sc13da.htm

0000950157-07-001153.txt : 20070921 0000950157-07-001153.hdr.sgml : 20070921 20070921170722 ACCESSION NUMBER: 0000950157-07-001153 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20070921 DATE AS OF CHANGE: 20070921 GROUP MEMBERS: RICHARD C. PERRY SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL AMERICAN FINANCIAL CORP CENTRAL INDEX KEY: 0000709878 STANDARD INDUSTRIAL CLASSIFICATION: HOSPITAL & MEDICAL SERVICE PLANS [6324] IRS NUMBER: 112580136 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-34486 FILM NUMBER: 071129906 BUSINESS ADDRESS: STREET 1: SIX INTERNATIONAL DRIVE STREET 2: SUITE 190 CITY: RYE BROOK STATE: NY ZIP: 10573-1068 BUSINESS PHONE: 9149345200X253 MAIL ADDRESS: STREET 1: SIX INTERNATIONAL DRIVE STREET 2: SUITE 190 CITY: RYE BROOK STATE: NY ZIP: 10573-1068 FORMER COMPANY: FORMER CONFORMED NAME: UNIVERSAL HOLDING CORP DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PERRY CORP CENTRAL INDEX KEY: 0000919085 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 767 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10153 BUSINESS PHONE: 2125834000 MAIL ADDRESS: STREET 1: 767 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10153 SC 13D/A 1 sc13da.htm AMENDMENT NO. 2 sc13da.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934 (Amendment No. 2)

UNIVERSAL AMERICAN FINANCIAL CORP.
(Name of Issuer)
Common Stock (par value $.01 per share)		913377107
(Title of class of securities)		(CUSIP number)
Michael C. Neus Perry Corp. 767 Fifth Avenue 19th Floor New York, NY 10153 Telephone: (212) 583-4000
(Name, address and telephone number of person authorized to receive notices and communications)
September 18, 2007
(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 that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240-13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [_].

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7 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 that 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 “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

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1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Perry Corp.
2.	Check the Appropriate Box If a Member of a Group (See Instructions): (a) [ ] (b) [X]
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]
6.	Citizenship or Place of Organization New York
Number of Shares Beneficially Owned By Each Reporting Person With		7.	Sole Voting Power 6,920,500
		8.	Shared Voting Power NONE
		9.	Sole Dispositive Power 6,920,500
		10.	Shared Dispositive Power NONE
11.	Aggregate Amount Beneficially Owned by Each Reporting Person 6,920,500
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
13.	Percent of Class Represented by Amount in Row (11) 9.23%
14.	Type of Reporting Person (See Instructions) IA, CO

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1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only). Richard C. Perry
2.	Check the Appropriate Box If a Member of a Group (See Instructions): (a) [ ] (b) [X]
3.	SEC Use Only
4.	Source of Funds (See Instructions) WC
5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) [ ]
6.	Citizenship or Place of Organization United States of America
Number of Shares Beneficially Owned By Each Reporting Person With		7.	Sole Voting Power 6,920,500 (all shares beneficially owned by Perry Corp.)
		8.	Shared Voting Power NONE
		9.	Sole Dispositive Power 6,920,500 (all shares beneficially owned by Perry Corp.)
		10.	Shared Dispositive Power NONE
11.	Aggregate Amount Beneficially Owned by Each Reporting Person 6,920,500
12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)
13.	Percent of Class Represented by Amount in Row (11) 9.23%
14.	Type of Reporting Person (See Instructions) IN, HC

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AMENDMENT NO. 2 TO SCHEDULE 13D

This Amendment No. 2 to Schedule 13D is filed by the undersigned to amend the Statement on Schedule 13D, filed October 25, 2006, as amended by Amendment No. 1 (“Amendment No. 1”), filed May 10, 2007 (as so amended, the “Schedule 13D”), relating to the common stock of Universal American Financial Corp.

ITEM 1.

SECURITY AND ISSUER

The title of the class of equity security to which this statement on Schedule 13D relates is the common stock, par value $.01 per share (the “Common Stock”), of Universal American Financial Corp., a New York corporation (the “Company”). The address of the Company’s principal executive offices is Six International Drive, Suite 190, Rye Brook, NY 10573.

ITEM 2.

IDENTITY AND BACKGROUND

This Amendment No. 2 to Schedule 13D is filed on behalf of Perry Corp., a New York corporation, and Richard C. Perry, a citizen of the United States of America (together, the “Reporting Persons”). Perry Corp. is a registered investment adviser that provides asset management services to private investment funds. Richard C. Perry is the President, sole director and sole shareholder of Perry Corp. The address of Perry Corp. and Richard C. Perry is 767 Fifth Avenue, 19th Floor, New York, NY 10153. A joint filing agreement of Perry Corp. and Richard C. Perry is attached hereto as Exhibit A.

The name, citizenship, business addresses and principal occupation of each of the directors and executive officers of Perry Corp. (other than Richard C. Perry) are set forth in Exhibit B attached hereto, which is incorporated herein by reference.

During the last five years, none of Perry Corp., Richard C. Perry, or any of the persons listed in Exhibit B attached hereto has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has 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 judgment, 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.

ITEM 3.

SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION

The shares of Common Stock owned by the Reporting Persons, excluding shares of Common Stock underlying Preferred Stock, were acquired by two or more private investment funds for which Perry Corp. acts as a general partner and/or investment adviser (“Perry Funds”). The source of funds for the purchase of such shares of Common Stock was the working capital of Perry Funds. The total original purchase price for such shares of Common Stock in the open market was $96,313,184.84.

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The shares of Series A Preferred Stock reported in Item 4 below as acquired by Perry Funds from the Company under the First Stage SPA (as defined below) were acquired with the working capital of Perry Funds for an aggregate purchase price of approximately $49,736,000.00.

The shares of Series A and Series B Preferred Stock reported in Item 4 below as acquired by Perry Funds from the Company (through the release of such shares to Perry Funds from escrow, as described in Item 4) were acquired with the working capital of Perry Funds for an aggregate purchase price of approximately $33,264,000.00 for the Series A Preferred Stock of the Company and an aggregate purchase price of approximately $22,000,000.00 for the Series B Preferred Stock of the Company.

The shares of Common Stock and Preferred Stock described above in this Item 3 may be held in margin accounts established with various brokers by Perry Funds.

ITEM 4.

PURPOSE OF TRANSACTION

See Item 4 of Amendment No. 1, which is incorporated herein by reference.

On May 15, 2007, the closing under the previously disclosed “stage 1” Securities Purchase Agreement, dated as of May 7, 2007 (the “First Stage SPA”), among the Company, Union Square Universal Partners, L.P. (“Union Square”), Lee-Universal Holdings, LLC (“Lee”), Welsh, Carson, Anderson & Stowe X, L.P. (“WCAS X”) and Perry Funds, attached hereto as Exhibit C, occurred. At that closing, Perry Funds purchased from the Company 24,868 shares of Series A Preferred Stock of the Company at a purchase price of $2,000 per share of Preferred Stock.

The Company’s Series A Preferred Stock is a non-voting security and is not convertible into shares of Common Stock while owned by Union Square, Lee, WCAS X or Perry Funds (the “Initial Holders”) or any affiliate of an Initial Holder. However, (A) upon transfer of a share of Series A Preferred Stock to a holder other than an Initial Holder or an affiliate of an Initial Holder, such share of Series A Preferred Stock will automatically convert into 100 shares of Common Stock (subject to customary anti-dilution adjustments), and (B) subject to the satisfaction of various conditions, an Initial Holder of shares of Series A Preferred Stock is entitled to exchange such shares of Series A Preferred Stock for a corresponding number of shares of the Company’s Series B Preferred Stock.

On September 18, 2007, the Company, the Initial Holders and the parties to the Agreement and Plan of Merger and Reorganization, dated as of May 7, 2007 (the “Merger Agreement”), among the Company, MHRx LLC, MemberHealth Inc. (“MemberHealth”) and the other parties thereto, entered into (1) an Agreement (the “Side Agreement”) and (2) an Escrow Agreement with The Bank of New York (as amended, the “Escrow Agreement”) pursuant to which, among other things, (a) each Initial Holder placed into escrow the aggregate purchase price for the shares of Series B Preferred Stock of the Company (or, at the option of such Initial Holder, Series A Preferred Stock of the Company) to be purchased by such Initial Holder under the previously disclosed “stage 2” Securities Purchase Agreement, dated as of May 7, 2007 (the “Second Stage SPA”), among the Company and the Initial

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Holders, attached hereto as Exhibit F, and (b) the Company placed into escrow certificates representing the shares of Preferred Stock to be purchased by each of the Initial Holders under the Second Stage SPA. Perry Funds have elected to purchase Series A and Series B Preferred Stock of the Company under the Second Stage SPA. In accordance with the Side Agreement and the Escrow Agreement, Perry Funds placed into escrow an amount equal to $55,264,000.00, and the Company placed into escrow certificates representing 16,632 shares of Series A Preferred Stock of the Company and 11,000 shares of Series B Preferred Stock of the Company for the account of Perry Funds under the Second Stage SPA at a purchase price of $2,000 per share of Preferred Stock. Pursuant to the Escrow Agreement, such shares of Series A and Series B Preferred Stock of the Company were released from escrow to Perry Funds on September 21, 2007 (the “Escrow Release Date”), which date was specified by the Company and MHRx LLC as the date on which the Company completed its acquisition of MemberHealth under the Merger Agreement. The Escrow Agreement was amended on September 21, 2007 to clarify the Escrow Release Date. A copy of the Side Agreement is set forth in Exhibit H hereto. A copy of the Escrow Agreement is set forth in Exhibit I hereto. A copy of the Amendment to the Escrow Agreement is set forth in Exhibit J hereto.

Each share of the Company’s Series B Preferred Stock is convertible (at the option of the holder thereof or, subject to certain conditions, by the Company) into 100 shares of Common Stock (subject to customary anti-dilution adjustments) and currently entitles the holder thereof to a number of votes (on all matters on which holders of Common Stock may vote) equal to the number of shares of Common Stock into which such share of Series B Preferred Stock is convertible.

Pursuant to the Second Stage SPA, the Company, WCAS X and Welsh, Carson, Anderson & Stowe IX, L.P. (collectively with WCAS X, “WCAS”), Union Square and certain affiliated entities of Cap Z Ltd., Lee, Perry Funds, Mr. Richard Barasch and certain other stockholders of the Company entered into, and placed into escrow under the Escrow Agreement, a Stockholders’ Agreement (the “Stockholders’ Agreement”), which Stockholders’ Agreement became effective on the Escrow Release Date. Pursuant to the Stockholders’ Agreement, from and after the Escrow Release Date, (i) the board of directors of the Company is to consist of thirteen directors, composed as follows: (A) two directors designated collectively by Union Square and certain affiliates of Cap Z Ltd., (B) two directors designated by WCAS, (C) one director designated by Lee, (D) one director designated by Perry Funds (who is currently Matthew Etheridge), (E) the Chief Executive Officer of the Company, and (F) six additional directors who shall each satisfy the criteria for “independent director” under applicable NASDAQ rules, provided that the right of a party to the Stockholders’ Agreement to designate directors may be reduced or lost if such party no longer holds a certain number of shares of Common Stock (which includes shares of Common Stock underlying Preferred Stock) and (ii) the stockholders party to the Stockholders’ Agreement agree to (A) vote all their shares in favor of election to the Company’s Board of Directors of such individuals as the parties to the Stockholders’ Agreement are entitled to designate from time to time, (B) certain restrictions on their ability to acquire additional shares of Common Stock without the approval of the independent directors of the Company, and (C) grant certain rights of first offer and other rights applicable to certain transfers of their shares in the Company.

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A copy of the Stockholders’ Agreement is set forth in Exhibit G hereto.

As previously disclosed, Perry Funds agreed with the Company that Perry Funds would not transfer any shares acquired under the First Stage SPA or the Second Stage SPA, in each case, for a period of one year from the date of the applicable acquisition, subject to limited exceptions.

The descriptions herein of the various agreements and other documents referred to above are qualified in their entirety by reference to the full text of such agreements and documents, which are incorporated herein by reference.

Except as otherwise contemplated herein, the Reporting Persons currently have no plans or proposals which relate to or would result in any of the actions enumerated in paragraphs (a) through (j) of Item 4 of the form of Schedule 13D promulgated under the Act. However, each of the Reporting Persons reserves the right to change its plans at any time, as it deems appropriate, in light of its ongoing evaluation of (a) its business and liquidity objectives, (b) the Company’s financial condition, business, operations, competitive position, prospects and/or share price, (c) industry, economic and/or securities markets conditions, (d) alternative investment opportunities, and (e) other relevant factors. Without limiting the generality of the preceding sentence, each of the Reporting Persons reserves the right (in each case, subject to any applicable restrictions under law or contract) to at any time or from time to time (i) purchase or otherwise acquire additional shares of Common Stock or other securities of the Company, or instruments convertible into or exercisable for any such securities (collectively, “Company Securities”), in the open market, in privately negotiated transactions or otherwise, (ii) sell, transfer or otherwise dispose of Company Securities in public or private transactions, (iii) cause Company Securities to be distributed in kind to its investors, (iv) acquire or write options contracts, or enter into derivatives or hedging transactions, relating to Company Securities, and/or (v) encourage (including, without limitation, through their designees on the Company’s board of directors and/or communications with directors, management, and existing or prospective security holders, investors or lenders, of the Company, existing or potential strategic partners, industry analysts and other investment and financing professionals) the Company to consider or explore (A) sales or acquisitions of assets or businesses, or extraordinary corporate transactions, such as a merger (including transactions in which affiliates of the Reporting Persons may be proposed as acquirers or as a source of financing), (B) changes to the Company’s capitalization or dividend policy, or (C) other changes to the Company’s business or structure.

ITEM 5.

INTEREST IN SECURITIES OF THE ISSUER

(a)-(b) Perry Corp. may be deemed to be the indirect beneficial owner of 6,920,500 shares of Common Stock, which constitutes approximately 9.23% of the Company’s outstanding shares of Common Stock. Perry Corp. may be deemed to have sole power to vote and sole power to dispose of such 6,920,500 shares of Common Stock. By virtue of his position as President, sole director and sole shareholder of Perry Corp., Richard C. Perry may be deemed to indirectly beneficially own such shares of Common Stock.

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The percentage in the immediately foregoing paragraph is calculated based on a total of 75,017,258 shares of Common Stock outstanding, which (A) includes the number of shares of Common Stock (59,742,258) outstanding as of July 31, 2007 (as stated by the Company in its quarterly report on Form 10-Q for the period ended June 30, 2007), (B) includes 14,175,000 shares of Common Stock issued by the Company to the former equity holders of MemberHealth under the Merger Agreement and (C) assumes the conversion into Common Stock of all shares of Series B Preferred Stock of the Company issued to Perry Funds under the Second Stage SPA, which would result in an additional 1,100,000 shares of Common Stock. The calculation of such percentage does not consider any shares of Preferred Stock issued to any investor other than Perry Funds (or any shares of Common Stock issuable upon conversion thereof) or any shares of Series A Preferred Stock issued to Perry Funds (the conversion of which is subject to various conditions).

As a result of the matters referred to in Item 4 hereof, the Reporting Persons may be deemed to constitute a “group” (within the meaning of Rule 13d-5(b) under the Act) with the other stockholders of the Company that are party to the Stockholders’ Agreement and certain of their respective affiliates. As a result, and on that basis, the Reporting Persons may be deemed to beneficially own shares of Common Stock that may be beneficially owned by such persons, including: (i) an aggregate 20,241,069 shares of Common Stock that Union Square has advised the Reporting Persons that Union Square and/or its affiliates (including certain affiliates of Cap Z Ltd.) beneficially own, (ii) an aggregate 14,743,825 shares of Common Stock that WCAS has advised the Reporting Persons that WCAS beneficially owns, (iii) an aggregate 5,250,000 shares of Common Stock that Lee has advised the Reporting Persons that Lee and/or its affiliates beneficially own, (iv) an aggregate 2,794,738 shares of Common Stock that Mr. Richard Barasch and/or his affiliates beneficially own as set forth in the Amendment to the Schedule 13D as filed by Mr. Richard Barasch on May 7, 2007 and (v) an aggregate 2,869,882 shares of Common Stock issued by the Company pursuant to the Merger Agreement to former equity holders of MemberHealth (other than WCAS) that are party to the Stockholders’ Agreement.

Including all such shares on the foregoing basis, the Reporting Persons may be deemed to be beneficial owners of, in the aggregate, 60.92% of the outstanding Common Stock. Each of the Reporting Persons disclaims beneficial ownership of shares that may be beneficially owned by any of the persons referred to in clauses (i) through (v) above and any of their respective affiliates, and neither the filing of this Statement nor its contents shall be deemed to constitute an admission to the contrary.

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The percentage in the immediately foregoing paragraph is calculated based on a total of 86,706,758 shares of Common Stock outstanding, which includes (A) the number of shares of Common Stock (59,742,258) outstanding as of July 31, 2007 (as stated by the Company in its quarterly report on Form 10-Q for the period ended June 30, 2007), (B) 14,175,000 shares of Common Stock issued by the Company to the former equity holders of MemberHealth under the Merger Agreement, (C) 1,952,700 shares of Common Stock underlying the shares of Series B Preferred Stock issued to the Initial Holders under the First Stage SPA and (D) 10,836,800 shares of Common Stock underlying the shares of Series B Preferred Stock issued to the Initial Holders under the Second Stage SPA, but does not include any shares of Common Stock underlying the shares of Series B Preferred Stock that may be issued by the Company in exchange for shares of Series A Preferred Stock issued under the First Stage SPA or under the Second Stage SPA, which exchange is in each case subject to various conditions.

None of the persons listed in Exhibit B hereto beneficially own shares of the Common Stock.

(c) Except as described in Item 4 (which is incorporated herein by reference), there have been no transactions with respect to the shares of Common Stock during the sixty days prior to the date of this statement on Schedule 13D by either Perry Corp., Richard C. Perry or any of the persons listed in Exhibit B hereto.

(d) The limited partners of (or investors in) each of two or more private investment funds for which Perry Corp. acts as general partner and/or investment adviser have the right to participate in the receipt of dividends from, or proceeds from the sale of, the shares of Common Stock (as well as Preferred Stock) held for the accounts of their respective funds in accordance with their respective limited partnership interests (or investment percentages) in their respective funds.

(e) Not applicable.

ITEM 6.

CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER

The responses to Items 4 and 5 hereof, and the response to Item 4 of Amendment No. 1, are incorporated herein by reference.

Except for the arrangements described in the responses to Items 4 and 5 hereof and the response to Item 4 of Amendment No. 1, to the best knowledge of the Reporting Persons, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 of this statement and between such persons and any other person with respect to any securities of the Company, including but not limited to transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies.

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As contemplated by the Stockholders’ Agreement, a designee of Perry Funds (which may include principals, directors and/or officers of one or more of the Reporting Persons), following the closing under the Second Stage SPA, will become a member of the board of directors of the Company. The Reporting Persons disclaim beneficial ownership of shares of Common Stock that may be beneficially owned by such individual.

ITEM 7.

MATERIALS TO BE FILED AS EXHIBITS

Exhibit A*	Agreement between Perry Corp. and Richard C. Perry to file Amendment No. 1 and any future amendments to Schedule 13D jointly on behalf of each of them
Exhibit B*	Executive Officers and Directors of Perry Corp. (other than Richard C. Perry)
Exhibit C*	Securities Purchase Agreement, dated May 7, 2007, by and among Universal American Financial Corp., Lee-Universal Holdings, LLC, Welsh, Carson, Anderson & Stowe X, L.P., Union Square Universal Partners, L.P., Perry Partners, L.P., Perry Partners International, Inc., Perry Commitment Fund, L.P. and Perry Commitment Master Fund, L.P.
Exhibit D†	Restated Certificate of Incorporation of Universal American Financial Corp.
Exhibit E*	Registration Rights Agreement, dated May 7, 2007, among Universal American Financial Corp. and the other parties named on the signature pages thereto
Exhibit F*	Securities Purchase Agreement, dated May 7, 2007, by and among Universal American Financial Corp., Lee-Universal Holdings, LLC, Welsh, Carson, Anderson & Stowe X, L.P., Union Square Universal Partners, L.P., Perry Partners, L.P., Perry Partners International, Inc., Perry Commitment Fund, L.P. and Perry Commitment Master Fund, L.P.
Exhibit G	Stockholders’ Agreement of Universal American Financial Corp., dated as of September 21, 2007

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Exhibit H	Agreement, dated September 18, 2007, by and among Universal American Financial Corp., MH Acquisition II LLC, MHRx LLC, MemberHealth, Inc., Welsh, Carson, Anderson & Stowe IX, L.P., Lee-Universal Holdings, LLC, Welsh, Carson, Anderson & Stowe X, L.P., Union Square Universal Partners, L.P., Perry Partners, L.P., Perry Partners International, Inc., Perry Private Opportunities Fund, L.P., Perry Private Opportunities Offshore Fund, L.P. and Bank of America, N.A. as administrative agent
Exhibit I	Escrow Agreement, dated September 18, 2007, by and among Universal American Financial Corp., MH Acquisition II LLC, MHRx LLC, MemberHealth, Inc., Welsh, Carson, Anderson & Stowe IX, L.P., Lee-Universal Holdings, LLC, Welsh, Carson, Anderson & Stowe X, L.P., Union Square Universal Partners, L.P., Perry Partners, L.P., Perry Partners International, Inc., Perry Private Opportunities Fund, L.P., Perry Private Opportunities Offshore Fund, L.P., Bank of America, N.A. as administrative agent and The Bank of New York, as escrow agent
Exhibit J	Amendment to Escrow Agreement, dated September 21, 2007, by and among Universal American Financial Corp., MH Acquisition II LLC, MHRx LLC, MemberHealth, Inc., Welsh, Carson, Anderson & Stowe IX, L.P., Lee-Universal Holdings, LLC, Welsh, Carson, Anderson & Stowe X, L.P., Union Square Universal Partners, L.P., Perry Partners, L.P., Perry Partners International, Inc., Perry Private Opportunities Fund, L.P., Perry Private Opportunities Offshore Fund, L.P., Bank of America, N.A. as administrative agent and The Bank of New York, as escrow agent

* Previously filed as an Exhibit to Amendment No. 1 and is incorporated herein by reference.

† Incorporated by reference to Annex C to the Company’s Registration Statement on Form S-4, Registration No. 333-143822.

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SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

	PERRY CORP.,

Dated: September 21, 2007	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	RICHARD C. PERRY,

Dated: September 21, 2007	By:	/s/ Richard C. Perry

EX-99.G 2 ex99-g.htm STOCKHOLDERS AGREEMENT ex99-g.htm

Exhibit G

STOCKHOLDERS’ AGREEMENT

THIS STOCKHOLDERS’ AGREEMENT (this “Agreement”) is entered into as of September 21, 2007 among Universal American Financial Corp., a New York corporation (the “Company”), and the securityholders listed on the signature pages hereto (or which become a party to this Agreement after the date hereof pursuant to the terms hereof) (each, a “Stockholder” and, collectively, the “Stockholders”).

WHEREAS, this is the Stockholders Agreement referred to in that certain Securities Purchase Agreement, dated as of May 7, 2007, among the Company and certain of the entities comprising the Investors relating to an aggregate of 125,000 shares of Preferred Stock of the Company (the “Securities Purchase Agreement”).

NOW, THEREFORE, in consideration of the covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS

SECTION 1.01. Definitions.

(a) The following terms, as used herein, have the following meanings:

“Affiliate” means with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such first Person. The terms “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

“Board” means the board of directors of the Company.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close.

“Capital Z/Union Square” means Capital Z Financial Services Fund II, L.P., Capital Z Financial Services Private Fund II, L.P. and Union Square Universal Partners, L.P. collectively, or, any of such limited partnerships in the event only one such limited partnership remains a Stockholder.

“Common Stock” means the Company’s authorized shares of common stock, par value $0.01 per share, and any stock into which such common stock may hereafter be converted, changed or reclassified.

“Common Stock Equivalents” means, without duplication, any rights, warrants, options, convertible securities or exchangeable securities (including, in each case, the Preferred Shares and NVC Shares), in each case, exercisable for or convertible or exchangeable into, directly or indirectly, Common Stock, whether at the time of issuance, upon the passage of time, or the occurrence of some future event.

“Company Securities” means (i) the Common Stock (or any other capital stock) issued by the Company and (ii) Common Stock Equivalents issued by the Company.

“Conversion Limitation” means the limitations on conversion of Preferred Shares and NVC Shares, as applicable, set forth in the Certificate of Amendment to the Certificate of Incorporation of the Company for such shares.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exempt Transfer” means:

(a) any sale by a Stockholder of Company Securities:

(i) in a public offering pursuant to a registration statement that was filed with the SEC and declared effective under the Securities Act;

(ii) in a sale to the public under Rule 144 under the Securities Act;

(iii) in a block sale to a financial institution in the ordinary course of such financial institution’s securities business, or in a private sale transaction pursuant to an available exemption from Securities Act registration requirements, in each case, in circumstances where, to the knowledge (after reasonable inquiry) of the Stockholder on whose behalf such sale is being made, such sale will not result in the acquisition by any other Person of beneficial ownership of any such Company Securities to the extent that, after giving effect to such acquisition, such acquiring Person (other than any underwriter acting in such capacity in an underwritten public offering of Company Securities) would beneficially own Company Securities entitled to in excess of 5% of the total number of votes that may be cast generally in the election of directors of the Company (assuming conversion in full of all outstanding Preferred Shares and NVC Shares, and irrespective of the Conversion Limitation); or

(iv) into a tender or exchange offer for more than 50% of the outstanding shares of Common Stock, or pursuant to a merger agreement to which the Company is a party providing for the conversion of the outstanding shares of Common Stock into other securities, cash or other property;

(b) a Transfer of Company Securities to the Company pursuant to any tender offer or exchange offer made by the Company that is open to substantially all holders of the class of Company Securities so Transferred;

(c) a Transfer by a Stockholder, of shares of Common Stock acquired by such Stockholder pursuant to the MH Merger Agreement, back to the Company if and as required pursuant to the terms of the MH Merger Agreement;

(d) in the case of an Investor, a bona fide pro rata Transfer by such Investor of Company Securities to its direct or indirect partners, limited partners, members or stockholders; and

(e) in the case of a Stockholder that is an officer of the Company, a sale pursuant to bona fide written “Rule 10b5-1 trading plans” adopted by such officer as part of his or her long-term strategy for achieving asset diversification and liquidity, provided that such plans shall have been adopted and shall operate in accordance with all applicable provisions of the Exchange Act and the Company’s securities trading policy for officers, and provided further that, for purposes of qualifying as an “Exempt Transfer” under this Agreement, such plans may not cover, in the aggregate, more than 35% of the Common Stock beneficially owned by such officer unless the Board provides otherwise.

For purposes hereof, the terms “beneficial ownership” or “beneficially own” are used within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, provided that a Person shall be deemed to beneficially own any securities that such Person has the right to acquire, whether or not such right is exercisable immediately.

“Investor” means each of Capital Z/Union Square, Lee, Perry and WCAS.

“Lee” means Lee-Universal Holdings, LLC.

“MH Merger Agreement” means that certain Agreement and Plan of Merger and Reorganization, dated as of May 7, 2007, among the Company, MHRx LLC, MemberHealth, Inc. and the other parties thereto.

“NVC Shares” means shares of non-voting common stock of the Company that are convertible into shares of Common Stock.

“Permitted Transferee” means, (a) with respect to any Stockholder that is an entity, any entity that is an Affiliate of such Stockholder (and, with respect to any such Stockholder that is an Investor, (i) without limiting the foregoing, (A) any funds under common management with such Investor and (B) any individual who is a managing member of the general partner of such Investor as well as any individuals who are employees of the manager of such Investor and any other related or similar co-investors of such Investor (and, with respect to any such individual, any Person of the type referred to in clause (b) of this definition), and (ii) any Person (“Pre-Closing Assignee”) to which such Investor (the “Syndicating Investor”) syndicated a portion of its equity commitment under the Securities Purchase Agreement prior to the closing thereunder and which purchased Preferred Shares from the Company at the closing thereunder, but such Pre-Closing Assignee shall constitute a Permitted Transferee of such Syndicating Investor only for so long as such Syndicating Investor maintains beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of all Company Securities directly or indirectly owned by such Pre-Closing Assignee through such Syndicating Investor maintaining voting discretion and voting control over such Company Securities pursuant to a written agreement), and (b) with respect to any Stockholder that is an individual, any spouse, lineal descendant, sibling, parent, executor or administrator of such Stockholder, or a trust, the beneficiaries of which, or a corporation or partnership, the stockholders or partners of which, include only such Stockholder and any spouse, lineal descendant, sibling or parent of such Stockholder.

“Perry” means Perry Partners, L.P., Perry Partners International, Inc., Perry Commitment Fund, L.P., Perry Commitment Master Fund, L.P., Perry Private Opportunities Fund, L.P. and Perry Private Opportunities Offshore Fund, L.P., collectively, or, either of such entities in the event only one of such entities remains a Stockholder.

“Person” means an individual, corporation, limited liability company, partnership, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Preferred Shares” means the shares of Series A Preferred Stock and Series B Preferred Stock of the Company.

“Registration Rights Agreement” means the Registration Rights Agreement, dated as of May 7, 2007, with the Company, as such Registration Rights Agreement may hereafter be amended or otherwise modified in accordance with its terms.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) are, as of such date, owned by such Person or one or more Subsidiaries of such Person or by such Person and one or more of its Subsidiaries.

“Transfer” means, with respect to any Company Securities, (i) when used as a verb, to sell, assign, dispose of, exchange, pledge, encumber, hypothecate or otherwise transfer such Company Securities or any participation or interest therein, whether directly or indirectly, or permit, agree or commit to do, any of the foregoing, and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange, pledge, encumbrance, hypothecation or other transfer of such Company Securities or any participation or interest therein, or any agreement or commitment to do any of the foregoing.

“WCAS” means Welsh, Carson, Anderson & Stowe IX, L.P. and Welsh, Carson, Anderson & Stowe X, L.P. collectively, or, either of such limited partnerships in the event only one such limited partnership remains a Stockholder.

(b) Other Definitional and Interpretive Matters. Unless otherwise expressly provided, for purposes of this Agreement the following rules of interpretation shall apply: (i) When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. (ii) The division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. (iii) The word “including” shall be deemed followed by “(but not limited to)”. (iv) The word “it” shall include references to the male and female gender as the context requires.

ARTICLE 2

CORPORATE GOVERNANCE

SECTION 2.01. Composition of the Board.

(a) Subject to Section 2.01(b), commencing on the date of this Agreement, the Board shall consist of thirteen directors, comprised as follows:

(i) two directors designated by Capital Z/Union Square;

(ii) two directors designated by WCAS;

(iii) one director designated by Lee;

(iv) one director designated by Perry (the directors referenced in sub-clauses (i), (ii), (iii) and (iv) of this Section 2.01(a) are sometimes referred to herein each

as an “Investor Designee”);

(v) one director who shall be the then current Chief Executive Officer of the Company; and

(vi) six additional directors who shall each satisfy the criteria for “independent director” under the rules of the principal stock exchange on which the Common Stock is listed.

(b) Going forward, (i) with respect to any Investor that is entitled, pursuant to Section 2.01(a), to designate more than one director, (A) at such time as such Investor, together with its Permitted Transferees, holds a number of shares of Common Stock that is less than 50% of the number (the “Start Number”) of shares of Common Stock that such Investor holds on the date of this Agreement, such Investor shall lose the right under this Agreement to designate one of its Investor Designees, and (B) at such time as such Investor, together with its Permitted Transferees, holds a number of shares of Common Stock that is less than 25% of such Investor’s Start Number, such Investor shall no longer have a right under this Agreement to designate any Investor Designees, and (ii) with respect to any Investor that is entitled, pursuant to Section 2.01(a), to designate one director, at such time as such Investor, together with its Permitted Transferees, holds a number of shares of Common Stock that is less than 50% of such Investor’s Start Number, such Investor shall no longer have a right under this Agreement to designate any Investor Designees. For purposes of the foregoing sentence, shares of Common Stock held by a Person shall include shares issuable directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares held by such Person, and irrespective of the Conversion Limitation. The foregoing calculations shall be appropriately adjusted to take into account any stock reclassification, recapitalization or split, exchange of shares or similar transaction.

(c) Each Stockholder agrees that, if at any time it is entitled to vote for the election of directors to the Board, it shall vote all of its Company Securities that are entitled to vote or execute proxies or written consents, as the case may be, and take all other necessary action (including causing the Company to call a special meeting of stockholders) in order to ensure that the composition of the Board is as set forth in this Section 2.01.

(d) If, as a result of the death, retirement, resignation or, subject to the other provisions of this Section 2.01, removal, of an Investor Designee there shall exist or occur any vacancy on the Board, the Investor entitled to designate such director pursuant to this Section 2.01 shall have the power to designate a person to fill such vacancy, whereupon each of the Stockholders agrees to take such action as is necessary to promptly elect such person to fill such vacancy (including, if necessary, causing the Company to call a special meeting of stockholders (or effecting a written consent in lieu thereof) and voting all Company Securities that are entitled to vote or execute proxies or written consents to accomplish such result).

(e) Directors may resign at any time. An Investor Designee may be removed at any time for any reason or no reason upon the written direction of the Investor that designated such Investor Designee, effective upon the delivery of such written direction. If any Investor entitled to designate any directors request that any of their respective Investor Designees be removed as a director, each of the Stockholders shall vote all of its Company Securities that are entitled to vote or execute proxies or written consents, as the case may be, and take all other necessary action, to remove such Investor Designee. Each Stockholder agrees that it shall not vote any of its Company Securities in favor of, or take any other action related to, the removal of any Investor Designee who shall have been designated for election to the Board by an Investor pursuant to this Section 2.01 unless the Investor entitled to designate such director shall have consented to such removal in writing or unless such Investor shall have lost the right to designate such director to the Board pursuant to this Section 2.01. If any Investor’s right to designate directors shall be reduced by one or more directors, such Investor shall, if so requested by any member of the Board, promptly cause a number of Investor Designees designated by such Investor equal to the number by which such right to designate was reduced to resign from the Board.

(f) If any person serving as the Chief Executive Officer of the Company (“CEO”) shall cease to be the CEO, then, unless otherwise determined by a majority of the other members of the Board, such former CEO shall cease to be a member of the Board and the new CEO shall be appointed as a member of the Board in place of the former CEO.

(g) The Company agrees to cause each individual designated for director pursuant to this Section 2.01 to be nominated, by all necessary and appropriate action, to serve as a director on the Board (including, to the extent required, by the Nominating Committee of the Board recommending that such designees be included in each slate of director nominees and by the Board presenting such slate for election to the Board) and to take all other actions as may be necessary to ensure that the composition of the Board is as set forth in this Section 2.01.

(h) To the extent permitted by applicable law and the rules of the principal stock exchange on which the Common Stock is listed, each Investor with an Investor Designee serving on the Board shall be entitled to have at least one of its Investor Designees serve on all committees of the Board.

(i) Any vacancies on the Board not filled pursuant to the forgoing principles shall be filled by an individual to be nominated by the Nominating Committee of the Board.

(j) Subject to the provisions of Section 4.01, an Investor Designee shall be entitled to supply details of any business transacted at Board meetings, and any other information obtained by him or her in his or her capacity as a director of the Company, to the Investor that designated such director to the Board and to that Investor’s Affiliates and professional advisers.

(k) The Company shall reimburse all reasonable out-of-pocket expenses incurred by the members of the Board in connection with traveling to and from and attending meetings of the Board and while conducting business at the request of the Company.

(l) The Company shall use its reasonable best efforts to purchase and maintain, at its expense, insurance, from reputable carriers and in an amount determined in good faith by the Board to be appropriate, on behalf of and covering the individuals who at any time on and after the date of this Agreement are or become directors or officers of the Company, or serve at the request of the Company as a director, officer, employee or agent of another company, joint venture, trust or other enterprise, against any expense, liability or loss asserted against or incurred by such individual in any such capacity, or arising out of such individual’s status as such, subject to customary exclusions.

(m) The rights granted to a Stockholder hereunder are in addition to all rights to which such Stockholder is entitled as a security holder of the Company under the Company’s certificate of incorporation and by-laws, as in effect from time to time, and applicable law.

(n) In addition, subject to the last sentence of this clause, WCAS shall be entitled to designate one individual as a non-voting Board observer (“Non-Voting Observer”). With the exception of meetings of the Board (or portions thereof) at which an Investor Designee designated by WCAS pursuant to Section 2.01(a)(ii) is recused, such Non-Voting Observer shall be allowed to attend and observe meetings of the Board, provided that such Non-Voting Observer shall agree with the Company to maintain the confidentiality, in accordance with Section 4.01, of all non-public information obtained in connection with being a Non-Voting Observer. For the avoidance of doubt, the Non-Voting Observer is not a director of the Company and shall have no right to vote on any matter coming to a vote of the Board. At such time as WCAS, together with its Permitted Transferees, holds a number of shares of Common Stock that is less than 25% of WCAS’s Start Number, WCAS shall no longer have a right to designate a Non-Voting Observer (for purposes of this sentence, shares of Common Stock held by a Person shall include shares issuable directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares held by such Person, and irrespective of the Conversion Limitation; and the foregoing calculation shall be appropriately adjusted to take into account any stock reclassification, recapitalization or split, exchange of shares or similar transaction).

(o) To the extent, if any, that any of the principles of this Article 2 conflict with any applicable law or any rules of the principal stock exchange on which the Common Stock is at the time listed and that are applicable to and binding upon the Company, the Company and the Stockholders shall make such elections under such rules and take any and all other actions as may be necessary in order to enable the purposes and intents of this Article 2 to be carried out to the fullest extent in compliance with such laws and rules.

SECTION 2.02. Corporate Opportunities. Each Investor Designee (other than any Investor Designee who may also be an officer or employee of the Company or of any of the Company’s Subsidiaries) shall have no duty to present corporate opportunities to the Company unless such opportunity was expressly offered to such Investor Designee in writing solely in his or her capacity as a director of the Company, and any Investor Designee who complies with this provision shall be deemed to have fully satisfied and fulfilled the fiduciary duty of such director to the Company and its stockholders with respect to such opportunity.

SECTION 2.03. Charter and By-law Provisions. Each Stockholder agrees to vote all of its Company Securities that are entitled to vote or execute proxies or written consents, as the case may be, and to take all other actions necessary, to ensure that the Company’s certificate of incorporation and by-laws (a) facilitate, and do not at any time conflict with, any provision of this Agreement and (b) permit each Stockholder to receive the benefits to which each such Stockholder is entitled under this Agreement.

ARTICLE 3

RESTRICTIONS ON TRANSFER

SECTION 3.01. General Restrictions on Transfer.

(a) Each Stockholder understands and agrees that the Company Securities held by it on the date hereof may not have been registered under the Securities Act and may be restricted securities under the Securities Act. Each Stockholder agrees that it shall not Transfer any Company Securities (or solicit any offers in respect of any Transfer of any Company Securities), except in compliance with the Securities Act, any other applicable securities or “blue sky” laws, and the restrictions on Transfer contained in this Agreement.

(b) No Stockholder shall Transfer, other than pursuant to Section 3.04, any Company Securities acquired by such Stockholder from the Company pursuant to the MH Merger Agreement, until after 180 days following the closing date of such acquisition.

(c) No Stockholder shall Transfer, other than pursuant to Section 3.04, any Preferred Shares acquired by such Stockholder from the Company pursuant to the Securities Purchase Agreement (or any shares of Series B Preferred Stock or NVC Shares issued in exchange therefor, or any shares of Common Stock or NVC Shares issued upon conversion of any thereof) until after the first anniversary of the closing of the acquisition of such Preferred Shares pursuant to the Securities Purchase Agreement.

(d) No Stockholder shall Transfer, other than pursuant to Section 3.04, any Preferred Shares acquired by such Stockholder from the Company pursuant to the Securities Purchase Agreement dated as of May 7, 2007 among the Company and certain of the entities comprising the Investors relating to an aggregate of 50,000 Preferred Shares (or any shares of Series B Preferred Stock or NVC Shares issued in exchange therefor, or any shares of Common Stock or NVC Shares issued upon conversion of any thereof) until after the first anniversary of the closing of the acquisition of such Preferred Shares pursuant to such Purchase Agreement.

(e) No Stockholder shall Transfer, other than pursuant to Section 3.04, any shares of Common Stock acquired by such Stockholder from Capital Z pursuant to the Share Purchase Agreement, dated as of May 7, 2007, among certain of the entities comprising the Investors, until after the first anniversary of the closing of such acquisition.

(f) The 180-day period referred to in Section 3.01(b), and the respective one-year periods referred to in Sections 3.01(c), 3.01(d) and 3.01(e), respectively, are each herein referred to as the respective “Lock-Up Period” with respect to the respective Company Securities to which such periods relate under such Sections. After the applicable Lock-Up Period, with respect to the Company Securities referred to in Sections 3.01(b), 3.01(c), 3.01(d) and 3.01(e), respectively, and with respect to all other Company Securities owned by a Stockholder, any proposed Transfer by a Stockholder of such Company Securities (or any shares of Series B Preferred Stock or NVC Shares issued in exchange therefor, or any shares of Common Stock or NVC Shares issued upon conversion of any thereof), other than Transfers pursuant to Section 3.04 or Exempt Transfers, shall be subject to the rights of first offer and tag-along rights as set forth in Section 3.02 and Section 3.03, as applicable. Sections 3.01(b)-(f) are not intended to prohibit exchanges by a Stockholder of shares of Series A Preferred Stock for shares of Series B Preferred Stock or NVC Shares, or conversions of Preferred Shares or NVC Shares into Common Stock.

(g) Sections 3.01(b), 3.01(c), 3.01(d) and 3.01(e) are not intended to prohibit Transfers pursuant to a merger agreement to which the Company is a party providing for the conversion of the outstanding shares of Common Stock into other securities, cash or other property.

(h) Notwithstanding anything to the contrary in Section 3.01(b), a Stockholder will not be prohibited under Section 3.01(b) from:

(i) exercising “piggy-back” registration rights under, and subject to the provisions of, the Registration Rights Agreement with respect to the shares referred to in Section 3.01(b) in any underwritten offering that occurs during the Lock-Up Period referred to in Section 3.01(b) and that is initiated by the Company or a Company stockholder exercising demand registration rights with respect to Company Securities; and

(ii) Transferring shares of Common Stock acquired by such Stockholder pursuant to the MH Merger Agreement back to the Company if and as required

pursuant to the terms of the MH Merger Agreement.

(i) Any attempt to Transfer any Company Securities not in compliance with this Agreement shall be null and void, and the Company shall not, and shall cause any transfer agent retained by it not to, give any effect in the Company’s records to such purported Transfer.

(j) Without limiting the other provisions of this Agreement, no Stockholder shall make or permit any Transfer of its Company Securities indirectly through any means that would not be permitted directly, in order to avoid the provisions of this Agreement.

(k) Each certificate for Company Securities issued to any Stockholder shall bear a legend in substantially the form set forth below (in addition to any legend that may be required by applicable securities laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER RESTRICTIONS PURSUANT TO A STOCKHOLDERS AGREEMENT (A COPY OF WHICH IS ON FILE WITH THE ISSUER OF THIS CERTIFICATE).

SECTION 3.02. Right of First Offer.

(a) If any Stockholder or Stockholders acting in concert (a “Transferor”) desire to Transfer (other than pursuant to an Exempt Transfer) Company Securities that represent, in the aggregate, more than 5% of the then outstanding shares of Common Stock (assuming conversion in full of all outstanding Preferred Shares and NVC Shares, and irrespective of the Conversion Limitation), such Transferor shall give each Stockholder (other than the Transferor and its Permitted Transferees, as applicable) that, together with its Permitted Transferees, holds more than 5% of the then outstanding shares of Common Stock (for this purpose, shares of Common Stock held by a Person shall include shares issuable upon exercise of Company stock options, or directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares, held by such Person, and irrespective of the Conversion Limitation) and the Company (collectively, the “Option Holders”) prior written notice of such proposed Transfer, which notice shall (i) specify the amount and type of Company Securities to be Transferred (the “Subject Securities”), the consideration to be received therefor, and the other material terms on which the Transferor proposes to Transfer the Subject Securities and (ii) contain the offer described below (collectively, the “Transferor’s Notice”). The Transferor’s Notice shall contain an offer to sell (the “Option”) the Subject Securities to the Option Holders in accordance with this Article 3 for the consideration and on the other terms specified in the Transferor’s Notice; provided that to the extent such consideration shall consist of anything other than cash, each Option Holder shall be entitled, at its option, to instead pay in cash the value of such consideration as determined by mutual agreement of all such Option Holders so electing to pay cash and the Transferor, or if such agreement is not reached within 5 days of receipt of the Transferor’s Notice, as determined by an investment banker or appraiser of national reputation reasonably acceptable to both the Transferor and such Option Holders (the fees and expenses of which shall be shared equally by the Transferor, on the one hand, and all such Option Holders requesting such valuation, on the other hand), in which case the date of the Transferor’s Notice shall be deemed the date the cash value of such consideration is so determined.

(b) The Company, at the election of the Board (acting by majority vote, excluding, for purposes of this Section (i) if the Transferor is an Investor (or Permitted Transferee thereof), any Investor Designee designated to the Board by such Investor pursuant to Article 2 hereof (and if such Transferor is WCAS (or Permitted Transferee thereof), also excluding Charles Halberg if he is then an Investor Designee of WCAS), and (ii) if the Transferor is Richard Barasch or any of his Permitted Transferees or Affiliates, and Richard Barasch is then a director of the Company, Richard Barasch), shall have the first right and option, exercisable at any time within the first 10 days following the date of the Transferor’s Notice, to exercise the Option to purchase from the Transferor the Subject Securities pursuant to the Option. If the Option is not exercised by the Company within the first 10 days after the date of the Transferor’s Notice, then the other Option Holders shall have the right and option, exercisable at any time within the first 20 days following the date of the Transferor’s Notice, to exercise the Option and purchase from the Transferor the Subject Securities pursuant to the Option, in which event, such other Option Holders may elect to purchase the Subject Securities in the proportions upon which they mutually agree or, if they are unable to agree upon an allocation of such Subject Securities among themselves, then in the proportion that the number of shares of Common Stock held by each such Option Holder which desires to participate in the purchase of such Company Securities pursuant to the Option bears to the aggregate number of shares of Common Stock held by all such Option Holders that desire to participate in the purchase of such Company Securities pursuant to the Option. For purposes of the foregoing sentence, shares of Common Stock held by a Person shall include shares issuable upon exercise of Company stock options, or directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares, held by such Person, and irrespective of the Conversion Limitation. Acceptance of the Option by an Option Holder shall be in a writing delivered to the Transferor and the Company, which shall deliver copies thereof to the other Option Holders.

(c) If the Option is accepted in a manner such that all Company Securities covered by the Transferor’s Notice are to be purchased by the Option Holders, the Transferor shall, subject to Section 3.03, Transfer such Company Securities free of all liens and encumbrances (other than restrictions imposed by this Agreement) to the respective Option Holder purchasers thereof against delivery by the Option Holder purchaser of the applicable consideration payable to the Transferor therefor. Unless, through exercise of the Option, all the Company Securities proposed to be transferred in the Transferor’s Notice are to be acquired by one or more Option Holders, the Transferor may, subject to Section 3.03, either (i) Transfer the Company Securities subscribed for by the Option Holders at the applicable purchase price therefor to the Option Holders or (ii) Transfer the Subject Securities that were subject to the Option to a third party Transferee at the same purchase price set forth in the Transferor’s Notice (or at a higher price) and on terms and conditions no less favorable to the Transferor than the terms and conditions set forth in the Transferor’s Notice; provided, however, that such Transfer shall occur no later than 90 days after the date of the Transferor’s Notice. If such Transfer does not occur within such 90 day period, then the Company Securities shall be re-offered to the Option Holders under this Section 3.02 prior to any subsequent Transfer otherwise covered by this Section 3.02. The transactions contemplated by this Section 3.02 shall be consummated in accordance with Section 3.03.

SECTION 3.03. Tag-Along Rights.

(a) In connection with each Option pursuant to Section 3.02, the Stockholders shall have the “tag along rights” set forth in this Section 3.03. Upon expiration or waiver of the rights of first offer under Section 3.02 and at least 20 days prior to any Transfer of any Company Securities to any proposed third party Transferee (“Proposed Transferee”) or Option Holder, as contemplated by Section 3.02(c), the Transferor shall deliver a notice (the “Sale Notice”) to each of the Company and the Stockholders stating (i) in reasonable detail the identity of the prospective transferee(s), the Subject Securities to be Transferred and the terms and conditions of such Transfer, and (ii) whether or not Option Holders elected pursuant to Section 3.02 to purchase all of the Subject Securities (the “Electing Stockholders”). If Electing Stockholders elect to purchase all of the Subject Securities pursuant to Section 3.02, the other Stockholders shall have the “tag along rights” under this Section 3.03 with respect to the Transfer to Electing Stockholders, and, if Electing Stockholders did not so elect to purchase all of the Subject Securities, such other Stockholders shall also have “tag along rights” under this Section 3.03 with respect to the proposed Transfer to the Proposed Transferee (the Stockholders that are entitled to exercise their “tag along rights” hereunder are referred to as the “Eligible Stockholders”).

(b) Each Eligible Stockholder may elect to participate in the contemplated Transfer on the same conditions and terms (including selling the percentage of its Company Securities specified below in this Section 3.03), and at the same price as the Transferor, by delivering written notice to the Transferor, with a copy to the other Stockholders, within 10 days after the delivery of the Sale Notice. Each Eligible Stockholder that elects to participate in such Transfer (a “Tag Along Electing Stockholder”) shall be entitled to sell in the contemplated Transfer, on the same conditions, terms and at the price described above, a portion of its Company Securities equal to the lesser of 100% of its Company Securities and such number of its Company Securities that represent the product of (A) the number of shares of Common Stock represented by the Subject Securities multiplied by (B) a fraction the numerator of which is the number of shares of Common Stock held by such Tag Along Electing Stockholder and the denominator of which is the aggregate number of shares of Common Stock held by all Stockholders electing to participate in the Transfer; provided that in order to be entitled to exercise its right pursuant to this Section 3.03 to Transfer Company Securities to the Proposed Transferee or the Electing Stockholders, as the case may be, a Tag Along Electing Stockholder must agree to make to the Proposed Transferee or the Electing Stockholders, as the case may be, the same representations and warranties (to the extent applicable to such Tag Along Electing Stockholder), and the same covenants, indemnities and agreements, in each case, as the Transferor agrees to make in connection with the proposed Transfer of its Subject Securities; provided, however, that (i) no Tag Along Electing Stockholder shall be required to become subject thereby to a covenant not to compete or similar restrictive covenant without such Stockholder’s consent, (ii) each Tag Along Electing Stockholder shall be obligated to join, severally but not jointly, on a pro rata basis (based on each such Tag Along Electing Stockholder’s share of the aggregate proceeds paid with respect to the Company Securities included in such Transfer) in any indemnification obligation to the Proposed Transferee that the Proposed Transferee requires of the Transferor in connection with the proposed Transfer, other than any such obligations that relate specifically to a particular Stockholder, such as indemnification with respect to representations and warranties given by a Stockholder regarding such Stockholder’s title to and ownership of Company Securities, and (iii) each Tag Along Electing Stockholder’s aggregate liability under such agreements shall be limited to no more than the aggregate proceeds received by such Tag Along Electing Stockholder from the acquirer(s) in such Transfer; and provided further, however, that if the Proposed Transferee refuses to purchase (x) the total amount of Company Securities offered by the Tag Along Electing Stockholders and (y) the Subject Securities, the amount of Company Securities to be Transferred by the Tag Along Electing Stockholders and the Transferor shall be reduced to the amount of the Subject Securities or (if greater) such amount of the sum of the Company Securities in clauses (x) and (y) above as the Proposed Transferee may agree to purchase, which amount of Company Securities shall be allocated among the Tag Along Electing Stockholders and the Transferor pro rata, in proportion to the relative amount of Common Stock held by them. For purposes of the preceding sentence, shares of Common Stock held by a Person shall include shares issuable upon exercise of Company stock options, or directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares, held by such Person, and irrespective of the Conversion Limitation. If any Tag Along Electing Stockholder elects to exercise its right to participate in a Transfer pursuant to this Section 3.03, the Transferor shall use reasonable efforts to obtain the agreement of the Proposed Transferee to the participation of such Tag Along Electing Stockholder(s) in the contemplated Transfer. The Transferor shall not Transfer any of its Company Securities to any prospective transferee(s) if such prospective transferee(s) decline(s) to allow the participation of such Tag Along Electing Stockholders in accordance with this Section 3.03.

(c) The closing of any purchase and sale of Company Securities pursuant to Section 3.02 and Section 3.03 shall take place on the first Business Day 20 days after delivery of the Sale Notice; provided that such period may be extended for up to an additional 90 days solely to the extent necessary to obtain any required governmental regulatory approvals. At such closing, the Proposed Transferee(s) or Electing Stockholders, as the case may be, shall deliver to the Transferor and, if applicable, each Tag Along Electing Stockholder a wire transfer or a certified check in the entire amount of the applicable purchase price against delivery of instrument(s) evidencing the Company Securities, in each case duly endorsed for Transfer to, such third party transferee(s) or Electing Stockholders, as the case may be. At or prior to the closing of any such purchase or sale to any third party transferee, such third party transferee shall execute and deliver to the Company all agreements and instruments required by Section 3.05.

SECTION 3.04. Certain Transfers Excluded. Sections 3.01(b)-(e), 3.02 and 3.03 shall not apply to any Transfer by a Stockholder of Company Securities to a Permitted Transferee of such Stockholder. Notwithstanding the foregoing, if, while a Permitted Transferee holds any Company Securities, such Person would cease to qualify as a Permitted Transferee in relation to the initial transferring Stockholder from whom or which such Permitted Transferee or any previous Permitted Transferee of such initial transferring Stockholder received such securities (an “Unwinding Event”), then the relevant initial transferor Stockholder shall forthwith notify the other Stockholders and the Company of the pending occurrence of such Unwinding Event and, prior to such Unwinding Event, such initial transferor Stockholder and such transferee shall take all actions necessary to effect a Transfer of all the Company Securities held by such transferee either back to such initial Stockholder or to another Person that qualifies as a Permitted Transferee of such initial Stockholder.

SECTION 3.05. Transferees Bound. No Stockholder shall Transfer any Company Securities pursuant to Section 3.04, or to a Proposed Transferee pursuant to Sections 3.02-3.03, unless (in each case) as a condition to the effectiveness of such Transfer, the Stockholder shall cause the proposed transferee to agree, pursuant to a written joinder agreement to this Agreement (which joinder agreement shall be in form and substance reasonably satisfactory to the Company), to take and hold such Company Securities subject to the obligations and restrictions applicable to a Stockholder under this Agreement and to be bound by the provisions of this Agreement. Any Person that hereafter becomes a Stockholder shall provide its contact details to the Company, which shall promptly provide such information to each other Stockholder. This Section 3.05 shall not apply to Exempt Transfers.

ARTICLE 4

CERTAIN OTHER PROVISIONS

SECTION 4.01. Confidentiality. Unless otherwise approved by the Board, each Stockholder shall maintain the confidentiality of any and all non-public information furnished by the Company and received by such Stockholder pursuant to this Agreement, by using the same degree of care, but no less than a reasonable degree of care, as such Stockholder uses to protect its own confidential information, except:

(a) to the extent such information shall have become publicly available otherwise than through a breach of this Agreement by such Stockholder or any of its Affiliates;

(b) to the extent required (i) to comply with any subpoena or similar demand to which a Stockholder becomes subject or (ii) by applicable law or regulation, or stock exchange rule; provided that in each such case such Stockholder shall give the Company prompt notice of such requirement or demand (as applicable), to the extent practicable, so that the Company may seek an appropriate protective order or similar relief (and the Stockholder shall cooperate reasonably with such efforts by the Company, at the Company’s expense);

(c) in the case of an Investor, to Affiliates of such Investor and its and their respective directors, officers, employees, counsel, accountants and other professional advisors with whom such Investor reasonably determines it is necessary to share such information in connection with such Investor’s investment in the Company and that are informed of the confidential nature of the information and agree to keep it confidential (and such Investor shall be liable for any disclosure made by such Persons that is not permitted hereunder), in each case, subject to any limitations under applicable law; or

(d) in the case of an Investor, to a bona fide prospective purchaser of such Investor’s Company Securities if such prospective purchaser shall have first executed and delivered to the Company a non-disclosure agreement in favor of the Company and in form and substance reasonably acceptable to the Company.

Nothing in this Section 4.01 or elsewhere in this Agreement is intended to limit any duties, covenants or other obligations that a Stockholder who is an officer or employee of the Company or its Subsidiaries may have pursuant to any agreement with the Company or any of its Subsidiaries or any applicable law.

SECTION 4.02. Information Rights; VCOC Rights.

(a) The Company shall, for so long as an Investor (together with its Permitted Transferees) shall continue to hold at least 5% of the outstanding shares of Common Stock, (i) afford such Investor (or Affiliate or Permitted Transferee thereof), during normal business hours and upon reasonable notice, reasonable access and consultation rights at all reasonable times to its officers, offices and books and records, and (ii) afford such Investor (or Affiliate or Permitted Transferee thereof) the opportunity to discuss the Company’s affairs, finances and accounts with the Company’s officers from time to time as such Investor (or Affiliate or Permitted Transferee thereof) may reasonably request.

(b) Any Investor (or Affiliate or Permitted Transferee thereof) that is intended to qualify as a “venture capital operating company” within the meaning of 29 C.F.R. 2510.3-101(d) (each such entity, a “VCOC Investor”) shall have the right, for so long as such Investor (together with its Permitted Transferees) holds at least 5% of the outstanding shares of Common Stock, to receive from the Company any written information or written materials provided by the Company to members of the Board; provided that the VCOC Investor receiving such information shall agree to maintain the confidentiality of such information in accordance with Section 4.01.

(c) For purposes of this Section, shares of Common Stock held by a Person shall include shares issuable upon exercise of Company stock options, or directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares, held by such Person, and irrespective of the Conversion Limitation.

SECTION 4.03. Additional Covenant.

No Investor or Affiliate thereof, nor Richard Barasch or Affiliate of Richard Barasch, shall acquire beneficial ownership (within the meaning of Rules 13d-3 and 13d-5(b)(1) under the Exchange Act, without regard to the 60-day limit in Rule 13d-3(d)(1)(i), but in each case excluding any beneficial ownership solely by reason of the express terms of this Agreement) of any additional shares of Common Stock except:

(i) if such acquisition is pursuant to a tender offer or exchange offer for outstanding shares of Common Stock, or a merger pursuant to a merger agreement with the Company, that in each case (A) is approved by not less than a majority of the members of the Board then in office (x) who have not recused themselves from the vote of the Board in respect of such approval, (y) who satisfy the criteria for “independent director” under the rules of the principal stock exchange on which the Common Stock is listed, and (z) who are not Investor Designees (such tender offer or exchange offer, an “Approved Offer”, and such merger, an “Approved Merger”), and (B) in such Approved Offer, not less than a majority of the Subject Shares (as defined below) are tendered into such Approved Offer and not withdrawn prior to the final expiration of such Approved Offer, or in such Approved Merger, not less than a majority of the Subject Shares that are affirmatively voted (in person or by proxy) on the related merger proposal (and not withdrawn) are voted for (i.e., in favor) of such proposal. As used in this Section 4.03, “Subject Shares” means, where such an offer or acquisition referred to in this clause (i) is made by or on behalf one or more Investors or Richard Barasch or any of their respective Affiliates or any combination of the foregoing (each such Person making such offer or acquisition or on whose behalf such offer or acquisition is made, together with its Affiliates, a “Subject Person”), the then outstanding shares of Common Stock not owned by any such Subject Person or Affiliate thereof;

(ii) acquisitions of Company Securities issued or sold to such Investor or its Affiliates pursuant to the Merger Agreement or any of the Purchase Agreements referred to in Section 3.01 or directly or indirectly through conversion or exchange of Preferred Shares or NVC Shares issued to such Investor or its Affiliates pursuant to any of such Purchase Agreements;

(iii) acquisitions of shares issued (including pursuant to exercise of stock options granted) with the approval of a majority of the Board or the Compensation Committee of the Board to any Investor Designee of such Investor in respect of such Investor Designee’s service on the Board;

(iv) acquisitions of shares pursuant to any stock split, stock dividend or the like effected by the Company;

(v) acquisitions by an Investor or any of its Affiliates that would not result in such Investor (together with its Affiliates) owning a percentage of the then outstanding Common Stock that is greater than such Investor’s Cap Percentage (as hereafter defined) (assuming for this purpose conversion in full of all Preferred Shares and NVC Shares (irrespective of the Conversion Limitation), and it being understood that no Person shall be in violation of this Section as a result of any reacquisition by the Company of any Company Securities provided that such reacquisition shall have been approved by not less than a majority of the members of the Board then in office who (x) have not recused themselves from the vote of the Board in respect of such approval, (y) are not Investor Designees and (z) satisfy the criteria for “independent director” under the rules of the principal stock exchange on which the Common Stock is listed (each, an “Approved Reacquisition Transaction”));

(vi) in the case of Richard Barasch, acquisitions of equity based compensation awards, including stock option grants and restricted stock grants, that have been approved by a majority of the Board or the Compensation Committee of the Board, and shares acquired upon exercise of such awards; or

(vii) acquisitions by an Investor or Affiliates thereof of securities of companies (each, a “Portfolio Company”) that own shares of Common Stock, provided that (A) the purpose of such acquisition by such Investor or its Affiliates was not the acquisition of beneficial ownership of additional shares of Common Stock and (B) such Portfolio Company owns no more than 0.5% of the outstanding shares of Common Stock.

As used in this Section 4.03:

“Base Cap Percentage” means (1) in respect of CapitalZ/Union Square 24%, (2) in respect of Lee, 7%, (3) in respect of Perry, 14%, and (4) in respect of WCAS, 18%.

“Cap Percentage” means, in respect of any Investor, a percentage equal to such Investor’s Base Cap Percentage plus such Investor’s Intra-Investor Buy Percentage (as hereafter defined) and less such Investor’s Intra-Investor Sale Percentage (as hereafter defined), provided that no Investor’s Cap Percentage shall exceed 25% (the “Ceiling Percentage”), provided further, however, that an Investor’s Cap Percentage, and the Ceiling Percentage, shall be equitably increased for (A) acquisitions permitted under clauses (iii) and (vii) above and (B) Approved Reacquisition Transactions. “Intra-Investor Buy Percentage” of any Investor means the percentage of the outstanding Common Stock acquired by such Investor (or any Affiliate of such Investor) in an Intra-Investor Private Transfer (as hereafter defined), determined as of the time of such acquisition (assuming for this purpose conversion in full of all Preferred Shares and NVC Shares (irrespective of the Conversion Limitation)). “Intra-Investor Private Transfer” means any sale by an Investor (or Affiliates thereof) to one or more of the other Investors (or Affiliates of such other Investor) in a private transaction, including a sale pursuant to the right of first offer or tag-along rights contemplated by Sections 3.02-3.03. “Intra-Investor Sell Percentage” of any Investor means the percentage of the outstanding Common Stock sold by such Investor (or any Affiliate of such Investor) in an Intra-Investor Private Transfer, determined as of the time of such sale (assuming for this purpose conversion in full of all Preferred Shares and NVC Shares (irrespective of the Conversion Limitation)).

For purposes of this Section 4.03, an Associate (as defined in Rule 12b-2 under the Exchange Act) of Richard Barasch shall be deemed an Affiliate of Richard Barasch.

The agreements of the several Investors and Richard Barasch hereunder are several and not joint.

All of the restrictions set forth above in this Section 4.03 shall terminate upon the earliest to occur of:

(A) June 30, 2010;

(B) the entry by the Company into a definitive agreement with any Person (other than such an agreement with a Subject Person made in contravention of this Section 4.03) providing for: (x) a recapitalization, merger, share exchange, business combination or similar extraordinary transaction as a result of which the Persons possessing, immediately prior to the consummation of such transaction, beneficial ownership of voting securities of the Company entitling them to exercise at 100% of the voting power of all outstanding securities entitled to vote generally in elections of directors of the Company, would cease to possess, immediately after consummation of such transaction, beneficial ownership of voting securities entitling them to exercise at least 60% of the total voting power of all outstanding securities entitled to vote generally in elections of directors of the Company (or, if the Company is not the surviving or resulting entity from such transaction, in elections of directors (or equivalent governing body) of such surviving or resulting entity); (y) a sale of all or substantially all of the assets the Company (determined on a consolidated basis), in one transaction or series of related transactions; or (z) the acquisition (by purchase, merger or otherwise) by any such Person (including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act) of beneficial ownership of voting securities of the Company entitling that Person to exercise 50% or more of the total voting power of all outstanding securities entitled to vote generally in elections of directors of the Company (for purposes of this subsection, “beneficial ownership” shall be determined in accordance with Rules 13d-3 and 13d-5 under the Exchange Act, provided that a Person shall be deemed to beneficially own any securities that such Person has the right to acquire, whether or not such right is exercisable immediately) (the transactions described in clauses (x), (y) and (z) of this subsection being each hereinafter referred to as a “Transaction Agreement”);

(C) the commencement (within the meaning of the Exchange Act) by any Person of a tender offer or exchange offer for voting securities of the Company entitling the holders thereof to exercise more than 50% of the total voting power of all outstanding securities entitled to vote generally in elections of directors of the Company (other than a tender offer or exchange offer (i) pursuant to a Transaction Agreement or (ii) made by or on behalf of an Investor (or Affiliate thereof) in violation of this Section 4.03 or that would be in violation of this Section 4.03 if such tender offer or exchange offer were consummated), which offer is not withdrawn within 5 days after it is commenced; or

(D) at such time as the Investors and their respective Affiliates, collectively, own in the aggregate less than 20% of the then outstanding Common Stock (assuming for this purpose conversion in full of all Preferred Shares and NVC Shares (irrespective of the Conversion Limitation)), provided that at such time no Investor (or Affiliate thereof) has disclosed in a Schedule 13D filing with the Securities and Exchange Commission that it or any of its Affiliates has any specific plan or proposal to acquire additional securities of the Company entitled to vote generally in elections of directors of the Company that is required to be disclosed under Item 4 of Schedule 13D.

Notwithstanding anything to the contrary in Section 5.03, neither the provisions of this Section 4.03 nor the penultimate sentence of Section 5.04 may be amended unless such amendment is approved by not less than a majority of the members of the Board then in office who (x) have not recused themselves from the vote of the Board in respect of such approval, (y) are not Investor Designees and (z) satisfy the criteria for “independent director” under the rules of the principal stock exchange on which the Common Stock is listed.

ARTICLE 5

MISCELLANEOUS

SECTION 5.01. Binding Effect; Assignability; Benefit.

(a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, legal representatives, heirs and permitted assigns; provided that rights granted to any Stockholder hereunder may only be assigned in connection with a Transfer of Company Securities in accordance with the terms of this Agreement, and provided further that an Investor’s right to designate Investor Designees (or a Non-Voting Observer) pursuant to Article 2 hereof are only assignable with the written consent of the Company in connection with a Transfer of Company Securities by such Investor to the purported assignee. Any purported assignment not in accordance with this Agreement shall be null and void. Except as may otherwise be expressly provided in this Agreement, any Stockholder that ceases to hold any Company Securities shall cease to be entitled to the benefits of this Agreement.

(b) Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, and their respective successors, legal representatives, heirs and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

SECTION 5.02. Notices. All notices, requests and other communications to any party shall be in writing and shall be delivered in person, sent by reputable overnight courier service, or sent by facsimile transmission,

if to the Company, to Universal American Financial Corp., 6 International Drive, Rye Brook, NY 10573-1068; Attention: General Counsel; Facsimile: (914) 934-0700,

if to Stockholders, at their respective addresses set forth in Schedule I,

or, in each case, at such other address or fax number as such party may hereafter specify for the purpose of notices hereunder by written notice to the other parties hereto. All notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. Any notice, request or other written communication sent by facsimile transmission shall be confirmed by personal delivery or by reputable overnight courier, made within two Business Days after the date of such facsimile transmissions.

SECTION 5.03. Waiver; Amendment.

(a) Except as otherwise provided herein, no failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof or the exercise of any other right, power or privilege. No provision of this Agreement may be waived except by an instrument in writing executed by the party against whom the waiver is to be effective.

(b) Except as otherwise provided herein, no provision of this Agreement may be amended or otherwise modified except by an instrument in writing executed by the Company and Stockholders holding more than 50% of the Common Stock held by the Stockholders (for this purpose, shares of Common Stock held by the Stockholders shall include shares issuable upon exercise of Company stock options, or directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares, held by the Stockholders, and irrespective of the Conversion Limitation); provided, however, that (i) any amendment or modification of this Agreement that treats a Stockholder individually in an inconsistent and materially adverse manner in relation to all other Stockholders shall require the consent of such Stockholder, (ii) any amendment of (A) Investors’ rights to designate Investor Designees (or a Non-Voting Observer) pursuant to Article 2 or (B) Investors’ information rights under Section 4.02, shall require the consent of all affected Investors, and (iii) any amendment of clause (v) or (vi) of Section 2.01(a) shall require the consent of the Company.

SECTION 5.04. Termination. This Agreement shall terminate upon the first to occur of any of the following events:

(a) consummation of the acquisition of “beneficial ownership” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act), by any Person, of all of the Company Securities subject to this Agreement without violation of this Agreement (provided that no Person shall be deemed to beneficially own another Person’s Company Securities for these purposes solely by fact of the existence of the voting and transfer covenants contained in this Agreement);

(b) if the Company shall admit in writing its general inability to pay its debts as they become due, shall make a written assignment for the benefit of creditors, or the appointment of a liquidator, bankruptcy receiver or similar occurrence under applicable law shall have occurred with respect to the Company and such proceeding shall not have been dismissed or stayed within 60 days after the commencement thereof;

(d) the written consent to such termination by Stockholders holding not less than 70% of the Common Stock held by all the Stockholders (for this purpose, shares of Common Stock held by the Stockholders shall include shares issuable upon exercise of Company stock options, or directly or indirectly through conversion or exchange of outstanding Preferred Shares and NVC Shares, held by the Stockholders, and irrespective of the Conversion Limitation);

provided that, (i) without the consent of the affected Investors, (A) an Investor’s right to designate Investor Designees (or a Non-Voting Observer) pursuant to Article 2 and (B) an Investor’s information rights under Section 4.02, shall survive any termination under clause (b), (c) or (d) of this Section, and (ii) without the consent of the Company, the provisions of clauses (v) and (vi) of Section 2.01(a) shall survive any termination under clause (b), (c) or (d) of this Section.

In addition, Richard Barasch and his Permitted Transferees shall cease to the bound by, and shall cease to be entitled to rights and benefits under, this Agreement at such time as Richard Barasch shall cease to be the Chief Executive Officer of the Company; provided that, for the avoidance of doubt, even after Richard Barasch ceases to be the Chief Executive Officer of the Company, if he shall remain a member of the Board he shall nonetheless not constitute an “independent director” for purposes of any of the matters requiring approval of “independent directors” under Section 4.03.

Notwithstanding the foregoing, Section 5.05 shall survive any termination of this Agreement.

SECTION 5.05. Fees and Expenses. Each party shall pay its own costs and expenses incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof, and (except as otherwise provided herein or separately agreed in writing) the transactions contemplated hereby and all matters related hereto. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof or thereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees in addition to any other available remedy.

SECTION 5.06. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial; Etc. All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to any choice of law or conflict of law rules or provisions (whether of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than New York. Each of the parties hereto irrevocably agrees that any legal action or proceeding that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance hereof, shall be brought and determined exclusively in any state courts of New York County of the State of New York, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in any federal District Court sitting in New York City. Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the exclusive personal jurisdiction of the aforesaid courts and agrees that it will not bring any such action in any court other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve in accordance with this Section, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by the applicable law, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject mater hereof, may not be enforced in or by such courts. Each of the parties hereto irrevocably consents to process being served by any party to this Agreement in any legal action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 5.02 without prejudice to the right of any party to serve process pursuant to applicable laws. The consents to jurisdiction set forth in this paragraph shall not constitute general consents to service of process in the State of New York and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties hereto. Each of the parties hereto hereby irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or related to this Agreement.

SECTION 5.07. Specific Enforcement; Cumulative Remedies. The parties hereto acknowledge that money damages may not be an adequate remedy for violations of this Agreement and that any party, in addition to any other rights and remedies which the parties may have hereunder or at law or in equity, may, in its sole discretion, apply to a court of competent jurisdiction for specific performance or injunction (without any requirement to post a bond or other security) or such other relief as such court may deem just and proper in order to enforce this Agreement or prevent any violation hereof and, to the extent permitted by applicable law, each party waives any objection to the imposition of such relief. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise or beginning of the exercise of any thereof by any party shall not preclude the simultaneous or later exercise of any other such rights, powers or remedies by such party.

SECTION 5.08. Entire Agreement. This Agreement, together with the Securities Purchase Agreement and the Registration Rights Agreement, constitute the entire agreement and understanding among the parties hereto in respect of the subject matter hereof and thereof and, except as otherwise expressly agreed in writing, supersede all prior agreements and understandings (including that certain Shareholders Agreement dated as of July 30, 1999) and contemporaneous agreements and understandings, both oral and written, among the parties hereto, or between any of them, with respect to the subject matter hereof and thereof.

SECTION 5.09. Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

SECTION 5.10. Drafting. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

SECTION 5.11. Counterparts; Effectiveness. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have caused this Stockholders Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

	UNIVERSAL AMERICAN FINANCIAL CORP.

	By:	/s/ Robert A. Waegelein
	Name: Robert A. Waegelein
	Title: Executive Vice President and Chief Financial Officer

STOCKHOLDERS:

	LEE-UNIVERSAL HOLDINGS, LLC

	By:	/s/ Joseph B. Rotberg
	Name: Joseph B. Rotberg
	Title: CFO

	WELSH, CARSON, ANDERSON & STOWE, IX, L.P., By: WCAS IX ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
	Name: Sean M. Traynor
	Title: Managing Member

	WELSH, CARSON, ANDERSON & STOWE, X, L.P., By: WCAS X ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
	Name: Sean M. Traynor
	Title: Managing Member

	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/ Craig Fisher
	Name: Craig Fisher
	Title: Authorized Signatory

	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/ Craig Fisher
	Name: Craig Fisher
	Title: Authorized Signatory

	UNION SQUARE UNIVERSAL PARTNERS, L.P. By: UNION SQUARE UNIVERSAL GP, LLC, its General Partner

	By:	/s/ Craig Fisher
	Name: Craig Fisher
	Title: Authorized Signatory

	PERRY PARTNERS, L.P., By: PERRY CORP., its General Partner

	By:	/s/ Michael C. Neus
	Name: Michael C. Neus
	Title: General Counsel

	PERRY PARTNERS INTERNATIONAL, INC. By: PERRY CORP., its Investment Manager

	By:	/s/ Michael C. Neus
	Name: Michael C. Neus
	Title: General Counsel



		/s/ Richard Barasch
		Richard Barasch

	PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND, L.P. By: PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND (CAYMAN) GP, L.L.C., its General Partner, By: PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
	Name: Michael C. Neus
	Title: General Counsel

	PERRY PRIVATE OPPORTUNITIES FUND, L.P. By: PERRY PRIVATE OPPORTUNITIES FUND GP, L.L.C., its General Partner, By: PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
	Name: Michael C. Neus
	Title: General Counsel

Russell L. Carson

Thomas E. McInerney

Robert A. Minicucci

Anthony J. de Nicola

Paul B. Queally

Sanjay Swani

D. Scott Mackesy

John D. Clark

James R. Matthews

John Almedia, Jr.

Sean M. Traynor

Thomas Scully

Michael E. Donovan

Eric J. Lee

Brian T. Regan

Lucas Garman

David Mintz



	By:	/s/ Jonathan M. Rather
	Name: Jonathan M. Rather
	Title: Attorney-in-Fact

	WCAS MANAGEMENT CORPORATION

	By:	/s/ Jonathan M. Rather
	Name: Jonathan M. Rather
	Title: Treasurer

	THE BRUCE K. ANDERSON 2004 IRREVOCABLE TRUST

	By:	/s/ Mary R. Anderson
	Name: Mary R. Anderson
	Title:

	THE PATRICK WELSH 2004 IRREVOCABLE TRUST

	By:	/s/ Carol Welsh
	Name: Carol Welsh
	Title: Trustee

	DE NICOLA HOLDINGS L.P.

	By:	/s/ Anthony J. de Nicola
	Name: Anthony J. de Nicola
	Title: Authorized Signatory

	SELECT GLOBAL INVESTORS, L.P.

	By:	/s/ Rocco a. Oretnzio
	Name: Rocco A. Ortenzio
	Title: General Partner

	JONATHAN M. RATHER – IRA CHARLES SCHWAB & CO., INC. CUSTODIAN

	By:	/s/ Jonathan M. Rather
	Jonathan M. Rather



		/s/ Norman Brownstein
	Norman Brownstein



		/s/ Charles E. Hallberg
	Charles E. Hallberg

SCHEDULE I

STOCKHOLDER NAME	CONTACT DETAILS
LEE-UNIVERSAL HOLDINGS, LLC	767 Fifth Avenue 6^th Floor New York, New York 10153 Phone: (212) 888-1500 Fax: (212) 702-3787 Attention: Mark Gormley/ Benjamin Hochberg
WELSH, CARSON, ANDERSON & STOWE, IX, L.P.	320 Park Avenue Suite 2500 New York, New York 10022-6815 Phone: (212) 893-9500 Fax: (212) 893-9575 Attention: Sean M. Traynor
WELSH, CARSON, ANDERSON & STOWE, X, L.P.	SAME AS IMMEDIATELY ABOVE.
CAPITAL Z FINANCIAL SERVICES FUND II, L.P.	230 Park Avenue South 11^th Floor New York, New York 10003 Phone: (212) 965-2400 Fax: (212) 965-2301 Attention: Robert Spass/ Eric Leathers
CAPITAL Z FINANCIAL SERVICES PRIVATE FUND II, L.P.	230 Park Avenue South 11^th Floor New York, New York 10003 Phone: (212) 965-2400 Fax: (212) 965-2301 Attention: Robert Spass/ Eric Leathers
UNION SQUARE UNIVERSAL PARTNERS, L.P.	230 Park Avenue South 11^th Floor New York, New York 10003 Phone: (212) 965-2400 Fax: (212) 965-2301 Attention: Robert Spass/ Eric Leathers
PERRY PARTNERS, L.P.	767 Fifth Avenue 19^th Floor New York, New York 10153 Phone: (212) 583-4000 Fax: (212) 583-4144 Attention: Michael C. Neus
PERRY PARTNERS INTERNATIONAL, INC.	SAME AS IMMEDIATELY ABOVE.

PERRY PRIVATE OPPORTUNITIES FUND, L.P.	SAME AS IMMEDIATELY ABOVE.
PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND, L.P.	SAME AS IMMEDIATELY ABOVE.
RICHARD BARASCH	c/o Universal American Financial Corp. 6 International Drive Rye Brook, NY 10573-1068 Phone: (914) 934-5200 Fax: (914) 934-0700
Russell L. Carson Thomas E. McInerney Robert A. Minicucci Anthony J. de Nicola Paul B. Queally Sanjay Swani D. Scott Mackesy John D. Clark James R. Matthews John Almedia, Jr. Sean M. Traynor Thomas Scully Michael E. Donovan Eric J. Lee Brian T. Regan Lucas Garman David Mintz	c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue Suite 2500 New York, New York 10022-6815 Phone: (212) 893-9500 Fax: (212) 893-9575 Attention: Sean M. Traynor
WCAS MANAGEMENT CORPORATION	SAME AS IMMEDIATELY ABOVE.
THE BRUCE K. ANDERSON 2004 IRREVOCABLE TRUST	SAME AS IMMEDIATELY ABOVE.
THE PATRICK WELSH 2004 IRREVOCABLE TRUST	SAME AS IMMEDIATELY ABOVE.
DE NICOLA HOLDINGS L.P.	SAME AS IMMEDIATELY ABOVE.
JONATHAN M. RATHER – IRA CHARLES SCHWAB & CO., INC. CUSTODIAN	SAME AS IMMEDIATELY ABOVE.
SELECT GLOBAL INVESTORS, L.P.	c/o Select Medical Corporation 4718 Old Gettysburg Road Suite 405 Mechanicsburg, Pennsylvania 17055 Attention: Rocco Ortenzio Facsimile: (717) 972-1050
Norman Brownstein	66 Sedgwick Place Englewood, Colorado 80113 Facsimile: (303) 223-0336
Charles E. Hallberg	c/o MemberHealth, LLC 29100 Aurora Road Suite 301 Solon, Ohio 44139 Facsimile: (440) 248-9644

EX-99.H 3 ex99-h.htm FINAL SIDE LETTER REGARDING ESCROW CLOSING ex99-h.htm

Exhibit H

EXECUTION COPY

AGREEMENT

This AGREEMENT (this “Agreement”) is made as of September 18, 2007, by and among Universal American Financial Corp., a New York corporation (“Parent”), MH Acquisition I Corp., a Delaware corporation and wholly owned subsidiary of Parent (the “Delaware Corp. Merger Sub”), MH Acquisition II LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (the “Delaware LLC Merger Sub” and, together with the Delaware Corp. Merger Sub, collectively, the “Merger Subs”), MHRx LLC, a Delaware limited liability company (“MHRx”), MemberHealth, Inc., an Ohio corporation and wholly owned subsidiary of MHRx (the “Company”), Welsh, Carson, Anderson & Stowe IX, L.P., a Delaware limited partnership, as the “Shareholder Representative” referred to in the Merger Agreement (as defined below) (the “Shareholder Representative”; Parent, the Merger Subs, MHRx, the Company and the Shareholder Representative are herein collectively referred to as the “Merger Agreement Parties”), Lee-Universal Holdings, LLC (“Lee”), Welsh, Carson, Anderson & Stowe X, L.P. (“WCAS X”), Union Square Universal Partners, L.P. (“Union Square”), Perry Partners, L.P., Perry Partners International, Inc., Perry Private Opportunities Fund, L.P., Perry Private Opportunities Offshore Fund, L.P. (the afore-named Perry entities are referred to herein collectively as “Perry”; Parent, Lee, WCAS X, Union Square and Perry are herein collectively referred to as the “SPA Parties” and Lee, WCAS X, Union Square and Perry are herein collectively referred to as the “SPA Investors”), and Bank of America, N.A., in its capacity as administrative agent (the “Administrative Agent”) for itself and certain other lenders under the Credit Agreement dated as of the date hereof among Parent, the Administrative Agent and the other lenders and agents from time to time party thereto (the “Credit Agreement”).

BACKGROUND

A. On May 7, 2007, the Merger Agreement Parties entered into a certain Agreement and Plan of Merger and Reorganization (as the same may be amended from time to time, the “Merger Agreement”) pursuant to which Parent has agreed to acquire the Company by means of certain mergers described therein involving the Merger Subs and the Company (the “Mergers”);

B. Additionally, on May 7, 2007, the SPA Parties entered into a certain Securities Purchase Agreement (as the same may be amended from time to time, the “Securities Purchase Agreement”) pursuant to which the Investors named therein have severally agreed to purchase securities in connection with the consummation of the Mergers;

C. The parties hereto have determined that all of the conditions to the consummation of the transactions contemplated by the Merger Agreement that are contained in Article 6 of the Merger Agreement and all of the conditions to the consummation of the transactions contemplated by the Securities Purchase Agreement that are contained in Article 6 of the Securities Purchase Agreement have either been satisfied or are capable of satisfaction (and ready to be satisfied) on the date hereof but that it is in their mutual best interests to delay the delivery of the closing documentation under the Merger Agreement and the Securities Purchase Agreement, the filing of the Certificates of Merger (such term being used herein as defined in the Merger Agreement), the delivery of the Initial Merger Consideration (such term being used herein as defined in the Merger Agreement) under the Merger Agreement and the Convertible Shares (such term being used herein as defined in the Securities Purchase Agreement) to be issued to the SPA Investors under the Securities Purchase Agreement and the cash purchase price therefor until October 15, 2007 or the date of any earlier delivery of an Escrow Release Certificate (such term being used herein as defined in the Closing Escrow Agreement) (such date, the “Closing Escrow Release Date”);

D. The parties hereto desire to (i) enter into a certain Escrow Agreement (the “Closing Escrow Agreement”), dated as of the date hereof, by and among the parties hereto and The Bank of New York, a New York banking corporation, as escrow agent (the “Closing Escrow Agent”), pursuant to which the transactions contemplated by the Merger Agreement and the Securities Purchase Agreement will be consummated on the Closing Escrow Release Date and (ii) set forth herein their mutual understanding and agreement that there shall be no remaining conditions to the consummation of the transactions contemplated by the Merger Agreement or the Securities Purchase Agreement other than the passage of time (i.e., the occurrence of the Closing Escrow Release Date); and

E. In furtherance of the foregoing, on the date hereof:

1. the SPA Investors are depositing cash in an aggregate amount of $250,000,000 with the Closing Escrow Agent (the “Investor Cash). Parent is borrowing under the Credit Agreement and the Administrative Agent is depositing, at the request of Parent, additional cash in an aggregate amount of $257,399,174.16 with the Closing Escrow Agent, of which $96,500,000 is referred to as the “Merger Consideration Cash” and $160,899,174.16 is referred to as the “Surplus Cash”. The Investors are depositing the Investor Cash, and Parent is borrowing under the Credit Agreement and, at the request of Parent, the Administrative Agent is depositing the Merger Consideration Cash in order to provide all of the funds necessary for the payment of the Initial Merger Consideration on the Closing Escrow Release Date (all such funds being referred to herein as the “Closing Escrow Cash”);

2. Parent is depositing with the Closing Escrow Agent certificates representing all shares of its Common Stock that are necessary for purposes of delivering the Initial Stock Merger Consideration on the Closing Escrow Release Date (the “Merger Escrow Shares”);

3. Parent is depositing with the Closing Escrow Agent certificates representing all Convertible Shares (such term being used herein as defined in the Securities Purchase Agreement) to be sold to the SPA Investors on the Closing Escrow Release Date (the “SPA Escrow Shares”);

4. the Merger Agreement Parties are depositing with the Closing Escrow Agent fully executed Certificates of Merger for purposes of effecting the Mergers on the Closing Escrow Release Date; and

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5. certain of the parties hereto are depositing with the Closing Escrow Agent executed versions of the other Escrow Documents (such term being used herein as defined in the Closing Escrow Agreement) for purposes of delivery on the Closing Escrow Release Date.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:

Section 1. Closing of the Merger Agreement.

Capitalized terms used in this Section 1 but not otherwise defined in this Agreement shall have the definitions ascribed to such terms in the Merger Agreement.

a. Simultaneously with the execution and delivery of this Agreement, (i) the Closing Escrow Agreement is being executed and delivered by the parties thereto, (ii) the Escrow Documents described under the heading “Merger Agreement Escrow Documents” on Schedule I thereto (“Merger Escrow Documents”) are being delivered by the parties thereto to the Closing Escrow Agent and (iii) the Initial Merger Consideration is being delivered to the Closing Escrow Agent. The parties hereto agree that, notwithstanding anything to the contrary contained in Article 6 of the Merger Agreement, all conditions to the Closing set forth in Article 6 of the Merger Agreement have been irrevocably and unconditionally satisfied for all purposes and that from and after the date hereof none of the obligations of the Merger Agreement Parties under the Merger Agreement, this Agreement or the Closing Escrow Agreement shall be subject to any of the conditions to closing set forth in Article 6 of the Merger Agreement or any other conditions except for the occurrence of the date October 15, 2007 or the earlier delivery of an Escrow Release Certificate. Notwithstanding anything to the contrary contained herein, nothing in this Agreement is intended to relieve the parties of their obligations to effect the transactions contemplated by the Merger Agreement and the Escrow Agreement on the Escrow Release Date, including the filing of the Certificates of Merger, as contemplated by Section 5 of the Escrow Agreement.

b. The covenants and agreements set forth in the Merger Agreement shall continue in full force and effect until the Closing Escrow Release Date, and all covenants and agreement that survive the Closing (as defined in the Merger Agreement) shall thereafter continue to survive in accordance with their terms. For the avoidance of doubt it is acknowledged and agreed that the Merger Agreement Parties’ compliance with the covenants and agreements set forth in the Merger Agreement shall not constitute a condition to the obligations of any of the Merger Agreement Parties to consummate the transactions contemplated by the Merger Agreement, this Agreement or the Closing Escrow Agreement; provided, however, that notwithstanding anything to the contrary contained in this Section 1(b), no party hereby waives any right to any indemnity or damages to which it is entitled by reason of any other party’s failure to comply with any applicable provision of the Merger Agreement.

c. Notwithstanding anything to the contrary in the Merger Agreement, any and all breaches of representations set forth in the Merger Agreement that (i) are caused solely by the delay of the delivery of the closing documentation under the Merger Agreement and the Securities Purchase Agreement, the filing of the Certificates of Merger, the delivery of the Initial Merger Consideration under the Merger Agreement and the Convertible Shares to be issued to the SPA Investors under the Securities Purchase Agreement until October 15, 2007 or an earlier date, pursuant to this Agreement and the Closing Escrow Agreement or (ii) that arise from a representation or warranty becoming inaccurate after the date hereof, are hereby irrevocably and unconditionally waived.

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d. The Merger Agreement Parties agree that the date October 7, 2007 contained in Section 7.1(b) of the Merger Agreement is extended until all distributions and other transactions contemplated by the Merger Agreement and the Closing Escrow Agreement have been completed on the Closing Escrow Release Date.

e. The Closing Date under the Merger Agreement shall be deemed to be the Closing Escrow Release Date which shall (i) be the date on which the Certificates of Merger are filed pursuant to Section 5(a) of the Closing Escrow Agreement and (ii) occur no later than October 15, 2007.

f. On the Closing Escrow Release Date, the Initial Merger Consideration shall be released from the escrow established pursuant to the Closing Escrow Agreement and the Closing Escrow Agent shall (i) deliver to the members of MHRx (A) the Initial Cash Merger Consideration (other than the Escrow Cash and subject to any tax withholdings permitted by the Merger Agreement and deductions for the payment of expenses or establishment of reserves as permitted by the Merger Agreement and directed by the Shareholder Representative) and (B) certificates evidencing the Initial Parent Shares (other than the Escrow Shares) registered in the names of the MHRx members, as required by, and in accordance with instructions provided by MHRx as contemplated by Section 2.9 of the Merger Agreement, and (ii) deposit the Escrow Cash and Escrow Shares (as such terms are defined in the Escrow Agreement) into the Escrow Fund as contemplated by the Merger Agreement.

g. On the Closing Escrow Release Date, the Merger Escrow Documents shall be delivered by the Closing Escrow Agent to the Merger Agreement Parties entitled to receive such documents under the Closing Escrow Agreement, the Merger Agreement or such Merger Escrow Documents. Notwithstanding anything else to the contrary contained in such Merger Escrow Documents, the Merger Agreement, this Agreement and the Closing Escrow Agreement, each of the Merger Escrow Documents listed on Schedule I hereto shall be dated and effective upon such release on the Closing Escrow Release Date and all other Merger Escrow Documents shall be dated and effective as of the date hereof.

h. On the Closing Escrow Release Date, all interest earned on the Escrow Cash (as such term is defined in the Closing Escrow Agreement) shall be delivered to MHRx and the Board of Directors of Parent shall be reconstituted as contemplated by the Shareholders Agreement.

Section 2. Closing of the Securities Purchase Agreement.

Capitalized terms used in this Section 2 but not otherwise defined in this Agreement shall have the definitions ascribed to such terms in the Securities Purchase Agreement.

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a. Simultaneously with the execution and delivery of this Agreement, (i) the Escrow Agreement is being executed and delivered by the parties thereto, (ii) the Escrow Documents described under the heading “Securities Purchase Agreement Escrow Documents” on Schedule II thereto (“Securities Purchase Agreement Escrow Documents”) are being delivered by the parties thereto to the Closing Escrow Agent and (iii) the Escrow Cash and the SPA Escrow Shares are being delivered to the Closing Escrow Agent. The parties hereto agree that, notwithstanding anything to the contrary contained in Article 6 of the Securities Purchase Agreement, all conditions to the Closing set forth in Article 6 of the Securities Purchase Agreement have been irrevocably and unconditionally satisfied for all purposes and that from and after the date hereof none of the obligations of the Securities Purchase Agreement Parties under the Securities Purchase Agreement, this Agreement or the Closing Escrow Agreement shall be subject to any of the conditions to closing set forth in Article 6 of the Securities Purchase Agreement or any other conditions except for the occurrence of the date October 15, 2007 or the earlier delivery of an Escrow Release Certificate. Notwithstanding anything to the contrary contained herein, nothing in this Agreement is intended to relieve the parties of their obligations to effect the transactions contemplated by the Securities Purchase Agreement and the Escrow Agreement on the Escrow Release Date as contemplated by Section 5 of the Escrow Agreement.

b. The covenants and agreements set forth in the Securities Purchase Agreement shall continue in full force and effect until the Closing Escrow Release Date, and all covenants and agreement that survive the Closing (as defined in the Securities Purchase Agreement) shall thereafter continue to survive in accordance with their terms. For the avoidance of doubt it is acknowledged and agreed that the SPA Parties’ compliance with the covenants and agreements set forth in the Securities Purchase Agreement shall not constitute a condition to the obligations of any of the SPA Parties to consummate the transactions contemplated by the Securities Purchase Agreement, this Agreement or the Closing Escrow Agreement; provided, however, that notwithstanding anything to the contrary contained in this Section 2(b), no party hereby waives any right to any indemnity or damages to which it is entitled by reason of any other party’s failure to comply with any applicable provision of the Securities Purchase Agreement.

c. Notwithstanding anything to the contrary in the Securities Purchase Agreement, any and all breaches of representations set forth in the Securities Purchase Agreement that (i) are caused solely by the delay of the delivery of the closing documentation under the Merger Agreement and the Securities Purchase Agreement, the filing of the Certificates of Merger, the delivery of the Initial Merger Consideration under the Merger Agreement and the Convertible Shares to be issued to the SPA Investors under the Securities Purchase Agreement until October 15, 2007 or an earlier date, pursuant to this Agreement and the Closing Escrow Agreement or (ii) that arise from a representation or warranty becoming inaccurate after the date hereof, are hereby irrevocably and unconditionally waived.

d. The SPA Parties agree that the date October 7, 2007 contained in Section 7.1(b) of the Securities Purchase Agreement is extended until all distributions and other transactions contemplated by the Securities Purchase Agreement and the Closing Escrow Agreement have been completed on the Closing Escrow Release Date.

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e. The Closing Date for purposes of the Securities Purchase Agreement shall be deemed to be the Closing Escrow Release Date which shall be date on which the Certificates of Merger are filed pursuant to Section 5(a) of the Escrow Agreement and which shall occur no later than October 15, 2007.

f. On the Closing Escrow Release Date, the SPA Escrow Shares shall be released from the escrow established pursuant to the Closing Escrow Agreement and delivered by the Closing Escrow Agent to the SPA Investors and the Securities Purchase Agreement Escrow Documents shall be delivered by the Closing Escrow Agent to the SPA Parties entitled to receive such documents under the Closing Escrow Agreement, the Securities Purchase Agreement or such Securities Purchase Agreement Escrow Documents. Notwithstanding anything else to the contrary contained in such Securities Purchase Agreement Escrow Documents, the Securities Purchase Agreement, this Agreement and the Closing Escrow Agreement, each of the Securities Purchase Agreement Escrow Documents listed on Schedule I hereto shall be dated and effective upon such release on the Closing Escrow Release Date and all other Securities Purchase Agreement Escrow Documents shall be dated and effective as of the date hereof.

g. On the Closing Escrow Release Date, the Board of Directors of Parent shall be reconstituted as contemplated by the Shareholders Agreement

Section 3. Execution of the Closing Escrow Agreement. The parties hereto shall enter into and perform their duties under the Closing Escrow Agreement, including the delivery of any required Escrow Items (as such term is defined in the Closing Escrow Agreement) to the Closing Escrow Agent.

Section 4. Enforcement. The provisions of Section 8.8 (Jurisdiction and Venue; Waiver of Jury Trial), Section 8.14 (No Strict Construction) and Section 8.15 (Specific Performance) of the Merger Agreement shall apply mutatis mutandis to this Agreement.

Section 5. Further Assurances. From time to time after the date of this Agreement, without the payment of any additional consideration, each party hereto shall execute all such instruments and take all such actions as the other parties shall reasonably request in connection with carrying out and effectuating the intent and purpose hereof and all of transactions contemplated by this Agreement.

Section 6. Assignability; Successors and Assigns; Entire Agreement; No Third Party Beneficiaries. No party hereto may make any assignment, delegation or transfer of any of its rights, interests or obligations hereunder without, in each case, obtaining the prior written consent of the other parties hereto and any purported assignment, delegation or transfer without such consent shall be of no force or effect. This Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the parties hereto and their respective successors, permitted assigns and executors, administrators and heirs. This Agreement (together with the Closing Escrow Agreement) sets forth the entire agreement and understanding among the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. No course of dealing between or among any persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. This Agreement shall be for the sole benefit of the parties to this Agreement and their respective heirs, successors, permitted assigns and legal representatives and is not intended, nor shall be construed, to give any person, other than the parties hereto and their respective heirs, successors, permitted assigns and legal representatives, any legal or equitable right, remedy or claim hereunder.

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Section 7. Severability. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement will not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision unless that provision held invalid will substantially impair the benefits of the remaining portions of this Agreement.

Section 8. Notices. All notices, requests, demands, claims and other communications required or permitted hereunder will be in writing and will be sent by facsimile, nationally recognized overnight courier, registered mail or certified mail. Any notice, request, demand, claim or other communication required or permitted hereunder will be deemed duly given, as applicable, (a) when so delivered by facsimile, (b) one (1) Business Day following the date sent when sent by overnight delivery or (c) five (5) Business Days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid to the following address:

(i) If to Parent or either of the Merger Subs to:

Universal American Financial Corp.

6 International Drive

Rye Brook, New York 10573-1068

Attention: Mitchell Stier, Esq.

Telephone: (914) 934-5200

Facsimile: (914) 934-0700

with a required copy to (which shall not constitute notice):

Dechert LLP

30 Rockefeller Plaza

New York, New York 10112

Attention: Gerald Adler, Esq.

Telephone: (212) 698-3679

Facsimile: (212) 698-3599

(ii) If to MHRx, the Company or the Shareholder Representative, to:

c/o Welsh, Carson, Anderson & Stowe

320 Park Avenue, Suite 2500

New York, New York 10022-6815

Telephone number: (212) 893-9500

Facsimile number: (212) 893-9583

Attention: Sean M. Traynor

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with a required copy to (which shall not constitute notice):

Ropes & Gray LLP

1211 Avenue of the Americas

New York, New York 10036

Telephone Number: (212) 596-9000

Facsimile Number: (212) 598-9090

Attn: Othon A. Prounis, Esq. and Christopher W. Rile, Esq.

(iii) If to WCAS X, to:

Welsh, Carson, Anderson & Stowe

320 Park Avenue, Suite 2500

New York, New York 10022-6815

Telephone number: (212) 893-9500

Facsimile number: (212) 893-9583

Attention: Sean M. Traynor

with required copies (which shall not constitute notice) to:

Ropes & Gray LLP

1211 Avenue of the Americas

New York, New York 10036

Telephone number: (212) 596-9000

Facsimile number: (212) 596-9090

Attention: Othon A. Prounis, Esq. and Christopher W. Rile, Esq.

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Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

(iv) If to Lee:

Lee Equity Partners

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 888-1500

Facsimile number: (212) 888-6388

Attention: Mark Gormley/Benjamin Hochberg

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with required copies (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

(v) If to Perry:

Perry Capital, LLC

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 583-4000

Facsimile number: (212) 583-4146

Attention: Michael C. Neus

with required copies (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

825 Eighth Avenue

New York, New York 10019-7475

Telephone number: (212) 474-1000

Facsimile number: (212) 474-3700

Attention: Mark Greene, Esq.

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Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

(vi) If to Union Square:

Union Square Partners

230 Park Avenue South, 11th floor

New York, New York 10003

Telephone number: (212) 965-2400

Facsimile number: (212) 343-5206

Attention: Bob Spass/Eric Leathers

with required copies (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

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(vii) If to the Administrative Agent:

Bank of America, N.A.

100 North Tryon Street

NCI-007-17-15

Charlotte, North Carolina 28255

Attention: Alysa Trakas

Section 9. Governing Law. This Agreement, and all claims arising in whole or in part out of, related to, based upon, or in connection herewith or the subject matter hereof will be governed by and construed in accordance with the domestic substantive laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

Section 10. Headings; Interpretation. The headings in this Agreement are for convenience of reference only and will not constitute a part of this Agreement, nor will they affect their meaning, construction or effect. References herein to Sections, Exhibits, Schedules or Annexes shall refer to Sections, Exhibits, Schedules or Annexes of or to this Agreement, unless otherwise identified.

Section 11. Counterparts. This Agreement may be executed in two or more counterparts and by the parties hereto in separate counterparts, each of which when so executed will be deemed to be an original, and all of which taken together will constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by electronic means, such as facsimile or portable document format, shall be as effective as delivery of a manually executed counterpart of this Agreement.

Section 12. No Further Amendments. Except as amended hereby, the Merger Agreement and the Securities Purchase Agreement shall remain in full force and effect enforceable in accordance with their terms.

Section 13. Amendments. This Agreement may not be amended or modified at any time except by a written instrument executed by each of the parties hereto.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

	UNIVERSAL AMERICAN FINANCIAL CORP.

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: Executive Vice President and Chief Financial Officer

	MH ACQUISITION I CORP.

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: Executive Vice President and Chief Financial Officer

	MH ACQUISITION II LLC

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: President

	MEMBERHEALTH, INC.

	By:	/s/ Charles E. Hallberg
		Name: Charles E. Hallberg
		Title: Chief Executive Officer

	MHRx LLC

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Member

	WELSH, CARSON, ANDERSON & STOWE IX, L.P., as Shareholder Representative

	By:	WCAS IX ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Managing Member

	LEE-UNIVERSAL HOLDINGS, LLC

	By:	/s/ Joseph B. Rotberg
		Name: Joseph B. Rotberg
		Title: CFO

	WELSH, CARSON, ANDERSON & STOWE X, L.P.,

	By:	WCAS X ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Managing Member

	UNION SQUARE UNIVERSAL PARTNERS, L.P.

	By:	Union Square Universal GP, LLC, its General Partner

	By:	/s/ Craig Fisher
		Name: Craig Fisher
		Title: Aughorized Signatory

	PERRY PARTNERS, L.P.,

	By:	Perry Corp., its General Partner

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PARTNERS INTERNATIONAL, INC.,

	By:	Perry Corp., its Investment Manager

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND, L.P.

	By:	PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND (CAYMAN) GP, L.L.C., its General Partner,

	By:	PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PRIVATE OPPORTUNITIES FUND, L.P.

	By:	PERRY PRIVATE OPPORTUNITIES FUND GP, L.L.C., its General Partner,

	By:	PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	BANK OF AMERICA, N.A., as Administrative Agent

	By:	/s/ Aamir Saleem
		Name: Aamir Saleem
		Title: Vice President

Schedule I

Escrow Documents to be Dated and

Effective as of the Closing Escrow Release Date

1.	Opinion of Squire, Sanders & Dempsey L.L.P. contemplated by Section 6.2(e)(iv) of the Merger Agreement

2.	Opinion of Dechert LLP contemplated by Section 6.3(i)(iii) of the Merger Agreement

3.	Shareholders Agreement

4.	Opinion of Dechert LLP contemplated by Section 6.3(h)(iii) of the Securities Purchase Agreement

5.	FIRPTA Certificate of MemberHealth, Inc.

EX-99.I 4 ex99-i.htm FINAL CLOSING ESCROW AGREEMENT ex99-i.htm

Exhibit I

EXECUTION COPY

ESCROW AGREEMENT

This ESCROW AGREEMENT (this “Agreement”) is made as of September 18, 2007, by and among Universal American Financial Corp., a New York corporation (“Parent”), MH Acquisition I Corp., a Delaware corporation and wholly owned subsidiary of Parent (the “Delaware Corp. Merger Sub”), MH Acquisition II LLC, a Delaware limited liability company and wholly owned subsidiary of Parent (the “Delaware LLC Merger Sub” and, together with the Delaware Corp. Merger Sub, collectively, the “Merger Subs”), MHRx LLC, a Delaware limited liability company (“MHRx”), MemberHealth, Inc., an Ohio corporation and wholly owned subsidiary of MHRx (the “Company”), Welsh, Carson, Anderson & Stowe IX, L.P., a Delaware limited partnership, as the “Shareholder Representative” referred to in the Merger Agreement (as defined below) (the “Shareholder Representative”; Parent, the Merger Subs, MHRx, the Company and the Shareholder Representative are herein collectively referred to as the “Merger Agreement Parties”), Lee-Universal Holdings, LLC (“Lee”), Welsh, Carson, Anderson & Stowe X, L.P. (“WCAS X”), Union Square Universal Partners, L.P. (“Union Square”), Perry Partners, L.P., Perry Partners International, Inc., Perry Private Opportunities Fund, L.P. and Perry Private Opportunities Offshore Fund, L.P. (the afore-named Perry entities are referred to herein collectively as “Perry”; Parent, Lee, WCAS X, Union Square and Perry are herein collectively referred to as the “SPA Parties” and Lee, WCAS X, Union Square and Perry are herein collectively referred to as the “SPA Investors”), Bank of America, N.A., in its capacity as administrative agent (the “Administrative Agent”) for itself and certain other lenders under the Credit Agreement dated as of the date hereof among Parent, the Administrative Agent and the other lenders and agents from time to time party thereto (the “Credit Agreement”), and The Bank of New York, a New York banking corporation, as escrow agent (the “Escrow Agent”).

Recitals

WHEREAS, the Merger Agreement Parties have entered into that certain Agreement and Plan of Merger and Reorganization dated as of May 7, 2007 (as the same may be amended from time to time, the “Merger Agreement”);

WHEREAS, the SPA Parties have entered into that certain Securities Purchase Agreement dated as of May 7, 2007 (as the same may be amended from time to time, the “Securities Purchase Agreement”);

WHEREAS, the parties hereto desire to establish an escrow mechanism for certain funds, certificates and documents; and

WHEREAS, the parties hereto desire to appoint the Escrow Agent to act as escrow agent in the manner hereinafter set forth and the Escrow Agent is willing to act in such capacity;

Agreement

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. Appointment of Agent. The parties hereto hereby appoint the Escrow Agent as their agent to hold in escrow the Escrow Items (as defined below), and to administer the disposition of the Escrow Items, in accordance with the terms of this Agreement, and the Escrow Agent hereby accepts such appointment.

2. Establishment of the Escrow Accounts.

(a) Concurrent with the execution and delivery of this Agreement, (i) the Merger Agreement Parties are herewith delivering to the Escrow Agent duly executed originals or copies of the documents described on Schedule I hereto (the “Merger Escrow Documents”); (ii) MHRx is delivering duly executed original certificates representing all of the outstanding shares of common stock of the Company (the “Company Escrow Shares”); (iii) Parent is delivering duly executed original certificates representing the initial stock merger consideration to be issued under the Merger Agreement (which shares are registered in the names of the persons and in the amounts listed on Schedule VII hereto) (collectively, the “Merger Consideration Escrow Shares”); and (iv) the Merger Subs and the Company are delivering duly executed originals or copies of the certificates of merger to be filed pursuant to the Merger Agreement (the “Certificates of Merger”).

(b) Concurrent with the execution and delivery of this Agreement, (i) the SPA Parties are herewith delivering to the Escrow Agent duly executed originals or copies of the documents described on Schedule II hereto (the “Securities Purchase Agreement Escrow Documents” and together with the Merger Escrow Documents, the “Escrow Documents”); (ii) each of the SPA Investors (or their co-investors) are delivering to the Escrow Agent cash in the amount set forth opposite its name on Schedule III hereto (the “SPA Cash”); and (iii) Parent is delivering duly executed original certificates representing the shares of Parent preferred stock (the “Convertible Shares”) being purchased by the SPA Investors (and their co-investors) under the Securities Purchase Agreement, which shares are registered in the names of the persons, and in the amounts listed on Schedule IV hereto (collectively, the “SPA Escrow Shares” and, together with the Merger Consideration Escrow Shares and the Company Escrow Shares, the “Escrow Shares”).

(c) Concurrent with the execution and delivery of this Agreement, Parent is borrowing under the Credit Agreement and, at the request of Parent, the Administrative Agent is depositing with the Escrow Agent cash in the aggregate amount of $257,399,174.16 (the “Borrowed Cash”), of which $96,500,000 is referred to herein as the “Merger Consideration Cash” and $160,899,174.16 is referred to herein as the “Surplus Cash” (such Borrowed Cash, together with the SPA Cash, in each case, exclusive of any and all interest, profits and other income thereon, from time to time held by the Escrow Agent pursuant to the terms hereof, the “Escrow Cash”). For the avoidance of doubt, it is acknowledged and agreed that Parent shall be the owner of the Borrowed Cash and the SPA Investors and their co-investors (as set forth on Schedule III) shall be the owners of the SPA Cash until the Escrow Release Date.

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(d) The Escrow Documents, the Escrow Cash, the Escrow Shares and the Certificates of Merger are referred to collectively herein as the “Escrow Items”). The Escrow Agent hereby agrees to hold and invest the Escrow Cash in two separate accounts (the “Cash Escrow Accounts”) as provided in this Agreement. One Cash Escrow Account shall hold the Surplus Cash and the other Cash Escrow Account shall hold the Merger Consideration Cash and the SPA Cash. The Escrow Agent hereby agrees to hold the Escrow Documents, the Escrow Shares and the Certificates of Merger in a separate account (the “Non-Cash Escrow Account” and together with the Cash Escrow Accounts, the “Escrow Accounts”). The purpose of each Escrow Account is to hold in escrow the Escrow Items pending the consummation of the transactions contemplated by the Merger Agreement and the Securities Purchase Agreement.

(e) Any shares of Parent’s or the Company’s equity securities (including shares issued upon a stock split, stock dividend or other similar event) (“New Shares”) issued or distributed by Parent or the Company in respect of the Escrow Shares as well as any other dividends or distributions on the Escrow Shares shall be added to the Non-Cash Escrow Account or Cash Escrow Account, as the case may be.

(f) Neither the parties in whose names the SPA Escrow Shares or Merger Consideration Escrow Shares are registered nor any other party hereto shall have the ability to vote or direct the voting of the SPA Escrow Shares or Merger Consideration Escrow Shares contributed to the Non-Cash Escrow Account (and on any New Shares issued in respect thereof) so long as such shares are held in the Non-Cash Escrow Account and neither the parties in whose names such SPA Escrow Shares or Merger Consideration Escrow Shares are registered nor any other party hereto shall be entitled to direct the disposition of any such shares in the event of any tender offer or exchange offer made in respect of such Escrow Shares (provided that the proceeds thereof shall be added to the Escrow Items and held in the Escrow Accounts as part thereof) so long as such shares are held in the Non-Cash Escrow Account.

3. No Interest in the Escrow Accounts or Escrow Items. The Escrow Agent does not own or have any interest in the Escrow Accounts or the Escrow Items but is serving as escrow holder, having only possession thereof and agreeing to hold and distribute the Escrow Items in accordance with the terms and conditions hereinafter set forth.

4. Investment of Escrow Cash.

(a) If the Escrow Agent will have received specific written investment instruction from MHRx (which instructions will include instruction as to term to maturity, if applicable), on a timely basis, the Escrow Agent will invest the Merger Consideration Cash and the SPA Cash in any combination of the following investments; provided, however, that the Escrow Agent will not invest the Merger Consideration Cash or the SPA Cash in any way in which either the Merger Consideration Cash or the SPA Cash would not be available for distribution upon the Escrow Release Date:

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(i)

marketable obligations of, or fully and directly guaranteed by, the United States, which obligations have a maturity of not more than ninety (90) days;

(ii)

money market funds registered under the Investment Company Act of 1940, as amended from time to time, the portfolios of which are limited to Government Securities (as defined therein); or

(iii)

such other investments as MHRx may authorize the Escrow Agent to make from time to time; provided, however, that such investments are rated at least “AA” or higher by at least one nationally recognized rating agency, or, if such investments are in short term commercial paper, are rated at least “A1” or “P1” by such an agency.

Absent its timely receipt of such specific written investment instruction from MHRx, the Escrow Agent will invest all of the Merger Consideration Cash and the SPA Cash as provided on Part A of Schedule VIII until such investment instruction is received.

(b) If the Escrow Agent will have received specific written investment instruction from Parent (which instructions will include instruction as to term to maturity, if applicable), on a timely basis, the Escrow Agent will invest the Surplus Cash in any combination of the following investments; provided, however, that the Escrow Agent will not invest the Surplus Cash in any way in which the Surplus Cash would not be available for distribution upon the Escrow Release Date:

(i)

marketable obligations of, or fully and directly guaranteed by, the United States, which obligations have a maturity of not more than ninety (90) days;

(ii)

money market funds registered under the Investment Company Act of 1940, as amended from time to time, the portfolios of which are limited to Government Securities (as defined therein); or

(iii)

such other investments as Parent may authorize the Escrow Agent to make from time to time; provided, however, that such investments are rated at least “AA” or higher by at least one nationally recognized rating agency, or, if such investments are in short term commercial paper, are rated at least “A1” or “P1” by such an agency.

Absent its timely receipt of such specific written investment instruction from Parent, the Escrow Agent will invest all of the Surplus Cash as provided on Part B of Schedule VIII until such investment instruction is received.

5. Disposition of Escrow Items. The Escrow Agent will hold the Escrow Items in its possession in the Escrow Accounts until authorized hereunder to deliver such Escrow Items as follows:

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(a) On October 15, 2007, or on an earlier date in the month of October, 2007 which is specified in a certificate signed by each of Parent and MHRx (the “Escrow Release Certificate”) and is received by the Escrow Agent prior to October 15, 2007, the Escrow Agent will promptly deliver and release the Escrow Items as follows (the date of the following distributions shall be known as the “Escrow Release Date”); provided, however, that any Escrow Release Certificate delivered to the Escrow Agent must be delivered by 5:00 PM (New York City time) at least one day prior to any proposed Escrow Release Date occurring earlier than October 15, 2007:

(i)

By no later than 9:00 AM (New York City time) on the Escrow Release Date, the Escrow Agent shall deliver each of the Escrow Documents to the Closing Room (as defined below) and distribute each such Escrow Document to the party or parties whose names are set forth opposite the description of such Escrow Document on Schedule I and/or Schedule II, as applicable;

(ii)

As promptly as possible on the Escrow Release Date, the Escrow Agent shall distribute the Escrow Cash by wire transfer of immediately available funds to the persons and accounts provided on Schedule VI;

(iii)

Concurrently with the distribution of the Escrow Documents on the Escrow Release Date, the Escrow Agent shall distribute the Merger Consideration Escrow Shares listed under the heading “MHRx Distributed Shares” on Schedule VII to the Closing Room, care of MHRx. MHRx shall further distribute such Merger Consideration Escrow Shares to its members. Furthermore, the Escrow Agent shall distribute the Merger Consideration Escrow Shares listed under the heading “Escrow Agent Shares” on Schedule VII to The Bank of New York, as escrow agent under the Escrow Agreement, dated September 17, 2007, by and among WCAS IX, as the “Shareholder Representative” referred to in the Merger Agreement, Parent and The Bank of New York, as escrow agent;

(iv)

Concurrently with the distribution of the Escrow Documents on the Escrow Release Date, the Escrow Agent shall distribute the SPA Escrow Shares to the SPA Investors as provided on Schedule IV;

(v)

Concurrently with the distribution of the Escrow Documents on the Escrow Release Date, the Escrow Agent shall deliver the Company Escrow Shares to Parent; and

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(vi)

Concurrently with the distribution of the Escrow Documents on the Escrow Release Date, the Escrow Agent shall deliver the Certificates of Merger to counsel for Parent (Dechert LLP) and the Company (Squire, Sanders & Dempsey LLP) and Parent and the Company shall cause such counsel to (A) file on the Escrow Release Date the Certificate of Merger relating to the merger of the Delaware Corp. Merger Sub with and into the Company (the “First Merger”) with the Secretary of State of Ohio and the Secretary of State of Delaware and (B) immediately following the Effective Time of the First Merger, file on the Escrow Release Date the Certificate of Merger relating to the merger of the surviving corporation of the First Merger with and into the Delaware LLC Merger Sub with the Secretary of State of Ohio and the Secretary of State of Delaware. If it is not possible to complete such filings as a result of any of any of such certificates not being in proper form for filing, Parent and MHRx shall promptly provide substitute Certificates of Merger that are consistent with the terms of the Merger Agreement and in proper form for filing to such counsel and cause such counsel to promptly file such substitute Certificates of Merger with such offices.

As used above the term “Closing Room” means a room to be located at the offices of Ropes & Gray LLP, 1211 Avenue of the Americas, New York, New York or Dechert LLP, 30 Rockefeller Plaza, New York, New York, which is specifically identified in writing to the Escrow Agent prior to the Escrow Release Date. In connection with the release and delivery of all documentation and certificates on the Escrow Release Date as herein contemplated, the Escrow Agent shall be entitled to receive and rely on joint written instructions of Parent and MHRx identifying the appropriate representatives of the various persons entitled to take possession of such documentation and certificates and to retain such documentation and certificates in its possession until satisfactory instructions are received. If any person entitled to receive documentation or certificates on the Escrow Release Date is not represented in person at the Closing Room by counsel or other representatives so identified by Parent and MHRx, Parent and MHRx shall provide joint written instructions to the Escrow Agent directing the Escrow Agent to deliver such items to such persons via deposit with a nationally recognized overnight courier on the Escrow Release Date. In the event that any Closing Items remain undistributed as of the close of business on the Escrow Release Date the Escrow Agent shall be required to deliver those Closing Items into the joint custody of Parent and MHRx and Parent and MHRx shall promptly deliver such items to the appropriate parties as provided above.

(b) All interest or other income received on investment and reinvestment of the Merger Consideration Cash and SPA Cash will be held separate and apart from the Escrow Cash and, subject to Section 5(c) below, be delivered to MHRx on the Escrow Release Date. All interest or other income received on investment and reinvestment of the Surplus Cash will be held separate and apart from the Escrow Cash and, subject to Section 5(c) below, be delivered to Parent on the Escrow Release Date.

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(c) Notwithstanding anything to the contrary contained herein, if Parent or the Administrative Agent provides to the Escrow Agent a written notice (a “Bankruptcy Notice”) informing the Escrow Agent that a case under the Bankruptcy Reform Act of 1978 has been commenced by or against Parent, and not withdrawn, stayed or dismissed before the Escrow Release Date, the Escrow Agent shall release the Escrow Items as follows:

(i)

The Escrow Documents shall be of no force or effect, and shall be returned to the parties which delivered such Escrow Documents to the Escrow Agent pursuant to Sections 2(a) and (b) or destroyed, in either case, pursuant to joint written instructions provided by Parent and MHRx to the Escrow Agent (it being agreed that the Escrow Agent shall be entitled to retain the Escrow Documents pending receipt of such instructions and, if no such instructions have been received by it prior to the 180th day following the delivery of such Bankruptcy Notice, to destroy such documents);

(ii)

The Escrow Cash shall be distributed by means of wire transfer of immediately available funds to the accounts set forth on Schedule IX to the applicable parties which delivered such Escrow Cash to the Escrow Agent pursuant to Sections 2(b) and(c) (it being understood that all interest, profits and other income earned on the SPA Cash shall be added to the SPA Cash being returned to the SPA Investors and their co-investors and distributed pro rata to them based on the amounts they contributed as set forth on Schedule III and all interest, profits and other income earned on the Borrowed Cash shall be added to the Borrowed Cash and be returned to the Administrative Agent);

(iii)

The Escrow Shares shall be returned to Parent by overnight courier service to its address set forth below; provided, however, that the Company Escrow Shares shall be returned to MHRx by overnight courier service to its address set forth below; and

(iv)

The Certificates of Merger shall be of no force or effect, and shall be returned to MHRx by overnight courier service to its address set forth below.

6. Monthly Statement. The Escrow Agent will provide the parties hereto with a monthly account statement for each Escrow Account.

7. Escrow Agent.

(a) The Escrow Agent will have no duties or responsibilities except those expressly set forth herein. Except for this Escrow Agreement, the Escrow Agent is not a party to, or bound by, any agreement that may be required under, evidenced by, or arise out of the Merger Agreement or the Securities Purchase Agreement.

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(b) If the Escrow Agent will be uncertain as to its duties or rights hereunder or will receive instructions from any of the undersigned with respect to the Escrow Accounts, that, in its opinion, are in conflict with any of the provisions of this Escrow Agreement, it will be entitled to refrain from taking any action until it will be directed otherwise in writing collectively by the parties hereto or by a final nonappealable order of a court of competent jurisdiction.

(c) The Escrow Agent will not be liable for any error or judgment or for any act done or step taken or omitted by it in good faith or for any mistake of fact or law, or for anything that it may do or refrain from doing in connection herewith, except its own bad faith, gross negligence or willful misconduct, and the Escrow Agent will have no duties to anyone except the parties hereto.

(d) The Escrow Agent may consult legal counsel in the event of any dispute or question as to the construction of this Escrow Agreement, or the Escrow Agent’s duties hereunder, and the Escrow Agent will incur no liability and will be fully protected with respect to any action taken or omitted in good faith in accordance with the opinion and instructions of such counsel.

(e) In the event of any disagreement between the undersigned or any of them, and/or any other person, resulting in adverse claims and demands being made in connection with or for the Escrow Items, the Escrow Agent will be entitled at its option to refuse to comply with any such claim or demand, so long as such disagreement will continue, and in so doing the Escrow Agent will not be or become liable for damages or interest to the undersigned or any of them or to any person named herein for its failure or refusal to comply with such conflicting or adverse demands. The Escrow Agent will be entitled to continue so to refrain and refuse so to act until all differences with respect thereto will have been resolved by agreement of the parties hereto and the Escrow Agent will have been notified thereof in writing signed by the parties hereto. In the event of such disagreement that continues for sixty (60) days or more, the Escrow Agent in its discretion may file a suit in interpleader for the purpose of having the respective rights of the claimants adjudicated, if the Escrow Agent determines such action to be appropriate under the circumstances, and may deposit with the court all documents and property held hereunder. Parent agrees to pay all reasonable out-of-pocket costs and expenses incurred by the Escrow Agent in such action, including reasonable attorney’s fees.

(f) The Parent shall be liable for and shall reimburse and indemnify Escrow Agent and hold Escrow Agent harmless from and against any and all claims, losses, liabilities, costs, damages or expenses (including reasonable attorneys’ fees and expenses) (collectively, “Losses”) arising from or in connection with or related to this Escrow Agreement or being Escrow Agent hereunder (including but not limited to Losses incurred by Escrow Agent in connection with its successful defense, in whole or in part, of any claim of gross negligence or willful misconduct on its part), provided, however, that nothing contained herein shall require Escrow Agent to be indemnified for Losses caused by its gross negligence or willful misconduct. Such indemnification (i) will be borne by Parent and (ii) will survive termination of this Escrow Agreement and resignation or removal of the Escrow Agent until extinguished by any applicable statute of limitations.

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(g) The Escrow Agent does not own or have any interest in the Escrow Accounts or in the Escrow Items deposited hereunder but is serving as escrow holder only and having only possession thereof and agreeing to hold and distribute the Escrow Items in accordance with the terms and conditions of this Agreement. This paragraph will survive notwithstanding any termination of this Escrow Agreement or the resignation or removal of the Escrow Agent.

(h) The Escrow Agent (and any successor Escrow Agent) may at any time resign as such by delivering the Escrow Items to (i) any banking corporation or trust company organized under the laws of the United States or of any state that is jointly designated by the other parties hereto in writing as successor escrow agent and consents in writing to act as successor escrow agent or (ii) any court of competent jurisdiction; whereupon the Escrow Agent will be discharged of and from any and all further obligations arising in connection with this Escrow Agreement. The resignation of the Escrow Agent will take effect on the earlier of (x) the appointment of a successor escrow agent by designation by the other parties hereto and delivery of the Escrow Items to such successor escrow agent (or delivery of the Escrow Items to any court of competent jurisdiction) or (y) the day that is sixty (60) days after the date of delivery of its written notice of resignation to the other parties. If at that time the Escrow Agent has not received a designation of a successor Escrow Agent, the Escrow Agent’s sole responsibility after that time will be to safekeep the Escrow Items until receipt of a designation of successor Escrow Agent, or a joint written instruction as to disposition of the Escrow Items by the other parties, or a final order of a court of competent jurisdiction mandating disposition of the Escrow Items.

(i) The Escrow Agent hereby accepts its appointment and agrees to act as escrow agent under the terms and conditions of this Escrow Agreement and acknowledges receipt of the Escrow Items. Parent will pay to the Escrow Agent as payment in full for its services hereunder the Escrow Agent’s compensation set forth in Schedule V hereto. Parent further agree to reimburse the Escrow Agent for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Escrow Agent in the performance of its duties hereunder (including reasonable fees, and out-of-pocket expenses and disbursements, of its counsel).

8. Tax Provisions; Other Deliverables. For all income tax purposes, including tax reporting purposes, the person to whom the Escrow Items are delivered pursuant to Section 5 hereof will be treated as the owners of the income on the Escrow Items and all interest earned from the investment of the Escrow Items, or any portion thereof, will be allocable to such person. The parties hereto receiving Escrow Shares or Escrow Cash shall provide (and MHRx hereby agrees to use its reasonable best efforts to cause the persons receiving Merger Consideration Cash and Merger Consideration Escrow Shares to provide) the Escrow Agent a Form W-9, a substitute Form W-9 or a Form W-8BEN for each such person upon or promptly following the execution and delivery of this Agreement. In addition, on the date hereof, each of Parent and MHRx agrees to provide the Escrow Agent with an incumbency certificate for such person setting forth the name, title and signature of each person permitted to authorize documents on their behalf pursuant to this Agreement.

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9. Notices. All notices, requests, demands, claims and other communications required or permitted hereunder will be in writing and will be sent by facsimile, nationally recognized overnight courier, registered mail or certified mail. Any notice, request, demand, claim, or other communication required or permitted hereunder will be deemed duly given, as applicable, (a) when so delivered by facsimile, (b) one (1) Business Day following the date sent when sent by overnight delivery or (c) five (5) Business Days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid to the following address:

(i)

If to Parent or either of the Merger Subs to:

Universal American Financial Corp.

6 International Drive

Rye Brook, New York 10573-1068

Attention: Mitchell Stier, Esq.

Telephone: (914) 934-5200

Facsimile: (914) 934-0700

with a required copy to (which shall not constitute notice):

Dechert LLP

30 Rockefeller Plaza

New York, New York 10112

Attention: Gerald Adler, Esq.

Telephone: (212) 698-3679

Facsimile: (212) 698-3599

(ii)

If to MHRx, the Company or the Shareholder Representative, to:

c/o Welsh, Carson, Anderson & Stowe

320 Park Avenue, Suite 2500

New York, New York 10022-6815

Telephone number: (212) 893-9500

Facsimile number: (212) 893-9583

Attention: Sean M. Traynor

with a required copy to (which shall not constitute notice):

Ropes & Gray LLP

1211 Avenue of the Americas

New York, New York 10036

Telephone Number: (212) 596-9000

Facsimile Number: (212) 598-9090

Attn: Othon A. Prounis, Esq. and Christopher W. Rile, Esq.

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(iii)

If to the Escrow Agent, to:

The Bank of New York

101 Barclay Street – 8th Floor East

New York, New York 10286

Telephone Number: (212) 815-3217

Facsimile Number: (212) 815-5875

Attention: Thomas O. Hacker

(iv) If to WCAS X, to:

Welsh, Carson, Anderson & Stowe

320 Park Avenue, Suite 2500

New York, New York 10022-6815

Telephone number: (212) 893-9500

Facsimile number: (212) 893-9583

Attention: Sean M. Traynor

with required copies (which shall not constitute notice) to:

Ropes & Gray LLP

1211 Avenue of the Americas

New York, New York 10036

Telephone number: (212) 596-9000

Facsimile number: (212) 596-9090

Attention: Othon A. Prounis, Esq. and Christopher W. Rile, Esq.

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Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

(v) If to Lee:

Lee Equity Partners

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 888-1500

Facsimile number: (212) 888-6388

Attention: Mark Gormley/Benjamin Hochberg

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with required copies (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

(vi) If to Perry:

Perry Capital, LLC

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 583-4000

Facsimile number: (212) 583-4146

Attention: Michael C. Neus

with required copies (which shall not constitute notice) to:

Cravath, Swaine & Moore LLP

825 Eighth Avenue

New York, New York 10019-7475

Telephone number: (212) 474-1000

Facsimile number: (212) 474-3700

Attention: Mark Greene, Esq.

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Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

(vii) If to Union Square:

Union Square Partners

230 Park Avenue South, 11th floor

New York, New York 10003

Telephone number: (212) 965-2400

Facsimile number: (212) 343-5206

Attention: Bob Spass/Eric Leathers

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with required copies (which shall not constitute notice) to:

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153

Telephone number: (212) 310-8000

Facsimile number: (212) 310-8007

Attention: Malcolm Landau, Esq.

(viii) If to the Administrative Agent:

Bank of America, N.A.

100 North Tryon Street

NCI-007-17-15

Charlotte, North Carolina 28255

Attention: Alysa Trakas

10. Termination. This Agreement will automatically terminate upon the final distribution of the Escrow Items in accordance with the terms hereof.

11. Successors and Assigns; No Third Party Beneficiaries. This Agreement will be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties, provided that no rights or obligations arising under this Agreement may be assigned by any party without the prior written consent of the other parties and any purported assignment without such consent shall be of no force or effect. This Agreement shall be for the sole benefit of the parties to this Agreement and their respective heirs, successors, permitted assigns and legal representatives and is not intended, nor shall be construed, to give any person, other than the parties hereto and their respective heirs, successors, permitted assigns and legal representatives, any legal or equitable right, remedy or claim hereunder.

12. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or under public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.

13. Entire Agreement. This Agreement, together with any documents, instruments and certificates explicitly referred to herein, constitutes the entire agreement among the parties and supersedes any and all prior communications, agreements and understandings, written and oral, with respect to the subject matter hereof.

14. Amendments. This Agreement may not be amended or modified at any time except by a written instrument executed by each of the parties hereto and the Escrow Agent (or any successor escrow agent designated in accordance with the provisions of Section 7 above).

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15. Waiver. No failure or delay on the part of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor will any single or partial exercise of any such right preclude any other or further exercise thereof or of any other right. No waiver by any party will be effective unless such waiver is specifically contained in a writing signed by such waiving party.

16. Headings. The headings contained in this Agreement are inserted only for reference as a matter of convenience and in no way define, limit, or describe the scope or intent of this Agreement, and will not affect in any way the meaning or interpretation of this Agreement.

17. Governing Law. This Agreement, and all claims arising in whole or in part out of, related to, based upon, or in connection herewith or the subject matter hereof will be governed by and construed in accordance with the domestic substantive laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

18. Jurisdiction and Venue; Waiver of Jury Trial. Each of the parties submits to the exclusive jurisdiction of any state or federal court sitting in New York, New York, in any action or proceeding arising out of or relating to this Agreement, agrees that all claims in respect of the action or proceeding may be heard and determined in any such court and agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Each of the parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. Each party agrees that service of summons and complaint or any other process that might be served in any action or proceeding may be made on such party by sending or delivering a copy of the process to the party to be served at the address of the party and in the manner provided for the giving of notices in Section 9. Nothing in this Section 18, however, shall affect the right of any party to serve legal process in any other manner permitted by law. Each party agrees that a final, non-appealable judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.

19. Force Majeure. No party to this Agreement is liable to any other party for losses due to, or if it is unable to perform its obligations under the terms of this Escrow Agreement because of, acts of God, fire, floods, strikes, equipment or transmission failure, or other causes reasonably beyond its control.

20. Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which will be deemed an original for all purposes and all of which together will constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by electronic means, such as facsimile or portable document format, shall be as effective as delivery of a manually executed counterpart of this Agreement.

[The remainder of this page is intentionally left blank. Signatures follow.]

-14-

IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as of the date first above written.

THE ESCROW AGENT:	THE BANK OF NEW YORK

	By:	/s/ Thomas Hacker
		Name: Thomas Hacker
		Title: Vice President

	UNIVERSAL AMERICAN FINANCIAL CORP.

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: Executive Vice President and Chief Financial Officer

	WELSH, CARSON, ANDERSON & STOWE IX, L.P., as Shareholder Representative

	By:	WCAS IX ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Managing Member

	MH ACQUSIITION I CORP.

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: Executive Vice President and Chief Financial Officer

	MH ACQUSIITION II LLC

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: President

	MEMBERHEALTH, INC.

	By:	/s/ Charles E. Hallberg
		Name: Charles E. Hallberg
		Title: Chief Executive Officer

	MHRx LLC

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Member

	LEE-UNIVERSAL HOLDINGS, LLC

	By:	/s/ Joseph B. Rotberg
		Name: Joseph B. Rotberg
		Title: CFO

	WELSH, CARSON, ANDERSON & STOWE X, L.P.

	By:	WCAS X ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Managing Member

	UNION SQUARE UNIVERSAL PARTNERS, L.P.

	By:	Union Square Universal GP, LLC, its General Partner

	By:	/s/ Craig Fisher
		Name: Craig Fisher
		Title: Authorized Signatory

	PERRY PARTNERS, L.P.,

	By:	Perry Corp., its General Partner

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PARTNERS INTERNATIONAL, INC.,

	By:	Perry Corp., its Investment Manager

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND, L.P.

	By:	PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND (CAYMAN) GP, L.L.C., its General Partner,

	By:	PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PRIVATE OPPORTUNITIES FUND, L.P.

	By:	PERRY PRIVATE OPPORTUNITIES FUND GP, L.L.C., its General Partner,

	By:	PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	BANK OF AMERICA, N.A., as Administrative Agent

	By:	/s/ Aamir Saleem
		Name: Aamir Saleem
		Title: Vice President

EX-99.J 5 ex99-j.htm AMENDMENT TO ESCROW AGREEMENT ex99-j.htm

Exhibit J

EXECUTION COPY

AMENDMENT TO

ESCROW AGREEMENT

This Amendment (this “Amendment”) dated as of September 21, 2007, to the Escrow Agreement (the “Agreement”) dated as of September 18, 2007, by and among Universal American Financial Corp., a New York corporation (“Parent”), MH Acquisition I Corp., a Delaware corporation and wholly owned subsidiary of Parent, MH Acquisition II LLC, a Delaware limited liability company and wholly owned subsidiary of Parent, MHRx LLC, a Delaware limited liability company (“MHRx”), MemberHealth, Inc., an Ohio corporation and wholly owned subsidiary of MHRx, Welsh, Carson, Anderson & Stowe IX, L.P., a Delaware limited partnership, as the “Shareholder Representative” referred to in the Merger Agreement, Lee-Universal Holdings, LLC, Welsh, Carson, Anderson & Stowe X, L.P., Union Square Universal Partners, L.P., Perry Partners, L.P., Perry Partners International, Inc., Perry Private Opportunities Fund, L.P. and Perry Private Opportunities Offshore Fund, L.P., Bank of America, N.A., in its capacity as administrative agent (the “Administrative Agent”) for itself and certain other lenders under the Credit Agreement dated as of September 18, 2007, among Parent, the Administrative Agent and the other lenders and agents from time to time party thereto, and The Bank of New York, a New York banking corporation, as escrow agent.

WHEREAS, on September 18, 2007, the parties entered into the Agreement; and

WHEREAS, the parties have agreed to amend the definition of the “Escrow Release Date” under the Agreement.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants contained herein, the parties hereto agree as follows:

1. Definitions. Unless otherwise defined herein, all capitalized terms used herein shall have the meanings assigned to such terms in the Agreement.

2. Amendment. The first paragraph of Section 5(a) of the Agreement is amended in its entirety to read as follows:

“(a) On October 15, 2007, or on an earlier date which is specified in a certificate signed by each of Parent and MHRx (the “Escrow Release Certificate”) and is received by the Escrow Agent prior to October 15, 2007, the Escrow Agent will promptly deliver and release the Escrow Items as follows (the date of the following distributions shall be known as the “Escrow Release Date”); provided, however, that any Escrow Release Certificate delivered to the Escrow Agent must be delivered by 5:00 PM (New York City time) at least one day prior to any proposed Escrow Release Date occurring earlier than October 15, 2007, provided, further, that notwithstanding anything herein, if any proposed Escrow Release Date is prior to October 1, 2007, the Escrow Agent shall not deliver and shall not release the Escrow Items and the Escrow Release Date shall not occur unless Parent shall have delivered to the Closing Room executed original certificates, dated as of or prior to the proposed Escrow Release Date, representing the Escrow Shares, which Escrow Shares shall be distributed to the SPA Investors, MHRx (which shall further distribute such shares to its members) and The Bank of New York (as applicable), in each case, subject to no additional conditions and as if the Escrow Agent were distributing such Escrow Shares pursuant to the Agreement:”

3. Miscellaneous.

(a) Effect on Agreement. Except as amended by this Amendment, the Agreement shall remain in full force and effect. After the date of this Amendment, every reference in the Agreement to “this Agreement” shall mean the Agreement as amended by this Amendment.

(b) Governing Law. This Amendment, and all claims arising in whole or in part out of, related to, based upon, or in connection herewith or the subject matter hereof will be governed by and construed in accordance with the domestic substantive laws of the State of New York, without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction.

(c) Counterparts. This Amendment may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which will be deemed an original for all purposes and all of which together will constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by electronic means, such as facsimile or portable document format, shall be as effective as delivery of a manually executed counterpart of this Amendment.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written.

THE ESCROW AGENT:	THE BANK OF NEW YORK

	By:	/s/ Thomas Hacker
		Name: Thomas Hacker
		Title: Vice President

	UNIVERSAL AMERICAN FINANCIAL CORP.

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: Chief Financial Officer

	WELSH, CARSON, ANDERSON & STOWE IX, L.P., as Shareholder Representative

	By:	WCAS IX ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Managing Member

	MH ACQUISITION I CORP.

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: Executive Vice President and
		Chief Financial Officer

	MH ACQUISITION II LLC

	By:	/s/ Robert A. Waegelein
		Name: Robert A. Waegelein
		Title: President

	MEMBERHEALTH, INC.

	By:	/s/ David Azzolina
		Name: David Azzolina
		Title: Chief Financial Officer

	MHRx LLC

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Authorized Representative

	LEE-UNIVERSAL HOLDINGS, LLC

	By:	/s/ Joseph B. Rotberg
		Name: Joseph B. Rotberg
		Title: CFO

	WELSH, CARSON, ANDERSON & STOWE, X L.P.

	By:	WCAS X ASSOCIATES LLC, its General Partner

	By:	/s/ Sean M. Traynor
		Name: Sean M. Traynor
		Title: Managing Member

	UNION SQUARE UNIVERSAL PARTNERS, L.P.

	By:	Union Square Universal GP, LLC, its General Partner

	By:	/s/ Craig Fisher
		Name: Craig Fisher
		Title: Authorized Signatory

	PERRY PARTNERS, L.P.,

	By:	Perry Corp., its General Partner

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PARTNERS INTERNATIONAL, INC.

	By:	Perry Corp., its Investment Manager

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND, L.P.

	By:	PERRY PRIVATE OPPORTUNITIES OFFSHORE FUND (CAYMAN) GP, L.L.C., its General Partner

	By:	PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	PERRY PRIVATE OPPORTUNITIES FUND, L.P.

	By:	PERRY PRIVATE OPPORTUNITIES FUND GP, L.L.C., its General Partner,

	By:	PERRY CORP., its Managing Member

	By:	/s/ Michael C. Neus
		Name: Michael C. Neus
		Title: General Counsel

	BANK OF AMERICA, N.A., as Administrative Agent

	By:	/s/ Aamir Saleem
		Name: Aamir Saleem
		Title: Vice President