SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
United Payors & United Providers, Inc.
--------------------------------------
(Name of Issuer)
Common Stock (par value $.01 per share)
---------------------------------------
(Title of Class of Securities)
911319101
---------
(CUSIP Number)
Capital Z Partners, Ltd.
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: Mr. David A. Spuria
Tel. No. (212) 898-8700
-----------------------
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
March 4, 1999
-------------
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this statement because of Rule 13d-1(e), 13(d)-1(f) or 13d-1(g), check the
following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedules, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section of the Exchange Act but shall be subject to all other provisions of the
Exchange Act.
NYFS08...:\60\33560\0019\2355\SCH2109S.07D
<PAGE>
SCHEDULE 13D
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
CUSIP NO. 911319101 PAGE 2 OF 22 PAGES
- -----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
<S> <C>
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Capital Z Financial Services Fund II, L.P.
- -------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO - Contributions from Partners
- -------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------------
6 CITIZEN OR PLACE OF ORGANIZATION
Bermuda
- -------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 3,982,816
BENEFICIALLY OWNED BY EACH
REPORTING
PERSON
WITH
----------------------------------------------------
8 SHARED VOTING POWER
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
3,982,816
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,982,816
- -------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- -------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.8%
- -------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- -------------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- -----------------------------------------------------------------------------------
CUSIP NO. 911319101 PAGE 3 OF 22 PAGES
- -----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Capital Z Financial Services Private Fund II, L.P.
- -------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO - Contributions from Partners
- -------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- -------------------------------------------------------------------------------------
6 CITIZEN OR PLACE OF ORGANIZATION
Bermuda
- -------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 17,184
BENEFICIALLY OWNED BY EACH
REPORTING
PERSON
WITH
----------------------------------------------------
8 SHARED VOTING POWER
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
17,184
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
- -------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
17,184
- -------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [X]
- -------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.1%
- -------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- -------------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- -----------------------------------------------------------------------------------
CUSIP NO. 911319101 PAGE 4 OF 22 PAGES
- -----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Capital Z Partners, L.P.
- -------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
00 - CONTRIBUTIONS FROM PARTNERS
- -------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
- -------------------------------------------------------------------------------------
6 CITIZEN OR PLACE OF ORGANIZATION
BERMUDA
- -------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY OWNED BY EACH
REPORTING
PERSON
WITH
----------------------------------------------------
8 SHARED VOTING POWER
4,000,000
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,000,000
- -------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
- -------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- -------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.8%
- -------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- -------------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- -----------------------------------------------------------------------------------
CUSIP NO. 911319101 PAGE 5 OF 22 PAGES
- -----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CAPITAL Z PARTNERS, LTD.
- -------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
00 - CONTRIBUTIONS FROM STOCKHOLDERS
- -------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
- -------------------------------------------------------------------------------------
6 CITIZEN OR PLACE OF ORGANIZATION
BERMUDA
- -------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY OWNED BY EACH
REPORTING
PERSON
WITH
----------------------------------------------------
8 SHARED VOTING POWER
4,000,000
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,000,000
- -------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
- -------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- -------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.8%
- -------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- -------------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- -----------------------------------------------------------------------------------
CUSIP NO. 911319101 PAGE 6 OF 22 PAGES
- -----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
STEVEN M. GLUCKSTERN
- -------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- -------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
- -------------------------------------------------------------------------------------
6 CITIZEN OR PLACE OF ORGANIZATION
USA
- -------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY OWNED BY EACH
REPORTING
PERSON
WITH
----------------------------------------------------
8 SHARED VOTING POWER
4,000,000
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,000,000
- -------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
- -------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- -------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.8%
- -------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- -------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------
CUSIP NO. 911319101 PAGE 7 OF 22 PAGES
- -----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ROBERT A. SPASS
- -------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
PF
- -------------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E) [ ]
- -------------------------------------------------------------------------------------
6 CITIZEN OR PLACE OF ORGANIZATION
BERMUDA
- -------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY OWNED BY EACH
REPORTING
PERSON
WITH
----------------------------------------------------
8 SHARED VOTING POWER
4,000,000
----------------------------------------------------
9 SOLE DISPOSITIVE POWER
-0-
----------------------------------------------------
10 SHARED DISPOSITIVE POWER
4,000,000
- -------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,000,000
- -------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- -------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
22.8%
- -------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
PN
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ITEM 1. SECURITY AND ISSUER
The title of the class of equity securities of United Payors &
United Providers, Inc., a Delaware corporation (the "Company"), to which this
Statement on Schedule 13D (this "Statement") relates is the common stock, par
value $.0l per share (the "Common Stock"), of the Company. The address of the
principal executive offices of the Company is 2275 Research Boulevard, 6th
Floor, Rockville, Maryland 20850.
ITEM 2. IDENTITY AND BACKGROUND
(a) This Statement is hereby filed by Capital Z Financial Services
Fund II, L.P., a Bermuda limited partnership ("Cap Z Fund II"), Capital Z
Financial Services Private Fund II, L.P., a Bermuda limited partnership ("Cap Z
Private Fund II"), Capital Z Partners, L.P., a Bermuda limited partnership ("Cap
Z L.P."), Capital Z Partners, Ltd., a Bermuda corporation ("Cap Z Ltd."), Steven
M. Gluckstern and Robert A. Spass (collectively, the "Reporting Persons").
(b) - (c)
Cap Z Fund II
Cap Z Fund II is a Bermuda limited partnership formed to invest in
securities of insurance, financial services and healthcare services companies
and other related businesses. Cap Z Fund II invests in parallel with Cap Z
Private Fund II. The principal business address of Cap Z Fund II, which also
serves as its principal office, is One Chase Manhattan Plaza, 44th floor, New
York, New York 10005. Pursuant to Instruction C to Schedule 13d of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), information
with respect to Cap Z L.P., The sole general partner of Cap Z Fund II, is set
forth below.
Cap Z Private Fund II
Cap Z Private Fund II is a Bermuda limited partnership formed to
invest in securities of insurance, financial services and healthcare services
companies and other related businesses. Cap Z Private Fund II invests in
parallel with Cap Z Fund II. The principal business address of Cap Z Private
Fund II, which also serves as its principal office, is One Chase Manhattan
Plaza, 44th floor, New York, New York 10005. Pursuant to Instruction C to
Schedule 13d of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), information with respect to Cap Z L.P., The sole general partner of Cap Z
Private Fund II, is set forth below.
Cap Z L.P.
Cap Z L.P. is a Bermuda limited partnership, the principal business
of which is serving as the sole general partner of Cap Z Fund II and Cap Z
Private Fund II. The principal address of Cap Z L.P., which also serves as its
principal office, is One Chase
8
<PAGE>
Manhattan Plaza, 44th floor, New York, New York 10005. Pursuant to Instruction C
to Schedule 13d of the Exchange Act, information with respect to Cap Z Ltd., the
sole general partner of Cap Z L.P., is set forth below.
Cap Z Ltd.
Cap Z Ltd. is a Bermuda exempt company, the principal business of
which is serving as the sole general partner of Cap Z L.P. The principal address
of Cap Z Ltd., which also serves as its principal office, is One Chase Manhattan
Plaza, 44th floor, New York, New York 10005. Pursuant to Instruction C to
Schedule 13d of the Exchange Act, the name, residence or business address, and
present principal occupation or employment of each director and executive
officer of Cap Z Ltd. are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
---- ---------------- -------------
<S> <C> <C>
Steven M. Gluckstern One Chase Manhattan Plaza Chairman of the Boards of
44th Floor Directors of Cap Z Management,
New York, New York 10005 Inc. ("Cap Z Management") and
Cap Z Ltd.
Robert A. Spass One Chase Manhattan Plaza Deputy Chairman of the Boards of
44th Floor Directors of Cap Z Management
New York, New York 10005 and Cap Z Ltd.
Lawrence W. Cheng One Chase Manhattan Plaza President and Director of Cap Z
44th Floor Management and Cap Z Ltd.
New York, New York 10005
Bradley E. Cooper One Chase Manhattan Plaza Senior Vice President and Director
44th Floor of Cap Z Management and Cap Z
New York, New York 10005 Ltd.
Mark K. Gormley One Chase Manhattan Plaza Senior Vice President and Director
44th Floor of Cap Z Management and Cap Z
New York, New York 10005 Ltd.
Adam M. Mizel One Chase Manhattan Plaza Senior Vice President and Director
44th Floor of Cap Z Management and Cap Z
New York, New York 10005 Ltd.
Paul H. Warren One Chase Manhattan Plaza Senior Vice President and Director
44th Floor of Cap Z Management and Cap Z
New York, New York 10005 Ltd.
Scott M. Delman One Chase Manhattan Plaza Senior Vice President and Director
44th Floor of Cap Z Management and Cap Z
New York, New York 10005 Ltd.
David A. Spuria One Chase Manhattan Plaza General Counsel and Secretary of
44th Floor Cap Z Management and Cap Z
New York, New York 10005 Ltd.
9
<PAGE>
PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
---- ---------------- -------------
Ronald V. Bernardon One Chase Manhattan Plaza Chief Financial Officer and
44th Floor Treasurer of Cap Z Management
New York, New York 10005 and Cap Z Ltd.
</TABLE>
Cap Z Management is a Bermuda exempt company, the principal business
of which is performing investment management services for Cap Z Fund II and Cap
Z Private Fund II and their respective portfolio companies. The principal
business address of Capital Z Management, Inc., which also serves as its
principal office, is One Chase Manhattan Plaza, 44th Floor, New York, New York
10005.
Steven M. Gluckstern
Steven M. Gluckstern owns 1,000 shares of Class A Shares of voting
Common Stock of Cap Z Ltd., which represents 9.9% of the 10,100 shares of Class
A Shares outstanding, and 18,280 shares of Class B Shares of non-voting Common
Stock of Cap Z Ltd., which represents 18.3% of the 100,000 shares of Class B
Shares outstanding. Mr. Gluckstern serves on the Board of Directors of Cap Z
Ltd. and on such Board's Investment Committee. As a member of the Investment
Committee, Mr. Gluckstern may be deemed the indirect beneficial owner of
4,000,000 shares of Common Stock. Mr. Gluckstern disclaims any beneficial
ownership of such shares. The business address of Mr. Gluckstern is One Chase
Manhattan Plaza, 44th Floor, New York, New York 10005.
Robert A. Spass
Robert A. Spass owns 1,000 shares of Class A Shares of voting Common
Stock of Cap Z Ltd., which represents 9.9% of the 10,100 outstanding shares of
Class A Shares, and 18,280 shares of Class B Shares of non-voting Common Stock
of Cap Z Ltd., which represents 18.3% of the 100,000 outstanding shares of Class
B Shares. Mr. Spass serves on the Board of Directors of Cap Z Ltd. and on such
Board's Investment Committee. As a member of the Investment Committee, Mr. Spass
may be deemed the indirect beneficial owner of 4,000,000 shares of Common Stock.
Mr. Spass disclaims any beneficial ownership of such shares. The business
address of Mr. Spass is One Chase Manhattan Plaza, 44th Floor, New York, New
York 10005.
(d) None of the entities or persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgement,
10
<PAGE>
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) All of the natural persons identified in this Item 2 are
citizens of the United States of America, except for Laurence W. Cheng, who is a
citizen of Canada.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
As more fully described in Item 6 below, on February 25, 1999 (i)
Cap Z Fund II purchased an aggregate of 1,742,482 shares of Common Stock for an
aggregate purchase price of $34,849,640 and an option to purchase an additional
2,240,334 shares of Common Stock for an aggregate purchase price of $13,442,004
(representing a non-refundable deposit to be applied against the exercise price)
and (ii) Cap Z Private Fund II purchased an aggregate of 7,518 shares of Common
Stock for an aggregate purchase price of $150,360 and an option to purchase an
additional 9,666 shares of Common Stock for an aggregate purchase price of
$57,996 (representing a non-refundable deposit to be applied against the
exercise price). Cap Z Fund II and Cap Z Private Fund II used contributions from
their respective partners to fund such purchases.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Persons consummated the transactions described herein
in order to acquire an interest in the Company for investment purposes. The
Reporting Persons intend to review continuously their position in the Company.
Depending upon future evaluations of the business prospects of the Company and
upon other developments, including, but not limited to, general economic and
business conditions and stock market conditions, the Reporting Persons may
retain or from time to time increase their holdings or dispose of all or a
portion of their holdings, subject to any applicable legal and contractual
restrictions on their ability to do so.
In addition, the matters set forth in Item 6 below are incorporated
in this Item 4 by reference as if fully set forth herein.
Except as set forth in this Item 4 (including the matters described
in Item 6 below which are incorporated in this Item 4 by reference), the
Reporting Persons have no present plans or proposals that relate to or that
would result in any of the actions specified in clauses (a) through (j) of Item
4 of Schedule 13D of the Exchange Act.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a)
Cap Z Fund II and Cap Z Private Fund II
Cap Z Fund II is the beneficial owner of 3,982,816 shares of Common
Stock, which based on calculations made in accordance with Rule 13d-3(d) of the
Exchange Act and
11
<PAGE>
there being 17,522,303 shares of Common Stock outstanding (as represented by the
Company to the Reporting Persons), represent approximately 22.8% of the
outstanding shares of Common Stock.
Cap Z Private Fund II is the beneficial owner of 17,184 shares of
Common Stock, which based on calculations made in accordance with Rule 13d-3(d)
of the Exchange Act and there being 17,522,303 shares of Common Stock
outstanding (as represented by the Company to the Reporting Persons), represent
approximately 0.1% of the outstanding shares of Common Stock.
Because Cap Z Fund II and Cap Z Private Fund II invest in parallel,
they may be deemed to be a group for purposes of Rule 13d-3. Each of Cap Z Fund
II and Cap Z Private Fund II disclaims the existence of such a group and
disclaims beneficial ownership of any shares of Common Stock owned by the other.
Cap Z L.P.
In its capacity as the sole general partner of Cap Z Fund II and Cap
Z Private Fund II, Cap Z L.P. may, pursuant to Rule 13d-3 of the Exchange Act,
be deemed to be the beneficial owner of 4,000,000 shares of Common Stock, which,
based on calculations made in accordance with Rule 13d-3(d) of the Exchange Act
and there being 17,522,303 shares of Common Stock outstanding (as represented by
the Company to the Reporting Persons), represent approximately 22.8% of the
outstanding shares of Common Stock.
Cap Z Ltd.
In its capacity as the sole general partner of Cap Z L.P., Cap Z
Ltd. may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the
beneficial owner of 4,000,000 shares of Common Stock, which, based on
calculations made in accordance with Rule 13d-3(d) of the Exchange Act and there
being 17,522,303 shares of Common Stock outstanding (as represented by the
Company to the Reporting Persons), represent approximately 22.8% of the
outstanding shares of Common Stock.
Steven M. Gluckstern
Mr. Gluckstern, in his capacity as a member of the Investment
Committee of Cap Z Ltd.'s Board of Directors, may, pursuant to Rule 13d-3 of the
Exchange Act, be deemed to be the beneficial owner of 4,000,000 shares of Common
Stock, which based on calculations made in accordance with Rule 13d-3(d) of the
Exchange Act and there being 17,522,303 shares of Common Stock outstanding (as
represented by the Company to the Reporting Persons), represent approximately
22.8% of the outstanding shares of Common Stock. Mr. Gluckstern disclaims
beneficial ownership of such shares.
12
<PAGE>
Robert A. Spass
Mr. Spass, in his capacity as a member of the Investment Committee
of Cap Z Ltd.'s Board of Directors, may, pursuant to Rule 13d-3 of the Exchange
Act, be deemed to be the beneficial owner of 4,000,000 shares of Common Stock,
which based on calculations made in accordance with Rule 13d-3(d) of the
Exchange Act and there being 17,522,303 shares of Common Stock outstanding (as
represented by the Company to the Reporting Persons), represent approximately
22.8% of the outstanding shares of Common Stock. Mr. Spass disclaims beneficial
ownership of such shares.
(b)
Cap Z Fund II
1. Sole power to vote or to direct
the vote 3,982,816
-----------
2. Shared power to vote or to direct
the vote -0-
-----------
3. Sole power to dispose or to direct
the disposition 3,982,816
-----------
4. Shared power to dispose of or to
direct the disposition -0-
-----------
Cap Z Private Fund II
1. Sole power to vote or to direct
the vote 17,184
-----------
2. Shared power to vote or to direct
the vote -0-
-----------
3. Sole power to dispose or to direct
the disposition 17,184
-----------
4. Shared power to dispose of or to
direct the disposition -0-
-----------
13
<PAGE>
Cap Z L.P.
1. Sole power to vote or to direct
the vote -0-
-----------
2. Shared power to vote or to direct
the vote 4,000,000
-----------
3. Sole power to dispose or to direct
the disposition -0-
-----------
4. Shared power to dispose of or to
direct the disposition 4,000,000
-----------
Cap Z Ltd.
1. Sole power to vote or to direct
the vote -0-
-----------
2. Shared power to vote or to direct
the vote 4,000,000
-----------
3. Sole power to dispose or to direct
the disposition -0-
-----------
4. Shared power to dispose of or to
direct the disposition 4,000,000
-----------
Steven M. Gluckstern
1. Sole power to vote or to direct
the vote -0-
-----------
2. Shared power to vote or to direct
the vote 4,000,000
-----------
3. Sole power to dispose or to direct
the disposition -0-
-----------
4. Shared power to dispose of or to
direct the disposition 4,000,000
-----------
14
<PAGE>
Robert A. Spass
1. Sole power to vote or to direct
the vote -0-
-----------
2. Shared power to vote or to direct
the vote 4,000,000
-----------
3. Sole power to dispose or to direct
the disposition -0-
-----------
4. Shared power to dispose of or to
direct the disposition 4,000,000
-----------
(c) Except as set forth herein, none of the persons named in
response to paragraph (a) has effected any transactions in shares of Common
Stock during the past 60 days.
(d) Each of the Reporting Persons affirms that no person other than
the Reporting Persons has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the shares of
Common Stock owned by the Reporting Persons.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER
The matters set forth in Item 2 are incorporated in this Item 6 by
reference as if fully set forth herein.
Securities Purchase Agreement
Pursuant to the Securities Purchase Agreement, dated as of February
2, 1999 (the "Securities Purchase Agreement"), between Thomas L. Blair and Cap Z
Fund II, Cap Z Fund II agreed to purchase from Mr. Blair an aggregate of
1,750,000 shares of Common Stock for an aggregate purchase price of $35,000,000
(the "Share Purchase Price") and an option to purchase an additional 2,250,000
shares of Common Stock ("Blair Option Shares") for an aggregate purchase price
of $13,500,000 (the "Blair Option Purchase Price"). The foregoing description of
the Securities Purchase Agreement is not, and does not purport to be, complete
and is qualified in its entirety by reference to the Agreement, a copy of which
is filed herewith as Exhibit 1.
Assignment and Assumption Agreement
In connection with the Securities Purchase Agreement, Cap Z Fund II
and Cap Z Private Fund II entered into an Assignment and Assumption Agreement,
dated as of February 25, 1999, whereby Cap Z Fund II assigned to Cap Z Private
Fund II certain of its
15
<PAGE>
rights and obligations under the Stock Purchase Agreement, including the right
to purchase 7,518 shares of Common Stock and 9,666 Blair Option Shares. The
foregoing description of the Assignment and Assumption Agreement is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Assignment and Assumption Agreement, a copy of which is filed herewith as
Exhibit 2.
As contemplated by the Securities Purchase Agreement and the
Assignment and Assumption Agreement, on February 25, 1999 (i) Cap Z Fund II
purchased an aggregate of 1,742,482 shares of Common Stock for an aggregate
purchase price of $34,849,640 and an option to purchase an additional 2,240,334
shares of Common Stock for an aggregate purchase price of $13,442,004
(representing a non-refundable deposit to be applied against the exercise price)
and (ii) Cap Z Private Fund II purchased an aggregate of 7,518 shares of Common
Stock for an aggregate purchase price of $150,360 and an option to purchase an
additional 9,666 shares of Common Stock for an aggregate purchase price of
$57,996 (representing a non-refundable deposit to be applied against the
exercise price).
Stockholders Agreement
In connection with the closing under the Securities Purchase
Agreement, Cap Z Fund II, Cap Z Private Fund II and Mr. Blair (herein
collectively referred to, along with any direct or indirect transferees, as the
"Holders") and the Company entered into a Stockholders Agreement, dated as of
February 25, 1999 (the "Stockholders Agreement").
Pursuant to Section 2.1. of the Stockholders Agreement, Cap Z Ltd.
and its affiliates and certain other related parties (the "CapZ Group") are
entitled to designate two individuals (the "CapZ Group Designees") who are
reasonably acceptable to the Company as members of the Board of Directors of the
Company. The Company and each Holder have agreed to take all actions necessary
to ensure that the certificate of incorporation and bylaws of the Company do
not, at any time, conflict in any respect with the provisions of the
Stockholders Agreement. Furthermore, each committee of the Board of Directors
will include as a member at least one of the CapZ Group Designees, except where
such inclusion would cause a conflict of interest. Additionally, for every four
board seats added to the nine currently existing board seats, CapZ Group will be
entitled to designate one additional CapZ Group Designee to the Board of
Directors. If at any time the CapZ Group owns beneficially less than 900,000
shares of the Common Stock (adjusted for any stock splits, stock dividends or
similar events), the CapZ Group will be entitled to designate only one CapZ
Group Designee. If at any time the CapZ Group owns beneficially less than
100,000 shares of the Common Stock (adjusted for any stock splits, stock
dividends or similar events), the CapZ Group will not be entitled to designate a
CapZ Group Designee.
Pursuant to Section 3.1 of the Stockholders Agreement, the CapZ
Group has been granted "tag along" rights in connection with certain transfers
of shares of Common Stock by Mr. Blair. Such "tag along" rights are subject to a
number of conditions and limitations.
16
<PAGE>
Pursuant to Section 3.2 of the Stockholders Agreement, the CapZ
Group has been granted a right of first offer in connection with certain
transfers of Common Stock by Mr. Blair. Such right of first offer is subject to
a number of conditions and limitations.
Pursuant to Section 5.5 of the Stockholders Agreement, the Company
has agreed to use its best efforts to (i) delete from its certificate of
incorporation the articles therein relating to the prohibition on stockholder
action by written consent, the restrictions on transactions with "interested
stockholders" and the right of the Company's Board of Directors to consider
non-stockholder constituencies in evaluating certain business transactions and
(ii) amend the articles therein relating to the conditions for removal of
directors, the methods for amending the Company's bylaws and the methods for
amending the company's certificate of incorporation to require in each case a
66-2/3% stockholder vote rather than the 80% stockholder vote presently
specified therein.
The foregoing description of the Stockholders Agreement is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Stockholders Agreement, a copy of which is attached hereto as Exhibit 3.
Blair Option Agreement
In connection with the closing under the Securities Purchase
Agreement, Cap Z Fund II and Mr. Blair entered into a letter agreement, dated as
of February 22, 1999 (the "Blair Option Agreement"). For a period of four years
from the date of the Blair Option Agreement, Cap Z Fund II has an irrevocable
option (the "Blair Option") to purchase from Mr. Blair 2,250,00 shares of Common
Stock (subject to certain adjustments) at a per share exercise price of $27.60
(subject to certain adjustments, the "Exercise Price"). The purchase price of
the Blair Option ($6.00 per Blair Option Share) and an amount equal to the
aggregate amount of dividends and other distributions of cash and property made
in respect of a share of Common Stock after February 25, 1999 and on or prior to
the applicable date of exercise (other than dividends of additional shares of
Common Stock) in excess of $4.00 per share (which amount shall be adjusted in
proportion to any adjustments to the Exercise Price), if any, shall be credited
against the Exercise Price. Furthermore, Mr. Blair assigned to Cap Z Fund II his
rights and obligations under the Seller Registration Rights Agreement, the
exercise of such rights being conditioned upon the prior acquisition of the
Blair Option Shares to be registered pursuant to the Seller Registration Rights
Agreement. The foregoing description of the Blair Option Agreement is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Blair Option Agreement, a copy of which is attached hereto as Exhibit 6.
Seller Registration Rights Agreement
In connection with the closing under the Securities Purchase
Agreement, Mr. Blair and the Company entered into a Registration Rights
Agreement, dated as of February 25, 1999 (the "Seller Registration Rights
Agreement"). Pursuant to the Seller
17
<PAGE>
Registration Rights Agreement, the Company has agreed to effect two "demand"
registrations at the request and expense of Mr. Blair or his affiliates for an
aggregate of up to 2,250,000 shares of Common Stock (as adjusted for all stock
splits or similar transactions). Mr. Blair and his affiliates also have certain
piggyback registration rights in connection with registrations by the Company
under the Securities Act, the expenses of which shall be borne by the Company.
The foregoing description of the Seller Registration Rights Agreement is not,
and does not purport to be, complete and is qualified in its entirety by
reference to the Seller Registration Rights Agreement, a copy of which is filed
herewith as Exhibit 5.
Pursuant to the Blair Option Agreement, Mr. Blair assigned to Cap Z
Fund II certain of its rights and obligations under this Seller Registration
Rights Agreement. Pursuant to the Assignment and Assumption Agreement, Cap Z
Fund II in term assigned to Cap Z Private Fund II certain of its rights and
obligations under the Seller Registration Rights Agreement. Cap Z Fund II and
Cap Z Private Fund II executed Registration Rights Agreement Joinders in
accordance with the terms of the Seller Registration Rights Agreement.
Registration Rights Agreement
In connection with the closing under the Securities Purchase
Agreement, the Company and Cap Z Fund II entered into the Registration Rights
Agreement, dated as of February 25, 1999 (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Company has agreed to effect
two "demand" registrations at the request and expense of Cap Z Fund II for an
aggregate of up to 1,750,000 shares of Common Stock (as adjusted for all stock
splits or similar transactions). Cap Z Fund II also has certain piggyback
registration rights in connection with registrations by the Company under the
Securities Act, the expenses of which shall be borne by the Company. The
foregoing description of the Registration Rights Agreement is not, and does not
purport to be, complete and is qualified in its entirety by reference to the
Registration Rights Agreement, a copy of which is attached hereto as Exhibit 6.
Pursuant to the Assignment and Assumption Agreement, Cap Z Fund II
assigned to Cap Z Private Fund II certain of its rights and obligations under
the Seller Registration Rights Agreement. Cap Z Private Fund II executed a
Registration Rights Agreement Joinder in accordance with the terms of the
Registration Rights Agreement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1: Securities Purchase Agreement, dated as of February 2, 1999,
between Thomas L. Blair and Capital Z Financial Services Fund
II, L.P.
Exhibit 2: Assignment and Assumption Agreement, dated as of February 25,
1999, between Capital Z Financial Services Fund II, L.P. and
Capital Z Financial Services Private Fund II, L.P.
18
<PAGE>
Exhibit 3: Stockholders Agreement, dated as of February 25, 1999 by and
among Capital Z Financial Services Fund II, L.P., Capital Z
Financial Services Private Fund II, L.P., Thomas L. Blair and
United Payors & United Providers, Inc.
Exhibit 4: Blair Option Agreement, dated as of February 25, 1999, between
Capital Z Financial Services Fund II, L.P. and Thomas L.
Blair.
Exhibit 5: Registration Rights Agreement, dated as of February 25,
1999, between Thomas L. Blair and United Payors & United
Providers, Inc. (together with Registration Rights Agreement
Joinders of Capital Z Financial Services Fund II, L.P. and
Capital Z Financial Services Private Fund II, L.P.)
Exhibit 6: Registration Rights Agreement, dated as of February 25, 1999,
between Capital Z Financial Services Fund II, L.P. and United
Payors & United Providers, Inc. (together with Registration
Rights Agreement Joinder of Capital Z Financial Services
Private Fund II, L.P.)
Exhibit 7: Joint Filing Agreement, dated as of March 4, 1999, between
Capital Z Financial Services Fund II, L.P., Capital Z
Financial Services Private Fund II, L.P., Capital Z Partners,
L.P., Capital Z Partners, Ltd., Steven M. Gluckstern and
Robert A. Spass.
19
<PAGE>
Signature
After reasonable inquiry and to the best of the knowledge and belief
of the undersigned, the undersigned hereby certifies that the information set
forth in this statement is true, complete and correct.
Dated: March 5, 1999
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P., its General Partner
By: Capital Z Partners, Ltd., its General Partner
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P., its General Partner
By: Capital Z Partners, Ltd., its General Partner
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
CAPITAL Z PARTNERS, L.P.,
By: Capital Z Partners, Ltd.
its General Partner
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
20
<PAGE>
CAPITAL Z PARTNERS, LTD.,
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
/s/ Steven M. Gluckstern
----------------------------------------------
Steven M. Gluckstern
/s/ Robert A. Spass
----------------------------------------------
Robert A. Spass
21
<PAGE>
EXHIBIT INDEX
Exhibit 1: Securities Purchase Agreement, dated as of February 2, 1999,
between Thomas L. Blair and Capital Z Financial Services Fund
II, L.P.
Exhibit 2: Assignment and Assumption Agreement, dated as of February 25,
1999, between Capital Z Financial Services Fund II, L.P. and
Capital Z Financial Services Private Fund II, L.P.
Exhibit 3: Stockholders Agreement, dated as of February 25, 1999 by and
among Capital Z Financial Services Fund II, L.P., Capital Z
Financial Services Private Fund II, L.P., Thomas L. Blair and
United Payors & United Providers, Inc.
Exhibit 4: Blair Option Agreement, dated as of February 25, 1999, between
Capital Z Financial Services Fund II, L.P. and Thomas L.
Blair.
Exhibit 5: Registration Rights Agreement, dated as of February 25,
1999, between Thomas L. Blair and United Payors & United
Providers, Inc. (together with Registration Rights Agreement
Joinders of Capital Z Financial Services Fund II, L.P. and
Capital Z Financial Services Private Fund II, L.P.)
Exhibit 6: Registration Rights Agreement, dated as of February 25, 1999,
between Capital Z Financial Services Fund II, L.P. and United
Payors & United Providers, Inc. (together with Registration
Rights Agreement Joinder of Capital Z Financial Services
Private Fund II, L.P.)
Exhibit 7: Joint Filing Agreement, dated as of March 4, 1999, between
Capital Z Financial Services Fund II, L.P., Capital Z
Financial Services Private Fund II, L.P., Capital Z Partners,
L.P., Capital Z Partners, Ltd., Steven M. Gluckstern and
Robert A. Spass.
22
Exhibit 1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
DATED AS OF FEBRUARY 2, 1999
BY AND BETWEEN
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
AND
THOMAS L. BLAIR
NYFS08...:\60\33560\0019\2205\AGRD308V.39E
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
PURCHASE OF SHARES........................... 1
1.1. Commitments to Purchase and Sell.......................... 1
1.2. Closing................................................... 1
ARTICLE II.
REPRESENTATIONS AND WARRANTIES..................... 2
2.1. Representations and Warranties of the Seller.............. 2
2.1.1. Organization and Good Standing................. 2
2.1.2. Authorization and Effect....................... 2
2.1.3. Capitalization................................. 3
2.1.4. Subsidiaries................................... 4
2.1.5. No Restrictions; Required Consents............. 5
2.1.6. SEC Documents.................................. 7
2.1.7. Unaudited Financial
Statements..................................... 8
2.1.8. Absence of Undisclosed Liabilities............. 8
2.1.9. Commissions or Finders Fees.................... 8
2.1.10. Disclosure..................................... 9
2.2. Representations and Warranties of the
Purchaser................................................. 9
2.2.1. Corporate Organization......................... 9
2.2.2. Authorization and Effect....................... 9
2.2.3. No Restrictions; Required Consents............. 10
2.2.4. Litigation; Decrees............................ 11
2.2.5. Purchase of Shares............................. 11
2.2.6. Commissions or Finders Fees.................... 12
2.2.7. Sufficient Funds............................... 12
ARTICLE III.
PRE-CLOSING COVENANTS......................... 12
3.1. Access to Information..................................... 12
3.2. Conduct of Business....................................... 12
3.3. Notification.............................................. 16
3.4. No Inconsistent Action.................................... 17
3.5. Injunctions............................................... 17
3.6. Filings................................................... 17
3.7. Confidentiality........................................... 17
3.8. Publicity................................................. 18
3.9. Delivery of Financial Statements.......................... 18
3.10. Efforts of the Seller....................................... 19
3.11. Efforts of the Purchaser.................................... 19
i
<PAGE>
Page
ARTICLE IV.
CONDITIONS TO CLOSING......................... 19
4.1. Conditions Precedent to Obligations of the
Purchaser................................................. 19
4.1.1. Representations, Warranties and
Covenants...................................... 19
4.1.2. Consents or Approvals.......................... 20
4.1.3. HSR Act........................................ 20
4.1.4. No Adverse Proceedings......................... 20
4.1.5. Trust Transactions............................. 20
4.1.6. UP&UP Stock Price.............................. 21
4.1.7. OTS Regulation................................. 21
4.1.8. No Material Adverse Effect..................... 21
4.2. Conditions Precedent to Obligations of the
Seller.................................................... 21
4.2.1. No Material Misrepresentation or
Breach......................................... 21
4.2.2. Consents or Approvals.......................... 22
4.2.3. HSR Act........................................ 22
4.2.4. No Adverse Proceedings......................... 22
4.2.5. Trust Transactions............................. 22
ARTICLE V.
DOCUMENTS TO BE DELIVERED AT THE CLOSING................ 22
5.1. Documents to be Delivered by the Sellers.................. 22
5.1.1. Transaction Agreements......................... 22
5.1.2. Certified Resolutions.......................... 23
5.1.3. Sellers' Certificate........................... 23
5.1.4. Good Standing Certificate...................... 23
5.1.5. Other Documents................................ 23
5.2. Documents to be Delivered by the Purchaser................ 24
5.2.1. Transaction Agreements......................... 24
5.2.2. Certified Resolutions.......................... 24
5.2.3. Purchaser's Certificate........................ 24
5.2.4. Good Standing Certificate...................... 24
5.2.5. Other Documents................................ 24
ARTICLE VI.
SURVIVAL AND INDEMNIFICATION...................... 25
6.1. Survival of Representations, Warranties and
Covenants................................................. 25
6.2. Definitions............................................... 25
6.3. Indemnification........................................... 25
6.4. Defense of Claims......................................... 26
ii
<PAGE>
Page
ARTICLE VII.
TERMINATION.............................. 29
7.1. Termination............................................... 29
ARTICLE VIII.
MISCELLANEOUS PROVISIONS........................ 30
8.1. Specific Performance...................................... 30
8.2. Notices................................................... 30
8.3. Expenses.................................................. 31
8.4. Successors and Assigns.................................... 31
8.5. Waiver.................................................... 32
8.6. Entire Agreement.......................................... 32
8.7. Amendments and Supplements................................ 33
8.8. Rights of the Parties..................................... 33
8.9. Brokers................................................... 33
8.10. Further Assurances.......................................... 33
8.11. Governing Law............................................... 33
8.12. Severability................................................ 33
8.13. Execution in Counterparts................................... 34
8.14. Titles and Headings......................................... 34
8.15. Certain Interpretive Matters and
Definitions............................................... 34
8.16. No Recourse................................................. 34
iii
<PAGE>
EXHIBITS
Exhibit A Form of Trust Stock Purchase Agreement
Exhibit B Form of Stockholders Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Blair Option Agreement
Exhibit E Form of Seller Registration Rights
Agreement
SCHEDULES
Schedule 2.1.1 Certificates of Incorporation and Bylaws
Schedule 2.1.3(a) Capitalization
Schedule 2.1.4(a) Subsidiaries
Schedule 2.1.5(a) Consents Required from Governmental
Entities (Sellers)
Schedule 2.1.5(b) Consents Required from Governmental
Entities (UP&UP)
Schedule 2.1.7 Unaudited Financial Information
Schedule 2.1.8(a) Absence of Undisclosed Liabilities
Schedule 2.1.8(b) Due Diligence Information
iv
<PAGE>
DEFINED TERMS
Page
Agreement .................................................................1
Blair Option.................................................................1
Blair Option Agreement......................................................23
Blair Option Purchase Price..................................................1
Blair Option Shares..........................................................1
Closing .................................................................1
Closing Date.................................................................1
Common Stock.................................................................1
Direct Claim................................................................29
Divestment Agreement........................................................20
Exchange Act.................................................................7
GAAP .................................................................7
Governmental Entity..........................................................6
HSR Act .................................................................7
Indemnifiable Losses........................................................25
Indemnifying Party..........................................................25
Indemnitee ................................................................25
Indemnity Payment...........................................................25
Law .................................................................6
Liabilities .................................................................8
Material Adverse Effect......................................................9
Person ................................................................34
PHCI ................................................................20
Purchase Price...............................................................1
Purchaser .................................................................1
Registration Rights Agreement...............................................23
Responsible Party...........................................................27
Securities Act...............................................................7
Seller Registration Rights Agreement........................................23
Sellers .................................................................1
Shares .................................................................1
Stockholders Agreement......................................................22
Subsidiary ................................................................34
Third Party Claim...........................................................25
Third Party Claim Notice....................................................26
Third Party Claim Notice Period.............................................27
Trust ................................................................20
Trust Shares................................................................20
Trust Stock Purchase Agreement..............................................20
UP&UP .................................................................1
UP&UP SEC Documents..........................................................7
v
<PAGE>
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 2nd day of February, 1999 by and between Capital Z Financial
Services Fund II, L.P., a Bermuda limited partnership and exempted partnership
(the "Purchaser"), and Thomas L. Blair, (the "Seller").
RECITALS:
WHEREAS, the Seller desires to sell to the Purchaser and the Purchaser
desires to purchase from the Seller an aggregate of 1,750,000 shares (the
"Shares") of Common Stock, par value $.01 per share (the "Common Stock"), of
United Payors & United Providers, Inc., a Delaware corporation ("UP&UP") and an
option (the "Blair Option") to purchase an additional 2,250,000 shares of Common
Stock (the "Blair Option Shares").
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I. PURCHASE OF SHARES
1.1. Commitments to Purchase and Sell. Subject to the terms and conditions
set forth herein and in reliance on the representations and warranties contained
herein, the Purchaser agrees to purchase from the Seller, and the Seller agrees
to sell to the Purchaser, the Shares for an aggregate purchase price of
$35,000,000 (the "Share Purchase Price") and the Blair Option for an aggregate
purchase price of $13,500,000 (the "Blair Option Purchase Price").
1.2. Closing.
1.2.1. The purchase and sale of the Shares and the Blair Option
shall take place at a closing (the "Closing") at the offices of UP&UP on the
third business day after the conditions set forth in Article IV have been
satisfied or waived, or at such other time and place as is agreed upon by the
Purchaser and the Seller. The date on which the Closing is effected is referred
to in this Agreement as the "Closing Date."
1
<PAGE>
1.2.2. At the Closing, the Seller shall deliver to the Purchaser,
against payment to the Seller of the Share Purchase Price and the Blair Option
Purchase Price, certificates representing the Shares, together with duly
executed stock powers, and the Blair Option Agreement.
1.2.3. At the Closing, the Purchaser shall pay the Share Purchase
Price and the Blair Option Purchase Price to the Seller by wire transfer of
immediately available funds to such bank account as the Seller may designate in
writing to the Purchaser not less than three days prior to Closing.
1.2.4. At the Closing, the parties shall also execute and deliver or
cause to be executed and delivered the documents referred to in Article V
hereof.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of the Seller. The Seller makes the
following representations and warranties to the Purchaser, each of which is true
and correct as of the date hereof and shall be true and correct as of the
Closing Date and shall be unaffected by any investigation heretofore or
hereafter made by the Purchaser.
2.1.1. Organization and Good Standing. Each of UP&UP and its
Subsidiaries is a corporation validly existing and in good standing under the
laws of its state of organization. Each of UP&UP and its Subsidiaries has the
requisite corporate power and authority to own, lease or otherwise hold the
assets owned, leased or otherwise held by it and to carry on its business as
presently conducted by it. Each of UP&UP and its Subsidiaries is in good
standing and duly qualified to conduct business as a foreign corporation in
every state of the United States in which its ownership or lease of property or
conduct of its business makes such qualification necessary. Attached hereto as
Schedule 2.1.1 are true, complete and correct copies of UP&UP's and its
Subsidiaries' certificates of incorporation and bylaws, each as currently in
effect.
2.1.2. Authorization and Effect. (a) This Agreement has been, and
the Stockholders Agreement, the Blair Option Agreement and the Seller
Registration Rights Agreement will be, duly executed and delivered by the Seller
and, assuming the due execution and delivery of this
2
<PAGE>
Agreement, the Stockholders Agreement, the Blair Option Agreement and the Seller
Registration Rights Agreement by the other parties hereto and thereto, this
Agreement constitutes, and the Stockholders Agreement, the Blair Option
Agreement and the Seller Registration Rights Agreement will constitute, the
valid and binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(b) UP&UP has the requisite corporate power to execute and to
deliver the Stockholders Agreement, the Registration Rights Agreement and the
Seller Registration Rights Agreement and to perform the transactions
contemplated thereby to be performed by it. The execution and delivery by UP&UP
of the Stockholders Agreement, the Registration Rights Agreement and the Seller
Registration Rights Agreement and the performance by it of the transactions
contemplated thereby to be performed by it have been duly authorized by all
necessary corporate action. The Stockholders Agreement, the Registration Rights
Agreement and the Seller Registration Rights Agreement will be duly executed and
delivered by duly authorized officers of UP&UP and, assuming the due execution
and delivery thereof by the Purchaser and the Seller, as applicable, will
constitute the valid and binding obligations of UP&UP, enforceable against it in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights in general and subject to general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
2.1.3. Capitalization. (a) Schedule 2.1.3(a) sets forth a true,
correct and complete description of all of the authorized, issued and
outstanding shares of capital stock of UP&UP. All of the outstanding shares of
capital stock of UP&UP have been duly authorized and validly issued, are fully
paid and non-assessable. None of the outstanding shares of UP&UP's capital stock
have been issued in violation of, and none of such outstanding shares are
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under
3
<PAGE>
any provisions of applicable law, the certificate of incorporation or bylaws of
UP&UP or any contract, agreement or instrument to which UP&UP is subject, bound
or a party.
(b) Except as set forth on Schedule 2.1.3(a), there are no options,
warrants, calls, subscriptions, conversion or other rights, agreements or
commitments (i) obligating UP&UP to issue, sell, purchase, return or redeem any
shares of capital stock of UP&UP or any other securities convertible into,
exchangeable or exercisable for or evidencing the right to subscribe for any
shares of capital stock of UP&UP or (ii) that give any person the right to
receive any benefits or rights similar to any rights enjoyed by or accruing to
the holders of capital stock of UP&UP. There are no outstanding bonds,
debentures, notes or other indebtedness having the right to vote on any matters
on which stockholders of UP&UP may vote.
(c) The Seller owns beneficially 3,311,900 shares of Common Stock.
The Seller is not a party to any voting trust, proxy or other agreement with
respect to the voting, ownership or transfer of any shares of UP&UP's capital
stock which will remain in force or effect after the Closing. At the Closing,
the Seller will transfer the Shares to the Purchaser free and clear of any and
all mortgages, liens, claims, charges, pledges, or other encumbrances of any
nature whatsoever, including, without limitation, licenses, leases, chattel or
other mortgages, collateral security arrangements, pledges, title imperfections,
defect or objection liens, security interests, conditional and installment sales
agreements, charges, easements, encroachments or restrictions, of any kind and
other title or interest retention arrangements, reservations or limitations of
any nature (collectively, "Liens").
2.1.4. Subsidiaries.
(a) Schedule 2.1.4(a) sets forth (i) the name of each Subsidiary of
UP&UP and (ii) with respect to each such Subsidiary, (A) its jurisdiction of
incorporation and (B) its capitalization and the percentage of outstanding
shares each class of voting stock owned by UP&UP and each of its Subsidiaries.
(b) All of the outstanding shares of capital stock of each
Subsidiary of UP&UP have been duly authorized and validly issued, are fully paid
and non-assessable, and are owned of record and beneficially, directly or
4
<PAGE>
indirectly, by UP&UP or its Subsidiaries, as the case may be, free and clear of
any Liens. None of the outstanding shares of capital stock of any Subsidiary of
UP&UP have been issued in violation of, and none of such outstanding shares are
subject to, any purchase option, call, right of first refusal, preemptive,
subscription or similar rights under any provisions of applicable law, the
certificate of incorporation or bylaws of such Subsidiary or any contract,
agreement or instrument to which such Subsidiary is subject, bound or a party.
(c) There are no options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments (i) obligating any Subsidiary of
UP&UP to issue any additional shares of capital stock of such Subsidiary or any
other securities convertible into, exchangeable or exercisable for or evidencing
the right to subscribe for any shares of such Subsidiary's capital stock or (ii)
that gives any person the right to receive any benefits or rights similar to any
rights enjoyed by or accruing to the holders of capital stock of any Subsidiary
of UP&UP. There are no outstanding bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders of
any Subsidiary of UP&UP may vote. Neither UP&UP nor any of its Subsidiaries is a
party to any voting agreement, voting trust, proxy or other agreement with
respect to the voting, ownership or transfer of any shares of the capital stock
of any of UP&UP's Subsidiaries that will remain in effect after the Closing. The
stock certificate and transfer books of each Subsidiary of UP&UP are true,
correct and complete.
(d) Neither UP&UP nor any of its Subsidiaries has any material
capital investment in or controls, directly or indirectly, any other
corporation, partnership, joint venture, association or other entity or business
concern other than (i) its ownership of the capital stock of a Subsidiary of
UP&UP as indicated on Schedule 2.1.4(a) and (ii) investments reflected on
UP&UP's unaudited consolidated condensed balance sheet dated December 31, 1998.
2.1.5. No Restrictions; Required Consents. (a) The execution and
delivery of this Agreement by the Seller does not, and the execution by the
Seller of the Stockholders Agreement, the Blair Option Agreement and the Seller
Registration Rights Agreement will not, and the performance by the Seller of the
transactions contemplated hereby and thereby to be performed by the Seller will
not,
5
<PAGE>
(i) conflict with, or result in any violation of, or constitute a default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any debt or obligation or
constitute a breach of, create a loss of a material benefit under, any contract,
mortgage, indenture, lease, agreement or other instrument or any permit, order,
judgment or decree to which the Seller is a party or by which any is bound, or
(ii) constitute a violation of any domestic or foreign statute, law, ordinance,
rule or regulation (the "Law") applicable to the Seller. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
domestic or foreign court, government, governmental agency, authority, entity or
instrumentality (a "Governmental Entity") is required to be obtained or made by
or with respect to the Seller in connection with the Seller's execution and
delivery of this Agreement, the Stockholders Agreement, the Blair Option
Agreement or the Seller Registration Rights Agreement or the consummation by the
Seller of the transactions contemplated hereby and thereby to be consummated by
the Seller, except for such of the foregoing as are listed or described on
Schedule 2.1.5(a).
(b) The execution and delivery of the Stockholders Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement by
UP&UP, and the performance by UP&UP of the transactions contemplated thereby to
be performed by it, will not (i) conflict with its or its Subsidiaries'
respective certificates of incorporation or bylaws, (ii) conflict with, or
result in any violation of, or constitute a default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material debt or obligation or constitute a
breach of, create a loss of a material benefit under, any contract, mortgage,
indenture, lease, agreement or other instrument or any permit, order, judgment
or decree to which UP&UP or any of its Subsidiaries is a party or by which any
of their respective properties are bound, (iii) constitute a violation of any
Law ("Law") applicable to UP&UP or any of its Subsidiaries, or (iv) result in
the creation of any Lien upon any of their respective assets which is material
to the business of UP&UP and its Subsidiaries taken as a whole. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to UP&UP or any of its Subsidiaries in connection with the
6
<PAGE>
execution and delivery of the Stockholders Agreement, the Registration Rights
Agreement or the Seller Registration Rights Agreement by UP&UP or the
performance by UP&UP of the transactions contemplated thereby to be performed by
it, except for such of the foregoing as are listed or described on Schedule
2.1.5(b) and any filings required with the Federal Trade Commission and
Department of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), in respect of the purchase of the
Shares and the Blair Option by the Purchaser.
2.1.6. SEC Documents. The Seller has made available to the Purchaser
a true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by UP&UP with the United States Securities and
Exchange Commission (the "SEC") since April 19, 1996 and prior to the date of
this Agreement (the "UP&UP SEC Documents"), which are all the documents (other
than preliminary material) that UP&UP was required to file with the SEC since
such date. As of their respective dates, the UP&UP SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as the case may be, and the rules and regulations
of the SEC thereunder applicable to such UP&UP SEC Documents, and none of the
UP&UP SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the UP&UP
SEC Documents complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited financial
statements, as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly
present in accordance with applicable requirements of GAAP (subject, in the case
of unaudited financial statements, to normal, recurring adjustments, which will
not be material, either individually or in the aggregate) the consolidated
financial position of UP&UP and its consolidated Subsidiaries as of their
respective dates and the consolidated results of operations and the consolidated
cash flows of UP&UP and its consolidated Subsidiaries for the periods presented
therein.
7
<PAGE>
2.1.7. Unaudited Financial Statements. Attached hereto as Schedule
2.1.7 are true, correct and complete copies of the unaudited consolidated
condensed balance sheet of UP&UP and its consolidated Subsidiaries dated as of
December 31, 1998 and the related statement of income for the fiscal year then
ended (collectively, the "Unaudited Financial Statements"), both of which have
been prepared in accordance with GAAP applied consistently with prior periods.
Such balance sheet fairly presents the financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise) of UP&UP and
its consolidated Subsidiaries at the date indicated and such statement of income
fairly presents the results of operations of UP&UP and its consolidated
Subsidiaries for the period indicated.
2.1.8. Absence of Undisclosed Liabilities. None of UP&UP and its
Subsidiaries has any material liabilities, either direct or indirect, matured or
unmatured or absolute, contingent or otherwise, except those liabilities
reflected (i) on UP&UP's unaudited consolidated condensed balance sheet at
December 31, 1998; or (ii) on Schedule 2.1.8(a) hereto.
For purposes of this Agreement, the term "liabilities" shall
include, without limitation, any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense or obligation,
whether fixed or contingent, known or unknown, asserted or unasserted, choate or
inchoate, liquidated or unliquidated, secured or unsecured. For purposes of this
Section 2.1.8, the term "material" shall mean any liabilities which individually
or in the aggregate exceed $5,000,000.
The Purchaser hereby acknowledges that in connection with its due
diligence investigation of the transactions contemplated by this Agreement, the
Seller has made or caused to be made available to the Purchaser the documents,
materials and other information referenced on Schedule 2.1.8(b).
2.1.9. Commissions or Finders Fees. Except for a $750,000 fee to be
paid by the Seller to Salomon Smith Barney, Inc., neither the Seller nor any
Person acting on behalf of the Seller has agreed to pay a commission, finder's
fee or similar payment in connection with this Agreement or any matter related
hereto to any Person.
8
<PAGE>
2.1.10. Disclosure. No representation or warranty by the Seller
contained in this Agreement, and no statement contained in any document
(including, without limitation, the financial statements included in the UP&UP
SEC Documents, the closing documents delivered pursuant to Article V and the
Schedules hereto), list, certificate or other instrument furnished or to be
furnished by or on behalf of the Seller to the Purchaser or any of its
representatives in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary, in light of the circumstances
under which it was or will be made, in order to make the statements herein or
therein not misleading or necessary in order fully and fairly to provide the
information required to be provided in any such document, list, certificate or
other instrument. The Seller has not failed to disclose to the Purchaser any
fact, circumstance or event which has had or could reasonably be expected to
have a Material Adverse Effect. For the purposes of this Agreement, "Material
Adverse Effect" shall mean any event, circumstance, condition, fact, effect, or
other matter which has had or could reasonably be expected to have a material
adverse effect on (i) the businesses, assets, financial condition, prospects, or
results of operations of UP&UP and its Subsidiaries taken as a whole or (ii) the
ability of any Seller to perform on a timely basis any material obligation under
this Agreement or to consummate the transactions contemplated hereby to be
consummated by such Seller.
2.2. Representations and Warranties of the Purchaser. The Purchaser makes
the following representations and warranties to the Seller, each of which is
true and correct as of the date hereof and shall be true and correct as of the
Closing Date and shall be unaffected by any investigation heretofore or
hereafter made by the Seller.
2.2.1. Corporate Organization. The Purchaser is validly existing and
in good standing under the laws of Bermuda and has the requisite partnership
power and authority to own, lease or otherwise hold its properties and assets
and to carry on its business as presently conducted. The Purchaser is in good
standing and duly qualified as a foreign limited partnership in the State of New
York.
2.2.2. Authorization and Effect. The Purchaser has the requisite
partnership power to execute and deliver this Agreement, the Stockholders
Agreement, the Blair Option
9
<PAGE>
Agreement, the Registration Rights Agreement and the Seller Registration Rights
Agreement and to consummate the transactions contemplated hereby and thereby to
be consummated by it. The execution and delivery by the Purchaser of this
Agreement, the Stockholders Agreement, the Blair Option Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement and
the consummation by it of the transactions contemplated hereby and thereby to be
consummated by it have been duly authorized by all necessary exempt company
action on the part of the ultimate general partner of the Purchaser. This
Agreement has been, and the Stockholders Agreement, the Blair Option Agreement,
the Registration Rights Agreement and the Seller Registration Rights Agreement
will be, duly executed and delivered by the Purchaser and, assuming the due
execution and delivery of this Agreement, the Stockholders Agreement, the Blair
Option Agreement, the Registration Rights Agreement and the Seller Registration
Rights Agreement by the other parties hereto and thereto, this Agreement
constitutes, and the Stockholders Agreement, the Blair Option Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement will
constitute, the valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
2.2.3. No Restrictions; Required Consents. The execution and
delivery of this Agreement by the Purchaser does not, and the execution and
delivery of the Stockholders Agreement, the Blair Option Agreement, the
Registration Rights Agreement and the Seller Registration Rights Agreement by
the Purchaser will not, and the performance by the Purchaser of the transactions
contemplated hereby and thereby to be performed by it will not, (a) conflict
with the Purchaser's limited partnership agreement, (b) conflict with, or result
in any violation of, or constitute a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any debt or obligation or constitute a breach of, create a loss
of a material benefit under, any contract, mortgage, indenture, lease, agreement
or other instrument or any permit, order, judgment or decree to which the
Purchaser is a party or by which it is bound, or
10
<PAGE>
(c) constitute a violation of any Law applicable to the Purchaser. Except for
any applicable requirements of the HSR Act, no consent, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity is required to be obtained or made by or with respect to the Purchaser in
connection with the execution and delivery of this Agreement, the Stockholders
Agreement, the Blair Option Agreement, the Registration Rights Agreement or the
Seller Registration Rights Agreement by the Purchaser or the consummation by the
Purchaser of the transactions contemplated hereby and thereby to be consummated
by the Purchaser.
2.2.4. Litigation; Decrees. There are no judicial or administrative
actions, proceedings or investigations pending or, to the Purchaser's knowledge,
threatened that question the validity or enforceability of this Agreement, the
Stockholders Agreement, the Blair Option Agreement, the Registration Rights
Agreement or the Seller Registration Rights Agreement or any action taken or to
be taken by the Purchaser in connection herewith or therewith. There are no
lawsuits, claims, administrative or other proceedings or investigations pending
or, to the Purchaser's knowledge, threatened by, against or affecting the
Purchaser in connection with this Agreement, the Stockholders Agreement, the
Blair Option Agreement, the Registration Rights Agreement or the Seller
Registration Rights or the Seller Registration Rights Agreement.
2.2.5. Purchase of Shares. (a) The Shares are being acquired for the
Purchaser's own account, not as a nominee or agent for any other Person, and
without a view to the distribution of such securities or any interest therein in
violation of the Securities Act.
(b) The Purchaser (i) is an "accredited investor" within the meaning
of Rule 501(a) under Regulation D promulgated under the Securities Act, (ii) has
such knowledge and experience in financial and business matters so as to be
capable of evaluating the merits and risks of its investment in the Shares, and
(iii) is capable of bearing the economic risks of such investment (including the
risk of the complete loss of its investment in the Shares); and
(c) The Purchaser acknowledges that the Shares have not been
registered under the Securities Act and understands that the Shares must be held
indefinitely unless
11
<PAGE>
they are subsequently registered under the Securities Act or such sale is
permitted pursuant to an available exemption from such registration requirement.
2.2.6. Commissions or Finders Fees. Neither the Purchaser nor any
Person acting on its behalf has agreed to pay a commission, finder's fee or
similar payment in connection with this Agreement or any matter related hereto
to any Person.
2.2.7. Sufficient Funds. The Purchaser has sufficient capital
commitments to enable it to fund the Share Purchase Price and the Blair Option
Purchase Price at the Closing.
ARTICLE III. PRE-CLOSING COVENANTS
3.1. Access to Information. Prior to the Closing, upon reasonable notice,
the Seller will cause UP&UP to afford to the officers, attorneys, employees,
directors, accountants, financing sources or other authorized representatives of
the Purchaser reasonable access during normal business hours to UP&UP's
employees, assets, facilities and books and records so as to afford the
Purchaser full opportunity to make such review, examination and investigation of
UP&UP's business as the Purchaser may desire to make, including, without
limitation, an environmental evaluation of UP&UP's properties and facilities.
The Purchaser will be permitted to make extracts from or to make copies of such
books and records as may be reasonably necessary in connection therewith. Prior
to the Closing, the Seller will cause UP&UP to promptly furnish or cause to be
furnished to the Purchaser such financial and operating data and other
information as the Purchaser may reasonably request.
3.2. Conduct of Business. At the Closing, the Seller shall certify to the
Purchaser in writing that during the period from the date of this Agreement to
the Closing Date, UP&UP and each of its Subsidiaries has:
(a) (i) carried on its business in the usual, regular and ordinary
course as presently conducted and consistent with past practice, (ii) kept
its business materially intact, (iii) kept available the services of its
key employees, and (iv) maintained in all material respects the goodwill
associated with its business, including but not limited to preserving its
12
<PAGE>
relationships with its top twenty payor clients (according to revenues
during the fiscal year ended December 31, 1998);
(b) maintained its assets in good condition, and except for sales in
the ordinary course of business, not moved any material asset to any
location other than real property owned or leased by UP&UP or any of its
Subsidiaries;
(c) not sold, leased or disposed of, or made any contract for the
sale, lease or disposition of, any material portion of its assets or
subjected any material portion of its assets to any Liens, other than
Liens for taxes, assessments and other governmental charges which are not
due and payable or which may thereafter be paid without penalty;
(d) not incurred any material indebtedness, liability or other
obligation (absolute, accrued, contingent or otherwise) or assumed,
guaranteed, endorsed or otherwise as an accommodation become responsible
for the obligations of any other Person (which obligations are material
with respect to UP&UP and its Subsidiaries taken as a whole), other than
bank indebtedness (provided that the aggregate amount of bank indebtedness
shall at no time exceed $25,000,000);
(e) not amended or terminated any material contract or agreement or
any license, permit, authorization, franchise or approval (each a
"Permit"), other than in the ordinary course of business consistent with
past practices;
(f) not made any change in the accounting, tax or financial
reporting principles or practices followed by it or the methods of
applying such principles unless required by GAAP or applicable law;
(g) not extended credit in the sale of products and services, the
collection of receivables or otherwise or made any loan to any Person,
other than in the ordinary course of business consistent with past
practices;
(h) maintained its books, accounts and records in the usual, regular
and ordinary manner on a basis consistent with prior years;
13
<PAGE>
(i) made any change to, or amended in any way, the contracts,
salaries, wages, or other compensation of any officer, director, employee,
agent, or other similar representative of UP&UP or any of its
Subsidiaries, except salary increases granted to their existing employees
in the ordinary course of business consistent with past practice in an
aggregate amount not exceeding five percent (5%) of such employees'
aggregate salaries as of the date of this Agreement;
(j) not adopted, entered into, amended, altered, or terminated
(partially or completely) any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), for which UP&UP or any of its Subsidiaries has any
obligation or liability, contingent or otherwise (collectively, "Employee
Plans"), or any employment or consulting agreements, bonus or other
incentive compensation, deferred compensation, salary continuation during
any absence from active employment for disability or other reasons,
severance, sick days, stock award, stock option, stock purchase, tuition
assistance, club membership, employee discount, employee loan, or vacation
pay agreements, policies or arrangements which UP&UP or any of its
Subsidiaries maintains or has any obligation or liability (contingent or
otherwise) with respect to any current or former officer, director or
employee of UP&UP or any of its Subsidiaries (collectively, "Employee
Arrangements"), except to the extent required by applicable Law;
(k) not entered into any contract with an officer, director,
employee, agent, or other similar representative of UP&UP or any of its
Subsidiaries that is not terminable, without penalty or other liability,
upon not more than 60 calendar days' notice.
(l) not entered into any agreement, including an agreement to
purchase or lease assets, which includes an aggregate payment or
commitment on the part of either party of more than $1,000,000 in the
aggregate, other than with respect to contractual prepayments to providers
in the ordinary course of business;
(m) not adopted or amended any Employee Plan or collective
bargaining agreements, except as required by Law;
14
<PAGE>
(n) maintained in full force and effect all of its insurance
policies in effect as of the date hereof;
(o) not declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital stock
or redeemed, purchased or otherwise acquired or agreed to redeem, purchase
or acquire any of its capital stock or any option, warrant or other
similar right or any security convertible into or exchangeable or
exercisable for any of its capital stock;
(p) not taken or omitted to take any action as a result of which any
representation or warranty of the Seller in Article II has been rendered
untrue or incorrect;
(q) not amended its certificate of incorporation
or bylaws (except as contemplated by the Stockholders
Agreement);
(r) not issued or agreed to issue any capital stock or any option,
warrant, call, subscription, conversion or other right obligating it to
issue any capital stock or any other securities convertible into or
exchangeable or exercisable for its capital stock (except for (i) grants
under UP&UP's existing stock option plan of options to purchase not more
than 100,000 shares of Common Stock and the issuance of shares of Common
Stock upon the exercise of such options and (ii) the issuance of shares of
Common Stock upon the exercise of the options and warrants described on
Schedule 2.1.3(a));
(s) not split, combined or reclassified any of its capital stock or
issued or authorized or proposed the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock;
(t) not acquired any business or any corporation, partnership, joint
venture, association or other business organization or division thereof
other than acquisitions the aggregate cost of which, together with the
costs of any acquisitions permitted under Section 3.2(l), does not exceed
$1,000,000, other than proposed acquisitions for not more than $2,450,000
in the
15
<PAGE>
aggregate of which the Seller has been notified in writing on the date
hereof;
(u) not paid, discharged, settled or satisfied any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction thereof in the ordinary course of business consistent with
past practice or in accordance with their respective terms;
(v) not merged, amalgamated or consolidated with any other entity in
any transaction in which it is not the surviving corporation or sold all
or substantially all of its business or assets;
(w) not waived any claims or rights having a value in excess of
$100,000 in the aggregate;
(x) not entered into any agreement, understanding or commitment that
restrains, limits or impedes in any material respect its ability to
compete with or conduct any business or line of business; and
(y) not authorized any of, or committed or agreed to take any of,
the foregoing actions.
3.3. Notification. (a) The Seller shall notify the Purchaser, and the
Purchaser shall notify the Seller, of any litigation, arbitration or
administrative proceeding pending or, to such party's knowledge, threatened
against the Seller or the Purchaser, as the case may be, which challenges the
transactions contemplated hereby.
(b) The Seller will provide prompt written notice to the Purchaser
of any change in any of the information contained in his representations and
warranties made in Article II hereof or any Exhibits or Schedules referred to
herein or attached hereto and shall promptly furnish or cause to be furnished
any information which the Purchaser may reasonably request in relation to such
change; provided, however, that such notice shall not operate to cure any breach
of the representations and warranties made in Article II hereof or any Exhibits
or Schedules referred to herein or attached hereto.
(c) The Purchaser will provide prompt written notice to the Seller
of any change in any of the information
16
<PAGE>
contained in its representations and warranties made in Article II hereof or any
Exhibits or Schedules referred to herein or attached hereto and shall promptly
furnish any information which the Seller may reasonably request in relation to
such change; provided, however, that such notice shall not operate to cure any
breach of the representations and warranties made in Article II hereof or any
Exhibits or Schedules referred to herein or attached hereto.
3.4. No Inconsistent Action. No party hereto shall take any action which
is materially inconsistent with its obligations under this Agreement.
3.5. Injunctions. Without limiting the generality or effect of any
provision of Article IV, if any United States federal, state or foreign court
having jurisdiction over any party hereto or UP&UP issues or otherwise
promulgates any injunction, decree or similar order prior to the Closing which
prohibits the consummation of the transactions contemplated hereby, the parties
hereto will use their respective commercially reasonable efforts to have such
injunction dissolved or otherwise eliminated as promptly as possible and, prior
to or after the Closing, to pursue the underlying litigation diligently and in
good faith.
3.6. Filings. As promptly as practicable after the execution of this
Agreement, each party hereto shall use its reasonable efforts to obtain, and to
cooperate with the other parties hereto in obtaining, all authorizations,
consents, orders and approvals of any Governmental Entity that may be or become
necessary in connection with the consummation of the transactions contemplated
by this Agreement, and to take all reasonable actions to avoid the entry of any
order or decree by any Governmental Entity prohibiting the consummation of the
transactions contemplated hereby, including, without limitation, any reports or
notifications that may be required to be filed by it under the HSR Act, and
shall furnish to the other all such information in its possession as may be
necessary for the completion of the reports or notifications to be filed by the
other parties.
3.7. Confidentiality. Each party hereto shall keep confidential all
information obtained by it from or with respect to the other in connection with
this Agreement and the negotiations preceding this Agreement, and will use such
information solely in connection with the transactions contemplated by this
Agreement, and if the transactions
17
<PAGE>
contemplated hereby are not consummated, each party shall return to the other
party, without retaining a copy thereof, or destroy (and deliver to the other
party a certificate as to such destruction), any schedules, documents or other
written information obtained from the other party in connection with this
Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, no party hereto shall be required to keep confidential or return any
information which (a) is publicly known or available through other lawful
sources, which sources are not bound by a confidentiality agreement with the
disclosing party, (b) is or becomes publicly known through no fault of the
receiving party or its agents, (c) is required to be disclosed pursuant to an
order or request of a judicial authority or Governmental Entity (provided that
to the extent practicable under the circumstances, the disclosing party is given
reasonable prior notice), or (d) is developed by the receiving party
independently of the disclosure by the disclosing party. The Purchaser shall
comply with its obligations under that certain Confidentiality Agreement, dated
as of November 3, 1998, by and between the Purchaser and UP&UP.
3.8. Publicity. Prior to the Closing, neither party hereto shall issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that nothing herein shall prohibit either party
from issuing or causing publication of any such press release or public
announcement to the extent that such party determines such action to be required
by Law, in which event the party making such determination shall, if practicable
in the circumstances, use commercially reasonable efforts to allow the other
party reasonable time to comment on such release or announcement in advance of
its issuance.
3.9. Delivery of Financial Statements. The Seller shall deliver to
Purchaser promptly upon their becoming available, and in no event later than 20
days from the end of such month, copies of monthly financial statements for each
of the months ended after the date hereof and prior to the Closing. Each of such
monthly financial statements shall be prepared in accordance with GAAP applied
consistently throughout the periods involved and present fairly the financial
condition of UP&UP and its Subsidiaries
18
<PAGE>
at the dates and for the periods indicated (subject to normal year end
adjustments).
3.10. Efforts of the Seller. Upon the terms and subject to the conditions
and other agreements set forth in this Agreement, the Seller agrees to use his
best efforts to take, or to cause to be taken, all actions, and to do, or to
cause to be done, and to assist and cooperate with the Purchaser in doing, all
things necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement, including, without limitation, the satisfaction of the respective
conditions set forth in Article IV.
3.11. Efforts of the Purchaser. Upon the terms and subject to the
conditions and other agreements set forth in this Agreement, the Purchaser
agrees to use its best efforts to take, or to cause to be taken, all actions,
and to do, or to cause to be done, and to assist and cooperate with the Seller
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including, without limitation, the satisfaction
of the respective conditions set forth in Article IV.
ARTICLE IV. CONDITIONS TO CLOSING
4.1. Conditions Precedent to Obligations of the Purchaser. The obligations
of the Purchaser under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to Closing,
of all of the following conditions, any one or more of which may be waived at
the option of the Purchaser:
4.1.1. Representations, Warranties and
Covenants.
(a) All representations and warranties of the Seller made in this
Agreement or in any Exhibit, Schedule or document delivered pursuant
hereto, shall be true, correct and complete in all material respects as of
the date hereof (without regard to any schedule updates furnished by any
of them after the date hereof) and on and as of the Closing Date as if
made on and as of that date.
19
<PAGE>
(b) All of the terms, covenants and conditions to be complied with
and performed by the Seller on or prior to the Closing Date (including,
without limitation, the delivery of documents in accordance with Sections
3.2 and 5.1) shall have been complied with or performed.
(c) The Purchaser shall have received a certificate, dated as of the
Closing Date, executed by the Seller, certifying in such detail as the
Purchaser may reasonably request that the conditions specified in Sections
4.1.1(a) and (b) hereof have been fulfilled.
4.1.2. Consents or Approvals. Each of the approvals, consents or
waivers listed or which was required to be listed on Schedule 2.1.5(a) or
2.1.5(b) or which is otherwise necessary or advisable in connection with the
consummation by the Seller of the transactions contemplated by this Agreement,
the Stockholders' Agreement, the Blair Option Agreement, the Registration Rights
Agreement or the Seller Registration Rights Agreement, shall have been obtained.
4.1.3. HSR Act. If applicable, the waiting period under the HSR Act
shall have expired or terminated.
4.1.4. No Adverse Proceedings. No order, decree or judgment of any
court, agency or Governmental Entity shall have been rendered against, any party
hereto which would render it unlawful, as of the Closing Date, to effect the
transactions contemplated by this Agreement in accordance with its terms.
4.1.5. Trust Transactions. Principal Health Care, Inc. ("PHCI")
shall have transferred at least 4,500,000 shares of Common Stock (the "Trust
Shares") to the Independent Divestment Trust, a Delaware business trust (the
"Trust"), in accordance with the terms of that certain Divestment and Common
Stock Sale Agreement, dated on or about the date hereof, between PHCI and the
Trust (the "Divestment Agreement"), and the Seller and the Trust shall have
entered into a stock purchase agreement with respect to the sale of the Trust
Shares to the Purchaser, which Stock Purchase Agreement shall be in
substantially the form attached hereto as Exhibit A (the "Trust Stock Purchase
Agreement").
20
<PAGE>
4.1.6. UP&UP Stock Price. The average of the last quoted bid and
offer price per share of Common Stock on the Nasdaq Stock Market on the Nasdaq
Stock Market trading day immediately preceding the Closing Date shall be not
less than $22.00.
4.1.7. OTS Regulation. After the date of this Agreement, there shall
not have occurred any change of Law, nor shall the Seller or UP&UP have taken
any action, as a result of which the Purchaser has reasonably determined that it
or any of its Affiliates will, as a result of the consummation of the
transactions contemplated by this Agreement, the Registration Rights Agreement,
the Stockholders Agreement, the Blair Option or the Seller Registration Rights
Agreement become a "savings and loan holding company" (as defined in 12 C.F.R.
ss.574.2(q)) or otherwise become subject to regulation by the United States
Office of Thrift Supervision or any other federal or state financial regulatory
authority.
4.1.8. No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect or any material disruption of or material adverse change
in financial, banking or capital market conditions.
4.2. Conditions Precedent to Obligations of the Seller. The obligations of
the Seller under this Agreement to consummate the transactions contemplated
hereby will be subject to the satisfaction, at or prior to the Closing, of all
the following conditions, any one or more of which may be waived at the option
of the Seller:
4.2.1. No Material Misrepresentation or Breach.
(a) All representations and warranties of the Purchaser made in this
Agreement or in any Exhibit, Schedule or document delivered pursuant
hereto, shall be true and complete in all material respects as of the date
hereof (without regard to any schedule updates furnished by the Purchaser
after the date hereof) and on and as of the Closing Date as if made on and
as of that date.
(b) All of the terms, covenants and conditions to be complied with
and performed by the Purchaser on or prior to the Closing Date (including,
without limitation, the delivery of documents in accordance
21
<PAGE>
with Section 5.2) shall have been complied with or performed.
(c) The Seller shall have received a certificate, dated as of the
Closing Date, executed on behalf of the Purchaser by an authorized officer
of its ultimate general partner, certifying in such detail as the Seller
may reasonably request that the conditions specified in Sections 4.2.1(a)
and (b) have been fulfilled.
4.2.2. Consents or Approvals. Each of the approvals, consents or
waivers necessary or advisable in connection with the consummation by the
Purchaser of the transactions contemplated hereby, shall have been obtained.
4.2.3. HSR Act. If applicable, the waiting period under the HSR Act
shall have expired or terminated.
4.2.4. No Adverse Proceedings. No order, decree or judgment of any
court, agency or other Governmental Entity shall have been rendered against, any
party hereto which would render it unlawful, as of the Closing Date, to effect
the transactions contemplated by this Agreement in accordance with its terms.
4.2.5. Trust Transactions. The Trust Shares shall have been duly
transferred to the Trust and the Trust shall have executed and delivered to the
Seller a counterpart to the Trust Stock Purchase Agreement.
ARTICLE V. DOCUMENTS TO BE DELIVERED AT THE CLOSING
5.1. Documents to be Delivered by the Seller. At the Closing, the Seller
shall deliver or cause to be delivered to the Purchaser the following, at the
expense of the Seller, and in proper form for recording when appropriate:
5.1.1. Transaction Agreements. The following:
(a) a counterpart, duly executed by the Seller,
of this Agreement
(b) counterparts, duly executed by the Seller and UP&UP, of a
stockholders agreement in substantially the form attached hereto as Exhibit B
(the "Stockholders Agreement");
22
<PAGE>
(c) a counterpart, duly executed by UP&UP, of a registration rights
agreement in substantially the form attached hereto as Exhibit C (the
"Registration Rights Agreement");
(d) a counterpart, duly executed by Blair, of an option agreement in
substantially the form attached hereto as Exhibit D (the "Blair Option
Agreement");
(e) a true, correct and complete copy of a registration rights
agreement, duly executed by UP&UP and the Seller, in substantially the form
attached hereto as Exhibit E (the "Seller Registration Rights Agreement"); and
(f) true, correct and complete copies of the Trust's trust agreement
(which shall include a provision obligating the trustee of the Trust to vote all
Trust Shares in favor of the amendments to UP&UP's certificate of incorporation
described in Section 5.5 of the Stockholders Agreement) and the Trust Stock
Purchase Agreement, duly executed by each of the parties thereto.
5.1.2. Certified Resolutions. Certified resolutions of the Board of
Directors of UP&UP approving the execution and delivery of the Stockholders
Agreement, the Registration Rights Agreement and the Seller Registration Rights
Agreement and the consummation by UP&UP of the transactions contemplated hereby
and thereby to be performed by it and expressly waiving application of Section
203 of the Delaware General Corporation Law to all transactions contemplated
hereby and thereby.
5.1.3. Sellers' Certificate. A certificate dated the Closing Date,
executed by each Seller, in the form described in Section 4.1.1(c).
5.1.4. Good Standing Certificate. A governmental certificate showing
that UP&UP is duly incorporated and in good standing in the State of Delaware,
certified as of a date not more than five (5) business days prior to the Closing
Date.
5.1.5. Other Documents. Such additional information and materials as
the Purchaser may reasonably request.
23
<PAGE>
5.2. Documents to be Delivered by the Purchaser. At the Closing, the
Purchaser will deliver to the Seller, at the expense of the Purchaser:
5.2.1. Transaction Agreements. Counterparts, duly executed by the
Purchaser, of the following agreements:
(a) this Agreement
(b) the Stockholders Agreement;
(c) the Registration Rights Agreement;
(d) the Blair Option Agreement; and
(e) the Seller Registration Rights Agreement.
5.2.2. Certified Resolutions. Certified resolutions of the board of
directors of the Purchaser's ultimate general partner approving the execution
and delivery of this Agreement, the Stockholders Agreement, the Blair Option
Agreement, the Registration Rights Agreement, and the Seller Registration Rights
Agreement and each of the other documents delivered by the Purchaser pursuant
hereto and thereto and authorizing the consummation of the transactions
contemplated hereby and thereby.
5.2.3. Purchaser's Certificate. A certificate dated the Closing
Date, executed by the Purchaser, in the form described in Section 4.2.1(c).
5.2.4. Good Standing Certificate. A governmental certificate showing
that the Purchaser is duly organized and in good standing in Bermuda, certified
as of a date not more than five (5) business days before the Closing Date.
5.2.5. Other Documents. Such additional information and materials as
the Seller may reasonably request.
24
<PAGE>
ARTICLE VI. SURVIVAL AND INDEMNIFICATION
6.1. Survival of Representations, Warranties and Covenants. (a) Except for
the representations and warranties contained in Section 2.1.3(c) (and the
corresponding representations of the Seller's assignees), which shall survive
indefinitely, the representations and warranties of the Seller (which for
purposes hereof shall be deemed to include all representations and warranties of
the Seller's assignees) and of the Purchaser contained in this Agreement shall
survive the Closing until May 15, 2000. Any claim for indemnification with
respect to any of such matters which is not asserted by notice given as herein
provided relating thereto within such specified period of survival may not be
pursued and is hereby irrevocably waived after such time. Any claim for an
Indemnifiable Loss (as defined in Section 6.2) asserted within such period of
survival as herein provided will be timely made for purposes hereof.
(b) Section 3.7 and Article VIII hereof will survive the Closing and
remain in effect indefinitely.
6.2. Definitions. For purposes of this Agreement, (i) "Indemnity Payment"
means any amount of Indemnifiable Losses required to be paid pursuant to this
Agreement, (ii) "Indemnitee" means any person or entity entitled to
indemnification under this Agreement, (iii) "Indemnifying Party" means any
person or entity required to provide indemnification under this Agreement, (iv)
"Indemnifiable Losses" means any and all damages, losses, liabilities,
obligations, costs and expenses, and any and all claims, demands or suits (by
any person or entity, including without limitation any Governmental Entity),
including without limitation the costs and expenses of any and all actions,
suits, proceedings, demands, assessments, judgments, settlements and compromises
relating thereto and including reasonable attorneys' fees and expenses in
connection therewith, and (v) "Third Party Claim" means any claim, action or
proceeding made or brought by any person or entity who or which is not a party
to this Agreement or an Affiliate of a party to this Agreement.
6.3. Indemnification. (a) Subject to Section 6.1, the
Seller agrees to indemnify, defend and hold harmless the
Purchaser and its Affiliates and their respective directors,
officers, partners, employees, agents and representatives
25
<PAGE>
from and against any and all Indemnifiable Losses to the extent relating to,
resulting from or arising out of:
(i) any breach of representation or warranty of the Seller
(which for purposes hereof shall be deemed to include all representations
and warranties of the Seller's assignees) under the terms of this
Agreement and any certificate or other document delivered pursuant hereto;
or
(ii) any breach or nonfulfillment of any agreement or covenant of
the Seller under the terms of this Agreement.
(b) The Purchaser agrees to indemnify, defend and hold harmless the
Seller from and against any and all Indemnifiable Losses to the extent relating
to, resulting from or arising out of:
(i) any breach of representation or warranty of the Purchaser
under the terms of this Agreement and any certificate or other document
delivered pursuant hereto; or
(ii) any breach or nonfulfillment of any agreement or covenant of
the Purchaser under the terms of this Agreement.
(c) An Indemnitee under this Section 6.3 shall be entitled to
indemnification for its Indemnifiable Losses hereunder notwithstanding such
Indemnifiable Losses resulted from its negligence to the extent such
Indemnifiable Losses have not resulted from the gross negligence or wilful
misconduct of such Indemnitee.
6.4. Defense of Claims. (a) If any Indemnitee receives notice of assertion
or commencement of any Third Party Claim against such Indemnitee with respect to
which an Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than 30 calendar days after
receipt of such notice of such Third Party Claim. Such notice (the "Third Party
Claim Notice") will describe the Third Party Claim in reasonable detail, will
include copies of all material written evidence thereof and will indicate the
estimated amount, if reasonably practicable, of the Indemnifiable Loss that has
been or may be sustained by the
26
<PAGE>
Indemnitee. The Indemnifying Party shall have 20 days from its receipt of a
Third Party Claim Notice (the "Third Party Claim Notice Period") to notify
Indemnitee (i) whether the Indemnifying Party disputes the Indemnitee's right of
indemnification with respect to such Third Party Claim, and (ii) if the
Indemnifying Party does not dispute such right of indemnification, whether or
not it desires to defend the Indemnitee against such Third Party Claim.
(b) If the Indemnifying Party notifies the Indemnitee within the
Third Party Claim Notice Period that (i) the Indemnifying Party does not dispute
the Indemnitee's right of indemnification and (ii) the Indemnifying Party
desires to defend against such Third Party Claim, then the Indemnifying Party
shall have the right to assume and control the defense of such Third Party Claim
by appropriate proceedings with counsel reasonably acceptable to Indemnitee at
the Indemnifying Party's sole cost and expense. The Indemnitee may participate
in, but not control, any such defense or settlement at its sole cost and
expense.
(c) If the Indemnifying Party (i) disputes the Indemnitee's right of
indemnification with respect to a Third Party Claim, (ii) does not dispute such
right of indemnification but fails to promptly assume and prosecute the defense
of such Third Party Claim, (iii) does not dispute such right of indemnification
but a conflict or potential conflict exists between the Indemnifying Party and
the Indemnitee or (iv) is not entitled to assume defense of such Third Party
Claim under Section 6.4(b), then the Indemnitee shall be entitled to assume and
control the defense of such Third Party Claim with counsel reasonably acceptable
to the Indemnifying Party. If the Indemnifying Party does not assume the defense
of a Third Party Claim for any reason, it may still participate in, but not
control, the defense of such Third Party Claim at the Indemnifying Party's sole
cost and expense.
(d) The party responsible for the defense of any Third Party Claim
(the "Responsible Party") shall, to the extent reasonably requested by the other
party, keep such other party informed as to the status of any Third Party Claim
for which such party is not the Responsible Party, including, without
limitation, all settlement negotiations and offers. With respect to a Third
Party Claim for which the Indemnifying Party is the Responsible Party, the
Indemnitee shall make available to the Indemnifying Party and its
representatives all books and records of the
27
<PAGE>
Indemnitees relating to such Third Party Claim and shall render to the
Indemnifying Party such assistance and access to records and the representatives
of the Indemnitee as the Indemnifying Party and its representatives may
reasonably request, except that the Indemnitee shall not be required to make
available to the Indemnifying Party and its representatives any books, records,
documents or other information that the Indemnitee reasonably determines to be
confidential or subject to attorney-client privilege unless and until the
Indemnifying Party shall have entered into such agreements as the Indemnitee
reasonably deem to be necessary in light of all surrounding circumstances
(including, without limitation, the Indemnifying Party's need for information in
connection with the investigation or defense of a Third Party Claim) to protect
such confidentiality or privilege.
(e) Neither the Indemnifying Party, on the one hand, nor the
Indemnitee, on the other hand, shall enter into any settlement of any Third
Party Claim without the prior written consent of the other party, which consent
shall not be unreasonably withheld. The Responsible Party shall promptly notify
the other party of each settlement offer (including whether or not the
Responsible Party is willing to accept the proposed settlement offer) with
respect to a Third Party Claim. Such other party agrees to notify the
Responsible Party with reasonable promptness whether or not such party is
willing to accept the proposed settlement offer. If an Indemnitee fails to
consent to any settlement offer of a Third Party Claim (whether or not the
Indemnitee is the Responsible Party with respect to such Third Party Claim), the
Indemnitee may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party with respect to such
Third Party Claim (including the reasonable costs and expenses of contesting or
defending such Third Party Claim incurred after the Indemnitee fails to consent
to such settlement offer) shall not exceed the full amount of such settlement
offer. If the Indemnifying Party fails to consent to any settlement offer of a
Third Party Claim (whether or not the Indemnifying Party is the Responsible
Party with respect to such Third Party Claim), the Indemnifying Party may
continue to contest or defend such Third Party Claim and, in such event, the
Indemnifying Party shall be liable to the Indemnitee for the amount of the
Indemnification Loss ultimately recovered against Indemnitee as a result of such
Third Party Claim.
28
<PAGE>
(f) A failure to give timely notice or to include any specified
information in any notice as provided in Sections 6.4(a) or 6.4(b) will not
affect the rights or obligations of any party hereunder except and only to the
extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise damaged as a result of such
failure.
(g) The Indemnifying Party will have a period of 30 calendar days
within which to respond in writing to any claim by an Indemnitee on account of
an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct
Claim"). If the Indemnifying Party does not so respond within such 30 calendar
day period, the Indemnifying Party will be deemed to have rejected such claim,
in which event the Indemnitee will be free to pursue such remedies as may be
available to the Indemnitee on the terms and subject to the provisions of this
Article VI.
ARTICLE VII. TERMINATION
7.1. Termination. Notwithstanding anything contained in this Agreement to
the contrary, this Agreement may be terminated at any time prior to the Closing:
(a) By the mutual written consent of the
Purchaser and the Seller;
(b) By either the Purchaser or the Seller if the Closing shall not
have occurred on or before March 15, 1999; provided, however, that the
terminating party shall not then be in material breach of this Agreement
and that the failure of the Closing to have occurred by such date shall
not have been caused by or resulted from such terminating party's failure
to fulfill any obligation under this Agreement;
(c) By either the Purchaser or the Seller if there shall have been
entered a final, nonappealable order or injunction of any Governmental
Entity restraining or prohibiting the consummation of the transactions
contemplated hereby or any material part thereof; or
(d) By either the Purchaser or the Seller if, prior to the Closing
Date, the other party is in
29
<PAGE>
material breach of any representation, warranty, covenant or agreement
contained herein and such breach shall not be cured within fifteen (15)
days of the date of notice of default served by the party claiming such
material default, provided that such terminating party shall not also be
in material breach of this Agreement at the time notice of termination is
delivered.
Upon the termination of this Agreement in accordance with this Section 7.1, the
obligations of the parties to effect the transactions contemplated hereby will
terminate, except that the provisions of this Section 7.1 and of Article VIII
shall continue to apply and no party shall be relieved of any liability for any
breach of this Agreement prior to the date of termination.
ARTICLE VIII. MISCELLANEOUS PROVISIONS
8.1. Specific Performance. The parties hereto agree that irreparable
damage would occur if any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
therefore agreed that the parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of this agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or in equity.
8.2. Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by electronic facsimile transfer or one business day after having
been dispatched by a nationally recognized overnight courier service to the
appropriate party at the address specified below:
(a) If to the Seller, to:
Thomas L. Blair
United Payors & United Providers, Inc.
2275 Research Boulevard
6th Floor
Rockville, Maryland 20850
Facsimile No.: (301) 921-2400
30
<PAGE>
with a copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile No.: (202) 966-9409
Attention: Thomas Haggerty
(b) If to the Purchaser, to:
Capital Z Financial Services Fund II, L.P.
c/o Capital Z Partners, Ltd.
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Facsimile No.: (212) 898-8720
Attention: Paul H. Warren
David A. Spuria, Esq.
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile No.: (212) 310-8007
Attention: Thomas A. Roberts, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
8.3. Expenses. Except as otherwise expressly provided herein, the Seller
agrees to pay or cause to be paid, promptly upon receipt of any request therefor
(together with reasonably satisfactory supporting documentation), all reasonable
accounting, legal, banking and other out-of-pocket expenses of the Purchaser
relating to the transactions contemplated hereby, up to a maximum of $250,000;
provided, however, that such payment shall be required only if the sale of the
Shares and the Blair Option is consummated or if the sale of the Shares and the
Blair Option is not consummated on account of a breach by the Seller of this
Agreement.
8.4. Successors and Assigns. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns, but will not be assignable or delegable by any party without
the prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that
31
<PAGE>
a party, upon notice to the other party, may assign or delegate any or all of
its rights or obligations under this Agreement to any Affiliate, in the case of
the Purchaser, or to any other UP&UP stockholder designated in writing by the
Seller at least five business days prior to the Closing Date (which stockholder
must be reasonably acceptable to the Purchaser), in the case of the Seller. Each
party agrees to execute acknowledgements of such assignment(s) and collateral
assignments in such forms as the other party may from time to time reasonably
request. In the event of such a proposed assignment by a party, the provisions
of this Agreement shall inure to the benefit of and be binding upon such party's
assigns. In the event of such a proposed assignment by the Seller, the Seller's
assign shall be required to make representations and warranties to the Purchaser
only as to matters described in Sections 2.1.3(c) (only as to the shares of
Common Stock to be transferred by such assign), 2.1.5 and 2.1.9 and the Seller
shall not be relieved of any of its obligations or liabilities hereunder.
8.5. Waiver. Each party hereto by written notice to the other party may
(a) extend the time for performance of any of the obligations of the other party
under this Agreement, (b) waive any inaccuracies in the representations or
warranties of the other party contained in this Agreement or in any document
delivered in connection herewith, (c) waive compliance with any of the
conditions or covenants of the other party contained in this Agreement, or (d)
waive or modify performance of any of the obligations of the other party under
this Agreement; provided, however, that no such party may, without the prior
written consent of the other party, make or grant such extension of time, waiver
of inaccuracies or compliance or waiver or modification of performance with
respect to its (or any of its Affiliates) representations, warranties,
conditions or covenants hereunder. Except as provided in the immediately
preceding sentence, no action taken pursuant to this Agreement will be deemed to
constitute a waiver of compliance with any representations, warranties,
conditions or covenants contained in this Agreement and will not operate or be
construed as a waiver of any subsequent breach, whether of a similar or
dissimilar nature.
8.6. Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) supersedes any other agreement, whether written or oral, that
may have been made or entered into by any party or any of their respective
Affiliates (or by any director, officer or representative
32
<PAGE>
thereof) relating to the matters contemplated hereby. This Agreement (together
with the Exhibits and Schedules hereto) constitutes the entire agreement by and
among the parties hereto and there are no agreements or commitments by or among
such parties or their Affiliates except as expressly set forth herein.
8.7. Amendments and Supplements. This Agreement may be amended or
supplemented at any time by additional written agreements signed by the parties
hereto.
8.8. Rights of the Parties. Except as provided in Article VI or in Section
8.4, nothing expressed or implied in this Agreement is intended or will be
construed to confer upon or give any person or entity other than the parties
hereto and their respective Affiliates any rights or remedies under or by reason
of this Agreement or any transaction contemplated hereby.
8.9. Brokers. The Purchaser hereby agrees to indemnify and hold harmless
the Seller, and the Seller hereby agrees to indemnify and hold harmless the
Purchaser, against any liability, claim, loss, damage or expense incurred by the
Purchaser or by the Seller, respectively, relating to any fees or commissions
owed to any broker, finder, or financial advisor as a result of actions taken by
the Purchaser or by the Seller, respectively.
8.10. Further Assurances. From time to time, as and when requested by
either party, the other party shall execute and deliver, or cause to be executed
and delivered, all such documents and instruments as may be reasonably necessary
to consummate the transactions contemplated by this Agreement.
8.11. Governing Law. This Agreement, including, without limitation, the
interpretation, construction and validity hereof, shall be governed by the Laws
of the State of New York without regard to the conflicts of laws principles
thereof.
8.12. Severability. The parties agree that if one or more provisions
contained in this Agreement shall be deemed or held to be invalid, illegal or
unenforceable in any respect under any applicable Law, then this Agreement shall
be construed with the invalid, illegal or unenforceable provision deleted, and
the validity, legality and
33
<PAGE>
enforceability of the remaining provisions contained herein shall not be
affected or impaired thereby.
8.13. Execution in Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
8.14. Titles and Headings. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
8.15. Certain Interpretive Matters and Definitions. (a) Unless the context
otherwise requires, (i) all references to Sections, Articles or Schedules are to
Sections, Articles or Schedules of or to this Agreement, (ii) each term defined
in this Agreement has the meaning assigned to it, (iii) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP, (iv) "or" is disjunctive but not necessarily exclusive, (v) words in
the singular include the plural and vice versa, (vi) the terms "Subsidiary" and
"Affiliate" have the meanings given to those terms in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934 Act, as amended, and (vii)
"Person" or "person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof. All references to
"$" or dollar amounts will be to lawful currency of the United States of
America.
(b) No provision of this Agreement will be interpreted in favor of,
or against, either of the parties hereto by reason of the extent to which either
such party or its counsel participated in the drafting thereof or by reason of
the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
8.16. No Recourse. Notwithstanding any of the terms or provisions of this
Agreement, each of the Purchaser and the Seller agrees that neither it nor any
person acting on its behalf may assert any claims or cause of action against any
officer, director, partner or stockholder of the other party in connection with
or arising out of this Agreement or the transactions contemplated hereby.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE PURCHASER:
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P.,
its general partner
By: Capital Z Partners, Ltd.,
its general partner
By: /s/ Paul H. Warren
--------------------------------
Name: Paul H. Warren
Title: Senior Vice President
THE SELLER:
By: /s/ Thomas L. Blair
-----------------------------
Thomas L. Blair
35
Exhibit 2
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is made
and entered into as of the 25th day of February, 1999 by and between Capital Z
Financial Services Fund II, L.P., a Bermuda exempt and limited partnership
("Assignor"), and Capital Z Financial Services Private Fund II, L.P., a Bermuda
exempt and limited partnership ("Assignee").
RECITALS:
WHEREAS, Assignor and Thomas L. Blair ("Blair") have entered into a
Securities Purchase Agreement dated as of February 2, 1999 (the "Securities
Purchase Agreement;" terms used but not defined herein shall have the meanings
ascribed to such terms in the Securities Purchase Agreement);
WHEREAS, pursuant to and on the terms and conditions set forth in
the Securities Purchase Agreement, Blair has agreed to sell to Assignor, and
Assignor has agreed to purchase from Blair, (i) 1,750,000 shares (the "Shares")
of common stock, par value $.01 per share ("Common Stock"), of United Payors &
United Providers, Inc., a Delaware corporation ("UP&UP) and (ii) an option (the
"Blair Option") to purchase 2,250,000 shares of Common Stock (the "Blair Option
Shares");
WHEREAS, as a condition to the consummation of the purchase and sale
of the Shares and the Blair Option, (i) Assignor, Blair and UP&UP are required
to enter into the Stockholders Agreement, (ii) Assignor and UP&UP are required
to enter into the Registration Rights Agreement and (iii) Blair is required to
assign to Assignor all of his rights and obligations under the Seller
Registration Rights Agreement;
WHEREAS, the Securities Purchase Agreement permits Assignor to
assign its rights thereunder to any of its Affiliates; and
WHEREAS, Assignor desires to assign and Assignee desires to assume
certain of Assignor's rights and obligations under the Securities Purchase
Agreement (including the right to purchase portions of the Shares and the Blair
Option and to become a party to the Stockholders
NYFS08...:\60\33560\0019\2205\AGR2219L.170
<PAGE>
Agreement, the Registrations Rights Agreement and the Seller Registrations
Rights Agreement).
NOW, THEREFORE, in consideration of the foregoing premises and
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Assignment. Assignor hereby assigns to Assignee Assignor's right
under (i) the Securities Purchase Agreement to purchase 7,518 of the Shares (the
"Assigned Shares") and (ii) the Blair Option to purchase 9,666 of the Blair
Option Shares (the "Assigned Blair Option Shares"), together with all rights
appurtenant thereto.
2. Assumption of Obligations. Assignee hereby expressly assumes all
obligations of Assignor under (i) the Securities Purchase Agreement with respect
to the Assigned Shares and (ii) the Blair Option Agreement with respect to the
Assigned Blair Option Shares.
3. Documentation. To properly effect the assignment of rights and
assumption of obligations pursuant to this Agreement, Assignee agrees to execute
and deliver to Assignor, Blair and UP&UP, as applicable, (i) a counterpart to
the Stockholders Agreement, (ii) a Registration Rights Agreement Joinder in the
form attached to the Registration Agreement as Exhibit A and (iii) a
Registration Rights Agreement Joinder in the form attached to the Seller
Registration Agreement as Exhibit A.
4. Further Assurances. In furtherance of the foregoing, each of
Assignor and Assignee agrees to, without further consideration and whenever and
as often as required by the other, execute, acknowledge and deliver such other
documents and instruments and take such other actions as the other may
reasonably require to carry out the purposes set forth in this Agreement.
5. No Third Party Beneficiaries. Nothing in this Agreement, express
or implied, is intended or shall be construed to confer upon, or give to, any
person or entity, other than the parties hereto and their respective successors
and assigns, any right or remedy under or by reason of this Agreement or any
term, covenant or condition hereof, and all of the terms, covenants, conditions,
promises and agreements contained in this Agreement shall be
2
<PAGE>
for the sole and exclusive benefit of the parties hereto and their respective
successors and assigns.
6. Counterparts. This Agreement may be executed in any number of
counterpart and each of such counterparts shall for all purposes be deemed to be
an original, and all such counterparts together shall constitute but one and the
same instrument.
7. Governing Law. This Agreement, including, without limitation, the
interpretation, construction and validity hereof, shall be governed by the laws
of the State of New York without regard to the conflicts of laws principles
thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date first written above.
ASSIGNOR:
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P.,
its sole general partner
By: Capital Z Partners, Ltd.,
its sole general partner
By: /s/ Paul H. Warren
----------------------------------------
Name: Paul H. Warren
Title: Senior Vice President
ASSIGNEE:
CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P.,
its sole general partner
By: Capital Z Partners, Ltd.,
its sole general partner
By: /s/ Steven M. Gluckstern
----------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
4
<PAGE>
ACKNOWLEDGED AS OF FEBRUARY 25, 1999:
/s/ Thomas L. Blair
- -------------------------------------
Thomas L. Blair
UNITED PAYORS & UNITED PROVIDERS, INC.
By: /s/ Edward S. Civera
-----------------------------------------------
Name: Edward S. Civera
Title: President and Chief Operating Officer
5
Exhibit 3
EXECUTION COPY
================================================================================
STOCKHOLDERS AGREEMENT
UNITED PAYORS & UNITED PROVIDERS, INC.
--------------------
Dated as of February 25, 1999
--------------------
================================================================================
NYFS08...:\60\33560\0019\2205\AGR1049P.57F
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions.................................. 1
Section 1.2 Rules of Construction........................ 4
ARTICLE 2
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
Section 2.1 Board of Directors........................... 4
2.1.1 Board Representation......................... 4
2.1.2 Vacancies.................................... 5
2.1.3 Committees................................... 5
2.1.4 Modification of Rights....................... 5
2.1.5 Costs and Expenses........................... 6
Section 2.2 Voting of Capital Stock...................... 6
Section 2.3 Other Activities of the Holders;
Fiduciary Duties............................. 7
2.3.1 CapZ Group................................... 7
2.3.2 TLB.......................................... 7
2.3.3 Fiduciary Duties............................. 7
ARTICLE 3
TRANSFERS OF SECURITIES
Section 3.1 Tag Along Rights............................. 7
3.1.1 Applicability................................ 7
3.1.2 Exempt Transfers............................. 8
3.1.3 Terms of Participation Offer................. 8
Section 3.2 Right of First Offer......................... 9
3.2.1 Notice of Proposed Transaction;
Election..................................... 9
3.2.2 Exempt Transfers............................. 10
3.2.3 Procedure for Sale........................... 10
Section 3.3 Transfer and Exchange........................ 10
Section 3.4 Replacement Securities....................... 11
ARTICLE 4
LIMITATION ON TRANSFERS
Section 4.1 Notice of Proposed Transfers................. 11
i
<PAGE>
ARTICLE 5
COMPANY COVENANTS
Section 5.1 General...................................... 12
Section 5.2 Mergers, Acquisitions and
Divestitures................................. 12
Section 5.3 Share Acquisitions........................... 12
Section 5.4 OTS Approvals and Determinations............. 13
Section 5.5 Charter and Bylaws Amendments................ 13
ARTICLE 6
TERMINATION
Section 6.1 Termination.................................. 13
ARTICLE 7
MISCELLANEOUS
Section 7.1 Notices...................................... 14
Section 7.2 Governing Law................................ 15
Section 7.3 Successors and Assigns....................... 15
Section 7.4 Duplicate Originals.......................... 15
Section 7.5 Severability................................. 15
Section 7.6 No Waivers; Amendments....................... 15
ii
<PAGE>
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Stockholders Agreement"), dated as of
February 25, 1999, is entered into by and among the securityholders from time to
time listed on the signature pages hereof and, as to all provisions herein other
than Article 3, United Payors & United Providers, Inc., a Delaware corporation
(including any successors thereto, the "Company").
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS.
"ACCREDITED INVESTOR" means an "Accredited Investor," as defined in
Regulation D, or any successor rule then in effect.
"ACCREDITED OFFEREE" shall have the meaning
provided in Section 3.1 hereof.
"ACQUIRED BLAIR OPTION SHARES" means Blair Option Shares which have
been acquired upon exercise of the Blair Option.
"AFFILIATE" means, with respect to any Person, any Person who,
directly or indirectly, controls, is controlled by or is under common
control with that Person. For purposes of this definition, "control" when
used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
"BLAIR OPTION" means the option to purchase up to 2,250,000 shares
of Common Stock granted by TLB to Capital Z Financial Services Fund II,
L.P.
<PAGE>
"BLAIR OPTION SHARES" means the shares of Common Stock which may be
or have been acquired upon exercise of the Blair Option.
"CAPZ" means Capital Z Partners, Ltd., a Bermuda exempt company.
"CAPZ GROUP" means CapZ and its Affiliates and its and their
respective officers, directors, and employees (and members of their
respective families and trusts for the primary benefit of such family
members).
"CAPZ GROUP DESIGNEE" shall have the meaning set forth in Section
2.1.1.
"COMMON STOCK" means shares of the Common Stock, $.01 par value per
share, of the Company, and any capital stock of the Company into which
such Common Stock thereafter may be changed.
"COMPANY" shall have the meaning set forth in the introductory
paragraph hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"HOLDER" means (i) a securityholder listed on the signature page
hereof and (ii) any direct or indirect transferee of any such
securityholder who shall become a party to this Stockholders Agreement.
"OFFER NOTICE" shall have the meaning provided in Section 3.1
hereof.
"OFFERED SECURITIES" shall have the meaning provided in Section 3.1
hereof.
"PARTICIPATION OFFER" shall have the meaning provided in Section 3.2
hereof.
"PERSON" or "PERSON" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock
company, trust, unincorporated organization or government or other agency
or political subdivision thereof.
2
<PAGE>
"REGULATION D" means Regulation D promulgated under the Securities
Act by the SEC.
"REQUIRED HOLDERS" means Holders who then own beneficially more than
66-2/3% of the aggregate number of shares of Common Stock subject to this
Stockholders Agreement.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Common Stock.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase
Agreement, dated February 2, 1999, between TLB and Capital Z Financial
Services Fund II, L.P.
"SHARES" shall have the meaning provided in the Securities Purchase
Agreement.
"STOCKHOLDERS AGREEMENT" means this Stockholders Agreement, as may
be amended from time to time.
"SUBSIDIARY" of any Person means (i) a corporation a majority of
whose outstanding shares of capital stock or other equity interests with
voting power, under ordinary circumstances, to elect directors, is at the
time, directly or indirectly, owned by such Person, by one or more
subsidiaries of such Person or by such Person and one or more subsidiaries
of such Person, and (ii) any other Person (other than a corporation) in
which such Person, a subsidiary of such Person or such Person and one or
more subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (x) at least a majority ownership interest or
(y) the power to elect or direct the election of the directors or other
governing body of such Person.
"TAG SALE" shall have the meaning provided in Section 3.1.1 hereof.
"TLB" means Thomas L. Blair.
3
<PAGE>
"TRANSFER" means any disposition of any Security or any interest
therein that would constitute a "sale" thereof within the meaning of
Section 2(3) of the Securities Act.
"TRANSFER NOTICE" shall have the meaning provided in Section 4.1
hereof.
SECTION 1.2 RULES OF CONSTRUCTION. Unless the context otherwise
requires
(1) a term has the meaning assigned to it;
(2) "or" is not exclusive;
(3) words in the singular include the plural and words in the plural
include the singular;
(4) provisions apply to successive events and transactions; and
(5) "herein," "hereof" and other words of similar import refer to
this Stockholders Agreement as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE 2
MANAGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
SECTION 2.1 BOARD OF DIRECTORS.
2.1.1 Board Representation. Subject to Section 2.1.4, the CapZ Group
shall be entitled to designate two individuals who are reasonably acceptable to
the Company as members of the Board of Directors of the Company (the "CapZ Group
Designees"). The Company shall duly nominate the CapZ Group Designees for
election to its Board of Directors and shall include in any proxy solicitation
materials related to the election of members of the Company's Board of Directors
all such information and recommendations of the Company's Board of Directors as
may be necessary or advisable to cause the election of the CapZ Group Designees
to the Company's Board of Directors. Each Holder shall vote such Holder's shares
of Common Stock at any regular or special meeting of stockholders of the Company
or in any written consent executed in lieu of such a meeting of stockholders for
the election of the CapZ Group
4
<PAGE>
Designees. The Company and each Holder shall take all other actions necessary to
ensure that the certificate of incorporation and bylaws of the Company as in
effect immediately following the date hereof do not, at any time thereafter,
conflict in any respect with the provisions of this Agreement.
2.1.2 Vacancies. If, prior to his or her election to the Board of
Directors of the Company pursuant to Section 2.1.1 hereof, any CapZ Group
Designee shall be unable or unwilling to serve as a director of the Company, the
CapZ Group shall be entitled to nominate a replacement (who is reasonably
acceptable to the Company) who shall then be a CapZ Group Designee for purposes
of this Article 2. If, following an election to the Board of Directors of the
Company pursuant to Section 2.1.1 hereof, any CapZ Group Designee shall resign
or be removed or be unable to serve for any reason prior to the expiration of
his term as a director of the Company, the CapZ Group shall, within thirty (30)
days of such event, notify the Board of Directors of the Company in writing of a
replacement CapZ Group Designee (who must be reasonably acceptable to the
Company), and either (i) the Holders shall vote their shares of Common Stock, at
any regular or special meeting called for the purpose of filling positions on
the Board of Directors of the Company or in any written consent executed in lieu
of such a meeting of stockholders, and shall take all such other actions
necessary to ensure the election to the Board of Directors of the Company of
such replacement CapZ Group Designee to fill the unexpired term of the CapZ
Group Designee who such new CapZ Group Designee is replacing or (ii) the Board
of Directors shall elect such replacement CapZ Group Designee to fill the
unexpired term of the CapZ Group Designee who such new Designee is replacing.
2.1.3 Committees. The Company and the Holders shall cause each
committee of the Board of Directors of the Company to include as a member at
least one of the CapZ Group Designees, except where such inclusion would give
rise to a conflict of interest.
2.1.4 Modification of Rights. For every four board seats added to
the nine board seats comprising the Company's Board of Directors on the date
hereof, the CapZ Group shall be entitled to designate one additional CapZ Group
Designee to the Company's Board of Directors. If at any time members of the CapZ
Group shall own beneficially less than 900,000 of the Shares (adjusted for any
stock
5
<PAGE>
splits, stock dividends or similar events) in the aggregate, the Cap Z Group
thereafter shall be entitled to designate only one CapZ Group Designee. If at
any time members of the CapZ Group shall own beneficially less than 100,000 of
the Shares (adjusted for any stock splits, stock dividends or similar events) in
the aggregate, the Cap Z Group thereafter shall not be entitled to designate a
CapZ Group Designee.
2.1.5 Costs and Expenses. The Company shall reimburse each CapZ
Group Designee for out-of-pocket expenses incurred by such CapZ Group Designee
in connection with such CapZ Group Designee's participation in meetings of the
Board of Directors of the Company (and committees thereof) and, if applicable,
the Boards of Directors of the Subsidiaries of the Company (and committees
thereof) at least to the same extent that the Company reimburses the independent
members of its Board of Directors.
SECTION 2.2 VOTING OF CAPITAL STOCK. To the extent any Holder owns shares
of any class or series of capital stock of the Company which such Holder may
vote on any particular matter which comes before the Company's stockholders as a
class or series separate from the Common Stock, such Holder shall vote all such
shares on such matter in such separate class or series vote as holders of a
majority of the outstanding shares of Common Stock vote thereon; provided,
however, that such Holder may nevertheless vote such shares as a separate class
or series without regard to the provisions of this Section 2.2 in respect of (a)
amendments to the certificate of incorporation of the Company, or the
certificate of designation which created such class or series, which change the
provisions thereof expressly applicable to such separate class or series, and
(b) any matter as to which such class or series is expressly entitled to vote as
a separate class or series pursuant to the Company's certificate of
incorporation or the certificate of designation which created such class or
series; provided further, however, that no statement in such certificate of
incorporation or certificate of designation that such class or series may vote
as a separate class or series "as required by law" or any similar language shall
permit such class or series to be voted without regard to the provisions of this
Section 2.2.
6
<PAGE>
SECTION 2.3 OTHER ACTIVITIES OF THE HOLDERS; FIDUCIARY DUTIES.
2.3.1 CapZ Group. It is understood and accepted that the members of
the CapZ Group have interests in other business ventures which may be in
conflict with the activities of the Company and its Subsidiaries and that,
subject to applicable law, nothing in this Stockholders Agreement shall limit
the current or future business activities of any member of the CapZ Group
whether or not such activities are competitive with those of the Company and its
Subsidiaries.
2.3.2 TLB. TLB agrees that any business opportunity in the
healthcare industry (or any industry reasonably related thereto) that is
presented to or otherwise becomes known or available to him shall be directed by
him to the Company. If the Company declines to pursue such business opportunity,
TLB shall give CapZ an opportunity to participate in such business opportunity
(either directly or indirectly through an Affiliate, at CapZ's discretion) on
terms acceptable to CapZ.
2.3.3 Fiduciary Duties. Nothing in this Agreement, express or
implied, shall relieve any officer or director of the Company or any of its
Subsidiaries, or any Holder, of any fiduciary or other duties or obligations
they may have to the Company or its stockholders.
ARTICLE 3
TRANSFERS OF SECURITIES
SECTION 3.1 TAG ALONG RIGHTS.
3.1.1 Applicability. Subject to Section 3.1.2, in the event that TLB
desires to effect a Transfer of shares of Common Stock (a "Tag Sale"), either
directly or indirectly pursuant to an assignment of TLB's right to purchase
Trust Shares (as defined in the Securities Purchase Agreement), TLB shall make
an offer (a "Participation Offer") to the CapZ Group to include in the proposed
Tag Sale (i) any all Shares which have not been transferred or otherwise
disposed of by the CapZ Group, up to that number of Shares which is equal to the
number of shares of Common Stock that TLB desires to sell pursuant to the Tag
Sale and (ii) after all Shares have been transferred or otherwise disposed of by
the CapZ Group, up to that number of Acquired
7
<PAGE>
Blair Option Shares which is equal to (A) one-half multiplied by (B) difference
between the number of shares of Common Stock that TLB desires to sell pursuant
to the Tag Sale and the number of Shares, if any, to be included in the Tag Sale
pursuant to clause (i). For purposes of this Section 3.1, the number "Shares"
and "Blair Option Shares" shall be deemed to have been adjusted to give effect
to any stock splits, stock dividends, and similar events.
3.1.2 Exempt Transfers. Notwithstanding Section 3.1.1, TLB shall be
entitled to Transfer free of any tag-along rights up to (i) 12,500 shares of
Common Stock per fiscal quarter to any person and (ii) 1,000,000 shares of
Common Stock in the aggregate to executive officers of the Company, including in
either case indirect Transfers to other executive officers of the Company
pursuant to an assignment of TLB's right to purchase Trust Shares (such sales
being referred to herein as "Exempt Transfers").
3.1.3 Terms of Participation Offer. The Participation Offer shall
describe the terms and conditions of the proposed Tag Sale and shall be
conditioned upon (i) the consummation of the transactions contemplated in the
Participation Offer with the transferee named therein, and (ii) the execution
and delivery by each participating member of the CapZ Group of all agreements
and other documents as TLB is required to execute and deliver in connection with
such Tag Sale (provided that no member of the CapZ Group shall be required to
make any representations or warranties in connection with such Tag Sale other
than representations and warranties as to (A) such member's ownership of such
member's shares of Common Stock to be sold or transferred free and clear of all
liens, claims, and encumbrances, (B) such member's power and authority to effect
such transfer and (C) such matters pertaining to compliance with securities laws
as the transferee may reasonably require). If any member of the CapZ Group shall
accept the Participation Offer, TLB shall reduce, to the extent necessary, the
number of shares of Common Stock that TLB otherwise would have sold in the
proposed Tag Sale so as to permit those members of the CapZ Group who have
accepted the Participation Offer to sell the number of shares of Common Stock
that they are entitled to sell pursuant to this Section 3.1, and TLB and such
members of the CapZ Group shall transfer the number of shares of Common Stock
specified in the Participation Offer to the proposed transferee in accordance
with the terms and conditions of such Tag Sale as set forth in the Participation
Offer. CapZ
8
<PAGE>
shall be empowered to allocate the tag-along rights under Section 3.1.1 among
the members of the CapZ Group as CapZ determines in its sole discretion.
SECTION 3.2 RIGHT OF FIRST OFFER.
3.2.1 Notice of Proposed Transaction; Election. Subject to Section
3.2.2, in the event that TLB desires to effect a Transfer of any or all of his
shares of Common Stock, either directly or indirectly pursuant to an assignment
of TLB's right to purchase Trust Shares (collectively, the "Subject Shares"), he
shall first give written notice (a "Right of First Offer Notice") of such desire
to the CapZ Group setting forth the terms and conditions of sale and the price
at which TLB desires to sell. The CapZ Group shall thereupon, within ten (10)
business days following its receipt of the Right of First Offer Notice (the
"Right of First Offer Election Period"), notify TLB in writing of the number, if
any, of Subject Shares that the CapZ Group desires to subscribe to purchase (the
"Right of First Offer Subscription"). Subject to the immediately following
sentence, the number of shares of Common Stock for which the CapZ Group may
subscribe to purchase shall not exceed (i) the number of Shares less (ii) the
aggregate number of shares of Common Stock previously (A) purchased by members
of the CapZ Group pursuant to this Section 3.2 or (B) Transferred to Persons who
are not members of the CapZ Group. In addition, to the extent that the CapZ
Group no longer has or would have any right of first offer pursuant to the
preceding provisions of this Section 3.2.1, and to the extent that TLB proposes
to sell Subject Shares at a price less than 90% of the Market Price, the CapZ
Group shall be entitled to subscribe to purchase an additional number of Subject
Shares not to exceed (i) the number of Acquired Blair Option Shares less (ii)
the aggregate of (A) the number of Blair Option Shares Transferred to Persons
other than members of the CapZ Group and (B) the number of Subject Shares
previously purchased by the CapZ Group pursuant to this sentence. For purposes
hereof, "Market Price" shall mean the average of the daily averages of the last
quoted bid and offer price per share of Common on the Nasdaq Stock Market for
each of the ten Nasdaq Stock Market trading days immediately preceding the date
on which the relevant Right of First Offer Notice was sent to the CapZ Group.
Failure to respond to TLB with regard to the Right of First Offer Notice prior
to the expiration of the Right of First Offer Election Period shall be deemed to
be an election not to subscribe for any of the Subject
9
<PAGE>
Shares. If TLB satisfies all of the foregoing conditions and the CapZ Group does
not subscribe for all of the Subject Shares, then TLB may, upon the expiration
of the Right of First Offer Election Period, sell the Subject Shares not
subscribed for by the CapZ Group to any other person at a purchase price equal
to or higher than the price set forth in the Right of First Offer Notice;
provided, however, that TLB shall again become subject to the above restrictions
on transfer if a definitive agreement for the proposed Transfer is not entered
into within ninety (90) days after the expiration of Right of First Offer
Election Period. CapZ shall be empowered to allocate the rights of first offer
under this Section 3.2.1 among the members of the CapZ Group as it determines in
its sole discretion.
3.2.2 Exempt Transfers. The CapZ Group's rights of first offer under
Section 3.2.1 shall not apply to Exempt Transfers.
3.2.3 Procedure for Sale. If all of the Subject Shares are
subscribed for by members of the CapZ Group, the closing of the purchase of the
Subject Shares shall take place at the principal offices of the Company no later
than thirty (30) days after the date of the expiration of the Right of First
Offer Election Period (subject to the last sentence of this Section). At the
closing, the CapZ Group will pay the purchase price for the Subject Shares to
TLB by wire transfer of immediately available funds upon TLB's delivery of valid
certificates evidencing the Subject Shares. Such certificates will be duly
endorsed (with signatures guaranteed, if appropriate) for transfer to applicable
members of the CapZ Group, and upon delivery of such certificates to such
members of the CapZ Group, TLB will be deemed to represent and warrant to each
such member of the CapZ Group that the Subject Shares are owned and being
transferred by TLB free and clear of all liens, adverse claims and other
encumbrances (other than as provided in this Stockholders Agreement), and that
TLB has all requisite power and authority to sell the Subject Shares. The
parties shall take all such actions as may be necessary to comply as promptly as
practicable with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, in connection with the sale of the Subject Shares.
SECTION 3.3 TRANSFER AND EXCHANGE. When Securities are presented to the
Company with a request to register the transfer of such Securities or to
exchange such Securities for Securities of other authorized denominations, the
10
<PAGE>
Company shall register the transfer or make the exchange as requested if the
requirements of this Stockholders Agreement for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company, duly executed by the Holder thereof or its
attorney and duly authorized in writing. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith.
SECTION 3.4 REPLACEMENT SECURITIES. If a mutilated Security is surrendered
to the Company or if the Holder of a Security claims and submits an affidavit or
other evidence, satisfactory to the Company, to the effect that the Security has
been lost, destroyed or wrongfully taken, the Company shall issue a replacement
Security if the Company's requirements are met. If required by the Company, such
Holder must provide an indemnity bond, or other form of indemnity, sufficient in
the judgment of the Company to protect the Company against any loss which may be
suffered. The Company may charge such Holder for its reasonable out-of-pocket
expenses in replacing a Security which has been mutilated, lost, destroyed, or
wrongfully taken.
ARTICLE 4
LIMITATION ON TRANSFERS
SECTION 4.1 NOTICE OF PROPOSED TRANSFERS. Prior to any Transfer or
attempted Transfer of any Security, the Holder of such Security shall (i) give
twenty (20) days' prior written notice (a "Transfer Notice") to the Company and
each other Holder of such Holder's intention to effect such Transfer, describing
the manner, circumstances and material terms of the proposed Transfer, (ii)
certify to the Company and each other Holder that such Holder has complied with
its obligations under Article 3 and (iii) provide to the Company an opinion
reasonably satisfactory to the Company from counsel who shall be reasonably
satisfactory to the Company (or supply such other evidence reasonably
satisfactory to the Company) that the proposed Transfer of such Security may be
effected without registration under the Securities Act. After receipt of the
Transfer Notice and opinion (if required), the Company shall within three (3)
days notify each other Holder of its receipt of the Transfer
11
<PAGE>
Notice (which notice shall be accompanied by a copy of the Transfer Notice).
Within ten (10) days after the Company's delivery of such notice, the Company
shall notify the Holder of such Security and such Holder shall thereupon be
entitled to Transfer such Security in accordance with the terms of the Transfer
Notice; provided, however, that no Transfer shall be effected unless such Holder
has in fact complied with such Holder's obligations under Article 3.
ARTICLE 5
COMPANY COVENANTS
SECTION 5.1 GENERAL. The Company shall not enter into any transaction,
including, without limitation, any purchase, sale, exchange or other transfer of
property or any provision or receipt of services, with any Affiliate of the
Company other than upon terms (i) no less favorable to the Company than could be
obtained by the Company in a comparable arm's length transaction with a Person
that is not an Affiliate of the Company or (ii) approved by the Company's
independent directors and the CapZ Group Designees.
SECTION 5.2 MERGERS, ACQUISITIONS AND DIVESTITURES. In addition to, and
not in limitation of, the requirements of Section 5.1, the Company shall not
merge with, acquire stock or assets from, sell stock or assets to, or engage in
any similar business combination transaction with, an Affiliate of the Company
if the value of such transaction exceeds ten million dollars ($10,000,000)
unless the Company first shall have obtained an opinion from a
nationally-recognized investment bank to the effect that such transaction is
fair to the Company or its stockholders, as the case may be, from a financial
point of view.
SECTION 5.3 SHARE ACQUISITIONS. At any time the Company is a "savings and
loan holding company" (as defined in 12 C.F.R. ss.574.2(q)), the Company shall
not redeem, purchase or otherwise acquire or agree to redeem, purchase or
otherwise acquire any shares of its capital stock or any option, warrant or
other similar right to acquire, or any security convertible into or exchangeable
or exercisable for, any shares of its capital stock, if such redemption,
purchase or other acquisition would cause the Shares and any Acquired Blair
Option Shares to constitute 10% or more of
12
<PAGE>
the outstanding shares of voting capital stock of the Company.
SECTION 5.4 OTS APPROVALS AND DETERMINATIONS. The Company shall reasonably
cooperate with the CapZ Group from time to time in obtaining any necessary
approvals, determinations or other authorizations from the United States Office
of Thrift Supervision in connection with the CapZ Group's acquisition,
ownership, or disposition of the Shares and the Blair Option Shares.
SECTION 5.5 CHARTER AND BYLAWS AMENDMENTS. The Company shall use its best
efforts to (i) delete from its certificate of incorporation Article Fifth,
Section C (which prohibits stockholder action by written consent), Article
Eighth (which imposes restrictions on transactions with "interested
stockholders") and Article Ninth (which allows the Company's Board of Directors
to consider non-stockholder constituencies in evaluating certain business
transactions) and (ii) amend Article 6, Section D (which specifies the
conditions for removal of directors), Article Seventh (which specifies the
methods for amending the Company's bylaws), and Article Twelfth (which specifies
the methods for amending the company's certificate of incorporation) to require
in each case a 66-2/3% stockholder vote rather than the 80% stockholder vote
presently specified therein. Without limiting the foregoing, the Company's Board
of Directors shall approve such amendments, submit such amendments to a vote of
the Company's stockholders at the Company's next annual meeting and cause the
Company to solicit proxies to vote the requisite number shares of Common Stock
in favor of such amendments at the Company's next annual meeting. In addition,
the Company's Board of Directors shall approve such corresponding amendments to
the Company's bylaws as may be necessary to eliminate any conflicts between the
Company's bylaws, on the one hand, and the Company's certificate of
incorporation, as amended in accordance herewith, on the other hand.
ARTICLE 6
TERMINATION
SECTION 6.1 TERMINATION. The provisions of this Agreement shall terminate
on the seventh anniversary of the date of this Agreement or, if later, the
second anniversary of the date on which TLB notifies the Company and each
13
<PAGE>
Holder in writing of his intention to terminate this Stockholders Agreement.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 NOTICES. Any notices or other communications required or
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telex, by telecopier or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows (or at such
other address as may be substituted by notice given as herein provided):
If to the Company:
United Payors & United Providers, Inc.
2275 Research Boulevard, 6th Floor
Rockville, Maryland 20850
Facsimile: (301) 921-2400
Attention: Edward S. Civera
With copies to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile: 202-966-9409
Attention: Thomas Haggerty, Esq.
If to any Holder, at its address listed on the signature pages hereof.
Any notice or communication hereunder shall be deemed to have been given
or made as of the date so delivered if personally delivered; when answered back,
if telexed; when receipt is acknowledged, if telecopied; and five (5) calendar
days after mailing if sent by registered or certified mail (except that a notice
of change of address shall not be deemed to have been given until actually
received by the addressee).
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
14
<PAGE>
SECTION 7.2 GOVERNING LAW. THIS STOCKHOLDERS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
SECTION 7.3 SUCCESSORS AND ASSIGNS. Whether or not an express assignment
has been made pursuant to the provisions of this Stockholders Agreement,
provisions of this Stockholders Agreement that are for the Holders' benefit as
the holders of any Securities are also for the benefit of, and enforceable by,
all subsequent holders of Securities, except as otherwise expressly provided
herein. This Stockholders Agreement shall be binding upon the Company, each
Holder, and their respective successors and assigns. Notwithstanding the
foregoing, the rights and obligations of members of the CapZ Group under Article
3 may not be assigned to any Person who is not a member of the CapZ Group.
SECTION 7.4 DUPLICATE ORIGINALS. All parties may sign any number of copies
of this Stockholders Agreement. Each signed copy shall be an original, but all
of them together shall represent the same agreement.
SECTION 7.5 SEVERABILITY. In case any provision in this Stockholders
Agreement shall be held invalid, illegal or unenforceable in any respect for any
reason, the validity, legality and enforceability of any such provision in every
other respect and the remaining provisions shall not in any way be affected or
impaired thereby
SECTION 7.6 NO WAIVERS; AMENDMENTS.
7.6.1 No failure or delay on the part of the Company or any Holder
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
any Holder at law or in equity or otherwise.
7.6.2 Any provision of this Stockholders Agreement may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed by
the Company and the Required Holders; provided, however, that no such amendment
or waiver shall, (i) unless signed by all of
15
<PAGE>
the Holders, amend the provisions of Section 2.1, (ii) unless signed by all of
the Holders affected, (A) amend the provisions of this Section 7.6.2 or (B)
change the number of Holders which shall be required for the Holders or any of
them to take any action under this Section 7.6.2 or any other provision of this
Stockholders Agreement, and (iii) unless signed by a majority of the Holders who
are members of the CapZ Group, amend Section 3.1, Section 3.2, Article 4, or
Article 5, or grant a waiver thereunder, so as to (A) impose additional
obligations on members of the CapZ Group that are not imposed on other Holders
or (B) adversely affect the rights granted to the members of CapZ Group where
such amendment or waiver does not apply to the same extent to the rights granted
to other Holders.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stockholders
Agreement to be duly executed as of the date first written above.
NAME OF HOLDER:
CAPITAL Z FINANCIAL SERVICES
FUND II, L.P.
By: Capital Z Partners, L.P.,
its General Partner
By: Capital Z Partners, Ltd.,
its General Partner
By: /s/ Steven M. Gluckstern
------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
Address:
c/o Capital Z Partners, Ltd.
One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Facsimile: (212) 898-8720
Attention: Paul H. Warren
David A. Spuria, Esq.
Copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile: (212) 310-8007
Attention: Thomas A. Roberts, Esq.
SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT
<PAGE>
NAME OF HOLDER:
CAPITAL Z FINANCIAL SERVICES
PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P.,
its General Partner
By: Capital Z Partners, Ltd.,
its General Partner
By: /s/ Steven M. Gluckstern
-------------------------------------
Name: Steven M. Gluckstern
Title: Chiarman of the Board
Address:
c/o Capital Z Partners, Ltd.
One Chase Manhattan Plaza
44th Floor
New York, New York 10005
Facsimile: (212) 898-8720
Attention: Paul H. Warren
David A. Spuria, Esq.
Copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile: (212) 310-8007
Attention: Thomas A. Roberts, Esq.
SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT
<PAGE>
NAME OF HOLDER:
THOMAS L. BLAIR
By: /s/ Thomas L. Blair
--------------------------------------
Address:
United Payors & United
Providers, Inc.
2275 Research Boulevard
6th Floor
Rockville, Maryland 20850
Facsimile No.: (310) 921-2400
Copy to:
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Facsimile No.: (202) 966-9409
Attention: Thomas Haggerty
SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT
<PAGE>
THE COMPANY:
UNITED PAYORS & UNITED PROVIDERS, INC.
By: /s/ Edward S. Civera
----------------------------------------------
Name: Edward S. Civera
Title: President and Chief Operating Officer
SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT
Exhibit 4
February 25, 1999
Capital Z Financial Services Fund II, L.P.
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: Paul H. Warren
Ladies and Gentlemen:
In connection with the purchase by Capital Z Financial Services Fund
II, L.P. (together with any participating affiliates thereof, "CapZ") of
1,750,000 shares of Common Stock, par value $.01 per share (the "Common Stock"),
of United Payors & United Providers, Inc., a Delaware corporation ("UP&UP"), on
the date hereof pursuant to the terms of that certain Securities Purchase
Agreement, dated as of February 2, 1999 (the "Securities Purchase Agreement"),
among CapZ, as the purchaser, and the undersigned as the seller (the "Seller"),
the undersigned agrees as set forth below. Any capitalized term used but not
defined in this agreement (this "Agreement") shall have the meaning assigned to
such term in the Securities Purchase Agreement.
1. Grant of Option. In partial consideration of CapZ's purchase of
1,750,000 shares of Common Stock, the undersigned hereby grants to CapZ an
irrevocable option (the "Blair Option") to purchase from the undersigned
2,250,000 shares of Common Stock (as such number of shares may be adjusted
pursuant to Section 5 of this Agreement, the "Blair Option Shares") at a per
share exercise price of $27.60 (as such exercise price may be adjusted pursuant
to Section 5 of this Agreement, the "Exercise Price"), subject to the credits
thereagainst pursuant to Section 3. The Blair Option shall be exercisable in
whole or in part at any time and from time to time during the period commencing
on the date hereof and ending at 5:00 p.m., New York City time, on February 25,
2003 (the "Exercise Period").
2. Exercise of Option. CapZ may exercise the Blair Option by
providing the undersigned with written notice of its election to do so (an
"Exercise Notice") at any time and from time to time during the Exercise Period.
The closing (the "Closing") of any purchase and sale of Blair Option Shares
shall take place at the executive
NYFS08...:\60\33560\0019\2205\AGR1059L.25F
<PAGE>
offices of UP&UP on the fifth business day following the date on which CapZ
delivers the related Exercise Notice to the undersigned (or at such other place
and time as may be agreed to by CapZ and the undersigned). At the Closing, (i)
the undersigned shall deliver (or cause to be delivered) to CapZ (x)
certificates representing the applicable number of Blair Option Shares, together
with duly executed stock powers, and (y) a certificate to the effect that the
undersigned is the beneficial and record owner of the applicable Blair Option
Shares and possesses all requisite power and authority to sell the applicable
Blair Option Shares to CapZ and that such Blair Option Shares are being sold to
CapZ free and clear of all Liens (other than those set forth in the Stockholders
Agreement) and (ii) CapZ shall deliver (or cause to be delivered) to the
undersigned (x) the aggregate Exercise Price for the applicable Blair Option
Shares by wire transfer of immediately available funds and (y) a certificate to
the effect that CapZ possesses all requisite partnership power and authority to
purchase the applicable Blair Option Shares, that CapZ is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act"), and that CapZ is purchasing such Blair
Option Shares for investment purposes and not with a view to distributing such
Blair Option Shares in violation of the Securities Act.
3. Option Prepayment; Other Credits. In consideration for granting
the Option, upon execution of this Agreement, CapZ shall pay to the undersigned
$6.00 per Option Share (as such per share amount may hereafter be adjusted
pursuant to Section 5 of this Agreement, the "Option Share Prepayment Amount").
The Option Share Prepayment Amount shall constitute a non-refundable, partial
prepayment of the Exercise Price of each Option Share. At the time or times at
which CapZ exercises the Blair Option, there also shall be credited against the
Exercise Price with respect to each of the Blair Option Shares then being
purchased by CapZ (without duplication) an amount equal to the aggregate amount
of dividends and other distributions of cash and property made in respect of a
share of Common Stock after the date hereof and on or prior to the applicable
date of exercise (other than dividends of additional shares of Common Stock) in
excess of $4.00 per share (which amount shall be adjusted in proportion to any
adjustments to the Exercise Price pursuant to Section 5 of this Agreement).
4. Ownership of Shares. At all times during the Exercise Period, the
undersigned shall own, free and clear
2
<PAGE>
of all Liens (other than those set forth herein or in the Stockholders
Agreement), at least that number of shares of Common Stock equal to the number
of Blair Option Shares for which the Blair Option is then exercisable.
5. Antidilution Adjustments. In the event that by reason of merger,
consolidation, business combination, liquidation, reorganization,
recapitalization, stock dividend, stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares, or other like change in the capital
structure of the Company (a "Reorganization"), the Common Stock is substituted,
combined or changed into any cash, property or other securities, or the shares
of Common Stock are changed into a greater or lesser number of shares of Common
Stock, the number and/or kind of shares and/or interests subject to the Blair
Option and the Exercise Price (and any credits thereagainst pursuant to Section
3 of this Agreement) shall be adjusted to give appropriate effect to such
Reorganization.
6. Rights Under Trust Stock Purchase Agreement. In furtherance, but
not in limitation, of the undersigned's obligations pursuant to Section 4 of
this Agreement, the undersigned agrees that promptly after the occurrence of a
Certain Event (as defined in the Trust Stock Purchase Agreement), the
undersigned shall assign to CapZ or its designees the undersigned's right under
the Trust Stock Purchase Agreement to purchase the lesser of (i) 2,250,000
shares of Common Stock and (ii) the number of Blair Option Shares for which the
Blair Option has not then been exercised (in each case as such number of shares
of Common Stock may be adjusted pursuant to Section 5 of this Agreement). For
purposes of the Stockholders Agreement, an assignment by the undersigned to any
Person of all or any portion of the undersigned's right to purchase Trust Shares
shall be deemed a "Transfer" of shares of Common Stock subject to the provisions
of the Stockholders Agreement.
7. Representations and Warranties. The undersigned represents and
warrants to CapZ that the undersigned has the requisite power and authority to
execute and deliver this Agreement, to comply with its terms and to consummate
the transactions contemplated hereby, and that this agreement is a valid and
binding obligation of the undersigned, enforceable against the undersigned in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights
3
<PAGE>
generally and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law). In
addition, the undersigned represents and warrants to CapZ that the
representations and warranties of the undersigned set forth in the Securities
Purchase Agreement are true and complete in all material respects as of the date
hereof. Furthermore, the undersigned represents and warrants to CapZ that until
the expiration of the Exercise Period, the undersigned will not take any action
which would cause the number of Trust Shares to at any time be reduced below the
number of Blair Option Shares for which the Blair Option may then be exercised.
8. Assignment. The Blair Option may be assigned or transferred in
whole or in part at any time and from time to time without restriction, and the
undersigned agrees to execute such documentation as CapZ or any subsequent
transferor may reasonably require in connection with any such assignment or
transfer. The undersigned hereby assigns to CapZ, subject to the terms and
conditions of the Seller Registration Rights Agreement, all of his rights and
obligations under the Seller Registration Rights Agreement, it being understood
that the exercise by CapZ or any direct or indirect transferee of CapZ of the
rights under the Seller Registration Rights Agreement shall be conditioned upon
the prior acquisition in accordance with the terms of this Agreement of, and
applicable only with respect to, such Blair Option Shares. A transferee of all
or any portion of the Blair Option shall become a party to the Seller
Registration Rights Agreement in accordance with the terms thereof and thereupon
become entitled to all benefits and subject to all obligations of CapZ or such
subsequent transferor thereunder with respect to that number of Blair Option
Shares transferred to such transferee.
9. Amendments. This Agreement may not be amended or supplemented,
except by the written consent of the parties hereto.
10. Counterparts. This Agreement may be executed in counterparts, by
facsimile, each of which shall be deemed to be an original but which together
shall be deemed to be one and the same instrument.
11. Specific Performance. The parties hereto agree that irreparable
damage would occur if any of the provisions of this Agreement were not performed
in
4
<PAGE>
accordance with their specific terms or were otherwise breached. It is therefore
agreed that the parties hereto shall be entitled to an injunction or injunctions
to prevent breaches of this agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof having
jurisdiction, this being in addition to any other remedy to which they may be
entitled at law or in equity.
12. No Third Party Beneficiaries. Except as otherwise provided
herein, this Agreement shall not confer any rights or remedies upon any person
or entity not a party to this Agreement.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of law principles thereof.
Very truly yours,
By: /s/ Thomas L. Blair
-------------------------------
Thomas L. Blair
Accepted and agreed to as of the date first written above:
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P.,
its general partner
By: Capital Z Partners, Ltd.,
its general partner
By: /s/ Paul H. Warren
---------------------------------
Name: Paul H. Warren
Title: Senior Vice President
5
Exhibit 5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
effective as of February 25, 1999, by and among Thomas L. Blair (the "Investor")
and United Payors & United Providers, Inc., a Delaware corporation (the
"Company").
RECITALS
A. Upon the terms and subject to the conditions of a Purchase Agreement,
dated as of February 2, 1999 (the "Purchase Agreement"), by and among the
Investor and the Independent Divestment Trust (the "Trust"), the Investor has
agreed to purchase from the Trust shares of the common stock, $0.01 par value
("Common Stock"), of the Company ("Purchase Agreement").
B. Such Purchase Agreement used by the Investor is a prerequisite to the
Company's acquisition of a financial institution;
C. The Company considers this Agreement to be in the best interests of the
Company and its stockholders.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements of the parties contained herein, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. Definitions. As used herein, the terms below shall have the following
meanings. Any such term, unless the context otherwise requires, may be used in
the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning provided in the Exchange Act.
"Agreement" shall mean this Registration Rights Agreement.
"Closing Date" shall have the meaning provided in the Securities
Purchase Agreement dated as of February 2, 1999 by and between Capital Z
Financial Services Fund II, L.P. and the Investor.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning provided in Recital A.
<PAGE>
"Common Stock Equivalents" means, without duplication with any other
Common Stock or Common Stock Equivalents, any warrants, options, convertible
securities or indebtedness, exchangeable securities or indebtedness, or other
rights exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock, whether at the time of issuance or upon the passage of
time or the occurrence of some future event.
"Company" shall mean United Payors & United Providers, Inc., a
Delaware corporation, and any successor thereto.
"Demand Registration" shall mean a registration effected pursuant to
Section 2(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and the rules and regulations issued pursuant to
that Act or any successor law.
"Holder" shall mean any holder of Shares listed on the signature
pages hereof and any direct or indirect transferee of any such holder that
becomes a party hereto by executing and delivering a Registration Rights
Agreement Joinder in the form attached hereto as Exhibit A.
"Initiating Holders" shall have the meaning provided in Section
2(b).
"Investor" shall have the meaning provided in the preamble of this
Agreement.
'Person" shall mean an individual, partnership, limited liability
company, joint venture, corporation, trust or unincorporated organization or any
other similar entity.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
Commission.
"Registrable Shares" shall mean (a) the Shares beneficially owned by
any Holder and (b) any shares of Common Stock or other securities of the Company
issued or distributed to a Holder with respect to, in exchange for or in
replacement of, any of the Shares; provided, however, that such shares of Common
Stock and other securities shall be treated as Registrable Shares only if and so
long as (i) they have not been sold by the Investor pursuant to an effective
Registration Statement under the Securities Act, (ii) they have not been sold to
the public in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof or pursuant to
Rule 144 under the Securities Act or any similar provision), or (iii) they may
not immediately be resold by a Holder pursuant to Rule 144 (k) under the
Securities Act without any volume limitation.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor law, and the rules and regulations issued pursuant to that Act
or any successor law.
- 2 -
<PAGE>
"Purchase Agreement" shall have the meaning provided in Recital A.
"Shares" shall mean 2,250,000 outstanding shares of Common Stock.
"Violation" shall have the meaning provided in Section 7(a).
2. Demand Registration.
(a) General. If the Company shall receive, at any time after
365 days after the Closing Date (subject to Section 10 of this Agreement),
a written request from Holders that the Company file a registration
statement under the Securities Act covering the registration of at least
750,000 Registrable Shares (adjusted for all stock splits or similar
transactions), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall,
subject to the limitations of this Section 2 file a registration statement
with respect to that number of Registrable Shares specified in such
written request (and such Registrable Shares as may be specified in the
written notice of any other Holder delivered to the Company within twenty
(20) days after the date on which the Company mailed notice of the
initiating written request to such other Holder) within 90 days of its
receipt of such written request (the "Required Filing Date") and use all
commercially reasonable efforts to cause such registration statement to be
declared effective by the Commission as promptly thereafter as is
practicable.
(b) Underwriters Cut-back. If the Holders initiating the
registration request under Section 2(a) (the "Initiating Holders") intend
to distribute the Registrable Shares covered by their request by means of
an underwritten offering, they shall so advise the Company as a part of
their request made pursuant to Section 2(a), and the Company shall include
in the applicable registration statement such information with respect
thereto as may be required or advisable. The selection of the managing
underwriter of any underwritten offering under this Section 2 shall be
made by a majority in interest of the Initiating Holders, with the consent
of the Company (such consent not to be unreasonably withheld) . In the
case of an underwritten offering, the right of any Holder to include
Registrable Shares in the related registration shall be conditioned upon
the inclusion of such Holder's Registrable Shares in the underwritten
offering (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder). All Holders proposing to
distribute their securities through such underwritten offering shall
(together with the Company as provided in Section 4(e)) enter into an
underwriting agreement with customary terms with the underwriter or
underwriters selected for such underwritten offering. Notwithstanding any
other provision of this Agreement, if the managing underwriter advises the
Initiating Holders that marketing factors require or make advisable a
limitation of the number of shares to be included in the underwritten
offering, then the Initiating Holders shall so advise all other
participating Holders, and the number of Registrable Shares that may be
included in the underwritten offering shall be allocated among all
participating Holders, including the Initiating Holders, in proportion (as
nearly as practicable) to the amount of Registrable Shares owned by each
- 3 -
<PAGE>
Holder; provided, however, that the number of Registrable Shares to be
included in such underwritten offering shall not be reduced unless and
until all other securities shall have been excluded from the underwritten
offering.
(c) Limit on Demand Registrations. The Company is obligated to
effect only two (2) Demand Registrations pursuant to Section 2 for an
aggregate of up to 2,250,000 shares of Common Stock (as adjusted for all
stock splits or similar transactions). For purposes of this Section 2(c),
no such registration shall be deemed a Demand Registration unless and
until the registration statement filed pursuant thereto has been declared
effective by the Commission.
(d) Deferral of Filing. The Company may defer the filing (but not
the preparation) of any registration statement required by Section 2 for a
period of up to: (i) 45 days in the event that the Company or any of its
Subsidiaries is engaged in confidential negotiations or other confidential
business activities, disclosure of which would be required in such
registration statement (but would not be required if such registration
statement were not filed), and the Board of Directors of the Company
determines in good faith that such disclosure would be materially
detrimental to the Company and its stockholders or would have a material
adverse effect on any such confidential negotiations or other confidential
business activities, or (ii) 120 days in the event that the Board of
Directors of the Company determined to effect a registered underwritten
public offering of the Company's securities for the Company's account and
the Company takes substantial steps (including, but not limited to,
selecting a managing underwriter for such offering) and proceeds with
reasonable diligence to effect such offering; provided that if such
determination is made by the Board of Directors after receipt of a Demand
Registration request, the Board prior to such request shall have commenced
negotiations with an underwriter with respect to such offering; and
provided further, however, that during any period of 360 consecutive days,
Holders shall not be subject to deferrals pursuant to the Company's
exercise of deferral rights for a period of at least 180 consecutive days
(which deferral period shall coincide with the deferral period permitted
under Section 2(d) of that certain Registration Rights Agreement, dated
the date hereof, between the Company and CapZ Fund). A deferral of the
filing of a registration statement pursuant to this Section 2(d) shall be
lifted, and the requested registration statement shall be filed forthwith,
if, in the case of a deferral pursuant to clause (i) of the preceding
sentence, the negotiations or other activities are terminated or the
transaction contemplated by such negotiations or other activities are
consummated, or, in the case of a deferral pursuant to clause (ii) of the
preceding sentence, the proposed registration for the Company's account is
abandoned. In order to defer the filing of a registration statement
pursuant to this Section 2(d), the Company shall promptly (but in any
event within 10 days), upon determining to seek such deferral, deliver to
each Initiating Holder a certificate signed by an executive officer of the
Company stating that the Company is deferring such filing pursuant to this
Section 2(d) and a general statement of the reason for such deferral and
an approximation of the anticipated delay. Within 20 days after receiving
such certificate, the holders of a majority
- 4 -
<PAGE>
in interest of the Registrable Shares held by the Requesting Holders and
for which registration was previously requested may withdraw their request
by giving notice to the Company. If withdrawn, the such request shall be
deemed not to have been made for all purposes of this Agreement.
(e) Expenses of Demand Registration. All expenses of Demand
Registrations shall be paid by the selling Holders; provided, however,
that if any securities other than the Shares are included in a Demand
Registration, any person on whose behalf such securities have been
included shall pay that percentage of the total expenses which equals the
percentage of the total proceeds received by such person, and the selling
Holders shall have no responsibility for any such expenses.
3. Piggy-Back Registration.
(a) General. If at any time after 180 days after the Closing Date,
the Company proposes to register (including for this purpose a
registration effected by the Company pursuant to Section 2 of this
Agreement) any shares of its Common Stock under the Securities Act in
connection with the public offering of such securities (other than a
registration on Form S-4 or Form S-8 (or any successor forms)), the
Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within
fifteen (15) days after mailing of such notice by the Company in
accordance with Section 18 hereof, the Company shall cause to be
registered under the Securities Act all of the Registrable Shares that
each such Holder has requested to be registered, subject to the
underwriter cutback and other provisions of Section 3(b) hereof.
(b) Underwriting Requirements. In connection with any underwritten
offering, the Company shall not be required under this Section 3 to
include any Holder's Registrable Shares in such underwritten offering
unless such Holder shall have agreed in writing to the terms of the
underwriting as agreed upon among the Company and the underwriters
selected by the Companyor by selling stockholders, as the case may be, and
then only in such quantity as the underwriters determine in their sole
discretion will not materially and adversely affect the distribution of
securities to be covered by such registration statement such determination
to be confirmed in writing upon the request of any Holder. If the total
amount of Registrable Shares requested by Holders to be included in such
offering pursuant to Section 3(a) exceeds the amount of securities that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in
the offering only that number of Registrable Shares and shares of Common
Stock offered by other selling shareholders which the underwriters
determine in their sole discretion will not have a material adverse effect
on the offering (the securities so included to be apportioned among all
selling Holders and other selling shareholders pro rata according to the
total amount of shares of Common Stock proposed to the be sold by each
selling holder.
(c) Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing,
qualification or sale of
- 5 -
<PAGE>
Registrable Shares pursuant to this Section 3, including (without
limitation) all registration, filing, and qualification fees, and
printers' fees, accounting fees and the fees and disbursements of counsel
for the Company relating or apportionable thereto, but excluding
underwriting discounts and commissions, stock transfer taxes and the fees
and expenses of separate counsel, if any, retained by the selling Holders.
4. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Shares, the
Company shall, as expeditiously as reasonably possible, use reasonable
commercial efforts to do the following:
(a) Commission Filing. Prepare and file with the
Commission a registration statement with respect to such Registrable
Shares and to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the
Registrable Shares registered thereunder, keep such registration
statement effective for up to 180 days or until all of the Shares
registered thereunder are sold, whichever occurs sooner.
(b) Amendments. Prepare and file with the Commission
such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by
such registration statement, and furnish such copies thereof to the
Holders and any underwriters as they may reasonably request.
(c) Prospectus. Furnish to the Holders and any
underwriters such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Shares
owned by them, and cause all related filings to be made with the
Commission as required by Rule 424 under the Securities Act.
(d) Blue Sky Qualification. Register and qualify the
Registrable Shares covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders and any underwriters; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) Underwriting Agreement. In the event of any
underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering, including, without
limitation, delivering opinions of counsel and "comfort letters" of
accountants. Each Holder participating in such underwriting shall
also enter
- 6 -
<PAGE>
into and perform its obligations under such an agreement.
(f) Prospectus Delivery. Promptly notify each Holder of
Registrable Shares covered by the registration statement at any time
when the Company becomes aware of the happening of any event as a
result of which the registration statement or the prospectus
included in such registration statement or any supplement to the
prospectus (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements therein (in the case of the prospectus, in light of
the circumstances under which they were made) not misleading or, if
for any other reason it shall be necessary during such time period
to amend or supplement the registration statement or the prospectus
in order to comply with the Securities Act, whereupon, in either
case, each Holder shall immediately cease to use such registration
statement or prospectus for any purpose and, as promptly as
practicable thereafter, the Company shall prepare and file with the
Commission, and furnish without charge to the appropriate Holders
and managing underwriters, if any, a supplement or amendment to such
registration statement or prospectus which will correct such
statement or omission or effect such compliance and provide such
copies thereof as the Holders and any underwriters may reasonably
request.
(g) Make generally available to the Company's
securityholders an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 30 days after the
end of the 12-month period beginning with the first day of the
Company's first fiscal quarter commencing after the effective date
of a registration statement, which earnings statement shall cover
said 12-month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Exchange Act and
otherwise complies with Rule 158 under the Securities Act;
(h) If requested by the managing underwriter or any
seller, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing
underwriter or any seller reasonably requests to be included
therein, including, without limitation, with respect to the
Registrable Shares being sold by such seller, the purchase price
being paid therefor by the underwriters and with respect to any
other terms of the underwritten offering of the Registrable Shares
to be sold in such offering, and promptly make all required filings
of such prospectus supplement or post-effective amendment;
(i) As promptly as practicable after filing with the
Commission of any document which is incorporated by reference into a
registration statement, deliver a copy of each such document (in the
form in which it was incorporated) to each seller;
- 7 -
<PAGE>
(j) Cooperate with the sellers and the managing
underwriter to facilitate the timely preparation and delivery of
certificates (which shall not bear any restrictive legends unless
required under applicable law) representing securities sold under
any registration statement, to enable such securities to be in such
denominations and registered in such names as the managing
underwriter or such sellers may request and to make available to the
Company's transfer agent prior to the effectiveness of such
registration statement a satisfactory supply of such certificates;
(k) Promptly make available for inspection by any
seller, any underwriter participating in any disposition pursuant to
any registration statement, and any attorney, accountant or other
agent or representative retained by any such seller or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to fulfill their due diligence responsibilities, and
cause the Company's officers, directors and employees to supply all
information requested by any such Inspector in connection with such
registration statement; provided, however, that unless the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, the Company shall not
be required to provide any information under this subparagraph (x)
if (A) the Company's Board of Directors determines in good faith,
after consultation with counsel for the Company, that to do so would
cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (B) if either (1) the Company has
requested and been granted from the SEC confidential treatment of
such information contained in any filing with the SEC or documents
provided supplementally or otherwise or (2) the Company reasonably
determines in good faith that such Records are confidential and so
notifies the Inspectors in writing unless prior to furnishing any
such information with respect to (A) and (B) such Holder of
Registrable Shares requesting such information agrees to enter into
a confidentiality agreement in customary form and subject to
customary exceptions; and provided further, however, that each
Holder of Registrable Shares agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company at
its expense, to undertake appropriate action to prevent disclosure
of the Records deemed confidential;
(l) Furnish to each seller and underwriter a signed
counterpart of (A) an opinion or opinions of counsel to the Company
and (B) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering
such matters as are customarily covered by such opinions or comfort
letters, as the case may be, as the sellers or managing underwriter
reasonably requests;
- 8 -
<PAGE>
(m) Cause the Registrable Shares included in any
registration statement to be (A) listed on each securities exchange,
if any, on which similar securities issued by the Company are then
listed, or (B) authorized to be quoted and/or listed (to the extent
applicable) on the National Association of Securities Dealers, Inc.
Automated Quotation System or the National Market System of Nasdaq
Stock Market if the Registrable Shares so qualify;
(n) Provide a CUSIP number for the Registrable Shares
included in any registration statement not later than the effective
date of such registration statement;
(o) Cooperate with each seller and each underwriter
participating in the disposition of such Registrable Shares and
their respective counsel in connection with any filings required to
be made with the National Association of Securities Dealers, Inc.;
(p) During the period when a prospectus is required to
be delivered under the Securities Act, promptly file all documents
required to be filed with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act;
(q) Notify each seller of Registrable Shares promptly of
any request by the Commission for the amending or supplementing of
such registration statement or prospectus or for additional
information;
(r) Prepare and file with the Commission promptly any
amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Company or the
managing underwriter, is required in connection with the
distribution of the Registrable Shares;
(s) Enter into such agreements (including underwriting
agreements in the managing underwriter's customary form) as are
customary in connection with an underwritten offering;
(t) Advise each seller of such Registrable Shares,
promptly after it shall receive notice or obtain knowledge thereof,
of the issuance of any stop order issued by the Commission
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for such purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if
such stop order should be issued;
(u) Cooperate in a reasonable manner, considering among
other
- 9 -
<PAGE>
things operating responsibilities to the Company, with each seller
and each underwriter participating in the disposition of Registrable
Shares in connection with their selling efforts, including, without
limitation, by making its officers and employees reasonably
available for road show or other presentations; and
(v) Subsequent to the date hereof, not grant rights to
more than four (4) Demand Registrations to any Person in connection
with any transaction or series of related transactions, or
Piggy-Back Registration rights having a priority over the Piggy-Back
Registration rights granted under this Agreement.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement
with respect to the Registrable Shares of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Shares held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Shares.
6. Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any registration
as the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
7. Indemnification. In the event (i) any Registrable Shares are
included in a registration statement under this Agreement or (ii) any
other shares of Common Stock held by the Investor are included in any
registration statement:
(a) Indemnification by the Company. To the fullest extent
permitted by law, the Company will indemnify and hold harmless each
Holder, each of its directors, officers, partners, employees,
advisors, agents and representatives, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the
Exchange Act and any agent or investment advisor thereof, against
any and all losses, claims, damages, expenses (including, without
limitation, attorneys' fees and disbursements) and liabilities
(joint or several) to which they may become subject, insofar as such
losses, claims, damages, expenses (including, without limitation,
attorneys' fees and disbursements) and liabilities (or actions in
respect thereof) arise out of, relate to, result from or are based
upon any of the following (each a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained
in such registration statement, including any preliminary prospectus
or final prospectus contained therein, or any amendments or
supplements thereto, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act,
the Exchange Act, or any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act,
or any state securities law, and the Company will
- 10 -
<PAGE>
pay to each such Holder or other person, as incurred, any legal or
other expenses reasonably incurred by one law firm retained by them,
plus appropriate local counsel in connection with investigating or
defending any such loss, claim, damage, expense, liability, or
action; provided, however, that the indemnity agreement contained in
this Section 7(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, expense, liability, or action if such
settlement is effected without the consent of the Company, nor shall
the Company be liable in any such case for any such loss, claim,
damage, expense, liability, or action to which any Holder or other
indemnifiable person may become subject to the extent that it arises
out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for
use in connection with such registration by such Holder or other
indemnifiable person. This right to indemnification shall remain in
full force and effect notwithstanding any investigation made by or
on behalf of such Holder or other indemnifiable person and shall
survive the transfer of such securities by such Holder.
(b) Indemnification by Selling Holder. To the fullest extent
permitted by law, each selling Holder severally, but not jointly,
will indemnify and hold harmless the Company, each of its directors,
each of its officers, partners, employees, advisors, agents and
representatives, who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, and any agent or investment
advisor thereof, any other Holder selling securities registered in
such registration statement and any controlling person of any such
underwriter or other Holder against any and all losses, claims,
damages, expenses (including, without limitation, attorney's fees
and disbursements) and liabilities (joint or several) to which any
of the foregoing persons may become subject, insofar as such losses,
claims, damages, expenses (including, without limitation, attorney's
fees and disbursements) and liabilities (or actions in respect
thereto) arise out of, relate to, result from or are based upon any
Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in
connection with such registration; provided, however, that the
indemnity agreement contained in this Section 7(b) shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Holder (which consent shall not be unreasonably
withheld); provided, further, that in no event shall any indemnity
under this Section 7 (b) exceed the net proceeds from the offering
received by such Holder.
(c) Procedures. Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying
party under this Section 7, deliver to the indemnifying party a
written notice of the commencement thereof in accordance with
Section 18 hereof and the indemnifying party shall have the right to
participate in, and, to the extent the
- 11 -
<PAGE>
indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which
may be represented without conflict by one counsel) shall have the
right to retain one separate counsel (plus appropriate local
counsel), with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between
such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement
of any such action, if prejudicial in any material respect to its
ability to defend such action, shall to the extent prejudicial
relieve such indemnifying party of any liability to the indemnified
party under this Section 7, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than
under this Section 7.
(d) Contribution. If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the
indemnified parties on the other in connection with the actions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or related to
information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action;
provided, however, that in no event shall the liability of any
selling Holder hereunder be greater in amount than the difference
between the dollar amount of the proceeds received by such Holder
upon the sale of the Registrable Shares giving rise to such
contribution obligation and all amounts previously contributed by
such Holder with respect to such losses, claims, damages,
liabilities and expenses. The amount paid or payable to a party as a
result of the losses, claims damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately
- 12 -
<PAGE>
preceding paragraph. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) Survival. The obligations of the Company and Holders under
this Section 7 shall survive the completion of any offering of
Registrable Shares in a registration statement under this Agreement,
and otherwise.
8. Reports Under Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities
Act and any other rule or regulation of the Commission that may at any
time permit a Holder to sell securities of the Company to the public
without registration, the Company agrees to use commercially reasonable
efforts to:
(a) make and keep public information available, as those terms
are defined in Rule 144;
(b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company under the
Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Shares, promptly upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual and/or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation
of the Commission which permits the selling of any Registrable Shares
without registration.
9. "Market Stand-Off" Agreement. Each Holder hereby agrees
that for a period of 180 days, or such shorter period required by the
underwriters, following the effective date of any registration effected
pursuant to Section 2, or if Holders participate in the sale of securities
effected pursuant to Section 3 hereof, such Holder, if requested by the
managing underwriter, shall not, directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other
than to donees and Affiliates who agree to be similarly bound) any
securities of the Company held by it at any time during such period,
except shares of Common Stock included in such registration. In addition,
each Holder agrees, if applicable, to acknowledge the undertaking provided
for in this Section 9 by entering into customary written "lock-up"
agreements with the managers of the relevant underwriting. The
requirements of this Section 9 shall not apply to any Holder that
(together with its Affiliates), at the time of receipt of the referenced
notice from the Company, (i) beneficially owns less than 5% of the
outstanding shares of Common Stock, (ii) is not an Affiliate or an
employee of the Company and (iii) waives any further benefits of this
Agreement for it or any subsequent assignee or transferee of its
Registrable Shares.
In order to enforce the foregoing covenant, the Company may impose
stop
- 13 -
<PAGE>
transfer instructions with respect to the Registrable Shares of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
10. "Lock-up" Agreements. Each Holder agrees to enter into a
customary written "lock-up" agreement with respect to the Registrable
Shares with the managers of any underwritten public offering by the
Company of shares of its equity securities for cash, which offering is
completed on or before August 31, 1999; provided, however, that the
aggregate of such "lock-up" period together with any deferral period
pursuant to Section 2(d) shall not exceed the deferral period permitted
under Section 2(d).
11. Right of First Offer.
(a) Notice of Proposed Transaction; Election. In the event
that any Holder or any holder of Common Stock Equivalents or shares of
common stock received upon exercise of such Common Stock Equivalents who
is a direct or indirect transferee of the Investor (the "Selling Holder")
desires to effect a sale, within the meaning of Section 2(3) of the
Securities Act of 1933, as amended, of any or all of its shares of Common
Stock or any Common Stock Equivalents (collectively, the "Subject
Shares"), the Selling Holder shall first give written notice (a "Right of
First Offer Notice") of such desire to the Company setting forth the terms
and conditions of sale and the price at which the Selling Holder desires
to sell. The Company shall thereupon, within twenty (20) business days
following its receipt of the Right of First Offer Notice (the "Right of
First Offer Election Period"), notify the Selling Holder in writing of the
number, if any, of Subject Shares that the Company or its designee, as the
case may be, desires to subscribe to purchase (the "Right of First Offer
Subscription"). Failure to respond to the Selling Holder with regard to
the Right of First Offer Notice prior to the expiration of the Right of
First Offer Election Period shall be deemed to be an election not to
subscribe for any of the Subject Shares. If the Selling Holder satisfies
all of the foregoing conditions and the Company and its designees, as the
case may be, do not collectively subscribe for all of the Subject Shares,
then the Selling Holder may, upon the expiration of the Right of First
Offer Election Period, sell the Subject Shares not subscribed for by the
Company or its designees, as the case may be, to any other person at a
purchase price equal to or higher than the price set forth in the Right of
First Offer Notice; provided, however, that the Selling Holder shall again
become subject to the above restrictions on transfer if a definitive
agreement for the proposed transfer is not entered into within ninety (90)
days after the expiration of Right of First Offer Election Period. This
Section 11(a) shall
- 14 -
<PAGE>
not apply to any Transfer by any Holder to any Affiliate of such Holder.
Procedure for Sale. If all the Subject Shares are
subscribed for by the Company or its designees, as the case may be, the
closing of the purchase of the Subject Shares shall take place at the
principal offices of the Company no later than thirty (30) days after the
date of the expiration of the Right of First Offer Election Period
(subject to the last sentence of this Section 11(b)). At the closing, the
Company or its designees, as the case may be, will pay the purchase price
for the Subject Shares to be purchased by it to the Selling Holder by wire
transfer of immediately available funds upon the Selling Holder's delivery
of valid certificates evidencing the Subject Shares. Such certificates
will be duly endorsed (with signatures guaranteed, if appropriate) for
transfer to the Company or its designees, as the case may be, and upon
delivery of such certificates to the Company or its designees, as the case
may be, the Selling Holder will be deemed to represent and warrant to the
Company or its designees, as the case may be, that the Subject Shares are
owned by the Selling Holder free and clear of all liens, adverse claims
and other encumbrances (other than as provided in this Registration Rights
Agreement), and that the Selling Holder has all requisite power and
authority to sell the Subject Shares. The parties shall take all such
actions as may be necessary to comply as promptly as practicable with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in
connection with the sale of the Subject Shares.
12. Amendment. This Agreement may be amended and the
observance of any provision of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and Holders of
at least sixty-six percent (66%) of the Registrable Shares. Any amendment
or waiver effected in accordance with this Section 12 shall be binding
upon each Holder, each transferee thereof and the Company.
13. Termination. The rights provided in this Agreement shall
terminate on the tenth anniversary of the effective date of this
Agreement.
14. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED,
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS THEREOF).
15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
- 15 -
<PAGE>
16. Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
17. Negotiation of Agreement. Each of the parties acknowledges
that it has been represented by independent counsel of its choice
throughout all negotiations that have preceded the execution of this
Agreement and that it has executed the same with consent and upon the
advice of said independent counsel. Each party and its counsel cooperated
in the drafting and preparation of this Agreement and the documents
referred to herein, and any and all drafts relating thereto shall be
deemed the work product of the parties and may not be construed against
any party by reason of its preparation. Accordingly, any rule of law or
any legal decision that would require interpretation of any ambiguities in
this Agreement against the party that drafted it is of no application and
is hereby expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intentions of the parties
and this Agreement.
18. Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto
shall be in writing, shall be deemed to have been duly given or delivered
when delivered personally or telecopied (receipt confirmed, with a copy
sent by reputable overnight courier), or one business day after delivery
to a reputable overnight courier, postage prepaid, to the address of the
party set forth below such party's signature on this Agreement or to such
address as the party to whom notice is to be given may provide in a
written notice to each of the other parties to this Agreement, a copy of
which written notice shall be on file with the Secretary of the Company.
19. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms to the fullest extent permitted by law.
20. Further Assurances. Each of the parties shall, without
further consideration, execute and deliver such additional documents and
take such other action as the other parties, or any of them, may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
21. Successors and Assigns. This Agreement shall be binding
upon, and all rights hereto shall inure to the benefit of, the parties
hereto, and their respective successors and assigns that execute and
deliver a Registration Rights Agreement Joinder in the form attached
hereto as Exhibit A.
22. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the
actions and transactions contemplated by this Agreement. There are no
restrictions promises, inducements, representations, warranties, covenants
or undertakings with regard to the registration of the Shares pursuant to
the Securities Act, other than those expressly set forth or referred to in
this Agreement.
- 16 -
<PAGE>
23. Recapitalization, etc. The provisions of this Agreement
(including any calculation of share ownership) shall apply, to the full
extent set forth herein with respect to the Registrable Shares, to any and
all shares of capital stock of the Company or any capital stock,
partnership units or, any other security evidencing ownership interests in
any successor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise) that may be issued in respect of, in exchange
for, or in substitution of the Registrable Shares by reason of any stock
dividend, split, combination, recapitalization, liquidation,
reclassification, merger, consolidation or otherwise.
- 17 -
<PAGE>
UNITED PAYORS & UNITED PROVIDERS, INC.
By: /s/ Edward S. Civera
----------------------------------------
Edward S. Civera
President and Chief Operating Officer
Address:
2275 Research Boulevard, Sixth Floor
Rockville, Maryland 20850
Attention: Edward S. Civera
Telecopier: (301) 548-8828
/s/ Thomas L. Blair
---------------------------------------
Thomas L. Blair
Address:
- 18 -
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT JOINDER
The undersigned, a [individual, corporation, partnership, etc. and place
of residence or organization , joins in the execution of that certain
Registration Rights Agreement ("Agreement"), dated _______________, by and among
_____________, a _______________, and United Payors & United Providers, Inc., a
Delaware corporation, for the purpose of accepting the benefits conferred and
assuming the obligations and liabilities imposed upon Holders (as such term is
defined in the Agreement) pursuant to the terms of the Agreement, with respect
to ___________ of the Shares (as such term is defined in the Agreement).
- ------------------- ------------------------------------
Date
- 19 -
<PAGE>
REGISTRATION RIGHTS AGREEMENT JOINDER
-------------------------------------
The undersigned, a Bermuda exempt and limited partnership, joins in
the execution of that certain Registration Rights Agreement (the "Agreement"),
dated February 25, 1999, by and between Thomas L. Blair and United Payors &
United Providers, Inc., a Delaware corporation, for the purpose of accepting the
benefits conferred, and assuming the obligations and liabilities imposed, upon
Holders (as such term is defined in the Agreement) pursuant to the Agreement,
with respect to 2,240,334 of the Shares (as such term is defined in the
Agreement).
February 25, 1999 CAPITAL Z FINANCIAL SERVICES
FUND II, L.P.
By: Capital Z Partners, L.P.,
its General Partner
By: Capital Z Partners, Ltd.,
its General Partner
By: /s/ Steven M. Gluckstern
--------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
NYFS08...:\60\33560\0019\2205\FRM2219U.020
<PAGE>
REGISTRATION RIGHTS AGREEMENT JOINDER
-------------------------------------
The undersigned, a Bermuda exempt and limited partnership, joins in
the execution of that certain Registration Rights Agreement (the "Agreement"),
dated February 25, 1999, by and between Capital Z Financial Services Fund II,
L.P., a Bermuda exempt and limited partnership, as assignee of Thomas L. Blair,
and United Payors & United Providers, Inc., a Delaware corporation, for the
purpose of accepting the benefits conferred, and assuming the obligations and
liabilities imposed, upon Holders (as such term is defined in the Agreement)
pursuant to the Agreement, with respect to 9,666 of the Shares (as such term is
defined in the Agreement).
February 25, 1999 CAPITAL Z FINANCIAL SERVICES
PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P.,
its General Partner
By: Capital Z Partners, Ltd.,
its General Partner
By: /s/ Paul H. Warren
----------------------------------
Name: Paul H. Warren
Title: Senior Vice President
NYFS08...:\60\33560\0019\2205\FRM2219P.210
Exhibit 6
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
effective as of February 25, 1999, by and among Capital Z Financial Services
Fund II, L.P., a Bermuda limited partnership and exempted partnership (the
"Investor"), and United Payors & United Providers, Inc., a Delaware corporation
(the "Company").
RECITALS
A. Upon the terms and subject to the conditions of a Securities Purchase
Agreement, dated as of February 2, 1999 (the 'Securities Purchase Agreement"),
by and among Thomas L. Blair (the "Seller") and the Investor, the Investor has
agreed to purchase from the Seller an aggregate of 1,750,000 shares of the
common stock, $0.01 par value ("Common Stock"), of the Company (the "Purchase").
B. The Purchase facilitates an acquisition by the Seller of Common Stock,
which acquisition is a prerequisite to the Company's acquisition of a financial
institution;
C. The execution of this Agreement by the Company is a prerequisite to the
Purchase.
D. The Company considers this Agreement to be in the best interests of the
Company and its stockholders.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements of the parties contained herein, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as
follows:
1. Definitions. As used herein, the terms below shall have the following
meanings. Any such term, unless the context otherwise requires, may be used in
the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning provided in the Exchange Act.
"Agreement" shall mean this Registration Rights Agreement.
"Closing Date" shall have the meaning provided in the Securities
Purchase Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning provided in Recital A.
<PAGE>
"Common Stock Equivalents" means, without duplication with any other
Common Stock or Common Stock Equivalents, any warrants, options, convertible
securities or indebtedness, exchangeable securities or indebtedness, or other
rights exercisable for or convertible or exchangeable into, directly or
indirectly, Common Stock, whether at the time of issuance or upon the passage of
time or the occurrence of some future event.
"Company" shall mean United Payors & United Providers, Inc., a
Delaware corporation, and any successor thereto.
"Demand Registration" shall mean a registration effected pursuant to
Section 2(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor law, and the rules and regulations issued pursuant to
that Act or any successor law.
"Holder" shall mean any holder of Shares listed on the signature
pages hereof and any direct or indirect transferee of any such holder that
becomes a party hereto by executing and delivering a Registration Rights
Agreement Joinder in the form attached hereto as Exhibit A.
"Initiating Holders" shall have the meaning provided in Section
2(b).
"Investor" shall have the meaning provided in the preamble of this
Agreement.
'Person" shall mean an individual, partnership, limited liability
company, joint venture, corporation, trust or unincorporated organization or any
other similar entity.
"Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
Commission.
"Registrable Shares" shall mean (a) the Shares owned by any Holder
and (b) any shares of Common Stock or other securities of the Company issued or
distributed to a Holder with respect to, in exchange for or in replacement of,
any of the Shares; provided, however, that such shares of Common Stock and other
securities shall be treated as Registrable Shares only if and so long as (i)
they have not been sold by the Investor pursuant to an effective Registration
Statement under the Securities Act, (ii) they have not been sold to the public
in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof or pursuant to
Rule 144 under the Securities Act or any similar provision), or (iii) they may
not immediately be resold by a Holder pursuant to Rule 144 (k) under the
Securities Act without any volume limitation.
- 2 -
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any successor law, and the rules and regulations issued pursuant to that Act
or any successor law.
"Securities Purchase Agreement" shall have the meaning provided in
Recital A.
"Shares" shall mean the shares of Common Stock agreed to be sold on
the Closing Date to the Investor pursuant to the Securities Purchase Agreement.
"Violation" shall have the meaning provided in Section 7(a).
2. Demand Registration.
(a) General. If the Company shall receive, at any time after
180 days after the Closing Date (subject to Section 10 of this Agreement),
a written request from Holders that the Company file a registration
statement under the Securities Act covering the registration of at least
750,000 Registrable Shares (adjusted for all stock splits or similar
transactions), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall,
subject to the limitations of this Section 2 file a registration statement
with respect to that number of Registrable Shares specified in such
written request (and such Registrable Shares as may be specified in the
written notice of any other Holder delivered to the Company within twenty
(20) days after the date on which the Company mailed notice of the
initiating written request to such other Holder) within 90 days of its
receipt of such written request (the "Required Filing Date") and use all
commercially reasonable efforts to cause such registration statement to be
declared effective by the Commission as promptly thereafter as is
practicable.
(b) Underwriters Cut-back. If the Holders initiating the
registration request under Section 2(a) (the "Initiating Holders") intend
to distribute the Registrable Shares covered by their request by means of
an underwritten offering, they shall so advise the Company as a part of
their request made pursuant to Section 2(a), and the Company shall include
in the applicable registration statement such information with respect
thereto as may be required or advisable. The selection of the managing
underwriter of any underwritten offering under this Section 2 shall be
made by a majority in interest of the Initiating Holders, with the consent
of the Company (such consent not to be unreasonably withheld) . In the
case of an underwritten offering, the right of any Holder to include
Registrable Shares in the related registration shall be conditioned upon
the inclusion of such Holder's Registrable Shares in the underwritten
offering (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder). All Holders proposing to
distribute their securities through such underwritten offering shall
(together with the Company as provided in Section 4(e)) enter into an
underwriting agreement with customary terms with the underwriter or
underwriters selected for such underwritten offering. Notwithstanding any
other provision of this Agreement, if the managing underwriter advises the
Initiating Holders that marketing factors require or make advisable a
limitation of the number of shares to be included in the underwritten
offering, then the Initiating Holders shall so advise all other
participating
- 3 -
<PAGE>
Holders, and the number of Registrable Shares that may be included in the
underwritten offering shall be allocated among all participating Holders,
including the Initiating Holders, in proportion (as nearly as practicable)
to the amount of Registrable Shares owned by each Holder; provided,
however, that the number of Registrable Shares to be included in such
underwritten offering shall not be reduced unless and until all other
securities shall have been excluded from the underwritten offering.
(c) Limit on Demand Registrations. The Company is obligated to
effect only two (2) Demand Registrations pursuant to Section 2 for an
aggregate of up to 1,750,000 shares of Common Stock (as adjusted for all
stock splits or similar transactions). For purposes of this Section 2(c),
no such registration shall be deemed a Demand Registration unless and
until the registration statement filed pursuant thereto has been declared
effective by the Commission.
(d) Deferral of Filing. The Company may defer the filing (but not
the preparation) of any registration statement required by Section 2 for a
period of up to: (i) forty-five (45) days in the event that the Company or
any of its Subsidiaries is engaged in confidential negotiations or other
confidential business activities, disclosure of which would be required in
such registration statement (but would not be required if such
registration statement were not filed), and the Board of Directors of the
Company determines in good faith that such disclosure would be materially
detrimental to the Company and its stockholders or would have a material
adverse effect on any such confidential negotiations or other confidential
business activities, or (ii) 120 days in the event that the Board of
Directors of the Company determined to effect a registered underwritten
public offering of the Company's securities for the Company's account and
the Company takes substantial steps (including, but not limited to,
selecting a managing underwriter for such offering) and proceeds with
reasonable diligence to effect such offering; provided that if such
determination is made by the Board of Directors after receipt of a Demand
Registration request, the Board prior to such request shall have commenced
negotiations with an underwriter with respect to such offering; and
provided, further, however, that during any period of 360 consecutive
days, Holders shall not be subject to deferrals pursuant to the Company's
exercise of deferral rights for a period of at least 180 consecutive days.
A deferral of the filing of a registration statement pursuant to this
Section 2(d) shall be lifted, and the requested registration statement
shall be filed forthwith, if, in the case of a deferral pursuant to clause
(i) of the preceding sentence, the negotiations or other activities are
terminated or the transaction contemplated by such negotiations or other
activities are consummated, or, in the case of a deferral pursuant to
clause (ii) of the preceding sentence, the proposed registration for the
Company's account is abandoned. In order to defer the filing of a
registration statement pursuant to this Section 2(d), the Company shall
promptly (but in any event within 10 days), upon determining to seek such
deferral, deliver to each Initiating Holder a certificate signed by an
executive officer of the Company stating that the Company is deferring
such filing pursuant to this Section 2(d) and a general statement of the
reason for such deferral and an approximation of the anticipated delay.
Within 20 days after receiving such certificate, the holders of a majority
- 4 -
<PAGE>
in interest of the Registrable Shares held by the Requesting Holders and
for which registration was previously requested may withdraw their request
by giving notice to the Company. If withdrawn, the such request shall be
deemed not to have been made for all purposes of this Agreement.
(e) Expenses of Demand Registration. All expenses of Demand
Registrations shall be paid by the selling Holders; provided, however,
that if any securities other than the Shares are included in a Demand
Registration, any person on whose behalf such securities have been
included shall pay that percentage of the total expenses which equals the
percentage of the total proceeds received by such person, and the selling
Holders shall have no responsibility for any such expenses.
3. Piggy-Back Registration.
(a) General. If at any time after 180 days after the Closing Date,
the Company proposes to register (including for this purpose a
registration effected by the Company pursuant to Section 2 of this
Agreement) any shares of its Common Stock under the Securities Act in
connection with the public offering of such securities (other than a
registration on Form S-4 or Form S-8 (or any successor forms)), the
Company shall, at such time, promptly give each Holder written notice of
such registration. Upon the written request of each Holder given within
fifteen (15) days after mailing of such notice by the Company in
accordance with Section 18 hereof, the Company shall cause to be
registered under the Securities Act all of the Registrable Shares that
each such Holder has requested to be registered, subject to the
underwriter cutback and other provisions of Section 3(b) hereof.
(b) Underwriting Requirements. In connection with any underwritten
offering, the Company shall not be required under this Section 3 to
include any Holder's Registrable Shares in such underwritten offering
unless such Holder shall have agreed in writing to the terms of the
underwriting as agreed upon among the Company and the underwriters
selected by the Company or by selling stockholders, as the case may be,
and then only in such quantity as the underwriters determine in their sole
discretion will not materially and adversely affect the distribution of
securities to be covered by such registration statement, such
determination to be confirmed in writing upon the request of any Holder.
If the total amount of Registrable Shares requested by Holders to be
included in such offering pursuant to Section 3(a) exceeds the amount of
securities that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of Registrable Shares
and shares of Common Stock offered by other selling shareholders which the
underwriters determine in their sole discretion will not have a material
- 5 -
<PAGE>
adverse effect on the offering (the securities so included to be
apportioned among all selling Holders and other selling shareholders pro
rata according to the total amount of shares of Common Stock proposed to
the be sold by each selling holder.
(c) Expenses of Company Registration. The Company shall bear and pay
all expenses incurred in connection with any registration, filing,
qualification or sale of Registrable Shares pursuant to this Section 3,
including (without limitation) all registration, filing, and qualification
fees, and printers' fees, accounting fees and the fees and disbursements
of counsel for the Company relating or apportionable thereto, but
excluding underwriting discounts and commissions, stock transfer taxes and
the fees and expenses of separate counsel, if any, retained by the selling
Holders.
4. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Shares, the
Company shall, as expeditiously as reasonably possible, use reasonable
commercial efforts to do the following:
(a) Commission Filing. Prepare and file with the
Commission a registration statement with respect to such Registrable
Shares and to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the
Registrable Shares registered thereunder, keep such registration
statement effective for up to 180 days or until all of the Shares
registered thereunder are sold, whichever occurs sooner.
(b) Amendments. Prepare and file with the Commission
such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by
such registration statement, and furnish such copies thereof to the
Holders and any underwriters as they may reasonably request.
(c) Prospectus. Furnish to the Holders and any
underwriters such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Shares
owned by them, and cause all related filings to be made with the
Commission as required by Rule 424 under the Securities Act.
(d) Blue Sky Qualification. Register and qualify the
Registrable Shares covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by the Holders and any underwriters; provided,
however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
- 6 -
<PAGE>
(e) Underwriting Agreement. In the event of any
underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering, including, without
limitation, delivering opinions of counsel and "comfort letters" of
accountants. Each Holder participating in such underwriting shall
also enter into and perform its obligations under such an agreement.
(f) Prospectus Delivery. Promptly notify each Holder of
Registrable Shares covered by the registration statement at any time
when the Company becomes aware of the happening of any event as a
result of which the registration statement or the prospectus
included in such registration statement or any supplement to the
prospectus (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements therein (in the case of the prospectus, in light of
the circumstances under which they were made) not misleading or, if
for any other reason it shall be necessary during such time period
to amend or supplement the registration statement or the prospectus
in order to comply with the Securities Act, whereupon, in either
case, each Holder shall immediately cease to use such registration
statement or prospectus for any purpose and, as promptly as
practicable thereafter, the Company shall prepare and file with the
Commission, and furnish without charge to the appropriate Holders
and managing underwriters, if any, a supplement or amendment to such
registration statement or prospectus which will correct such
statement or omission or effect such compliance and provide such
copies thereof as the Holders and any underwriters may reasonably
request.
(g) Make generally available to the Company's
securityholders an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act no later than 30 days after the
end of the 12-month period beginning with the first day of the
Company's first fiscal quarter commencing after the effective date
of a registration statement, which earnings statement shall cover
said 12-month period, and which requirement will be deemed to be
satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Exchange Act and
otherwise complies with Rule 158 under the Securities Act;
(h) If requested by the managing underwriter or any
seller, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing
underwriter or any seller reasonably requests to be included
therein, including, without limitation, with respect to the
Registrable Shares being sold by such seller, the purchase price
being paid therefor by the underwriters and with respect to any
other terms of the underwritten offering of the Registrable
- 7 -
<PAGE>
Shares to be sold in such offering, and promptly make all required
filings of such prospectus supplement or post-effective amendment;
(i) As promptly as practicable after filing with the
Commission of any document which is incorporated by reference into a
registration statement, deliver a copy of each such document (in the
form in which it was incorporated) to each seller;
(j) Cooperate with the sellers and the managing
underwriter to facilitate the timely preparation and delivery of
certificates (which shall not bear any restrictive legends unless
required under applicable law) representing securities sold under
any registration statement, to enable such securities to be in such
denominations and registered in such names as the managing
underwriter or such sellers may request and to make available to the
Company's transfer agent prior to the effectiveness of such
registration statement a satisfactory supply of such certificates;
(k) Promptly make available for inspection by any
seller, any underwriter participating in any disposition pursuant to
any registration statement, and any attorney, accountant or other
agent or representative retained by any such seller or underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to fulfill their due diligence responsibilities, and
cause the Company's officers, directors and employees to supply all
information requested by any such Inspector in connection with such
registration statement; provided, however, that unless the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the registration statement or the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction, the Company shall not
be required to provide any information under this subparagraph (x)
if (A) the Company's Board of Directors determines in good faith,
after consultation with counsel for the Company, that to do so would
cause the Company to forfeit an attorney-client privilege that was
applicable to such information or (B) if either (1) the Company has
requested and been granted from the SEC confidential treatment of
such information contained in any filing with the SEC or documents
provided supplementally or otherwise or (2) the Company reasonably
determines in good faith that such Records are confidential and so
notifies the Inspectors in writing unless prior to furnishing any
such information with respect to (A) and (B) such Holder of
Registrable Shares requesting such information agrees to enter into
a confidentiality agreement in customary form and subject to
customary exceptions; and provided further, however, that each
Holder of Registrable Shares agrees that it will, upon learning that
disclosure of such Records
- 8 -
<PAGE>
is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential;
(l) Furnish to each seller and underwriter a signed
counterpart of (A) an opinion or opinions of counsel to the Company
and (B) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering
such matters as are customarily covered by such opinions or comfort
letters, as the case may be, as the sellers or managing underwriter
reasonably requests;
(m) Cause the Registrable Shares included in any
registration statement to be (A) listed on each securities exchange,
if any, on which similar securities issued by the Company are then
listed, or (B) authorized to be quoted and/or listed (to the extent
applicable) on the National Association of Securities Dealers, Inc.
Automated Quotation System or the National Market System of Nasdaq
Stock Market if the Registrable Shares so qualify;
(n) Provide a CUSIP number for the Registrable Shares
included in any registration statement not later than the effective
date of such registration statement;
(o) Cooperate with each seller and each underwriter
participating in the disposition of such Registrable Shares and
their respective counsel in connection with any filings required to
be made with the National Association of Securities Dealers, Inc.;
(p) During the period when a prospectus is required to
be delivered under the Securities Act, promptly file all documents
required to be filed with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act;
(q) Notify each seller of Registrable Shares promptly of
any request by the Commission for the amending or supplementing of
such registration statement or prospectus or for additional
information;
(r) Prepare and file with the Commission promptly any
amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Company or the
managing underwriter, is required in connection with the
distribution of the Registrable Shares;
(s) Enter into such agreements (including underwriting
agreements
- 9 -
<PAGE>
in the managing underwriter's customary form) as are customary in
connection with an underwritten offering;
(t) Advise each seller of such Registrable Shares,
promptly after it shall receive notice or obtain knowledge thereof,
of the issuance of any stop order issued by the Commission
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for such purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if
such stop order should be issued;
(u) Cooperate in a reasonable manner, considering among
other things operating responsibilities to the Company, with each
seller and each underwriter participating in the disposition of
Registrable Shares in connection with their selling efforts,
including, without limitation, by making its officers and employees
reasonably available for roadshow or other presentations; and
(v) Subsequent to the date hereof, not grant rights to
more than four (4) Demand Registrations to any Person in connection
with any transaction or series of related transactions, or
Piggy-Back Registration rights having a priority over the Piggy-Back
Registration rights granted under this Agreement.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement
with respect to the Registrable Shares of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Shares held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Shares.
6. Delay of Registration. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any registration
as the result of any controversy that might arise with respect to the
interpretation or implementation of this Agreement.
7. Indemnification. In the event (i) any Registrable Shares are
included in a registration statement under this Agreement or (ii) any
other shares of Common Stock held by the Investor are included in any
registration statement:
(a) Indemnification by the Company. To the fullest extent
permitted by law, the Company will indemnify and hold harmless each
Holder, each of its directors, officers, partners, employees,
advisors, agents and representatives, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the
Exchange Act and any agent or investment advisor thereof, against
any and all losses, claims, damages, expenses (including, without
limitation, attorneys' fees and disbursements) and liabilities
(joint or several) to which they may become subject,
- 10 -
<PAGE>
insofar as such losses, claims, damages, expenses (including,
without limitation, attorneys' fees and disbursements) and
liabilities (or actions in respect thereof) arise out of, relate to,
result from or are based upon any of the following (each a
"Violation"): (i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained
therein, or any amendments or supplements thereto, (ii) the omission
or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, or any state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act, or any state securities law, and
the Company will pay to each such Holder or other person, as
incurred, any legal or other expenses reasonably incurred by one law
firm retained by them, plus appropriate local counsel in connection
with investigating or defending any such loss, claim, damage,
expense, liability, or action; provided, however, that the indemnity
agreement contained in this Section 7(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, expense,
liability, or action if such settlement is effected without the
consent of the Company, nor shall the Company be liable in any such
case for any such loss, claim, damage, expense, liability, or action
to which any Holder or other indemnifiable person may become subject
to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by such Holder or other indemnifiable person. This
right to indemnification shall remain in full force and effect
notwithstanding any investigation made by or on behalf of such
Holder or other indemnifiable person and shall survive the transfer
of such securities by such Holder.
(b) Indemnification by Selling Holder. To the fullest extent
permitted by law, each selling Holder severally, but not jointly,
will indemnify and hold harmless the Company, each of its directors,
each of its officers, partners, employees, advisors, agents and
representatives, who has signed the registration statement, each
person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, and any agent or investment
advisor thereof, any other Holder selling securities registered in
such registration statement and any controlling person of any such
underwriter or other Holder against any and all losses, claims,
damages, expenses (including, without limitation, attorney's fees
and disbursements) and liabilities (joint or several) to which any
of the foregoing persons may become subject, insofar as such losses,
claims, damages, expenses (including, without limitation, attorney's
fees and disbursements) and liabilities (or actions in respect
thereto) arise out of, relate to, result from or are based upon any
Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in
connection with such registration; provided, however, that the
indemnity agreement contained in this Section 7(b) shall not apply
to amounts paid in settlement of any
- 11 -
<PAGE>
such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Holder (which consent shall not
be withheld unreasonably); provided, further, that in no event shall
any indemnity under this Section 7 (b) exceed the net proceeds from
the offering received by such Holder.
(c) Procedures. Promptly after receipt by an indemnified party
under this Section 7 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying
party under this Section 7, deliver to the indemnifying party a
written notice of the commencement thereof in accordance with
Section 18 hereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified
party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to
retain one separate counsel (plus appropriate local counsel), with
the reasonable fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified
party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial in any material respect to its
ability to defend such action, shall to the extent prejudicial
relieve such indemnifying party of any liability to the indemnified
party under this Section 7, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than
under this Section 7.
(d) Contribution. If the indemnification provided for in this
Section 7 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the
indemnified parties on the other in connection with the actions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or related to
information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action;
provided, however, that in no event shall the liability of any
selling Holder
- 12 -
<PAGE>
hereunder be greater in amount than the difference between the
dollar amount of the proceeds received by such Holder upon the sale
of the Registrable Shares giving rise to such contribution
obligation and all amounts previously contributed by such Holder
with respect to such losses, claims, damages, liabilities and
expenses. The amount paid or payable to a party as a result of the
losses, claims damages, liabilities and expenses referred to above
shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and Holders under
this Section 7 shall survive the completion of any offering of
Registrable Shares in a registration statement under this Agreement,
and otherwise.
8. Reports Under Exchange Act. With a view to making available
to the Holders the benefits of Rule 144 promulgated under the Securities
Act and any other rule or regulation of the Commission that may at any
time permit a Holder to sell securities of the Company to the public
without registration, the Company agrees to use commercially reasonable
efforts to:
(a) make and keep public information available, as those terms
are defined in Rule 144;
(b) file with the Commission in a timely manner all reports
and other documents required to be filed by the Company under the
Securities Act and the Exchange Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Shares, promptly upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144,
the Securities Act and the Exchange Act, (ii) a copy of the most recent
annual and/or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may
be reasonably requested in availing any Holder of any rule or regulation
of the Commission which permits the selling of any Registrable Shares
without registration.
9. "Market Stand-Off" Agreement. Each Holder hereby agrees
that for a period of 180 days, or such shorter period required by the
underwriters, following the effective date of any registration effected
pursuant to Section 2, or if Holders participate in the sale of securities
effected pursuant to Section 3 hereof, such Holder, if requested by the
managing underwriter, shall not, directly or indirectly sell, offer to
sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other
than to donees and Affiliates who agree to be similarly bound)
- 13 -
<PAGE>
any securities of the Company held by it at any time during such period,
except shares of Common Stock included in such registration. In addition,
each Holder agrees, if applicable, to acknowledge the undertaking provided
for in this Section 9 by entering into customary written "lock-up"
agreements with the managers of the relevant underwriting. The
requirements of this Section 9 shall not apply to any Holder that
(together with its Affiliates), at the time of receipt of the referenced
notice from the Company, (i) beneficially owns less than 5% of the
outstanding shares of Common Stock, (ii) is not an Affiliate or an
employee of the Company and (iii) waives any further benefits of this
Agreement for it or any subsequent assignee or transferee of its
Registrable Shares.
In order to enforce the foregoing covenant, the Company may
impose stop transfer instructions with respect to the Registrable Shares
of each Holder (and the shares or securities of every other person subject
to the foregoing restriction) until the end of such period.
10. "Lock-up" Agreements. Each Holder agrees to enter into a
customary written "lock-up" agreement with respect to the Registrable
Shares with the managers of any underwritten public offering by the
Company of shares of its equity securities for cash, which offering is
completed on or before August 31, 1999; provided, however, that the
aggregate of such "lock-up" period together with any deferral period
pursuant to Section 2(d) shall not exceed the deferral period permitted
under Section 2(d).
11. Right of First Offer.
(a) Notice of Proposed Transaction; Election. In the event
that the Investor, any Holder or any holder of Common Stock Equivalents or
shares of common stock received upon exercise of such Common Stock
Equivalents who is a direct or indirect transferee of the Investor (the
"Selling Holder") desires to effect a sale, within the meaning of Section
2(3) of the Securities Act of 1933 , as amended, of any or all of its
shares of Common Stock or any Common Stock Equivalents (collectively, the
"Subject Shares"), the Selling Holder shall first give written notice (a
"Right of First Offer Notice") of such desire to the Company setting forth
the terms and conditions of sale and the price at which the Selling Holder
desires to sell. The Company shall thereupon, within twenty (20) business
days following its receipt of the Right of First Offer Notice (the "Right
of First Offer Election Period"), notify the Selling Holder in writing of
the number, if any, of Subject Shares that the Company or its designee, as
the case may be, desires to subscribe to purchase (the "Right of First
Offer Subscription"). Failure to respond to the Selling Holder with regard
to the Right of First Offer Notice prior to the expiration of the Right of
First Offer Election Period shall be deemed to be an election not to
subscribe for any of the Subject Shares. If the Selling Holder satisfies
all of the foregoing conditions and the Company and its designees, as the
case may be, do not collectively subscribe for all of the Subject Shares,
then the Selling Holder may, upon the expiration of the Right of First
Offer Election Period, sell the Subject Shares not subscribed for by the
Company or its designees, as the case may be, to any other person at a
purchase price equal to or higher than the price set forth in the Right of
First Offer Notice; provided, however, that the Selling Holder shall again
become subject to the above restrictions on transfer if a definitive
agreement for the proposed transfer is not entered into within ninety (90)
days after the expiration of Right of First Offer Election Period. This
- 14 -
<PAGE>
Section 11(a) shall not apply to any Transfer by any Holder to any
Affiliate of such Holder.
(b) Procedure for Sale. If all the Subject Shares are
subscribed for by the Company or its designees, as the case may be, the
closing of the purchase of the Subject Shares shall take place at the
principal offices of the Company no later than thirty (30) days after the
date of the expiration of the Right of First Offer Election Period
(subject to the last sentence of this Section 11(b)). At the closing, the
Company or its designees, as the case may be, will pay the purchase price
for the Subject Shares to be purchased by it to the Selling Holder by wire
transfer of immediately available funds upon the Selling Holder's delivery
of valid certificates evidencing the Subject Shares. Such certificates
will be duly endorsed (with signatures guaranteed, if appropriate) for
transfer to the Company or its designees, as the case may be, and upon
delivery of such certificates to the Company or its designees, as the case
may be, the Selling Holder will be deemed to represent and warrant to the
Company or its designees, as the case may be, that the Subject Shares are
owned by the Selling Holder free and clear of all liens, adverse claims
and other encumbrances (other than as provided in this Registration Rights
Agreement), and that the Selling Holder has all requisite power and
authority to sell the Subject Shares. The parties shall take all such
actions as may be necessary to comply as promptly as practicable with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in
connection with the sale of the Subject Shares.
12. Amendment. This Agreement may be amended and the
observance of any provision of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and Holders of
at least sixty-six percent (66%) of the Registrable Shares. Any amendment
or waiver effected in accordance with this Section 12 shall be binding
upon each Holder, each transferee thereof and the Company.
13. Termination. The rights provided in this Agreement shall
terminate on the tenth anniversary of the effective date of this
Agreement.
14. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED,
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS THEREOF).
15. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
16. Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
17. Negotiation of Agreement. Each of the parties acknowledges
that it has been represented by independent counsel of its choice
throughout all negotiations that have preceded the execution of this
Agreement and that it has executed the same with consent
- 15 -
<PAGE>
and upon the advice of said independent counsel. Each party and its
counsel cooperated in the drafting and preparation of this Agreement and
the documents referred to herein, and any and all drafts relating thereto
shall be deemed the work product of the parties and may not be construed
against any party by reason of its preparation. Accordingly, any rule of
law or any legal decision that would require interpretation of any
ambiguities in this Agreement against the party that drafted it is of no
application and is hereby expressly waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect the
intentions of the parties and this Agreement.
18. Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto
shall be in writing, shall be deemed to have been duly given or delivered
when delivered personally or telecopied (receipt confirmed, with a copy
sent by reputable overnight courier), or one business day after delivery
to a reputable overnight courier, postage prepaid, to the address of the
party set forth below such party's signature on this Agreement or to such
address as the party to whom notice is to be given may provide in a
written notice to each of the other parties to this Agreement, a copy of
which written notice shall be on file with the Secretary of the Company.
19. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms to the fullest extent permitted by law.
20. Further Assurances. Each of the parties shall, without
further consideration, execute and deliver such additional documents and
take such other action as the other parties, or any of them, may
reasonably request to carry out the intent of this Agreement and the
transactions contemplated hereby.
21. Successors and Assigns. This Agreement shall be binding
upon, and all rights hereto shall inure to the benefit of, the parties
hereto, and their respective successors and assigns.
22. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the
actions and transactions contemplated by this Agreement. There are no
restrictions promises, inducements, representations, warranties, covenants
or undertakings with regard to the registration of the Shares pursuant to
the Securities Act, other than those expressly set forth or referred to in
this Agreement.
23. Recapitalization, etc. The provisions of this Agreement
(including any calculation of share ownership) shall apply, to the full
extent set forth herein with respect to the Registrable Shares, to any and
all shares of capital stock of the Company or any capital stock,
partnership units or, any other security evidencing ownership interests in
any successor or assign of the Company (whether by merger, consolidation,
sale of assets or otherwise) that may be issued in respect of, in exchange
for, or in substitution of the Registrable Shares by reason of any stock
dividend, split, combination, recapitalization, liquidation,
reclassification, merger, consolidation or otherwise.
- 16 -
<PAGE>
UNITED PAYORS & UNITED PROVIDERS, INC.
By: /s/ Edward S. Civera
---------------------------------------
Edward S. Civera
President and Chief Operating Officer
Address:
2275 Research Boulevard, Sixth Floor
Rockville, Maryland 20850
Attention: Edward S. Civera
Telecopier: (301) 548-8828
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: /s/ Paul H. Warren
---------------------------------------
Address:
c/o Capital Z Partners, Ltd.
One Chase Manhattan Plaza, 44th Floor
New York, New York 10005
Attention: Paul Warren
David Spuria
Telecopier: (212) 898-8720
- 17 -
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT JOINDER
The undersigned, a [individual, corporation, partnership, etc. and place
of residence or organization , joins in the execution of that certain
Registration Rights Agreement ("Agreement"), dated _______________, by and among
_____________, a _______________, and United Payors & United Providers, Inc., a
Delaware corporation, for the purpose of accepting the benefits conferred and
assuming the obligations and liabilities imposed upon Holders (as such term is
defined in the Agreement) pursuant to the terms of the Agreement, with respect
to ___________ of the Shares (as such term is defined in the Agreement).
- ------------------- ------------------------------------
Date
- 18 -
<PAGE>
REGISTRATION RIGHTS AGREEMENT JOINDER
-------------------------------------
The undersigned, a Bermuda exempt and limited partnership, joins in
the execution of that certain Registration Rights Agreement (the "Agreement"),
dated February 25, 1999, by and between Capital Z Financial Services Fund II,
L.P., a Bermuda exempt and limited partnership, and United Payors & United
Providers, Inc., a Delaware corporation, for the purpose of accepting the
benefits conferred, and assuming the obligations and liabilities imposed, upon
Holders (as such term is defined in the Agreement) pursuant to the Agreement,
with respect to 7,518 of the Shares (as such term is defined in the Agreement).
February 25, 1999 CAPITAL Z FINANCIAL SERVICES
PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P.,
its General Partner
By: Capital Z Partners, Ltd.,
its General Partner
By: /s/ Paul H. Warren
--------------------------------
Name: Paul H. Warren
Title: Senior Vice President
NYFS08...:\60\33560\0019\2205\FRM2219P.090
Exhibit 7
JOINT FILING AGREEMENT
Each of the undersigned parties hereby agrees that the Schedule 13D
filed herewith is filed jointly, pursuant to Rule 13d-1(f)(1) promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, on behalf of each of them.
Dated: March 5, 1999
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.
By: Capital Z Partners, L.P., its General Partner
By: Capital Z Partners, Ltd., its General Partner
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.
By: Capital Z Partners, L.P., its General Partner
By: Capital Z Partners, Ltd., its General Partner
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
CAPITAL Z PARTNERS, L.P.,
By: Capital Z Partners, Ltd.
its General Partner
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
<PAGE>
CAPITAL Z PARTNERS, LTD.,
By: /s/ Steven M. Gluckstern
----------------------------------------------
Name: Steven M. Gluckstern
Title: Chairman of the Board
/s/ Steven M. Gluckstern
----------------------------------------------
Steven M. Gluckstern
/s/ Robert A. Spass
----------------------------------------------
Robert A. Spass
