EXHIBIT 7.8
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STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (this "AGREEMENT") is entered into as of
[Closing Date], 200[7] among Universal American Financial Corp., a New York
corporation (the "COMPANY"), and the securityholders listed on the signature
pages hereto (or which become a party to this Agreement after the date hereof
pursuant to the terms hereof) (each, a "STOCKHOLDER" and, collectively, the
"STOCKHOLDERS").
WHEREAS, this is the Stockholders Agreement referred to in that certain
Securities Purchase Agreement, dated as of May 7, 2007, among the Company and
certain of the entities comprising the Investors relating to an aggregate of
125,000 shares of Preferred Stock of the Company (the "SECURITIES PURCHASE
AGREEMENT").
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.
(a) The following terms, as used herein, have the following meanings:
"AFFILIATE" means with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such first
Person. The terms "CONTROL" (including, with correlative meanings, the terms
"CONTROLLING," "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means, with
respect to any Person, the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or otherwise.
"BOARD" means the board of directors of the Company.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"CAPITAL Z/UNION SQUARE" means Capital Z Financial Services Fund II, L.P.,
Capital Z Financial Services Private Fund II, L.P. and Union Square Universal
Partners, L.P. collectively, or, any of such limited partnerships in the event
only one such limited partnership remains a Stockholder.
"COMMON STOCK" means the Company's authorized shares of common stock, par
value $0.01 per share, and any stock into which such common stock may hereafter
be converted, changed or reclassified.
"COMMON STOCK EQUIVALENTS" means, without duplication, any rights,
warrants, options, convertible securities or exchangeable securities (including,
in each case, the Preferred Shares and NVC Shares), in each case, exercisable
for or convertible or exchangeable into, directly or indirectly, Common Stock,
whether at the time of issuance, upon the passage of time, or the occurrence of
some future event.
"COMPANY SECURITIES" means (i) the Common Stock (or any other capital
stock) issued by the Company and (ii) Common Stock Equivalents issued by the
Company.
"CONVERSION LIMITATION" means the limitations on conversion of Preferred
Shares and NVC Shares, as applicable, set forth in the respective Certificates
of Amendment to the Certificate of Incorporation of the Company for such shares.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXEMPT TRANSFER" means:
(a) any sale by a Stockholder of Company Securities:
(i) in a public offering pursuant to a registration statement that
was filed with the SEC and declared effective under the Securities Act;
(ii) in a sale to the public under Rule 144 under the Securities
Act;
(iii) in a block sale to a financial institution in the ordinary
course of such financial institution's securities business, or in a private sale
transaction pursuant to an available exemption from Securities Act registration
requirements, in each case, in circumstances where, to the knowledge (after
reasonable inquiry) of the Stockholder on whose behalf such sale is being made,
such sale will not result in the acquisition by any other Person of beneficial
ownership of any such Company Securities to the extent that, after giving effect
to such acquisition, such acquiring Person (other than any underwriter acting in
such capacity in an underwritten public offering of Company Securities) would
beneficially own Company Securities entitled to in excess of 5% of the total
number of votes that may be cast generally in the election of directors of the
Company (assuming conversion in full of all outstanding Preferred Shares and NVC
Shares, and irrespective of the Conversion Limitation); or
(iv) into a tender or exchange offer for more than 50% of the
outstanding shares of Common Stock, or pursuant to a merger agreement to which
the Company is a party providing for the conversion of the outstanding shares of
Common Stock into other securities, cash or other property;
(b) a Transfer of Company Securities to the Company pursuant to any
tender offer or exchange offer made by the Company that is open to substantially
all holders of the class of Company Securities so Transferred;
(c) a Transfer by a Stockholder, of shares of Common Stock acquired by
such Stockholder pursuant to the MH Merger Agreement, back to the Company if and
as required pursuant to the terms of the MH Merger Agreement;
(d) in the case of an Investor, a bona fide pro rata Transfer by such
Investor of Company Securities to its direct or indirect partners, limited
partners, members or stockholders; and
(e) in the case of a Stockholder that is an officer of the Company, a
sale pursuant to bona fide written "Rule 10b5-1 trading plans" adopted by such
officer as part of his or her long-term strategy for achieving asset
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diversification and liquidity, provided that such plans shall have been adopted
and shall operate in accordance with all applicable provisions of the Exchange
Act and the Company's securities trading policy for officers, and provided
further that, for purposes of qualifying as an "Exempt Transfer" under this
Agreement, such plans may not cover, in the aggregate, more than 35% of the
Common Stock beneficially owned by such officer unless the Board provides
otherwise.
For purposes hereof, the terms "BENEFICIAL OWNERSHIP" or "BENEFICIALLY
OWN" are used within the meaning of Rules 13d-3 and 13d-5 under the Exchange
Act, provided that a Person shall be deemed to beneficially own any securities
that such Person has the right to acquire, whether or not such right is
exercisable immediately.
"INVESTOR" means each of Capital Z/Union Square, Xxx, Xxxxx and WCAS.
"XXX" means Xxx-Universal Holdings, LLC.
"MH MERGER AGREEMENT" means that certain Agreement and Plan of Merger and
Reorganization, dated as of May 7, 2007, among the Company, MHRx LLC,
MemberHealth, Inc. and the other parties thereto.
"NVC SHARES" means shares of non-voting common stock of the Company that
are convertible into shares of Common Stock.
"PERMITTED TRANSFEREE" means, (a) with respect to any Stockholder that is
an entity, any entity that is an Affiliate of such Stockholder (and, with
respect to any such Stockholder that is an Investor, (i) without limiting the
foregoing, (A) any funds under common management with such Investor and (B) any
individual who is a managing member of the general partner of such Investor as
well as any individuals who are employees of the manager of such Investor and
any other related or similar co-investors of such Investor (and, with respect to
any such individual, any Person of the type referred to in clause (b) of this
definition), and (ii) any Person ("PRE-CLOSING ASSIGNEE") to which such Investor
(the "SYNDICATING INVESTOR") syndicated a portion of its equity commitment under
the Securities Purchase Agreement prior to the closing thereunder and which
purchased Preferred Shares from the Company at the closing thereunder, but such
Pre-Closing Assignee shall constitute a Permitted Transferee of such Syndicating
Investor only for so long as such Syndicating Investor maintains beneficial
ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act)
of all Company Securities directly or indirectly owned by such Pre-Closing
Assignee through such Syndicating Investor maintaining voting discretion and
voting control over such Company Securities pursuant to a written agreement),
and (b) with respect to any Stockholder that is an individual, any spouse,
lineal descendant, sibling, parent, executor or administrator of such
Stockholder, or a trust, the beneficiaries of which, or a corporation or
partnership, the stockholders or partners of which, include only such
Stockholder and any spouse, lineal descendant, sibling or parent of such
Stockholder.
"PERRY" means Perry Partners, L.P., Perry Partners International, Inc.,
Perry Commitment Fund, L.P., and Perry Commitment Master Fund, L.P.
collectively, or, either of such entities in the event only one of such
entities remains a Stockholder.
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"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"PREFERRED SHARES" means the shares of Series A Preferred Stock and Series
B Preferred Stock of the Company.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of May 7, 2007, with the Company, as such Registration Rights Agreement
may hereafter be amended or otherwise modified in accordance with its terms.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership or other entity of which securities or other
ownership interests representing more than 50% of the equity or more than 50% of
the ordinary voting power (or, in the case of a partnership, more than 50% of
the general partnership interests) are, as of such date, owned by such Person or
one or more Subsidiaries of such Person or by such Person and one or more of its
Subsidiaries.
"TRANSFER" means, with respect to any Company Securities, (i) when used as
a verb, to sell, assign, dispose of, exchange, pledge, encumber, hypothecate or
otherwise transfer such Company Securities or any participation or interest
therein, whether directly or indirectly, or permit, agree or commit to do, any
of the foregoing, and (ii) when used as a noun, a direct or indirect sale,
assignment, disposition, exchange, pledge, encumbrance, hypothecation or other
transfer of such Company Securities or any participation or interest therein, or
any agreement or commitment to do any of the foregoing.
"WCAS" means Welsh, Carson, Xxxxxxxx & Xxxxx IX, L.P. and Welsh, Carson,
Xxxxxxxx & Xxxxx X, L.P. collectively, or, either of such limited partnerships
in the event only one such limited partnership remains a Stockholder.
(b) Other Definitional and Interpretive Matters. Unless otherwise
expressly provided, for purposes of this Agreement the following rules of
interpretation shall apply: (i) When calculating the period of time before
which, within which or following which any act is to be done or step taken
pursuant to this Agreement, the date that is the reference date in calculating
such period shall be excluded. If the last day of such period is a non-Business
Day, the period in question shall end on the next succeeding Business Day. (ii)
The division of this Agreement into Articles, Sections and other subdivisions
and the insertion of headings are for convenience of reference only and shall
not affect or be utilized in construing or interpreting this Agreement. (iii)
The word "including" shall be deemed followed by "(but not limited to)". (iv)
The word "it" shall include references to the male and female gender as the
context requires.
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ARTICLE 2
CORPORATE GOVERNANCE
SECTION 2.01. Composition of the Board.
(a) Subject to Section 2.01(b), commencing on the date of this
Agreement, the Board shall consist of thirteen directors, comprised as follows:
(i) two directors designated by Capital Z/Union Square;
(ii) two directors designated by WCAS;
(iii) one director designated by Xxx;
(iv) one director designated by Perry (the directors referenced in
sub-clauses (i), (ii), (iii) and (iv) of this Section 2.01(a) are
sometimes referred to herein each as an "INVESTOR DESIGNEE");
(v) one director who shall be the then current Chief Executive
Officer of the Company; and
(vi) six additional directors who shall each satisfy the criteria
for "independent director" under the rules of the principal stock exchange
on which the Common Stock is listed.
(b) Going forward, (i) with respect to any Investor that is entitled,
pursuant to Section 2.01(a), to designate more than one director, (A) at such
time as such Investor, together with its Permitted Transferees, holds a number
of shares of Common Stock that is less than 50% of the number (the "START
NUMBER") of shares of Common Stock that such Investor holds on the date of this
Agreement, such Investor shall lose the right under this Agreement to designate
one of its Investor Designees, and (B) at such time as such Investor, together
with its Permitted Transferees, holds a number of shares of Common Stock that is
less than 25% of such Investor's Start Number, such Investor shall no longer
have a right under this Agreement to designate any Investor Designees, and (ii)
with respect to any Investor that is entitled, pursuant to Section 2.01(a), to
designate one director, at such time as such Investor, together with its
Permitted Transferees, holds a number of shares of Common Stock that is less
than 50% of such Investor's Start Number, such Investor shall no longer have a
right under this Agreement to designate any Investor Designees. For purposes of
the foregoing sentence, shares of Common Stock held by a Person shall include
shares issuable directly or indirectly through conversion or exchange of
outstanding Preferred Shares and NVC Shares held by such Person, and
irrespective of the Conversion Limitation. The foregoing calculations shall be
appropriately adjusted to take into account any stock reclassification,
recapitalization or split, exchange of shares or similar transaction.
(c) Each Stockholder agrees that, if at any time it is entitled to vote
for the election of directors to the Board, it shall vote all of its Company
Securities that are entitled to vote or execute proxies or written consents, as
the case may be, and take all other necessary action (including causing the
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Company to call a special meeting of stockholders) in order to ensure that the
composition of the Board is as set forth in this Section 2.01.
(d) If, as a result of the death, retirement, resignation or, subject to
the other provisions of this Section 2.01, removal, of an Investor Designee
there shall exist or occur any vacancy on the Board, the Investor entitled to
designate such director pursuant to this Section 2.01 shall have the power to
designate a person to fill such vacancy, whereupon each of the Stockholders
agrees to take such action as is necessary to promptly elect such person to fill
such vacancy (including, if necessary, causing the Company to call a special
meeting of stockholders (or effecting a written consent in lieu thereof) and
voting all Company Securities that are entitled to vote or execute proxies or
written consents to accomplish such result).
(e) Directors may resign at any time. An Investor Designee may be
removed at any time for any reason or no reason upon the written direction of
the Investor that designated such Investor Designee, effective upon the delivery
of such written direction. If any Investor entitled to designate any directors
request that any of their respective Investor Designees be removed as a
director, each of the Stockholders shall vote all of its Company Securities that
are entitled to vote or execute proxies or written consents, as the case may be,
and take all other necessary action, to remove such Investor Designee. Each
Stockholder agrees that it shall not vote any of its Company Securities in favor
of, or take any other action related to, the removal of any Investor Designee
who shall have been designated for election to the Board by an Investor pursuant
to this Section 2.01 unless the Investor entitled to designate such director
shall have consented to such removal in writing or unless such Investor shall
have lost the right to designate such director to the Board pursuant to this
Section 2.01. If any Investor's right to designate directors shall be reduced by
one or more directors, such Investor shall, if so requested by any member of the
Board, promptly cause a number of Investor Designees designated by such Investor
equal to the number by which such right to designate was reduced to resign from
the Board.
(f) If any person serving as the Chief Executive Officer of the Company
("CEO") shall cease to be the CEO, then, unless otherwise determined by a
majority of the other members of the Board, such former CEO shall cease to be a
member of the Board and the new CEO shall be appointed as a member of the Board
in place of the former CEO.
(g) The Company agrees to cause each individual designated for director
pursuant to this Section 2.01 to be nominated, by all necessary and appropriate
action, to serve as a director on the Board (including, to the extent required,
by the Nominating Committee of the Board recommending that such designees be
included in each slate of director nominees and by the Board presenting such
slate for election to the Board) and to take all other actions as may be
necessary to ensure that the composition of the Board is as set forth in this
Section 2.01.
(h) To the extent permitted by applicable law and the rules of the
principal stock exchange on which the Common Stock is listed, each Investor with
an Investor Designee serving on the Board shall be entitled to have at least one
of its Investor Designees serve on all committees of the Board.
(i) Any vacancies on the Board not filled pursuant to the forgoing
principles shall be filled by an individual to be nominated by the Nominating
Committee of the Board.
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(j) Subject to the provisions of Section 4.01, an Investor Designee
shall be entitled to supply details of any business transacted at Board
meetings, and any other information obtained by him or her in his or her
capacity as a director of the Company, to the Investor that designated such
director to the Board and to that Investor's Affiliates and professional
advisers.
(k) The Company shall reimburse all reasonable out-of-pocket expenses
incurred by the members of the Board in connection with traveling to and from
and attending meetings of the Board and while conducting business at the request
of the Company.
(l) The Company shall use its reasonable best efforts to purchase and
maintain, at its expense, insurance, from reputable carriers and in an amount
determined in good faith by the Board to be appropriate, on behalf of and
covering the individuals who at any time on and after the date of this Agreement
are or become directors or officers of the Company, or serve at the request of
the Company as a director, officer, employee or agent of another company, joint
venture, trust or other enterprise, against any expense, liability or loss
asserted against or incurred by such individual in any such capacity, or arising
out of such individual's status as such, subject to customary exclusions.
(m) The rights granted to a Stockholder hereunder are in addition to all
rights to which such Stockholder is entitled as a security holder of the Company
under the Company's certificate of incorporation and by-laws, as in effect from
time to time, and applicable law.
(n) In addition, subject to the last sentence of this clause, WCAS shall
be entitled to designate one individual as a non-voting Board observer
("NON-VOTING OBSERVER"). With the exception of meetings of the Board (or
portions thereof) at which an Investor Designee designated by WCAS pursuant to
Section 2.01(a)(ii) is recused, such Non-Voting Observer shall be allowed to
attend and observe meetings of the Board, provided that such Non-Voting Observer
shall agree with the Company to maintain the confidentiality, in accordance with
Section 4.01, of all non-public information obtained in connection with being a
Non-Voting Observer. For the avoidance of doubt, the Non-Voting Observer is not
a director of the Company and shall have no right to vote on any matter coming
to a vote of the Board. At such time as WCAS, together with its Permitted
Transferees, holds a number of shares of Common Stock that is less than 25% of
WCAS's Start Number, WCAS shall no longer have a right to designate a Non-Voting
Observer (for purposes of this sentence, shares of Common Stock held by a Person
shall include shares issuable directly or indirectly through conversion or
exchange of outstanding Preferred Shares and NVC Shares held by such Person, and
irrespective of the Conversion Limitation; and the foregoing calculation shall
be appropriately adjusted to take into account any stock reclassification,
recapitalization or split, exchange of shares or similar transaction).
(o) To the extent, if any, that any of the principles of this Article 2
conflict with any applicable law or any rules of the principal stock exchange on
which the Common Stock is at the time listed and that are applicable to and
binding upon the Company, the Company and the Stockholders shall make such
elections under such rules and take any and all other actions as may be
necessary in order to enable the purposes and intents of this Article 2 to be
carried out to the fullest extent in compliance with such laws and rules.
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SECTION 2.02. Corporate Opportunities. Each Investor Designee (other
than any Investor Designee who may also be an officer or employee of the Company
or of any of the Company's Subsidiaries) shall have no duty to present corporate
opportunities to the Company unless such opportunity was expressly offered to
such Investor Designee in writing solely in his or her capacity as a director of
the Company, and any Investor Designee who complies with this provision shall be
deemed to have fully satisfied and fulfilled the fiduciary duty of such director
to the Company and its stockholders with respect to such opportunity.
SECTION 2.03. Charter and By-law Provisions. Each Stockholder agrees
to vote all of its Company Securities that are entitled to vote or execute
proxies or written consents, as the case may be, and to take all other actions
necessary, to ensure that the Company's certificate of incorporation and by-laws
(a) facilitate, and do not at any time conflict with, any provision of this
Agreement and (b) permit each Stockholder to receive the benefits to which each
such Stockholder is entitled under this Agreement.
ARTICLE 3
RESTRICTIONS ON TRANSFER
SECTION 3.01. General Restrictions on Transfer.
(a) Each Stockholder understands and agrees that the Company Securities
held by it on the date hereof may not have been registered under the Securities
Act and may be restricted securities under the Securities Act. Each Stockholder
agrees that it shall not Transfer any Company Securities (or solicit any offers
in respect of any Transfer of any Company Securities), except in compliance with
the Securities Act, any other applicable securities or "blue sky" laws, and the
restrictions on Transfer contained in this Agreement.
(b) No Stockholder shall Transfer, other than pursuant to Section 3.04,
any Company Securities acquired by such Stockholder from the Company pursuant to
the MH Merger Agreement, until after 180 days following the closing date of such
acquisition.
(c) No Stockholder shall Transfer, other than pursuant to Section 3.04,
any Preferred Shares acquired by such Stockholder from the Company pursuant to
the Securities Purchase Agreement (or any shares of Series B Preferred Stock or
NVC Shares issued in exchange therefor, or any shares of Common Stock or NVC
Shares issued upon conversion of any thereof) until after the first anniversary
of the closing of the acquisition of such Preferred Shares pursuant to the
Securities Purchase Agreement.
(d) No Stockholder shall Transfer, other than pursuant to Section 3.04,
any Preferred Shares acquired by such Stockholder from the Company pursuant to
the Securities Purchase Agreement dated as of May 7, 2007 among the Company and
certain of the entities comprising the Investors relating to an aggregate of
50,000 Preferred Shares (or any shares of Series B Preferred Stock or NVC Shares
issued in exchange therefor, or any shares of Common Stock or NVC Shares issued
upon conversion of any thereof) until after the first anniversary of the closing
of the acquisition of such Preferred Shares pursuant to such Purchase Agreement.
(e) No Stockholder shall Transfer, other than pursuant to Section 3.04,
any shares of Common Stock acquired by such Stockholder from Capital Z pursuant
to the Share Purchase Agreement, dated as of May 7, 2007, among certain of the
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entities comprising the Investors, until after the first anniversary of the
closing of such acquisition.
(f) The 180-day period referred to in Section 3.01(b), and the
respective one-year periods referred to in Sections 3.01(c), 3.01(d) and
3.01(e), respectively, are each herein referred to as the respective "LOCK-UP
PERIOD" with respect to the respective Company Securities to which such periods
relate under such Sections. After the applicable Lock-Up Period, with respect to
the Company Securities referred to in Sections 3.01(b), 3.01(c), 3.01(d) and
3.01(e), respectively, and with respect to all other Company Securities owned by
a Stockholder, any proposed Transfer by a Stockholder of such Company Securities
(or any shares of Series B Preferred Stock or NVC Shares issued in exchange
therefor, or any shares of Common Stock or NVC Shares issued upon conversion of
any thereof), other than Transfers pursuant to Section 3.04 or Exempt Transfers,
shall be subject to the rights of first offer and tag-along rights as set forth
in Section 3.02 and Section 3.03, as applicable.
(g) Sections 3.01(b), 3.01(c), 3.01(d) and 3.01(e) are not intended to
prohibit Transfers pursuant to a merger agreement to which the Company is a
party providing for the conversion of the outstanding shares of Common Stock
into other securities, cash or other property.
(h) Notwithstanding anything to the contrary in Section 3.01(b), a
Stockholder will not be prohibited under Section 3.01(b) from:
(i) exercising "piggy-back" registration rights under, and subject
to the provisions of, the Registration Rights Agreement with respect to
the shares referred to in Section 3.01(b) in any underwritten offering
that occurs during the Lock-Up Period referred to in Section 3.01(b) and
that is initiated by the Company or a Company stockholder exercising
demand registration rights with respect to Company Securities; and
(ii) Transferring shares of Common Stock acquired by such
Stockholder pursuant to the MH Merger Agreement back to the Company if and
as required pursuant to the terms of the MH Merger Agreement.
(i) Any attempt to Transfer any Company Securities not in compliance
with this Agreement shall be null and void, and the Company shall not, and shall
cause any transfer agent retained by it not to, give any effect in the Company's
records to such purported Transfer.
(j) Without limiting the other provisions of this Agreement, no
Stockholder shall make or permit any Transfer of its Company Securities
indirectly through any means that would not be permitted directly, in order to
avoid the provisions of this Agreement.
(k) Each certificate for Company Securities issued to any Stockholder
shall bear a legend in substantially the form set forth below (in addition to
any legend that may be required by applicable securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER
RESTRICTIONS PURSUANT TO A STOCKHOLDERS AGREEMENT (A COPY OF WHICH IS ON
FILE WITH THE ISSUER OF THIS CERTIFICATE).
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SECTION 3.02. Right of First Offer.
(a) If any Stockholder or Stockholders acting in concert (a
"TRANSFEROR") desire to Transfer (other than pursuant to an Exempt Transfer)
Company Securities that represent, in the aggregate, more than 5% of the then
outstanding shares of Common Stock (assuming conversion in full of all
outstanding Preferred Shares and NVC Shares, and irrespective of the Conversion
Limitation), such Transferor shall give each Stockholder (other than the
Transferor and its Permitted Transferees, as applicable) that, together with its
Permitted Transferees, holds more than 5% of the then outstanding shares of
Common Stock (for this purpose, shares of Common Stock held by a Person shall
include shares issuable upon exercise of Company stock options, or directly or
indirectly through conversion or exchange of outstanding Preferred Shares and
NVC Shares, held by such Person, and irrespective of the Conversion Limitation)
and the Company (collectively, the "OPTION HOLDERS") prior written notice of
such proposed Transfer, which notice shall (i) specify the amount and type of
Company Securities to be Transferred (the "SUBJECT SECURITIES"), the
consideration to be received therefor, and the other material terms on which the
Transferor proposes to Transfer the Subject Securities and (ii) contain the
offer described below (collectively, the "TRANSFEROR'S NOTICE"). The
Transferor's Notice shall contain an offer to sell (the "OPTION") the Subject
Securities to the Option Holders in accordance with this Article 3 for the
consideration and on the other terms specified in the Transferor's Notice;
provided that to the extent such consideration shall consist of anything other
than cash, each Option Holder shall be entitled, at its option, to instead pay
in cash the value of such consideration as determined by mutual agreement of all
such Option Holders so electing to pay cash and the Transferor, or if such
agreement is not reached within 5 days of receipt of the Transferor's Notice, as
determined by an investment banker or appraiser of national reputation
reasonably acceptable to both the Transferor and such Option Holders (the fees
and expenses of which shall be shared equally by the Transferor, on the one
hand, and all such Option Holders requesting such valuation, on the other hand),
in which case the date of the Transferor's Notice shall be deemed the date the
cash value of such consideration is so determined.
(b) The Company, at the election of the Board (acting by majority vote,
excluding, for purposes of this Section (i) if the Transferor is an Investor (or
Permitted Transferee thereof), any Investor Designee designated to the Board by
such Investor pursuant to Article 2 hereof (and if such Transferor is WCAS (or
Permitted Transferee thereof), also excluding Xxxxxxx Xxxxxxx if he is then an
Investor Designee of WCAS), and (ii) if the Transferor is Xxxxxxx Xxxxxxx or any
of his Permitted Transferees or Affiliates, and Xxxxxxx Xxxxxxx is then a
director of the Company, Xxxxxxx Xxxxxxx), shall have the first right and
option, exercisable at any time within the first [__] days following the date of
the Transferor's Notice, to exercise the Option to purchase from the Transferor
the Subject Securities pursuant to the Option. If the Option is not exercised by
the Company within the first [__] days after the date of the Transferor's
Notice, then the other Option Holders shall have the right and option,
exercisable at any time within the first [__] days following the date of the
Transferor's Notice, to exercise the Option and purchase from the Transferor the
Subject Securities pursuant to the Option, in which event, such other Option
Holders may elect to purchase the Subject Securities in the proportions upon
which they mutually agree or, if they are unable to agree upon an allocation of
such Subject Securities among themselves, then in the proportion that the number
of shares of Common Stock held by each such Option Holder which desires to
participate in the purchase of such Company Securities pursuant to the Option
bears to the aggregate number of shares of Common Stock held by all such Option
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Holders that desire to participate in the purchase of such Company Securities
pursuant to the Option. For purposes of the foregoing sentence, shares of Common
Stock held by a Person shall include shares issuable upon exercise of Company
stock options, or directly or indirectly through conversion or exchange of
outstanding Preferred Shares and NVC Shares, held by such Person, and
irrespective of the Conversion Limitation. Acceptance of the Option by an Option
Holder shall be in a writing delivered to the Transferor and the Company, which
shall deliver copies thereof to the other Option Holders.
(c) If the Option is accepted in a manner such that all Company
Securities covered by the Transferor's Notice are to be purchased by the Option
Holders, the Transferor shall, subject to Section 3.03, Transfer such Company
Securities free of all liens and encumbrances (other than restrictions imposed
by this Agreement) to the respective Option Holder purchasers thereof against
delivery by the Option Holder purchaser of the applicable consideration payable
to the Transferor therefor. Unless, through exercise of the Option, all the
Company Securities proposed to be transferred in the Transferor's Notice are to
be acquired by one or more Option Holders, the Transferor may, subject to
Section 3.03, either (i) Transfer the Company Securities subscribed for by the
Option Holders at the applicable purchase price therefor to the Option Holders
or (ii) Transfer the Subject Securities that were subject to the Option to a
third party Transferee at the same purchase price set forth in the Transferor's
Notice (or at a higher price) and on terms and conditions no less favorable to
the Transferor than the terms and conditions set forth in the Transferor's
Notice; provided, however, that such Transfer shall occur no later than 90 days
after the date of the Transferor's Notice. If such Transfer does not occur
within such 90 day period, then the Company Securities shall be re-offered to
the Option Holders under this Section 3.02 prior to any subsequent Transfer
otherwise covered by this Section 3.02. The transactions contemplated by this
Section 3.02 shall be consummated in accordance with Section 3.03.
SECTION 3.03. Tag-Along Rights.
(a) In connection with each Option pursuant to Section 3.02, the
Stockholders shall have the "tag along rights" set forth in this Section 3.03.
Upon expiration or waiver of the rights of first offer under Section 3.02 and at
least [__] days prior to any Transfer of any Company Securities to any proposed
third party Transferee ("PROPOSED TRANSFEREE") or Option Holder, as contemplated
by Section 3.02(c), the Transferor shall deliver a notice (the "SALE NOTICE") to
each of the Company and the Stockholders stating (i) in reasonable detail the
identity of the prospective transferee(s), the Subject Securities to be
Transferred and the terms and conditions of such Transfer, and (ii) whether or
not Option Holders elected pursuant to Section 3.02 to purchase all of the
Subject Securities (the "ELECTING STOCKHOLDERS"). If Electing Stockholders elect
to purchase all of the Subject Securities pursuant to Section 3.02, the other
Stockholders shall have the "tag along rights" under this Section 3.03 with
respect to the Transfer to Electing Stockholders, and, if Electing Stockholders
did not so elect to purchase all of the Subject Securities, such other
Stockholders shall also have "tag along rights" under this Section 3.03 with
respect to the proposed Transfer to the Proposed Transferee (the Stockholders
that are entitled to exercise their "tag along rights" hereunder are referred to
as the "ELIGIBLE STOCKHOLDERS").
(b) Each Eligible Stockholder may elect to participate in the
contemplated Transfer on the same conditions and terms (including selling the
percentage of its Company Securities specified below in this Section 3.03), and
at the same price as the Transferor, by delivering written notice to the
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Transferor, with a copy to the other Stockholders, within [__] days after the
delivery of the Sale Notice. Each Eligible Stockholder that elects to
participate in such Transfer (a "TAG ALONG ELECTING STOCKHOLDER") shall be
entitled to sell in the contemplated Transfer, on the same conditions, terms and
at the price described above, a portion of its Company Securities equal to the
lesser of 100% of its Company Securities and such number of its Company
Securities that represent the product of (A) the number of shares of Common
Stock represented by the Subject Securities multiplied by (B) a fraction the
numerator of which is the number of shares of Common Stock held by such Tag
Along Electing Stockholder and the denominator of which is the aggregate number
of shares of Common Stock held by all Stockholders electing to participate in
the Transfer; provided that in order to be entitled to exercise its right
pursuant to this Section 3.03 to Transfer Company Securities to the Proposed
Transferee or the Electing Stockholders, as the case may be, a Tag Along
Electing Stockholder must agree to make to the Proposed Transferee or the
Electing Stockholders, as the case may be, the same representations and
warranties (to the extent applicable to such Tag Along Electing Stockholder),
and the same covenants, indemnities and agreements, in each case, as the
Transferor agrees to make in connection with the proposed Transfer of its
Subject Securities; provided, however, that (i) no Tag Along Electing
Stockholder shall be required to become subject thereby to a covenant not to
compete or similar restrictive covenant without such Stockholder's consent, (ii)
each Tag Along Electing Stockholder shall be obligated to join, severally but
not jointly, on a pro rata basis (based on each such Tag Along Electing
Stockholder's share of the aggregate proceeds paid with respect to the Company
Securities included in such Transfer) in any indemnification obligation to the
Proposed Transferee that the Proposed Transferee requires of the Transferor in
connection with the proposed Transfer, other than any such obligations that
relate specifically to a particular Stockholder, such as indemnification with
respect to representations and warranties given by a Stockholder regarding such
Stockholder's title to and ownership of Company Securities, and (iii) each Tag
Along Electing Stockholder's aggregate liability under such agreements shall be
limited to no more than the aggregate proceeds received by such Tag Along
Electing Stockholder from the acquirer(s) in such Transfer; and provided
further, however, that if the Proposed Transferee refuses to purchase (x) the
total amount of Company Securities offered by the Tag Along Electing
Stockholders and (y) the Subject Securities, the amount of Company Securities to
be Transferred by the Tag Along Electing Stockholders and the Transferor shall
be reduced to the amount of the Subject Securities or (if greater) such amount
of the sum of the Company Securities in clauses (x) and (y) above as the
Proposed Transferee may agree to purchase, which amount of Company Securities
shall be allocated among the Tag Along Electing Stockholders and the Transferor
pro rata, in proportion to the relative amount of Common Stock held by them. For
purposes of the preceding sentence, shares of Common Stock held by a Person
shall include shares issuable upon exercise of Company stock options, or
directly or indirectly through conversion or exchange of outstanding Preferred
Shares and NVC Shares, held by such Person, and irrespective of the Conversion
Limitation. If any Tag Along Electing Stockholder elects to exercise its right
to participate in a Transfer pursuant to this Section 3.03, the Transferor shall
use reasonable efforts to obtain the agreement of the Proposed Transferee to the
participation of such Tag Along Electing Stockholder(s) in the contemplated
Transfer. The Transferor shall not Transfer any of its Company Securities to any
prospective transferee(s) if such prospective transferee(s) decline(s) to allow
the participation of such Tag Along Electing Stockholders in accordance with
this Section 3.03.
(c) The closing of any purchase and sale of Company Securities pursuant
to Section 3.02 and Section 3.03 shall take place on the first Business Day [__]
days after delivery of the Sale Notice; provided that such period may be
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extended for up to an additional [__] Business Days solely to the extent
necessary to obtain any required governmental regulatory approvals. At such
closing, the Proposed Transferee(s) or Electing Stockholders, as the case may
be, shall deliver to the Transferor and, if applicable, each Tag Along Electing
Stockholder a wire transfer or a certified check in the entire amount of the
applicable purchase price against delivery of instrument(s) evidencing the
Company Securities, in each case duly endorsed for Transfer to, such third party
transferee(s) or Electing Stockholders, as the case may be. At or prior to the
closing of any such purchase or sale to any third party transferee, such third
party transferee shall execute and deliver to the Company all agreements and
instruments required by Section 3.05.
SECTION 3.04. Certain Transfers Excluded. Sections 3.01(b)-(e), 3.02
and 3.03 shall not apply to any Transfer by a Stockholder of Company Securities
to a Permitted Transferee of such Stockholder. Notwithstanding the foregoing,
if, while a Permitted Transferee holds any Company Securities, such Person would
cease to qualify as a Permitted Transferee in relation to the initial
transferring Stockholder from whom or which such Permitted Transferee or any
previous Permitted Transferee of such initial transferring Stockholder received
such securities (an "UNWINDING EVENT"), then the relevant initial transferor
Stockholder shall forthwith notify the other Stockholders and the Company of the
pending occurrence of such Unwinding Event and, prior to such Unwinding Event,
such initial transferor Stockholder and such transferee shall take all actions
necessary to effect a Transfer of all the Company Securities held by such
transferee either back to such initial Stockholder or to another Person that
qualifies as a Permitted Transferee of such initial Stockholder.
SECTION 3.05. Transferees Bound. No Stockholder shall Transfer any
Company Securities pursuant to Section 3.04, or to a Proposed Transferee
pursuant to Sections 3.03-3.04, unless (in each case) as a condition to the
effectiveness of such Transfer, the Stockholder shall cause the proposed
transferee to agree, pursuant to a written joinder agreement to this Agreement
(which joinder agreement shall be in form and substance reasonably satisfactory
to the Company), to take and hold such Company Securities subject to the
obligations and restrictions applicable to a Stockholder under this Agreement
and to be bound by the provisions of this Agreement. Any Person that hereafter
becomes a Stockholder shall provide its contact details to the Company, which
shall promptly provide such information to each other Stockholder. This Section
3.05 shall not apply to Exempt Transfers.
ARTICLE 4
CERTAIN OTHER PROVISIONS
SECTION 4.01. Confidentiality. Unless otherwise approved by the Board,
each Stockholder shall maintain the confidentiality of any and all non-public
information furnished by the Company and received by such Stockholder pursuant
to this Agreement, by using the same degree of care, but no less than a
reasonable degree of care, as such Stockholder uses to protect its own
confidential information, except:
(a) to the extent such information shall have become publicly available
otherwise than through a breach of this Agreement by such Stockholder or any of
its Affiliates;
(b) to the extent required (i) to comply with any subpoena or similar
demand to which a Stockholder becomes subject or (ii) by applicable law or
regulation, or stock exchange rule; provided that in each such case such
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Stockholder shall give the Company prompt notice of such requirement or demand
(as applicable), to the extent practicable, so that the Company may seek an
appropriate protective order or similar relief (and the Stockholder shall
cooperate reasonably with such efforts by the Company, at the Company's
expense);
(c) in the case of an Investor, to Affiliates of such Investor and its
and their respective directors, officers, employees, counsel, accountants and
other professional advisors with whom such Investor reasonably determines it is
necessary to share such information in connection with such Investor's
investment in the Company and that are informed of the confidential nature of
the information and agree to keep it confidential (and such Investor shall be
liable for any disclosure made by such Persons that is not permitted hereunder),
in each case, subject to any limitations under applicable law; or
(d) in the case of an Investor, to a bona fide prospective purchaser of
such Investor's Company Securities if such prospective purchaser shall have
first executed and delivered to the Company a non-disclosure agreement in favor
of the Company and in form and substance reasonably acceptable to the Company.
Nothing in this Section 4.01 or elsewhere in this Agreement is intended to
limit any duties, covenants or other obligations that a Stockholder who is an
officer or employee of the Company or its Subsidiaries may have pursuant to any
agreement with the Company or any of its Subsidiaries or any applicable law.
SECTION 4.02. Information Rights; VCOC Rights.
(a) The Company shall, for so long as an Investor (together with its
Permitted Transferees) shall continue to hold at least 5% of the outstanding
shares of Common Stock, (i) afford such Investor (or Affiliate or Permitted
Transferee thereof), during normal business hours and upon reasonable notice,
reasonable access and consultation rights at all reasonable times to its
officers, offices and books and records, and (ii) afford such Investor (or
Affiliate or Permitted Transferee thereof) the opportunity to discuss the
Company's affairs, finances and accounts with the Company's officers from time
to time as such Investor (or Affiliate or Permitted Transferee thereof) may
reasonably request.
(b) Any Investor (or Affiliate or Permitted Transferee thereof) that is
intended to qualify as a "venture capital operating company" within the meaning
of 29 C.F.R. 2510.3-101(d) (each such entity, a "VCOC INVESTOR") shall have the
right, for so long as such Investor (together with its Permitted Transferees)
holds at least 5% of the outstanding shares of Common Stock, to receive from the
Company any written information or written materials provided by the Company to
members of the Board; provided that the VCOC Investor receiving such information
shall agree to maintain the confidentiality of such information in accordance
with Section 4.01.
(c) For purposes of this Section, shares of Common Stock held by a
Person shall include shares issuable upon exercise of Company stock options, or
directly or indirectly through conversion or exchange of outstanding Preferred
Shares and NVC Shares, held by such Person, and irrespective of the Conversion
Limitation.
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SECTION 4.03. Additional Covenant.
No Investor or Affiliate thereof, nor Xxxxxxx Xxxxxxx or Affiliate of
Xxxxxxx Xxxxxxx, shall acquire beneficial ownership (within the meaning of Rules
13d-3 and 13d-5(b)(1) under the Exchange Act, without regard to the 60-day limit
in Rule 13d-3(d)(1)(i), but in each case excluding any beneficial ownership
solely by reason of the express terms of this Agreement) of any additional
shares of Common Stock except:
(i) if such acquisition is pursuant to a tender offer or exchange offer
for outstanding shares of Common Stock, or a merger pursuant to a merger
agreement with the Company, that in each case (A) is approved by not less than a
majority of the members of the Board then in office (x) who have not recused
themselves from the vote of the Board in respect of such approval, (y) who
satisfy the criteria for "independent director" under the rules of the principal
stock exchange on which the Common Stock is listed, and (z) who are not Investor
Designees (such tender offer or exchange offer, an "APPROVED OFFER", and such
merger, an "APPROVED MERGER"), and (B) in such Approved Offer, not less than a
majority of the Subject Shares (as defined below) are tendered into such
Approved Offer and not withdrawn prior to the final expiration of such Approved
Offer, or in such Approved Merger, not less than a majority of the Subject
Shares that are affirmatively voted (in person or by proxy) on the related
merger proposal (and not withdrawn) are voted for (i.e., in favor) of such
proposal. As used in this Section 4.03, "SUBJECT SHARES" means, where such an
offer or acquisition referred to in this clause (i) is made by or on behalf one
or more Investors or Xxxxxxx Xxxxxxx or any of their respective Affiliates or
any combination of the foregoing (each such Person making such offer or
acquisition or on whose behalf such offer or acquisition is made, together with
its Affiliates, a "SUBJECT PERSON"), the then outstanding shares of Common Stock
not owned by any such Subject Person or Affiliate thereof;
(ii) acquisitions of Company Securities issued or sold to such Investor
or its Affiliates pursuant to the Merger Agreement or any of the Purchase
Agreements referred to in Section 3.01 or directly or indirectly through
conversion or exchange of Preferred Shares or NVC Shares issued to such Investor
or its Affiliates pursuant to any of such Purchase Agreements;
(iii) acquisitions of shares issued (including pursuant to exercise of
stock options granted) with the approval of a majority of the Board or the
Compensation Committee of the Board to any Investor Designee of such Investor in
respect of such Investor Designee's service on the Board;
(iv) acquisitions of shares pursuant to any stock split, stock dividend
or the like effected by the Company;
(v) acquisitions by an Investor or any of its Affiliates that would not
result in such Investor (together with its Affiliates) owning a percentage of
the then outstanding Common Stock that is greater than such Investor's Cap
Percentage (as hereafter defined) (assuming for this purpose conversion in full
of all Preferred Shares and NVC Shares (irrespective of the Conversion
Limitation), and it being understood that no Person shall be in violation of
this Section as a result of any reacquisition by the Company of any Company
Securities provided that such reacquisition shall have been approved by not less
than a majority of the members of the Board then in office who (x) have not
recused themselves from the vote of the Board in respect of such approval, (y)
are not Investor Designees and (z) satisfy the criteria for "independent
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director" under the rules of the principal stock exchange on which the Common
Stock is listed (each, an "APPROVED REACQUISITION TRANSACTION");
(vi) in the case of Xxxxxxx Xxxxxxx, acquisitions of equity based
compensation awards, including stock option grants and restricted stock grants,
that have been approved by a majority of the Board or the Compensation Committee
of the Board, and shares acquired upon exercise of such awards; or
(vii) acquisitions by an Investor or Affiliates thereof of securities of
companies (each, a "PORTFOLIO COMPANY") that own shares of Common Stock,
provided that (A) the purpose of such acquisition by such Investor or its
Affiliates was not the acquisition of beneficial ownership of additional shares
of Common Stock and (B) such Portfolio Company owns no more than 0.5% of the
outstanding shares of Common Stock.
As used in this Section 4.03:
"BASE CAP PERCENTAGE" means (1) in respect of CapitalZ/Union Square [__]%,
(2) in respect of Xxx, [__]%, (3) in respect of Perry, [__]%, and (4) in respect
of WCAS, [__]%.(1)
"CAP PERCENTAGE" means, in respect of any Investor, a percentage equal to
such Investor's Base Cap Percentage plus such Investor's Intra-Investor Buy
Percentage (as hereafter defined) and less such Investor's Intra-Investor Sale
Percentage (as hereafter defined), provided that no Investor's Cap Percentage
shall exceed 25% (the "CEILING PERCENTAGE"), provided further, however, that an
Investor's Cap Percentage, and the Ceiling Percentage, shall be equitably
increased for (A) acquisitions permitted under clauses (iii) and (vii) above and
(B) Approved Reacquisition Transactions. "INTRA-INVESTOR BUY PERCENTAGE" of any
Investor means the percentage of the outstanding Common Stock acquired by such
Investor (or any Affiliate of such Investor) in an Intra-Investor Private
Transfer (as hereafter defined), determined as of the time of such acquisition
(assuming for this purpose conversion in full of all Preferred Shares and NVC
Shares (irrespective of the Conversion Limitation)). "INTRA-INVESTOR PRIVATE
TRANSFER" means any sale by an Investor (or Affiliates thereof) to one or more
of the other Investors (or Affiliates of such other Investor) in a private
transaction, including a sale pursuant to the right of first offer or tag-along
rights contemplated by Sections 3.02-3.03. "INTRA-INVESTOR SELL PERCENTAGE" of
any Investor means the percentage of the outstanding Common Stock sold by such
Investor (or any Affiliate of such Investor) in an Intra-Investor Private
Transfer, determined as of the time of such sale (assuming for this purpose
conversion in full of all Preferred Shares and NVC Shares (irrespective of the
Conversion Limitation)).
For purposes of this Section 4.03, an Associate (as defined in Rule 12b-2
under the Exchange Act) of Xxxxxxx Xxxxxxx shall be deemed an Affiliate of
Xxxxxxx Xxxxxxx.
The agreements of the several Investors and Xxxxxxx Xxxxxxx hereunder are
several and not joint.
--------
(1) Percentages to be equal to percentages following Closing (as appropriately
adjusted in the event there is a non-funding investor at closing and cure rights
are invoked by the other investors or under the MH Merger Agreement).
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All of the restrictions set forth above in this Section 4.03 shall
terminate upon the earliest to occur of:
(A) June 30, 2010;
(B) the entry by the Company into a definitive agreement with any Person
(other than such an agreement with a Subject Person made in contravention of
this Section 4.03) providing for: (x) a recapitalization, merger, share
exchange, business combination or similar extraordinary transaction as a result
of which the Persons possessing, immediately prior to the consummation of such
transaction, beneficial ownership of voting securities of the Company entitling
them to exercise at 100% of the voting power of all outstanding securities
entitled to vote generally in elections of directors of the Company, would cease
to possess, immediately after consummation of such transaction, beneficial
ownership of voting securities entitling them to exercise at least 60% of the
total voting power of all outstanding securities entitled to vote generally in
elections of directors of the Company (or, if the Company is not the surviving
or resulting entity from such transaction, in elections of directors (or
equivalent governing body) of such surviving or resulting entity); (y) a sale of
all or substantially all of the assets the Company (determined on a consolidated
basis), in one transaction or series of related transactions; or (z) the
acquisition (by purchase, merger or otherwise) by any such Person (including any
syndicate or group deemed to be a "person" under Section 13(d)(3) of the
Exchange Act) of beneficial ownership of voting securities of the Company
entitling that Person to exercise 50% or more of the total voting power of all
outstanding securities entitled to vote generally in elections of directors of
the Company (for purposes of this subsection, "beneficial ownership" shall be
determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act,
provided that a Person shall be deemed to beneficially own any securities that
such Person has the right to acquire, whether or not such right is exercisable
immediately) (the transactions described in clauses (x), (y) and (z) of this
subsection being each hereinafter referred to as a "TRANSACTION AGREEMENT");
(C) the commencement (within the meaning of the Exchange Act) by any
Person of a tender offer or exchange offer for voting securities of the Company
entitling the holders thereof to exercise more than 50% of the total voting
power of all outstanding securities entitled to vote generally in elections of
directors of the Company (other than a tender offer or exchange offer (i)
pursuant to a Transaction Agreement or (ii) made by or on behalf of an Investor
(or Affiliate thereof) in violation of this Section 4.03 or that would be in
violation of this Section 4.03 if such tender offer or exchange offer were
consummated), which offer is not withdrawn within 5 days after it is commenced;
or
(D) at such time as the Investors and their respective Affiliates,
collectively, own in the aggregate less than 20% of the then outstanding Common
Stock (assuming for this purpose conversion in full of all Preferred Shares and
NVC Shares (irrespective of the Conversion Limitation)), provided that at such
time no Investor (or Affiliate thereof) has disclosed in a Schedule 13D filing
with the Securities and Exchange Commission that it or any of its Affiliates has
any specific plan or proposal to acquire additional securities of the Company
entitled to vote generally in elections of directors of the Company that is
required to be disclosed under Item 4 of Schedule 13D.
Notwithstanding anything to the contrary in Section 5.03, neither the
provisions of this Section 4.03 nor the penultimate sentence of Section 5.04 may
be amended unless such amendment is approved by not less than a majority of the
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members of the Board then in office who (x) have not recused themselves from the
vote of the Board in respect of such approval, (y) are not Investor Designees
and (z) satisfy the criteria for "independent director" under the rules of the
principal stock exchange on which the Common Stock is listed.
ARTICLE 5
MISCELLANEOUS
SECTION 5.01. Binding Effect; Assignability; Benefit.
(a) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors, legal representatives, heirs and
permitted assigns; provided that rights granted to any Stockholder hereunder may
only be assigned in connection with a Transfer of Company Securities in
accordance with the terms of this Agreement, and provided further that an
Investor's right to designate Investor Designees (or a Non-Voting Observer)
pursuant to Article 2 hereof are only assignable with the written consent of the
Company in connection with a Transfer of Company Securities by such Investor to
the purported assignee. Any purported assignment not in accordance with this
Agreement shall be null and void. Except as may otherwise be expressly provided
in this Agreement, any Stockholder that ceases to hold any Company Securities
shall cease to be entitled to the benefits of this Agreement.
(b) Nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto, and their respective
successors, legal representatives, heirs and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 5.02. Notices. All notices, requests and other communications
to any party shall be in writing and shall be delivered in person, sent by
reputable overnight courier service, or sent by facsimile transmission,
if to the Company, to Universal American Financial Corp., 0
Xxxxxxxxxxxxx Xxxxx, Xxx Xxxxx, XX 00000-0000; Attention: General
Counsel; Facsimile: (000) 000-0000,
if to Stockholders, at their respective addresses set forth in Schedule I,
or, in each case, at such other address or fax number as such party may
hereafter specify for the purpose of notices hereunder by written notice to the
other parties hereto. All notices, requests and other communications shall be
deemed received on the date of receipt by the recipient thereof if received
prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the
place of receipt. Otherwise, any such notice, request or communication shall be
deemed not to have been received until the next succeeding Business Day in the
place of receipt. Any notice, request or other written communication sent by
facsimile transmission shall be confirmed by personal delivery or by reputable
overnight courier, made within two Business Days after the date of such
facsimile transmissions.
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SECTION 5.03. Waiver; Amendment.
(a) Except as otherwise provided herein, no failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof or the exercise
of any other right, power or privilege. No provision of this Agreement may be
waived except by an instrument in writing executed by the party against whom the
waiver is to be effective.
(b) Except as otherwise provided herein, no provision of this Agreement
may be amended or otherwise modified except by an instrument in writing executed
by the Company and Stockholders holding more than 50% of the Common Stock held
by the Stockholders (for this purpose, shares of Common Stock held by the
Stockholders shall include shares issuable upon exercise of Company stock
options, or directly or indirectly through conversion or exchange of outstanding
Preferred Shares and NVC Shares, held by the Stockholders, and irrespective of
the Conversion Limitation); provided, however, that (i) any amendment or
modification of this Agreement that treats a Stockholder individually in an
inconsistent and materially adverse manner in relation to all other Stockholders
shall require the consent of such Stockholder, (ii) any amendment of (A)
Investors' rights to designate Investor Designees (or a Non-Voting Observer)
pursuant to Article 2 or (B) Investors' information rights under Section 4.02,
shall require the consent of all affected Investors, and (iii) any amendment of
clause (v) or (vi) of Section 2.01(a) shall require the consent of the Company.
SECTION 5.04. Termination. This Agreement shall terminate upon the
first to occur of any of the following events:
(a) consummation of the acquisition of "beneficial ownership" (within
the meaning of Rules 13d-3 and 13d-5 under the Exchange Act), by any Person, of
all of the Company Securities subject to this Agreement without violation of
this Agreement (provided that no Person shall be deemed to beneficially own
another Person's Company Securities for these purposes solely by fact of the
existence of the voting and transfer covenants contained in this Agreement);
(b) if the Company shall admit in writing its general inability to pay
its debts as they become due, shall make a written assignment for the benefit of
creditors, or the appointment of a liquidator, bankruptcy receiver or similar
occurrence under applicable law shall have occurred with respect to the Company
and such proceeding shall not have been dismissed or stayed within 60 days after
the commencement thereof;
(c) duly authorized winding up, liquidation or dissolution of the
Company; or
(d) the written consent to such termination by Stockholders holding not
less than 70% of the Common Stock held by all the Stockholders (for this
purpose, shares of Common Stock held by the Stockholders shall include shares
issuable upon exercise of Company stock options, or directly or indirectly
through conversion or exchange of outstanding Preferred Shares and NVC Shares,
held by the Stockholders, and irrespective of the Conversion Limitation);
provided that, (i) without the consent of the affected Investors, (A) an
Investor's right to designate Investor Designees (or a Non-Voting Observer)
pursuant to Article 2 and (B) an Investor's information rights under Section
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4.02, shall survive any termination under clause (b), (c) or (d) of this
Section, and (ii) without the consent of the Company, the provisions of clauses
(v) and (vi) of Section 2.01(a) shall survive any termination under clause (b),
(c) or (d) of this Section.
In addition, Xxxxxxx Xxxxxxx and his Permitted Transferees shall
cease to the bound by, and shall cease to be entitled to rights and benefits
under, this Agreement at such time as Xxxxxxx Xxxxxxx shall cease to be the
Chief Executive Officer of the Company; provided that, for the avoidance of
doubt, even after Xxxxxxx Xxxxxxx ceases to be the Chief Executive Officer of
the Company, if he shall remain a member of the Board he shall nonetheless not
constitute an "independent director" for purposes of any of the matters
requiring approval of "independent directors" under Section 4.03.
Notwithstanding the foregoing, Section 5.05 shall survive any
termination of this Agreement.
SECTION 5.05. Fees and Expenses. Each party shall pay its own costs
and expenses incurred in connection with the preparation and execution of this
Agreement, or any amendment or waiver hereof, and (except as otherwise provided
herein or separately agreed in writing) the transactions contemplated hereby and
all matters related hereto. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof or thereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
SECTION 5.06. Governing Law; Consent to Jurisdiction; Waiver of Jury
Trial; Etc. All issues and questions concerning the construction, validity,
interpretation and enforceability of this Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than New York. Each of the parties hereto irrevocably
agrees that any legal action or proceeding that may be based upon, arise out of
or relate to this Agreement or the negotiation, execution or performance hereof,
shall be brought and determined exclusively in any state courts of New York
County of the State of New York, or in the event (but only in the event) that
such court does not have subject matter jurisdiction over such action or
proceeding, in any federal District Court sitting in New York City. Each of the
parties hereto hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect of its property, generally and
unconditionally, to the exclusive personal jurisdiction of the aforesaid courts
and agrees that it will not bring any such action in any court other than the
aforesaid courts. Each of the parties hereto hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any action or proceeding with respect to this Agreement, (a) any claim that
it is not personally subject to the jurisdiction of the above named courts for
any reason other than the failure to serve in accordance with this Section, (b)
any claim that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise) and (c) to the fullest extent
permitted by the applicable law, any claim that (i) the suit, action or
proceeding in such court is brought in an inconvenient forum, (ii) the venue of
such suit, action or proceeding is improper or (iii) this Agreement, or the
subject mater hereof, may not be enforced in or by such courts. Each of the
parties hereto irrevocably consents to process being served by any party to this
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Agreement in any legal action or proceeding by delivery of a copy thereof in
accordance with the provisions of Section 5.02 without prejudice to the right of
any party to serve process pursuant to applicable laws. The consents to
jurisdiction set forth in this paragraph shall not constitute general consents
to service of process in the State of New York and shall have no effect for any
purpose except as provided in this paragraph and shall not be deemed to confer
rights on any Person other than the parties hereto. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.
SECTION 5.07. Specific Enforcement; Cumulative Remedies. The parties
hereto acknowledge that money damages may not be an adequate remedy for
violations of this Agreement and that any party, in addition to any other rights
and remedies which the parties may have hereunder or at law or in equity, may,
in its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunction (without any requirement to post a bond or other
security) or such other relief as such court may deem just and proper in order
to enforce this Agreement or prevent any violation hereof and, to the extent
permitted by applicable law, each party waives any objection to the imposition
of such relief. All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such rights, powers or remedies by such party.
SECTION 5.08. Entire Agreement. This Agreement, together with the
Securities Purchase Agreement and the Registration Rights Agreement, constitute
the entire agreement and understanding among the parties hereto in respect of
the subject matter hereof and thereof and, except as otherwise expressly agreed
in writing, supersede all prior agreements and understandings (including that
certain Shareholders Agreement dated as of July 30, 1999) and contemporaneous
agreements and understandings, both oral and written, among the parties hereto,
or between any of them, with respect to the subject matter hereof and thereof.
SECTION 5.09. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Upon such a determination, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
SECTION 5.10. Drafting. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement and, in the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as jointly drafted by the parties hereto and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
SECTION 5.11. Counterparts; Effectiveness. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Stockholders
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
UNIVERSAL AMERICAN FINANCIAL CORP.
By: __________________________
Name:
Title:
STOCKHOLDERS:
[CAPITAL Z]
By: __________________________
Name:
Title:
[UNION SQUARE]
By: __________________________
Name:
Title:
[XXX]
By: __________________________
Name:
Title:
[PERRY]
By: __________________________
Name:
Title:
[WCAS]
By: __________________________
Name:
Title:
______________________________
Xxxxxxx Xxxxxxx
[CERTAIN MEMBERHEALTH SELLERS]
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SCHEDULE I
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STOCKHOLDER NAME CONTACT DETAILS
---------------- ---------------
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