Stockholders") or (b) purchase any selling,
general, management or administrative services from a stockholder or an
affiliate of a stockholder; provided, however, that nothing contained in this
paragraph shall prohibit the corporation from performing its obligations under
any agreements existing on the date of the closing of the acquisition of certain
subsidiaries and assets of PennCorp Financial Group, Inc. ("PFG") under the
Purchase Agreement, Dated December 31, 1998 between the corporation, PFG and
certain subsidiaries of PFG, between the corporation and any Interested
Stockholder or any Affiliate of an Interested Stockholder; and provided,
further, that any such renewal, extension, modification or amendment of any such
existing agreements shall require approval of the Board of Directors (excluding
directors nominated by an Interested Stockholder).
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
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recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution,
or amending the by-laws of the corporation; and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
The corporation shall have an audit committee and a
compensation committee. Capital Z Financial Services Fund II, L.P. ("Capital Z")
shall be entitled to appoint a member to all committees of the Board of
Directors for so long as Capital Z continues to own at least ten percent of the
corporation's outstanding common stock.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
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ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or
of the certificate of incorporation or of these by-laws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of incorporation or of
these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by
the Board of Directors and there shall be a chairman of the Board of Directors,
a president, a vice president, a secretary and a treasurer. The Board of
Directors may also choose additional vice presidents, and one or more assistant
secretaries and assistant treasurers. Any number of offices may be held by the
same person, unless the certificate of incorporation or these by-laws otherwise
provide. The chairman emeritus of the Board of Directors (if any) shall not be
an officer of the Company.
Section 2. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a chairman of the Board of
Directors, a president, one or more vice presidents, a secretary and a
treasurer.
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Section 3. The Board of Directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office
until their successors are chosen and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors. Any vacancy occurring
in any office of the corporation shall be filled by the Board of Directors.
CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board of Directors shall
preside at all meetings of stockholders and directors.
THE PRESIDENT
Section 7. The president shall be the Chief Executive Officer
of the corporation. In the absence of the Chairman of the Board of Directors and
the Vice Chairman of the Board of Directors, the president shall preside at all
meetings of the stockholders and the Board of Directors, shall have general and
active management of the business of the corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
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The president shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
THE TREASURER AND ASSISTANT TREASURERS
Section 8. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors.
Section 9. He shall disburse the funds of the corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the chairman of the board or the president
and the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, on account of all his transactions as treasurer and of
the financial condition of the corporation.
Section 10. If required by the Board of Directors, he shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
ARTICLE VI
INDEMNIFICATION
Section 1. To the fullest extent permitted by law, the
corporation shall indemnify any person made, or threatened to be made, a party
to any action or proceeding (formal or informal), whether
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civil, criminal, administrative or investigative and whether by or in the right
of the corporation or otherwise, by reason of the fact that such person, such
person's testator or intestate, is or was a director, officer or employee of the
corporation, or of any subsidiary or affiliate of the corporation, or served any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise in any capacity at the request of the corporation, against all
loss and expense including, without limiting the generality of the foregoing,
judgments, fines (including excise taxes), amounts paid in settlement and
attorneys' fees and disbursements actually and necessarily incurred as a result
of such action or proceeding, or any appeal therefrom, and all legal fees and
expenses incurred in successfully asserting a claim for indemnification pursuant
to this Article VI; provided, however, that no indemnification may be made to or
on behalf of any director, officer or employee if a judgment or other final
adjudication adverse to the director, officer or employee establishes that such
person's acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that such person personally gained in fact a financial profit or other
advantage to which such person was not legally entitled.
In any case in which a director, officer or employee of the
corporation (or a representative of the estate of such director, officer or
employee) requests indemnification, upon such person's request, the Board of
Directors shall meet within 60 days thereof to determine whether such person is
eligible for indemnification in accordance with the standard set forth above.
Such person claiming indemnification shall be entitled to indemnification upon a
determination that no judgment or other final adjudication adverse to such
person has established that such person's acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that such person personally gained in fact a
financial profit or other advantage to which such person was not legally
entitled. Such determination shall be made:
(a) by the Board of Directors acting by a quorum
consisting of directors who are not parties to the action or
proceeding in respect of which indemnification is sought; or
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(b) if such quorum is unobtainable or if directed by
such quorum, then by either (i) the Board of Directors upon
the opinion in writing of independent legal counsel that
indemnification is proper in the circumstances because such
person is eligible for indemnification in accordance with the
standard set forth above, or (ii) by the stockholders upon a
finding that such person is eligible for indemnification in
accordance with the standard set forth above. Notwithstanding
the foregoing, a determination of eligibility for
indemnification may be made in any manner permitted by law.
To the fullest extent permitted by law, the corporation
shall promptly advance to any person made, or threatened to be made, a party to
any action or proceeding (formal or informal), whether civil, criminal,
administrative or investigative and whether by or in the right of the
corporation or otherwise, by reason of the fact that such person, such person's
testator or intestate, is or was a director or officer of the corporation, or of
any subsidiary or affiliate of the corporation, or served any other corporation
or any partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity at the request of the corporation, all expenses
incurred by such person in defending such actions or proceedings, upon request
of such person and receipt by the corporation of an undertaking by or on behalf
of such person to repay amounts advanced to the extent that it is ultimately
determined that such person was not eligible for indemnification in accordance
with the standard set forth above.
The foregoing provisions of this Article VI shall be deemed to
be a contract between the corporation and each director, officer or employee of
the corporation, or its subsidiaries or affiliates, and any modification or
repeal of this Article VI or such provisions of the New York Business
Corporation Law shall not diminish any rights or obligations existing prior to
such modification or repeal with respect to any action or proceeding theretofore
or thereafter brought; provided, however, that the right of indemnification
provided in this Article VI shall not be deemed exclusive of any other rights to
which any director, officer or employee of the corporation may now be or
hereafter become entitled apart from this Article VI or under any applicable law
including the New York Business Corporation Law. Irrespective of
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the provisions of this Article VI, the Board of Directors may, at any time or
from time to time, approve indemnification and advancement of expenses of
directors, officers, employees or agents to the full extent permitted by the New
York Business Corporation Law at the time in effect, whether on account of past
or future actions or transactions. Notwithstanding the foregoing, the
corporation shall enter into such additional contracts providing for
indemnification and advancement of expenses with directors, officers, or
employees of the corporation or its subsidiaries or affiliates as the Board of
Directors shall authorize, provided that the terms of any such contract shall be
consistent with the provisions of the New York Business Corporation Law.
As used in this Article VI, the term "employee" shall include,
without limitation, any employee, including any professionally licensed
employee, of the corporation. Such term shall also include, without limitation,
any employee, including any professionally licensed employee, of a subsidiary or
affiliate of the corporation who is acting on behalf of the corporation.
The indemnification provided by this Article VI shall be
limited with respect to directors, officers and controlling persons to the
extent provided in any undertaking entered into by the corporation or its
subsidiaries or affiliates, as required by the Securities and Exchange
Commission pursuant to any rule or regulation of the Securities and Exchange
Commission now or hereafter in effect.
If any action with respect to indemnification of directors or
officers is taken by way of amendment to these By-Laws, resolution of the Board
of Directors or by separate agreement, then the corporation shall give such
notice to the stockholders as is required by law.
If any provision of this Article VI shall be found to be
invalid or limited in application by reason of any law, regulation or
proceeding, it shall not affect any other provision or the validity of the
remaining provisions hereof.
The provisions of this Article VI shall be applicable to
claims, actions, suits or proceedings made, commenced or pending after the
adoption hereof, whether arising from acts or omissions to act occurring before
or after the adoption hereof.
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Section 2. The corporation may purchase and maintain insurance
on behalf of any person described in this Article VI against any liability which
may be asserted against such person whether or not the corporation would have
the power to indemnify such person against such liability under the provisions
of this Article VI or otherwise.
ARTICLE VII
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the chairman of the board, the president or a vice-president and the treasurer,
or the secretary or an assistant secretary of the corporation, certifying the
number of shares owned by him in the corporation.
Certificates may be issued for partly paid shares and in such
case upon the face or back of the certificates issued to represent any such
partly paid shares, the total amount of the consideration to be paid therefor,
and the amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as may
otherwise be provided by the New York Business Corporation Law, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the corporation shall issue to represent such class or series
of stock, a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
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Section 2. When a certificate is countersigned, (1) by a
transfer agent other than the corporation or its employee, or (2) by a registrar
other than the corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
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TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
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Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of New
York.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 2. Before payment of any dividend, there may be set
aside out of the funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition of
the corporation.
CHECKS
Section 4. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
CORPORATE SEAL
Section 6. The seal of the corporation shall be circular in
form and bear the name of the corporation, the year of its organization and the
words "Corporate Seal, New York." The seal may be used by causing it to be
impressed directly on the instrument or writing to be sealed, or upon adhesive
substance affixed thereto. The seal on the certificate for shares or on any
corporate obligation for the payment of money may be a facsimile, engraved or
printed.
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ARTICLE IX
AMENDMENTS
Section 7. These by-laws may be altered, amended or repealed
or new by-laws may be adopted by the stockholders or by the Board of Directors,
when such power is conferred upon the Board of Directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the Board of
Directors, or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting.
