SECURITIES PURCHASE AGREEMENT among UNIVERSAL AMERICAN FINANCIAL CORP. and THE SEVERAL INVESTORS PARTY HERETO DATED AS OF MAY 7, 2007
EXHIBIT
H
among
UNIVERSAL
AMERICAN FINANCIAL CORP.
and
THE
SEVERAL INVESTORS PARTY HERETO
DATED
AS
OF MAY 7, 2007
Page
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CERTAIN
DEFINITIONS
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3
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Certain
Definitions
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3
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Interpretive
Provision
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10
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ISSUANCE
AND PURCHASE OF CONVERTIBLE SHARES
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10
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Issuance
and Purchase of Convertible Shares
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10
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Deliveries
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11
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Closing
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11
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INVESTOR
REPRESENTATIONS AND WARRANTIES
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12
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Organization,
Good Standing, Qualification and Power
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12
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Authority;
Execution and Delivery; Enforceability
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12
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Non-contravention
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12
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Consents
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12
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Information
Supplied
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13
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Brokers
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13
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Acquisition
for Investment
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13
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Disclosure
of Information
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13
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Restricted
Securities
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13
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REPRESENTATIONS
AND WARRANTIES OF PARENT
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14
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Organization,
Good Standing, Qualification and Power
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14
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Authority;
Execution and Delivery; Enforceability
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14
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Non-contravention
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15
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Consents
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15
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Capitalization
of Parent; Parent Subsidiaries
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16
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Parent
SEC Documents
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18
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No
Undisclosed Liabilities
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19
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Title
to Tangible Personal Property
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19
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Absence
of Certain Developments
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19
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Governmental
Authorizations; Licenses; Etc
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20
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Litigation
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20
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Taxes
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20
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Employee
Matters
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21
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Employee
Benefit Plans
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22
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Intellectual
Property Rights
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22
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Contracts
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22
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Insurance
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23
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Real
Property
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23
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Transactions
With Affiliates
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23
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Financing
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23
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Information
Supplied
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24
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Required
Parent Shareholder Approval
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24
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Valid
Issuance of Parent Shares
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24
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Anti-Takeover
Statutes
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25
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Exemption
from Registration
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25
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Brokers
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25
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Fairness
Opinion; Acknowledgement
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26
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Merger
Agreement
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26
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COVENANTS
AND AGREEMENTS
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26
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Access;
Documents and Information
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26
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Charter
Amendment
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27
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Conduct
of Business by Parent
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27
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Closing
Documents
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29
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Commercially
Reasonable Efforts; Further Assurances
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30
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Public
Announcements
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31
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Availability
of Shares
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31
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Certificates
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32
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Certain
Claims
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32
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Certain
Tax Matters
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32
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Preparation
of the Proxy Statement; Parent Shareholder Meeting
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32
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Anti-Takeover
Statutes
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34
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Nasdaq
National Market Listing
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34
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Legends
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34
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Use
of Proceeds
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35
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Exchange
of Series A Preferred Stock for Series B Preferred Stock
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35
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CONDITIONS
TO CLOSING
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37
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Mutual
Conditions
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37
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Conditions
to the Obligations of Parent
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37
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Conditions
to the Obligations of the Investors
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38
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Frustration
of Closing Conditions
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40
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TERMINATION
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40
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Termination
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40
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Effect
of Termination
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41
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MISCELLANEOUS
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41
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Survival
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41
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Indemnification
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42
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Notices
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44
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Exhibits
and Schedules
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46
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Time
of the Essence; Computation of Time
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47
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Expenses
and Fees
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47
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Governing
Law
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47
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Jurisdiction
and Venue; Waiver of Jury Trial
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47
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Assignment;
Successors and Assigns; No Third Party Rights
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47
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Counterparts
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48
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Titles
and Headings
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48
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Entire
Agreement
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48
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Severability
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48
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No
Strict Construction
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48
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Specific
Performance
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49
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Failure
or Indulgence not Waiver
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49
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Amendments
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49
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Nature
of Investors' Obligations and Rights
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49
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THIS
SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of May 7,
2007, is entered into by and among Universal American Financial Corp., a New
York corporation (“Parent”), ▇▇▇-Universal Holdings, LLC (“▇▇▇”),
Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ X, L.P. (“WCAS”), Union Square
Universal Partners, L.P. (“Union Square”), Perry Partners, L.P., Perry
Partners International, Inc., Perry Commitment Fund, L.P. and Perry Commitment
Master Fund, L.P. (the afore-named Perry entities are referred to herein
collectively as “Perry”). ▇▇▇, WCAS, Union Square and Perry
are herein sometimes referred to each as an “Investor” and collectively
as the “Investors”.
RECITALS
WHEREAS,
concurrently with the execution and delivery of this Agreement, Parent has
entered into the Agreement and Plan of Merger and Reorganization, dated as
of
the date of this Agreement, among Parent, MHRx LLC, a Delaware limited liability
company, MemberHealth, Inc., an Ohio corporation (“MemberHealth”), and
the other parties named therein, a copy of which is attached as Exhibit A
hereto (the “Merger Agreement”);
WHEREAS,
pursuant to the Merger Agreement, Parent has agreed to acquire, through the
merger transactions set forth therein, 100% of the issued and outstanding shares
of capital stock and other equity interests of and in MemberHealth on the terms,
for the consideration and subject to the conditions set forth in the Merger
Agreement (the “Merger”);
WHEREAS,
this Agreement is the Securities Purchase Agreement referred to in Section
4.20
of the Merger Agreement;
WHEREAS,
the Board of Directors of Parent has duly authorized and approved, and created
and provided for the issuance of, (i) Series A Participating Convertible
Preferred Stock, par value $1.00 per share, of Parent (“Series A Preferred
Stock”), which Series A Preferred Stock shall have such powers, preferences
and rights as set forth in the Certificate of Amendment to Parent’s Certificate
of Incorporation for the Series A Preferred Stock attached hereto as Exhibit
B-1 (the “Series A Preferred Stock Certificate of Designations”), and
(ii) Series B Participating Convertible Preferred Stock, par value $1.00 per
share, of Parent (“Series B Preferred Stock”), which Series B Preferred
Stock shall have such powers, preferences and rights as set forth in the
Certificate of Amendment to Parent’s Certificate of Incorporation for the Series
B Preferred Stock attached hereto as Exhibit B-2 (the “Series B
Preferred Stock Certificate of Designations” and, together with the Series A
Preferred Stock Certificate of Designations, the “Certificates of
Designations”);
WHEREAS,
concurrently with the execution and delivery of this Agreement, Parent and
the
Investors are also entering into (i) another Securities Purchase Agreement,
dated as of the date of this Agreement, pursuant to which Parent has agreed
to
issue and sell to the Investors, and the Investors have agreed to purchase
from
Parent, shares of Series A Preferred Stock and Series B Preferred Stock on
the
terms and subject to the conditions set forth therein, a copy of which is
attached as Exhibit C hereto (the “▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇”),
▇▇▇ (▇▇) a Registration Rights Agreement in the form attached hereto as
Exhibit D (the “Registration Rights Agreement”);
WHEREAS,
at or prior to the Closing under this Agreement, a Shareholders Agreement
substantially in the form attached hereto as Exhibit E (the
“Shareholders Agreement”) will be executed and delivered by the parties
hereto and any other Persons contemplated therein to be initial parties
thereto;
WHEREAS,
the Board of Directors of Parent has (a) approved this Agreement, the ▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the Registration Rights Agreement and the Shareholders
Agreement (collectively, the “Transaction Agreements”), and the Merger
Agreement, and all of the transactions contemplated hereby and thereby
(collectively, the “Transactions”), including, without limitation, (i)
the issuance to the Investors pursuant to this Agreement of an aggregate of
125,000 shares of Series B Preferred Stock (a portion of which may be issued
to
and purchased by an Investor instead in the form of Series A Preferred Stock
at
the request of such Investor) (collectively, the “Convertible Shares”),
and all shares of common stock, par value $.01 per share, of Parent (“Parent
Common Stock”) issuable upon conversion of the Convertible Shares, (ii) the
issuance to the Investors pursuant to the ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ of an
aggregate of 30,473 shares of Series A Preferred Stock and 19,527 shares of
Series B Preferred Stock (collectively, the “Stage 1 Shares”), the shares
of Series B Preferred Stock for which shares of Series A Preferred Stock may
be
exchanged as contemplated by the ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and all shares
of
Parent Common Stock issuable upon transfer or conversion, as the case may be,
of
the Stage 1 Shares and shares of Series B Preferred Stock for which shares
of
Series A Preferred Stock may be exchanged as contemplated by the ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and (iii) the issuance of the shares of Common Stock
contemplated to be issued as merger consideration pursuant to the Merger
Agreement as in effect on the date of this Agreement ((i) and (iii)
collectively, the “Share Issuances”); and (b) determined that the
Transaction Agreements, the Merger Agreement, and all of the Transactions,
are
fair to and in the best interests of Parent and its shareholders;
WHEREAS,
as contemplated by Rule 4350(i) of The Nasdaq Stock Market, Inc.
(“Nasdaq”) Marketplace Rules, Parent shall call a special meeting of its
shareholders (the “Parent Shareholder Meeting”) and, at such meeting,
seek the affirmative vote of the holders of a majority of the shares of Parent
Common Stock voting in person or by proxy at such meeting in favor of the Share
Issuances (such vote, together with the Parent Charter Vote referred to below,
being hereinafter referred to as the “Required Parent Shareholder
Approval”);
WHEREAS,
at the Parent Shareholder Meeting, Parent shall also seek the affirmative vote
of the holders of a majority of the shares of Parent Common Stock then
outstanding on a proposal to amend the Certificate of Incorporation of Parent
to
authorize a new class of Parent non-voting common stock and increase the number
of authorized shares of Parent capital stock on terms substantially in the
form
attached hereto as Exhibit F (the “Charter Amendment”) (the
“Parent Charter Vote”);
WHEREAS,
the Board of Directors of Parent has resolved to recommend that the shareholders
of Parent vote in favor of and approve the Share Issuances and the Charter
Amendment;
WHEREAS,
each of the Investors, severally but not jointly, wishes to purchase from
Parent, and Parent wishes to sell to each Investor, upon the terms and subject
to the conditions set forth in this Agreement, the number of Convertible Shares
respectively set forth by the name of such Investor in Section 2.1 below
at a purchase price of $2,000 per Convertible Share;
WHEREAS,
Parent will apply the proceeds from the sale of the Convertible Shares to the
Investors pursuant to this Agreement to payment of the cash portion of the
merger consideration under the Merger Agreement and payment of fees and expenses
incurred by Parent in connection with the consummation of the Transactions,
and
the balance for general corporate purposes;
WHEREAS,
Parent and the Investors are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of
the
Securities Act, and Rule 506 of Regulation D promulgated under the Securities
Act; and
WHEREAS,
concurrently with the execution and delivery of this Agreement, certain of
the
Investors are also entering into a Share Purchase Agreement in the form attached
hereto as Exhibit G pursuant to which they will respectively acquire
certain outstanding shares of Parent Common Stock (the transactions contemplated
thereby, collectively with the Transactions, the “Collective
Transactions”);
NOW,
THEREFORE, in consideration of the mutual covenants contained herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the parties hereto
agree
as follows:
CERTAIN
DEFINITIONS
Section
1.1
Certain Definitions. As
used in this Agreement, the following terms have the respective meanings set
forth below.
“A/B
Consents” has the meaning set forth in Section 5.16(b).
“A/B
Preferred Exchange” has the meaning set forth in Section
5.16(a).
“Affiliate”
means, with respect to any Person, any other Person who directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
“controlled” and “controlling” have meanings correlative thereto. For
purposes hereof, (i) Parent shall not be considered an Affiliate of any Investor
and (ii) the Affiliates of an Investor shall be deemed to include one or more
funds under common management with such Investor.
“Agreement”
has the meaning set forth in the preamble.
“Antitrust
Division” has the meaning set forth in Section 5.5(a).
“Business
Day” means a day, other than a Saturday or Sunday, on which commercial banks
in New York City and Cleveland, Ohio are open for the general transaction of
business.
“Capitalization
Date” has the meaning set forth in Section 4.5(a).
“Closing”
has the meaning set forth in Section 2.3.
“Closing
Date” has the meaning set forth in Section 2.3.
“CMS”
means the Centers for Medicare & Medicaid Services.
“COBRA”
means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code and
any similar state law.
“Code”
has the meaning set forth in the recitals.
“Consents”
has the meaning set forth in Section 5.5(a).
“Contracts”
means the Parent Contracts.
“Contractual
Obligation” means, with respect to any Person, any contract, obligation,
agreement, deed, mortgage, lease, sublease, license or legally binding
commitment, promise, undertaking or instrument, whether written or oral, to
which or by which such Person is a party or otherwise bound or to which or
by
which any property, business, operation or right of such Person is
bound.
"Conversion
Shares" means the shares of Parent Common Stock issuable upon conversion of
(i) the Convertible Shares, (ii) the ▇▇▇▇▇ ▇ ▇▇▇▇▇▇, (▇▇▇) the shares of Series
B Preferred Stock that may be issued in exchange for the Stage 1 Shares and
(iv)
the shares of Parent non-voting common stock that may be issued upon conversion
or exchange of any of the shares referred to in clauses (i)-(iii).
“Debt
Commitment Letter” has the meaning set forth in Section
4.20.
“Disclosure
Schedules” means the Investor Disclosure Schedules and Parent Disclosure
Schedules.
“Employee
Benefit Plan” means any “employee benefit plan” (as such term is defined in
Section 3(3) of ERISA) and any other material employee benefit plan, program
or
arrangement maintained, sponsored or contributed to by a Person or any of its
Subsidiaries.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder).
“Financing”
has the meaning set forth in Section 4.20.
“FTC”
has the meaning set forth in Section 5.5(a).
“Funded
Indebtedness” means, as of any date, without duplication, the outstanding
principal amount of, accrued and unpaid interest on and other payment
obligations (including any prepayment premiums payable as a result of the
consummation of the Collective Transactions) arising under any obligations
of a
Person or any of its Subsidiaries consisting of (i) indebtedness for
borrowed money, (ii) indebtedness evidenced by any note, bond, debenture or
other debt security, or (iii) obligations under any interest rate, currency
or other hedging agreements, to the extent payable if terminated, in each case,
as of such date.
“GAAP”
means generally accepted accounting principles as in effect in the United States
on the date of this Agreement, applied on a consistent basis.
“Governing
Documents” means the legal document(s) by which any Person (other than an
individual) establishes its legal existence or which govern its internal
affairs. For example, the “Governing Documents” of a corporation are
its certificate of incorporation and by-laws (or equivalent), the “Governing
Documents” of a limited partnership are its certificate of formation and its
limited partnership agreement and the “Governing Documents” of a limited
liability company are its certificate of formation and its operating
agreement.
“Government
Order” means any order, writ, judgment, injunction, decree, stipulation,
ruling, determination or award entered by or with any Governmental
Authority.
“Governmental
Authority” means any foreign government, or the government of the United
States of America and any state, commonwealth, territory, possession, county,
or
municipality thereof, or the government of any political subdivision of any
of
the foregoing, or any entity, authority, agency, ministry, court or other
similar body exercising executive, legislative, judicial, regulatory or
administrative authority or functions of or pertaining to government, including
any authority or other quasi-governmental entity established to perform any
of
such functions and, in the case of Parent, Nasdaq.
“Governmental
Authorization” means any or all licenses, permits, waivers, accreditations,
approvals, qualifications, certifications, and other authorizations granted
by
any Governmental Authority, accreditation organization or Payment Program
relating to or affecting a Medicare prescription drug plan, discount drug plan
or other drug plan or product offered or administered by Parent, the
establishment, ownership, operation, maintenance, management, regulation,
development or expansion thereof.
“HSR
Act” means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
“Insurance
Laws” means the laws and regulations of any State of the United States of
America governing insurance companies that are applicable to Parent or its
Subsidiaries, including the respective insurance laws and regulations of the
States of Florida, Kansas, New York, Oklahoma, Pennsylvania and
Texas.
“Intellectual
Property Rights” means all intellectual property, whether owned or held for
use under license, whether registered or unregistered, including, without
limitation, such rights in and to: (i) all patents and patent applications
(collectively, “Patents”); (ii) trademarks, trade dress, service marks,
certification marks, logos and trade names; (iii) copyrights, copyright
registrations and applications and works of authorship; (iv) Internet domain
names and uniform resource locators; (v) trade secrets (as defined in the
Uniform Trade Secrets Act and common law) (“Trade Secrets”); and (vi)
software and information technology systems including, without limitation,
data
files, source code, object code, application programming interfaces, databases
and other software-related specifications and documentation (collectively,
“Software”).
“Investor
Disclosure Schedules” means the disclosure schedules to this Agreement
delivered by the Investors to Parent on or prior to the date hereof in
connection with this Agreement.
“Investor
Material Adverse Effect” means, with respect to a particular Investor, any
fact, event, circumstance, change, occurrence, effect or condition which has
had
or would reasonably be expected to have, individually or in the aggregate with
all other facts, events, circumstances, changes, occurrences, effects or
conditions, a material adverse effect on the ability of such Investor to
consummate the transactions contemplated by this Agreement.
“KNOWLEDGE”
MEANS, WITH RESPECT TO ANY PERSON, THE ACTUAL KNOWLEDGE OF SUCH PERSON (AND
SHALL IN NO EVENT ENCOMPASS CONSTRUCTIVE, IMPUTED OR SIMILAR CONCEPTS OF
KNOWLEDGE); PROVIDED THAT IN THE CASE OF PARENT, SUCH ACTUAL KNOWLEDGE SHALL
BE
LIMITED TO THE KNOWLEDGE OF ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ISRAEL, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇▇▇▇▇▇▇ AND ▇▇▇▇▇
▇▇▇▇▇▇, NONE OF WHOM SHALL HAVE ANY PERSONAL LIABILITY REGARDING SUCH
KNOWLEDGE.
“Latest
Parent Balance Sheet” has the meaning set forth in Section
4.7.
“Legal
Requirement” means any United States federal, state or local or foreign law,
statute, standard, ordinance, code, rule, regulation, binding directive,
resolution or promulgation, or any Government Order, or any license, franchise,
permit or similar right granted under any of the foregoing, or any similar
provision having the force or effect of law and, with respect to Parent, the
Nasdaq Marketplace Rules.
“Lender”
has the meaning set forth in Section 4.20.
“Lien”
means any mortgage, pledge, security interest, encumbrance, lien or charge
of
any kind. For avoidance of doubt, “Lien” shall not include any
license of Intellectual Property Rights.
“Losses”
has the meaning set forth in Section 8.2(a).
“Medicare
Part D” means the Outpatient Prescription Drug Program established by the
Medicare Modernization of Act of 2003.
“Merger”
has the meaning set forth in the recitals.
“Multiemployer
Plan” has the meaning set forth in Section 3(37) of ERISA.
“Nasdaq”
has the meaning set forth in the recitals.
“Outstanding
Parent Stock Awards” has the meaning set forth in Section
4.5(a).
“Parent”
has the meaning set forth in the preamble.
“Parent
Board Recommendation” has the meaning set forth in Section
5.11(d).
“Parent
Charter Vote” has the meaning set forth in the recitals.
“Parent
Common Stock” has the meaning set forth in the recitals.
“Parent
Confidentiality Agreement” means the confidentiality agreements by and
between the several Investors and Parent.
“Parent
Contracts” has the meaning set forth in Section 4.16.
“Parent
Disclosure Schedules” means the disclosure schedules to this Agreement
delivered by Parent and the Investors on or prior to the date hereof in
connection with this Agreement.
“Parent
Employee Benefit Plan” means any Employee Benefit Plan of Parent or any of
its Subsidiaries.
“Parent
ERISA Affiliate” means any entity that is considered a single employer with
Parent under Section 414 of the Code.
“Parent
Intellectual Property Rights” has the meaning set forth in Section
4.15.
“Parent
Material Adverse Effect” means any fact, event, circumstance, change,
occurrence, effect or condition individually or in the aggregate which has
had
or would reasonably be expected to have a material adverse effect on (A) the
combined financial condition, business or results of operations of Parent and
its Subsidiaries and MemberHealth and its Subsidiaries, taken as a whole,
assuming completion of the Merger, or (B) the ability of Parent to consummate
the Transactions; provided, that any change, event or effect arising from
or related to, or in the case of matters covered by clauses (ix) and (x) below,
directly and solely resulting from: (i) conditions generally affecting the
industries in which Parent and its Subsidiaries operate or the United States
economy generally; (ii) acts of terrorism, acts of war or the escalation of
hostilities; (iii) any disruption of the financial, banking or securities
markets (including any decline in the price of any security or any market
index); (iv) changes in GAAP; (v) changes in any Legal Requirements, except
for
changes in Legal Requirements or CMS written interpretations and guidance
related to Medicare Part D or related to the business of providing health and
life insurance or managed care products and services; (vi) any action taken
or
omission by Parent in accordance with this Agreement or at the written request
of, or with the prior written consent of, all of the Investors; (vii) any change
in or effect on the business of Parent or its Subsidiaries that is cured prior
to the Closing; (viii) the announcement of the Transactions; (ix) any failure,
in and of itself, by Parent or any of its Subsidiaries to meet any projections,
forecasts or revenue or earnings predictions for any period ending on or after
the date of this Agreement; or (x) any change, in and of itself, in the market
price or trading volume of shares of Parent Common Stock, shall not be taken
into account in determining whether a “Parent Material Adverse Effect” has
occurred, or would reasonably be expected to occur, except in the case of
clauses (i) and (iii), to the extent that such change, event or effect referred
to therein has had a materially disproportionate impact on the financial
condition, business or results of operations of Parent and its Subsidiaries,
taken as a whole, relative to other industry participants and, except in the
case of clauses (ix) and (x), any fact, event, circumstance, change, occurrence,
effect or condition underlying any failure to meet any projections, forecasts
or
revenue or earnings predictions or affecting such market price or trading volume
shall be taken into account in determining whether a Parent Material Adverse
Effect has occurred or would reasonably be expected to occur, and except that
clause (viii) shall not apply with respect to Sections 4.3 and 4.4
hereof.
“Parent
Preferred Stock” has the meaning set forth in Section
4.5(a).
“Parent
SEC Documents” has the meaning set forth in Section 4.6.
“Parent
Shareholder Meeting” has the meaning set forth in the recitals.
“Parent
Shareholder Meeting Date” has the meaning set forth in Section
3.5.
“Parent
Significant Subsidiaries” means, the “significant subsidiaries” of the
Parent as defined by Regulation S-X under the Exchange Act.
“Parent
Stock Plans” has the meaning set forth in Section
4.5(a).
“Payment
Program” means Medicare, Medicaid, commercial and private insurers, employer
group health plans (including, without limitation a “Welfare Plan” described in
Section 3(1) of ERISA), and any other governmental, commercial, or other
organization which maintains a health care reimbursement program or
policy.
“Permitted
Liens” means (a) mechanics, materialmen’s, carrier’s, repairer’s and other
Liens arising or incurred in the ordinary course of business or that are not
yet
delinquent or are being contested in good faith; (b) Liens for Taxes,
assessments or other governmental charges not yet delinquent or which are being
contested in good faith, provided an appropriate reserve is established therefor
to the extent required by GAAP; (c) Liens (including encumbrances and
restrictions on real property such as easements, covenants, rights of way and
similar matters affecting title) that do not, individually or in the aggregate,
materially interfere with the present uses or value of the property subject
to
such Liens; (d) Liens granted to any lender at the Closing in connection with
the Debt Financing of the transactions contemplated by the Merger Agreement;
(e)
with respect to the Parent Common Stock, restrictions on transfer imposed under
applicable securities laws; and (f) with respect to Parent and its Subsidiaries,
Liens described on Schedule 1.1(b).
“Person”
means an individual, partnership, corporation, limited liability company, joint
stock company, unincorporated organization or association, trust, joint venture,
association or other organization, whether or not a legal entity, or a
Governmental Authority.
“Proxy
Statement” has the meaning set forth in Section 4.4.
“Registration
Statement” has the meaning set forth in Section 4.4.
“Regulatory
Clearance” means, with respect to any Person, requirements pursuant to
Insurance Laws or the HSR Act to make a filing, await expiration or termination
of a regulatory clearance waiting period, or obtain a clearance, approval or
waiver, under Insurance Laws or the HSR Act, before such Person may lawfully
acquire shares of Parent Common Stock or other securities of Parent that are
entitled to vote in the election of directors of Parent generally.
“Required
Parent Shareholder Approval” has the meaning set forth in the
recitals.
“▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act” means the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
“SEC”
means the United States Securities and Exchange Commission.
“Securities
Act” means the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder).
“Subsidiary”
of a Person means any and all corporations, partnerships, limited liability
companies and other entities, whether incorporated or unincorporated, with
respect to which such Person, directly or indirectly, owns securities having
the
power to elect a majority of the board of directors or similar body governing
the affairs of such entity.
“Tax”
means (A) any and all federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
real property gains, registration, value added, excise, natural resources,
severance, stamp, occupation, windfall profits, environmental (under Section
59A
of the Code), customs, duties, real property, personal property, capital stock,
social security (or similar), unemployment, disability, payroll, license,
employee or other withholding, or other tax assessment, duty, fee, levy, or
other governmental charge, of any kind whatsoever, including any interest,
penalties or additions to tax or similar items in respect of the foregoing
(whether disputed or not) and including any obligations to indemnify or
otherwise assume or succeed to the tax liability of any other Person and (B)
any
liability for the payment of any amount of the type described in the immediately
preceding clause (A) as a result of (1) being a “transferee” of another person,
(2) being a member of an affiliated, combined, consolidated or unitary group,
or
(3) any contractual liability.
“Tax
Return” means any return, report, declaration, claim for refund, information
return or other document (including any related or supporting schedule,
statement or information) filed or required to be filed in connection with
the
determination, assessment or collection of any Tax of any party or the
administration of any Legal Requirements relating to any Tax (including any
amendment thereof).
“Termination
Date” has the meaning set forth in Section 7.1(b).
“Third
Party Claim” has the meaning set forth in Section
8.2(d).
“Transactions”
has the meaning set forth in the recitals.
Section
1.2 Interpretive
Provision. Unless otherwise indicated to the contrary herein by
the context or use thereof: (i) the words, “herein,” “hereto,” “hereof” and
words of similar import refer to this Agreement as a whole and not to any
particular Section or paragraph hereof; (ii) the word “including” means
“including, but not limited to”; (iii) masculine gender shall also include the
feminine and neutral genders, and vice versa; and (iv) words importing the
singular shall also include the plural, and vice versa.
ISSUANCE
AND PURCHASE OF CONVERTIBLE SHARES
Section
2.1 Issuance and
Purchase of Convertible Shares. Subject
to the
satisfaction (or waiver) of the conditions set forth in Article 6, at the
Closing:
(a) Parent
shall
issue and sell to ▇▇▇, and ▇▇▇ shall purchase from Parent, 27,632 Convertible
Shares in exchange for the payment by ▇▇▇ to Parent of an aggregate purchase
price for such shares equal to $55,264,000 (such dollar amount, the “▇▇▇
Aggregate Purchase Price”);
(b) Parent
shall
issue and sell to WCAS, and WCAS shall purchase from Parent, 36,841 Convertible
Shares in exchange for the payment by WCAS to Parent of an aggregate purchase
price for such shares equal to $73,682,000 (such dollar amount, the “WCAS
Aggregate Purchase Price”);
(c) Parent
shall
issue and sell to Union Square, and Union Square shall purchase from Parent,
32,895 Convertible Shares in exchange for the payment by Union Square to Parent
of an aggregate purchase price for such shares equal to $65,790,000 (such dollar
amount, the “Union Square Aggregate Purchase Price”); and
(d) Parent
shall
issue and sell to Perry, and Perry shall purchase from Parent, 27,632
Convertible Shares in exchange for the payment by Perry to Parent of an
aggregate purchase price for such shares equal to $55,264,000 (such dollar
amount, the “Perry Aggregate Purchase Price”) (the Convertible Shares
referred to in this clause (d) shall be allocated among the entities comprising
Perry in such percentages as shall be determined by Perry prior to
Closing).
For
the
avoidance of doubt, at the option of an Investor, all or a portion of the shares
of Series B Preferred Stock to be issued to and purchased by such Investor
hereunder may instead be issued and purchased in the form of Series A Preferred
Stock.
Parent
shall issue and sell all such Convertible Shares as aforesaid free and clear
of
any and all Liens (other than transfer restrictions of general applicability
under the Securities Act).
Section
2.2 Deliveries. At
the Closing (and in addition to the other closing deliveries specified in
Article 6):
(a) ▇▇▇
shall pay
to Parent the ▇▇▇ Aggregate Purchase Price;
(b) WCAS
shall
pay to Parent the WCAS Aggregate Purchase Price;
(c) Perry
shall
pay to Parent the Perry Aggregate Purchase Price;
(d) Union
Square
shall pay to Parent the Union Square Aggregate Purchase Price; and
(e) Parent
shall
deliver to each Investor a certificate or certificates (in definitive form)
duly
executed on behalf of Parent and registered in the name of such Investor (or
its
designee) representing the number of Convertible Shares purchased by such
Investor from Parent pursuant to this Agreement.
All
payments pursuant to clauses (a) through (d) of this paragraph shall be made
by
wire transfer of immediately available funds to an account designated by Parent
pursuant to wire instructions to be provided by Parent no later than at least
three Business Days prior to the anticipated Closing Date.
Section
2.3 Closing. Subject
to the satisfaction (or waiver) of the conditions set forth in Article 6,
the closing of the transactions contemplated hereby (the “Closing”) shall
take place at the offices of Ropes & ▇▇▇▇ LLP, 1211 Avenue of the Americas,
New York, New York, at 10:00 A.M. (New York City time) on the fifth Business
Day
following the satisfaction or waiver of the conditions set forth in Article
6 (other than those conditions that by their terms cannot be satisfied until
the Closing, but subject to satisfaction of such conditions at the Closing),
or
on such other date and time as Parent and the Investors shall mutually agree;
provided that, subject to the satisfaction (or waiver) of the
conditions set forth in Article 6, it is the intention of the parties
that the Closing occur contemporaneously with the consummation of the
Merger. The date of the Closing is herein called the “Closing
Date”.
INVESTOR
REPRESENTATIONS AND WARRANTIES
Except
as
set forth in the Investor Disclosure Schedules, each Investor, severally as
to
itself only, but not jointly with any other Investor, represents and warrants
to
Parent as follows:
Section
3.1 Organization, Good
Standing, Qualification and Power. Such Investor is a
corporation, limited liability company or other entity duly organized, validly
existing and in good standing under the laws of its respective jurisdiction
of
incorporation, formation or organization, as the case may be, and has the
requisite corporate, limited liability company or partnership power and
authority to own or lease its properties and assets and to carry on its business
as presently conducted.
Section
3.2 Authority;
Execution and Delivery; Enforceability. Such Investor has the
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, all of which have been duly authorized by
all
requisite corporate, limited liability company or partnership, as applicable,
action on its part. Such Investor has duly executed and delivered
this Agreement and (assuming this Agreement has been duly and validly
authorized, executed and delivered by each other party hereto), this Agreement
is a valid and binding agreement of such Investor, enforceable against such
Investor in accordance with its terms, except as the enforceability hereof
or
thereof may be limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar Legal Requirements affecting the enforcement of
creditors’ rights generally or (ii) applicable equitable principles (whether
considered in a proceeding at law or in equity).
Section
3.3 Non-contravention. Neither
the execution and delivery of this Agreement by such Investor nor the
fulfillment of and the performance by such Investor of its obligations hereunder
will (i) contravene any provision contained in the Governing Documents of
such Investor, or (ii) conflict with, violate or result in a breach (with
or without the lapse of time, the giving of notice or both) of, permit any
Person to terminate, or constitute a default (with or without the lapse of
time,
the giving of notice or both) under (A) except as set forth on Schedule
3.3, any contract, agreement, commitment, indenture, mortgage, lease,
pledge, note, bond, license, permit, or other instrument or obligation to which
such Investor is a party or (B) assuming the completion of the actions described
in Section 3.4 and on Schedule 3.4, any Legal Requirement to
which such Investor is bound or subject, which in the case of any of clause
(ii)
above, would reasonably be expected to have an Investor Material Adverse
Effect.
Section
3.4 Consents. No
notice to, filing with, or authorization, registration, consent or approval
of
any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement by such Investor or the consummation
of the transactions contemplated hereby by such Investor, except for (i)
compliance with and filings under the HSR Act, (ii) compliance with and filings
under the Exchange Act, (iii) filings and approvals required by state insurance
departments, departments of health, and/or other Governmental Authorities having
jurisdiction over the Governmental Authorizations or any part of Parent’s
business, or such other filings, authorizations, registrations, consents or
approvals that may be required be reason of Parent’s or MemberHealth’s
involvement in the transactions, (iv) other notices, filings, authorizations,
registrations, consents or approvals set forth on Schedule 3.4, and (v)
any other notices, filings, authorizations, registrations, consents or approvals
the failure of which to obtain or make would not reasonably be expected to
have
an Investor Material Adverse Effect.
Section
3.5 Information
Supplied. The information supplied or to be supplied by such
Investor in writing and designated specifically for inclusion in the Proxy
Statement shall not, on the date the Proxy Statement is mailed to the
shareholders of Parent or on the date of the Parent Shareholder Meeting (the
“Parent Shareholder Meeting Date”) contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not
misleading. Notwithstanding the foregoing, such Investor makes
no representation, warranty or covenant with respect to any information
contained in any of the foregoing documents other than information supplied
by
such Investor in writing and designated specifically for inclusion
therein.
Section
3.6 Brokers. No
Person is or will be entitled to a broker’s, finder’s, investment banker’s,
financial advisor’s or similar fee from Parent in connection with this Agreement
or any of the transactions contemplated hereby based on any commitments made
by
such Investor.
Section
3.7 Acquisition for
Investment. Such Investor is acquiring the shares issuable to it
under this Agreement for investment purposes and not with a view towards any
distribution thereof in violation of applicable securities laws;
provided, however, that by making such representation and
warranty, such Investor does not agree to hold any securities for any minimum
or
other specific term. Such Investor is an “accredited investor” (as
that term is defined in Rule 501(a) of Regulation D under the Securities
Act). Such Investor acknowledges that the shares to be purchased by
such Investor under this Agreement may not be resold absent registration under
the Securities Act or the availability of an applicable exemption from
Securities Act registration requirements. By executing this
Agreement, such Investor further represents that, except as set forth on
Schedule 3.7, such Investor does not presently have any contract,
undertaking, agreement or arrangement with any Person, other than a Permitted
Transferee (as defined in the Shareholders Agreement) of such Investor, or
any
direct or indirect shareholders, partners or members of such Investor, to sell,
transfer or grant participations to such Person or to any third Person, with
respect to any of the Convertible Shares.
Section
3.8 Disclosure of
Information. Such Investor has had an opportunity to discuss
Parent’s business, management, financial affairs and the terms and conditions of
the offering of the Convertible Shares with Parent’s management. The
foregoing, however, does not limit or modify the representations and warranties
of Parent in Article 4 of this Agreement or the right of the Investors to
rely thereon.
Section
3.9 Restricted
Securities. Such Investor understands that the issuance and sale
of the Convertible Shares have not been registered under the Securities Act
by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature
of
the investment intent and the accuracy of the Investor’s representations as
expressed in Section 3.7. Such Investor understands that the
Convertible Shares are “restricted securities” under applicable U.S. federal and
state securities laws and that, pursuant to these laws, the Investor must hold
the Convertible Shares indefinitely unless they are registered with the
Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is
available. Such Investor acknowledges that Parent has no obligation
to register or qualify the Convertible Shares, or the Parent Common Stock into
which it may be converted, for resale except as set forth in the Registration
Rights Agreement. Such Investor further acknowledges that if an
exemption from registration or qualification is available, it may be conditioned
on various requirements including, but not limited to, the time and manner
of
sale, the holding period for the Convertible Shares, and on requirements
relating to Parent which are outside of the Investor’s control.
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except
as
set forth in the Parent Disclosure Schedules, Parent hereby represents and
warrants to each Investor as follows:
Section
4.1 Organization, Good
Standing, Qualification and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State
of
New York and has the requisite corporate power and authority to own or lease
its
properties and assets and to carry on its business as presently conducted.
Except as has not had and would not reasonably be expected to have a Parent
Material Adverse Effect, each of the Subsidiaries of Parent is a corporation,
limited liability company or other entity duly organized, validly existing
and
in good standing under the laws of its respective jurisdiction of incorporation,
formation or organization, as the case may be, specified on Schedule 4.1
and has the requisite corporate, limited liability company or partnership power
and authority to own or lease its properties and assets and to carry on its
business as presently conducted. Parent and each of Parent’s
Subsidiaries is duly qualified to transact business and is in good standing
in
each jurisdiction wherein the nature of its business or the ownership of its
assets makes such qualification necessary, except where the failure to be so
qualified and in good standing has not had and would not reasonably be expected
to have a Parent Material Adverse Effect. Parent has delivered to the
Investors true and complete copies of the Governing Documents of
Parent. Parent is not in material violation of or material default
under the provisions of any such Governing Documents. None of the
Parent’s Subsidiaries is in material violation or material default under its
governing documents, except as would not cause a Parent Material Adverse
Effect.
Section
4.2 Authority;
Execution and Delivery; Enforceability. Parent has the requisite
power and authority to execute and deliver this Agreement, the other Transaction
Agreements and the Merger Agreement and to perform its obligations hereunder,
and thereunder (subject, with respect to consummation of the transactions
contemplated by this Agreement and the Merger Agreement, to obtaining the
Required Parent Shareholder Approval), all of which have been duly authorized
(subject, with respect to consummation of the transactions contemplated by
this
Agreement and the Merger Agreement, to obtaining the Required Parent Shareholder
Approval) by all requisite corporate action on its part. Parent has
duly executed and delivered this Agreement, the ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
the
Registration Rights Agreement and the Merger Agreement, and each of this
Agreement, the ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and the Registration Rights Agreement,
and (assuming that they have been duly and validly authorized, executed and
delivered by the other parties thereto, respectively) this Agreement, and the
Registration Rights Agreement are, and each other Transaction Agreement will
from and after the Closing be, a valid and binding agreement of Parent,
enforceable against Parent in accordance with their respective terms, except
as
the enforceability hereof or thereof may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Legal
Requirements affecting the enforcement of creditors’ rights generally or (ii)
applicable equitable principles (whether considered in a proceeding at law
or in
equity).
Section
4.3 Non-contravention. Neither
the execution and delivery of this Agreement, the other Transaction Agreements
and the Merger Agreement nor the fulfillment of and the performance by Parent
of
its obligations hereunder or thereunder, nor consummation of the Collective
Transactions, will (i) contravene any provision contained in the Governing
Documents of Parent, (ii) conflict with, violate or result in a breach
(with or without the lapse of time, the giving of notice or both) of, permit
any
Person to terminate, or constitute a default (with or without the lapse of
time,
the giving of notice or both) under (A) except as set forth on Schedule
4.3, any contract, agreement, commitment, indenture, mortgage, lease,
pledge, note, bond, license, permit or other instrument or obligation to which
Parent or any of Parent’s Subsidiaries is a party or is bound or to which any of
their respective properties or assets are subject or (B) assuming the completion
of the actions described in Section 4.4 and on Schedule 4.4, any
Legal Requirement to which Parent or any of Parent’s Subsidiaries is bound or
subject or to which any of their respective assets or properties are subject,
(iii) except as set forth on Schedule 4.3, result in the creation or
imposition of any Lien on any of the assets or properties of Parent or any
of
Parent’s Subsidiaries, or (iv) except as set forth on Schedule 4.3,
result in the acceleration of, or permit any Person to terminate, modify,
cancel, accelerate or declare due and payable prior to its stated maturity,
any
obligation of Parent or any of Parent’s Subsidiaries, which in the case of any
of clauses (ii) through (iv) above, would reasonably be expected to have a
Parent Material Adverse Effect.
Section
4.4 Consents. No
notice to, filing with, or authorization, registration, consent or approval
of
any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement, the other Transaction Agreements
and
the Merger Agreement or the consummation of the transactions contemplated hereby
and thereby by Parent or consummation of the Collective Transactions, except
for
(i) compliance with and filings under the HSR Act with respect to consummation
of the transactions contemplated by this Agreement and the Merger Agreement,
(ii) compliance with the notice and approval requirements of CMS applicable
to
the Transactions, (iii) with respect to consummation of the transactions
contemplated by this Agreement, the filing of the Charter Amendment with the
Secretary of State of the State of New York, and with respect to consummation
of
the transactions contemplated by the Merger Agreement, the filing of appropriate
Certificates of Merger and any related documents with the Secretaries of State
of the States of Ohio and Delaware pursuant to the Merger Agreement, (iv)
filings and approvals required by state insurance departments and/or departments
of health, each as set forth on Schedule 4.4, (v) with respect to
consummation of the transactions contemplated by this Agreement and the Merger
Agreement, the filing with the SEC of (A) a joint proxy statement/prospectus
for
distribution to the shareholders of MemberHealth in connection with the Merger
and the shareholders of Parent in connection with the Parent Shareholder Meeting
in accordance with Regulation 14A promulgated under the Exchange Act (such
proxy
statement as amended or supplemented from time to time being hereinafter
referred to as the “Proxy Statement”), (B) a registration statement on
Form S−4 relating to the offer and sale of shares of Parent Common Stock in
connection with the Merger pursuant to the Merger Agreement (such registration
statement as amended or supplemented from time to time being hereinafter
referred to as the “Registration Statement”), and (C) such reports under
and such other compliance with the Exchange Act and the Securities Act as may
be
required in connection with this Agreement and the Merger, (vi) compliance
with
any applicable Legal Requirements relating to state blue sky laws, securities
laws or Nasdaq filing requirements in connection with the issuance of the
Convertible Shares or the shares of Parent Common Stock issuable in the Merger,
and (vii) other notices, filings, authorizations, registrations, consents or
approvals set forth on Schedule 4.4.
Section
4.5 Capitalization
of
Parent; Parent Subsidiaries.
(a) As
of the
date hereof, the authorized capital stock of Parent consists of (i) 100,000,000
shares of Parent Common Stock and (ii) 2,000,000 shares of Preferred Stock,
par
value $0.01 per share (the "Parent Preferred Stock"), of which 300,000
shares of Parent Preferred Stock will be designated as Series A Preferred Stock
and 300,000 shares of Parent Preferred Stock will be designated as Series B
Preferred Stock (each having the rights, preferences and privileges set forth
in
the Certificates of Designations attached as Exhibits B-1 and B-2,
respectively). Upon effectiveness of the Charter Amendment, the
authorized capital stock of Parent will consist of at least (i) 125,000,000
shares of Parent Common Stock, (ii) 30,000,000 shares of Parent non-voting
common stock and (iii) 2,000,000 shares of Parent Preferred Stock, of which
300,000 shares of Parent Preferred Stock will have been designated as Series
A
Preferred Stock and 300,000 shares of Parent Preferred Stock will have been
designated as Series B Preferred Stock (each having the rights, preferences
and
privileges set forth in the Certificates of Designations attached as Exhibits
B-1 and B-2, respectively). As of the close of business on May 7,
2007 (the "Capitalization Date"), 59,442,873 shares of Parent Common
Stock were issued and outstanding; no shares of Parent Preferred Stock were
issued and outstanding; 626,045 shares of Parent Common Stock were held in
Parent’s treasury; and 5,227,403 shares of Parent Common Stock were reserved for
issuance pursuant to the Outstanding Parent Stock Awards. Schedule
4.5(a) contains a list of each stock option plan, program or arrangement of
Parent (the “Parent Stock Plans”) and information with respect to all of
the outstanding stock options, restricted stock awards and other stock-based
awards issued under the Parent Stock Plans (“Outstanding Parent Stock
Awards”), including the name of Parent Stock Plan under which such options
or awards were issued, the holders thereof, the number of shares subject
thereto, the exercise prices and other material terms thereof and a description
of the vesting provisions thereof. Except as set forth above or on
Schedule 4.5(a), there are no outstanding shares of capital stock of
Parent or securities, directly or indirectly, convertible into, or exchangeable
or exercisable for, shares of capital stock of Parent or any outstanding
“phantom” stock, stock appreciation right or other stock-based
awards. Except as set forth on Schedule 4.5(a), there are no
puts, calls, rights (including preemptive rights), commitments or agreements
to
which Parent is a party or by which it is bound, in any case obligating Parent
to issue, deliver, sell, purchase, redeem or acquire, any equity securities
of
Parent or securities convertible into, or exercisable or exchangeable for equity
securities of Parent, or obligating Parent to grant, extend or enter into any
such option, put, warrant, call, right, commitment or agreement. All
outstanding shares of Parent Common Stock are validly issued, fully paid and
nonassessable and are not subject to, and have not been issued in violation
of,
preemptive or other similar rights. No bonds, debentures, notes or
other indebtedness of Parent having any right to vote with the stockholders
of
Parent on matters submitted to the stockholders of Parent (or any such
indebtedness or other securities that are convertible into or exercisable or
exchangeable for securities having such voting rights) are issued or
outstanding. No shares of capital stock of Parent and no other
securities directly or indirectly convertible into, or exchangeable or
exercisable for, capital stock of Parent have been issued since the
Capitalization Date and on or prior to the date of this Agreement, other than
shares of Parent Common Stock issued in respect of Outstanding Parent Stock
Awards.
(b) Agreements
Relating to Capital Stock. Except as set forth on Schedule
4.5(b), there are not any stockholder agreements, voting trusts or other
agreements or understandings to which Parent is a party or by which it is bound
relating to the voting or transfer of any shares of Parent Common
Stock. All registration rights agreements, stockholders’ agreements
and voting agreements to which Parent or any of its Subsidiaries is a party
are
identified on Schedule 4.5(b).
(c) Set
forth on
Schedule 4.5(c) is the number of authorized, issued and outstanding
shares of capital stock (or other ownership interests) of each Parent
Significant Subsidiary. All of the issued and outstanding shares of
capital stock (or other ownership interests) of each Parent Significant
Subsidiary are owned beneficially and of record by Parent or another Subsidiary
of Parent as set forth on Schedule 4.5(c), have been validly issued, and
are fully paid and nonassessable and, except as set forth on Schedule
4.5(c), are held free and clear of any preemptive rights (other than such
rights as may be held by Parent or a Subsidiary of Parent) or Liens (other
than
Permitted Liens). Except as set forth on Schedule 4.5(c), (a)
there are no other issued or outstanding equity securities of any Parent
Significant Subsidiary and (b) there are no other issued and outstanding
securities of any Parent Significant Subsidiary convertible into or exchangeable
for, at any time, equity securities of any Parent Significant
Subsidiary. Except as set forth on Schedule 4.5(c), there
are no (i) outstanding obligations of Parent or Parent Significant Subsidiary
to
repurchase, redeem or otherwise acquire any capital stock (or other ownership
interests) of any of the Parent Significant Subsidiaries or (ii) voting trusts,
proxies or other agreements with respect to the voting or transfer of the
capital stock (or other ownership interests) of the Parent Significant
Subsidiaries.
(d) Except
as set
forth on Schedule 4.5(d), and except for the capital stock (or other
ownership interests) of the Parent Significant Subsidiaries, Parent does not
own, directly or indirectly, (i) any shares of outstanding capital stock or
membership interests of any other corporation or limited liability company
or
securities convertible into or exchangeable for capital stock or membership
interests of any other corporation or limited liability company (ii) any equity
or other participating interest in the revenues or profits of any Person, and
neither Parent nor any of the Parent Significant Subsidiaries is subject to
any
obligation to make any investment (in the form of a loan, capital contribution
or otherwise) in any Person.
Section
4.6 Parent SEC
Documents.
(a) Parent
has
made available to the Investors a true and complete copy of each report,
schedule, registration statement and proxy statement filed by Parent with the
SEC since December 31, 2004 (the “Parent SEC Documents”), which are all
the documents that Parent was required to file with the SEC since December
31,
2004. As of their respective dates, the Parent SEC Documents complied
in all material respects with the requirements of the Securities Act, the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder, and, to the extent in effect and applicable, the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, and none of Parent SEC Documents contains any untrue
statement of a material fact or omits to state a material fact required to
be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Parent has
made available to the Investors true and complete copies of all comment letters
received by Parent from the SEC since December 31, 2004, together with all
written responses of Parent thereto. As of the date hereof, to the
Knowledge of Parent, there are no outstanding or unresolved comments in such
comment letters and none of the Parent SEC Documents is the subject of any
ongoing review by the SEC.
(b) The
financial
statements of Parent included in the Parent SEC Documents comply as to form
in
all material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q or Rule 10-01 of Regulation S-X of the SEC) and present
fairly in all material respects the consolidated financial position of Parent
and its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of Parent
and
its consolidated Subsidiaries for the periods presented therein (subject, in
the
case of the unaudited statements, to year-end audit adjustments, as permitted
by
Rule 10-01, and any other adjustments described therein).
(c) Parent
and
its Subsidiaries have established and maintain “disclosure controls and
procedures” (as defined in Rule 13a−15(e) promulgated under the Exchange Act)
and “internal control over financial reporting” (as defined in Rule 13a-15(f)
promulgated under the Exchange Act), in each case, as required by Rule 13a-15
under the Exchange Act. Such “disclosure controls and procedures” are
designed to ensure that information required to be disclosed by Parent in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and
forms
of the SEC, and that such information is accumulated and communicated to
Parent’s management, including its principal executive officer and principal
financial officer, or persons performing similar functions, as appropriate
to
allow timely decisions regarding required disclosure and to make the
certifications of the principal executive officer and the principal financial
officer of Parent required by Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act
with respect to such reports. For purposes of this Agreement,
“principal executive officer” and “principal financial officer” shall have the
meanings given to such terms in the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. Each of the
principal executive officer and the principal financial officer of Parent (and
each former principal executive officer of Parent and each former principal
financial officer of Parent, as applicable) has made all certifications required
by Sections 302 and 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the rules and regulations
promulgated thereunder with respect to the Parent SEC Documents. Such
“internal control over financial reporting” provides reasonable assurances
regarding the reliability of financial reporting and the preparation of
financial statements, including that (A) transactions are executed in accordance
with management’s general or specific authorization; and (B) transactions are
recorded as necessary (x) to permit preparation of consolidated financial
statements in conformity with GAAP and (y) to maintain accountability of the
assets of Parent and its Subsidiaries. The management of Parent has
disclosed, based on its most recent evaluation, to Parent’s auditors and the
audit committee of Parent’s board of directors (i) all significant deficiencies
in the design or operation of internal control over financial
reporting which could adversely affect Parent’s ability to record,
process, summarize and report financial data and have identified for Parent’s
auditors any material weaknesses in internal controls and (ii) any fraud,
whether or not material, that involves management or other employees who have
a
significant role in Parent’s internal controls over financial
reporting. A summary of any such disclosure made by management to
Parent’s auditors and audit committee has been made available to the
Investors.
Section
4.7 No Undisclosed
Liabilities. Neither Parent nor any of its Subsidiaries has any
liability other than (i) liabilities reflected in consolidated balance sheet
of
Parent included in the Annual Report on Form 10-K for the fiscal year of Parent
ended December 31, 2006 filed by Parent on March 16, 2007 (including the related
notes thereto) (the “Latest Parent Balance Sheet”), (ii) liabilities
arising under Contractual Obligations that are connected with future performance
under such Contractual Obligations and not required to be reflected on a
consolidated balance sheet of Parent and its Subsidiaries prepared in accordance
with GAAP, (iii) liabilities that were incurred in the ordinary course of
business since the date of the Latest Parent Balance Sheet and (iv) liabilities
that have not had and would not reasonably be expected to have a Parent Material
Adverse Effect.
Section
4.8 Title to Tangible
Personal Property. Parent or a Subsidiary of Parent has good
title to all of the tangible personal property reflected as being owned by
them
on the Latest Parent Balance Sheet, in each case, free and clear of Liens (other
than Permitted Liens), except for any such assets which have been sold or
otherwise disposed of since the date of the Latest Parent Balance Sheet or
where
the failure to have such good title has not had and would not reasonably be
expected to have a Parent Material Adverse Effect. Parent and its
Subsidiaries own or lease all tangible assets necessary for the conduct of
their
business as presently conducted except where such failure to own or lease has
not had and would not reasonably be expected to have a Parent Material Adverse
Effect.
Section
4.9 Absence of Certain
Developments. Except as set forth on Schedule 4.9, during
the period beginning on the date of the Latest Balance Sheet and ending on
the
date of this Agreement, (a) there has not been any change, event or effect
that
has had or would reasonably be expected to have a Parent Material Adverse Effect
and (b) each of Parent and its Subsidiaries has conducted its business in the
ordinary course substantially consistent with past practices. Without
limiting the generality of the foregoing, except as set forth on Schedule
4.9, none of Parent or any of its Subsidiaries has taken any action that
would have constituted a violation of Section 5.3(b) of this Agreement if
Section 5.3(b) had been in effect at all times since the date of the
Latest Parent Balance Sheet.
Section
4.10 Governmental
Authorizations; Licenses; Etc. Except as set forth on Schedule
4.10, the business of each of Parent and its Subsidiaries is now and has
been at all times since January 1, 2005 operated in compliance with all
applicable Legal Requirements, except where failure to so comply has not had
and
would not reasonably be expected to have a Parent Material Adverse
Effect. Parent is, and has been since the effective date thereof, in
compliance in all material respects with the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act applicable to it. Except as set forth on
Schedule 4.10, each of Parent and its Subsidiaries has all permits,
licenses, approvals, certificates, Governmental Authorizations, and has made
all
notifications, registrations, certifications and filings with all Governmental
Authorities, necessary or advisable for the operation of its business as
currently conducted, in each case except as has not had and would not reasonably
be expected to have a Parent Material Adverse Effect. Except as set
forth on Schedule 4.10, all such permits, licenses, approvals,
certificates and Governmental Authorizations are in full force and
effect. Except as set forth on Schedule 4.10, there is no
action, audit, case, proceeding or investigation pending or, to Parent’s
Knowledge, threatened in writing by any Governmental Authority with respect
to
(i) any alleged violation by Parent or any of its Subsidiaries of any Legal
Requirement, (ii) any alleged failure by Parent or any of its Subsidiaries
to
have any permit, license, approval, certification or other authorization
required in connection with the operation of the business of Parent and its
Subsidiaries or (iii) any change or amendment to the permits, licenses,
approvals, certifications or other authorizations which would impair the ability
of Parent and/or its Subsidiaries to operate in the normal course, in each
case
except as has not had and would not reasonably be expected to have a Parent
Material Adverse Effect. This Section 4.10 does not relate to
matters with respect to Taxes (which are the subject of Section 4.12),
Employee Matters (which are the subject of Section 4.13) or Employee
Benefit Plans (which are the subject of Section 4.14).
Section
4.11 Litigation. Except
as set forth on Schedule 4.11, there are no judgments, decrees, lawsuits,
actions, proceedings, claims, complaints, injunctions or orders by or before
any
Governmental Authority pending or, to Parent’s Knowledge, threatened in writing
or, to Parent’s Knowledge, any pending investigation by any Governmental
Authority, in any such case, against Parent or any of its Subsidiaries which
have had or would reasonably be expected to have a Parent Material Adverse
Effect.
Section
4.12 Taxes.
(a) Except
as set
forth on Schedule 4.12(a), or except as has not had and would not
reasonably be expected to have a Parent Material Adverse Effect, each of Parent
and its Subsidiaries has duly and timely filed all Tax Returns required to
be
filed by it, all such Tax Returns have been prepared in material compliance
with
all applicable Legal Requirements and are true, correct and complete in all
material respects. Except as set forth on Schedule 4.12, or except as
has not had and would not reasonably be expected to have a Parent Material
Adverse Effect, all Taxes owed by each of Parent and its Subsidiaries, whether
or not shown as due on any such Tax Return, have been timely paid.
(b) Except
as set
forth on Schedule 4.12(b), or except as has not had and would not reasonably
be
expected to have a Parent Material Adverse Effect:
(i) neither
Parent nor any of its Subsidiaries is currently the subject of a Tax audit
or
examination nor is party to any claim, dispute, action or
controversy;
(ii) neither
Parent nor any of its Subsidiaries has consented to extend the time, or is
the
beneficiary of any extension of time, in which any Tax may be assessed or
collected by any taxing authority;
(iii) neither
Parent nor any of its Subsidiaries has received from any taxing authority any
written notice of proposed adjustment, deficiency, underpayment of Taxes or
any
other such written notice which has not been satisfied by payment or been
withdrawn;
(iv) no
claim, or
notice of a claim, has ever been made by an authority in a jurisdiction where
Parent or any of its Subsidiaries does not file Tax Returns that Parent or
any
of its Subsidiaries is or may be subject to taxation by that
jurisdiction;
(v) the
unpaid
Taxes of Parent and its Subsidiaries did not, as of December 31, 2006, exceed
the reserve for Taxes (rather than any reserve for deferred Taxes established
to
reflect timing differences between GAAP and Tax income) set forth on the face
of
the Latest Parent Balance Sheet. Parent and its Subsidiaries have
paid all estimated Taxes required to be paid for Parent's, and each of its
Subsidiaries', current taxable year; and
(vi) neither
Parent nor any of its Subsidiaries has ever been a member of a combined,
consolidated, affiliated or unitary group for Tax purposes, other than a group
of which Parent is or one of its Subsidiaries was the parent
corporation.
Section
4.13 Employee
Matters. Except as set forth on Schedule 4.13, (i) neither
Parent nor any of its Subsidiaries has entered into any collective bargaining
agreement with respect to its employees, (ii) there is no labor strike, labor
dispute, or work stoppage or lockout pending or, to Parent’s Knowledge,
threatened in writing against or affecting Parent or any of its Subsidiaries
and
since January 1, 2005 there has been no such action, (iii) to Parent’s
Knowledge, no union organization campaign is in progress with respect to any
of
the employees of Parent or any of its Subsidiaries, and (iv) except as has
not
had and would not reasonably be expected to have a Parent Material Adverse
Effect, there is no unfair labor practice, charge or complaint pending or,
to
Parent’s Knowledge, threatened against Parent or any of its
Subsidiaries. Neither Parent nor any of its Subsidiaries has engaged
in any plant closing or employee layoff activities since January 1, 2005 that
would violate or give rise to an obligation to provide any notice required
pursuant to the Worker Adjustment Retraining and Notification Act of 1988,
as
amended, or any similar state or local plant closing or mass layoff statute,
rule or regulation.
Section
4.14 Employee Benefit
Plans. Each Parent Employee Benefit Plan has been maintained and
administered in compliance in all material respects with the applicable
requirements of ERISA, the Code and any other applicable Legal
Requirements.
Section
4.15 Intellectual
Property Rights.
(a) Except
as set
forth on Schedule 4.15(a), Parent and its Subsidiaries own all right,
title and interest in, free and clear of all Liens, or have a license or other
right to use, all of the material Intellectual Property Rights necessary for
the
conduct of the business of Parent and its Subsidiaries as currently conducted
(collectively, the “Parent Intellectual Property Rights”).
(b) To
Parent’s
Knowledge, the Parent Intellectual Property Rights are valid and enforceable
by
Parent and/or its Subsidiaries. Except as has not had and would not
reasonably be expected to have a Parent Adverse Effect, there is not pending
against Parent or any of its Subsidiaries or, to Parent’s Knowledge, threatened
against Parent or any of its Subsidiaries any claim by any third party
contesting the validity, enforceability, ownership, or Parent’s and its
Subsidiaries’ rights with respect to, any Parent Intellectual Property Rights,
and there has been no such claim pending or, to Parent’s Knowledge, threatened
in the past three (3) years. Except as has not had and would not
reasonably be expected to have a Parent Adverse Effect, to Parent’s Knowledge,
the operations of Parent and its Subsidiaries, and the provision of goods and
services therein, do not infringe or misappropriate any material Intellectual
Property Rights of any third party. Except as has not had and would
not reasonably be expected to have a Parent Adverse Effect, there is no pending
or, to Parent’s Knowledge, threatened assertion or claim and there has been no
such assertion or claim in the last three (3) years asserting that the
operations of Parent or any of its Subsidiaries infringe upon or misappropriate
in any way the material Intellectual Property Rights of any Person.
Section
4.16 Contracts. Schedule 4.16
sets forth a list of all contracts, agreements, leases, permits or licenses
that
would be required to be filed by Parent as of the date hereof as a “material
contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act
(the “Parent Contracts”). Each Contractual Obligation of
Parent is a valid and binding agreement of Parent or its Subsidiary, as the
case
may be, and, to Parent’s Knowledge, of the other parties thereto, enforceable by
Parent or its Subsidiary against the other party thereto in accordance with
its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting generally the enforcement of creditors’ rights and
subject to general principles of equity). Except as has not had and
would not reasonably be expected to have a Parent Material Adverse Effect,
(A)
neither Parent nor any of its Subsidiaries or, to Parent’s Knowledge, any other
party to any Contractual Obligation of Parent, is in breach or violation of,
or
default under any such Contractual Obligation of Parent (and no event has
occurred which with notice or lapse of time would constitute such breach,
violation or default) and (B) neither Parent nor any of its Subsidiaries has
received written notice of any such breach, violation or default under any
such
Contractual Obligation of Parent. Parent has made available to the
Investors true and complete copies of all Parent Contracts, including all
amendments thereto.
Section
4.17 Insurance. Except
as would not, individually or in the aggregate, have or reasonably be expected
to have a Parent Material Adverse Effect, the insurance policies maintained
by
Parent and its Subsidiaries provide insurance in such amounts and against such
risks as are customary and adequate for companies of similar size and operating
in the same industry as Parent and its Subsidiaries, and such insurance policies
are in full force and effect and were in full force and effect during the
periods of time such insurance policies are purported to be in effect and all
premiums due with respect to all such policies have been paid.
Section
4.18 Real
Property.
(a) Each
material
lease or sublease of real property to which Parent or any of its Subsidiaries
is
a party or by which it is bound (each a "Parent Lease", and collectively
the "Parent Leases") is a valid and binding agreement of Parent or its
Subsidiary, as the case may be, and, to Parent’s Knowledge, of the other parties
thereto, enforceable in accordance with its terms (subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
generally the enforcement of creditors’ rights and subject to general principles
of equity). Except as set forth on Schedule 4.18(a), (A)
neither Parent nor any of its Subsidiaries or, to Parent’s Knowledge, any other
party to any Parent Lease is in material breach or material violation of, or
material default under any such Parent Lease (and no event has occurred which
with notice or lapse of time would constitute such material breach, violation
or
default) and (B) neither Parent nor any of its Subsidiaries has received written
notice of any such material breach, violation or default under any such Parent
Lease. Parent has made available to the Investors true and complete
copies of all Parent Leases, including all amendments thereto and all material
notices and correspondence, memoranda of lease, estoppel certificates and
subordination, non-disturbance and attornment agreements related
thereto.
(b) Neither
Parent nor any of its Subsidiaries owns any real property.
Section
4.19 Transactions With
Affiliates. Except as set forth on Schedule 4.19 or
as described in Parent SEC Documents filed prior to the date hereof, and except
pursuant to the Transactions, no director or executive officer of Parent or
of
any of its Subsidiaries (or, to Parent’s knowledge, any family member of any
such Person who is an individual or any entity in which any such Person or
any
such family member owns a material beneficial interest) or any Person owning
5%
of more of Parent Common Stock (i) is involved in any material business
arrangement or relationship with Parent or any of its Subsidiaries other than
employment arrangements and severance arrangements entered into in the ordinary
course of business or (ii) owns any material property or right, tangible or
intangible, which is used by Parent or any of its Subsidiaries.
Section
4.20 Financing. Parent
has received a commitment letter, dated as of May 7, 2007 (the "Debt
Commitment Letter"), from Bank of America, N.A. (the "Lender"),
pursuant to which the Lender has committed, subject to the terms and conditions
set forth therein, to provide up to $500,000,000 in senior secured debt
financing (the "Debt Financing"). True, accurate and complete copies of
the Debt Commitment Letter, as in effect on the date of this Agreement, have
been furnished to the Investors. The proceeds to Parent from the
issuance and sale of the Convertible Shares to the Investors pursuant to this
Agreement together with the financing contemplated by the Debt Commitment Letter
(collectively, the “Financing”) is sufficient for Parent to consummate
the Transactions on the Closing Date and pay the initial merger consideration
under the Merger Agreement and all related fees and expenses thereunder and
hereunder. As of the date hereof, (A) the Debt Commitment Letter has
not been amended or modified, and (B) the financing commitments contained in
the
Debt Commitment Letter have not been withdrawn or rescinded in any
respect. The Debt Commitment Letter, in the form so delivered, is in
full force and effect and is a legal, valid and binding obligation of Parent
and, to the Knowledge of Parent, the other parties thereto. As of the
date hereof and assuming the accuracy of all representations and warranties
of
MemberHealth in the Merger Agreement, no event has occurred which, with or
without notice, lapse of time or both, would constitute a default or breach
on
the part of Parent under any term or condition of the Debt Commitment
Letter. As of the date hereof and assuming the accuracy of all
representations and warranties of MemberHealth in the Merger Agreement and
compliance by MemberHealth with its agreements in the Merger Agreement, Parent
has no reason to believe that it will be unable to satisfy on a timely basis
any
term or condition of closing to be satisfied by it contained in the Debt
Commitment Letter. Parent has fully paid, or caused to be fully paid,
any and all commitment and other fees required by the terms of the Debt
Commitment Letter to be paid on or before the date hereof.
Section
4.21 Information
Supplied. The information included or incorporated by reference
or to be included or incorporated by reference in the Registration Statement
(other than information supplied by the Investors in writing specifically for
inclusion therein) shall not at the time the Registration Statement is filed
with the SEC or at any time it is supplemented or amended or at the time it
becomes effective under the Securities Act contain any untrue statement of
a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The information
included or incorporated by reference or to be included or incorporated by
reference in the Proxy Statement (other than information supplied by the
Investors in writing and designated specifically for inclusion therein) shall
not, on the date the Proxy Statement is mailed to the shareholders of Parent
(or
of MemberHealth), or on the Parent Shareholder Meeting Date, contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they are made, not misleading.
Section
4.22 Required Parent
Shareholder Approval. The Required Parent Shareholder Approval is
the only vote of the holders of Parent's capital stock or other securities
necessary (under applicable Legal Requirement or otherwise) to consummate the
Transactions. No vote of the holders of Parent’s capital stock or other
securities is necessary (under applicable Legal Requirement or otherwise) to
consummate the transactions contemplated by the ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇.
Section
4.23 Valid Issuance
of
Parent Shares. Prior to the closing under the Stage 1 Purchase
Agreement, Parent shall have (i) duly filed the Series A Preferred Stock
Certificate of Designations and Series B Preferred Stock Certificate of
Designations, in the forms attached as Exhibits B-1 and B-2 hereto,
respectively, with the Secretary of State of the State of New York in accordance
with all applicable provisions of the Business Corporation Law of the State
of
New York and (ii) delivered to the Investors a correct and complete official
copy of such filing dated and stamped as accepted and filed by such Secretary
of
State. The issuance, sale and delivery by Parent of the shares of
Series A Preferred Stock and Series B Preferred Stock pursuant to the Stage
1
Purchase Agreement (and the issuance and delivery of shares of Series B
Preferred Stock issuable in exchange for any such shares of Series A Preferred
Stock) and of the Convertible Shares in accordance with this Agreement, and
the
issuance and delivery of the Conversion Shares issuable upon conversion of
all
such shares of Series A Preferred Stock and Series B Preferred Stock, have
been
duly authorized by all necessary corporate action on the part of Parent
(subject, with respect to the Convertible Shares, to obtaining the Required
Parent Shareholder Approval). The Conversion Shares have been duly
reserved for issuance. The Convertible Shares (when issued, sold and
delivered at the Closing against payment therefor in accordance with the
provisions of this Agreement), all shares of Series A Preferred Stock and Series
B Preferred Stock deliverable pursuant to the Stage 1 Purchase Agreement (and
all shares of Series B Preferred Stock issuable in exchange for any such shares
of Series A Preferred Stock), and all of the Conversion Shares (when issued
upon
conversion of such shares of Series A Preferred Stock and Series B Preferred
Stock), will all be duly and validly issued, fully paid and nonassessable,
free
and clear of any Liens (other than transfer restrictions of general
applicability under the Securities Act). No Person has any preemptive
right which would be triggered by reason of the issuance of Convertible Shares,
the Stage 1 Shares or Conversion Shares.
Section
4.24 Anti-Takeover
Statutes. The Board of Directors of Parent has taken all action
necessary to ensure that any restrictions on business combinations contained
in
the provisions of Section 912 of the New York Business Corporation Law will
not
apply to the Transactions (including the Shares Issuances) and the Collective
Transactions. No other “fair price,” “moratorium,” “control share
acquisition” or other similar anti-takeover statute or regulation or any
anti-takeover provision in Parent’s Certificate of Incorporation or Bylaws is,
or at the Closing will be, applicable to Parent, the shares of Parent capital
stock, the Transactions or such other transactions contemplated by this
Agreement, the other Transaction Agreements, the Merger Agreement and the
Collective Transactions.
Section
4.25 Exemption from
Registration. Assuming the accuracy of the representations and
warranties made by the Investors in Section 3.7 of this Agreement, the
offer and issuance by Parent of the Convertible Shares under this Agreement,
and
the issuance and delivery of the Conversion Shares upon conversion of
Convertible Shares, is exempt from registration under the Securities
Act.
Section
4.26 Brokers. Except
as set forth on Schedule 4.26, no Person is or will be entitled to a
broker’s, finder’s, investment banker’s, financial advisor’s or similar fee from
Parent or any of its Subsidiaries in connection with this Agreement, the ▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the Merger Agreement or the Transactions.
Section
4.27 Fairness Opinion;
Acknowledgement.
(a) The
Board of
Directors of Parent has received the opinion of Credit Suisse, dated the date
of
this Agreement, to the effect that, as of such date, the merger consideration
to
be paid by Parent pursuant to the Merger Agreement is fair to Parent from a
financial point of view. A correct and complete copy of such opinion
has been delivered to the Investors.
(b) Parent
acknowledges and agrees that Investors are acting solely in the capacity of
arm’s length purchasers with respect to this Agreement and the transactions
contemplated hereby. Parent further acknowledges that (i) Investors
are not acting as advisors or fiduciaries of Parent (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and
(ii)
Parent’s decision to enter into this Agreement and the other Transaction
Agreements has been based solely on the independent evaluation of the
transactions contemplated hereby and thereby by Parent and its independent
representatives.
Section
4.28 Merger
Agreement. Attached hereto as Exhibit A is a correct and
complete copy of the definitive Merger Agreement executed by the parties
thereto, together with all schedules and exhibits thereto, and none of the
foregoing have been amended, supplemented or otherwise modified as of the date
hereof.
COVENANTS
AND AGREEMENTS
Section
5.1 Access; Documents
and Information.
(a) Except
for
information that, if provided, would adversely affect the ability of a Person
or
any of its Subsidiaries to assert attorney-client or attorney work product
privilege or a similar privilege or as limited by applicable Legal Requirements
or the confidentiality provisions of any material agreement, from and after
the
date hereof until the earlier of the Closing or the termination of this
Agreement in accordance with its terms, Parent shall, and shall cause its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other representatives and agents of each Investor (each of the foregoing,
respectively for each Investor, “Investor Representatives”), during
normal business hours and upon reasonable request, reasonable access to Parent’s
and its Subsidiaries’ books, records, leases, licenses, contracts, properties,
officers, employees, accountants, counsel and other representatives who have
material knowledge relating to Parent or any of its
Subsidiaries. Each Investor and its respective Investor
Representatives shall conduct any investigation under this Section 5.1(a)
in a manner that does not unreasonably interfere with the conduct of the
business of Parent and its Subsidiaries. An Investor shall be
responsible for any breach of this Section 5.1(a) by any of its Investor
Representatives.
(b) All
information and documents disclosed to an Investor or its Investor
Representatives, whether before or after the date hereof, pursuant to this
Agreement or in connection with the transactions contemplated by, or the
discussions and negotiations preceding, this Agreement shall be subject to
the
terms of the Parent Confidentiality Agreement.
Section
5.2 Charter
Amendment. Prior to the Closing, Parent shall duly file the
Charter Amendment with the Secretary of State of the State of New York in
accordance with all applicable provisions of the Business Corporation Law of
the
State of New York.
Section
5.3 Conduct of
Business by Parent.
(a) From
and
after the date hereof until the earlier of the Closing or the termination of
this Agreement in accordance with its terms, Parent will, and will cause its
Subsidiaries to, except as otherwise provided on Schedule 5.3(b) or as
otherwise required by this Agreement or the Merger Agreement (as in effect
on
the date hereof), by applicable Legal Requirements, or consented to in writing
by each of the Investors (which consent shall not be unreasonably withheld,
conditioned or delayed):
(i) conduct
its
business in the ordinary and regular course in substantially the same manner
as
heretofore conducted (including any conduct that is reasonably related,
complementary or incidental thereto);
(ii) use
commercially reasonable efforts to maintain the insurance described on
Schedule 4.17 (or reasonable replacement policies);
(iii) preserve
intact its business organization and material relationships with third parties
with whom Parent and its Subsidiaries do business; and
(iv) consult
with
the Investors prior to taking any action which would reasonably be expected
to
result in a Parent Material Adverse Effect.
(b) Without
limiting the generality of the foregoing, from and after the date hereof until
the earlier of the Closing or the termination of this Agreement in accordance
with its terms, Parent will not, and will not cause or permit any of its
Subsidiaries to, except as otherwise provided on Schedule 5.3(b), or as
otherwise required by this Agreement or by applicable Legal Requirements, or
as
otherwise consented to in writing by each of the Investors (which consent shall
not be unreasonably withheld, conditioned or delayed):
(i) amend
its
Governing Documents (except to change Parent’s authorized shares of capital
stock in the manner contemplated by this Agreement or to amend Parent’s by-laws
to increase the size of its board of directors);
(ii) authorize
or
adopt a plan of liquidation or dissolution;
(iii) (A)
except
with respect to Parent’s wholly owned Subsidiaries, declare or pay dividends on,
or make other distributions in respect of, any capital stock or other equity
interests, (B) adjust, split, combine or reclassify any capital stock or other
equity interests; (C) issue, sell, pledge or otherwise transfer any capital
stock or other equity interests or any securities exercisable or exchangeable
for or convertible into capital stock or other equity interests, other than
(w)
the issuance of Convertible Shares as contemplated by this Agreement, (x) the
issuance of the Stage 1 Shares as contemplated by the Stage 1 Purchase Agreement
(and the issuance of shares of Series B Preferred Stock upon exchange of shares
of Series A Preferred Stock), (y) the issuance of Parent Common Stock as Merger
consideration pursuant to, and on the terms and subject to the conditions set
forth in, the Merger Agreement as in effect on the date of this Agreement,
or
the issuance of any Conversion Shares upon conversion of any shares of Series
A
Preferred Stock or Series B Preferred Stock and (z) the issuance of Parent
Common Stock issued pursuant to the terms of Outstanding Parent Stock Awards
or
(D) purchase, redeem or otherwise acquire any capital stock or other equity
interests;
(iv) merge
or
consolidate with, or acquire any equity interest in, any business entity, or
acquire any line of business, division or other material assets other than
in
the ordinary course of business or pursuant to the Merger
Agreement;
(v) enter
into
any new line of business;
(vi) sell,
lease,
license, encumber or otherwise dispose of, or subject to any Lien (other than
a
Permitted Lien), any of its material assets other than in the ordinary course
of
business;
(vii) make
any
change in its customary methods of accounting or accounting practices, other
than changes required by GAAP, industry organizations or Governmental
Authorities;
(viii) enter
into a
settlement or compromise of any pending or threatened claims, litigation,
arbitrations or other proceedings if such settlement or compromise (A) involves
payments by or to Parent or any of its Subsidiaries of more than $500,000 in
the
aggregate or (B) involves a consent to material non-monetary relief by Parent
or
any Subsidiary of Parent;
(ix) incur
or
guarantee any Funded Indebtedness other than (A) in the ordinary course of
business or (B) pursuant to the Debt Commitment Letter for purposes of financing
the Merger; or
(x) enter
into a
contractual obligation to do any of the things referred to in this Section
5.3(b).
(c) Promptly
after receipt by Parent of the notice of commencement thereof, Parent shall
provide the Investors with notice of (i) any audit, investigation, claim
(excluding immaterial adjustments, complaints, and corrective activity in the
ordinary course of business), proceeding, settlement, judgment, consent order,
or corporate integrity agreement by or imposed by any Governmental Authority,
(ii) any suspension, debarment or disqualification of Parent from being a
government contractor, holder of any Governmental Authorization or recipient
of
reimbursement from any Payment Program, or (iii) any suspension,
termination, or revocation of any Governmental Authorization.
(d) Parent
shall
provide the Investors with reasonable notice of any and all settlement
discussions and/or negotiations (excluding immaterial adjustments, complaints,
and corrective activity in the ordinary course of business) (“Settlement
Discussions”) between representatives of Parent and any Governmental
Authority, including without limitation negotiations with respect to any claim,
settlement agreement, consent order or corporate integrity agreement between
Parent and any Governmental Authority. In connection with any such
Settlement Discussions, (i) Parent shall timely provide the Investors with
copies of any and all documents that Parent intends to submit, or that Parent
receives, in connection with any such Settlement Discussions, and (ii) Parent
shall timely advise the Investors as to the status of such Settlement
Discussions.
(e) Parent
shall
furnish the Investors, within ten (10) days of the receipt by Parent, any and
all written notices or charges issued relating to non-compliance from any
Governmental Authority and/or any Payment Program that Parent’s Governmental
Authorizations, Medicare or Medicaid certification, or accreditation or ranking
by any Governmental Authority or Payment Program are being, or could be,
downgraded, revoked, or suspended, that action is pending, being considered
or
being, or could be, taken to downgrade, revoke, or suspend Parent’s Governmental
Authorization or certification or to fine, penalize or impose material remedies
upon Parent, or that action is pending, being considered, or being, or could
be,
taken, to discontinue, suspend, deny, decrease or recoup any payments or
reimbursements due, made or coming due to Parent or related to the operation
of
Parent.
(f) Parent
shall
furnish the Investors, within ten (10) Business Days of receipt but at least
five (5) days prior to the earliest date on which Parent is required to take
any
action with respect thereto or would suffer any material adverse consequence,
a
copy of any Payment Program or other Governmental Authority licensing or
accreditation or ranking agency or entity survey, report, warning letter, or
written notice, and any statement of deficiencies, and within the time period
required by the particular agency for furnishing a plan of correction also
furnish or cause to be furnished to the Investors a copy of the plan of
correction generated from such survey, report, warning letter, or written notice
for Parent and by subsequent correspondence related thereto, and use
commercially reasonable efforts to correct or cause to be corrected any
deficiency, the curing of which is a condition of continued licensure or of
full
participation in any Payment Program by the date required for cure by such
agency or entity (plus extensions granted by such agency or
entity).
(g) Prior
to the
Closing, Parent shall promptly notify the Investors if Parent obtains Knowledge
that any of the representations and warranties of Parent in this Agreement
are
not true and correct in all material respects.
(h) Prior
to the
Closing, Parent shall promptly provide the Investors and Investor
Representatives correct and complete copies of all notices, documents and other
materials made available by or to Parent under the Merger
Agreement.
Section
5.4 Closing
Documents. Each Investor, severally but not jointly, hereby
agrees that it shall, prior to or on the Closing Date, execute and deliver,
or
cause to be executed and delivered to Parent, the documents or instruments
described in Section 6.2 (c) Parent shall, prior to or on the Closing
Date, execute and deliver, or cause to be executed and delivered, to the
Investors, the documents or instruments described in Section
6.3(h).
Section
5.5 Commercially
Reasonable Efforts; Further Assurances.
(a) Each
Investor, severally but not jointly, and Parent, shall cooperate with each
other
and use (and shall cause their respective Affiliates to use) their respective
commercially reasonable efforts to take or cause to be taken all actions, and
to
do or cause to be done all things necessary, proper or advisable under all
applicable Contracts and Legal Requirements to consummate and make effective
the
Collective Transactions as soon as practicable, including preparing and filing
as promptly as practicable all documentation to effect all necessary notices,
reports and other filings and to obtain as promptly as practicable all waivers,
consents, registrations, approvals, permits and authorizations necessary or
advisable to be obtained from CMS and/or any other Governmental Authority or
other third party (hereinafter referred to as “Consents”) and to lift any
injunction or other legal bar to the transactions contemplated hereby in order
to consummate the transactions contemplated hereby as promptly as
practicable. All costs incurred in connection with obtaining such
Consents, including CMS consent fees and expert consultant fees, shall be borne
by Parent. HSR filing fees shall be borne by
Parent. Without limiting the foregoing, each Investor, severally but
not jointly, and Parent, undertakes and agrees to file (or cause their
respective Affiliates to file, as applicable) as soon as practicable, and in
any
event prior to fifteen (15) Business Days after the date hereof, a Notification
and Report Form under the HSR Act with the United States Federal Trade
Commission (the “FTC”) and the Antitrust Division of the United States
Department of Justice (the “Antitrust Division”). Each
Investor, severally but not jointly, and Parent, agrees to make appropriate
filings with all appropriate Governmental Authorities, including insurance
regulators, other competition authorities and CMS (or cause their respective
Affiliates to make such filings, as applicable) with respect to the Collective
Transactions promptly after the date of this Agreement and shall supply as
promptly as practicable to such Governmental Authorities any additional
information and documentary material that may be requested in connection
therewith. Each Investor, severally but not jointly, and Parent,
agrees to (and to cause their respective Affiliates to) respond as
promptly as practicable to any inquiries received from such Governmental
Authorities for additional information or documentation and to all inquiries
and
requests received from any other Governmental Authority in connection with
Consents.
(b) Parent
shall
(and shall cause its Affiliates to) offer to take (and if such offer is
accepted, commit to take) all reasonable steps to avoid or eliminate impediments
under any antitrust, competition, or trade regulation Legal Requirement that
may
be asserted by the FTC, the Antitrust Division or any other Governmental
Authority with respect to the Collective Transactions so as to enable the
Closing to occur as expeditiously as possible; provided, however,
that nothing in this Agreement will require, or be deemed to require, Parent
to
agree to or effect any divestiture. In addition, nothing in this
Agreement will require or be deemed to require Parent to take any other action
(including agreeing to any requirements or conditions to be imposed in order
to
obtain CMS or insurance regulatory consents or approvals, including those listed
on Schedule 6.1(b) hereto) if in the reasonable judgment of Parent doing
so would be materially detrimental to the business conducted by Parent or
MemberHealth taken as a whole. Subject to the foregoing
sentence, Parent shall cooperate in a reasonable manner with the Investors
in
connection with Investors’ efforts to seek consents and approvals from
Governmental Authorities in connection with the Transactions (including by
keeping the Investors informed on a reasonably current basis of the status
of
such efforts and using its commercially reasonable efforts to permit the
representatives of the Investors to attend any meetings between Parent's
representatives and Governmental Authorities).
(c) In
the event
any claim, action, suit, investigation or other proceeding by any Governmental
Authority or other Person is commenced which questions the validity or legality
of the transactions contemplated hereby or seeks damages in connection
therewith, the Investors, severally but not jointly, and Parent, agree to
cooperate and use commercially reasonable efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use
commercially reasonable efforts to have such injunction or other order lifted,
and to cooperate reasonably regarding any other impediment to the consummation
of the Collective Transactions.
(d) Notwithstanding
the
foregoing or any other provision of this Agreement, nothing in this Section
5.5
shall (i) limit any applicable rights the Investors may have to terminate this
Agreement pursuant to Article 7, (ii) require any Investor to offer, accept
or
agree to (A) dispose or hold separate any businesses, assets or operations
and/or (B) restrict the manner in which, or whether, such Investor or any of
its
Affiliates may carry on business or compete in any geographic area or line
of
business, or (iii) obligate any Investor to litigate or threaten any
litigation.
(e) Parent
shall
provide to the Investors copies of any application or other communication,
which
references the Investors, to Governmental Authorities in connection with the
Merger Agreement in advance of filing or submission thereof, and Parent shall
provide the Investors a reasonable opportunity to comment upon or modify any
such reference as to the Investors. Parent’s consent to accepting
such comment or modification shall not be unreasonably withheld.
Section
5.6 Public
Announcements. The timing and content of all announcements
regarding any aspect of this Agreement to the financial community, governmental
agencies or the general public shall be mutually agreed upon in advance by
the
Investors and Parent; provided, that each party hereto may make any such
announcement which it in good faith believes, based on advice of counsel, is
necessary in connection with any Legal Requirement, it being understood and
agreed that each party shall provide the other parties hereto with copies of
any
such announcement in advance of such issuance and the reasonable opportunity
to
comment on the same.
Section
5.7 Availability of
Shares. Parent will not issue or agree to issue any shares of
Parent Common Stock or options, rights or warrants to purchase shares of Parent
Common Stock or securities convertible into or exchangeable for shares of Parent
Common Stock or take any other action if, after giving effect thereto, the
number of shares of Parent Common Stock remaining unissued and duly reserved
for
issuance upon conversion of the shares of Series A Preferred Stock and Series
B
Preferred Stock shall be insufficient to permit conversion of all the then
outstanding shares of Series A Preferred Stock and Series B Preferred Stock
after giving effect to any adjustment in the number of shares of Parent Common
Stock into which such shares of Series A Preferred Stock and Series B Preferred
Stock are convertible as a result of such action. Parent shall take
all action necessary to at all times have authorized, and reserved for the
purpose of issuance, after the Closing Date, the maximum number of shares of
Parent Common Stock issuable from time to time upon conversion of the shares
of
Series A Preferred Stock and Series B Preferred Stock.
Section
5.8 Certificates. If,
from and after the Closing, any certificate for shares of Series A Preferred
Stock or Series B Preferred Stock or Conversion Shares shall be mutilated,
lost,
stolen or destroyed, Parent shall issue, in exchange and in substitution the
mutilated certificate, or in lieu of and substitution for the certificate lost,
stolen or destroyed, a new certificate of like tenor and representing an
equivalent amount and kind of shares. If reasonably required by
Parent in connection with replacing a share certificate as aforesaid, the
applicable record holder of such shares shall furnish Parent with an indemnity
on customary terms for such situations, reasonably sufficient to protect Parent
from any out-of-pocket loss which it may suffer from replacing such
certificate.
Section
5.9 Certain
Claims. Without limiting Parent’s obligations under any other
provision of this Agreement (or under any other contractual obligation, or
under
the Certificate of Incorporation or By-laws of Parent), Parent shall (a)
cooperate with the Investors in the defense or settlement of any claim, suit,
litigation, arbitration or proceeding (“Claim”) against Parent and/or its
directors that is brought or asserted by any third party (whether filed in
the
name of a shareholder of Parent or other third party or derivatively in the
name
of Parent) in which any of the Investors or any of their respective Affiliates
is made a party (by subpoena or otherwise), challenging, or otherwise arising
out of or relating to, this Agreement or the ▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and
(b)
reimburse the Investors for reasonable attorney’s fees and expenses incurred by
the Investors or any of their respective Affiliates in connection with any
Claim; provided that (i) each Investor, severally but not jointly,
hereby agrees to cooperate reasonably with Parent in connection with the
defense, or any proposed settlement of, any such Claim; (ii) unless in the
reasonable judgment of the Investors there exists an actual or potential
conflict of interest between Investors, this clause (b) shall apply only to
one
counsel (plus local counsel in each applicable jurisdiction) for all the
Investors (it being understood that this clause (ii) shall not limit any rights
a Person may otherwise have to indemnification or advancement of expenses from
Parent); and (iii) this clause (b) shall not apply to any expenses incurred
in
connection with any Claim brought or asserted by any Person in such Person’s
capacity as a limited partner or other investor in any investment fund
controlled or managed by an Investor.
Section
5.10 Certain Tax
Matters. All transfer, documentary, sales, use, stamp,
registration and other such Taxes, and all conveyance fees, recording charges
and other fees and charges (including any penalties and interest) incurred
in
connection with consummation of the Transactions shall be paid by
Parent.
Section
5.11 Preparation of
the
Proxy Statement; Parent Shareholder Meeting.
(a) As
soon as
practicable following the date of this Agreement (but in any event no later
than
twenty (20) Business Days after the date of this Agreement), Parent shall
prepare in accordance with the provisions of the Securities Act and the Exchange
Act, as applicable, and Parent shall file with the SEC the Proxy
Statement. Each Investor, severally but not jointly, and Parent,
agree to cooperate with each other in connection with the preparation of the
Proxy Statement. Each of the parties shall be provided with
reasonable opportunity to review and comment on drafts of the Proxy Statement
(including each amendment or supplement thereto) and all responses to requests
for additional information by and replies to comments of the SEC, prior to
filing such with or sending such to the SEC, and Parent will provide the
Investors with copies of all such filings made and correspondence with the
SEC. Parent shall include in any such documents or responses all
comments reasonably proposed by the Investors and shall not file, mail or
otherwise deliver such document or respond to the SEC or the staff of the SEC
over an Investor’s reasonable objection. Parent will as promptly as
practicable notify the Investors of (i) the receipt of any oral or written
comments from the SEC with respect to the Registration Statement or the Proxy
Statement, (ii) any request by the SEC for any amendment to the Registration
Statement or the Proxy Statement or comments thereon and responses thereto
or
requests from the SEC for additional information, (iii) the time at which the
Registration Statement has become effective or any supplement or amendment
has
been filed with the SEC, (iv) the issuance of any stop order or (v) the
suspension of the qualification of any of the shares of Parent capital stock
issuable in connection with the Transactions (or shares issuable upon conversion
thereof) for offering or sale in any jurisdiction.
(b) Parent
will
use its commercially reasonable efforts to have the Proxy Statement cleared
by
the SEC as soon as practical after the date hereof. Parent shall take all or
any
action reasonably required under Legal Requirements pertaining to applicable
state securities laws in connection with the issuance of Stage 1 Shares pursuant
to the Stage 1 Purchase Agreement (and shares of Series B Preferred Stock
issuable in exchange for any shares of Series A Preferred Stock) and of the
Convertible Shares in accordance with this Agreement, and the issuance and
delivery of the Conversion Shares. Each Investor, severally but not
jointly, and Parent, agree to furnish all information concerning itself as
the
other may reasonably request in connection with such actions and the preparation
of the Proxy Statement. As promptly as practicable, but in no event
later than the third Business Day after the Registration Statement is declared
effective under the Securities Act, Parent shall mail or cause to be mailed
the
Proxy Statement to its shareholders.
(c) If
at any
time prior to the Parent Shareholder Meeting Date, any information should be
discovered by any party hereto which should be set forth in an amendment or
supplement to the Proxy Statement so that the Proxy Statement would not include
any misstatement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, the party
which
discovers such information shall promptly notify the other parties hereto and,
to the extent required by applicable Legal Requirement, the parties will
cooperate with each other in connection with the preparation of an appropriate
amendment or supplement describing such information, which amendment or
supplement will be promptly filed by Parent with the SEC and, in the case of
any
amendment or supplement to the Proxy Statement, disseminated to the shareholders
of Parent.
(d) Parent
shall,
acting through its Board of Directors and in accordance with applicable Legal
Requirements and the Certificate of Incorporation and the Bylaws of Parent,
(i)
duly call, give notice of, convene and hold the Parent Shareholder Meeting
as
promptly as practicable for the purpose of obtaining the Required Parent
Shareholder Approval, (ii) use its commercially reasonable efforts to hold
the
Parent Shareholder Meeting as soon as practicable after the date on which the
Registration Statement is declared effective under the Securities Act and (iii)
shall in any event hold the Parent Shareholder Meeting within 45 days after
such
effective date. Parent shall solicit proxies in favor of the Required
Parent Shareholder Approval and shall take all other commercially reasonable
action necessary or advisable to secure the Required Parent Shareholder Approval
in accordance with all applicable Legal Requirements and its Governing
Documents. The Proxy Statement shall include the recommendation of
the Board of Directors of Parent to the stockholders of Parent to vote in favor
of the Parent Charter Vote and the Share Issuances (the “Parent Board
Recommendation”) and neither the Board of Directors of Parent nor any
committee thereof shall withhold or withdraw or amend, modify or change in
any
manner adverse to the Investors, or propose to withhold or withdraw or adversely
amend, modify or change, the Parent Board Recommendation.
Section
5.12 Anti-Takeover
Statutes. Parent shall (i) take all action necessary to ensure
that no “business combination”, “fair price”, “control share acquisition” or
other similar anti-takeover statute or regulation, including Section 912 of
the
New York Business Corporation Law, is or becomes applicable to the Transactions
(including the Share Issuances, any other transactions contemplated by this
Agreement or the other Transaction Agreements) or the Collective Transactions
or
to the ownership and voting of such securities deliverable in the Collective
Transactions and (ii) if any such anti-takeover statute or similar statute
or
regulation becomes applicable to any of such transactions or to the ownership
or
voting of any such securities, take all action necessary to ensure that each
of
such transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the other agreements referred to herein
and
otherwise to minimize the effect of such statute or regulation on such
transactions and the ownership and voting of such securities.
Section
5.13 Nasdaq National
Market Listing. Parent shall promptly prepare and file with
Nasdaq a Notification Form for Listing Additional Shares with respect to the
Conversion Shares, and shall use its reasonable efforts to obtain, prior to
the
Closing, approval for the listing of such shares of Parent Common Stock, subject
only to official notice to Nasdaq of issuance, and each Investor, severally
but
not jointly, agrees to cooperate with Parent with respect to such
filing.
Section
5.14 Legends. Each
Investor, severally but not jointly, agrees with Parent not to transfer any
Convertible Shares or Conversion Shares unless (a) there is then in effect
a
registration statement under the Securities Act covering such proposed transfer
or (b) such transfer is made in accordance with Rule 144 under the Securities
Act or another available exemption from registration under the Securities
Act. Certificates representing Convertible Shares issued pursuant to
this Agreement may be imprinted with a legend substantially as follows (in
addition to any legends required pursuant to the Shareholders
Agreement):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE, AND MAY
NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT RELATING THERETO UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR SUCH LAWS.
Securities
law legends on share certificates shall be removed by Parent (and a certificate
without such legend shall be delivered, at Parent’s expense) upon request (i) in
connection with any transfer pursuant to clause (b) of this Section if the
legend is no longer required to ensure compliance with the Securities Act,
or
(ii) in connection with any transfer pursuant to clause (a) of this
Section.
Section
5.15 Use of
Proceeds. Parent shall apply all of the proceeds from the
issuance and sale of Convertible Shares to the Investors pursuant to this
Agreement toward payments of the cash portion of the Merger consideration
pursuant to the Merger Agreement and payments of fees and expenses pursuant
to
Section 8.6 hereof, and the balance for general corporate
purposes.
Section
5.16 Exchange of Series
A Preferred Stock for Series B Preferred Stock. Without limiting
any of Parent’s other obligations contained elsewhere herein:
(a) Parent
hereby
covenants that, at anytime after the date hereof, at an Investor’s request and
to the extent so requested, Parent shall exchange all or any shares of Series
A
Preferred Stock held by such Investor at such time for a like number of shares
of Series B Preferred Stock (such exchange, the “A/B Preferred
Exchange”); provided that, prior to the consummation of any such A/B
Preferred Exchange, such Investor shall have either received Regulatory
Clearance, or represented to Parent that no Regulatory Clearance is required,
in
connection with such A/B Preferred Exchange.
(b) Each
Investor, severally but not jointly, and Parent, shall cooperate with each
other
and use (and shall cause their respective Affiliates to use) their respective
commercially reasonable efforts to take or cause to be taken all actions, and
to
do or cause to be done all things necessary, proper or advisable under all
applicable Contracts and Legal Requirements to obtain all Regulatory Clearance
in anticipation of effecting any A/B Preferred Exchange requested by such
Investor so as to enable such A/B Preferred Exchange to occur as expeditiously
as possible, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports and other filings and
to
obtain as promptly as practicable all waivers, consents, registrations,
approvals, permits and authorizations necessary or advisable to be obtained
from
CMS and/or any other Governmental Authority or other third party (hereinafter
referred to as “A/B Consents”) and to lift any injunction or other legal
bar to such A/B Preferred Exchange in order to consummate such A/B Preferred
Exchange as promptly as practicable. All costs incurred in connection
with obtaining such A/B Consents, including CMS consent fees and expert
consultant fees, shall be borne by Parent. HSR filing fees shall be
borne by Parent. Each Investor, severally but not jointly, and
Parent, agrees to make appropriate filings with all appropriate Governmental
Authorities, including insurance regulators, other competition authorities
and
CMS (or cause their respective Affiliates to make such filings, as applicable)
promptly after the date of this Agreement in anticipation of any A/B Preferred
Exchange and shall supply as promptly as practicable to such Governmental
Authority any additional information and documentary material that may be
requested in connection therewith. Each Investor, severally but not
jointly, and Parent, agrees to (and to cause their respective Affiliates to)
respond as promptly as practicable to any inquiries received from such
Governmental Authority for additional information or documentation and to all
inquiries and requests received from any other Governmental Authority in
connection with A/B Consents.
(c) Parent
shall
(and shall cause its Affiliates to) offer to take (and if such offer is
accepted, commit to take) all reasonable steps to avoid or eliminate impediments
under any antitrust, competition, or trade regulation Legal Requirement that
may
be asserted by the FTC, the Antitrust Division or any other Governmental
Authority with respect to any A/B Preferred Exchange so as to enable such A/B
Preferred Exchange to occur as expeditiously as possible;
provided, however, that nothing in this Agreement will
require, or be deemed to require, Parent to agree to or effect any
divestiture. In addition, nothing in this Agreement will require or
be deemed to require Parent to take any other action with respect to any A/B
Preferred Exchange (including agreeing to any requirements or conditions to
be
imposed in order to obtain CMS or insurance regulatory consents or approvals)
if
doing so would be materially detrimental to the business conducted by Parent
or
MemberHealth taken as a whole. Subject to the foregoing
sentence, Parent shall cooperate in a reasonable manner with the Investors
in
connection with Investors’ efforts to seek consents and approvals from
Governmental Authorities in anticipation of effecting any A/B Preferred Exchange
(including by keeping the Investors informed on a reasonably current basis
of
the status of such efforts and using its commercially reasonable efforts to
permit the representatives of the Investors to attend any meetings between
Parent's representatives and Governmental Authorities).
(d) In
the event
any claim, action, suit, investigation or other proceeding by any Governmental
Authority or other Person is commenced which questions the validity or legality
of any A/B Preferred Exchange or seeks damages in connection therewith, each
Investor, severally but not jointly, and Parent, agree to cooperate and use
commercially reasonable efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order is issued
in any such action, suit or other proceeding, to use commercially reasonable
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of such A/B
Preferred Exchange.
(e) Notwithstanding
the
foregoing or any other provision of this Agreement, nothing in this Section
5.16 shall require any Investor to (i) offer, accept or agree to (A) dispose
or hold separate any businesses, assets or operations, (B) restrict the manner
in which, or whether, such Investor or any of its Affiliates may carry on
business or compete in any geographic area or line of business, and/or (C)
any
limitations with respect to its or its Affiliates’ ownership or voting of Parent
capital stock, or (ii) obligate any Investor to litigate or threaten any
litigation.
(f) Parent
agrees
to use its commercially reasonable efforts to obtain, at the earliest
practicable date, the Parent Charter Vote. Upon obtaining the Parent
Charter Vote, Parent shall promptly duly file the Charter Amendment with the
Secretary of State of the State of New York in accordance with all applicable
provisions of the Business Corporation Law of the State of New York, and shall,
with respect to each then outstanding share of Series A Preferred Stock, on
or
after the first anniversary of the original issue date of such share of Series
A
Preferred Stock, effect an exchange of such share of Series A Preferred Stock
for shares of a class of non-voting Parent Common Stock authorized to be issued
by Parent under the Charter Amendment, which exchange shall be effected in
accordance with the provisions of the Series A Preferred Stock Certificate
of
Designation as if such share of Series A Preferred Stock is being converted
into
Parent Common Stock (in the form of such class of non-voting Parent Common
Stock) under Section 8 of the Series A Preferred Stock Certificate of
Designations and at the conversion rate specified therein (without giving effect
to the provisions of Section 8(a) of the Series A Preferred Stock Certificate
of
Designation).
CONDITIONS
TO CLOSING
Section
6.1 Mutual
Conditions. The respective obligations of each party to
consummate the transactions contemplated by this Agreement shall be subject
to
the fulfillment or waiver at or prior to the Closing of each of the following
conditions, any and all of which may be waived, in whole or in part, by Parent,
on the one hand, and unanimous consent of the Investors, on the other hand,
to
the extent permitted by applicable law:
(a) No
Injunction. At the Closing there shall be no effective
injunction, writ or preliminary restraining order or any order of any nature
issued by a court or Governmental Authority of competent jurisdiction to the
effect that any of the Collective Transactions contemplated by this Agreement,
the other Transaction Agreements or the Merger Agreement may not be consummated
as herein and therein provided.
(b) Filings
and Consents. All material consents, authorizations, orders or
approvals of, and filings or registrations with, any state insurance regulators
or other Governmental Authority which are required in connection with the
consummation of the Collective Transactions, as disclosed in Schedule
6.1(b), shall have been obtained or made and shall be in full force and
effect and shall not be subject to any materially adverse conditions (other
than
voting restrictions) imposed by such regulators.
(c) HSR
Waiting Period. Any waiting period (and any extension thereof)
under the HSR Act applicable to the Collective Transactions shall have expired
or shall have been terminated.
(d) Required
Stockholder Approval. The Required Parent Shareholder Approval
shall have been obtained at the Parent Shareholder Meeting in accordance with
the New York Business Corporation Law, the Nasdaq Marketplace Rules and the
Certificate of Incorporation and Bylaws of Parent.
Section
6.2 Conditions to the
Obligations of Parent. The obligations of Parent to consummate
the transactions contemplated by this Agreement shall be subject to the
fulfillment prior to or at Closing of each of the following conditions, any
and
all of which may be waived, in whole or in part, by Parent, to the extent
permitted by applicable law:
(a) Representations
and Warranties of the Investors. The representations and
warranties made by the Investors in Article 3 shall be true and correct
(disregarding all qualifications relating to materiality or an Investor Material
Adverse Effect) as of the date of this Agreement and as of the Closing Date
as
though such representations and warranties were made as of the Closing Date
(or,
in the case of any representation or warranty which specifically relates to
an
earlier date, as of such date), except to the extent the failure of such
representations and warranties to be so true and correct as of such dates,
individually or in the aggregate, would not have an Investor Material Adverse
Effect.
(b) Performance
of Obligations. The Investors shall have duly performed or
complied with, in all material respects, all of the covenants to be performed
or
complied with by them under the terms of this Agreement prior to or at
Closing.
(c) Closing
Deliveries. Prior to or at the Closing, the Investors shall have
delivered (or caused to be delivered) the following closing documents in the
form referred to below or otherwise in form and substance reasonably acceptable
to Parent:
(i) a
certificate
of an officer of each Investor, dated the Closing Date, to the effect that
(1)
the Person signing such certificate is familiar with this Agreement and (2)
the
conditions specified in Sections 6.2(a) and (b), to the extent
relating to the representations, warranties and covenants of such Investor,
have
been satisfied; and
(ii) the
Shareholders Agreement, executed by the Investors.
(d) Satisfaction
of
Merger Agreement Conditions. All conditions precedent set forth
in Sections 6.1 and 6.2 of the Merger Agreement shall have been satisfied and
each of the parties to the Merger Agreement (other than Parent and its
Subsidiaries) shall have confirmed that they are ready, willing and able to
consummate the Merger concurrently with the Closing under this
Agreement.
Section
6.3 Conditions to the
Obligations of the Investors. The obligations of the Investors to
consummate the transactions contemplated by this Agreement shall be subject
to
the fulfillment at or prior to the Closing of each of the following conditions,
any and all of which may be waived in whole or in part by unanimous consent
of
the Investors, to the extent permitted by applicable law:
(a) Representations
and Warranties. (i) Other than with respect to Sections
4.1, 4.2, 4.5, 4.9(a) (first sentence only),
4.21, 4.22, 4.23, 4.24, 4.25,
4.26,
4.27 and 4.28, the representations and warranties made by Parent
in Article 4 shall be true and correct (disregarding all qualifications
relating to materiality or a Parent Material Adverse Effect) as of the date
of
this Agreement and as of the Closing Date as though such representations and
warranties were made as of the Closing Date (or, in the case of any
representation or warranty which specifically relates to an earlier date, as
of
such date), except to the extent the failure of such representations and
warranties to be so true and correct as of such dates, individually or in the
aggregate, would not have a Parent Material Adverse Effect, (ii) the
representations and warranties made by Parent in Sections 4.1,
4.2, 4.5, 4.21, 4.22, 4.23, 4.24,
4.25, 4.26, 4.27
and 4.28 shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though such representations and warranties were made as of the Closing
Date (or, in the case of any representation or warranty which specifically
relates to an earlier date, as of such date), and (iii) the representation
contained in clause (a) of the first sentence of Section 4.9 shall be
true and correct in all respects.
(b) Performance
of
Obligations. Parent shall have duly performed or complied with,
in all material respects, all of the covenants, obligations and conditions
to be
performed or complied with by Parent under the terms of this Agreement prior
to
or at the Closing.
(c) No
Material Adverse Change. Since the date of this Agreement there
shall not have occurred any event, development or occurrence of any condition
that has had, or would reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
(d) Nasdaq
Listing. The Conversion Shares shall have been approved for
quotation on the Nasdaq Global Select Market, subject to official notice of
issuance.
(e) Charter
Amendment. The Charter Amendment shall have been duly filed with,
and accepted for filing by, the Secretary of State of the State of New York
pursuant to all applicable provisions of the Business Corporation Law of the
State of New York, and shall be in full force and effect, and the Investors
shall have received a copy of such due filing.
(f) Satisfaction
of
Merger Agreement Conditions. All conditions precedent set forth
in Sections 6.1 and 6.2 of the Merger Agreement (as in effect on the date of
this Agreement) (other than the condition in Section 6.2(d) of the Merger
Agreement) shall have been satisfied, without (A) waiver of any such condition
precedent or (B) amendment or other modification of any term set forth in such
Merger Agreement from the original execution version attached hereto as
Exhibit A, unless such waiver, amendment or modification (as the case may
be) shall have been approved in writing by all parties to this Agreement;
provided, however, that, for purposes of this Section
6.3(f): (x) when the term “Company Material Adverse Effect” is used
in Sections 6.2(a) and 6.2(c) of the Merger Agreement (or in any related
certificates deliverable pursuant to Section 6.2(e)(i) of the Merger Agreement,
to the extent such certificates certify that the conditions specified in
Sections 6.2(a) and 6.2(c) of the Merger Agreement have been satisfied), it
shall be deemed to be replaced with the term “Parent Material Adverse Effect”
(as defined in this Agreement), and (y) the figure “95%” when used in clauses
(v) and (vi) of Section 6.2(e) of the Merger Agreement shall be deemed to be
replaced with “75%”. At the Closing, each of the parties to the
Merger Agreement shall have confirmed that they are ready, willing and able
to
consummate the Merger concurrently with the Closing under this
Agreement.
(g) Board
of
Directors. The Board of Directors of Parent shall have been
reconstituted as contemplated by the Shareholders Agreement.
(h) Closing
Deliveries. Prior to or at the Closing, Parent shall have
delivered to the Investors the following closing documents in the form referred
to below or otherwise in form and substance reasonably acceptable to the
Investors:
(i) certificates
of officers of Parent, dated the Closing Date, to the effect that (1) the Person
signing such certificate is familiar with the Agreement and (2) the conditions
specified in Sections 6.3(a), (b), (c), (d),
(e), and (f) have been satisfied;
(ii) certified
copies of the resolutions of the board of directors and stockholders of Parent
authorizing the execution and delivery of this Agreement and the other
Transaction Agreements and the consummation of the Transactions;
(iii) an
opinion of
Dechert LLP, dated as of the Closing Date, in the form of Exhibit
6.3(h)(iii);
(iv) the
Shareholders Agreement and the Registration Rights Agreement, executed and
delivered by Parent; and
(v) the
certificates (in definitive form) for the Convertible Shares pursuant to Section
2.2 hereof, duly executed on behalf of Parent and registered in the names of
the
applicable Investors (or their respective designees) representing the number
of
Convertible Shares purchased pursuant to this Agreement.
Section
6.4 Frustration of
Closing Conditions. No party hereto may rely on the failure of
any condition set forth in this Article 6 if such party’s failure to
comply with any provision of this Agreement was a proximate cause of such
failure of such condition.
TERMINATION
Section
7.1 Termination. This
Agreement may be terminated and the transactions contemplated by this Agreement
abandoned at any time prior to the Closing:
(a) by
mutual
written consent of Parent and the Investors;
(b) by
either
Parent or the Investors, if the Closing shall not have been consummated on
or
before October 7, 2007 (the “Termination Date”), unless extended by
written agreement of the Investors and Parent; provided, that the right
to terminate this Agreement under this paragraph shall not be available to
any
party whose failure to fulfill any obligation under this Agreement has been
the
primary cause of the failure of the Closing to occur on or prior to such date;
and provided further that the Investors or Parent may extend the
Termination Date by not more than sixty (60) days if the Closing does not occur
by October 7, 2007 as a result of the failure to satisfy the conditions set
forth in (i) Sections 6.1(b) or (c) of this Agreement or (ii)
Sections 6.1(b), (c) or (e) of the Merger Agreement as in
effect on the date of this Agreement;
(c) by
the
Investors, if there has been a breach of any representation, warranty or
covenant made by Parent in this Agreement, such that the conditions in
Section 6.3 are not capable of being satisfied and which have not been
cured by Parent within fifteen (15) Business Days after receipt of written
notice from the Investors requesting such breach to be cured; provided
that the right to terminate this Agreement pursuant to this Section
7.1(c) shall not be available to the Investors if the failure of the
Investors to fulfill any of their obligations under this Agreement has been
a
proximate cause of such breach;
(d) by
Parent, if
there has been a breach of any representation, warranty or covenant made by
the
Investors in this Agreement, such that the conditions in Section 6.2 are
not capable of being satisfied and which have not been cured by the Investors
within fifteen (15) Business Days after receipt of written notice from Parent
requesting such breach to be cured; provided that the right to terminate
this Agreement pursuant to this Section 7.1(d) shall not be available to
Parent if the failure of Parent to fulfill any of its obligations under this
Agreement has been a proximate cause of such breach;
(e) by
either the
Investors or Parent, if any Governmental Authority shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the consummation of the Collective Transactions and such order,
decree, ruling or other action shall have become final and
nonappealable;
(f) by
Parent or
the Investors, if the Parent Shareholder Meeting is held (and not adjourned)
and
Parent fails to obtain the Required Parent Shareholder Approval at the Parent
Shareholder Meeting (or any reconvened meeting after any adjournment thereof);
or
(g) by
Parent or
the Investors, if the Merger Agreement shall have been terminated in accordance
with its terms.
Section
7.2 Effect of
Termination. If this Agreement is terminated pursuant to
Section 7.1, all rights and obligations of the parties hereunder
shall terminate and no party shall have any liability to the other party, except
for obligations of the parties hereto in Sections 5.1(b),
5.6, 5.9 and 7.2 and Article 8 (including any
definitions set forth in Article I that are used in such sections), which
shall survive the termination of this Agreement. Notwithstanding
anything to the contrary contained herein, termination of this Agreement
pursuant to Section 7.1 shall not release any party from any liability
for any material breach by such party of the terms and provisions of this
Agreement prior to such termination.
MISCELLANEOUS
Section
8.1 Survival. The
representations and warranties contained in or made pursuant to this Agreement
or in any certificate delivered pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing for a period beginning
on the Closing Date and ending on the twelve month anniversary of the Closing
Date; provided, that the representations and warranties set forth in
Sections 4.1 (first sentence only), 4.2, 4.5, 4.12, 4.21, 4.22, 4.23, 4.24,
4.25, 4.26, 4.27 and 4.28, and corresponding representations and warranties
in
any certificate (collectively, the “Specified Representations”) shall
survive the execution and delivery of this Agreement and the Closing
indefinitely. All covenants and agreements that contemplate
performance after the Closing contained herein shall survive the Closing
indefinitely or for any shorter period expressly specified in accordance with
their terms. Notwithstanding the preceding sentences, if notice of an
indemnification claim shall have been delivered before the aforementioned time
period has elapsed with respect to any breach of any such representation,
warranty, covenant or agreement, such representation, warranty, covenant or
agreement shall survive until such claim is finally resolved.
Section
8.2 Indemnification.
(a) Indemnification
by
Parent. Subject to the limitations set forth in this Section
8.2, from and after the Closing Date, Parent shall indemnify and hold
harmless each of the Investors and each of their respective direct or indirect
Affiliates, officers, directors, members, managers, partners, employees, agents
and other representatives (collectively, the “Investor Indemnified
Persons”), from, against and in respect of any and all liabilities, losses,
damages, fines, penalties, fees, costs and expenses (in each case, including
reasonable attorneys’ fees and expenses), whether or not involving a third party
claim (collectively, “Losses”), incurred or suffered by such Investor
Indemnified Persons as a result of:
(i) any
breach
of, or inaccuracy in, any representation or warranty made by Parent in this
Agreement or in any certificate delivered pursuant to this Agreement;
or
(ii) any
breach or
violation of any covenant or agreement of Parent pursuant to this Agreement
or
the other Transaction Agreements.
For
the
purposes of clause (i) of this Section 8.2(a), the representations and
warranties of Parent contained in Article 4 of this Agreement (other than the
first sentence of Section 4.9), or in any certificate delivered pursuant
to this Agreement, shall be read as if all qualifications as to materiality,
including each reference to the terms and phrases “material”, “in all material
respects” or like phrases, and the defined term “Parent Material Adverse
Effect”, were deleted therefrom in determining whether there has been a breach
of any such representation or warranty.
(b) Limitations
on
Liability.
(i) Investor
Indemnified Persons shall not be entitled to assert any claim for
indemnification under Section 8.2(a)(i) until such time as the aggregate
of all indemnifiable Losses that Investor Indemnified Persons may have under
Section 8.2(a)(i) exceed $5,000,000, and then Parent shall be responsible
for all Losses except the first $2,500,000 of such $5,000,000
threshold.
(ii) The
maximum
aggregate liability of Parent for indemnification claims under Section
8.2(a)(i) shall be limited to $37,500,000.
(iii) The
limitations set forth in Section 8.2(b)(i) and (ii) shall not be
applicable to Losses incurred or suffered by Investor Indemnified Persons as
a
result of (A) any breach of, or inaccuracy in, the Specified Representations
or
(B) fraud, intentional misrepresentation or intentional omission by
Parent.
(iv) The
amount of
Losses for which indemnification is available under this Section 8.2
shall be calculated net of any amounts actually recovered by the Person entitled
to seek indemnification hereunder (the “Indemnified Person”) under
insurance policies with respect to such Losses.
(c) Payment
of
Claims. If Parent shall be required to make an indemnification
payment to any Investor Indemnified Person pursuant to this Article 8,
Parent shall satisfy the claim of such Investor Indemnified Person through
a
payment of immediately available funds.
(d) Third
Party Claims.
(i) Notice
of
Claim. If any third party notifies an Indemnified Person with
respect to any matter (a “Third Party Claim”) which may give rise to a
claim for indemnification against an Indemnifying Party, then the Indemnified
Person will promptly (and, in any event, within twenty (20) Business Days)
give
written notice thereof to the party required to provide indemnification under
this Section 8.2 (the “Indemnifying Party”); provided, that
no delay on the part of the Indemnified Person in notifying the Indemnifying
Party will relieve the Indemnifying Person from any obligation under this
Article 8, except to the extent such delay actually and materially
prejudices the Indemnifying Party.
(ii) Assumption
of Defense, etc. The Indemnifying Party will be entitled to
participate in the defense of any Third Party Claim that is the subject of
a
notice given by the Indemnified Person pursuant to Section
8.2(d)(i). In addition, upon written notice to the Indemnified
Person, the Indemnifying Party will have the right to defend the Indemnified
Person against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Person. In such event, the
Indemnified Person may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party
Claim. Notwithstanding the foregoing, the Indemnifying Person will
not consent to the entry of any judgment or enter into any compromise or
settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Person unless such judgment, compromise or settlement
(A) provides for the payment by the Indemnifying Party of money as sole relief
for the claimant and (B) results in the full and general release of all
Indemnified Persons from all liabilities arising or relating to, or in
connection with, the Third Party Claim.
(iii) Indemnified
Party’s Control. If the Indemnifying Party does not deliver the
notice contemplated by Section 8.2(d)(ii) within twenty (20) days after
the Indemnified Party has given notice of the Third Party Claim pursuant to
Section 8.2(d)(i), the Indemnified Party may defend, and may consent to
the entry of any judgment or enter into any compromise or settlement with
respect to, the Third Party Claim.
(e) Tax
Treatment. The parties will treat any payment received pursuant
to this Section 8.2 as an adjustment to purchase price for Tax and
financial reporting purposes, to the extent permissible under applicable Legal
Requirements.
Section
8.3 Notices. All
notices or other communications required or permitted under this Agreement
shall
be in writing and shall be delivered personally, by facsimile or sent by
certified, registered or express air mail, postage prepaid, and shall be deemed
given when so delivered personally, or by facsimile, or if mailed, two (2)
days
after the date of mailing, as follows:
If
to
Parent:
Universal
American Financial Corp.
▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇)
▇▇▇-▇▇▇▇
with
a
required copy (which shall not constitute notice) to:
Dechert
LLP
▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇
▇▇▇▇▇, Esq.
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
If
to
WCAS:
Welsh,
Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇
▇. ▇▇▇▇▇▇▇
with
required copies (which shall not constitute notice) to:
Ropes
& ▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esq. and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
-
and-
Weil,
Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
If
to
▇▇▇:
▇▇▇
Equity Partners
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇
▇▇▇▇▇▇▇/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
with
required copies (which shall not constitute notice) to:
Weil,
Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
If
to
Perry:
Perry
Capital
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇. ▇▇▇▇
with
required copies (which shall not constitute notice) to:
Cravath,
Swaine & ▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇
▇▇▇▇▇▇, Esq.
-
and -
Weil,
Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
If
to
Union Square:
Union
Square Partners
▇▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇
Spass/▇▇▇▇ ▇▇▇▇▇▇▇▇
with
required copies (which shall not constitute notice) to:
Weil,
Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
number: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Esq.
or
to
such other address as any party hereto shall notify the other parties hereto
(as
provided above) from time to time.
Section
8.4 Exhibits and
Schedules. All exhibits and schedules hereto, or documents
expressly incorporated into this Agreement, are hereby incorporated into this
Agreement and are hereby made a part hereof as if set out in full in this
Agreement. The inclusion of any information in the Disclosure Schedules will
not
be deemed an admission or acknowledgment, in and of itself and solely by virtue
of the inclusion of such information in the Disclosure Schedules, that such
information is required to be listed in any Disclosure Schedule or that such
items are material to any party hereto or any of their respective
Subsidiaries. The headings, if any, of the individual sections of
each of the Disclosure Schedules are inserted for convenience only and will
not
be deemed to constitute a part thereof or a part of the
Agreement. The Disclosure Schedules are arranged in sections and
subsections that correspond to the sections and subsections of this Agreement
merely for convenience, and the disclosure of an item in one section or
subsection of the Disclosure Schedules as an exception to a particular covenant,
representation or warranty will be deemed adequately disclosed as an exception
with respect to all other covenants, representations or warranties herein to
the
extent that the relevance of such item to such other covenants, representations
or warranties is reasonably apparent on its face, notwithstanding (x) the
presence or absence in this Agreement of an appropriate reference to the section
or subsection of the Disclosure Schedules, (y) the presence or absence in the
Disclosure Schedules of an appropriate reference to the section or subsection
of
this Agreement to which such disclosure relates or (z) an appropriate
cross-reference thereto.
Section
8.5 Time of the
Essence; Computation of Time. Time is of the essence for each and
every provision of this Agreement. Whenever the last day for the
exercise of any privilege or the discharge or any duty hereunder shall fall
upon
a day that is not a Business Day, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding day which
is a regular Business Day.
Section
8.6 Expenses and
Fees. Except as otherwise set forth in this Agreement, if the
transactions provided for in this Agreement are not consummated, each party
hereto shall pay its own expenses incident to this Agreement. If the
transactions provided for in this Agreement are consummated, Parent shall,
in
addition to paying all of its own expenses incident to this Agreement, also
(a)
pay the expenses of the Investors incident to this Agreement (including fees
and
expenses of financial advisors, outside legal counsel and accountants), and
in
addition (b) pay to the Investors the fees separately agreed among the Investors
and Parent.
Section
8.7 Governing
Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the schedules
and
exhibits hereto 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 that would cause the application of the laws of
any
jurisdiction other than the State of New York.
Section
8.8 Jurisdiction and
Venue; Waiver of Jury Trial. Each of the parties submits to the
exclusive jurisdiction of any state or federal court sitting in New York, New
York, in any action or proceeding arising out of or relating to this Agreement,
agrees that all claims in respect of the action or proceeding may be heard
and
determined in any such court and agrees not to bring any action or proceeding
arising out of or relating to this Agreement in any other court. Each
of the parties waives any defense of inconvenient forum to the maintenance
of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect
thereto. Each party agrees that service of summons and complaint or
any other process that might be served in any action or proceeding may be made
on such party by sending or delivering a copy of the process to the party to
be
served at the address of the party and in the manner provided for the giving
of
notices in Section 8.3. Nothing in this Section 8.8,
however, shall affect the right of any party to serve legal process in any
other
manner permitted by law. Each party agrees that a final,
non-appealable judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT.
Section
8.9 Assignment;
Successors and Assigns; No Third Party Rights. Except as
otherwise provided herein, this Agreement may not, without the prior written
consent of the other parties hereto, be assigned by any party hereto by
operation of law or otherwise, and any attempted assignment shall be null and
void; provided that, (a) without the consent of any other parties
hereto, each Investor may assign its rights hereunder to one or more Affiliates
of such Investor, and (b) without the consent of any other parties hereto,
each
Investor may assign up to 20% of its equity purchase commitment hereunder to
(i)
any Permitted Transferees (as defined in the Shareholders Agreement) or (ii)
any
other co-investors, provided in the case of (ii) that such Investor shall
maintain beneficial ownership (within the meaning of Rules 13d-3 and 13d-5
under
the Exchange Act) of all Parent shares directly or indirectly owned by such
assignees through such Investor maintaining voting discretion and voting control
over all such shares pursuant to a written agreement, and the assignee shall,
to
the extent requested by the parties hereto other than the assigning Investor,
become a party to the Shareholders Agreement at the Closing; provided
that no such assignment under clause (a) or (b) of this sentence shall relieve
the assignor Investor of any of its obligations hereunder that shall have not
been performed timely by the assignee. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors, permitted assigns and legal
representatives. Notwithstanding the foregoing or anything to the
contrary, WCAS shall not assign any of its rights hereunder to Welsh, Carson,
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ IX, L.P. Except as set forth in Section
8.2, this Agreement shall be for the sole benefit of the parties to this
Agreement and their respective heirs, successors, permitted assigns and legal
representatives and is not intended, nor shall be construed, to give any Person,
other than the parties hereto and their respective heirs, successors, permitted
assigns and legal representatives, any legal or equitable right, remedy or
claim
hereunder. Nothing in this Agreement, expressed or implied, is
intended to or shall constitute the parties hereto partners or participants
in a
joint venture.
Section
8.10 Counterparts. This
Agreement may be executed in one or more counterparts for the convenience of
the
parties hereto, each of which shall be deemed an original and all of which
together will constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile or
other
electronic delivery shall be effective as delivery of a mutually executed
counterpart to this Agreement.
Section
8.11 Titles and
Headings. The titles, captions and table of contents in this
Agreement are for reference purposes only, and shall not in any way define,
limit, extend or describe the scope of this Agreement or otherwise affect the
meaning or interpretation of this Agreement.
Section
8.12 Entire
Agreement. This Agreement (including the Schedules and Exhibits
attached hereto) and the Confidentiality Agreement, constitute the entire
agreement among the parties with respect to the matters covered hereby and
supersedes all previous written, oral or implied understandings among them
with
respect to such matters.
Section
8.13 Severability. The
invalidity of any portion hereof shall not affect the validity, force or effect
of the remaining portions hereof. If it is ever held that any
restriction hereunder is too broad to permit enforcement of such restriction
to
its fullest extent, such restriction shall be enforced to the maximum extent
permitted by law.
Section
8.14 No Strict
Construction. Each of the parties hereto acknowledges that this
Agreement has been prepared jointly by the parties hereto, and shall not be
strictly construed against any party.
Section
8.15 Specific
Performance. Each of the parties acknowledges that the rights of
each party to consummate the transactions contemplated hereby are unique and
recognize and affirm that in the event of a breach of this Agreement by any
party, money damages may be inadequate and the non-breaching party may have
no
adequate remedy at law. Accordingly, the parties agree that such
non-breaching party shall have the right, in addition to any other rights and
remedies existing in their favor at law or in equity, to enforce their rights
and the other party’s obligations hereunder by an action or actions for specific
performance, injunctive and/or other equitable relief (without posting of bond
or other security).
Section
8.16 Failure or
Indulgence not Waiver. No failure or delay on the part of any
party hereto in the exercise of any right hereunder shall impair such right
or
be construed to be waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or
any
other right. No provision of this Agreement may be waived except by
an instrument in writing executed by the party or parties, as applicable,
against whom the waiver is to be effective.
Section
8.17 Amendments. Subject
to applicable law, this Agreement may be amended by the parties hereto at any
time prior to the Closing. This Agreement (including the provisions
of this Section 8.17) may not be amended or modified except by an
instrument in writing signed on behalf of the parties hereto. Between
the date hereof and the Closing, Parent shall not agree to, or enter into,
any
amendment to the Merger Agreement or any agreement with an Investor unless
all
Investors have consented thereto (such consent not to be unreasonably withheld
or delayed).
Section
8.18 Nature of
Investors’ Obligations and Rights.
(a) The
obligations of each Investor under this Agreement or any other Transaction
Agreement are several and not joint with the obligations of any other Investor,
and no Investor shall be responsible in any way for the performance of the
obligations of any other Investor under this Agreement or any other Transaction
Agreement. Nothing contained herein or in any other Transaction
Agreement, and no action taken by any Investor pursuant hereto or thereto,
shall
be deemed to constitute the Investors as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Investors
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by this Agreement or the other Transaction
Agreements. Each Investor confirms that it has independently
participated in the negotiation of the transactions contemplated
hereby. All rights, powers and remedies provided to the Investors
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative or exclusive, 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 rights, powers or remedies by such
party.
(b) No
information made available or provided to an Investor pursuant to any provision
of Article 5 of this Agreement, or otherwise obtained or known to an Investor
other than on account of being expressly disclosed in the Parent Disclosure
Schedule, shall limit or otherwise affect the remedies available to the
Investors, or the representations or warranties of, or the conditions to the
obligations of, the Investors hereunder.
(c) Notwithstanding
anything to the contrary, in no event shall any Investor’s aggregate liability
under this Agreement exceed an amount equal to the respective purchase price
such Investor may be obligated to pay pursuant to Section
2.1. In addition, notwithstanding anything to the
contrary, in no event shall any Investor be liable for consequential,
incidental, punitive or special damages, including loss of future revenue,
income or profits, diminution of value or loss of business opportunity (provided
that the limitation in this sentence shall not limit Parent’s rights to recover
contract damages from an Investor in connection with a failure by such Investor
to close on the purchase of Convertible Shares in violation of this
Agreement).
(d) This
Agreement may only be enforced against, and any claims or causes of action
that
may be based upon, arise out of or relate to this Agreement, or the negotiation,
execution or performance of this Agreement may only be made against, the
entities that are expressly identified as parties hereto and their respective
successors and assigns, and no past, present or future Affiliate, director,
officer, employee, incorporator, member, manager, partner, stockholder, agent,
attorney or representative of any party hereto shall have any liability for
any
obligations or liabilities of the parties to this Agreement or for any claim
based on, in respect of, or by reason of, the negotiation, execution or
performance of this Agreement or the transactions contemplated
hereby.
* * * * * * *
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed as of the day and year first above
written.
| UNIVERSAL AMERICAN FINANCIAL CORP. | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
| Title: CEO | |||
| ▇▇▇-UNIVERSAL HOLDINGS, LLC | |||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
| Title: CFO | |||
|
WELSH,
CARSON, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, X, L.P.,
By:
WCAS X ASSOCIATES, LLC, its General Partner
|
|||
|
|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |||
| Title: Managing Member | |||
|
UNION
SQUARE UNIVERSAL PARTNERS, L.P.
By:
UNION SQUARE UNIVERSAL GP, LLC, its General Partner
|
|||
|
|
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| Title: Authorized Signatory | |||
|
PERRY
PARTNERS, L.P.,
By: PERRY
CORP., its General Partner
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |||
| Title: General Counsel | |||
|
PERRY
PARTNERS INTERNATIONAL, INC.
By: PERRY
CORP., its Investment Manager
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |||
| Title: General Counsel | |||
|
PERRY
COMMITMENT FUND, L.P.,
By:
PERRY COMMITMENT ASSOCIATES, LLC,
its General Partner,
By: PERRY
CORP., its Managing Member
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |||
| Title: General Counsel | |||
|
PERRY
COMMITMENT MASTER FUND,
L.P.,
By:
PERRY COMMITMENT ASSOCIATES,
LLC, its General Partner,
By: PERRY
CORP., its Managing Member
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |||
| Title: General Counsel | |||
52