Tiptree Inc 8-K, filed Jun 21, 2022
Tiptree Inc. (TIPT)
8-K
2022-06-21
For: 2022-06-21
View Original
Added on
April 04, 2026
About this 8-K
Tiptree Inc filed this 8-K on June 21, 2022.
Items reported
- Item 1.01: Entered into a material agreement
- Item 1.02: Ended a material agreement
- Item 7.01: Regulation FD disclosure
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 21, 2022
(Exact Name of Registrant as Specified in Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||||||||||||
(212 ) 446-1400
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||
| Capital Market | |||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 1.01 | Entry into a Material Definitive Agreement. | ||||
The information set forth under “Item 8.01 - Other Events - Closing of the Strategic Investment” below is incorporated into this Item 1.01 by reference.
Item 1.02 | Termination of a Material Definitive Agreement | ||||
On June 21, 2022, in connection with the Closing (defined below), all outstanding obligations in respect of principal, interest, expenses, fees and other charges under that certain Credit Agreement, dated as of February 21, 2020 (the “Loan Agreement”), among Tiptree Inc. (“Tiptree”), Tiptree Holdings LLC (f/k/a Tiptree Operating Company, LLC) (the “Borrower”), Fortress Credit Corp. as Administrative Agent, Collateral Agent and Lead Arranger, and the lenders party thereto (the “Lenders”) were paid in full pursuant to a payoff letter (the “Payoff Letter”).
Pursuant to the Payoff Letter, Tiptree caused to be paid an aggregate prepayment amount of $113,202,343.75 (the “Payoff Amount”) and, upon payment of the Payoff Amount, the obligations of the Borrower, as well as Tiptree and its other subsidiaries, to the Lender thereunder were satisfied in full, the Loan Agreement and all related loan documents were terminated and all liens and security interests granted thereunder were released and terminated (excluding certain indemnification obligations that expressly survive termination of the Loan Agreement).
Item 7.01 | Regulation FD Disclosure. | ||||
On June 21, 2022, Tiptree released a press release related to the Strategic Investment (defined below). The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
The information in Item 7.01 of this Current Report on Form 8-K, including the information contained in Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section. Furthermore, the information in Item 7.01 of this Current Report on Form 8-K, including the information contained in Exhibit 99.1, shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 8.01 | Other Events. | ||||
Closing of the Strategic Investment
As previously disclosed in the Current Report on Form 8-K filed by Tiptree, with the Securities and Exchange Commission (the “SEC”) on October 12, 2021, Tiptree and its subsidiary, The Fortegra Group, LLC (“Fortegra”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with WP Falcon Aggregator, L.P., (“Purchaser”), a Delaware limited partnership affiliated with funds advised or managed by Warburg Pincus LLC, pursuant to which, subject to terms and conditions set forth in the Purchase Agreement, Fortegra committed to convert to a Delaware corporation and issue and sell, and the Purchaser agreed to purchase, a combination of (i) shares of common stock, par value $0.01 (“Common Stock”) of Fortegra, (ii) warrants to purchase shares of Common Stock (the “Warrants”), (iii) shares of Series A Preferred Stock (the “Preferred Stock”) of Fortegra and (iv) additional warrants to acquire Common Stock (the “Additional Warrants”), for an aggregate purchase price of $200 million, in one or more fundings (collectively, the transactions contemplated by the Purchase Agreement, hereinafter referred to as the “Strategic Investment”).
On June 21, 2022, the Strategic Investment closed (the “Closing”). Pursuant to the Purchase Agreement, at the Closing, Purchaser paid $200 million in cash to Fortegra as consideration for the issuance by Fortegra of (i) 10,666,667 shares of Common Stock, (ii) 3,520,000 Warrants (subject to adjustment), (iii) 5,333,333 shares of Preferred Shares and (iv) 1,712,511
Additional Warrants to Purchaser and 1,712,511 Additional Warrants to Tiptree Holdings LLC. The Strategic Investment gives the Purchaser an approximately 24% ownership in Fortegra on an as-converted basis consisting of the Common Stock and the Preferred Shares, as converted (not including the Warrants, Additional Warrants and all management incentives awards). In addition, at the Closing, Tiptree Holdings LLC, Fortegra, Purchaser and other investor parties thereto, entered into a Stockholders Agreement (the “Stockholders Agreement”) and Fortegra, Tiptree and Purchaser entered into a Registration Rights Agreement (the “RRA”). Summaries of the material terms of the Warrants, the Additional Warrants, the Preferred Stock, the Stockholders Agreement and the RRA were previously summarized in Tiptree’s Current Report on Form 8-K filed with the SEC on October 12, 2021 and incorporated into this Item 8.01 by reference.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which was filed as Exhibit 10.1 to the Current Report on Form 8-K filed by Tiptree with the SEC on October 12, 2021, and is incorporated into this Item 8.01 by reference.
The summaries of the material terms of the Warrants, the Additional Warrants, the Preferred Stock, the Stockholders Agreement and the RRA do not purport to be complete and are qualified in their entirety by reference to the full text of the Warrant to Purchase Common Stock, attached hereto as Exhibit 10.1, the Additional Warrants to Purchase Common Stock, attached hereto as Exhibits 10.2 and 10.3, respectively, the Certificate of Designations, attached hereto as Exhibit 10.4, the Stockholders Agreement, attached hereto as Exhibit 10.5, and the RRA, attached hereto as Exhibit 10.6, each of which is incorporated herein by reference.
Sale of Remaining Dry-Bulk Vessels
In May 2022, we signed definitive agreements to sell our remaining two dry-bulk vessels for an aggregate of $46.2 million, representing an approximate 47% gain as compared to the book value. The sales are expected to close in the third fiscal quarter of 2022.
Cautionary Statements
This filing includes “forward-looking statements.” All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. Although Tiptree believes that the expectations reflected in the forward-looking statements are reasonable, Tiptree can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect Tiptree’s operations, financial performance, and other factors as discussed in Tiptree’s filings with the SEC. Among the factors that could cause results to differ materially are those risks discussed in the periodic reports the Company files with the SEC. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” Tiptree does not undertake any duty to update any forward-looking statement except as required by law.
Item 9.01 | Financial Statements and Exhibits. | ||||
(d) List of Exhibits:
10.1 | |||||
10.2 | |||||
10.3 | |||||
10.4 | |||||
10.5 | |||||
10.6 | |||||
99.1 | |||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL). | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TIPTREE INC. | |||||||||||
| Date: | June 21, 2022 | By: | /s/ Jonathan Ilany | ||||||||
| Name: Jonathan Ilany | |||||||||||
| Title: Chief Executive Officer | |||||||||||
EXHIBIT 10.1
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
FORTEGRA GROUP, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: ___ Issued on June 21, 2022
Maximum Number of Shares: 3,520,000
This certifies that in consideration for value received by The Fortegra Group, Inc., a Delaware corporation, receipt of which is hereby acknowledged, WP Falcon Aggregator, L.P., a Delaware limited partnership (the “Holder”), is entitled, subject to the terms and conditions of this Warrant, to purchase from the Company (as defined below), from time to time, at a price per share equal to the Exercise Price at any time on or prior to the Expiration Date (as defined below), up to Three Million Five Hundred Twenty Thousand (3,520,000) shares of Warrant Stock (as defined below) (the “Maximum Number of Shares”) at the Exercise Price, upon delivery at the principal offices of the Company of a duly executed exercise notice in the form attached hereto as Exhibit 1 (“Exercise Notice”) and prior or concurrent payment of an amount equal to the Exercise Price multiplied by the number of shares of Warrant Stock so purchased, in lawful money of the United States or by an election to net exercise as set forth in Section 2.5. The Exercise Price and the number and character of shares of Warrant Stock purchasable under this Warrant are subject to adjustment as provided herein.
This Warrant has been issued pursuant to that certain Securities Purchase Agreement, dated as of October 11, 2021 (the “Purchase Agreement”), by and among the Company, the Holder and Tiptree Inc.
1.DEFINITIONS. The following definitions shall apply for purposes of this Warrant:
“Additional Shares of Common Stock” shall have the meaning set forth in the Certificate of Designation, dated as of June 21, 2022, establishing the Series A Preferred Stock, par value $0.01 per share, of the Company.
“Affiliate” means any Person or entity, directly or indirectly Controlling, Controlled by or under common Control with such Person or entity.
“Allowed Dividend” means an amount equal to one and a half percent (1.5%) of the of the initial price per share of Common Stock or Common Stock Equivalents to the public in the Initial Public Offering which amount shall be adjusted in the event of any share dividend, share split, share combination or other similar recapitalization of the Company’s Common Stock or any Common Stock Equivalent. In addition, the amount of the Allowed Dividend will be calculated in an equitable manner in connection with an Initial Public Offering not involving an underwritten offering.
“Board” means the Board of Directors of the Company.
“Business Day” means any day that is not a Saturday, a Sunday or any other day on which commercial banks generally are required or authorized to be closed by applicable Law in the State of New York.
“Certificate of Incorporation” means Company’s Certificate of Incorporation, as amended from time to time.
“Change of Control” means with respect to any Person, (a) any transaction or series of related transactions, whether or not such Person is a party thereto, in which, after giving effect to such transaction or transactions, the equity securities representing in excess of fifty percent (50%) of the voting power of such Person are owned directly or indirectly through one or more entities, by any “person” or “group” (as such terms are used in Section 13(d) of the Exchange Act) of persons, other than Michael G. Barnes, his Affiliates and any “group” in which Michael G. Barnes and his Affiliates represent at least 50% of the equity interests or voting power of such group or (b) a sale, lease or other disposition of all or substantially all of the assets of such Person and its Subsidiaries on a consolidated basis (including securities of such Person’s directly or indirectly owned Subsidiaries) to one or more purchasers.
“Closing Date” has the meaning set forth in the Purchase Agreement.
“Common Stock” means the Company’s Common Stock, par value $0.01 per share.
“Common Stock Equivalents” means any security of the Company that is equivalent to Common Stock or has rights to dividends or distributions that are pari passu to the Common Stock, or any such security of any Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
“Company” means The Fortegra Group, Inc., its predecessor and any corporation or other entity that succeeds to the Company’s obligations under this Warrant, whether by permitted assignment, by merger or consolidation or otherwise.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise.
“Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for, or rights, options or warrants to subscribe for, purchase or otherwise acquire, Common Stock or Common Stock Equivalents, but excluding Options, whether or not any of the foregoing is then immediately exercisable, convertible or exchangeable.
“Exercise Price” means an amount (not to be below $0.01) equal to (i) $15.00 minus (ii) the aggregate value of all cash dividends or distributions in respect of the Common Stock or Common Stock Equivalents from and after the Signing Date (whether such dividends or distributions are made prior to, on or after the date hereof), other than, after an Initial Public Offering, ordinary course dividends on the Common Stock or Common Stock Equivalents not exceeding the Allowed Dividend per share per annum.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.
“Expiration Date” means 5:00 p.m. Eastern Time on the seventh (7th) anniversary of the Closing Date (or, if such date is not a Business Day, the first Business Day thereafter) or such earlier date and time on which the Warrant ceases to be exercisable as provided in Section 4.2.
“Fair Market Value” means, with respect to a share of Warrant Stock as of any determination date, (i) if determined in connection with an exercise contingent upon an Initial Public Offering, the initial “price to public” of one share of the Warrant Stock specified in the final prospectus with respect to the Initial Public Offering (or comparable term); (ii) if determined in connection with a Change of Control of the Company or a transfer of shares subject to Section 2(b) of the Stockholders Agreement, then Fair Market Value shall be the value to be received in the applicable transaction by the holders of the Warrant Stock; (iii) if determined after, and not in connection with the Company’s Initial Public Offering, and: (A)
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if the Warrant Stock is traded on a national securities exchange, the value shall be deemed to be the volume-weighted average prices on the primary exchange on which the Warrant Stock is traded over the sixty (60) trading day period ending one (1) trading day prior to the date of determination (or, if shorter, over the period from the Company’s Initial Public Offering through the date that is one (1) trading day prior to the date of determination); or (B) if the Warrant Stock is actively traded over-the-counter, the value shall be deemed to be the average of the volume-weighted average prices over the sixty (60) day period ending one (1) trading day prior to the date of determination (or, if shorter, over the period from the Company first began trading over-the-counter through the date that is one (1) trading day prior to the date of determination); or (iv) if there is no active public market for the Warrant Stock, and the determination is not subject to clause (i) or (ii) above, then Fair Market Value shall be mutually agreed by the Holder and the Company; provided, that if the Holder and the Company do not mutually agree on Fair Market Value within fifteen (15) Business Days, then Fair Market Value shall be determined by the Independent Arbitrator in accordance with the Independent Arbitration Rules; provided, further, that in the case of clause (iv), the Holder shall have the right to withdraw its Exercise Notice within five (5) Business Days after the final determination of Fair Market Value.
“Independent Arbitrator” means a nationally recognized global investment bank, independent accounting firm, or other advisor having relevant valuation expertise, in each case agreed upon by the Holder and the Company.
“Independent Arbitration Rules” means that, in determining Fair Market Value, the Independent Arbitrator will determine in good faith its own fair market value (which shall not take into account any discount for lack of liquidity, minority interest or similar discounts) and shall then select either the value proposed by the Holder or the value proposed by the Company (each, as submitted to the Independent Arbitrator in connection with its engagement), whichever one is closer to the value determined by the Independent Arbitrator (which selected value shall constitute Fair Market Value for such purpose for the three (3) months following such determination, unless an event, fact or circumstance shall have occurred that would, in the reasonable judgment of the Company or the Holder, be material to a determination of Fair Market Value). The Independent Arbitrator will be instructed to issue its determination within 30 days of being engaged, and to deliver a written report to the Holder and the Company reflecting the Independent Arbitrator’s own calculation of fair market value together with reasonable supporting detail thereof. The Company will cooperate with the Independent Arbitrator in all reasonable respects, but neither the Holder nor the Company will be permitted to have any ex parte meetings, teleconferences or other correspondence with the Independent Arbitrator without giving the other party reasonable advance notice as it is intended that both parties be included in all discussions and correspondence with the Independent Arbitrator. The party whose proposed fair market value has not been selected by the Independent Arbitrator shall be responsible for the fees, costs and expenses of the Independent Arbitrator in respect of such determination. The determination by the Independent Arbitrator shall be final and binding, absent fraud or manifest error.
“Initial Public Offering” means an initial registered offering of Common Stock or Common Stock Equivalents to the public or the initial date Common Stock or Common Stock Equivalents trade on a national securities exchange or is registered with the SEC (including as a result of a transaction with a “special purpose acquisition company”).
“Lien” means any mortgage, pledge, lien, encumbrance, charge, restriction, option or other security interest, equitable interest, or easement of any nature.
“Marketable Securities” shall mean securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, and is then current in its filing of all required reports and other information under the Securities Act of 1933, as amended, and the Exchange Act of 1934, as amended; (ii) the class and series of shares or other security of the issuer that would be received by the Holder in connection with a Change of Control were Holder to exercise this Warrant on or prior to the closing thereof is then traded on a nationally recognized securities exchange; (iii) the issuer has a market capitalization, as of the date immediately prior to and on the closing of such Change of Control, of at least one billion dollars ($1,000,000,000); and (iv) the shares or other security of the issuer that would be received by the Holder in connection with a Change of Control were Holder to exercise this Warrant on or prior to the closing thereof represents (A) less than ten percent (10%) of the number of issued and outstanding shares of the issuer or (B) the average daily trading volume over the twenty (20) trading day
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period before the date of the announcement of the Change of Control is at least one percent (1%) of the outstanding shares of common stock of the issuer, provided that, in the case of this clause (B), such shares are not more than fifteen percent (15%) of the issued and outstanding shares of the issuer.
“Option” means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to a bona fide plan, agreement or arrangement approved by the Board.
“Person” means an individual, partnership (whether general or limited), joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.
“Signing Date” means October 11, 2021.
“Stockholders Agreement” means that certain Stockholders Agreement, dated as of the Closing Date, as amended, by and among the Company, the Holder, Tiptree Holdings LLC and the other parties thereto.
“Subsidiary” means, with respect to any Person, (a) any other Person of which an aggregate of more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such other Person (or comparable body in the case of a Person that is not a corporation) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, (b) any partnership, limited liability company or other entity in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%), and (c) any other Person, the management of which is controlled, directly or indirectly, by such Person.
“Warrant” means this Warrant and any warrant(s) delivered in substitution or exchange for this Warrant, as provided herein.
“Warrant Stock” means the Common Stock. The number and character of shares of Warrant Stock are subject to adjustment as provided herein and the term “Warrant Stock” shall include stock and other securities and property at any time receivable or issuable upon exercise of this Warrant taking into account all such adjustments.
“Warrant Stock Equivalents” means any security of the Company that is equivalent to a Warrant Stock or has rights to dividends or distributions that are pari passu to the Warrant Stock, or any such security of any Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
2.EXERCISE.
2.1Method of Exercise. Subject to the terms and conditions of this Warrant, Holder may exercise this Warrant in whole or in part, at any time or from time to time, on any Business Day on or before the Expiration Date, for up to the Maximum Number of Shares. This Warrant shall be exercised by delivery of the Exercise Notice duly executed by Holder, and by payment in a form specified in Section 2.2 of an amount equal to (i) the number of shares of Warrant Stock to be purchased by Holder (not to exceed the Maximum Number of Shares) multiplied by (ii) the Exercise Price or an election to net exercise the Warrant as provided in Section 2.5 for the number of shares of Warrant Stock to be determined in accordance with Section 2.5. Holder may exercise this Warrant, in whole or in part, contingent upon the occurrence of a Change of Control of the Company, an Initial Public Offering or the consummation of a transfer of shares subject to Section 2(b) of the Stockholders Agreement (so long as such Change of Control, Initial Public Offering or transfer occurs prior to the Expiration Date), which contingent exercise may further require that such Change of Control, Initial Public Offering or transfer
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occur prior to a certain date. Unless the Exercise Notice expressly specifies otherwise, such contingent exercise shall be deemed to occur immediately prior to the occurrence of such Change of Control, Initial Public Offering or transfer (it being agreed that in the event the aggregate Exercise Price thereof is paid to the Company prior to the occurrence of such event, fact or circumstance, such amounts will be held in trust for the benefit of the Holder and promptly returned to the Holder in the event such event, fact or circumstance does not timely occur).
2.2Form of Payment. Payment for the Warrant Stock upon exercise may be made by (a) a check payable to the Company’s order, (b) wire transfer of funds to the Company, (c) cancellation of indebtedness of the Company to Holder, if any, provided that the amount of such indebtedness is not subject to dispute, (d) by net exercise as provided in Section 2.5, or (e) any combination of the foregoing.
2.3Partial Exercise. Upon a partial exercise of this Warrant, the Company shall promptly (and, in any event, within ten (10) Business Days) replace this Warrant with a new Warrant of like tenor in which the Maximum Number of Shares is so reduced. Whether or not this Warrant is surrendered, upon exercise thereof, this Warrant shall have no further force or effect, except in respect of the rights hereunder with respect to such exercise and the right, if any, to receive a substitute warrant in the event of a partial exercise.
2.4No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant. If upon exercise of this Warrant in whole or in part, a fraction of a share would otherwise result, then in lieu of such fractional share, the Company shall pay to Holder an amount in cash equal to such fraction of a share multiplied by the Fair Market Value of a Warrant Share as of the effective date of such exercise.
2.5Net Exercise Election. Holder may elect to exercise all or any portion, of this Warrant, without the payment by Holder of any additional consideration, by delivery of an Exercise Notice with the net exercise election selected, duly executed by Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula:
X = Y (A-B)
A
A
where X = the number of shares of Warrant Stock to be issued to Holder pursuant to a net exercise of this Warrant effected pursuant to this Section 2.5.
Y = the number of shares of Warrant Stock being exercised.
A = the Fair Market value of one share of Warrant Stock as of the effective date of such exercise.
B = the Exercise Price.
The Company will respond in writing to an inquiry by Holder as to the then current Fair Market Value of one share of Warrant Stock as promptly as practicable under the circumstances.
3.ISSUANCE OF STOCK. Except as set forth in Section 2.1 or Section 4 or as set forth in the Exercise Notice (provided, that the Exercise Notice may not specify a date or time prior to the delivery of the Exercise Notice and payment in full of the Exercise Price, to the extent not elected to be net settled), this Warrant shall be deemed to have been exercised as of the close of business on the date of delivery of the Exercise Notice, and the Holder shall be treated for all purposes as the holder of record of the applicable shares of Warrant Stock (and, to the extent applicable, any cash, securities or other property issuable thereon in accordance with Section 5) as of 11:59 p.m. on the date of delivery of the Exercise Notice (or, if such day is not a Business Day, the first Business Day thereafter), subject to
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payment in full of the Exercise Price, to the extent not elected to be net settled. As soon as practicable on or after such date (and, in any event, no later than ten (10) Business Days thereafter), the Company shall issue and deliver to the Holder evidence of issuance in book-entry form of the number of whole shares of Warrant Stock issuable upon such exercise, together with payment of any fractional shares pursuant to Section 2.4 (and, to the extent applicable, evidence of issuance or delivery of any other securities or other property issuable thereon in accordance with Section 5).
4.CERTAIN TRANSACTIONS.
4.1If the Company proposes at any time to effect a Change of Control, an Initial Public Offering, a Deemed Liquidation Event, a Reorganization Event or a Dividend Event, then the Company shall give the Holder at least ten (10) Business Days advance written notice (each, a “Transaction Notice”) of the anticipated closing date for such transaction or event or the anticipated initial closing date for such Initial Public Offering, as applicable.
4.2In the event of a merger involving the Company that constitutes a Change of Control of the Company in which the consideration received by the holders of Warrant Stock consists solely of cash or a combination of cash and Marketable Securities (provided, that the cash portion thereof is at least equal to the Exercise Price at the time), and the Fair Market Value of the consideration per share to be received by the holders of Warrant Stock in such transaction would be greater than the Exercise Price in effect immediately prior to such transaction, and Holder has not fully exercised this Warrant prior thereto, then this Warrant shall automatically be deemed to be fully exercised in a net exercise pursuant to Section 2.4 effective immediately prior to and contingent upon the consummation of such transaction; provided, that at the election of the Holder in connection with such transaction where the consideration is a combination of cash and Marketable Securities, the cash portion of the consideration shall be used first to effect such net exercise (i.e., notwithstanding the net exercise, if so elected, the Holder would receive all of the Marketable Securities that it would have received had it exercised this Warrant for cash, but the cash consideration would be net of the Exercise Price). In the event of a merger involving the Company that constitutes a Change of Control of the Company in which the consideration to be received by the holders of Warrant Stock consists solely of cash or a combination of cash and Marketable Securities (provided, that the cash portion thereof is at least equal to the Exercise Price at the time), and where the Fair Market Value of the consideration per share to be received by the holders of Warrant Stock in such transaction would be equal to or less than the Exercise Price in effect immediately prior to such transaction, then this Warrant will expire immediately prior to the consummation of such Change of Control. For clarity, upon the closing of any Change of Control of the Company that does not result in the exercise or expiration of this Warrant pursuant to this Section 4.2, Section 5.3 shall apply.
4.3In the event that, upon the Expiration Date, the Fair Market Value of one share of Warrant Stock is greater than the Exercise Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised on a net exercise basis pursuant to Section 2.5 as to all shares of Warrant Stock for which it shall not previously has been exercised.
4.4At the request of the Holder in connection with a Change of Control of the Company, the Company shall use commercially reasonable efforts to structure such Change of Control transaction to ensure that a pro rata portion of this Warrant is sold or otherwise disposed of in such transaction in lieu of selling or otherwise disposing of the Warrant Stock exercisable hereunder.
5.ADJUSTMENT PROVISIONS. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant and the Exercise Price therefor, are subject to adjustment upon each event in Sections 5.1 through 5.4 occurring between the date this Warrant is issued and earlier of the time that it is exercised in full or the Expiration Date:
5.1Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) effect a subdivision of the outstanding shares of Warrant Stock or Warrant Stock Equivalents by reclassification
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or otherwise into a greater number of shares, or declare a dividend on, or a distribution in respect of, Warrant Stock, which dividend or distribution is payable in additional shares of Warrant Stock (or a distribution in respect of, Warrant Stock Equivalents, which dividend or distribution is payable in additional Warrant Stock Equivalents of the same class and series and from the same issuer), then the Maximum Number of Shares purchasable hereunder shall be proportionately increased and the Exercise Price shall be proportionately decreased. If the Company shall at any time or from time to time after the Signing Date effect a combination or consolidation of the outstanding shares of Warrant Stock or Warrant Stock Equivalents, by reclassification or otherwise into a lesser number of shares, then the Exercise Price shall be proportionately increased and the Maximum Number of Shares shall be proportionately decreased.
5.2Adjustment for Other Dividends and Distributions. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) make or issue, or shall fix a record date for the determination of eligible holders entitled to receive a dividend or other distribution payable with respect to the Warrant Stock or any Warrant Stock Equivalent that is payable in (a) securities of the Company or any of its Subsidiaries (that is not subject to Section 5.1) or (b) other securities, property or assets (other than cash), which dividend or distribution is actually made (each a “Dividend Event”), then and in each such case, Holder, upon exercise of this Warrant at any time after such Dividend Event (or the record date thereof), shall receive, in addition to the shares of Warrant Stock, the securities or such other properties or assets that would have been payable to Holder if Holder had completed such exercise (in cash) of this Warrant, immediately prior to the record date of such Dividend Event.
5.3Adjustment for Merger or Reorganization, etc.. If after the Signing Date (whether prior to, on or after the date hereof) (a) the Company shall effect any recapitalization, reorganization or reclassification of the Company or any of its securities, (b) the Company shall consolidate with or merge into one or more other Persons which results in the Warrant Stock being converted or exchanged for other securities or (c) a Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis and is not a direct or indirect wholly-owned Subsidiary of the Company takes any of the actions contemplated by clause (a) or (b), mutatis mutandis (each, a “Reorganization Event”), then and in each such case, Holder, upon the exercise of this Warrant after such Reorganization Event shall be entitled to receive, in lieu of the shares of Warrant Stock that Holder would have been entitled to receive upon such exercise prior to such Reorganization Event (but without limiting the right to receive any securities or property owed as a result of Section 5.2), the stock or other securities or property which Holder would have been entitled to receive upon such Reorganization Event if, immediately prior to such Reorganization Event (or, if applicable, the record date thereof), Holder had completed such exercise (in cash) of this Warrant (and the Maximum Number of Shares shall be adjusted accordingly). If after such Reorganization Event, the Warrant is exercisable for securities of a corporation or entity other than the Company, then as a condition to effecting the Reorganization Event, the Company shall cause such corporation or entity to duly execute and deliver, upon request to Holder a supplement hereto acknowledging such corporation’s or other entity’s obligations under this Warrant promptly (and, in any event, within ten (10) Business Days) following the completion of such Reorganization Event; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such Reorganization Event.
5.4Adjustment upon Issuance of Additional Common Stock.
(a)Other than in connection with the Reorganization (as defined in the Purchase Agreement) or the Management Rollover (as defined in the Purchase Agreement) and subject to Section 5.7, in the event the Company or any of its Subsidiaries shall at any time on or after the Signing Date (whether prior to, on or after the date hereof) issue or be deemed to issue Additional Shares of Common Stock, without consideration or for a consideration per share less than the Exercise Price in effect immediately prior to such issuance or deemed issuance, then the Exercise Price shall be
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reduced, concurrently with such issuance or deemed issuance, to a price (calculated to the nearest cent) determined in accordance with the following formula:
EP2 = ((A * EP1) + B) ÷ (A + C)
For purposes of the foregoing formula, the following definitions shall apply:
“EP2” shall mean the Exercise Price in effect as of immediately after such issuance or deemed issuance of Additional Shares of Common Stock.
“EP1” shall mean the Exercise Price in effect as of immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock.
“A” shall mean the number of shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance (treating for this purpose as outstanding (i) all shares of vested restricted stock that were issued pursuant to a stock option or stock incentive plan prior to such issuance, (ii) all shares of Common Stock or Common Stock Equivalents issuable upon exercise (in cash) of outstanding vested and unexercised options that were issued pursuant to a stock option or stock incentive plan prior to such issuance, but only to the extent such vested and unexercised options have an exercise price that is less than the per share consideration received in connection with such issuance, and (iii) without duplication and subject to clauses (i) and (ii), all other shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance or that would be outstanding upon conversion or exchange of Convertible Securities outstanding immediately prior to such issuance, but only to the extent such Convertible Securities have a conversion price that is less than the per share consideration received in connection with such issuance);
“B” shall mean the aggregate consideration, if any, received by the Company or its Subsidiaries for such issuance; and
“C” shall mean the number of Additional Shares of Common Stock issued or deemed issued in such transaction.
(b)In the event that at any time in any manner Convertible Securities are granted or issued and the price per share for which the Common Stock or Common Stock Equivalents is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Company or its Subsidiaries as consideration for the granting or issuing of such Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Company or its Subsidiaries upon the exercise, conversion or exchange of all such Convertible Securities, plus, in the case of Convertible Securities which are exercisable, convertible or exchangeable into other Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such other Convertible Securities and upon the conversion, exchange or exercise thereof, by (y) the total maximum number of shares of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities) shall be less than the Exercise Price in effect immediately prior to such issuance, then the total maximum amount of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities shall (as of the date of issuance of such Convertible Security) be deemed to have been issued for such price per share. No adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or Common Stock Equivalents, except as otherwise provided in the paragraph immediately below.
(c)If the purchase price provided for in any Convertible Securities, or the additional consideration, if any, payable upon the conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into, exchangeable for or exercisable for Common Stock or Common Stock Equivalents shall change at any time (including by reason of provisions designed to protect against dilution of the type set forth in this Section 5.4), the Exercise Price in effect at the time of such change shall forthwith be readjusted to the Exercise Price
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which would have been in effect at such time had such Convertible Securities still outstanding provided for such changed purchase price, additional consideration or rate, as the case may be, at the time initially granted, issued or sold.
(d)On the expiration or redemption of, or the termination of any right to convert, exchange or exercise, any Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be increased to the Exercise Price which would have been in effect at the time of such expiration or termination had such Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.
(e)In the event any Additional Shares of Common Stock shall be issued or deemed issued for a consideration other than cash, the amount of the consideration other than cash received shall be the fair market value of such consideration as mutually agreed by the Holder and the Company; provided, that if the Holder and the Company do not so mutually agree within fifteen (15) Business Days, then fair market value shall be determined by the Independent Arbitrator in accordance with the Independent Arbitration Rules, mutatis mutandis.
5.5Notice of Adjustments. Upon the occurrence of each adjustment or readjustment or the Exercise Price or the number of shares of Warrant Stock or other securities issuable upon the exercise of this Warrant, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and shall promptly give written notice to the Holder of each adjustment under Section 5 of the Exercise Price or the number of shares of Warrant Stock or other securities that remain issuable upon exercise of this Warrant. The notice shall describe the adjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
5.6No Change Necessary. No adjustment shall be made pursuant to Section 5 for any action taken that is required by, and taken in accordance with, the Purchase Agreement or the Certificate of Designation, dated as of June 21, 2022, establishing the Series A Preferred Stock, par value $0.01 per share, of the Company. No adjustment shall be made pursuant to Section 5 with respect to any dividend, distribution, subdivision, reclassification, combination or consolidation of the securities of a wholly-owned Subsidiary of the Company. The form of this Warrant need not be changed because of any adjustment in the Exercise Price or in the number of shares of Warrant Stock issuable upon its exercise.
5.7Reservation of Stock. If the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant that are authorized and unissued under the Company’s Certificate of Incorporation shall not be sufficient to effect the exercise of this Warrant in full, the Company will promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Warrant Stock or other securities issuable upon exercise of this Warrant as shall be sufficient for such purpose. The Company shall at all times reserve a sufficient number of shares of Warrant Stock out of its authorized but unissued shares to allow the exercise in full of this Warrant.
6.NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder against wrongful impairment. Without limiting the generality of the foregoing, the Company will take all such action as may be necessary or appropriate in order that the Company may duly and validly issue fully paid and nonassessable shares of Warrant Stock upon the exercise of this Warrant.
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7.REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Holder as of the date hereof that:
7.1Organization, Qualification and Corporate Power. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority, and all authorizations, licenses and permits, necessary to own, lease and operate the assets and properties it purports to own, lease or operate and to carry on its business as presently conducted.
7.2Enforceability. The Company has all requisite corporate power and authority to execute and deliver this Warrant. The execution, delivery and performance of this Warrant by the Company and the consummation by the Company of the of transactions contemplated hereby have been duly and validly authorized and approved by all require action on the part of the Company. No other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Warrant or to consummate the transactions contemplated hereby. This Warrant has been duly executed and delivered by the Company constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies.
7.3No Violations; Consents.
(a)The execution, delivery and performance of this Warrant by the Company does not, and the consummation by the Company of the transactions contemplated hereby, and compliance by the Company with the provisions of this Warrant will not conflict with, or result in any violation or breach by the Company of the governing documents of the Company or any of its Subsidiaries.
(b)Except as required by the Securities Act of 1933, as amended, or under any applicable “blue sky” or state securities law then in effect (if applicable), no consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Person is required in connection with the execution, delivery and performance of this Warrant.
7.4Due Authorization and Valid Issuance. The shares of Warrant Stock to be issued under this Warrant will be duly authorized, validly issued, fully paid and nonassessable and will not be issued in violation of any preemptive rights, right of first refusals or offer, buy-sell arrangements or similar arrangements, and will be issued in compliance in all material respects with applicable law and free and clear of all Liens (other than transfer restrictions under applicable securities laws).
7.5Reserve. The Company has reserved, free of preemptive rights and other preferential rights, a sufficient number of its previously authorized but unissued shares of Warrant Stock to satisfy the exercise of this Warrant in full.
8.GENERAL PROVISIONS.
8.1No Voting or Other Rights. This Warrant does not entitle Holder to any voting rights or other rights as a stockholder of the Company, unless and until (and only to the extent that) this Warrant is actually validly exercised for shares of the Company’s capital stock in accordance with its terms. In the absence of valid exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of Holder, shall cause Holder to be a stockholder of the Company for any purpose.
8.2Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount
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to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall promptly (and, in any event, within ten (10) Business Days) execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
8.3Assignment; Transfer. This Warrant and any Warrant Stock issued hereunder may be assigned, conveyed or transferred, in whole or in part, only in accordance with, and to the extent permitted by, Section 2 of the Stockholders Agreement, mutatis mutandis. The rights and obligations of the Company and Holder under this Warrant shall be binding upon and benefit of their respective permitted successors, permitted assigns, heirs, administrators and permitted transferees.
8.4Construction. Except where expressly stated otherwise in this Warrant, the following rules of interpretation apply to this Warrant: (a) unless the context otherwise requires, “either” and “or” are not exclusive and shall include both the conjunctive and disjunctive, “any” shall mean “one or more” and “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”; (b) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Warrant refer to this Warrant as a whole and not to any particular provision of this Warrant; (c) “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if”; (d) the descriptive headings and table of contents included herein are included for convenience only and shall not affect in any way the meaning or interpretation of this Warrant or any provision hereof; (e) definitions contained in this Warrant are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms and vice versa; (f) references to a Person are also to its successors and permitted assigns to the extent not prohibited by this Warrant; (g) references to a “Section,” “Exhibit” or “Schedule” refer to a Section of, or an Exhibit or Schedule to, this Warrant; (h) references to “$” or otherwise to dollar amounts refer to the lawful currency of the United States; (i) the word “will” shall have the same meaning as the word “shall” and vice versa; and (j) references to “day” or “days” in the lower case means calendar days. The language used in this Warrant shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. No summary of this Warrant prepared by any Party shall affect the meaning or interpretation of this Warrant. If any date on which a Party is permitted or required to exercise any right or privilege or discharge any duty or obligation pursuant to the terms hereof is not a Business Day, then such Party may exercise such right or privilege or discharge such duty or obligation on the next succeeding Business Day. In the computation of periods of time before which, within which or following which any act is to be done or step taken under this Warrant, the date that is the reference date in calculating such period will be included in such computation.
8.5Notices. Any and all notices required or permitted to be given pursuant to the provisions of this Warrant will be in writing and will be effective and deemed to provide the recipient sufficient notice under this Warrant on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) Business Day after deposit with an express overnight courier for United States deliveries (marked for overnight delivery), or five (5) Business Days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; (iii) three (3) Business Days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries or (iv) when sent via email if sent prior to 5:00 p.m. (local time of the recipient) on a Business Day, or at 9:00 a.m. (local time of the recipient) on the next succeeding Business Day otherwise. All notices not delivered personally or email will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address or email address as follows, or at such other address, email address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto as follows.
If to Holder:
c/o Warburg Pincus LLC
450 Lexington Avenue
New York, NY 10017
Attention: Brett K. Shawn
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Email: brett.shawn@warburgpincus.com
notices@warburgpincus.com
with a copy to (which shall not constitute notice):
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: Mark A. Cognetti
Dvir Oren
Email: Mcognetti@willkie.com
Doren@willkie.com
If to the Company:
Fortegra Group, Inc.
10751 Deerwood Park Blvd., Suite 200
Jacksonville, FL 32256,
Attention: General Counsel
Email: CRomaine@fortegra.com
with a copy to (which shall not constitute notice):
Tiptree Inc.
299 Park Avenue, 13th FL
New York, NY 10171
Attention: Jonathan Ilany
Neil C. Rifkind
Email: NRifkind@tiptreeinc.com
JIlany@tiptreeinc.com
and
Ropes & Gray LLP
Prudential Tower, 800 Boylston Street
Boston, MA 02199
Attention: Michael Littenberg
William Michener
Email: Michael.Littenberg@ropesgray.com
William.Michener@ropesgray.com
8.6Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Warrant is held to be prohibited by or invalid under the applicable Law of any jurisdiction, or unenforceable in any jurisdiction, such provision shall be effective only to the extent of such prohibition, invalidity or unenforceability in such jurisdiction, without invalidating the remainder of this Warrant, and without affecting the validity or enforceability of this Warrant, including such provision, in any other jurisdiction, and such provision shall be interpreted, revised or applied in a manner that renders it valid and enforceable to the fullest extent possible.
8.7Waivers and Amendments. This Warrant may be amended or modified only by a written agreement executed and delivered by duly authorized officers of the Company and Holder. This Warrant and any provision herein or performance hereunder may be waived only in writing (including by electronic means) by the Holder. The waiver of a breach of any provision of this Warrant shall not operate or be construed as a waiver of any subsequent breach, whether or not similar, unless such waiver specifically states that it is to be construed as a continuing waiver. No delay or omission to exercise any right, power or remedy accruing under this Warrant, upon any breach or default under this Warrant, shall impair any such right, power or remedy of Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring;
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nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Warrant, or any waiver of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.
8.8Counterparts. This Warrant may be executed and delivered (including by facsimile transmission, PDF or other electronic delivery) in one or more counterparts, and in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
8.9Enforcement of Agreement; Specific Performance. The Company acknowledges and agrees that the rights and obligations set forth in this Warrant are unique and that, if this Warrant is not timely performed in accordance with its terms or is otherwise breached or threatened to be breached, Holder may be damaged irreparably and have no adequate remedy at law and even if monetary damages would be available, such monetary damages would not be an adequate remedy. Accordingly, the Company agrees that Holder will have the right, in addition to any other rights and remedies existing in its favor at law or in equity, to enforce its rights and the Company’s obligations under the terms of this Warrant, by bringing an action or actions for specific performance (including for specific performance of any and all of the transactions contemplated by this Warrant), injunctive or other equitable relief (without proof of damage or posting of bond or other security). Any and all remedies provided herein will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon Holder, and the exercise by Holder of any one remedy will not preclude the exercise of any other remedy. The Company agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief when available pursuant to the terms of this Warrant on the basis that Holder has an adequate remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity.
8.10Governing Law; Attorneys’ Fees. This Warrant and any claim, dispute, action, cause of action, or controversy related to or arising, directly or indirectly, out of, caused by or resulting from this Warrant will be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any law (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
8.11Jurisdiction. This Warrant has been executed and delivered in and shall be deemed to have been made in the State of Delaware. The Company, and by acceptance of this Warrant, the Holder agrees to the exclusive jurisdiction of the Chancery Court of the State of Delaware (or any appellate court therefrom) or, if jurisdiction is not available in the Chancery Court of the State of Delaware, any state or federal court within the City of Wilmington, Delaware, with respect to any claim, dispute, action, cause of action or controversy arising, directly or indirectly, out of, caused by, or resulting from this Warrant, and waives personal service of any and all process upon it, and consents that all services of process be made by registered or certified mail, return receipt requested, directed to it at its address as set forth in Section 8.5 (excluding e-mail delivery), and service so made shall be deemed to be completed when received. The Company and, by acceptance of this Warrant, the Holder waive any objection based on forum non conveniens and waive any objection to venue of any action instituted hereunder. Nothing in this Section 8.11 shall affect the rights to serve legal process in any other manner permitted by Law. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
8.12Waiver of Jury Trial. THE COMPANY, AND BY ACCEPTANCE OF THIS WARRANT, THE HOLDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS WARRANT.
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[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the date first written above.
THE FORTEGRA GROUP INC.
By:/s/Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
Title: President and Chief Executive Officer
Title: President and Chief Executive Officer
[Signature Page to Warrant]
EXHIBIT 1
EXERCISE NOTICE
EXERCISE NOTICE
To: The Fortegra Group Inc. (the “Company”)
We refer to that certain Warrant to Purchase Common Stock, Warrant No.___, issued on [______] (the “Warrant”). Capitalized terms used but not otherwise defined herein shall have the meaning assigned to them in the Warrant.
Select one of the following two alternatives:
Cash Exercise. On the terms and conditions set forth in the Warrant, the Holder hereby elects to purchase shares of Warrant Stock, pursuant to the terms of the Warrant, and tenders herewith payment of the Exercise Price for such shares in full.
Net Exercise Election. On the terms and conditions set forth in the Warrant, the undersigned Holder elects to exercise the Warrant by net exercise election pursuant to Section 2.5 of the Warrant. This conversion is exercised with respect to ____________________ shares of Warrant Stock.
Contingency. This exercise is contingent upon the occurrence of the following.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Effective Time. Notwithstanding the Warrant, the exercise contemplated by this Exercise Notice shall be effective as of ______________________________ and the shares of Warrant Stock exercised hereby shall be deemed issued on ____________________________________________________________________.
Date: | [HOLDER] | ||||
By: | |||||
| Its: | |||||
EXHIBIT 10.2
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
FORTEGRA GROUP, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: ___ Issued on June 21, 2022
This certifies that in consideration for value received by The Fortegra Group, Inc., a Delaware corporation, receipt of which is hereby acknowledged, WP Falcon Aggregator, L.P., a Delaware limited partnership (the “Holder”), is entitled, subject to the terms and conditions of this Warrant, to purchase from the Company (as defined below), from time to time, at an exercise price (the “Exercise Price”) of one cent ($0.01) per share of Warrant Stock (as defined below), at any time on or after the Vesting Date (as defined below) and on or prior to the Expiration Date (as defined below), up to One Million Seven Hundred Twelve Thousand Five Hundred Eleven (1,712,511) shares of Warrant Stock (the “Maximum Number of Shares”), upon delivery at the principal offices of the Company of a duly executed exercise notice in the form attached hereto as Exhibit 1 (“Exercise Notice”) and prior or concurrent payment of an amount equal to the Exercise Price multiplied by the number of shares of Warrant Stock so purchased, in lawful money of the United States or by an election to net exercise as set forth in Section 2.5. The number and character of shares of Warrant Stock purchasable under this Warrant are subject to adjustment as provided herein.
This Warrant has been issued pursuant to that certain Securities Purchase Agreement, dated as of October 11, 2021 (the “Purchase Agreement”), by and among the Company, the Holder and Tiptree Inc.
1.DEFINITIONS. The following definitions shall apply for purposes of this Warrant:
“Additional Shares of Common Stock” shall have the meaning set forth in the Certificate of Designation, dated as of June 21, 2022, establishing the Series A Preferred Stock, par value $0.01 per share, of the Company.
“Affiliate” means any Person or entity, directly or indirectly Controlling, Controlled by or under common Control with such Person or entity.
“Board” means the Board of Directors of the Company.
“Business Day” means any day that is not a Saturday, a Sunday or any other day on which commercial banks generally are required or authorized to be closed by applicable Law in the State of New York.
“Capital Commitment” has the meaning set forth in the Purchase Agreement.
“Certificate of Incorporation” means Company’s Certificate of Incorporation, as amended from time to time.
“Change of Control” means with respect to any Person, (a) any transaction or series of related transactions, whether or not such Person is a party thereto, in which, after giving effect to such transaction or transactions, the equity securities representing in excess of fifty percent (50%) of the voting power of such Person are owned directly or indirectly through one or more entities, by any “person” or “group” (as such terms are used in Section 13(d) of the Exchange Act) of persons, other than, Michael G. Barnes, his Affiliates and any “group” in which Michael G. Barnes and his Affiliates represent at least 50% of the equity interests or voting power of such group or (b) a sale, lease or other disposition of all or substantially all of the assets of such Person and its Subsidiaries on a consolidated basis (including securities of such Person’s directly or indirectly owned Subsidiaries) to one or more purchasers.
“Closing Date” has the meaning set forth in the Purchase Agreement.
“Common Stock” means the Company’s Common Stock, par value $0.01 per share.
“Common Stock Equivalents” means any security of the Company that is equivalent to a Common Stock or has rights to dividends or distributions that are pari passu to the Common Stock, or any such security of any Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
“Company” means The Fortegra Group, Inc., its predecessor and any corporation or other entity that succeeds to the Company’s obligations under this Warrant, whether by permitted assignment, by merger or consolidation or otherwise.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise.
“Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for, or rights, options or warrants to subscribe for, purchase or otherwise acquire, Common Stock or Common Stock Equivalents, but excluding Options, whether or not any of the foregoing is then immediately exercisable, convertible or exchangeable.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.
“Expiration Date” means 5:00 p.m. Eastern Time on the seventh (7th) anniversary of the Closing Date (or, if such date is not a Business Day, the first Business Day thereafter) or such earlier date and time on which the Warrant ceases to be exercisable as provided in Section 4.2.
“Fair Market Value” means, with respect to a share of Warrant Stock as of any determination date, (i) if determined in connection with an exercise contingent upon an Initial Public Offering, the initial “price to public” of one share of the Warrant Stock specified in the final prospectus with respect to the Initial Public Offering (or comparable term); (ii) if determined in connection with a Change of Control of the Company or a transfer of shares subject to Section 2(b) of the Stockholders Agreement, then Fair Market Value shall be the value to be received in the applicable transaction by the holders of the Warrant Stock; (iii) if determined after, and not in connection with the Company’s Initial Public Offering, and: (A) if the Warrant Stock is traded on a national securities exchange, the value shall be deemed to be the volume-weighted average prices on the primary exchange on which the Warrant Stock is traded over the sixty (60) trading day period ending one (1) trading day prior to the date of determination (or, if shorter, over the period from the Company’s Initial Public Offering through the date that is one (1) trading day prior to the date of determination); or (B) if the Warrant Stock is actively traded over-the-counter, the value shall be deemed to be the average of the volume-weighted average prices over the sixty (60) day period ending one (1) trading day prior to the date of determination (or, if shorter, over the period from the Company first began trading over-the-counter through the date that is one (1) trading day prior to the date of determination); or (iv) if there is no active public market for the Warrant Stock, and the
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determination is not subject to clause (i) or (ii) above, then Fair Market Value shall be mutually agreed by the Holder and the Company; provided, that if the Holder and the Company do not mutually agree on Fair Market Value within fifteen (15) Business Days, then Fair Market Value shall be determined by the Independent Arbitrator in accordance with the Independent Arbitration Rules; provided, further, that in the case of clause (iv), the Holder shall have the right to withdraw its Exercise Notice within five (5) Business Days after the final determination of Fair Market Value.
“Independent Arbitrator” means a nationally recognized global investment bank, independent accounting firm, or other advisor having relevant valuation expertise, in each case, agreed upon by the Holder and the Company.
“Independent Arbitration Rules” means that, in determining Fair Market Value, the Independent Arbitrator will determine in good faith its own fair market value (which shall not take into account any discount for lack of liquidity, minority interest or similar discounts) and shall then select either the value proposed by the Holder or the value proposed by the Company (each, as submitted to the Independent Arbitrator in connection with its engagement), whichever one is closer to the value determined by the Independent Arbitrator (which selected value shall constitute Fair Market Value for such purpose for the three (3) months following such determination, unless an event, fact or circumstance shall have occurred that would, in the reasonable judgment of the Company or the Holder, be material to a determination of Fair Market Value). The Independent Arbitrator will be instructed to issue its determination within 30 days of being engaged, and to deliver a written report to the Holder and the Company reflecting the Independent Arbitrator’s own calculation of fair market value together with reasonable supporting detail thereof. The Company will cooperate with the Independent Arbitrator in all reasonable respects, but neither the Holder nor the Company will be permitted to have any ex parte meetings, teleconferences or other correspondence with the Independent Arbitrator without giving the other party reasonable advance notice as it is intended that both parties be included in all discussions and correspondence with the Independent Arbitrator. The party whose proposed fair market value has not been selected by the Independent Arbitrator shall be responsible for the fees, costs and expenses of the Independent Arbitrator in respect of such determination. The determination by the Independent Arbitrator shall be final and binding, absent fraud or manifest error.
“Initial Public Offering” means an initial registered offering of Common Stock or Common Stock Equivalents to the public or the initial date Common Stock or Common Stock Equivalents trade on a national securities exchange or is registered with the SEC (including as a result of a transaction with a “special purpose acquisition company”).
“Investor” means WP Falcon Aggregator, L.P., a Delaware limited partnership.
“Investor Liquidity Transaction” means any transaction or series of related transactions, including a Change of Control, after which (after giving effect to such transaction or series of related transactions) Investor and its Permitted Transferees have sold, transferred or otherwise disposed of (for clarity, other than to Permitted Transferees), directly or indirectly, in the aggregate (together with any prior transactions), fifty percent (50%) of the Common Stock (measured on an as-converted basis, assuming the conversion or exercise (for cash) of all Convertible Securities (excluding this Warrant)) acquired (or to be acquired) by the Investor pursuant to the Purchase Agreement, and any security or property received in substitution or exchange thereof, solely for cash.
“IRR” means, as of any date of determination, the cumulative internal rate of return (as calculated in accordance with the XIRR function of the latest version of Microsoft Excel or, if not available, a readily available equivalent thereof) of Investor and its Permitted Transferees, from cash proceeds received from the sale, transfer or other disposition (for clarity, other than to Permitted Transferees) of the Common Stock and Convertible Securities (excluding this Warrant) acquired by the Investor pursuant to the Purchase Agreement, whether by way of merger, stock sale or otherwise, and from cash dividends and other cash distributions made in respect thereof (but excluding expense reimbursements), in each case, on the consideration paid by Investor pursuant to the Purchase Agreement (for clarity, taking into account the timing such consideration was actually paid). If the Vesting Date occurs pursuant to clause (x) of the definition thereof, then solely for purposes of calculating IRR on such date, any Common Stock or Convertible Securities (excluding this Warrant) acquired by the Investor pursuant to the Purchase
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Agreement still held by the Investor and its Permitted Transferees shall be deemed to have been sold for cash on the Vesting Date for Fair Market Value as of such date.
“Lien” means any mortgage, pledge, lien, encumbrance, charge, restriction, option or other security interest, equitable interest, or easement of any nature.
“Nominal Price” means an amount (not to be below $0.01) equal to (i) $12.50 minus (ii) the aggregate value of all cash dividends or distributions in respect of the Common Stock or Common Stock Equivalents from and after the Signing Date (whether such dividends or distributions are made prior to, on or after the date hereof). The Nominal Price will be subject to further adjustment as provided herein.
“Option” means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to a bona fide plan, agreement or arrangement approved by the Board.
“Permitted Transferees” has the meaning set forth in the Stockholders Agreement.
“Person” means an individual, partnership (whether general or limited), joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.
“Signing Date” means October 11, 2021.
“Stockholders Agreement” means that certain Stockholders Agreement, dated as of the Closing Date, as amended, by and among the Company, the Holder, Tiptree Holdings LLC and the other parties thereto.
“Subsidiary” means, with respect to any Person, (a) any other Person of which an aggregate of more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such other Person (or comparable body in the case of a Person that is not a corporation) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, (b) any partnership, limited liability company or other entity in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%), and (c) any other Person, the management of which is controlled, directly or indirectly, by such Person.
“Unfunded Capital Commitment” has the meaning set forth in the Purchase Agreement.
“Vesting Date” means the earlier of (x) 5:00 p.m. New York City Time on the fifth (5th) anniversary of the Closing Date (or, if such date is not a Business Day, the first Business Day thereafter) and (y) the date and time an Investor Liquidity Transaction is consummated.
“Warrant” means this Warrant and any warrant(s) delivered in substitution or exchange for this Warrant, as provided herein.
“Warrant Stock” means the Common Stock. The number and character of shares of Warrant Stock are subject to adjustment as provided herein and the term “Warrant Stock” shall include stock and other securities and property at any time receivable or issuable upon exercise of this Warrant taking into account all such adjustments.
“Warrant Stock Equivalents” means any security of the Company that is equivalent to a Warrant Stock or has rights to dividends or distributions that are pari passu to the Warrant Stock, or any such
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security of any Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
2.EXERCISE.
2.1Restrictions on Exercise. Subject to the terms and conditions of this Warrant (including Section 4.2), Holder shall have the right to exercise this Warrant for up to a portion of the Maximum Number of Shares equal to a percentage determined by dividing (x) the sum of (i) $140,000,000 and (ii) the Capital Commitment less the Unfunded Capital Commitment, by (y) $200,000,000 (such portion of the Maximum Number of Shares, the “Unrestricted Percentage”). For example, if on the date on which Holder wishes to exercise this Warrant pursuant to Section 2.2, the Unfunded Capital Commitment is equal to $10,000,000, the Unrestricted Percentage shall be calculated by dividing (x) $140,000,000 + $60,000,000 - $10,000,000, by (y) $200,000,000, which equals to ninety-five percent (95%).
2.2Method of Exercise. Subject to the terms and conditions of this Warrant, Holder may exercise this Warrant in whole or in part, at any time or from time to time, on any Business Day on or after the Vesting Date and on or before the Expiration Date, for up to an amount equal to (x) the Unrestricted Percentage multiplied by (y) Maximum Number of Shares (the “Unrestricted Number of Shares”). This Warrant shall be exercised by delivery of the Exercise Notice duly executed by Holder, and by payment in a form specified in Section 2.3 of an amount equal to (i) the number of shares of Warrant Stock to be purchased by Holder (not to exceed the Unrestricted Number of Shares) multiplied by (ii) the Exercise Price or an election to net exercise the Warrant as provided in Section 2.6 for the number of shares of Warrant Stock to be determined in accordance with Section 2.5. Holder may exercise this Warrant, in whole or in part, contingent upon the occurrence of a Change of Control of the Company, an Initial Public Offering or the consummation of a transfer of shares subject to Section 2(b) of the Stockholders Agreement (so long as such Change of Control, Initial Public Offering or transfer occurs prior to the Expiration Date), which contingent exercise may further require that such Change of Control, Initial Public Offering or transfer occur prior to a certain date. Unless the Exercise Notice expressly specifies otherwise, such contingent exercise shall be deemed to occur immediately prior to the occurrence of such Change of Control, Initial Public Offering or transfer (it being agreed that in the event the aggregate Exercise Price thereof is paid to the Company prior to the occurrence of such event, fact or circumstance, such amounts will be held in trust for the benefit of the Holder and promptly returned to the Holder in the event such event, fact or circumstance does not timely occur).
2.3Form of Payment. Payment for the Warrant Stock upon exercise may be made by (a) a check payable to the Company’s order, (b) wire transfer of funds to the Company, (c) cancellation of indebtedness of the Company to Holder, if any, provided that the amount of such indebtedness is not subject to dispute (d) by net exercise as provided in Section 2.6, or (e) any combination of the foregoing.
2.4Partial Exercise. Upon a partial exercise of this Warrant, the Company shall promptly (and, in any event, within ten (10) Business Days) replace this Warrant with a new Warrant of like tenor in which the Maximum Number of Shares is so reduced. Whether or not this Warrant is surrendered, upon exercise thereof, this Warrant shall have no further force or effect, except in respect of the rights hereunder with respect to such exercise and the right, if any, to receive a substitute warrant in the event of a partial exercise.
2.5No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant. If upon exercise of this Warrant in whole or in part, a fraction of a share would otherwise result, then in lieu of such fractional share, the Company shall pay to Holder an amount in cash equal to such fraction of a share multiplied by the Fair Market Value of a Warrant Share as of the effective date of such exercise.
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2.6Net Exercise Election. Holder may elect to exercise all or any portion, of this Warrant, without the payment by Holder of any additional consideration, by delivery of an Exercise Notice with the net exercise election selected, duly executed by Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula:
X = Y (A-B)
A
A
where X = the number of shares of Warrant Stock to be issued to Holder pursuant to a net exercise of this Warrant effected pursuant to this Section 2.6.
Y = the number of shares of Warrant Stock being exercised.
A = the Fair Market value of one share of Warrant Stock as of the effective date of such exercise.
B = the Exercise Price.
The Company will respond in writing to an inquiry by Holder as to the then current Fair Market Value of one share of Warrant Stock as promptly as practicable under the circumstances.
3.ISSUANCE OF STOCK. Except as set forth in Section 2.2 or Section 4 or as set forth in the Exercise Notice (provided, that the Exercise Notice may not specify a date or time prior to the delivery of the Exercise Notice and payment in full of the Exercise Price, to the extent not elected to be net settled), this Warrant shall be deemed to have been exercised as of the close of business on the date of delivery of the Exercise Notice, and the Holder shall be treated for all purposes as the holder of record of the applicable shares of Warrant Stock (and, to the extent applicable, any cash, securities or other property issuable thereon in accordance with Section 5) as of 11:59 p.m. on the date of delivery of the Exercise Notice (or, if such day is not a Business Day, the first Business Day thereafter), subject to payment in full of the Exercise Price, to the extent not elected to be net settled. As soon as practicable on or after such date (and, in any event, no later than ten (10) Business Days thereafter), the Company shall issue and deliver to the Holder evidence of issuance in book-entry form of the number of whole shares of Warrant Stock issuable upon such exercise, together with payment of any fractional shares pursuant to Section 2.5 (and, to the extent applicable, evidence of issuance or delivery of any other securities or other property issuable thereon in accordance with Section 5).
4.CERTAIN TRANSACTIONS.
4.1If the Company proposes at any time to effect a Change of Control, an Initial Public Offering, a Deemed Liquidation Event, a Reorganization Event, Cash Dividend Event or a Dividend Event, then the Company shall give the Holder at least ten (10) Business Days advance written notice (each, a “Transaction Notice”) of the anticipated closing date for such transaction or event or the anticipated initial closing date for such Initial Public Offering, as applicable.
4.2If the IRR on the Vesting Date (after giving effect and taking into account the Investor Liquidity Transaction, if applicable, including its effect on any other securities or obligations of the Company) is equal to or greater than 23.0%, then this Warrant shall be deemed to be expired, cancelled and forfeited for no consideration and shall not be exercisable. If the IRR on the Vesting Date is less than 23.0% but equal to or greater than 21.0%, then from and after the Vesting Date, the Maximum Number of Shares shall be reduced by an amount, rounded to the nearest whole share, equal to: (x) the Maximum Number of Shares immediately prior to the adjustment pursuant to this Section 4.2 multiplied by (y) a fraction, the numerator of which equals such IRR minus 21.0% and the denominator of which equals 2%.
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4.3In the event of a merger involving the Company that constitutes a Change of Control of the Company that does not result in the expiration, cancellation and forfeiture of this Warrant pursuant to Section 4.2, and Holder has not fully exercised this Warrant prior thereto, then this Warrant shall automatically be deemed to be fully exercised in a net exercise pursuant to Section 2.5 effective immediately prior to and contingent upon the consummation of such transaction; provided, that if the consideration in such Change of Control does not consist solely of cash, at the election of the Holder, the cash portion of the consideration shall be used first to effect such net exercise (i.e., notwithstanding the net exercise, if so elected, the Holder would receive all of the non-cash consideration that it would have received had it exercised this Warrant for cash, but the cash consideration would be net of the Exercise Price).
4.4In the event that that this Warrant has not been exercised prior to the Expiration Date, then this Warrant shall automatically be deemed to be exercised on the Expiration Date on a net exercise basis pursuant to Section 2.6 as to all shares of Warrant Stock for which it shall not previously has been exercised.
4.5At the request of the Holder in connection with a Change of Control of the Company, the Company shall use commercially reasonable efforts to structure such Change of Control transaction to ensure that a pro rata portion of this Warrant is sold or otherwise disposed of in such transaction in lieu of selling or otherwise disposing of the Warrant Stock exercisable hereunder.
5.ADJUSTMENT PROVISIONS. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant and the Exercise Price therefor, are subject to adjustment upon each event in Sections 5.1 through 5.5 occurring between the date this Warrant is issued and earlier of the time that it is exercised in full or the Expiration Date:
5.1Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) effect a subdivision of the outstanding shares of Warrant Stock or Warrant Stock Equivalents by reclassification or otherwise into a greater number of shares, or declare a dividend on, or a distribution in respect of, Warrant Stock, which dividend or distribution is payable in additional shares of Warrant Stock (or a distribution in respect of, Warrant Stock Equivalents, which dividend or distribution is payable in additional Warrant Stock Equivalents of the same class and series and from the same issuer), then the Maximum Number of Shares purchasable hereunder shall be proportionately increased and the Nominal Price shall be proportionately decreased. If the Company shall at any time or from time to time after the Signing Date effect a combination or consolidation of the outstanding shares of Warrant Stock or Warrant Stock Equivalents, by reclassification or otherwise into a lesser number of shares, then the Nominal Price shall be proportionately increased and the Maximum Number of Shares shall be proportionately decreased.
5.2Adjustment for Cash Dividends and Distributions. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) make or issue, or shall fix a record date for the determination of eligible holders entitled to receive a cash dividend or other cash distribution payable with respect to the Warrant Stock or any Warrant Stock Equivalent, which dividend or distribution is actually made (each a “Cash Dividend Event”), then, and in each such case, the Maximum Number of Shares shall be increased by (x) the Maximum Number of Shares as in effect immediately prior to the Cash Dividend Event multiplied by (y) a fraction, the numerator of which is the amount of cash dividends or cash distributions in respect of a share of Warrant Stock or Warrant Stock Equivalent and the denominator of which is $12.50 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Warrant Stock or Warrant Stock Equivalents).
5.3Adjustment for Other Dividends and Distributions. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) make
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or issue, or shall fix a record date for the determination of eligible holders entitled to receive a dividend or other distribution payable with respect to the Warrant Stock or any Warrant Stock Equivalent that is payable in (a) securities of the Company or any of its Subsidiaries (that is not subject to Section 5.1) or (b) other securities, property or assets (other than cash), which dividend or distribution is actually made (each a “Dividend Event”), then and in each such case, Holder, upon exercise of this Warrant at any time after such Dividend Event (or the record date thereof), shall receive, in addition to the shares of Warrant Stock, the securities or such other properties or assets that would have been payable to Holder if Holder had completed such exercise (in cash) of this Warrant, immediately prior to the record date of such Dividend Event.
5.4Adjustment for Merger or Reorganization, etc. If after the Signing Date (whether prior to, on or after the date hereof) (a) the Company shall effect any recapitalization, reorganization or reclassification of the Company or any of its securities, (b) the Company shall consolidate with or merge into one or more other Persons which results in the Warrant Stock being converted or exchanged for other securities or (c) a Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis and is not a direct or indirect wholly-owned Subsidiary of the Company takes any of the actions contemplated by clause (a) or (b), mutatis mutandis (each, a “Reorganization Event”), then, and in each such case, Holder, upon the exercise of this Warrant after such Reorganization Event shall be entitled to receive, in lieu of the shares of Warrant Stock that Holder would have been entitled to receive upon such exercise prior to such Reorganization Event (but without limiting the right to receive any securities or property owed as a result of Section 5.2), the stock or other securities or property which Holder would have been entitled to receive upon such Reorganization Event if, immediately prior to such Reorganization Event (or, if applicable, the record date thereof), Holder had completed such exercise (in cash) of this Warrant (and the Maximum Number of Shares shall be adjusted accordingly). If after such Reorganization Event, the Warrant is exercisable for securities of a corporation or entity other than the Company, then as a condition to effecting the Reorganization Event, the Company shall cause such corporation or entity to duly execute and deliver, upon request to Holder a supplement hereto acknowledging such corporation’s or other entity’s obligations under this Warrant promptly (and, in any event, within ten (10) Business Days) following the completion of such Reorganization Event; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such Reorganization Event.
5.5Adjustment upon Issuance of Additional Common Stock.
(a)Other than in connection with the Reorganization (as defined in the Purchase Agreement) or the Management Rollover (as defined in the Purchase Agreement) and subject to Section 5.7, in the event the Company or any of its Subsidiaries shall at any time on or after the Signing Date (whether prior to, on or after the date hereof) issue or be deemed to issue Additional Shares of Common Stock, without consideration or for a consideration per share less than the Nominal Price in effect immediately prior to such issuance or deemed issuance, then:
(i)the Nominal Price shall be reduced, concurrently with such issuance or deemed issuance, to a price (calculated to the nearest cent) determined in accordance with the following formula:
NP2 = ((A * NP1) + B) ÷ (A + C)
For purposes of the foregoing formula, the following definitions shall apply:
“NP2” shall mean the Nominal Price in effect as of immediately after such issuance or deemed issuance of Additional Shares of Common Stock.
“NP1” shall mean the Nominal Price in effect as of immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock.
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“A” shall mean the number of shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance (treating for this purpose as outstanding (i) all shares of vested restricted stock that were issued pursuant to a stock option or stock incentive plan prior to such issuance, (ii) all shares of Common Stock or Common Stock Equivalents issuable upon exercise (in cash) of outstanding vested and unexercised options that were issued pursuant to a stock option or stock incentive plan prior to such issuance, but only to the extent such vested and unexercised options have an exercise price that is less than the per share consideration received in connection with such issuance, and (iii) without duplication and subject to clauses (i) and (ii), all other shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance or that would be outstanding upon conversion or exchange of Convertible Securities outstanding immediately prior to such issuance, but only to the extent such Convertible Securities have a conversion price that is less than the per share consideration received in connection with such issuance);
“B” shall mean the aggregate consideration, if any, received by the Company or its Subsidiaries for such issuance; and
“C” shall mean the number of Additional Shares of Common Stock issued or deemed issued in such transaction.
(ii)The Maximum Number of Shares shall be increased, concurrently with such issuance or deemed issuance, to a price (calculated to the nearest 1/100th of a share) determined in accordance with the following formula:
MNS2 = (MNS1 * NP1) ÷ (NP2)
For purposes of the foregoing formula, the following definitions shall apply:
“MNS2” shall mean the Maximum Number of Shares in effect as of immediately after such issuance or deemed issuance of Additional Shares of Common Stock.
“MNS1” shall mean the Maximum Number of Shares in effect as of immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock.
“NP1” shall mean the Nominal Price in effect as of immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock.
“NP2” shall mean the Nominal Price in effect as of immediately after such issuance or deemed issuance of Additional Shares of Common Stock (after giving effect to the adjustment contemplated in clause (i)).
(b)In the event that at any time in any manner Convertible Securities are granted or issued and the price per share for which the Common Stock or Common Stock Equivalents is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Company or its Subsidiaries as consideration for the granting or issuing of such Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Company or its Subsidiaries upon the exercise, conversion or exchange of all such Convertible Securities, plus, in the case of Convertible Securities which are exercisable, convertible or exchangeable into other Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such other Convertible Securities and upon the conversion, exchange or exercise thereof, by (y) the total maximum number of shares of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities) shall be less than the Exercise Price in effect immediately prior to such issuance, then the total maximum amount of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities shall (as of the date of issuance of such Convertible Security) be deemed to have been issued for such price per share. No adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or Common Stock Equivalents, except as otherwise provided in the paragraph immediately below.
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(c)If the purchase price provided for in any Convertible Securities, or the additional consideration, if any, payable upon the conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into, exchangeable for or exercisable for Common Stock or Common Stock Equivalents shall change at any time (including by reason of provisions designed to protect against dilution of the type set forth in this Section 5.5), the Exercise Price in effect at the time of such change shall forthwith be readjusted to the Exercise Price which would have been in effect at such time had such Convertible Securities still outstanding provided for such changed purchase price, additional consideration or rate, as the case may be, at the time initially granted, issued or sold.
(d)On the expiration or redemption of, or the termination of any right to convert, exchange or exercise, any Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be increased to the Exercise Price which would have been in effect at the time of such expiration or termination had such Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.
(e)In the event any Additional Shares of Common Stock shall be issued or deemed issued for a consideration other than cash, the amount of the consideration other than cash received shall be the fair market value of such consideration as mutually agreed by the Holder and the Company; provided, that if the Holder and the Company do not so mutually agree within fifteen (15) Business Days, then fair market value shall be determined by the Independent Arbitrator in accordance with the Independent Arbitration Rules, mutatis mutandis.
5.6Notice of Adjustments. Upon the occurrence of each adjustment or readjustment or the Exercise Price or the number of shares of Warrant Stock or other securities issuable upon the exercise of this Warrant, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and shall promptly give written notice to the Holder of each adjustment under Section 5 of the Exercise Price or the number of shares of Warrant Stock or other securities that remain issuable upon exercise of this Warrant. The notice shall describe the adjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
5.7No Change Necessary. No adjustment shall be made pursuant to Section 5 for any action taken that is required by, and taken in accordance with, the Purchase Agreement or the Certificate of Designation dated as of June 21, 2022, establishing the Series A Preferred Stock, par value $0.01 per share, of the Company. No adjustment shall be made pursuant to Section 5 with respect to any dividend, distribution, subdivision, reclassification, combination or consolidation of the securities of a wholly-owned Subsidiary of the Company. The form of this Warrant need not be changed because of any adjustment in the Exercise Price or in the number of shares of Warrant Stock issuable upon its exercise.
5.8Reservation of Stock. If the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant that are authorized and unissued under the Company’s Certificate of Incorporation shall not be sufficient to effect the exercise of this Warrant in full, the Company will promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Warrant Stock or other securities issuable upon exercise of this Warrant as shall be sufficient for such purpose. The Company shall at all times reserve a sufficient number of shares of Warrant Stock out of its authorized but unissued shares to allow the exercise in full of this Warrant.
6.NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder against wrongful impairment. Without limiting the generality of the foregoing, the Company will take all such action as may be necessary or appropriate in order that the
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Company may duly and validly issue fully paid and nonassessable shares of Warrant Stock upon the exercise of this Warrant.
7.REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Holder as of the date hereof that:
7.1Organization, Qualification and Corporate Power. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority, and all authorizations, licenses and permits, necessary to own, lease and operate the assets and properties it purports to own, lease or operate and to carry on its business as presently conducted.
7.2Enforceability. The Company has all requisite corporate power and authority to execute and deliver this Warrant. The execution, delivery and performance of this Warrant by the Company and the consummation by the Company of the of transactions contemplated hereby have been duly and validly authorized and approved by all require action on the part of the Company. No other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Warrant or to consummate the transactions contemplated hereby. This Warrant has been duly executed and delivered by the Company constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies.
7.3No Violations; Consents.
(a)The execution, delivery and performance of this Warrant by the Company does not, and the consummation by the Company of the transactions contemplated hereby, and compliance by the Company with the provisions of this Warrant will not conflict with, or result in any violation or breach by the Company of the governing documents of the Company or any of its Subsidiaries.
(b)Except as required by the Securities Act of 1933, as amended, or under any applicable “blue sky” or state securities law then in effect (if applicable), no consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Person is required in connection with the execution, delivery and performance of this Warrant.
7.4Due Authorization and Valid Issuance. The shares of Warrant Stock to be issued under this Warrant will be duly authorized, validly issued, fully paid and nonassessable and will not be issued in violation of any preemptive rights, right of first refusals or offer, buy-sell arrangements or similar arrangements, and will be issued in compliance in all material respects with applicable law and free and clear of all Liens (other than transfer restrictions under applicable securities laws).
7.5Reserve. The Company has reserved, free of preemptive rights and other preferential rights, a sufficient number of its previously authorized but unissued shares of Warrant Stock to satisfy the exercise of this Warrant in full.
8.GENERAL PROVISIONS.
8.1No Voting or Other Rights. This Warrant does not entitle Holder to any voting rights or other rights as a stockholder of the Company, unless and until (and only to the extent that) this Warrant is actually validly exercised for shares of the Company’s capital stock in accordance with its terms. In the absence of valid exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of Holder, shall cause Holder to be a stockholder of the Company for any purpose.
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8.2Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall promptly (and, in any event, within ten (10) Business Days) execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
8.3Assignment; Transfer. This Warrant and any Warrant Stock issued hereunder may be assigned, conveyed or transferred, in whole or in part, only in accordance with, and to the extent permitted by, Section 2 of the Stockholders Agreement, mutatis mutandis. The rights and obligations of the Company and Holder under this Warrant shall be binding upon and benefit of their respective permitted successors, permitted assigns, heirs, administrators and permitted transferees.
8.4Construction. Except where expressly stated otherwise in this Warrant, the following rules of interpretation apply to this Warrant: (a) unless the context otherwise requires, “either” and “or” are not exclusive and shall include both the conjunctive and disjunctive, “any” shall mean “one or more” and “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”; (b) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Warrant refer to this Warrant as a whole and not to any particular provision of this Warrant; (c) “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if”; (d) the descriptive headings and table of contents included herein are included for convenience only and shall not affect in any way the meaning or interpretation of this Warrant or any provision hereof; (e) definitions contained in this Warrant are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms and vice versa; (f) references to a Person are also to its successors and permitted assigns to the extent not prohibited by this Warrant; (g) references to a “Section,” “Exhibit” or “Schedule” refer to a Section of, or an Exhibit or Schedule to, this Warrant; (h) references to “$” or otherwise to dollar amounts refer to the lawful currency of the United States; (i) the word “will” shall have the same meaning as the word “shall” and vice versa; and (j) references to “day” or “days” in the lower case means calendar days. The language used in this Warrant shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. No summary of this Warrant prepared by any Party shall affect the meaning or interpretation of this Warrant. If any date on which a Party is permitted or required to exercise any right or privilege or discharge any duty or obligation pursuant to the terms hereof is not a Business Day, then such Party may exercise such right or privilege or discharge such duty or obligation on the next succeeding Business Day. In the computation of periods of time before which, within which or following which any act is to be done or step taken under this Warrant, the date that is the reference date in calculating such period will be included in such computation.
8.5Notices. Any and all notices required or permitted to be given pursuant to the provisions of this Warrant will be in writing and will be effective and deemed to provide the recipient sufficient notice under this Warrant on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) Business Day after deposit with an express overnight courier for United States deliveries (marked for overnight delivery), or five (5) Business Days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; (iii) three (3) Business Days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries or (iv) when sent via email if sent prior to 5:00 p.m. (local time of the recipient) on a Business Day, or at 9:00 a.m. (local time of the recipient) on the next succeeding Business Day otherwise. All notices not delivered personally or email will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address or email address as follows, or at such other address, email address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto as follows.
If to Holder:
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c/o Warburg Pincus LLC
450 Lexington Avenue
New York, NY 10017
Attention: Brett K. Shawn
Email: brett.shawn@warburgpincus.com
notices@warburgpincus.com
with a copy to (which shall not constitute notice):
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: Mark A. Cognetti
Dvir Oren
Email: Mcognetti@willkie.com
Doren@willkie.com
If to the Company:
Fortegra Group, Inc.
10751 Deerwood Park Blvd., Suite 200
Jacksonville, FL 32256,
Attention: General Counsel
Email: CRomaine@fortegra.com
with copies to (which shall not constitute notice):
Tiptree Inc.
299 Park Avenue, 13th FL
New York, NY 10171
Attention: Jonathan Ilany
Neil C. Rifkind
Email: NRifkind@tiptreeinc.com
JIlany@tiptreeinc.com
and
Ropes & Gray LLP
Prudential Tower, 800 Boylston Street
Boston, MA 02199
Attention: Michael Littenberg
William Michener
Email: Michael.Littenberg@ropesgray.com
Email: Michael.Littenberg@ropesgray.com
William.Michener@ropesgray.com
8.6Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Warrant is held to be prohibited by or invalid under the applicable Law of any jurisdiction, or unenforceable in any jurisdiction, such provision shall be effective only to the extent of such prohibition, invalidity or unenforceability in such jurisdiction, without invalidating the remainder of this Warrant, and without affecting the validity or enforceability of this Warrant, including such provision, in any other jurisdiction, and such provision shall be interpreted, revised or applied in a manner that renders it valid and enforceable to the fullest extent possible.
8.7Waivers and Amendments. This Warrant may be amended or modified only by a written agreement executed and delivered by duly authorized officers of the Company and Holder. This
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Warrant and any provision herein or performance hereunder may be waived only in writing (including by electronic means) by the Holder. The waiver of a breach of any provision of this Warrant shall not operate or be construed as a waiver of any subsequent breach, whether or not similar, unless such waiver specifically states that it is to be construed as a continuing waiver. No delay or omission to exercise any right, power or remedy accruing under this Warrant, upon any breach or default under this Warrant, shall impair any such right, power or remedy of Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Warrant, or any waiver of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.
8.8Counterparts. This Warrant may be executed and delivered (including by facsimile transmission, PDF or other electronic delivery) in one or more counterparts, and in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
8.9Enforcement of Agreement; Specific Performance. The Company acknowledges and agrees that the rights and obligations set forth in this Warrant are unique and that, if this Warrant is not timely performed in accordance with its terms or is otherwise breached or threatened to be breached, Holder may be damaged irreparably and have no adequate remedy at law and even if monetary damages would be available, such monetary damages would not be an adequate remedy. Accordingly, the Company agrees that Holder will have the right, in addition to any other rights and remedies existing in its favor at law or in equity, to enforce its rights and the Company’s obligations under the terms of this Warrant, by bringing an action or actions for specific performance (including for specific performance of any and all of the transactions contemplated by this Warrant), injunctive or other equitable relief (without proof of damage or posting of bond or other security). Any and all remedies provided herein will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon Holder, and the exercise by Holder of any one remedy will not preclude the exercise of any other remedy. The Company agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief when available pursuant to the terms of this Warrant on the basis that Holder has an adequate remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity.
8.10Governing Law; Attorneys’ Fees. This Warrant and any claim, dispute, action, cause of action, or controversy related to or arising, directly or indirectly, out of, caused by or resulting from this Warrant will be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any law (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
8.11Jurisdiction. This Warrant has been executed and delivered in and shall be deemed to have been made in the State of Delaware. The Company, and by acceptance of this Warrant, the Holder agrees to the exclusive jurisdiction of the Chancery Court of the State of Delaware (or any appellate court therefrom) or, if jurisdiction is not available in the Chancery Court of the State of Delaware, any state or federal court within the City of Wilmington, Delaware, with respect to any claim, dispute, action, cause of action or controversy arising, directly or indirectly, out of, caused by, or resulting from this Warrant, and waives personal service of any and all process upon it, and consents that all services of process be made by registered or certified mail, return receipt requested, directed to it at its address as set forth in Section 8.5 (excluding e-mail delivery), and service so made shall be deemed to be completed when received. The Company and, by acceptance of this Warrant, the Holder waive any objection based on forum non conveniens and waive any objection to venue of any action instituted hereunder. Nothing in this Section 8.11 shall affect the rights to serve legal process in any other manner
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permitted by Law. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
8.12Waiver of Jury Trial. THE COMPANY, AND BY ACCEPTANCE OF THIS WARRANT, THE HOLDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS WARRANT.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the date first written above.
THE FORTEGRA GROUP INC.
By:/s/Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
Title: President and Chief Executive Officer
[Signature Page to Warrant]
EXHIBIT 1
EXERCISE NOTICE
EXERCISE NOTICE
To: The Fortegra Group Inc. (the “Company”)
We refer to that certain Warrant to Purchase Common Stock, Warrant No.___, issued on [______] (the “Warrant”). Capitalized terms used but not otherwise defined herein shall have the meaning assigned to them in the Warrant.
Select one of the following two alternatives:
Cash Exercise. On the terms and conditions set forth in the Warrant, the Holder hereby elects to purchase shares of Warrant Stock, pursuant to the terms of the Warrant, and tenders herewith payment of the Exercise Price for such shares in full.
Net Exercise Election. On the terms and conditions set forth in the Warrant, the undersigned Holder elects to exercise the Warrant by net exercise election pursuant to Section 2.5 of the Warrant. This conversion is exercised with respect to ____________________ shares of Warrant Stock.
Contingency. This exercise is contingent upon the occurrence of the following.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Effective Time. Notwithstanding the Warrant, the exercise contemplated by this Exercise Notice shall be effective as of ______________________________ and the shares of Warrant Stock exercised hereby shall be deemed issued on ____________________________________________________________________.
Date: | [HOLDER] | ||||
By: | |||||
| Its: | |||||
EXHIBIT 10.3
CONFIDENTIAL
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
FORTEGRA GROUP, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No.: ___ Issued on June 21, 2022
This certifies that in consideration for value received by The Fortegra Group, Inc., a Delaware corporation, receipt of which is hereby acknowledged, Tiptree Holdings LLC, a Delaware limited liability company (the “Holder”), is entitled, subject to the terms and conditions of this Warrant, to purchase from the Company (as defined below), from time to time, at an exercise price (the “Exercise Price”) of one cent ($0.01) per share of Warrant Stock (as defined below), at any time on or after the Vesting Date (as defined below) and on or prior to the Expiration Date (as defined below), up to One Million Seven Hundred Twelve Thousand Five Hundred Eleven (1,712,511) shares of Warrant Stock (the “Maximum Number of Shares”), upon delivery at the principal offices of the Company of a duly executed exercise notice in the form attached hereto as Exhibit 1 (“Exercise Notice”) and prior or concurrent payment of an amount equal to the Exercise Price multiplied by the number of shares of Warrant Stock so purchased, in lawful money of the United States or by an election to net exercise as set forth in Section 2.5. The number and character of shares of Warrant Stock purchasable under this Warrant are subject to adjustment as provided herein.
This Warrant has been issued pursuant to that certain Securities Purchase Agreement, dated as of October 11, 2021 (the “Purchase Agreement”), by and among the Company, the Investor (as defined below) and Tiptree Inc.
1.DEFINITIONS. The following definitions shall apply for purposes of this Warrant:
“Additional Shares of Common Stock” shall have the meaning set forth in the Certificate of Designation, dated as of June 21, 2022, establishing the Series A Preferred Stock, par value $0.01 per share, of the Company.
“Affiliate” means any Person or entity, directly or indirectly Controlling, Controlled by or under common Control with such Person or entity.
“Board” means the Board of Directors of the Company.
“Business Day” means any day that is not a Saturday, a Sunday or any other day on which commercial banks generally are required or authorized to be closed by applicable Law in the State of New York.
“Capital Commitment” has the meaning set forth in the Purchase Agreement.
“Certificate of Incorporation” means Company’s Certificate of Incorporation, as amended from time to time.
“Change of Control” means with respect to any Person, (a) any transaction or series of related transactions, whether or not such Person is a party thereto, in which, after giving effect to such transaction or transactions, the equity securities representing in excess of fifty percent (50%) of the voting power of such Person are owned directly or indirectly through one or more entities, by any “person” or “group” (as such terms are used in Section 13(d) of the Exchange Act) of persons, other than, Michael G. Barnes, his Affiliates and any “group” in which Michael G. Barnes and his Affiliates represent at least 50% of the equity interests or voting power of such group or (b) a sale, lease or other disposition of all or substantially all of the assets of such Person and its Subsidiaries on a consolidated basis (including securities of such Person’s directly or indirectly owned Subsidiaries) to one or more purchasers.
“Closing Date” has the meaning set forth in the Purchase Agreement.
“Common Stock” means the Company’s Common Stock, par value $0.01 per share.
“Common Stock Equivalents” means any security of the Company that is equivalent to a Common Stock or has rights to dividends or distributions that are pari passu to the Common Stock, or any such security of any Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
“Company” means The Fortegra Group, Inc., its predecessor and any corporation or other entity that succeeds to the Company’s obligations under this Warrant, whether by permitted assignment, by merger or consolidation or otherwise.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by Contract or otherwise.
“Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for, or rights, options or warrants to subscribe for, purchase or otherwise acquire, Common Stock or Common Stock Equivalents, but excluding Options, whether or not any of the foregoing is then immediately exercisable, convertible or exchangeable.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.
“Expiration Date” means 5:00 p.m. Eastern Time on the seventh (7th) anniversary of the Closing Date (or, if such date is not a Business Day, the first Business Day thereafter) or such earlier date and time on which the Warrant ceases to be exercisable as provided in Section 4.2.
“Fair Market Value” means, with respect to a share of Warrant Stock as of any determination date, (i) if determined in connection with an exercise contingent upon an Initial Public Offering, the initial “price to public” of one share of the Warrant Stock specified in the final prospectus with respect to the Initial Public Offering (or comparable term); (ii) if determined in connection with a Change of Control of the Company or a transfer of shares subject to Section 2(b) of the Stockholders Agreement, then Fair Market Value shall be the value to be received in the applicable transaction by the holders of the Warrant Stock; (iii) if determined after, and not in connection with the Company’s Initial Public Offering, and: (A) if the Warrant Stock is traded on a national securities exchange, the value shall be deemed to be the volume-weighted average prices on the primary exchange on which the Warrant Stock is traded over the
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sixty (60) trading day period ending one (1) trading day prior to the date of determination (or, if shorter, over the period from the Company’s Initial Public Offering through the date that is one (1) trading day prior to the date of determination); or (B) if the Warrant Stock is actively traded over-the-counter, the value shall be deemed to be the average of the volume-weighted average prices over the sixty (60) day period ending one (1) trading day prior to the date of determination (or, if shorter, over the period from the Company first began trading over-the-counter through the date that is one (1) trading day prior to the date of determination); or (iv) if there is no active public market for the Warrant Stock, and the determination is not subject to clause (i) or (ii) above, then Fair Market Value shall be mutually agreed by the Holder and the Company; provided, that if the Holder and the Company do not mutually agree on Fair Market Value within fifteen (15) Business Days, then Fair Market Value shall be determined by the Independent Arbitrator in accordance with the Independent Arbitration Rules; provided, further, that in the case of clause (iv), the Holder shall have the right to withdraw its Exercise Notice within five (5) Business Days after the final determination of Fair Market Value.
“Independent Arbitrator” means a nationally recognized global investment bank, independent accounting firm, or other advisor having relevant valuation expertise, in each case, agreed upon by the Holder and the Company.
“Independent Arbitration Rules” means that, in determining Fair Market Value, the Independent Arbitrator will determine in good faith its own fair market value (which shall not take into account any discount for lack of liquidity, minority interest or similar discounts) and shall then select either the value proposed by the Holder or the value proposed by the Company (each, as submitted to the Independent Arbitrator in connection with its engagement), whichever one is closer to the value determined by the Independent Arbitrator (which selected value shall constitute Fair Market Value for such purpose for the three (3) months following such determination, unless an event, fact or circumstance shall have occurred that would, in the reasonable judgment of the Company or the Holder, be material to a determination of Fair Market Value). The Independent Arbitrator will be instructed to issue its determination within 30 days of being engaged, and to deliver a written report to the Holder and the Company reflecting the Independent Arbitrator’s own calculation of fair market value together with reasonable supporting detail thereof. The Company will cooperate with the Independent Arbitrator in all reasonable respects, but neither the Holder nor the Company will be permitted to have any ex parte meetings, teleconferences or other correspondence with the Independent Arbitrator without giving the other party reasonable advance notice as it is intended that both parties be included in all discussions and correspondence with the Independent Arbitrator. The party whose proposed fair market value has not been selected by the Independent Arbitrator shall be responsible for the fees, costs and expenses of the Independent Arbitrator in respect of such determination. The determination by the Independent Arbitrator shall be final and binding, absent fraud or manifest error.
“Initial Public Offering” means an initial registered offering of Common Stock or Common Stock Equivalents to the public or the initial date Common Stock or Common Stock Equivalents trade on a national securities exchange or is registered with the SEC (including as a result of a transaction with a “special purpose acquisition company”).
“Investor” means WP Falcon Aggregator, L.P., a Delaware limited partnership.
“Investor Liquidity Transaction” means any transaction or series of related transactions, including a Change of Control, after which (after giving effect to such transaction or series of related transactions) Investor and its Permitted Transferees have sold, transferred or otherwise disposed of (for clarity, other than to Permitted Transferees), directly or indirectly, in the aggregate (together with any prior transactions), fifty percent (50%) of the Common Stock (measured on an as-converted basis, assuming the conversion or exercise (for cash) of all Convertible Securities (excluding this Warrant)) acquired (or to be acquired) by the Investor pursuant to the Purchase Agreement, and any security or property received in substitution or exchange thereof, solely for cash.
“IRR” means, as of any date of determination, the cumulative internal rate of return (as calculated in accordance with the XIRR function of the latest version of Microsoft Excel or, if not available, a readily available equivalent thereof) of Investor and its Permitted Transferees, from cash proceeds received from the sale, transfer or other disposition (for clarity, other than to Permitted Transferees) of the
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Common Stock and Convertible Securities (excluding this Warrant) acquired by the Investor pursuant to the Purchase Agreement, whether by way of merger, stock sale or otherwise, and from cash dividends and other cash distributions made in respect thereof (but excluding expense reimbursements), in each case, on the consideration paid by Investor pursuant to the Purchase Agreement (for clarity, taking into account the timing such consideration was actually paid). If the Vesting Date occurs pursuant to clause (x) of the definition thereof, then solely for purposes of calculating IRR on such date, any Common Stock or Convertible Securities (excluding this Warrant) acquired by the Investor pursuant to the Purchase Agreement still held by the Investor and its Permitted Transferees shall be deemed to have been sold for cash on the Vesting Date for Fair Market Value as of such date.
“Lien” means any mortgage, pledge, lien, encumbrance, charge, restriction, option or other security interest, equitable interest, or easement of any nature.
“Nominal Price” means an amount (not to be below $0.01) equal to (i) $12.50 minus (ii) the aggregate value of all cash dividends or distributions in respect of the Common Stock or Common Stock Equivalents from and after the Signing Date (whether such dividends or distributions are made prior to, on or after the date hereof). The Nominal Price will be subject to further adjustment as provided herein.
“Option” means rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to a bona fide plan, agreement or arrangement approved by the Board.
“Permitted Transferees” has the meaning set forth in the Stockholders Agreement.
“Person” means an individual, partnership (whether general or limited), joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.
“Signing Date” means October 11, 2021.
“Stockholders Agreement” means that certain Stockholders Agreement, dated as of the Closing Date, as amended, by and among the Company, the Holder, the Investor and the other parties thereto.
“Subsidiary” means, with respect to any Person, (a) any other Person of which an aggregate of more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such other Person (or comparable body in the case of a Person that is not a corporation) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, (b) any partnership, limited liability company or other entity in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%), and (c) any other Person, the management of which is controlled, directly or indirectly, by such Person.
“Unfunded Capital Commitment” has the meaning set forth in the Purchase Agreement.
“Vesting Date” means the earlier of (x) 5:00 p.m. New York City Time on the fifth (5th) anniversary of the Closing Date (or, if such date is not a Business Day, the first Business Day thereafter) and (y) the date and time an Investor Liquidity Transaction is consummated.
“Warrant” means this Warrant and any warrant(s) delivered in substitution or exchange for this Warrant, as provided herein.
“Warrant Stock” means the Common Stock. The number and character of shares of Warrant Stock are subject to adjustment as provided herein and the term “Warrant Stock” shall include stock and
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other securities and property at any time receivable or issuable upon exercise of this Warrant taking into account all such adjustments.
“Warrant Stock Equivalents” means any security of the Company that is equivalent to a Warrant Stock or has rights to dividends or distributions that are pari passu to the Warrant Stock, or any such security of any Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis.
2.EXERCISE.
2.1Restrictions on Exercise. Subject to the terms and conditions of this Warrant (including Section 4.2), Holder shall have the right to exercise this Warrant for up to a portion of the Maximum Number of Shares equal to a percentage determined by dividing (x) the sum of (i) $140,000,000 and (ii) the Capital Commitment less the Unfunded Capital Commitment, by (y) $200,000,000 (such portion of the Maximum Number of Shares, the “Unrestricted Percentage”). For example, if on the date on which Holder wishes to exercise this Warrant pursuant to Section 2.2, the Unfunded Capital Commitment is equal to $10,000,000, the Unrestricted Percentage shall be calculated by dividing (x) $140,000,000 + $60,000,000 - $10,000,000, by (y) $200,000,000, which equals to ninety-five percent (95%).
2.2Method of Exercise. Subject to the terms and conditions of this Warrant, Holder may exercise this Warrant in whole or in part, at any time or from time to time, on any Business Day on or after the Vesting Date and on or before the Expiration Date, for up to an amount equal to (x) the Unrestricted Percentage multiplied by (y) Maximum Number of Shares (the “Unrestricted Number of Shares”). This Warrant shall be exercised by delivery of the Exercise Notice duly executed by Holder, and by payment in a form specified in Section 2.3 of an amount equal to (i) the number of shares of Warrant Stock to be purchased by Holder (not to exceed the Unrestricted Number of Shares) multiplied by (ii) the Exercise Price or an election to net exercise the Warrant as provided in Section 2.6 for the number of shares of Warrant Stock to be determined in accordance with Section 2.5. Holder may exercise this Warrant, in whole or in part, contingent upon the occurrence of a Change of Control of the Company, an Initial Public Offering or the consummation of a transfer of shares subject to Section 2(b) of the Stockholders Agreement (so long as such Change of Control, Initial Public Offering or transfer occurs prior to the Expiration Date), which contingent exercise may further require that such Change of Control, Initial Public Offering or transfer occur prior to a certain date. Unless the Exercise Notice expressly specifies otherwise, such contingent exercise shall be deemed to occur immediately prior to the occurrence of such Change of Control, Initial Public Offering or transfer (it being agreed that in the event the aggregate Exercise Price thereof is paid to the Company prior to the occurrence of such event, fact or circumstance, such amounts will be held in trust for the benefit of the Holder and promptly returned to the Holder in the event such event, fact or circumstance does not timely occur).
2.3Form of Payment. Payment for the Warrant Stock upon exercise may be made by (a) a check payable to the Company’s order, (b) wire transfer of funds to the Company, (c) cancellation of indebtedness of the Company to Holder, if any, provided that the amount of such indebtedness is not subject to dispute (d) by net exercise as provided in Section 2.6, or (e) any combination of the foregoing.
2.4Partial Exercise. Upon a partial exercise of this Warrant, the Company shall promptly (and, in any event, within ten (10) Business Days) replace this Warrant with a new Warrant of like tenor in which the Maximum Number of Shares is so reduced. Whether or not this Warrant is surrendered, upon exercise thereof, this Warrant shall have no further force or effect, except in respect of the rights hereunder with respect to such exercise and the right, if any, to receive a substitute warrant in the event of a partial exercise.
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2.5No Fractional Shares. No fractional shares may be issued upon any exercise of this Warrant. If upon exercise of this Warrant in whole or in part, a fraction of a share would otherwise result, then in lieu of such fractional share, the Company shall pay to Holder an amount in cash equal to such fraction of a share multiplied by the Fair Market Value of a Warrant Share as of the effective date of such exercise.
2.6Net Exercise Election. Holder may elect to exercise all or any portion, of this Warrant, without the payment by Holder of any additional consideration, by delivery of an Exercise Notice with the net exercise election selected, duly executed by Holder, into up to the number of shares of Warrant Stock that is obtained under the following formula:
X = Y (A-B)
A
A
where X = the number of shares of Warrant Stock to be issued to Holder pursuant to a net exercise of this Warrant effected pursuant to this Section 2.6.
Y = the number of shares of Warrant Stock being exercised.
A = the Fair Market value of one share of Warrant Stock as of the effective date of such exercise.
B = the Exercise Price.
The Company will respond in writing to an inquiry by Holder as to the then current Fair Market Value of one share of Warrant Stock as promptly as practicable under the circumstances.
3.ISSUANCE OF STOCK. Except as set forth in Section 2.2 or Section 4 or as set forth in the Exercise Notice (provided, that the Exercise Notice may not specify a date or time prior to the delivery of the Exercise Notice and payment in full of the Exercise Price, to the extent not elected to be net settled), this Warrant shall be deemed to have been exercised as of the close of business on the date of delivery of the Exercise Notice, and the Holder shall be treated for all purposes as the holder of record of the applicable shares of Warrant Stock (and, to the extent applicable, any cash, securities or other property issuable thereon in accordance with Section 5) as of 11:59 p.m. on the date of delivery of the Exercise Notice (or, if such day is not a Business Day, the first Business Day thereafter), subject to payment in full of the Exercise Price, to the extent not elected to be net settled. As soon as practicable on or after such date (and, in any event, no later than ten (10) Business Days thereafter), the Company shall issue and deliver to the Holder evidence of issuance in book-entry form of the number of whole shares of Warrant Stock issuable upon such exercise, together with payment of any fractional shares pursuant to Section 2.5 (and, to the extent applicable, evidence of issuance or delivery of any other securities or other property issuable thereon in accordance with Section 5).
4.CERTAIN TRANSACTIONS.
4.1If the Company proposes at any time to effect a Change of Control, an Initial Public Offering, a Deemed Liquidation Event, a Reorganization Event, Cash Dividend Event or a Dividend Event, then the Company shall give the Holder at least ten (10) Business Days advance written notice (each, a “Transaction Notice”) of the anticipated closing date for such transaction or event or the anticipated initial closing date for such Initial Public Offering, as applicable.
4.2If the IRR on the Vesting Date (after giving effect and taking into account the Investor Liquidity Transaction, if applicable, including its effect on any other securities or obligations of the Company) is less than 30.0%, then this Warrant shall be deemed to be expired, cancelled and forfeited for no consideration and shall not be exercisable. If the IRR on the Vesting Date is less than 32.0% but
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equal to or greater than 30.0%, then from and after the Vesting Date, the Maximum Number of Shares shall be reduced by an amount, rounded to the nearest whole share, equal to: (x) the Maximum Number of Shares immediately prior to the adjustment pursuant to this Section 4.2 multiplied by (y) a fraction, the numerator of which equals 32.0% minus such IRR and the denominator of which equals 2%.
4.3In the event of a merger involving the Company that constitutes a Change of Control of the Company that does not result in the expiration, cancellation and forfeiture of this Warrant pursuant to Section 4.2, and Holder has not fully exercised this Warrant prior thereto, then this Warrant shall automatically be deemed to be fully exercised in a net exercise pursuant to Section 2.5 effective immediately prior to and contingent upon the consummation of such transaction; provided, that if the consideration in such Change of Control does not consist solely of cash, at the election of the Holder, the cash portion of the consideration shall be used first to effect such net exercise (i.e., notwithstanding the net exercise, if so elected, the Holder would receive all of the non-cash consideration that it would have received had it exercised this Warrant for cash, but the cash consideration would be net of the Exercise Price).
4.4In the event that that this Warrant has not been exercised prior to the Expiration Date, then this Warrant shall automatically be deemed to be exercised on the Expiration Date on a net exercise basis pursuant to Section 2.6 as to all shares of Warrant Stock for which it shall not previously has been exercised.
4.5At the request of the Holder in connection with a Change of Control of the Company, the Company shall use commercially reasonable efforts to structure such Change of Control transaction to ensure that a pro rata portion of this Warrant is sold or otherwise disposed of in such transaction in lieu of selling or otherwise disposing of the Warrant Stock exercisable hereunder.
5.ADJUSTMENT PROVISIONS. The number and character of shares of Warrant Stock issuable upon exercise of this Warrant and the Exercise Price therefor, are subject to adjustment upon each event in Sections 5.1 through 5.5 occurring between the date this Warrant is issued and earlier of the time that it is exercised in full or the Expiration Date:
5.1Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) effect a subdivision of the outstanding shares of Warrant Stock or Warrant Stock Equivalents by reclassification or otherwise into a greater number of shares, or declare a dividend on, or a distribution in respect of, Warrant Stock, which dividend or distribution is payable in additional shares of Warrant Stock (or a distribution in respect of, Warrant Stock Equivalents, which dividend or distribution is payable in additional Warrant Stock Equivalents of the same class and series and from the same issuer), then the Maximum Number of Shares purchasable hereunder shall be proportionately increased and the Nominal Price shall be proportionately decreased. If the Company shall at any time or from time to time after the Signing Date effect a combination or consolidation of the outstanding shares of Warrant Stock or Warrant Stock Equivalents, by reclassification or otherwise into a lesser number of shares, then the Nominal Price shall be proportionately increased and the Maximum Number of Shares shall be proportionately decreased.
5.2Adjustment for Cash Dividends and Distributions. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) make or issue, or shall fix a record date for the determination of eligible holders entitled to receive a cash dividend or other cash distribution payable with respect to the Warrant Stock or any Warrant Stock Equivalent, which dividend or distribution is actually made (each a “Cash Dividend Event”), then, and in each such case, the Maximum Number of Shares shall be increased by (x) the Maximum Number of Shares as in effect immediately prior to the Cash Dividend Event multiplied by (y) a fraction, the numerator of which is the amount of cash dividends or cash distributions in respect of a share of Warrant Stock or Warrant Stock Equivalent and the denominator of which is $12.50 (subject to appropriate
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adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Warrant Stock or Warrant Stock Equivalents).
5.3Adjustment for Other Dividends and Distributions. If the Company shall at any time or from time to time after the Signing Date (whether prior to, on or after the date hereof) make or issue, or shall fix a record date for the determination of eligible holders entitled to receive a dividend or other distribution payable with respect to the Warrant Stock or any Warrant Stock Equivalent that is payable in (a) securities of the Company or any of its Subsidiaries (that is not subject to Section 5.1) or (b) other securities, property or assets (other than cash), which dividend or distribution is actually made (each a “Dividend Event”), then and in each such case, Holder, upon exercise of this Warrant at any time after such Dividend Event (or the record date thereof), shall receive, in addition to the shares of Warrant Stock, the securities or such other properties or assets that would have been payable to Holder if Holder had completed such exercise (in cash) of this Warrant, immediately prior to the record date of such Dividend Event.
5.4Adjustment for Merger or Reorganization, etc. If after the Signing Date (whether prior to, on or after the date hereof) (a) the Company shall effect any recapitalization, reorganization or reclassification of the Company or any of its securities, (b) the Company shall consolidate with or merge into one or more other Persons which results in the Warrant Stock being converted or exchanged for other securities or (c) a Subsidiary of the Company that owns all or substantially all of the assets of the Company and its Subsidiaries on a consolidated basis and is not a direct or indirect wholly-owned Subsidiary of the Company takes any of the actions contemplated by clause (a) or (b), mutatis mutandis (each, a “Reorganization Event”), then, and in each such case, Holder, upon the exercise of this Warrant after such Reorganization Event shall be entitled to receive, in lieu of the shares of Warrant Stock that Holder would have been entitled to receive upon such exercise prior to such Reorganization Event (but without limiting the right to receive any securities or property owed as a result of Section 5.2), the stock or other securities or property which Holder would have been entitled to receive upon such Reorganization Event if, immediately prior to such Reorganization Event (or, if applicable, the record date thereof), Holder had completed such exercise (in cash) of this Warrant (and the Maximum Number of Shares shall be adjusted accordingly). If after such Reorganization Event, the Warrant is exercisable for securities of a corporation or entity other than the Company, then as a condition to effecting the Reorganization Event, the Company shall cause such corporation or entity to duly execute and deliver, upon request to Holder a supplement hereto acknowledging such corporation’s or other entity’s obligations under this Warrant promptly (and, in any event, within ten (10) Business Days) following the completion of such Reorganization Event; and in each such case, the terms of this Warrant shall be applicable to the shares of stock or other securities or property receivable upon the exercise of this Warrant after the consummation of such Reorganization Event.
5.5Adjustment upon Issuance of Additional Common Stock.
(a)Other than in connection with the Reorganization (as defined in the Purchase Agreement) or the Management Rollover (as defined in the Purchase Agreement) and subject to Section 5.7, in the event the Company or any of its Subsidiaries shall at any time on or after the Signing Date (whether prior to, on or after the date hereof) issue or be deemed to issue Additional Shares of Common Stock, without consideration or for a consideration per share less than the Nominal Price in effect immediately prior to such issuance or deemed issuance, then:
(i)the Nominal Price shall be reduced, concurrently with such issuance or deemed issuance, to a price (calculated to the nearest cent) determined in accordance with the following formula:
NP2 = ((A * NP1) + B) ÷ (A + C)
For purposes of the foregoing formula, the following definitions shall apply:
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“NP2” shall mean the Nominal Price in effect as of immediately after such issuance or deemed issuance of Additional Shares of Common Stock.
“NP1” shall mean the Nominal Price in effect as of immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock.
“A” shall mean the number of shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance (treating for this purpose as outstanding (i) all shares of vested restricted stock that were issued pursuant to a stock option or stock incentive plan prior to such issuance, (ii) all shares of Common Stock or Common Stock Equivalents issuable upon exercise (in cash) of outstanding vested and unexercised options that were issued pursuant to a stock option or stock incentive plan prior to such issuance, but only to the extent such vested and unexercised options have an exercise price that is less than the per share consideration received in connection with such issuance, and (iii) without duplication and subject to clauses (i) and (ii), all other shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance or that would be outstanding upon conversion or exchange of Convertible Securities outstanding immediately prior to such issuance, but only to the extent such Convertible Securities have a conversion price that is less than the per share consideration received in connection with such issuance);
“B” shall mean the aggregate consideration, if any, received by the Company or its Subsidiaries for such issuance; and
“C” shall mean the number of Additional Shares of Common Stock issued or deemed issued in such transaction.
(ii)The Maximum Number of Shares shall be increased, concurrently with such issuance or deemed issuance, to a price (calculated to the nearest 1/100th of a share) determined in accordance with the following formula:
MNS2 = (MNS1 * NP1) ÷ (NP2)
For purposes of the foregoing formula, the following definitions shall apply:
“MNS2” shall mean the Maximum Number of Shares in effect as of immediately after such issuance or deemed issuance of Additional Shares of Common Stock.
“MNS1” shall mean the Maximum Number of Shares in effect as of immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock.
“NP1” shall mean the Nominal Price in effect as of immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock.
“NP2” shall mean the Nominal Price in effect as of immediately after such issuance or deemed issuance of Additional Shares of Common Stock (after giving effect to the adjustment contemplated in clause (i)).
(b)In the event that at any time in any manner Convertible Securities are granted or issued and the price per share for which the Common Stock or Common Stock Equivalents is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Company or its Subsidiaries as consideration for the granting or issuing of such Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Company or its Subsidiaries upon the exercise, conversion or exchange of all such Convertible Securities, plus, in the case of Convertible Securities which are exercisable, convertible or exchangeable into other Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such other Convertible Securities and upon the conversion, exchange or exercise thereof, by (y) the total maximum number of shares of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities) shall be less than the
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Exercise Price in effect immediately prior to such issuance, then the total maximum amount of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities shall (as of the date of issuance of such Convertible Security) be deemed to have been issued for such price per share. No adjustment of the Exercise Price shall be made upon the actual issuance of such shares of Common Stock or Common Stock Equivalents, except as otherwise provided in the paragraph immediately below.
(c)If the purchase price provided for in any Convertible Securities, or the additional consideration, if any, payable upon the conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into, exchangeable for or exercisable for Common Stock or Common Stock Equivalents shall change at any time (including by reason of provisions designed to protect against dilution of the type set forth in this Section 5.5), the Exercise Price in effect at the time of such change shall forthwith be readjusted to the Exercise Price which would have been in effect at such time had such Convertible Securities still outstanding provided for such changed purchase price, additional consideration or rate, as the case may be, at the time initially granted, issued or sold.
(d)On the expiration or redemption of, or the termination of any right to convert, exchange or exercise, any Convertible Securities, the Exercise Price then in effect hereunder shall forthwith be increased to the Exercise Price which would have been in effect at the time of such expiration or termination had such Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.
(e)In the event any Additional Shares of Common Stock shall be issued or deemed issued for a consideration other than cash, the amount of the consideration other than cash received shall be the fair market value of such consideration as mutually agreed by the Holder and the Company; provided, that if the Holder and the Company do not so mutually agree within fifteen (15) Business Days, then fair market value shall be determined by the Independent Arbitrator in accordance with the Independent Arbitration Rules, mutatis mutandis.
5.6Notice of Adjustments. Upon the occurrence of each adjustment or readjustment or the Exercise Price or the number of shares of Warrant Stock or other securities issuable upon the exercise of this Warrant, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and shall promptly give written notice to the Holder of each adjustment under Section 5 of the Exercise Price or the number of shares of Warrant Stock or other securities that remain issuable upon exercise of this Warrant. The notice shall describe the adjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
5.7No Change Necessary. No adjustment shall be made pursuant to Section 5 for any action taken that is required by, and taken in accordance with, the Purchase Agreement or the Certificate of Designation dated as of June 21, 2022, establishing the Series A Preferred Stock, par value $0.01 per share, of the Company. No adjustment shall be made pursuant to Section 5 with respect to any dividend, distribution, subdivision, reclassification, combination or consolidation of the securities of a wholly-owned Subsidiary of the Company. The form of this Warrant need not be changed because of any adjustment in the Exercise Price or in the number of shares of Warrant Stock issuable upon its exercise.
5.8Reservation of Stock. If the number of shares of Warrant Stock or other securities issuable upon exercise of this Warrant that are authorized and unissued under the Company’s Certificate of Incorporation shall not be sufficient to effect the exercise of this Warrant in full, the Company will promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Warrant Stock or other securities issuable upon exercise of this Warrant as shall be sufficient for such purpose. The Company shall at all times reserve a sufficient number of shares of Warrant Stock out of its authorized but unissued shares to allow the exercise in full of this Warrant.
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6.NO IMPAIRMENT. The Company will not, by amendment of its Certificate of Incorporation or bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder against wrongful impairment. Without limiting the generality of the foregoing, the Company will take all such action as may be necessary or appropriate in order that the Company may duly and validly issue fully paid and nonassessable shares of Warrant Stock upon the exercise of this Warrant.
7.REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to the Holder as of the date hereof that:
7.1Organization, Qualification and Corporate Power. The Company is duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority, and all authorizations, licenses and permits, necessary to own, lease and operate the assets and properties it purports to own, lease or operate and to carry on its business as presently conducted.
7.2Enforceability. The Company has all requisite corporate power and authority to execute and deliver this Warrant. The execution, delivery and performance of this Warrant by the Company and the consummation by the Company of the of transactions contemplated hereby have been duly and validly authorized and approved by all require action on the part of the Company. No other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Warrant or to consummate the transactions contemplated hereby. This Warrant has been duly executed and delivered by the Company constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies.
7.3No Violations; Consents.
(a)The execution, delivery and performance of this Warrant by the Company does not, and the consummation by the Company of the transactions contemplated hereby, and compliance by the Company with the provisions of this Warrant will not conflict with, or result in any violation or breach by the Company of the governing documents of the Company or any of its Subsidiaries.
(b)Except as required by the Securities Act of 1933, as amended, or under any applicable “blue sky” or state securities law then in effect (if applicable), no consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Person is required in connection with the execution, delivery and performance of this Warrant.
7.4Due Authorization and Valid Issuance. The shares of Warrant Stock to be issued under this Warrant will be duly authorized, validly issued, fully paid and nonassessable and will not be issued in violation of any preemptive rights, right of first refusals or offer, buy-sell arrangements or similar arrangements, and will be issued in compliance in all material respects with applicable law and free and clear of all Liens (other than transfer restrictions under applicable securities laws).
7.5Reserve. The Company has reserved, free of preemptive rights and other preferential rights, a sufficient number of its previously authorized but unissued shares of Warrant Stock to satisfy the exercise of this Warrant in full.
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8.GENERAL PROVISIONS.
8.1No Voting or Other Rights. This Warrant does not entitle Holder to any voting rights or other rights as a stockholder of the Company, unless and until (and only to the extent that) this Warrant is actually validly exercised for shares of the Company’s capital stock in accordance with its terms. In the absence of valid exercise of this Warrant, no provisions of this Warrant, and no enumeration herein of the rights or privileges of Holder, shall cause Holder to be a stockholder of the Company for any purpose.
8.2Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall promptly (and, in any event, within ten (10) Business Days) execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
8.3Assignment; Transfer. This Warrant and any Warrant Stock issued hereunder may be assigned, conveyed or transferred, in whole or in part, only in accordance with, and to the extent permitted by, Section 2 of the Stockholders Agreement, mutatis mutandis. The rights and obligations of the Company and Holder under this Warrant shall be binding upon and benefit of their respective permitted successors, permitted assigns, heirs, administrators and permitted transferees.
8.4Construction. Except where expressly stated otherwise in this Warrant, the following rules of interpretation apply to this Warrant: (a) unless the context otherwise requires, “either” and “or” are not exclusive and shall include both the conjunctive and disjunctive, “any” shall mean “one or more” and “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”; (b) “hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Warrant refer to this Warrant as a whole and not to any particular provision of this Warrant; (c) “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends, and such phrase does not mean simply “if”; (d) the descriptive headings and table of contents included herein are included for convenience only and shall not affect in any way the meaning or interpretation of this Warrant or any provision hereof; (e) definitions contained in this Warrant are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms and vice versa; (f) references to a Person are also to its successors and permitted assigns to the extent not prohibited by this Warrant; (g) references to a “Section,” “Exhibit” or “Schedule” refer to a Section of, or an Exhibit or Schedule to, this Warrant; (h) references to “$” or otherwise to dollar amounts refer to the lawful currency of the United States; (i) the word “will” shall have the same meaning as the word “shall” and vice versa; and (j) references to “day” or “days” in the lower case means calendar days. The language used in this Warrant shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party. No summary of this Warrant prepared by any Party shall affect the meaning or interpretation of this Warrant. If any date on which a Party is permitted or required to exercise any right or privilege or discharge any duty or obligation pursuant to the terms hereof is not a Business Day, then such Party may exercise such right or privilege or discharge such duty or obligation on the next succeeding Business Day. In the computation of periods of time before which, within which or following which any act is to be done or step taken under this Warrant, the date that is the reference date in calculating such period will be included in such computation.
8.5Notices. Any and all notices required or permitted to be given pursuant to the provisions of this Warrant will be in writing and will be effective and deemed to provide the recipient sufficient notice under this Warrant on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) Business Day after deposit with an express overnight courier for United States deliveries (marked for overnight delivery), or five (5) Business Days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; (iii) three (3)
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Business Days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries or (iv) when sent via email if sent prior to 5:00 p.m. (local time of the recipient) on a Business Day, or at 9:00 a.m. (local time of the recipient) on the next succeeding Business Day otherwise. All notices not delivered personally or email will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address or email address as follows, or at such other address, email address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto as follows.
If to Holder:
Tiptree Holdings LLC
299 Park Avenue, 13th FL
New York, NY 10171
Attention: Jonathan Ilany
Neil C. Rifkind
Email: NRifkind@tiptreeinc.com
JIlany@tiptreeinc.com
with a copy to (which shall not constitute notice):
Ropes & Gray LLP
Prudential Tower, 800 Boylston Street
Boston, MA 02199
Attention: Michael Littenberg
William Michener
Email: Michael.Littenberg@ropesgray.com
William.Michener@ropesgray.com
If to the Company:
Fortegra Group, Inc.
10751 Deerwood Park Blvd., Suite 200
Jacksonville, FL 32256,
Attention: General Counsel
Email: CRomaine@fortegra.com
with copies to (which shall not constitute notice):
Ropes & Gray LLP
Prudential Tower, 800 Boylston Street
Boston, MA 02199
Attention: Michael Littenberg
William Michener
Email: Michael.Littenberg@ropesgray.com
William.Michener@ropesgray.com
and
c/o Warburg Pincus LLC
450 Lexington Avenue
New York, NY 10017
Attention: Brett K. Shawn
Email: brett.shawn@warburgpincus.com
notices@warburgpincus.com
and
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Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, NY 10019
Attention: Mark A. Cognetti
Dvir Oren
Email: Mcognetti@willkie.com
Doren@willkie.com
8.6Severability. Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Warrant is held to be prohibited by or invalid under the applicable Law of any jurisdiction, or unenforceable in any jurisdiction, such provision shall be effective only to the extent of such prohibition, invalidity or unenforceability in such jurisdiction, without invalidating the remainder of this Warrant, and without affecting the validity or enforceability of this Warrant, including such provision, in any other jurisdiction, and such provision shall be interpreted, revised or applied in a manner that renders it valid and enforceable to the fullest extent possible.
8.7Waivers and Amendments. This Warrant may be amended or modified only by a written agreement executed and delivered by duly authorized officers of the Company and Holder. This Warrant and any provision herein or performance hereunder may be waived only in writing (including by electronic means) by the Holder. The waiver of a breach of any provision of this Warrant shall not operate or be construed as a waiver of any subsequent breach, whether or not similar, unless such waiver specifically states that it is to be construed as a continuing waiver. No delay or omission to exercise any right, power or remedy accruing under this Warrant, upon any breach or default under this Warrant, shall impair any such right, power or remedy of Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character of any breach or default under this Warrant, or any waiver of any provisions or conditions of this Warrant, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Warrant or by law or otherwise afforded to any party, shall be cumulative and not alternative.
8.8Counterparts. This Warrant may be executed and delivered (including by facsimile transmission, PDF or other electronic delivery) in one or more counterparts, and in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.
8.9Enforcement of Agreement; Specific Performance. The Company acknowledges and agrees that the rights and obligations set forth in this Warrant are unique and that, if this Warrant is not timely performed in accordance with its terms or is otherwise breached or threatened to be breached, Holder may be damaged irreparably and have no adequate remedy at law and even if monetary damages would be available, such monetary damages would not be an adequate remedy. Accordingly, the Company agrees that Holder will have the right, in addition to any other rights and remedies existing in its favor at law or in equity, to enforce its rights and the Company’s obligations under the terms of this Warrant, by bringing an action or actions for specific performance (including for specific performance of any and all of the transactions contemplated by this Warrant), injunctive or other equitable relief (without proof of damage or posting of bond or other security). Any and all remedies provided herein will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon Holder, and the exercise by Holder of any one remedy will not preclude the exercise of any other remedy. The Company agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief when available pursuant to the terms of this Warrant on
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the basis that Holder has an adequate remedy at law or an award of specific performance is not an appropriate remedy for any reason at law or equity.
8.10Governing Law; Attorneys’ Fees. This Warrant and any claim, dispute, action, cause of action, or controversy related to or arising, directly or indirectly, out of, caused by or resulting from this Warrant will be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any law (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
8.11Jurisdiction. This Warrant has been executed and delivered in and shall be deemed to have been made in the State of Delaware. The Company, and by acceptance of this Warrant, the Holder agrees to the exclusive jurisdiction of the Chancery Court of the State of Delaware (or any appellate court therefrom) or, if jurisdiction is not available in the Chancery Court of the State of Delaware, any state or federal court within the City of Wilmington, Delaware, with respect to any claim, dispute, action, cause of action or controversy arising, directly or indirectly, out of, caused by, or resulting from this Warrant, and waives personal service of any and all process upon it, and consents that all services of process be made by registered or certified mail, return receipt requested, directed to it at its address as set forth in Section 8.5 (excluding e-mail delivery), and service so made shall be deemed to be completed when received. The Company and, by acceptance of this Warrant, the Holder waive any objection based on forum non conveniens and waive any objection to venue of any action instituted hereunder. Nothing in this Section 8.11 shall affect the rights to serve legal process in any other manner permitted by Law. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
8.12Waiver of Jury Trial. THE COMPANY, AND BY ACCEPTANCE OF THIS WARRANT, THE HOLDER HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS WARRANT.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the date first written above.
THE FORTEGRA GROUP INC.
By:/s/ Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
Title: President and Chief Executive Officer
[Signature Page to Warrant]
EXHIBIT 1
EXERCISE NOTICE
EXERCISE NOTICE
To: The Fortegra Group Inc. (the “Company”)
We refer to that certain Warrant to Purchase Common Stock, Warrant No.___, issued on [______] (the “Warrant”). Capitalized terms used but not otherwise defined herein shall have the meaning assigned to them in the Warrant.
Select one of the following two alternatives:
Cash Exercise. On the terms and conditions set forth in the Warrant, the Holder hereby elects to purchase shares of Warrant Stock, pursuant to the terms of the Warrant, and tenders herewith payment of the Exercise Price for such shares in full.
Net Exercise Election. On the terms and conditions set forth in the Warrant, the undersigned Holder elects to exercise the Warrant by net exercise election pursuant to Section 2.5 of the Warrant. This conversion is exercised with respect to ____________________ shares of Warrant Stock.
Contingency. This exercise is contingent upon the occurrence of the following.
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
Effective Time. Notwithstanding the Warrant, the exercise contemplated by this Exercise Notice shall be effective as of ______________________________ and the shares of Warrant Stock exercised hereby shall be deemed issued on ____________________________________________________________________.
Date: | [HOLDER] | ||||
By: | |||||
| Its: | |||||
EXHIBIT 10.4
CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK
OF
THE FORTEGRA GROUP, INC.
___________________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
General Corporation Law of the State of Delaware
___________________________________
Pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware (the “General Corporation Law”), the undersigned duly authorized officer of The Fortegra Group, Inc. (the “Corporation”), a corporation organized and existing under the General Corporation Law, certifies that pursuant to the authority expressly granted to and vested in the Board of Directors of the Corporation (the “Board”) by the Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), which authorizes the issuance, by the Corporation, of up to 100,000,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”), the Board on June 21, 2022 adopted the following resolutions:
RESOLVED, that pursuant to Article IV of the Certificate of Incorporation, the Board hereby creates and provides for the issuance of a series of Preferred Stock, par value $0.01 per share, and through this certificate of designation (the “Certificate of Designation”), hereby fixes the number, powers, designations, preferences, rights, restrictions and limitations of such series of Preferred Stock as follows:
1.Designation and amount. 5,333,333 shares of Preferred Stock of the Corporation are hereby constituted as a series of Preferred Stock, par value $0.01 per share, designated as “Series A Preferred Stock”.
2.Ranking. The Series A Preferred Stock shall rank (a) senior as to dividends over (i) the Corporation’s common stock, par value $0.01 per share (the “Common Stock”), and (ii) any other series or class of the Corporation’s capital stock created after the date hereof that does not by its terms rank senior as to dividends to the Series A Preferred Stock, when and if issued, (b) senior as to distributions of assets upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation, over (i) the Common Stock and (ii) any other series or class of the Corporation’s capital stock issued after the date hereof that does not by its terms rank senior as to liquidation, dissolution and winding up to the Series A Preferred Stock, when and if issued (any such capital stock contemplated by clauses (a) or (b), “Junior Stock”), and (c) subordinate to any outstanding indebtedness of the Corporation, including any senior secured, unsecured, mezzanine, subordinated or convertible indebtedness.
3.Dividends.
3.1.From and after the date of the issuance of any shares of Series A Preferred Stock, dividends at an annual rate equal to the Applicable Dividend Rate (as defined below) on the Liquidation Preference (as defined below, but disregarding for purposes of this Section 3.1 clause (y) of the definition thereof) per share of Series A Preferred Stock shall accrue on such shares of Series A Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock) (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, shall be compounded on a quarterly basis (on each of January 15th, April 15th, July 15th and October 15th of each year (each, a “Payment Date” and the period of time from one Payment Date (or, in the case of the first period, from the date of issuance) to the next Payment Date, a “Quarterly Period”)), and shall be cumulative; provided, however, that except as set forth in the following sentence of this Section 3.1 or in Section 4, such Accruing Dividends shall be payable only when, as, and if declared by the Board and the Corporation shall be under no obligation to pay such Accruing Dividends. Notwithstanding the foregoing, the Corporation shall have the option to satisfy its obligations, in whole or in part, with respect to the Accruing Dividends that accrued during any Quarterly Period by making cash payments in an amount equal to the Accruing Dividends that accrued during such Quarterly Period, in which case such dividends (or portion thereof) actually paid in cash will cease to accrue as of the date payment is actually made (but any portion not paid in cash will continue to accrue). As a condition to the payment of cash in lieu of accruing the Accruing Dividends in respect of any particular Quarterly Period, the Corporation shall deliver written notice of its intention to pay a cash dividend to the holders of shares of Series A Preferred Stock at least ten (10) business days prior to the Payment Date in respect of such Quarterly Period and payment of such cash dividend will be made no later than the Payment Date. For clarity, in no event shall the Corporation have the right to pay any Accruing Dividends that accrued in prior Quarterly Periods, which Accruing Dividends shall continue to accrue in accordance with the terms hereof.
3.2.Each dividend declared by the Board in respect of the Series A Preferred Stock shall be payable to the holders of record thereof as they appear on the stock records of the Corporation at the close of business on such record dates as may be established by the Board, which shall be not more than 30 days nor less than 10 days preceding the applicable dividend payment date.
4.Liquidation Rights.
4.1.In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, and in the event of a Deemed Liquidation Event (as defined below), the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or out of the Available Proceeds (as defined below), as applicable, before any payment shall be made to or set aside for the holders of Junior Stock by reason of their ownership thereof, an amount per share equal to the greater of (x) the Original Issue Price, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon and (y) the payment such
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holders would have received had such holders, immediately prior to such liquidation, dissolution or winding up, converted such shares of Series A Preferred Stock into shares of Common Stock at the applicable Series A Conversion Price set forth in Section 5 hereof (the greater of (x) and (y), the “Liquidation Preference”). Unless expressly waived in writing (with specific reference to this provision) by the Requisite Holders, the Liquidation Preference shall be paid in cash (whether in connection with a liquidation, dissolution or winding up of the Corporation, in connection with a Deemed Liquidation Event or otherwise).
4.2.If upon any such liquidation, bankruptcy, dissolution or winding up of the Corporation, or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under Section 4.1, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
4.3.The “Original Issue Price” shall be $15.00, which amount shall be adjusted in the event of any share dividend, share split, share combination or other similar recapitalization of the Series A Preferred Stock, Common Stock or any Common Stock Equivalent.
4.4.Deemed Liquidation Events.
4.4.1.Definition: Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least 50% of the outstanding shares of Series A Preferred Stock (the “Requisite Holders”) elect otherwise by written notice sent to the Corporation at least five (5) days prior to the effective date of any such event:
4.4.1.1.a merger or consolidation in which:
(a)the Corporation is a constituent party; or
(b)a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation or other securities or the capital stock or other securities of one or more subsidiaries of the Corporation are issued if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries,
except any such merger or consolidation involving the Corporation or a direct or indirect subsidiary thereof in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock or other equity securities of (1) the surviving or resulting corporation, limited liability company, partnership, association, joint-stock corporation, trust or other form of business entity (each sometimes referred to herein as a “Party”) or (2) if the surviving or resulting Party is a wholly owned subsidiary of another
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Party immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or
4.4.1.2.(1) the sale, lease, exchange, transfer, exclusive license or other disposition (for cash, securities or other consideration) in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or (2) the sale, lease, exchange, transfer, exclusive license or other disposition (for cash, securities or other consideration) and whether in a single transaction or a series of related transactions, of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except, in each case, where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation;
4.4.1.3.any other transaction in which any shares of Series A Preferred Stock are converted, reclassified or exchanged into any property or Security (as defined below) other than the conversion of Series A Preferred Stock into Common Stock in accordance with this Certificate of Designation; or.
4.4.1.4.the sale, lease, exchange, transfer, exclusive license or other disposition (for cash, securities or other consideration) and whether in a single transaction or series of related transactions, of all or substantially all or at least a majority of the capital stock of the Corporation or the capital stock of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries.
4.5.Effecting a Deemed Liquidation Event.
4.5.1.1.The Corporation shall notify the holders of Series A Preferred Stock at least ten (10) business days prior to consummating a Deemed Liquidation Event of which it is aware.
4.5.1.2.Unless expressly waived in writing (with specific reference to this provision) by the Requisite Holders, the Corporation shall not have the power (and shall cause its subsidiaries not) to effect a Deemed Liquidation Event or enter into any agreement or arrangement to effect a Deemed Liquidation Event unless the agreement or plan of merger or consolidation or purchase agreement, as applicable, for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation in such Deemed Liquidation Event shall be allocated to the holders of capital stock of the Corporation in accordance with Section 4.1.
4.5.1.3.In the event of a Deemed Liquidation Event referred to in Section 4.4.1.2, if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within thirty (30) days after such Deemed Liquidation Event, then (i) the
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Corporation shall send a written notice to each holder of Series A Preferred Stock no later than the thirtieth (30th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right, and whether the Corporation has sufficient Available Proceeds to fully redeem the Series A Preferred Stock) pursuant to the terms of the following clause (ii) to require the redemption of such shares of Series A Preferred Stock, and (ii) if the Requisite Holders so request in a written instrument delivered to the Corporation not later than the one hundred and twentieth (120th) days after Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation from such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board), together with any other assets of the Corporation available for distribution to its stockholders, (the “Available Proceeds”), on or prior to the one hundred and fiftieth (150th) day after the Deemed Liquidation Event, to redeem all outstanding shares of Series A Preferred Stock at a price per share equal to the applicable Liquidation Preference. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Series A Preferred Stock, the Corporation shall redeem a pro rata portion of each holder’s shares of Series A Preferred Stock to the fullest extent of such Available Proceeds, based on the respective amounts which would otherwise be payable in respect of the shares to be redeemed if the Available Proceeds were sufficient to redeem all such shares, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. Prior to the distribution or redemption provided for in this Section 4.3.1.2, the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event.
5.Conversion.
5.1.Optional Conversion: Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof by delivering written notice thereof to the Corporation (a “Conversion Notice”), at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the Series A Original Issue Price, plus any Accruing Dividends, by the Series A Conversion Price (as defined below) in effect at the time of conversion. The “Series A Conversion Price” of any share of Series A Preferred Stock shall initially be $15.00. Such initial Series A Conversion Price shall be reduced (but not below $0.01) by the aggregate value of all cash dividends or distributions in respect of a share of Common Stock or Common Stock Equivalents from and after the Series A Original Issue Date (other than, after an Initial Public Offering, ordinary course dividends on the Common Stock or Common Stock Equivalents not exceeding the Allowed Dividend per share per annum, which amount shall be adjusted in the event of any share dividend, share split, share combination or other similar recapitalization of the Series A Preferred
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Stock, Common Stock or any Common Stock Equivalent) and shall further be subject to adjustment as provided below. A Conversion Notice may provide that a conversion of any shares of Series A Preferred Stock will be contingent upon the occurrence of an event, fact or circumstance, which contingent exercise may further require that such event, fact or circumstance occur prior to a certain date, including the occurrence of a Change of Control of the Corporation or an Initial Public Offering, in which case, unless the Conversion Notice expressly specifies otherwise, the conversion shall be deemed to occur immediately prior to the occurrence of such event, fact or circumstance. Upon the request of the Requisite Holders, the Corporation will provide notice of the then-current Series A Conversion Price.
5.2.Mandatory Conversion. Immediately prior to the closing of a Qualified Public Offering, each outstanding share of Series A Preferred Stock shall automatically be converted into (a) such number of fully paid and non-assessable shares of Common Stock as is determined by dividing (i) the Original Issue Price, plus any Accruing Dividends by (ii) the Conversion Price in effect at such time and (b) the right to concurrently with such conversion receive the Make Whole Amount either (i) in cash or (ii) in additional shares of Common Stock in an amount as is determined by dividing the Make Whole Amount by the Conversion Price in effect at such time, which determination between (i) and (ii) the Board shall make at least ten (10) Business Days prior to the closing of the Qualified Public Offering and provide prompt notice thereof to the holders of the Series A Preferred Stock (it being agreed that in the absence of such determination and notice, the Make Whole Amount shall be received pursuant to the foregoing clause (ii)). Following the conversion of the Series A Preferred Stock pursuant to this Section 5.2, the Corporation may not reissue such Series A Preferred Stock or issue additional shares of Series A Preferred Stock.
5.3.Adjustments to the Series A Conversion Price.
5.3.1.Special Definitions. For purposes of this Section 5, the following definitions shall apply:
5.3.1.1.“Allowed Dividend” means an amount equal to one and a half percent (1.5%) of the initial price per share of Common Stock or Common Stock Equivalents to the public in the Initial Public Offering, which amount shall be adjusted in the event of any share dividend, share split, share combination or other similar recapitalization of the Corporation’s Common Stock or any Common Stock Equivalent. In addition, the amount of the Allowed Dividend will be calculated in an equitable manner in connection with an Initial Public Offering not involving an underwritten offering.
5.3.1.2.“Make Whole Amount” means, with respect to any shares of Series A Preferred Stock, the net present value (using a discount rate of eight percent (8%) per annum) of the amount of Accruing Dividends that would have accrued on such shares of Series A Preferred Stock (disregarding the conversion thereof pursuant to Section 5.2 or otherwise) from and after the closing of the Qualified Public Offering through the date that is five (5) years following the date such share was issued (the “Accrued Amount”).
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5.3.1.3.“Qualified Public Offering” shall mean an Initial Public Offering resulting in at least $150,000,000 of gross proceeds of the Initial Public Offering to the Corporation and/or the stockholders of the Corporation that includes a per share Common Stock or Common Stock Equivalents offered to the public in the Initial Public Offering of at least $15.00 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock or Common Stock Equivalents).
5.3.1.4.“Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to any Approved Plan (as defined in the Stockholders Agreement).
5.3.1.5.“The Series A Original Issue Date” shall mean the date on which the first share of Series A Preferred Stock was issued.
5.3.1.6.“Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for, or rights, options or warrants to subscribe for, purchase or otherwise acquire, Common Stock or Common Stock Equivalents, but excluding Options, whether or not any of the foregoing is then immediately exercisable, convertible or exchangeable.
5.3.1.7.“Additional Shares of Common Stock” shall mean all shares of Common Stock or Common Stock Equivalents issued after the Series A Original Issue Date, other than (1) the following shares of Common Stock and Common Stock Equivalents and (2) shares of Common Stock and Common Stock Equivalents deemed issued pursuant to the following Options, Common Stock Equivalents and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):
(a)shares of Common Stock, Common Stock Equivalents Options or Convertible Securities issued as a dividend or distribution on, or upon conversion of outstanding shares of, Series A Preferred Stock;
(b)shares of Common Stock, Common Stock Equivalents, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Sections 5.3.1.10, 5.3.1.11 and 5.3.1.12;
(c)shares of Common Stock issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to the Management Incentive Plan or a bona fide plan, agreement or arrangement approved by the Board in accordance with the Stockholders Agreement;
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(d)shares of Common Stock, Common Stock Equivalents or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock or Common Stock Equivalents actually issued upon the conversion or exchange of Convertible Securities, in each case provided such issuance is pursuant to the terms of such Option or Convertible Security;
(e)shares of Common Stock, Common Stock Equivalents, Options or Convertible Securities issued to lenders, or other financial institutions, pursuant to a debt financing as a bona fide “equity kicker”;
(f)shares of Common Stock, Common Stock Equivalents Options or Convertible Securities issued (solely as consideration for the transaction and not in connection with financing the transaction or other consideration or compensation) pursuant to the acquisition of another Party by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture or similar collaboration, agreement or arrangement;
(g)Shares of Common Stock or Common Stock Equivalents to the Corporation or a wholly-owned subsidiary of the Corporation;
(h)shares of Common Stock, Common Stock Equivalents or Convertible Securities issued pursuant to and in accordance with the Securities Purchase Agreement, including shares of Common Stock, Common Stock Equivalents or Convertible Securities issued pursuant to and in accordance with the Warrants or the Additional Warrants (each, as defined in the Securities Purchase Agreement); and
(i)shares of Common Stock, Common Stock Equivalents or Convertible Securities issued to the Corporation or a wholly-owned subsidiary of the Corporation.
5.3.1.8.No Adjustment of Series A Conversion Price. Unless expressly waived in writing (with specific reference to this provision) by the Requisite Holders, no adjustment in the Series A Conversion Price shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the Requisite Holders agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.
5.3.1.9.Adjustment of Series A Conversion Price Upon Issuance of Additional Shares of Common Stock.
(a)In the event the Corporation or its subsidiaries shall at any time after the Series A Original Issue Date issue Additional Shares of Common Stock, without consideration or for a
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consideration per share less than the Series A Conversion Price in effect immediately prior to such issuance or deemed issuance, then the Series A Conversion Price shall be reduced, concurrently with such issuance, to a price (calculated to the nearest cent) determined in accordance with the following formula:
CP2 = ((CP1* A) + B) ÷ (A + C).
(i)“CP2” shall mean the Series A Conversion Price in effect immediately after such issuance or deemed issuance of Additional Shares of Common Stock;
(ii)“CP1” shall mean the Series A Conversion Price in effect immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock;
(iii)“A” shall mean the number of shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance or deemed issuance of Additional Shares of Common Stock (treating for this purpose as outstanding (i) all shares of vested restricted stock that were issued pursuant to a stock option or stock incentive plan prior to such issuance, (ii) all shares of Common Stock or Common Stock Equivalents issuable upon exercise (in cash) of outstanding vested and unexercised options that were issued pursuant to a stock option or stock incentive plan prior to such issuance, but only to the extent such vested and unexercised options have an exercise price that is less than the per share consideration received in connection with such issuance, and (iii) without duplication and subject to clauses (i) and (ii), all other shares of Common Stock or Common Stock Equivalents outstanding immediately prior to such issuance or that would be outstanding upon conversion or exchange of Convertible Securities outstanding immediately prior to such issuance);
(iv)“B” shall mean the aggregate consideration, if any, received by the Corporation or its subsidiaries in respect of such issuance; and
(v)“C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.
(b)In the event that at any time in any manner Convertible Securities are granted or issued and the price per share for which the Common Stock or Common Stock Equivalents is issuable upon exercise, conversion or exchange (determined by dividing (x) the total amount, if any, received or receivable by the Corporation or its subsidiaries as consideration for the granting or issuing of such
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Convertible Securities, plus the minimum aggregate amount of additional consideration payable to the Corporation or its subsidiaries upon the exercise, conversion or exchange of all such Convertible Securities, plus, in the case of Convertible Securities which are exercisable, convertible or exchangeable into other Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such other Convertible Securities and upon the conversion, exchange or exercise thereof, by (y) the total maximum number of shares of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities) shall be less than the Conversion Price in effect immediately prior to such issuance, then the total maximum amount of Common Stock or Common Stock Equivalents issuable upon the exercise, conversion or exchange of such Convertible Securities shall (as of the date of issuance of such Convertible Security) be deemed to have been issued for such price per share. No adjustment of the Conversion Price shall be made upon the actual issuance of such shares of Common Stock or Common Stock Equivalents, except as otherwise provided in the paragraph immediately below.
(c)If the purchase price provided for in any Convertible Securities, or the additional consideration, if any, payable upon the conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible Securities are convertible into, exchangeable for or exercisable for Common Stock or Common Stock Equivalents shall change at any time (including by reason of provisions designed to protect against dilution of the type set forth in this Section 5.3.1.9), the Conversion Price in effect at the time of such change shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Convertible Securities still outstanding provided for such changed purchase price, additional consideration or rate, as the case may be, at the time initially granted, issued or sold.
(d)On the expiration or redemption of, or the termination of any right to convert, exchange or exercise, any Convertible Securities, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such Convertible Securities, to the extent outstanding immediately prior to such expiration or termination, never been issued.
(e)In the event any Additional Shares of Common Stock shall be issued or deemed issued for a consideration other than cash, the amount of the consideration other than cash received shall be the fair market value of such consideration as mutually agreed by the Requisite Holders
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and the Corporation; provided, that if the Requisite Holders and the Corporation do not so mutually agree within fifteen (15) Business Days, then fair market value shall be determined by the Independent Arbitrator in accordance with the Independent Arbitration Rules, mutatis mutandis.
5.3.1.10.Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Series A Original Issue Date effect a subdivision of the outstanding Common Stock or Common Stock Equivalents or declare a dividend on, or a distribution in respect of, Common Stock, which dividend or distribution is payable in additional shares of Common Stock (or a distribution in respect of, Common Stock Equivalents, which dividend or distribution is payable in additional Common Stock Equivalents of the same class and series and from the same issuer), then the Series A Conversion Price in effect immediately before that subdivision, dividend or distribution shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock or Common Stock Equivalents outstanding. If the Corporation shall at any time or from time to time after the Series A Original Issue Date combine the outstanding shares of Common Stock or Common Stock Equivalents, then the Series A Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock or Common Stock Equivalents outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.
5.3.1.11.Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series A Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock or Common Stock Equivalents entitled to receive, a dividend or other distribution payable on the Common Stock or any Common Stock Equivalents that is payable in (a) securities of the Corporation or any of its subsidiaries (which is not subject to Section 5.3.1.10) or (b) other securities, property or assets (other than cash), which dividend or distribution is actually made (a “Dividend Event”), then and in each such event each holder of Series A Preferred Stock, upon conversion at any time after such dividend or distribution (or the record date thereof), shall receive, in addition to the shares of Common Stock, the securities or such other properties or assets that would have been payable to such holder if such holder had completed such conversion immediately prior to the record date of such dividend or distribution. For the avoidance of doubt, no adjustment to the number of shares of Common Stock issuable under, or the exercise price of, the Warrants or the Additional Warrants (each, as defined in the
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Securities Purchase Agreement) shall result in an adjustment under Section 5.3.1.10 or this Section 5.3.1.11.
5.3.1.12.Adjustment for Merger or Reorganization, etc. Subject to, and without limiting, the provisions of Section 4 including Section 4.2, if (a) there shall occur any reorganization, recapitalization or reclassification of the Corporation or any of its securities, (b) there shall occur a consolidation or merger involving the Corporation in which the Common Stock or Common Stock Equivalents is converted into or exchanged for securities, cash or other property or (c) a subsidiary of the Corporation that owns all or substantially all of the assets of the Corporation and its subsidiaries on a consolidated basis and is not a direct or indirect wholly-owned subsidiary of the Corporation takes any of the actions contemplated by clause (a) or (b), mutatis mutandis (a “Reorganization Event”), then, and in each such case, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event (but without limiting the right to receive any securities or property owed as a result of Section 5.3.1.8) into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock or Common Stock Equivalents issuable upon conversion of one share of Series A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in this Section 5 with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock, to the end that the provisions set forth in this Section 5 (including provisions with respect to changes in and other adjustments of the Series A Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock.
5.3.2.Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Series A Conversion Price pursuant to this Section 5.3, the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and shall promptly give written notice to the holder of shares of Series A Preferred Stock adjustment or readjustment under this Section 5.3 of the Series A Conversion Price . The notice shall describe the adjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
5.4.Issuance of Stock. Except as set forth in the Conversion Notice (provided, that the Conversion Notice may not specify a date or time prior to the delivery of the Conversion Notice), a share of Series A Preferred Stock shall be deemed to have been converted as of the close of business on the Business Day prior to the date of delivery of a Conversion Notice with respect to such share of Series A Preferred Stock, and the holder thereof shall be treated for all purposes as the holder of
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record of the applicable shares of Common Stock (and, to the extent applicable, any cash, securities or other property issuable thereon) as of 11:59 p.m. on the date of delivery of the Conversion Notice (or, if such day is not a Business Day, the first Business Day thereafter). As soon as practicable on or after such date (and, in any event, no later than ten (10) Business Days thereafter), the Corporation shall issue and deliver to the holder evidence of issuance in book-entry form of the number of whole shares of Common Stock issuable upon such conversion (and, to the extent applicable and practicable, evidence of issuance or delivery of any other securities or other property issuable thereon).
5.5.Reservation of Shares. The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of the Series A Preferred Stock, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series A Preferred Stock then outstanding. Any shares of Common Stock issued upon conversion of Series A Preferred Stock (i) shall be duly authorized, validly issued and fully paid and non-assessable, (ii) shall rank pari passu with the other shares of Common Stock outstanding from time to time and (iii) from and after such time as the Common Stock is listed on a securities exchange, shall be approved for listing on each securities exchange on which the Common Stock is listed.
5.6.Notices. If the Corporation proposes at any time to effect a Change of Control, an Initial Public Offering, a Reorganization Event or a Dividend Event, the Corporation shall give the holder of shares of Series A Preferred Stock at least twenty (20) Business Days advance written notice (each, a “Transaction Notice”) of the anticipated closing date for such transaction or event.
6.Voting Rights. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock (rounded to the nearest whole share) into which the shares of Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of this Certificate of Designation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis. In connection with an Initial Public Offering and, in any event, at all times when the Common Stock is listed on a securities exchange, the Corporation shall take all actions within its control to ensure that any stockholder or other approval or action necessary for the Series A Preferred Stock to have the voting rights contemplated by this Section 6 and to have the right to convert into Common Stock shall have been obtained and be in effect.
7.No Impairment. The Corporation will not, by amendment of the Certificate of Incorporation including pursuant to any certificate of designation, bylaws, or through reorganization, consolidation, merger, dissolution, issue or sale of securities, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Certificate of Designation, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder against wrongful impairment. Without limiting the generality of the foregoing, the Corporation will take all such action as may be necessary or appropriate in order that the Corporation
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may duly and validly issue fully paid and non-assessable shares of Common Stock upon the conversion of Series A Preferred Stock.
8.Certain Definitions.
The terms defined in this Section 8 shall have, for all purposes of this Certificate of Designation, the meanings herein specified.
“Applicable Dividend Rate” means eight percent (8) per annum.
“Business Day” means any day other than a Saturday, Sunday or any day on which banking institutions are authorized to close in New York, New York.
“Change of Control” means with respect to any Person, (a) any transaction or series of related transactions, whether or not such Person is a party thereto, in which, after giving effect to such transaction or transactions, the equity securities representing in excess of fifty percent (50%) of the voting power of such Person are owned directly or indirectly through one or more entities, by any “person” or “group” (as such terms are used in Section 13(d) of the Exchange Act) of persons not currently owning in excess of fifty percent (50%) of the voting power of such Person, or (b) a sale, lease or other disposition of all or substantially all of the assets of such Person and its subsidiaries on a consolidated basis (including securities of such Person’s directly or indirectly owned subsidiaries) to one or more purchasers.
“Common Stock” means shares of the Common Stock, par value $.01 per share, of the Corporation or any other shares of capital stock of the Corporation into which the Common Stock is reclassified or changed.
“Common Stock Equivalents” means any security of the Corporation that is equivalent to Common Stock or has rights to dividends or distributions that are pari passu to the Common Stock, or any such security of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries on a consolidated basis are held by such subsidiary or subsidiaries.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Independent Arbitrator” means a nationally recognized global investment bank, independent accounting firm, or other advisor having relevant valuation expertise, in each case, agreed upon by the Requisite Holders and the Corporation.
“Independent Arbitrator Rules” means that, in determining fair market value, the Independent Arbitrator will determine in good faith its own fair market value (which shall not take into account any discount for lack of liquidity, minority interest or similar discounts) and shall then select either the value proposed by the Requisite Holders or the value proposed by the Corporation (each, as submitted to the Independent Arbitrator in connection with its engagement), whichever one is closer to the value determined by the Independent Arbitrator (which selected value shall
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constitute fair market value for such purpose for the three (3) months following such determination, unless an event, fact or circumstance shall have occurred that would, in the reasonable judgment of the Corporation or the Requisite Holders, be material to a determination of fair market value). The Independent Arbitrator will be instructed to issue its determination within 30 days of being engaged, and to deliver a written report to the Requisite Holders and the Corporation reflecting the Independent Arbitrator’s own calculation of fair market value together with reasonable supporting detail thereof. The Corporation will cooperate with the Independent Arbitrator in all reasonable respects, but neither the Requisite Holders nor the Corporation will be permitted to have any ex parte meetings, teleconferences or other correspondence with the Independent Arbitrator without giving the other party reasonable advance notice as it is intended that both parties be included in all discussions and correspondence with the Independent Arbitrator. The party whose proposed fair market value has not been selected by the Independent Arbitrator shall be responsible for the fees, costs and expenses of the Independent Arbitrator in respect of such determination. The determination by the Independent Arbitrator shall be final and binding, absent fraud or manifest error.
“Initial Public Offering” means an initial registered offering of Common Stock or Common Stock Equivalents to the public or the initial date Common Stock or Common Stock Equivalents trade on a national securities exchange or is registered with the SEC (including as a result of a transaction with a “special purpose acquisition company”).
“Management Incentive Plan” means the Fortegra Group, Inc. Management Incentive Plan, as amended from time to time.
“Person” means any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof.
“Securities Purchase Agreement” means the Securities Purchase Agreement, dated as of October 11, 2021, by and among the Corporation, Tiptree Inc. and WP Falcon Aggregator, L.P.
“Stockholders Agreement” means the Stockholders Agreement of the Corporation, dated as of date hereof, by and among the Tiptree Holdings LLC, WP Falcon Aggregator, L.P. the Corporation and the other parties thereto.
9.Miscellaneous.
9.1.Transfer Taxes. The Corporation shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series A Preferred Stock or shares of Common Stock or other securities issued on account of Series A Preferred Stock pursuant hereto, or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series A Preferred Stock, shares of Common Stock or other securities in a name other than the name
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in which the shares of Series A Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any Person other than a payment to the registered holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.
9.2.Tax Treatment. The Series A Preferred Stock is intended to be treated as common stock that does not constitute “preferred stock” within the meaning of Section 305 of the Internal Revenue Code of 1986, as amended, and the Corporation shall apply the provisions of this Certificate of Designations consistent with such intention.
9.3.Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.
9.4.The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.
9.5.If any of the voting powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof set forth herein which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional and other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences and relative, participating, optional or other special rights of the Series A Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein.
9.6.This Certificate of Designation and all questions related to the interpretation or enforcement of this Certificate of Designation will be governed by and construed in accordance with the Laws of the State of Delaware.
10.RECEIPT AND ACCEPTANCE OF A SHARE OR SHARES OF THE SERIES A PREFERRED STOCK BY OR ON BEHALF OF A HOLDER OF SERIES A PREFERRED STOCK SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE HOLDER (AND ALL OTHERS HAVING BENEFICIAL OWNERSHIP OF SUCH SHARE OR SHARES) OF ALL OF THE TERMS AND
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PROVISIONS OF THIS CERTIFICATE. NO SIGNATURE OR OTHER FURTHER MANIFESTATION OF ASSENT TO THE TERMS AND PROVISIONS OF THIS CERTIFICATE SHALL BE NECESSARY FOR ITS OPERATION OR EFFECT AS BETWEEN THE CORPORATION AND THE HOLDER OF SERIES A PREFERRED STOCK (AND ALL SUCH OTHERS).
11.Amendments. Subject to the Stockholders Agreement, this Certificate of Designation cannot be amended without the consent of the Requisite Holders.
12.Renouncement or Corporate Opportunities.
12.1.Scope. The provisions of this Section 12 are set forth to define, to the extent permitted by applicable law, the duties of Exempted Persons (as defined below) to the Corporation and, to the extent applicable, to its stockholders, with respect to certain classes or categories of business opportunities. “Exempted Persons” means the Principal Stockholder (defined below) and its partners, principals, directors, officers, members, managers, managing directors and/or employees, including any of the foregoing who serve as employees, officers or directors of the Corporation and the Warburg Pincus Entities and their partners, principals, directors, officers, members, managers, managing directors and/or employees. “Principal Stockholder” means Tiptree Inc., any and all successors to Tiptree Inc. by way of merger, consolidation or sale of all or substantially all of its assets, and any and all corporations, partnerships, joint ventures, limited liability companies, associations and other entities (i) in which Tiptree Inc. owns, directly or indirectly, more than 50% of the outstanding voting stock, voting power, partnership interests or similar ownership interests, (ii) of which Tiptree Inc. otherwise directly or indirectly controls or directs the policies or operations, (iii) that would be considered subsidiaries of Tiptree Inc. within the meaning of Regulation S-K or Regulation S-X of the general rules and regulations under the Securities Act of 1933, as amended (the “Securities Act”), or (iv) directly or indirectly controlling or under common control with Tiptree Inc. “Warburg Pincus Entities” shall mean Warburg Pincus LLC and/or Warburg Pincus & Co. (or an affiliate of one or more of such entities) or their respective subsidiaries (collectively, “Warburg Pincus”), (ii) any investment fund, vehicle or account which is managed by Warburg Pincus or in respect of which Warburg Pincus has investment discretion, including Warburg Pincus Global Growth, L.P. and Warburg Pincus Financial Sector II, L.P. (each, a “Warburg Pincus Fund or Account”) or (iii) an affiliate of Warburg Pincus or a Warburg Pincus Fund or Account (not including portfolio companies).
12.2.Competition and Allocation of Corporate Opportunities. The Exempted Persons shall not have any fiduciary duty or other duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries. To the fullest extent permitted by applicable law, the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, business opportunities that are from time to time available or presented to the Exempted Persons, even if the opportunity is in the line of business of the Corporation or its subsidiaries or is otherwise one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so, and each such Exempted Person shall have no duty to communicate or offer such business opportunity to the Corporation (and there shall be no restriction on the Exempted Persons using the general knowledge and understanding of the
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Corporation and the industry in which it operates in considering and pursuing such opportunities or in making investment, voting, monitoring, governance or other decisions relating to other entities or securities) and, to the fullest extent permitted by applicable law, shall not be liable to the Corporation or any of its subsidiaries or, to the extent applicable, any of its or their stockholders for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such Exempted Person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries, or uses such knowledge and understanding in the manner described herein.
[signature page follows]
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IN WITNESS WHEREOF, the Corporation has caused this certificate to be duly executed this 21st day of June, 2022.
THE FORTEGRA GROUP, INC.
By:/s/ Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
Title: President and Chief Executive Officer
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EXHIBIT 10.5
STOCKHOLDERS AGREEMENT
DATED AS OF
JUNE 21, 2022
AMONG
THE FORTEGRA GROUP INC.
AND
THE INVESTORS IDENTIFIED HEREIN
TABLE OF CONTENTS
Page
THE FORTEGRA GROUP INC.
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this “Agreement”) is dated as of this 21st day of June, 2022 and entered into by and among Tiptree Holdings LLC, a Delaware limited liability company (“Tiptree” and together with its Permitted Transferees (as defined below) and permitted assignees, the “Tiptree Investors”); WP Falcon Aggregator, L.P., a Delaware limited partnership (together with its Permitted Transferees and permitted assignees, the “Warburg Investors”); and the Persons whose names and addresses appear from time to time on Schedule I hereto (together with his, her or its Permitted Transferees and permitted assignees, the “Other Investors”); and The Fortegra Group Inc., a Delaware corporation (the “Company”). The Tiptree Investors, the Warburg Investors and the Other Investors are hereinafter each referred to as an “Investor” and collectively referred to as the “Investors.”
R E C I T A L S
WHEREAS, prior to Closing, Tiptree owned 100% of the issued capital in the Company;
WHEREAS, pursuant to the terms of a Securities Purchase Agreement, dated as of October 11, 2021, by and among Tiptree, the Warburg Investors and the Company (as the same may be amended from time to time, the “Purchase Agreement”), the Warburg Investors have agreed to purchase (i) shares of Series A Convertible Preferred Stock of the Company, par value $0.01 per share, (ii) shares of Common Stock of the Company, par value $0.01 per share and (iii) warrants to purchase shares of Common Stock of the Company, par value $0.01 per share, in each case, for cash;
WHEREAS, the parties believe that it is in the best interests of the Company and the Investors to enter into this Agreement for the purposes, among others, of (i) establishing the composition of the Board of Directors of the Company (the “Board”), (ii) assuring continuity in the management and ownership of the Company and (iii) limiting the manner and terms by which the Shares (as defined below) may be transferred;
WHEREAS, the parties intend to treat the purchase of shares of Series A Convertible Preferred Stock of the Company, shares of Common Stock of the Company and warrants to purchase shares of Common Stock of the Company as part of a transaction integrated with the Conversion (as defined below) for purposes of section 351 of the Internal Revenue Code of 1986, as amended; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and adequacy of which is acknowledged, intending to be legally bound, the parties hereto hereby agree as follows:
1.BOARD OF DIRECTORS.
(a)Election of Directors.
(i)From and after the date hereof, the Investors and the Company shall take all reasonable action within their respective power, including convening and attending one or more regular or special meetings and the voting of (or acting by written consent with respect to) all shares of capital stock of the Company Owned by them (including the Shares), required to cause the Board to consist of eight (8) members, which shall include:
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(A)three (3) representatives designated by the Tiptree Investors (the “Tiptree Directors”), each of whom shall have, pursuant to the Certificate of Incorporation, three (3) votes;
(B)two (2) representatives designated by the Warburg Investors (the “Warburg Directors”), one of which shall have one (1) vote and the other of which shall have two (2) votes;
(C)subject to Section 1(c), two (2) representatives designated by mutual agreement between the Tiptree Investors and Warburg Investors, with each party acting in good faith (the “Independent Directors”), who shall have one (1) vote; and
(D)the then-current Chief Executive Officer of the Company (the “CEO Director”), who shall have one (1) vote.
The parties hereto acknowledge that, as of the date hereof, the Board will consist of Randy Maultsby, Michael Barnes and Jonathan Ilany, each of whom will have three (3) votes (as the Tiptree Directors), Jeff Stein will have two (2) votes and Jose Arredondo will have one (1) vote (as the Warburg Directors), John Hendrickson and Sean Sweeney as the Independent Directors, who will each have one (1) vote, and Rick Kahlbaugh (as the CEO Director), who will have one (1) vote.
(ii)Neither any Investor, nor any officer, director, stockholder, partner, employee or agent of any such Investor makes any representation or warranty as to the fitness or competence of the nominee of such Investor hereunder to serve on the Board by virtue of such Investor’s execution of this Agreement or by the act of such Investor in voting for such nominee pursuant to this Agreement.
(iii)Each Investor shall, at any time it is then entitled to vote for the election of directors to the Board, vote all of its Shares of the Company 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 Investors) in order to ensure that the composition of the Board is as set forth in this Section 1(a) and Section 1(b). Each Other Investor hereby grants to Tiptree or a Person designated by Tiptree, solely for purposes of this Section 1(a) and Section 1(b), an irrevocable proxy coupled with an interest to cause any and all Shares held by such Investor to be present for purposes of determining a quorum at any meeting and to vote, or to take any action by written consent such Other Investor’s Shares in accordance with such Other Investor’s agreements contained in this Section 1(a). Each of the Tiptree Investors and the Warburg Investors hereby grant to one another an irrevocable proxy to take any action to give effect to the Director designation rights specified in this Section 1(a). Each Other Investor hereby revokes any and all previous proxies or powers of attorney with respect to such Other Investor’s Shares and shall not hereafter, until this Agreement terminates pursuant to its terms, grant, or purport to grant, to any Person (other than Tiptree, the Warburg Investors, the Company or a designee of Tiptree or the Company) any other proxy or power of attorney with respect to such Shares, deposit any of such Shares into a voting trust or enter into any agreement (other than this Agreement or any amendment hereof), arrangement or understanding with any person, directly or indirectly, to vote, grant any proxy or power of attorney or give instructions with respect to the voting of any of such Shares, in each case, with respect to any of the matters set forth in this Agreement.
(iv)From the date on which the Company or its successor completes an initial registered offering of Common Stock of the Company or its successor to the public or otherwise has a class of equity securities trading on a national securities exchange or registered with the SEC (including as a result of a transaction with a “special purpose acquisition
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company”) (the “Initial Public Offering”), and for as long as the Tiptree Investors or Warburg Investors, as applicable Owns at least five percent (5%) of the issued and outstanding Common Stock (on an As Converted Basis), the Company will nominate and use its reasonable best efforts (including soliciting proxies for the Tiptree Investor or Warburg Investor designees, as applicable, to the same extent as it does for any of its other nominees to the Board) to have such number of individuals designated by the Tiptree Investors or the Warburg Investors, as applicable, elected to the Board so that the number of individuals designated by each such Investor for election to the Board as compared to the size of the Board is proportionate to the number of Shares of issued and outstanding Common Stock (on an As Converted Basis) then Owned by such Investors and their respective Affiliates as compared to the number of Shares of issued and outstanding Common Stock (on an As Converted Basis) at such time; provided, however, that as long as the Tiptree Investors or the Warburg Investors, as applicable, Own at least five percent (5%) of the issued and outstanding Common Stock (on an As Converted Basis), the Tiptree Investors or the Warburg Investors, as applicable, shall have the right to designate at least one (1) individual for election to the Board. Following the Initial Public Offering, for as long as the Tiptree Investors or the Warburg Investors, as applicable, are entitled to appoint one or more persons to the Board, the Board, or a committee thereof consisting of non-employee directors (as such term is defined for purposes of Rule 16b-3 under the Exchange Act), shall, if requested by the Tiptree Investors or Warburg Investors, as applicable, and to the extent then permitted under applicable law, adopt resolutions and otherwise use reasonable efforts to cause any acquisition from the Company of securities or disposition of securities to the Company (including in connection with any exercise of warrants or other derivative securities held by the Tiptree Investors, the Warburg Investors or their respective Affiliates) to be exempt under Rule 16b-3 under the Exchange Act.
(v)For the avoidance of doubt, the fact that the Investor(s) of the Company entitled to designate a representative of the Board pursuant to this Section 1(a) fails to do so shall not in any way permit any Person other than such Investor(s) to fill such vacancy.
(b)Replacement Directors; Vacancies; Removal of Directors. In the event that any Tiptree Director, Warburg Director or other Director designated in the manner set forth in Section 1(a) hereof is unable to serve, or once having commenced to serve, is removed (in accordance with the terms hereof) or withdraws from the Board (a “Withdrawing Director”), such Withdrawing Director’s replacement (the “Substitute Director”) will be designated exclusively by the Person(s) whose previously designated representative vacated the Board in accordance with the terms of the Certificate of Incorporation and this Agreement. The Investors and the Company agree to take all action within their respective power, including convening and attending one or more regular or special meetings and the voting of (or acting by written consent with respect to) capital stock of the Company Owned by them (i) to cause the election of such Substitute Director promptly following his or her designation pursuant to this Section 1(b), or (ii) upon (and only upon) the written request of the applicable Person(s) who designated a Director pursuant to clause (A), (B) or (C) (for clarity, in the case of (C), by mutual agreement between the Tiptree Investors and the Warburg Investors), as applicable, of Section 1(a)(i), to remove, with or without cause, any such Director in accordance with the terms of the Certificate of Incorporation. In no event shall any Investor vote to remove a Director other than in accordance with this Agreement. For the avoidance of doubt, the fact that the stockholder(s) of the Company entitled to designate a representative of the Board pursuant to Section 1(a) fails to do so shall not in any way permit any Person other than such stockholder(s) to fill such vacancy. If the CEO Director is no longer Chief Executive Officer of the Company, then the CEO Director shall be deemed to have resigned from the Board immediately upon ceasing to be Chief Executive Officer of the Company and the vacancy created thereby shall be filled with the new Chief Executive Officer of the Company, if any.
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(c)Committees of the Board. In the event that the Board establishes any committee thereof, the Company will ensure that at least one (1) of the Warburg Directors and one (1) of the Tiptree Directors will be appointed to each committee of the Board, unless otherwise prohibited by law or applicable rules or regulations of any stock exchange or automated dealer quotation system on which the Common Stock is listed. Notwithstanding the foregoing, and subject to Section 1(g), the Board shall establish the following committees:
(i)The related party transaction committee (the “Related Party Transaction Committee”) consisting entirely of one (1) of the Warburg Directors, one (1) of the Tiptree Directors and one (1) of the Independent Directors, which shall initially be John Hendrickson, with each member having one (1) vote, to which committee the Board shall delegate exclusive power and authority (to the extent permitted by law) on behalf of the Company and its Subsidiaries, to monitor, terminate, and make decisions in respect of any Affiliate Arrangement (as defined on Schedule II) existing as of the date hereof or entered into following the date hereof in accordance with Section 1(g); provided that if no Independent Director has been appointed to and/or is serving on the Related Party Transaction Committee, then the Tiptree Investors, on the one hand, and the Warburg Investors, on the other hand, shall each have the right to designate one (1) additional director who is not an officer, director, stockholder, partner, employee, manager or independent contractor of any Investor or any of their respective Affiliates, which directors shall serve on the Related Party Transaction Committee and shall each be considered an “Independent Director” for purposes of this Agreement. Directors appointed pursuant to this Section 1(c)(i) may only be removed with the mutual consent of the Tiptree Investors and the Warburg Investors. The parties hereto hereby acknowledge and agree that the approval of the Related Party Transaction Committee shall be required for Tiptree or its Affiliates to invest in or acquire the assets of Tiptree or any of its Affiliates (other than the Group Companies) on behalf of, or for the benefit of, the Company or its Subsidiaries, or to sell or transfer to the Company or its Subsidiaries any assets or equity of or held by Tiptree or any of its Affiliates (other than the Group Companies), or have any investments held by or for the benefit of the Company or its Subsidiaries sold or transferred to Tiptree or its Affiliates (other than the Group Companies) in each case, under any investment advisory agreement, investment management agreement or similar agreement.
(ii)The audit committee (the “Audit Committee”) consisting of one (1) Independent Director, which shall initially be John Hendrickson (who will, initially, serve as the chairman of the Audit Committee), and at least one (1) of the Warburg Directors and one (1) of the Tiptree Directors. The Audit Committee shall select the Company’s auditor, review accounting and internal reporting policies, along with such other duties as are commonly designated to such a committee; provided that, prior to the Initial Public Offering (as defined below), for as long as the Tiptree Investors own at least five percent (5%) of the issued and outstanding Common Stock (on an As Converted Basis), the Audit Committee may not select an auditor other than Tiptree Inc.’s auditor without the prior written consent of the Tiptree Investors (not to be unreasonably withheld, conditioned or delayed), unless such auditor refuses to serve as the Company’s auditor. The Independent Director appointed pursuant to this Section 1(c)(ii) may only be removed with the mutual consent of the Tiptree Investors and the Warburg Investors.
(iii)The risk committee (the “Risk Committee”) consisting of one (1) Independent Director, which shall initially be Sean Sweeney (who will, initially, serve as the chairman of the Risk Committee), and at least one (1) of the Warburg Directors and one (1) of the Tiptree Directors. The Risk Committee shall have oversight responsibilities to assure that the Company maintains adequate policies, controls, and practices, along with such other duties as are commonly designated to such a committee. The Risk Committee shall be authorized to establish a underwriting and product subcommittee that will report to the Risk Committee. The Independent Director appointed pursuant to this Section 1(c)(iii) may only be removed with the mutual consent of the Tiptree Investors and the Warburg Investors.
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(d)Directors of Subsidiaries. In the event that a director, officer, employee or designee of Tiptree or its Affiliates is a member of a board of directors, or similar governing body, of a Subsidiary of the Company, then Tiptree shall notify the Warburg Investors thereof and promptly after the request thereof by the Warburg Investors at any time and from time to time, the Company, shall appoint at least one (1) Warburg Director to that Subsidiary’s board of directors (or comparable governing body), unless otherwise prohibited by law or applicable rules or regulations of any stock exchange or automated dealer quotation system on which the Common Stock is listed. Such designee(s) shall have the same right to participate on committees of the board of directors (or comparable governing body) of such Subsidiaries as such designees have pursuant to Section 1(c). Notwithstanding anything to the contrary contained herein, the size of the board of directors or managers of each Subsidiary of the Company, if any, shall not be larger than the size of the Board.
(e)No Exclusive Duty to Company.
(i)In recognition that each of the Warburg Investors and the Tiptree Investors currently have, and will in the future have or will consider acquiring, investments in numerous companies with respect to which such Investors (or one or more of their Affiliates, associated investment funds, portfolio companies or employees) may serve as an advisor, a director or in some other capacity, and in recognition that such Investors (or one or more of their respective Affiliates, associated investment funds, portfolio companies or employees) may have a myriad of duties to various investors and partners, and in anticipation that the Company, on the one hand, and such Investor (or one or more Affiliates, associated investment funds, portfolio companies or employees), on the other hand, may engage in the same or similar activities or lines of business and have an interest in the same areas of corporate opportunities, and in recognition of the benefits to be derived by the Company hereunder and in recognition of the difficulties which may confront such Investors who desire and endeavor fully to satisfy their respective duties, in determining the full scope of such duties in any particular situation, the provisions of this Section 1(e) are set forth to regulate, define and guide the conduct of certain affairs of the Company as they may involve the Warburg Investors and the Tiptree Investors (as applicable).
(ii)In furtherance and without limiting the foregoing, the Warburg Investors and the Tiptree Investors shall each have the right:
(A)to directly or indirectly engage in or invest in any business (including any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, the Company or any of its Subsidiaries);
(B)to directly or indirectly do business with any client or customer of the Company or any of its Subsidiaries;
(C)subject to Section 4, to take any other action that the Warburg Investors or the Tiptree Investors (as applicable) believe is necessary to or appropriate to fulfill its obligations as described in Section 1(e)(i); and
(D)not to present potential transactions, matters or business opportunities to the Company or any of its Subsidiaries, and to pursue, directly or indirectly, any such opportunity for itself, and to direct any such opportunity to another person.
(iii)Neither the Warburg Investors, the Tiptree Investors nor any of their respective Affiliates, associated investment funds, portfolio companies or employees shall have any duty (contractual or otherwise) to communicate or present any corporate opportunities to the Company or any of its Subsidiaries or to refrain from any actions specified in Section 1(e)(i), and the Company, on its own behalf and on behalf of its Subsidiaries, hereby renounces
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and waives any right to require the Warburg Investors, the Tiptree Investors or their respective Affiliates, associated investment funds, portfolio companies or employees to act in a manner inconsistent with the provisions of Section 1(e)(i).
(iv)Neither the Warburg Investors, the Tiptree Investors nor any of their respective Affiliates, associated investment funds, portfolio companies and employees shall be liable to the Company or any of its Subsidiaries for breach of any duty (contractual or otherwise) by reason of any activities or omissions of the types referred to in Section 1(e)(i) or the participation therein by the Warburg Investors, the Tiptree Investors or any of their respective Affiliates, associated investment funds, portfolio companies or employees.
(v)For the avoidance of doubt, the provisions of this Section 1(e) do not supersede or otherwise limit (and shall be in addition to) any of the provisions set forth in the organizational or constitutive documents of the Company or any of its Subsidiaries in respect of the subject matter hereof.
(f)Indemnification, Expense Reimbursement and Other Rights.
(i)In addition to any other indemnification rights the Tiptree Directors, the Warburg Directors, the Independent Directors or the CEO Director, if any (the “Directors” and each, a “Director”), have pursuant to the Certificate of Incorporation, the Bylaws and any agreement with the Company, each Director shall have the right to enter into, and the Company agrees to enter into, an indemnification agreement with each such Director, which indemnification agreement shall be reasonably acceptable to the Company and consistent with indemnification agreements customarily entered into between companies and their independent board members. The Company shall reimburse the reasonable expenses incurred by the Directors in connection with attending (whether in person or telephonically) all meetings of the Board, the board of directors or managers of the Company’s director or indirect Subsidiaries or committees thereof or other Company-related meetings to the same extent as all other members of the Board are reimbursed for such expenses (or, in case any such expense reimbursement policy shall apply only to non-employee directors, to the same extent as all other non-employee directors). The Company shall maintain director and officer insurance covering the Directors on the same terms and with the same amount of coverage as is provided to other members of the Board. Following the Initial Public Offering, each Tiptree Director and Warburg Director shall be entitled to the same equity grants and other stock incentives and the same Board and committee fees, in each case, if any.
(ii)The Company agrees that if Warburg Pincus LLC or any of its Affiliates (collectively, the “Warburg Pincus Entities”) or Tiptree Inc. or any of its Affiliates (collectively, the “Tiptree Entities”), directly or indirectly, provides any advisory, monitoring, consulting or other similar services to the Company and/or any of its Subsidiaries, except as may be set forth in a written agreement between the Warburg Pincus Entities and the Company or its Subsidiaries, or the Tiptree Entities and the Company or its Subsidiaries, as applicable, (A) neither the Warburg Pincus Entities nor the Tiptree Entities (as applicable) shall be liable to the Company or any of its Subsidiaries or Affiliates for any loss, liability, damage or expense arising from or in connection with any services provided by the Warburg Pincus Entities or the Tiptree Entities (as applicable), except to the extent a court of competent jurisdiction has determined by entry of a final and non-appealable judgment to have resulted by fraud or willful misconduct by any Warburg Pincus Entity or any Tiptree Entity (as applicable) and (B) the Company shall, at its own cost and expense, defend, indemnify and hold harmless the Warburg Pincus Entities and the Tiptree Entities (as applicable) from and against any and all loss, liability, damage or expenses arising from any claim by any Person with respect to, or in any way related to, any services provided by the Warburg Pincus Entities and the Tiptree Entities (as applicable) (including reasonable attorneys’ fees), except to the extent a court of competent jurisdiction has determined
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by entry of a final and non-appealable judgment to have resulted by fraud or willful misconduct by any Warburg Pincus Entity or any Tiptree Entity (as applicable).
(g)Certain Protective Covenants. For so long as the Warburg Investors or the Tiptree Investors, as applicable, collectively Own at least five percent (5%) of total Shares outstanding (on an As Converted Basis), the Company shall not, and shall cause each of its Subsidiaries not to, either directly or indirectly, by amendment, merger, consolidation or otherwise, take any of the actions set forth on Schedule II, or enter into any agreement, arrangement or understanding to effect any such actions, without the written consent or affirmative vote of each of the Majority Warburg Investors and the Majority Tiptree Investors (as applicable), given in writing or by vote at a meeting (in addition to any other vote required by law, the organizational documents of the Company or such Subsidiary or this Agreement), and any such act or transaction entered into without such consent shall be null and void ab initio, and of no force and effect; provided that the consent of the Majority Tiptree Investors shall not be required with respect to any transaction involving Tiptree or its Affiliates set forth in clause 7 of Schedule II. Notwithstanding the foregoing, from time to time, each of the Company and the Tiptree Investors may provide services, office space, software, services of third parties, facilities, and/or supplies to the other party and their Affiliates, in each case, consistent with past practice (collectively, the “General Services”) as shall reasonably be requested by such other party without the need for written consent or an affirmative vote pursuant to the foregoing sentence, or by the Related Party Transaction Committee. The parties hereto will establish the cost allocation methods and procedures for the allocation of the fees, costs and expenses of the General Services consistent with past practices (provided that in no event shall such methods result in an allocation that is worse to any party than those obtainable on arm’s-length terms) related to such personnel, services, office space, software, services of third parties, facilities, and/or supplies.
2.TRANSFER OF STOCK.
(a)Transfer Restrictions.
(i)Tiptree Investors. Until the earliest of (A) the Initial Public Offering and (B) the closing of a Deemed Liquidation Event, no Tiptree Investor shall directly or indirectly Transfer any Shares without the prior written consent of the Majority Warburg Investors, which consent may be withheld in their sole discretion; provided, however, that a Tiptree Investor shall be permitted (subject to Section 1(g)) to Transfer any Shares Owned by such Tiptree Investor without the consent of the Majority Warburg Investors: (1) in accordance with Section 2(b), Section 2(c) or Section 2(d); (2) pursuant to a bona fide pledge to, or similar arrangement in connection with a bona fide borrowing from, a financial institution (and any Transfer of Shares upon exercise of any remedies in connection therewith); or (3) to Permitted Transferees made in compliance with this Agreement.
(ii)Warburg Investors. Until the earliest of (A) the Initial Public Offering, (B) the closing of a Deemed Liquidation Event and (C) the Exit Event Triggering Date, no Warburg Investor shall directly or indirectly Transfer any Shares without the prior written consent of the Tiptree Investors, which consent may be withheld in their sole discretion; provided, however, that a Warburg Investor shall be permitted to Transfer any Shares Owned by such Warburg Investor without the consent of the Majority Tiptree Investors: (1) pursuant to Section 2(b), Section 2(c) or Section 2(d); (2) pursuant to a bona fide pledge to, or similar arrangement in connection with a bona fide borrowing from, a financial institution (and any Transfer of Shares upon exercise of any remedies in connection therewith); (3) to Permitted Transferees made in compliance with this Agreement; and (4) pursuant to the terms of a Deemed Liquidation Event.
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(iii)Other Investors. Until the earlier of (I) the Initial Public Offering and (II) the closing of a Deemed Liquidation Event, no Other Investor shall directly or indirectly Transfer any Shares without the prior written consent of the Board (and, in the case of a Transfer to a Tiptree Investor, Warburg Investor or their respective Affiliates, the applicable consent contemplated by clause (2) below), which consent may be withheld in its sole discretion; provided, however, that an Other Investor shall be permitted to Transfer any Purchased Equity Shares Owned and Granted Equity Shares (but only to the extent vested) Owned by such Other Investor without the consent of the Board: (1) pursuant to Section 2(b), Section 2(c) or Section 2(d); (2) with the consent of the Warburg Investors, to a Tiptree Investor or its Affiliates or, with the consent of the Tiptree Investors, to a Warburg Investor or its Affiliates; or (3) to the Company in connection with repurchases of Purchased Equity Shares and Granted Equity Shares from employees, officers, directors, consultants or other persons who performed services for the Company or any Subsidiary in connection with a termination of employment of any such person with the Company or any of its Subsidiaries for any reason (including death or disability) (a “Termination”) or other cessation of such employment or service or in connection with a breach of a restrictive covenant, to the extent made pursuant to an agreement entered into between the Company and such Person in the ordinary course; (4) to Permitted Transferees made in compliance with this Agreement; and (5) pursuant to the terms of a Deemed Liquidation Event. Without limiting the foregoing, with respect to any Other Investor holding Granted Equity Shares, such holder shall also be subject to the transfer and other restrictions applicable to such Granted Equity Shares, including with respect to transfer restrictions following the Initial Public Offering.
(iv)Notwithstanding anything in this Agreement to the contrary, any Transfer or attempt to Transfer any Shares not in compliance with this Agreement shall be null and void and have no force or effect, and the Company shall not, and shall cause any transfer agent not to, give any effect in the Company’s stock records to such Transfer or attempted Transfer. The parties hereto acknowledge that the transfer restrictions contained herein are reasonable and in the best interests of the Company.
(v)The Transfer restrictions in this Agreement may not be avoided by doing indirectly what is prohibited to be done directly, including by the holding of Shares directly or indirectly through a Person that can itself be sold to dispose of (or otherwise transfer the economic benefit of) an interest in Shares or Share Equivalents free of such restrictions.
(vi)Transfers by Permitted Transferees. A Permitted Transferee of Shares of an Investor pursuant to this Agreement may subsequently Transfer his, her or its Shares only to the Investor who Transferred such Shares to the Permitted Transferee or to a Person that is a Permitted Transferee of such Investor that originally transferred such shares to the Permitted Transferee. Each Permitted Transferee of any Investor to which Shares are Transferred shall, and such Investor shall use reasonable best efforts to cause such Permitted Transferee to, promptly Transfer back to such Investor (or to another Permitted Transferee of such Investor) the Shares it acquired from such Investor if such Person who was a Permitted Transferee ceases to be a Permitted Transferee of such Investor.
(vii)Transfers – Generally. No Transfer of Shares Owned by any Investor may be made by such Investor unless (A) as a condition precedent to the Transfer, the Transferee (if not already party to this Agreement) has agreed in writing to be bound by the terms and conditions of this Agreement pursuant to a Joinder Agreement substantially in the form attached as Exhibit A hereto (a “Joinder Agreement”) and have the same rights and obligations of such transferring Investor (including if the Investor is a Tiptree Investor or a Warburg Investor the same rights and obligations as the Tiptree Investors and the Warburg Investors, as applicable, hereunder) (other than if (1) the Transfer is conducted pursuant to and in accordance with Section 2(c), or (2) the Transfer is to the Company), and (B) the Transfer
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complies in all respects with the applicable provisions of this Agreement and any employee stock option plan, stock bonus plan, stock purchase plan, employment agreement or other management equity program governing any Shares owned by such Investor. For the avoidance of doubt, the transfer restrictions contained in this Agreement shall be in addition to and shall not limit in any way the transfer restrictions contained in any employee stock option plan, stock bonus plan, stock purchase plan, employment agreement or other management equity program governing any Shares owned by such Investor.
(b)Tag-Along Rights.
(i)Until the time of a Qualified Public Offering and subject to (and, as applicable, following compliance with) Section 2(a), Section 2(c) and Section 2(d), in the event that the Tiptree Investors and their Affiliates (the “Selling Investor”) intend to Transfer any Shares Owned by such Investor (other than Transfers to any Permitted Transferee or to the Company) in a Transfer that is permitted pursuant to the terms of this Agreement (the “Tag-Along Stock”), such Selling Investor shall notify each other Investor (collectively, the “Tag-Along Investors”), in writing, of such proposed Transfer and its terms and conditions. Within twenty (20) Business Days of the date of such notice, each Tag-Along Investor shall have the right to notify the Selling Investor if he, she or it elects to participate in such Transfer. Any Tag-Along Investor that fails to notify the Selling Investor within such twenty (20)-Business Day period shall be deemed to have waived his, her or its rights hereunder with respect to such transfer (but not subsequent transfers). Each Tag-Along Investor that so notifies the Selling Investor shall have the right to sell, at the same price (subject to the provisions below), an amount of Shares (which, for clarity, may include Preferred Stock or Share Equivalents to the extent converted or exercised upon consummation of such sale) (excluding for purposes of this Section 2(b) any Granted Equity Shares (whether or not vested)) equal to the Shares the third party actually proposes to purchase multiplied by a fraction, the numerator of which shall be the number of Shares Owned (excluding any Granted Equity Shares (whether or not vested)) by such Tag-Along Investor (calculated on an As Converted Basis) and the denominator of which shall be the aggregate number of Shares Owned (excluding any Granted Equity Shares (whether or not vested)) by the Selling Investor and each Tag-Along Investor exercising his, her or its rights under this Section 2(b) (calculated on an As Converted Basis); provided that, in the event that the Transfer of Shares proposed by the Selling Investor would result in a Change of Control of the Company, the Warburg Investors shall have the right (but not the obligation) to sell all of Shares then-Owned by the Warburg Investors.
(ii)The provisions of this Section 2(b) shall not apply to a sale or other Transfer pursuant to which the Triggering Stockholders (as defined below) have exercised their Drag-Along Rights set forth herein or sale or other Transfer pursuant to an Initial Public Offering.
(iii)Conditions. Notwithstanding the foregoing, any Transfer in respect of which a Tag-Along Investor exercises its rights under this Section 2(b) must provide that:
(A)any representations and warranties to be made by such Investor in connection with such Transfer are limited to representations and warranties related to organization, authority, ownership and the ability to convey title to such Shares (including any Share Equivalents), due execution and enforceability of transaction documents, non-contravention and no conflicts, governmental approvals, no brokers and no litigation relating to the transaction;
(B)the Investor shall not be liable for the inaccuracy of any representation or warranty made by any other Person in connection with such Transfer, other
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than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company, as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders), except that the liability for claims related to breaches of such Investor’s representations, warranties and covenants or fraud by such Investor shall only be borne by such Investor (except to the extent of any such escrow);
(C)the liability for indemnification, damages or other remedies, if any, of such Investor in any such transaction and for the inaccuracy of any representations and warranties made by the Company or its stockholders in connection with such transaction, is several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company, as well as breach by any stockholder of any of the identical representations, warranties and covenants provided by all stockholders), and is pro rata in proportion to, and does not exceed, the amount of consideration paid to such Investor in connection with such transaction (subject to and taking into account any liquidation preference provisions of the Certificate of Incorporation), except that the liability for claims related to breaches of such Investor’s representations, warranties and covenants or fraud by such Investor shall only be borne by such Investor (except to the extent of any such escrow);
(D)subject to Section 2(b)(ii), the Investors will receive the same form of consideration in such Transfer and if any holders of any capital stock of the Company are given an option as to the form and amount of consideration to be received as a result of such Transfer, all holders of the same class or series of capital stock will be given the same option; provided, however, that nothing in this Section 2(b)(iii)(D) shall entitle any holder to receive any form of consideration that such holder would be ineligible to receive as a result of such holder’s failure to satisfy any condition, requirement or limitation that is generally applicable to the Company’s stockholders; provided, further that an Investor that is an employee of the Company or its Subsidiaries may be given an option to receive securities in lieu of cash consideration in a “rollover transaction” without offering the same to other Investors as long as such securities are of an equivalent value at the closing of such Transfer as the consideration paid to the other Investors; and
(E)notwithstanding anything to the contrary in the foregoing, no Tiptree Investor or Warburg Investor, shall be required to make any non-compete with respect to such Transfer.
(c)Drag Along Rights.
(i)Subject to Section 2(d), if at any time and from time to time after June 21, 2028 and prior to a Qualified Public Offering, the Tiptree Investors and their Affiliates, on the one hand, or the Warburg Investors and their Affiliates, on the other hand (in each case, the “Triggering Stockholders”), desire to (A) Transfer in a bona fide arm’s-length sale all of their Shares to any Person or Persons who are not Affiliates of the Company or the Triggering Stockholders, (B) approve any merger of the Company with or into any other Person who is not an Affiliate of the Company or the Triggering Stockholders that would constitute a Deemed Liquidation Event, or (C) approve any sale of all or substantially all of the Company’s assets to any Person or Persons who are not Affiliates of the Company or the Triggering Stockholders (for purposes of this Section 2(c), such Person or Persons are referred to as the “Proposed Transferee” and any such transaction, a “Drag-Along Sale”), the Triggering Stockholders shall have the right (for purposes of this Section 2(c), the “Drag-Along Right”), but not the obligation (I) in the case of a Transfer of the type referred to in clause (A) above, to require each other Investor to sell to the Proposed Transferee all of such Investor’s Shares (for clarity, excluding the Warrants and the Additional Warrants (as defined in the Purchase Agreement)) for the Per Share
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Drag-Along Purchase Price (as defined below), or (II) in the case of a merger or sale of assets or other Deemed Liquidation Event referred to in clause (B) or (C) above, to require each other Investor to vote (or act by written consent with respect to) all Shares then Owned by such other Investor in favor of such Drag-Along Sale and to waive (and each hereby does waive) any dissenters’ rights, appraisal rights or similar rights such Investor may have under applicable law in connection with a Drag-Along Sale. Each Investor agrees to take all steps reasonably necessary to enable such Investor to comply with the provisions of this Section 2(c) to facilitate the Triggering Stockholders’ exercise of a Drag-Along Right and to reasonably cooperate with the Triggering Stockholder in connection therewith. As used herein, “Per Share Drag-Along Purchase Price” means: (x) to the extent that an Investor subject to the Drag-Along Right is selling the same security being sold by the Triggering Stockholders, the same consideration per share for such security as is proposed to be received by the Triggering Stockholders (less, in the case of Share Equivalents, the exercise price for such Share Equivalents), including equivalent rights to receive (when and if paid) a proportionate share of any deferred consideration, earn-out or escrow funds that may become available to the Triggering Stockholders in connection with the proposed transaction; and (y) to the extent that an Investor subject to the Drag-Along Right is selling Shares or Share Equivalents other than the securities being sold by the Triggering Stockholders, the Per Share Drag-Along Purchase Price for each such different Share or Share Equivalent, shall be equal to the implied value of such different Share or Share Equivalent (less, in the case of Share Equivalents, the exercise price for such Share Equivalents) determined by reference to the per share price being paid for the Shares being sold by the Triggering Stockholders and after giving effect to all amounts payable to the holders of Preferred Stock prior and in preference to the Common Stock pursuant to the liquidation preference provisions of the Certificate of Incorporation (for clarity, the holders of Preferred Stock shall be entitled to receive at least their liquidation preference pursuant to the Certificate of Incorporation in priority to any amounts to be received by any other holders of Shares); provided, however, that if the per share price being paid for the Shares includes any rights to receive a proportionate share of any deferred consideration, earn-out or escrow funds that may become available to the Triggering Stockholders in connection with the Drag-Along Sale, such amounts shall be considered when determining the implied equity price of each Share of Common Stock or Preferred Stock, as applicable, but any portion of such amount included in the implied equity price of each Share of Common Stock shall not be paid to the Investors selling Common Stock unless and until the portions of such amount included in the price per share being paid for the Preferred Stock are paid to the holders of the Preferred Stock and only to the extent that the holders of the Preferred Stock have received all amounts payable to the holders of Preferred Stock prior and in preference to the Common Stock pursuant to the liquidation preference provisions of the Certificate of Incorporation. Notwithstanding the foregoing, in no event will the Warburg Investors be obligated to sell their Shares pursuant to a Drag-Along Right by another party if the form of consideration payable in connection with such a sale consists of anything other than cash or New York Stock Exchange or the NASDAQ Stock Market listed publicly-traded shares of common stock.
(ii)To exercise a Drag-Along Right, the Triggering Stockholders shall give each Investor a written notice (for purposes of this Section 2(c), a “Drag-Along Notice”) containing the proposed Per Share Drag-Along Purchase Price for each security proposed to be sold, terms of payment and other material terms and conditions of the Proposed Transferee’s offer at least twenty (20) Business Days prior to the consummation of such transaction. Each Investor shall thereafter be obligated to sell or vote (or act by written consent with respect to) all Shares (including any Share Equivalents) Owned by such Investor, provided that if the sale to the Proposed Transferee is consummated within one hundred twenty (120) days of delivery of the Drag-Along Notice, subject to reasonable extensions of time for up to an additional 120-day period as necessary to obtain any approvals or authorizations that are required under applicable laws, then each Investor shall no longer be obligated to sell such Shares Owned by such Investor
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pursuant to that specific Drag-Along Right unless a new Drag-Along Notice is delivered and in any event shall remain subject to the provisions of this Section 2(c).
(iii)Each Investor shall execute and deliver such instruments of conveyance and transfer and take such other action, including executing any purchase agreement, merger agreement, indemnity agreement, escrow agreement or related documents, as may be reasonably required by the Triggering Stockholders or the Company in order to carry out the terms and provisions of this Section 2(c). At the closing of the proposed transaction, each Investor shall deliver, against receipt of the consideration payable in such transaction, certificates representing the Shares which the Investor Owns and is Transferring pursuant to such transaction (or affidavit of loss, if applicable, in form and substance reasonably satisfactory to the Board), together with executed stock powers or other instruments of transfer acceptable to the Triggering Stockholders.
(iv)Notwithstanding anything contained in this Section 2(c), in the event that all or a portion of the Per Share Drag-Along Purchase Price consists of securities and the sale of such securities to the Investors would require (A) either a registration under the Securities Act which has not already been made or will not be made in connection with the transaction, or (B) the preparation of a disclosure document pursuant to Regulation D under the Securities Act (or any successor regulation) or a similar provision of any state securities law, then, at the option of the Triggering Stockholders, any one or more of the Investors may receive, in lieu of such securities, the Fair Market Value of some or all of such securities in cash, as determined in good faith by the Board.
(v)The Company agrees to reasonably cooperate with the Triggering Stockholders and any proposed transferee, and their respective advisors, to facilitate and effect any Drag-Along Sale and, upon the request of any Triggering Stockholder, subject to any proposed transferee executing a reasonably satisfactory confidentiality agreement with the Company, the Company will, and will cause its and its Subsidiaries’ employees and personnel to, use its and their reasonable best efforts to facilitate and support any due diligence process being undertaken in connection with such proposed Drag-Along Sale. In furtherance and not in limitation thereof, if requested by the Triggering Stockholder: (i) the Company will promptly engage, on customary terms (including customary indemnification from the Company), a nationally recognized investment banking firm selected by the Triggering Stockholder to provide financial advisory services to the Company and the Company shall pay the fees and expenses of such investment banking firm and (ii) the Company will enter into a definitive agreement with the proposed transferee(s) providing for such Drag-Along Sale and make and agree to representations, warranties, covenants and indemnities and other similar agreements that are reasonable and customary for negotiated transactions of the type contemplated by such Transfer.
(vi)All reasonable costs and expenses incurred by the Triggering Stockholder in connection with any proposed Drag-Along Sale (whether or not consummated), shall be borne by the Company.
(vii)Exceptions. Notwithstanding the foregoing, an Investor will not be required to comply with the provisions of this Section 2(c) unless:
(A)any representations and warranties to be made by such Investor in connection with any transaction proposed to be subject to the Drag-Along Right are limited to representations and warranties related to organization, authority, ownership and the ability to convey title to such Shares (including any Share Equivalents), due execution and enforceability of transaction documents, non-contravention and no conflicts, governmental approvals, no brokers and no litigation relating to the transaction;
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(B)the Investor shall not be liable for the inaccuracy of any representation or warranty made by any other Person in connection with any transaction proposed to be subject to the Drag-Along Right, other than the Company (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company, as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders);
(C)the liability for indemnification, damages or other remedies if any, of such Investor in any such transaction and for the inaccuracy of any representations and warranties made by the Company or its stockholders in connection with such transaction, is several and not joint with any other Person (except to the extent that funds may be paid out of an escrow established to cover breach of representations, warranties and covenants of the Company, as well as breach by any stockholder of any identical representations, warranties and covenants provided by all stockholders), and is pro rata in proportion to, and does not exceed, the amount of consideration paid to such Investor in connection with such transaction (subject to and taking into account any liquidation preference provisions of the Certificate of Incorporation), except that the liability for claims related to breaches of such Investor’s representations, warranties and covenants or fraud by such Investor shall only be borne by such Investor (except to the extent of any such escrow);
(D)subject to Section 2(c)(iv), the Investors will receive the same form of consideration in such Transfer and if any holders of any capital stock of the Company are given an option as to the form and amount of consideration to be received as a result of any transaction proposed to be subject to the Drag-Along Right, all holders of the same class or series of capital stock will be given the same option; provided, however, that nothing in this Section 2(c)(vii)(D) shall entitle any holder to receive any form of consideration that such holder would be ineligible to receive as a result of such holder’s failure to satisfy any condition, requirement or limitation that is generally applicable to the Company’s stockholders; provided, further that an Investor that is an employee of the Company or its Subsidiaries may be given an option to receive securities in lieu of cash consideration in a “rollover transaction” without offering the same to other Investors, as long as such securities are of an equivalent value at the closing of the Drag-Along Sale as the consideration paid to the other Investors; and
(E)notwithstanding anything to the contrary in the foregoing, no Tiptree Investor or Warburg Investor shall be required to make any non-compete with respect to any transaction proposed to be subject to the Drag-Along Right.
(viii)Grant of Irrevocable Proxy. Each Other Investor, hereby grants to the Triggering Stockholder such Other Investor’s proxy, and appoints the Triggering Stockholders, or any designee or nominee of the triggering stockholders, as such Investor’s attorney-in-fact (with full power of substitution and resubstitution), for and in its name, place and stead, (i) to vote or act by written consent with respect to the Shares (including any Purchased Equity Shares or Granted Equity Shares) now or hereafter Owned by such Other Investor (or any Transferee thereof) (including the right to sign his, her or its name to any consent, certificate or other document relating to the Company that applicable law may require) in connection with any and all matters contemplated by this Section 2(c) or (ii) to take any and all reasonable action necessary to sell or otherwise Transfer any Shares (including any Purchased Equity Shares or Granted Equity Shares) Owned by such Investor as contemplated by this Section 2(c) hereof. This proxy is coupled with an interest and shall be irrevocable, and each such Other Investor will take such further action or execute such other instruments as may be reasonably necessary to effectuate the intent of this proxy and, except with respect to any other proxy given by the Other Investor to the Company or the Triggering Stockholders (or pursuant to the purchase agreement), hereby revokes any proxy previously granted by such Other Investor with respect to such Other Investor’s Shares. In the event that the proxy granted in this Section 2(c)(viii) is inconsistent
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with the terms of any other proxy granted by an Other Investor to the Triggering Stockholders or any other Person, including pursuant to any stock incentive or other equity compensation plan of the Company, then the terms of the proxy granted in this Section 2(c)(viii) shall govern. In the event that any or all provisions of this Section 2(c)(viii) are determined to be unenforceable, each Other Investor will enter into a proxy that, to the fullest extent permitted by applicable law, preserves the intent and provides the Triggering Stockholders substantially the same benefits of this Section 2(c)(viii).
(d)Right of First Offer.
(i)If either the Tiptree Investors or the Warburg Investors or their respective Permitted Transferees (each, a “Transferor”) intends to Transfer any Shares Owned by the Transferor (other than Transfers described in Section 2(a)(i)(2), Section 2(a)(ii)(2) or Section 2(c)) in a Transfer permitted pursuant to the terms of this Agreement, the Transferor shall first provide written notice (the “Transfer Notice”) to the Warburg Investors or the Tiptree Investors, respectively (collectively, the “Non-Transferring Investors”) of its bona fide intention to Transfer such number of Shares (the “Offered Shares”) set forth in the Transfer Notice. A Transfer Notice may be given prior to the time a Transfer would be permitted in accordance with this Agreement, but no earlier than 90 days prior to such time.
(ii)One or more Non-Transferring Investors may (but are not obligated to) offer to purchase all or any portion of the Offered Shares at a price and on other terms set forth in a written notice (the “Offer Notice”) delivered to the Transferor(s) within thirty (30) days after receipt of the Transfer Notice (the “ROFO Option Period”). Any Offer Notice that is delivered shall be a legally binding and irrevocable offer by the Non-Transferring Investor delivering such Offer Notice (each such Non-Transferring Investor, a “ROFO Joining Investor”) to purchase such amount of the Offered Shares at the price and on the terms set forth in such Offer Notice, capable of being accepted by the applicable Transferor within thirty (30) days from the receipt of the Offer Notice. If a Transferor accepts any such offer, then the Transferor and the applicable ROFO Joining Investors shall negotiate in good faith to consummate such Transfer within thirty (30) days of such acceptance.
(iii)If (x) the Transferor rejects (or fails to timely accept) the Offer Notices received, (y) no ROFO Joining Investors delivers any Offer Notices or (z) the Transferor accepts an Offer Notice and definitive agreements to effect such Transfer are not entered into within thirty (30) days following such acceptance or such agreement is entered into and is not timely consummated in accordance with the terms thereof, then within one hundred twenty (120) days (provided that if a definitive agreement to effect such transfer is entered into within such 120-day period, then the Transferor shall have 180 days to consummate such transaction from entry into such definitive agreement, with an additional 180 days for any approvals or authorizations that are required under applicable laws) of (1) the receipt of the Offer Notices, if delivered, (2) the expiration of the ROFO Option Period or (3) solely in the case of clause (z), from the expiration of the time to enter into or consummate such Transfer, then, subject to compliance with all other applicable provisions of this Agreement, the Transferor may sell all, or any portion, of the Offered Shares to any Person not engaged in a Competing Business; provided that (A) solely in the event the ROFO Joining Investors collectively timely deliver Offer Notices with respect to all (but not less than all) of the Offered Shares, such Transfer may only be for a per Share amount equal to or greater than the lowest price per Share set forth in the Offer Notices and otherwise no less favorable to the Transferor than those offered in the Offer Notices and (B) solely in the event one or more ROFO Joining Investors timely deliver an Offer Notice, which Offer Notices are collectively with respect to less than all of the Offered Shares, such Transfer is not required to be for a per Share amount equal to or greater than the lowest price set forth in the Offer Notice if the acquirer acquires at least five percent (5%) more Offered Shares than offered collectively by the ROFO Joining Investors.
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(iv)If the Transferor does not consummate the Transfer of any of the Offered Shares in accordance with this Section 2(d) within such one hundred twenty (120)-day period (provided that if a definitive agreement to effect such transfer is entered into within such 120-day period, then the Transferor shall have 180 days from entry into such definitive agreement to consummate such transaction, with an additional 180 days for any approvals or authorizations that are required under applicable laws), then the Transferor may not Transfer such Offered Shares unless it sends a new Transfer Notice and once again complies with the provisions of this Section 2(d) with respect to such Offered Shares.
(v)Each ROFO Joining Investor may assign all or any portion of its rights under this Section 2(d) to any of its Permitted Transferees.
(vi)For the avoidance of doubt, the provisions of this Section 2(d) shall not apply to a Transfer of Shares which is to a Permitted Transferee, and shall terminate and be of no further force or effect following an Initial Public Offering. Nothing herein shall limit the rights of any Investor pursuant to Section 2(b).
(e)Preemptive Rights.
(i)If at any time on or after the date hereof and prior to the Initial Public Offering, subject to compliance with Section 1(g), the Company or its Subsidiaries proposes to issue (x) equity securities of any kind (for purposes of this Section 2(e), the term “equity securities” shall include any warrants, options or other rights to acquire equity securities or debt securities convertible into equity securities) of the Company or (y) debt securities of any kind to which any Tiptree Investor or any of their Affiliates subscribe (in each case, other than the issuance of securities (A) upon conversion of the Preferred Stock pursuant to the Certificate of Incorporation, or exercise of the Warrants, (B) to the public in a firm commitment underwriting pursuant to a registration statement filed under the Securities Act, (C) pursuant to the acquisition of another Person (not affiliated with any Tiptree Investor) by the Company or any Subsidiary, whether by purchase of stock, merger, consolidation, purchase of all or substantially all of the assets of such Person or otherwise, provided that such acquisition has been approved by the Board, and such securities are being issued as consideration for the transaction and not in connection with financing the transaction, (D) pursuant to an employee stock option plan, stock bonus plan, stock purchase plan, employment agreement or other management equity program, in each case, approved by the Board, (E) upon conversion or exercise of any security convertible into or exercisable for any equity securities, provided that such convertible or exercisable security that were issued in accordance with the terms of this Agreement, (F) to vendors, lenders and customers of and consultants to the Company or any Subsidiary or in connection with a strategic partnership (provided that such securities are (1) being issued as consideration for the strategic partnership and not in connection with financing the strategic partnership, (2) being issued to the Company or another wholly owned Subsidiary of the Company by a wholly owned Subsidiary of the Company), in each case, to the extent such issuance has been approved by the Board, (G) immaterial issuances by Subsidiaries of the Company, solely to the extent such issuance is required by applicable law, (H) by reason of a dividend, stock split or other distribution on shares of Common Stock, (I) to any Investor that is an employee of the Company or its Subsidiaries, pursuant to the terms of any employment or similar agreement between the Company and such Investor to the extent such employment or similar agreement was approved by the Board or (J) pursuant to the Purchase Agreement), then, subject to the provisions set forth below, as to each Qualified Investor and, in the case of any issuance to a Qualified Investor, each Other Investor (other than any such Other Investor that cannot demonstrate to the Company’s reasonable satisfaction that such Other Investor is at the time of the proposed issuance of such securities an “accredited investor” as such term is defined in Regulation D of the Securities Act) (each a “Preemptive Right Investor”), the Company shall:
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(A)give written notice setting forth in reasonable detail (1) the designation and all of the terms and provisions of the securities proposed to be issued (the “Proposed Securities”), including where applicable, the voting powers, preferences and relative participating, optional or other special rights, and the qualification, limitations or restrictions thereof and interest or dividend rate and maturity; (2) the price and other terms of the proposed sale of such securities; (3) the amount of such securities proposed to be issued; and (4) such other information as a Preemptive Right Investor may reasonably request in order to evaluate the proposed issuance; and
(B)offer to issue to each such Preemptive Right Investor for the same price (it being agreed that if such price was to be paid not in cash, the Preemptive Right Investors may pay for such Proposed Securities in cash equal to the Fair Market Value thereof) a portion of the Proposed Securities equal to a percentage determined by dividing (x) the number of shares of Common Stock Owned by such Preemptive Right Investor as a result of Purchased Equity Shares (excluding, for the sake of clarity, any Granted Equity Shares, whether or not vested), determined on an As Converted Basis, by (y) the total number of shares of Common Stock then outstanding on an As Converted Basis (such portion of Proposed Securities in respect of Preemptive Right Investor, such Preemptive Right Investor’s “Full Allotment”); provided that in the case of issuance by a non-wholly owned Subsidiary of the Company, the Full Allotment shall be further multiplied by the direct or indirect ownership percentage of the Company of such Subsidiary.
(ii)Each such Preemptive Right Investor may exercise his, her or its purchase rights hereunder by delivering an irrevocable written notice to the Company within twenty (20) Business Days after receipt of such notice from the Company, which notice shall state the dollar amount of Proposed Securities such Preemptive Right Investor would like to purchase up to a maximum amount equal to such Preemptive Right Investor’s Full Allotment, plus the additional dollar amount of the Proposed Securities such Preemptive Right Investor would like to purchase in excess of its Full Allotment (the “Over-Allotment Amount”), if any, if other Preemptive Right Investors do not elect to purchase their full allotment of the Proposed Securities. The right of each Preemptive Right Investor to purchase Proposed Securities in excess of its Full Allotment shall be apportioned based on the relative Full Allotments of those Preemptive Right Investors desiring Over-Allotment Amounts (as indicated in such irrevocable written notice). To the extent that the Company offers two or more securities to all prospective purchasers in a proposed issuance in units, such as convertible notes coupled with attached warrants (and only in such units), such Preemptive Right Investors must purchase such units as a whole and will not be given the opportunity to purchase only one of the securities making up such unit.
(iii)Upon the expiration of the offering periods described above, the Company will be free to sell such Proposed Securities that such Preemptive Right Investors have not elected to purchase during the one hundred twenty (120) days following such expiration on terms and conditions not more favorable, taken as a whole (but with aggregate economic terms not more favorable), to the purchasers thereof than those offered to such Preemptive Right Investors. Any Proposed Securities offered or sold by the Company after such ninety (90)-day period must be reoffered to such Preemptive Right Investors pursuant to this Section 2(e).
(iv)Except as set forth in Section 2(e)(iii), the election by a Preemptive Right Investor not to exercise such Preemptive Right Investor’s subscription rights under this Section 2(e) in any one instance shall not affect such Preemptive Right Investor’s right (other than in respect of a reduction in such Preemptive Right Investor’s percentage holdings) as to any subsequent proposed issuance subject to this Section 2(e). If the Board determines in good faith that it is in the best interest of the Company to sell the Proposed Securities to one or more Tiptree Investors or their respective Affiliates, the Company shall be permitted to sell such Proposed
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Securities to such Tiptree Investors and/or their respective Affiliates without first complying with Section 2(e)(i), provided that promptly following such sale, the Company permits each other Preemptive Right Investor having rights under this Section 2(e) to purchase such Preemptive Right Investor’s proportionate amount of such Proposed Securities in the manner contemplated by this Section 2(e); provided, further, that in the event the Company desires to sell such Proposed Securities to a Tiptree Investor or its Affiliates in reliance on this Section 2(e)(iv), then such Proposed Securities may only be sold to such Tiptree Investor or its Affiliates if they are concurrently offered to be sold to the Warburg Investors. Following the issuance of any Proposed Securities to such Tiptree Investors and/or their respective Affiliates and prior to the issuance of the Proposed Securities to any other Preemptive Right Investor in accordance with this Section 2(e)(iv), the Company shall not set a record date for any meeting or dividend, shall not permit any stockholder action by written consent to be taken, shall not convene any meeting of the stockholders and shall not take any other action, in each case, the result of which could reasonably be expected to be influenced by a decision of a Preemptive Right Investor to purchase any Proposed Securities.
(v)Each such Preemptive Right Investor shall, if requested by the Company, execute a stockholders agreement (or consent to an amendment to this Agreement) with respect to such Proposed Securities with terms that are (to the extent practicable) substantially equivalent to, mutatis mutandis, the terms of this Agreement. If any Subsidiary of the Company offers any additional equity securities (“New Subsidiary Securities”) to any Person (other than to the Company or any Subsidiary, directly or indirectly, wholly owned by the Company), then this Section 2(e) will apply to any such offering of New Subsidiary Securities, and each Preemptive Right Investor shall have the right to purchase a portion of such New Subsidiary Securities offered thereunder as though they were equity securities pursuant to this Section 2(e), mutatis mutandis.
(f)Exit Rights.
(i)At any time from and after the earlier of (A) June 21, 2026 and (B) the consummation of a Change of Control of Tiptree (such earlier date, the “Exit Event Triggering Date”), if a Qualified Public Offering has not been consummated prior thereto, upon a request of the Warburg Investors, the Company shall use reasonable best efforts to consummate (at the Company’s expense) a Qualified Public Offering as promptly as practicable thereafter and, in any event, prior to the twelve (12) month anniversary of such request; provided that at the request of the Warburg Investors, the Company shall take such steps as may be reasonably requested by the Warburg Investors in preparation of effecting such Qualified Public Offering six (6) months prior to the Exit Event Triggering Date (excluding, for clarity, making any public filing or otherwise making public its intention to effect a Qualified Public Offering), including engaging (at the Company’s expense) a nationally-recognized investment bank reasonably acceptable to the Warburg Investors to assist the Company in effecting a Qualified Public Offering and preparing the relevant offering documents, such that upon the Exit Event Triggering Date the Company shall be prepared to commence any applicable “road shows” or other substantive steps to effect the Qualified Public Offering. The Company shall keep the Warburg Investors reasonably apprised of the efforts to consummate such Qualified Public Offering.
(ii)In the event that the Company does not consummate a Qualified Public Offering within twelve (12) months of the Warburg Investors’ request to initiate a Qualified Public Offering pursuant to Section 2(f)(i) or at any time following a Change of Control of Tiptree, if a Qualified Public Offering has not been consummated prior thereto, upon the request of the Warburg Investors, the Board shall establish a committee of the Board, on which committee designees of the Warburg Investors shall hold a majority of the votes, and delegate to such committee customary powers, to explore strategic alternatives to the Company,
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including a Deemed Liquidation Event of the Company and in good faith pursue such a process, with authority to engage (at the Company’s expense) a nationally recognized investment bank to assist the Company in such process. The Company shall direct its directors, officers and employees to cooperate with such committee. The Company and the Tiptree Investors shall not be required to accept any particular proposal. Notwithstanding anything else to the contrary, in the event that the Company does not consummate a Deemed Liquidation Event within twelve (12) months of the commencement of the foregoing process, the Warburg Investors shall have the right to exercise Drag-Along Rights as Triggering Stockholders under Section 2(c). The Company shall keep the Warburg Investors reasonably apprised of the efforts to effect such a transaction.
(iii)The Tiptree Investors shall use commercially reasonable efforts to cooperate with the Warburg Investors and the Company (at the Company’s expense) in connection with any of the actions or transactions contemplated by this Section 2(f).
(g)Cooperation with Transfer. The Company agrees to reasonably cooperate with the Warburg Investors and the Tiptree Investors with respect to any proposed Transfer by such Investors, made in compliance with this Agreement, of all or a portion of the Shares Owned by such Investors, including providing financial and other information with respect to the Company to prospective investors in conducting their due diligence review and investigation and causing the officers and representatives of the Company to cooperate reasonably with such prospective investors in connection with their review and investigation, subject to any prospective investor executing a customary confidentiality agreement with the Company.
(h)Legends.
(i)The certificates evidencing the Shares acquired by the Investors will bear substantially the following legend reflecting the restrictions on the Transfer of such securities contained in this Agreement:
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE TERMS OF THAT CERTAIN STOCKHOLDERS AGREEMENT (AS AMENDED FROM TIME TO TIME) BY AND AMONG FORTEGRA GROUP INC. AND CERTAIN INVESTORS IDENTIFIED THEREIN, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER. A COPY OF SUCH AGREEMENT HAS BEEN FILED WITH THE SECRETARY OF FORTEGRA GROUP INC. AND IS AVAILABLE UPON REQUEST.
(ii)If any certificates representing any Shares held by an Investor do not bear substantially the foregoing legend and such legend is so required pursuant to Section 2(h) hereof, such Investor shall, as promptly as practicable after the date hereof, deliver all such certificates to the Company to enable the Company to place such legend on such certificates.
(iii)In the event that the restrictive legend set forth in Section 2(h)(i) above has ceased to be applicable to the Shares held by an Investor, the Company shall provide such Investor, at his, her or its request, with new certificates for such Shares not bearing the legend with respect to which the restriction has ceased and terminated. In connection with and following Initial Public Offering, the Company shall provide each Investor, at his, her or its request, with new certificates for all Shares held by such Investor not bearing the legend.
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3.INFORMATION RIGHTS.
(a)Information Rights. The Company shall provide to each Qualified Investor the following:
(i)Quarterly Statements. As promptly as practicable after provided to the Board and in any event within forty-five (45) days after the end of each fiscal quarter (other than the last quarter of any fiscal year), the unaudited quarterly financial statements of the Company and its Subsidiaries;
(ii)Monthly Reports. As promptly as practicable after provided to the Board and in any event within twenty (20) days after the end of each calendar month, the unaudited monthly financial reports of the Company and its Subsidiaries;
(iii)Annual Statements. As promptly as practicable after provided to the Board and in any event within one hundred ninety (190) days after the end of each fiscal year, the audited annual financial statements of the Company and its Subsidiaries;
(iv)Annual Budget. Without limiting clause (9) of Schedule II, as promptly as practicable after approval by the Board and in any event within sixty (60) days after the beginning of each fiscal year, a copy of the annual budget of the Company and its Subsidiaries for such fiscal year, in such form and containing such information as approved by the Board;
(v)Audit Reports. Promptly following receipt thereof, one copy of each audit report submitted to the Company by its independent accountants in connection with any annual, interim or special audit made by them of the books of the Company and its Subsidiaries;
(vi)Reports to Stockholders and Creditors. As promptly as practical after it is provided to the Company’s stockholders or lenders, any material report that is provided to such stockholders or lenders;
(vii)Capitalization Changes. As promptly as practical after the number of shares of Common Stock outstanding on a Fully Diluted Basis increases or decreases by more than one percent (1%), an updated capitalization table reflecting such changes; and
(viii)Requested Information and Data. As promptly as practical, such other data and information as from time to time may be reasonably requested by such Investor.
(b)Exceptions. Notwithstanding the foregoing, the Company shall have no obligation to provide the information required pursuant to this Section 3 to a Qualified Investor to the extent that such Qualified Investor and/or one of its Affiliates is (1) an employee of the Company; (2) is a Competing Business of the Company; and (3) otherwise has access to such information. Notwithstanding anything else in this Section 3 to the contrary, the Company may cease providing the information set forth in this Section 3 during the period starting with the date sixty (60) days before the Company’s good-faith estimate of the date of filing of a registration statement in connection with its Initial Public Offering if it reasonably concludes it must do so to comply with the SEC rules applicable to such registration statement and related offering; provided that the Company’s covenants under this Section 3 shall be reinstated at such time as the Company is no longer actively employing its commercially reasonable efforts to cause such registration statement to become effective.
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(c)Inspection Rights. The Company will permit each Qualified Investor and its nominees, assignees and representatives, at such Qualified Investor’s expense, to visit and inspect any of the properties of the Company and its Subsidiaries, to examine all its books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss its affairs, finances and accounts with its officers, directors, key employees and independent public accountants or any of them (and by this provision the Company authorizes said accountants to discuss with such Qualified Investor, its nominees, permitted assigns and representatives the finances and affairs of the Company and its Subsidiaries), all at such reasonable times and as often as may be reasonably requested.
4.RESTRICTIVE COVENANTS.
(a)Non-Solicitation. For so long as any Investor holds any Shares and for the twenty-four (24) months thereafter:
(i)Such Investor shall not, and shall cause each of its Affiliates and representatives (to the extent acting on such Investor’s behalf) not to, without the prior written consent of the Company, and except, to the extent applicable, in the furtherance of such Investors duties as an employee, board member of the Company or its Subsidiaries, directly or indirectly, (i) recruit or otherwise solicit, encourage, seek to persuade or induce any employee of the Company or any of its Subsidiaries (each a “Company Employee” and collectively, the “Company Employees”) to terminate his or her employment with the Company or any of its Subsidiaries, or hire any such Company Employee, or (ii) solicit, encourage, seek to persuade or induce any independent contractor (other than any attorney, regulatory advisor, accountant, investment banker, broker or similar outside advisor, or actuary, IT service provider or cybersecurity service provider to the Company or its Affiliates) providing services to the Company or any of its Subsidiaries to terminate or diminish his or her relationship with them, or hire any such independent contractor; provided, however, that nothing in this Section 4(a) shall prohibit such Investor or any of his, her or its Affiliates or representatives from (A) conducting generalized searches for employees through the use of bona fide public advertisements in the media or any recruitment efforts conducted by any recruitment agency, in each case that are not specifically targeted at Company Employees or independent contractors of the Company or its Subsidiaries or (B) taking any of the actions otherwise restricted by this Section 4(a)(i), in respect of any Company Employee who has not been employed with the Company or its Subsidiaries at any point during the six (6)-month period preceding the taking of such action or any independent contractor who has not provided services to the Company or its Subsidiaries at any point during the six (6)-month period preceding the taking of such action.
(ii)Each Investor hereby agrees not to bring, commence or institute any action or proceeding (derivative or otherwise) in law or in equity in any court or before any governmental entity, against the Company or any of its Affiliates or any of their respective successors or assigns or any other Person challenging the validity of, or seeking to enjoin the operation of, any provision of this Section 4(a).
(iii)Each Investor acknowledges that such Investor has carefully read and considered all the terms and conditions of this Agreement, including the restraints imposed upon such Investor pursuant to this Section 4(a). The restrictions and covenants set forth in this Section 4(a) are in addition to any other obligations that such Investor may have to the Company and any of its Affiliates, including any obligations set forth in such Investor’s employment agreement, if applicable, with the Company or any of its Affiliates, any award agreement with respect to equity in the Company or any of its Affiliates, and any agreement entered into in connection with the Purchase Agreement. Each Investor agrees that the restraints set forth in this Section 4(a) are necessary for the reasonable and proper protection of the Company and its Affiliates and their confidential or proprietary information or data, employee, customer and
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supplier relations, the general goodwill of their business and other legitimate interests of the Company and its Subsidiaries, and that each and every one of the restraints is reasonable in respect to subject matter, length of time and geographic area, and that these restraints, individually or in the aggregate, will not prevent (in the case such Investor is an individual) such Investor from obtaining other suitable employment during the period in which such Investor is bound by the restraints. Each Investor acknowledges that each of these covenants has a unique, substantial and immeasurable value to the Company and its Affiliates and that such Investor (in the case such Investor is an individual) has sufficient assets and skills to provide a livelihood while such covenants remain in force.
(iv)Notwithstanding any provision to the contrary herein, each of the Company, the Tiptree Investors and the Warburg Investors may pursue, at their respective sole discretion, enforcement of this Section 4(a).
(b)Confidentiality of Records. During the term of this Agreement and for the twenty-four (24) months following the termination of this Agreement, each Investor agrees that (x) it will keep confidential any confidential or proprietary information that such Investor obtains in respect of the Company pursuant to Section 3 or that any Director designated by such Investor obtains in connection with its services as a Director, and (y) it will only use such information in connection with its investment in the Company and not in any manner that would reasonably be expected to be detrimental in any material respect to the Company’s business (provided that this clause (y) shall not restrict the use by any individual of knowledge retained in the unaided memory of such individual, which knowledge was not retained with the intention of circumventing this clause (y)), except that such Investor may disclose such information (i) at such time as it enters the public domain without breach of this Section 4(b) by such Investor; (ii) that is communicated to it free of any obligation of confidentiality; (iii) that is developed by such Investor or its agents independently of and without reference to any such information; (iv) as required by applicable law, rule or regulation, including the rules of the SEC and the regulations of any stock exchange or automated dealer quotation system on which the securities of such Investor are listed, or if requested by a governmental or regulatory authority of competent jurisdiction; (v) to its attorneys, accountants, Directors, consultants, advisors and other professionals, provided that such Person in clause (v) is advised of and has agreed to be bound by the confidentiality provisions of this Section 4(b) or is bound by comparable restrictions or by confidentiality obligations under rules of professional conduct; (vi) with respect to the Tiptree Investors and the Warburg Investors, (1) to any current, former or prospective investors (including limited partners), (2) to any Affiliate, partner, member, employee, stockholder or agent, (3) to any current, former or potential lenders or financing sources, (4) to any marketing or public relations representatives, (5) to any investor in such Tiptree Investor or Warburg Investor to whom such Tiptree Investor or Warburg Investor is contractually obligated or required to provide such information, (6) to any prospective purchaser of any Shares from a Tiptree Investor or Warburg Investor, as long as such prospective purchaser is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 4(b) or comparable restrictions; or (vii) to any Subsidiary or parent of such Investor as long as such Subsidiary or parent is advised of and agrees or has agreed to be bound by the confidentiality provisions of this Section 4(b) or comparable restrictions. Any Director will have the right to disclose to the Investor that appointed such Director any and all information it receives concerning the Company or its Subsidiaries in its capacity as a Director. Any information that a Director designated by an Investor obtains in connection with his or her services as a Director shall be deemed information disclosed to the Investor and subject to this Section 4(b). Each Investor shall be responsible for violations by any Director it designates or any other Person to whom such Investor provides such information.
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5.REGULATORY MATTERS
(a)Regulatory Filings. Each of the Investors and the Company shall cooperate in good faith, engage in communications and share and exchange documents and other information as may be required for the Company or any of its Subsidiaries, or for any Investor, to file any registrations (including registrations required as a member of an insurance holding company system), petitions, statements, applications, schedules, forms, declarations, notices, reports, submissions (including any sales material, any nonrenewal, cancellation or revision of reinsurance agreements, material acquisitions of assets or material dispositions of assets) or other filings (including with respect to premium rates, rating plans, policy terms and other terms established or used by any Subsidiaries of the Company) with any Governmental Authority to the extent relating to the Company or its Subsidiaries (including all supplements and amendments to any of the foregoing, whether made or required to be made prior to, on or after the date hereof, but excluding any filings contemplated by the Registration Rights Agreement, the “Regulatory Filings”). To the extent that any Regulatory Filing by the Company or its Subsidiaries requires, or a Governmental Authority requests in connection with any Regulatory Filing, whether formally or informally, any documents or other information in any way regarding or relating to an Investor or its Affiliates, including any officers, directors, managers, partners or employees of Investor or its Affiliates, the Company shall provide the applicable Investor reasonably prompt notice (such notice to include the provision of copies of any writings or documents which relate to the request). The applicable Investor and the Company shall then discuss in good faith the proposed disclosure of such documents or other information by the Company, reasonably cooperate to limit the disclosure of such information or documents in response to any such requirement or request and/or find and facilitate reasonable alternatives to any such disclosure and the Company agrees that it shall not, and shall cause its Subsidiaries not to, provide such documents or other information unless such disclosure is agreed to in writing by the applicable Investor, except to the extent reasonably required by applicable law, rule or regulation and reasonable alternatives are not available, in which case Investor shall have an opportunity to review and comment on any such disclosure, and the Company shall consider in good faith any such comments. If an Investor determines (in its sole discretion), after consultation with the Company pursuant to the preceding sentence, that the proposed disclosure of certain documents or other information includes sensitive or confidential information regarding the Investor or any of its Affiliates (other than the Company and its Subsidiaries), or any officers, directors, managers, parents or employees of Investor or its Affiliates (other than the Company and its Subsidiaries), the Investor may provide such sensitive or confidential information directly to the applicable Governmental Authority without the prior disclosure of such information to the Company. The Company agrees that it will not consent to the disclosure by any Governmental Authority of any information or other documentation provided by an Investor or its Affiliates (other than the Company and its Subsidiaries), or any officers, directors, managers, parents or employees of Investor or its Affiliates (other than the Company and its Subsidiaries), without such Investor’s consent, not to be unreasonably withheld, conditioned or delayed. All reasonable and documented out-of-pocket third party costs incurred in connection with any Regulatory Filing made on or after the date hereof shall be at the sole cost and expense of the Company and the Company shall reimburse each Investor for any such out-of-pocket costs and expenses incurred by it.
(b)Confidentiality. The Company and each Investor agrees that it will keep confidential any documents or other information provided by the Investors or their Affiliates or any officers, directors, managers, partners or employees of the Investors or their Affiliates (whether provided prior to on or after the date of this Agreement), including any documents and information related to any Regulatory Filings, and agrees to only use such documents or other information as may be required by the Company, including in connection with the Regulatory Filings, and not in any other manner, except that the Company and the Investors may disclose such information (i) at such time as it enters the public domain without breach of this
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Section 5(b) or any other confidentiality obligation between, among or involving the Company and the Investors; (ii) that is communicated to it by a third party free of any obligation of confidentiality; (iii) that is developed by it or its agents independently of and without reference to any such information; (iv) as required by applicable law, rule or regulation, including the rules of the SEC and the regulations of any stock exchange or automated dealer quotation system on which the securities of the Company are listed, or if requested by a Governmental Authority (provided, that in the event any Investor’s information or other documentation is required or requested to be disclosed by applicable law, rule or regulation, the Company agrees (to the extent permitted by law) to provide such Investor with prompt written notice of any such requirement or request to enable the Investor (and the Company shall cooperate with the Investor) to seek an appropriate protective order or take other appropriate action to prevent or limit such disclosure); or (v) to its attorneys, accountants, directors, consultants, advisors and other professionals.
(c)Information Supplied.
(i)The Company represents to each Investor that is required to make Regulatory Filings that all of the information or other documentation supplied by the Company or its Subsidiaries to be included in a Regulatory Filing was or will be, at the date it is supplied to, or filed with, as applicable, any Governmental Authority, accurate in all material respects. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information or other documentation provided by any Investor that is included in any Regulatory Filing.
(ii)Each applicable Investor represents to the Company that all of the information or other documentation supplied by such Investor or its Affiliates to be included in a Regulatory Filing was or will be, at the date it is supplied to, or filed with, as applicable, any Governmental Authority, accurate in all material respects. Notwithstanding the foregoing, none of the Investors make any representation or warranty with respect to any information supplied by the Company that is included in any Regulatory Filing.
(d)Indemnification.
(i)The Company agrees to, at its own cost and expense, defend, indemnify and hold harmless each Investor that makes or is required to make any Regulatory Filings and such Investor’s Affiliates and its and their officers, directors, managers, partners and employees from and against any and all loss, liability, damage or expenses arising from or in any way related to any (A) Regulatory Filing (except to the extent the Company is entitled to indemnification pursuant to Section 5(d)(ii)) and (B) breach of Section 5(c)(i).
(ii)Each Investor that makes or is required to make (or whose Affiliates make or are required to make) any Regulatory Filings or supply (or whose Affiliates supply) any information or documentation included in any Regulatory Filings made by the Company or its Subsidiaries) agrees to, at its own cost and expense, defend, indemnify and hold harmless the Company, its Affiliates and any other Investor that has made or is required to make any Regulatory Filings and its and their officers, directors, managers, partners and employees from and against any and all loss, liability, damage or expenses arising from or in any way related to such Investors’ breach of Section 5(c)(ii).
(iii)This Section 5(d) shall not be deemed a substitute for, nor diminish or abrogate in any way, nor supersede or deemed an amendment or modification of, any rights to indemnification that the Company or any Investor may have pursuant to this Agreement, any other agreement or otherwise.
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6.TERMINATION.
(a)Survival. Upon the closing of a Qualified Public Offering or, at the written election of the Majority Tiptree Investors and Majority Warburg Investors, an Initial Public Offering, this Agreement shall automatically terminate, except with respect to the following Sections which shall survive such termination in accordance with their terms:
(i)Section 1(a)(iv) (Post-IPO Board Seat);
(ii)Section 1(c) (Committees of the Board);
(iii)Section 1(d) (Directors of Subsidiaries);
(iv)Section 1(f) (Indemnification, Expense Reimbursement and Other Rights);
(v)Section 2(h) (Legends);
(vi)Section 4 (Restrictive Covenants);
(vii)Section 5 (Regulatory Matters);
(viii)Section 6 (Termination);
(ix)Section 7 (Interpretation of this Agreement); and
(x)Section 8 (Miscellaneous).
(b)Deemed Liquidation Event. This Agreement shall terminate upon a Deemed Liquidation Event.
(c)Consent to Termination. This Agreement shall terminate on the date on which the Majority Tiptree Investors and the Majority Warburg Investors shall have agreed in writing to terminate this Agreement.
(d)Effect of Termination. Notwithstanding the foregoing, if this Agreement is terminated (i) pursuant to Section 6(b), the rights and obligations of the Investors (including the Triggering Stockholders) pursuant to Section 2(c) with respect to such Deemed Liquidation Event shall survive the termination of this Agreement.
7.INTERPRETATION OF THIS AGREEMENT
(a)Terms Defined. As used in this Agreement, the following terms have the respective meaning set forth below:
“2021 Equity Incentive Plan” shall mean the Fortegra Group, Inc. 2021 Equity Incentive Plan, as amended from time to time.
“Affiliate” shall mean any Person or entity, directly or indirectly controlling, controlled by or under common control with such Person or entity where, “control” means the power and ability to direct, directly or indirectly, or share equally in or cause the direction of, the management and/or policies of a Person, whether through ownership of voting shares or other equivalent interests of the controlled Person, by contract (including proxy) or otherwise; provided that neither the Company nor any of its Subsidiaries shall be deemed to be an Affiliate
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of any Investor; provided, further that, solely for purposes of Section 4(a), (i) no portfolio company (as such term is commonly used in the private equity business and, for clarity, is distinct from Subsidiaries) of any fund advised or managed by Warburg Pincus LLC shall be deemed to be an Affiliate of the Warburg Investors and (ii) no portfolio company (as such term is commonly used in the private equity business and, for clarity, is distinct from Subsidiaries) of (x) Tiptree (to the extent Tiptree conducts a business similar to an investment fund) or (y) any investment fund advised or managed by Corvid Peak Holdings, L.P., Corvid Peak Capital Management, LLC, Corvid Peak GP Holdings, LLC, Corvid Peak Holdings GP, LLC or an affiliated registered investment advisor, in the case of each of (x) and (y), shall be deemed to be an Affiliate of the Tiptree Investors.
“As Converted Basis” shall mean all outstanding shares of the Common Stock assuming (i) the conversion of all outstanding shares of Preferred Stock (which shall be counted on an as-converted-to-Common-Stock basis based on the Liquidation Preference of the Preferred Stock in accordance with the Certificate of Incorporation) and (ii) the exercise (for cash) of all outstanding Share Equivalents (other than Granted Equity Shares) without regard to any restrictions or conditions with respect to the exercisability of such Share Equivalents.
“Business Day” shall mean any day other than a Saturday, Sunday or a day on which banks in New York, New York are authorized or obligated by law or executive order to close.
“Bylaws” shall mean the Bylaws of the Company as they may be amended from time to time.
“Certificate of Designation” shall mean any Certificate of Designation adopted by the Company and filed with the Secretary of State of the State of Delaware.
“Certificate of Incorporation” shall mean the Certificate of Incorporation of the Company as it may be amended from time to time, including pursuant to a Certificate of Designation, if any.
“Change of Control” shall mean, with respect to any Person, (a) any transaction or series of related transactions, whether or not such Person is a party thereto, in which, after giving effect to such transaction or transactions, the equity securities representing in excess of fifty percent (50%) of the voting power of such Person are owned directly or indirectly through one or more entities, by any “person” or “group” (as such terms are used in Section 13(d) of the Exchange Act) of persons, other than, with respect to a Change of Control of Tiptree, Michael G. Barnes, his Affiliates and any “group” in which Michael G. Barnes and his Affiliates represent at least 50% of the equity interests or voting power of such group, (b) a sale, lease or other disposition of all or substantially all of the assets of such Person and its Subsidiaries on a consolidated basis (including securities of such Person’s directly or indirectly owned Subsidiaries) to one or more purchasers or (c) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board ceasing for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company’s stockholders, of each new director was approved by a vote of at least fifty percent (50%) of the directors eligible to vote who were directors at the beginning of the period.
“Closing” shall mean the closing of the purchase and sale of the Closing Purchased Securities (as defined in the Purchase Agreement), pursuant to the terms and conditions of the Purchase Agreement.
“Common Stock” shall mean the common stock of the Company, par value $0.01 per share.
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“Competing Business” shall mean, with respect to any Person, any business conducted by such Person or any of its Affiliates, anywhere in the North America, South America or Europe that competes, directly or indirectly, with the Company or any of its Subsidiaries. For the avoidance of doubt, any Person, entity or business engaged in the business of providing payment protection products, motor club memberships, service contracts, warranty products, specialty commercial insurance, including excess and surplus and admitted lines, auto insurance, premium financing, and related administration services to business partners, including insurance companies, retailers, dealers, insurance brokers and agents and financial services companies, shall be considered a Competing Business, but a potential Transferee shall not be deemed to engage in a Competing Business solely by reason of the fact that such Person’s Affiliates include any separately managed portfolio company (as such term is commonly used in the private equity business) engaged in a Competing Business.
“Conversion” means the conversion of the Company under Section 265 of the Delaware General Corporation Law from a Delaware limited liability company into a Delaware corporation named “The Fortegra Group, Inc.”
“Deemed Liquidation Event” shall have the meaning set forth in the Certificate of Incorporation.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated thereunder, or any successor statute thereto.
“Fair Market Value” shall mean, with respect to any assets or securities, the fair market value for such assets or securities as determined by the Board in good faith, reflecting the amount that a willing buyer would pay to a willing seller in an arm’s-length transaction occurring on the date of valuation, taking into account all relevant factors determinative of value, including preference rights, lack of liquidity, control, and restrictions on marketability or transferability.
“Fully Diluted Basis” shall mean all outstanding shares of the Common Stock assuming (i) the conversion of all outstanding shares of Preferred Stock (which shall be counted on an as-converted-to-Common-Stock basis based on the Liquidation Preference of the Preferred Stock in accordance with the Certificate of Incorporation) and (ii) the exercise of all outstanding Share Equivalents and Granted Equity Shares without regard to any restrictions or conditions with respect to the exercisability of such Share Equivalents and Granted Equity Shares.
“GAAP” means generally accepted accounting principles in the United States.
“Governmental Authority” means any government, governmental, administrative or regulatory authority, agency, instrumentality, department, court, commission, body, tribunal or other governmental entity or any non-governmental self-regulatory authority, agency, instrumentality, department, court, commission, body, tribunal (whether or not private or quasi-private), whether foreign or domestic and whether national, federal, state, provincial or local.
“Granted Equity Shares” shall mean shares of Common Stock, Share Equivalents or other equity securities that are granted or issued pursuant to any of the Company’s stock option plans, stock bonus plans, stock incentive plans or other similar plans, in each case, approved by the Board and any shares of Common Stock issued in exchange for equity interests in LOTS Intermediate Co.
“Group Companies” means the Company and each of its Subsidiaries.
“Indebtedness” means any and all obligations of any Person for money borrowed (or a guarantee thereof) which, in accordance with GAAP, would be reflected on the balance
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sheet of such Person as a liability on the date as of which Indebtedness is to be determined; provided that Indebtedness shall exclude (a) Non‑Recourse Indebtedness, (b) any undrawn portion of any letters of credit or bank guarantees (or similar obligations), unless the same are drawn and not reimbursed within thirty (30) days thereafter, (c) obligations which would otherwise constitute Indebtedness but which have been cash collateralized or amounts for the repayment thereof placed in escrow or otherwise deposited in defeasance or discharge of such obligations, but only to the extent of such cash collateral or amounts escrowed or otherwise deposited in defeasance or discharge thereof, (d) trade payables and accrued expenses arising in the ordinary course of business, (e) any earn-out obligations, (f) prepaid or deferred revenue arising in the ordinary course of business, (g) purchase price holdbacks, indemnities and/or purchase price adjustments arising in the ordinary course of business, (h) intercompany indebtedness incurred in the ordinary course of business, (i) overdraft or other cash management obligations arising in the ordinary course of business, (j) any tax liabilities, including joint and several tax liabilities arising by operation of consolidated return, fiscal unity or similar provisions of applicable law or (k) the aggregate amount of accrued but unpaid interest, interest paid‑in‑kind, fees, underwriting discounts, premiums and other costs and expenses incurred in connection with any and all refinancing thereof.
“Majority Investors” shall mean the Investors that Own a majority of the Shares Owned by all Investors (calculated on an As Converted Basis, but excluding for this purpose any Granted Equity Shares that are not vested).
“Majority Other Investors” shall mean the Other Investors Owning a majority of the Shares Owned by all Other Investors (calculated on an As Converted Basis).
“Majority Tiptree Investors” shall mean Tiptree Investors Owning a majority of the Shares Owned by all Tiptree Investors (calculated on an As Converted Basis).
“Majority Warburg Investors” shall mean the Warburg Investors that Own a majority of the Shares Owned by all Warburg Investors (calculated on an As Converted Basis). Unless the context otherwise requires, any action required to be taken by the Warburg Investors hereunder may be taken by the Majority Warburg Investors.
“Non‑Recourse Indebtedness” means Indebtedness of the Company or its Subsidiaries which is (i) secured only by the specific assets of the Company or a Subsidiary, respectively, to which such Indebtedness relates or (ii) without recourse to the Company or its Subsidiaries (except for customary exceptions for fraud, environmental indemnities and violation of special purpose entity covenants, unless and until, and for so long as, no claim for payment or performance has been made thereunder (which has not been satisfied), at which time the obligations with respect to such customary exceptions shall not be considered Non‑Recourse Indebtedness to the extent such claim is a liability of such Person for GAAP purposes), in each case, (x) as characterized as non‑recourse, asset‑specific debt in the Company’s GAAP financial statements, including any notes thereto (including non‑GAAP reconciliations), and (y) to the extent such Indebtedness relates to investments in the Company’s or its Subsidiaries’ investment portfolio or financing associated with premium and/or service contract finance operations (whether now owned or hereafter acquired) or any other similar type of asset‑based financing incurred in the ordinary course of business.
“Owns,” “Own,” “Owning” or “Owned” shall mean beneficial ownership, assuming the conversion (whether or not then convertible) of all outstanding securities convertible (including Preferred Stock) into Common Stock and the exercise (for cash) of all outstanding Share Equivalents. No Investor shall be deemed to Own any shares of Common Stock or Preferred Stock issuable pursuant to the Purchase Agreement prior to the date of issuance of such shares of Common Stock or Preferred Stock to such Investor.
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“Permitted Transferee” shall mean, (i) in the case of any Tiptree Investor, Warburg Investor or any Other Investor that is not a natural person Investor, any Affiliate of such Investor, so long as such Affiliate is not engaged in a Competing Business and so long as such Transfer would not result in a breach or default (with or without the giving of notice, lapse of time or both) under any material agreement or contract of the Company or its Subsidiaries (including, for clarity, an “event of default” as a result of a change of control or similar event) and subject the Company or its Subsidiaries to any regulatory approvals (unless such approvals are obtained by the Transferring Investor at its own cost), and (ii) in the case of Other Investors who are natural persons, (A) any trust established for the sole benefit of such Other Investor or such Other Investor’s spouse or direct lineal descendants, provided such Other Investor is the trustee of such trust or such trust is a grantor trust, (B) any Person in which the direct and beneficial owner of all voting securities of such Person is such Other Investor or (C) such Other Investor’s heirs, executors, administrators or personal representatives upon the death, incompetency or disability of such Other Investor.
“Person” shall mean an individual, partnership (whether general or limited), joint-stock company, corporation, limited liability company, trust or unincorporated organization, and a government or agency or political subdivision thereof.
“Preferred Stock” shall mean all shares of Series A Preferred Stock and any other series of preferred stock issued by the Company.
“Purchased Equity Shares” shall mean, subject to the following sentence, shares of Common Stock, Share Equivalents (including the Preferred Stock) or other equity securities that are purchased for value by an Investor from the Company pursuant to the Purchase Agreement or otherwise (whether issued prior to, on or after the date hereof) or shares of Common Stock, Share Equivalents (including the Preferred Stock) or other equity securities that are purchased, gifted or otherwise acquired (whether purchased, gifted or acquired prior to, on or after the date hereof) by an Investor from any other stockholder of the Company (including any Other Investor). For the avoidance of doubt, for all purposes under this Agreement, Purchased Equity Shares shall not include any Granted Equity Shares that were initially issued by the Company.
“Qualified Investor” shall mean, as of any time, (i) the Tiptree Investors and (ii) the Warburg Investors.
“Qualified Public Offering” shall mean an Initial Public Offering resulting in at least $150,000,000 of gross proceeds of the Initial Public Offering to the Company and/or the selling Investors.
“Registration Rights Agreement” shall mean that certain Registration Rights Agreement dated as of the date hereof by and among the Company and the stockholders named therein, as the same may be amended from time to time.
“Sales Costs” shall mean any costs or expenses (including legal or other advisor costs and expenses), fees (including investment banking fees), commissions or discounts payable directly by the Warburg Investors or any of their respective Affiliates in connection with, arising out of or relating to any sale or other disposition of equity security interests in the Company (including in connection with the negotiation, preparation and execution of any transaction documentation with respect to such sale or other disposition).
“SEC” shall mean the U.S. Securities and Exchange Commission or any successor agency.
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“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, or any successor statute thereto.
“Security” or “Securities” shall have the meaning set forth in Section 2(1) of the Securities Act.
“Series A Preferred Stock” shall mean all shares of Series A Convertible Preferred Stock of the Company, par value $0.01.
“Share Equivalent” shall mean any stock, warrants, rights, calls, options or other securities exchangeable or exercisable for, or convertible into, directly or indirectly, Shares of Common Stock.
“Shares” shall mean the Purchased Equity Shares and Granted Equity Shares (together with any Share Equivalents and any shares of capital stock of the Company issued with respect to such Purchased Equity Shares or Granted Equity Shares by way of a stock dividend or distribution payable thereon or stock split, reverse stock split, recapitalization, reclassification, reorganization, exchange, subdivision or combination thereof).
“Subsidiary” shall mean, with respect to any Person, (a) any other Person of which an aggregate of more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such other Person (or comparable body in the case of a Person that is not a corporation) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, (b) any partnership, limited liability company or other entity in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%), and (c) any other Person, the management of which is controlled, directly or indirectly, by such Person.
“Total Capital” shall mean the sum of the Indebtedness of the Company and its Subsidiaries as of such date and the Company’s stockholders equity as of the most recent date calculated in accordance with GAAP; provided that if after such date any Indebtedness was settled, discharged, offset or repaid or any additional Indebtedness was incurred or guaranteed after such most recent date, the Company’s stockholders’ equity will be recalculated to take into account such settlement, discharge, offset or repayment of Indebtedness or incurrence or guarantee of additional Indebtedness (net of any cash received or paid, as applicable, as a result therefrom).
“Transfer” shall mean any direct or indirect transfer, sale, assignment, gift, inter vivos transfer, pledge, hypothecation, mortgage or other disposition or encumbrance (whether voluntary or involuntary or by operation of law), including derivative or similar transactions or arrangements whereby a portion or all of the economic interest in, or risk of loss or opportunity for gain with respect to, the Shares is transferred or shifted to another person the offer to make a sale, transfer or other disposition, and each option, agreement, arrangement or understanding, whether or not in writing, to effect any of the foregoing, each of “Transferring,” “Transferred,” “Transferee” and “Transferor” have a correlative meaning. For the avoidance of doubt (1) transfers made by any limited partners of any funds managed or advised by Warburg Pincus LLC shall not be deemed a Transfer under this Agreement; and (2) transfers of publicly traded securities in Tiptree Inc. shall not be deemed a Transfer under this Agreement.
“Warburg Investments” shall mean, without duplication, as of the consummation of any Change of Control of the Company, Deemed Liquidation Event or other transaction contemplated by clause 2 of Schedule II, all payments made by the Warburg Investors (on a cumulative basis) with respect to, or in exchange for, Shares and Share Equivalents of the
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Company (whether such payments are made to the Company or any third party) from the date hereof until such Change of Control, Deemed Liquidation Event or such other transaction; provided that Warburg Investments shall not include payments made in connection with Permitted Transfers.
“Warburg Returns” shall mean, without duplication, as of the consummation of any Change of Control of the Company, Deemed Liquidation Event or other transaction contemplated by clause 2 of Schedule II, all cash (excluding management fees, transaction-related fees, indemnification payments and expense reimbursements) received (on a cumulative basis) by the Warburg Investors, net of Sales Costs, with respect to or in exchange for Shares and Share Equivalents of the Company (whether such payments are received from the Company or any third party) from the date hereof through such Change of Control, Deemed Liquidation Event or such other transaction; provided that Warburg Returns shall not include proceeds resulting from Permitted Transfers. For the sake of clarity, Warburg Returns shall be determined after giving effect to Granted Equity Shares exercised, settled, or vested in connection with the applicable Change of Control, Deemed Liquidation Event or other transaction.
(b)Other Defined Terms. The location of the definition of each other capitalized term used in this Agreement is set forth below.
Affiliate Arrangement Schedue II
Agreement Preamble
Approved Plan Schedue II
Board Recitals
CEO Director §1(a)(i)(D)
Company Preamble
Company Employee §4(a)(i)
Director(s) §1(f)(i)
Disqualification Event §7(b)(i)
Disqualified Designee §7(b)(i)
Drag-Along Notice §2(c)(ii)
Drag-Along Right §2(c)(i)
Drag-Along Sale §2(c)(i)
Full Allotment §2(d)(i)(B)
General Service §1(g)
Independent Director §1(a)(i)(C)
Initial Public Offering §1(a)(iv)
Investor(s) Preamble
Joinder Agreement §2(a)(vii)
New Subsidiary Securities §2(e)(v)
Non-Transferring Investors §2(d)(i)
Offer Notice §2(d)(ii)
Offered Shares §2(d)(i)
Other Investors Preamble
Over-Allotment Amount §2(e)(ii)
Purchase Agreement Recitals
Preemptive Right Investor §2(e)(i)
Proposed Securities §2(e)(i)(A)
Proposed Transferee §2(c)(i)
ROFO Joining Investor §2(d)(ii)
ROFO Option Period §2(d)(ii)
Selling Investor §2(b)(i)
Substitute Director §1(b)
Tag-Along Investors §2(b)(i)
Tag-Along Stock §2(b)(i)
Termination §2(a)(iii)
Tiptree Preamble
Tiptree Entity §1(f)(ii)
Warburg Investor Preamble
Tiptree Directors §1(a)(i)(A)
Transferor §2(d)(i)
Triggering Stockholder §2(c)(i)
Warburg Directors §1(a)(i)(B)
Warburg Pincus Entities §1(f)(ii)
Withdrawing Director §1(b)
(c)Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.
(d)Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.
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8.MISCELLANEOUS
(a)Additional Investors. The parties hereto acknowledge that certain Persons, including directors, employees and consultants of the Company and its Affiliates and their Permitted Transferees, may become stockholders of the Company or holders of Share Equivalents after the date hereof. As a condition to the issuance of shares of capital stock of the Company to them (including Share Equivalents), the Company shall require such Persons to execute and deliver an agreement in writing to be bound by the terms and conditions of this Agreement pursuant to a Joinder Agreement substantially in the form attached as Exhibit A hereto. With respect to any such Person required to become a party to this Agreement who is a director, employee or consultant of the Company, such Person shall be, and such Joinder Agreement or other agreement shall provide that such Person be, for purposes hereof, an Other Investor. With respect to any such Person required to become a party to this Agreement who is not a director, employee or consultant of the Company, such Person shall be, and such Joinder Agreement or other agreement shall provide that such Person be, for purposes hereof, a Tiptree Investor, a Warburg Investor or an Other Investor, as determined by the Board.
(b)Bad Actor.
(i)No Bad Actor. Each Person with the right to designate or participate in the designation of a director as specified in Section 1 hereby represents and warrants to the Company that, to such Person’s knowledge, none of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)(viii) promulgated under the Securities Act (each, a “Disqualification Event”), is applicable to such Person’s initial designee named above except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Any director designee to whom any Disqualification Event is applicable, except for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable, is hereinafter referred to as a “Disqualified Designee.” Each Person with the right to designate or participate in the designation of a director as specified above hereby covenants and agrees (A) not to designate or participate in the designation of any director designee who, to such Person’s knowledge, is a Disqualified Designee and (B) that in the event such Person becomes aware that any individual previously designated by any such Person is or has become a Disqualified Designee, such Person shall as promptly as practicable take such actions as are necessary to remove such Disqualified Designee from the Board and designate a replacement designee who is not a Disqualified Designee.
(ii)Disqualification Events. Each Investor hereby represents that none of the “bad actor” Disqualification Events is applicable to such Person or any of its Rule 506(d) Related Parties, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable.
(c)Notices. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (i) at the time of personal delivery, if delivery is in person; (ii) one (1) Business Day after deposit with an express overnight courier for U.S. deliveries (marked for overnight delivery), or three (3) Business Days after such deposit for deliveries outside of the U.S., with proof of delivery from the courier requested; (iii) five (5) Business Days after deposit in the United States mail by certified mail (return receipt requested) for U.S. deliveries; or (iv) when sent via email if sent prior to 5:00 p.m. (local time of the recipient) on a Business Day, or at 9:00 a.m. (local time of the recipient) on the next succeeding Business Day otherwise. All notices not delivered personally or sent via email will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address or email address as follows, or at such other
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address, email address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto as follows:
(i)if to the Company, at Fortegra Group Inc., 10751 Deerwood Park Blvd., Suite 200, Jacksonville, FL 32256, Attention: General Counsel, Email: CRomaine@fortegra.com, or at such other address as it may have furnished to the Investors in writing;
(ii)if to the Tiptree Investors, at c/o Tiptree Inc., 299 Park Avenue, 13th Floor, New York, NY 10171, Attention: Jonathan Ilany and Neil C. Rifkind, Email: JIlany@tiptreeinc.com and NRifkind@tiptreeinc.com, with a copy (which shall not constitute notice) to Ropes & Gray LLP, 1211 Avenue of Americas, New York, NY 10036-8704, Attention: Michael Littenberg and William Michener, Email: Michael.Littenberg@ropesgray.com and William.Michener@ropesgray.com, or at such other address as it may have furnished to the Investors in writing;
(iii)if to the Warburg Investors, at c/o Warburg Pincus & Co., 450 Lexington Avenue, New York, NY 10019, Attention: Eric Friedman and Brett K. Shawn, Email: brett.shawn@warburgpincus.com and notices@warburgpincus.com, with a copy (which shall not constitute notice) to Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019-6099, Attention: Mark A. Cognetti and Dvir Oren, Email: Mcognetti@willkie.com and Doren@willkie.com, or at such other address as it may have furnished to the Investors in writing; and
(iv)if to any of the Other Investors, at the address or facsimile number of such Investor shown on Schedule I, or at such other address as the Investor may have furnished the Company and the other Investors in writing.
(d)Reproduction of Documents. This Agreement and all documents relating thereto, including (i) consents, waivers and modifications which may hereafter be executed, (ii) documents received by each Investor pursuant hereto and (iii) financial statements, certificates and other information previously or hereafter furnished to each Investor, may be reproduced by each Investor by photographic, photostatic, microfilm, microcard, miniature photographic, electronic or other similar process and each Investor may destroy any original document so reproduced. All parties hereto agree and stipulate that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by each Investor in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
(e)Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties, provided that no Investor shall be permitted to assign any of his, her or its rights or obligations pursuant to this Agreement without the prior written consent of the Majority Investors, unless such assignment is in connection with a Transfer explicitly permitted by this Agreement (which shall include in connection with a Permitted Transfer) and, prior to such assignment, such assignee complies with the requirements of this Agreement. Any attempted assignment by an Other Investor in violation of the foregoing shall be null and void.
(f)Entire Agreement; Amendment and Waiver. This Agreement, the Purchase Agreement, the Registration Rights Agreement, the Certificate of Incorporation, the Bylaws and any employee stock option plan, stock bonus plan, stock purchase plan, employment agreement or other management equity program approved by the Board constitute the entire understandings of the parties hereto and supersede all prior agreements or understandings with
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respect to the subject matter hereof among such parties (including the term sheets dated August 6, 2021 and October 1, 2021 between Warburg Pincus LLC and Tiptree). This Agreement may be amended, with the written consent of the Company, the Majority Tiptree Investors and the Majority Warburg Investors. The Company shall give notice of any amendment or termination hereof to any party hereto that did not consent in writing to such amendment or termination. Each party hereto may waive any rights hereunder by providing written notice to the Company thereof. The obligations of the Company hereunder or of any other party hereto (other than the Warburg Investors and the Tiptree Investors) may be waived with the written consent of the Majority Tiptree Investors and the Majority Warburg Investors. The obligations of the Tiptree Investors hereunder may be waived with the written consent of the Company and the Majority Warburg Investors. The obligations of the Warburg Investors hereunder may be waived with the written consent of the Company and the Majority Tiptree Investors. Notwithstanding the foregoing, any amendment of, or waiver of any obligation pursuant to, this Agreement that would adversely and disproportionately affect the Other Investors in a material respect shall, in addition to the consents set forth above, require the consent of the Majority Other Investors. Any amendment, termination or waiver effected in accordance with this Section 8(f) shall be binding on all parties hereto, regardless of whether any such party has consented thereto.
(g)Severability.
(i)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.
(ii)To the extent the terms of the organizational documents of the Company are contradictory to, or inconsistent with, the terms of this Agreement, the terms of this Agreement shall, to the extent permitted by law, supersede such conflicting or inconsistent terms. All terms of the organizational documents and any constitutive or organizational documents of the Company not contradictory to, or inconsistent with, the terms of this Agreement shall remain in full force and effect. In the case that any one or more of the provisions contained in Section 4(a) shall, for any reason, be held to be invalid, illegal or unenforceable in any respect under any applicable law in any jurisdiction or with respect to the applicable Investor, such provision or provisions shall be ineffective to the extent, and only to the extent, of such invalidity, illegality or unenforceability and shall not affect the enforceability of any other provision in such jurisdiction or the enforcement of the entirety of Section 4(a) in any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction and with respect to the applicable Investor as if such invalid, illegal or unenforceable provision had never been contained herein. Notwithstanding the foregoing, if any court determines that any of the covenants or agreements set forth in Section 4(a) are overbroad under applicable law in time, geographical scope or otherwise, the parties hereto specifically agree and authorize such court to rewrite this Agreement to reflect the maximum time, geographical and/or other restrictions permitted under applicable law to be reasonable and enforceable; provided that if such courts are unable or unwilling to reform such invalid or unenforceable provision of Section 4(a) that the parties hereto will use reasonable best efforts to amend such invalid and unenforceable provision.
(h)Governing Law. This Agreement and all claims, disputes, controversies or proceedings hereunder (or in connection with the negotiation hereof) shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts
33
made and to be performed entirely within such State (disregarding any rule or law requiring the application of the law of any other state). The parties hereto hereby irrevocably submit to the exclusive jurisdiction of Court of Chancery of the State of Delaware and, if such court lacks jurisdiction, the United States District Court for the District of Delaware and, if such court lacks jurisdiction, any state or federal court sitting in the State of Delaware, in respect of the interpretation and enforcement of the provisions of this Agreement and all claims, disputes, controversies or proceedings hereunder (or in connection with the negotiation hereof), and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in either the United States District Court for the District of Delaware or the Court of Chancery of the State of Delaware. The parties hereto agree that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(i)Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTIONS, SUITS, DEMAND LETTERS, JUDICIAL, ADMINISTRATIVE OR REGULATORY PROCEEDINGS, OR HEARINGS, NOTICES OF VIOLATION OR INVESTIGATIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (B) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY.
(j)Specific Performance. It is hereby agreed and acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that, in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such party shall, therefore, be entitled (in addition to any other remedy to which such party may be entitled at law or in equity) to injunctive relief, including specific performance, to enforce such obligations, without the posting of any bond and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.
(k)No Partnership. Nothing in this Agreement and no actions taken by the parties under this Agreement shall constitute a partnership, association or other co-operative entity between any of the parties or cause any party to be deemed the agent of any other party for any purpose.
(l)Third Party Beneficiaries. Except the director indemnification rights, this Agreement does not create any rights, claims or benefits inuring to any Person that is not a party hereto, and it does not create or establish any third party beneficiary hereto.
(m)Counterparts. This Agreement may be executed in two or more counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall be considered one and the same agreement.
(n)Agreements to Be Bound. Upon acceptance by the Company of a Joinder Agreement or as contemplated by Section 8(a) (Additional Investors), Schedule I or Schedule II
34
hereof, as applicable, shall be amended to include the applicable joining party and attached to this Agreement and be effective with no further action or consent required.
(o)After-Acquired Securities. Each Investor agrees that, except as otherwise provided herein, all of the provisions of this Agreement shall apply to all of the Shares now Owned (including any Granted Equity Shares and Purchased Equity Shares) or which may be issued or Transferred hereafter to an Investor in consequence of any additional issuance, purchase, Transfer, exchange or reclassification of any of such Shares, corporate reorganization, or any other form of recapitalization, consolidation, acquisition, stock split or stock dividend, or which are acquired by an Investor in any other manner.
(p)“Market Stand-off” Agreement. Each of the Investors agrees, other than the Tiptree Investors and Warburg Investors, if requested by the Company and an underwriter of equity securities of the Company, not to sell or otherwise transfer or dispose of any Shares held by such Other Investor during the one hundred eighty (180) day period (or such other period as may be requested by the Company or the managing underwriter to accommodate regulatory restrictions on (i) the publication or other distribution of research reports and (ii) analyst recommendations and opinions, including the restrictions contained in NASD Rule 2711(f)(4), or any successor provisions or amendments thereto) following the effective date of a registration statement of the Company filed under the Securities Act, provided that:
(i)such agreement only applies to the Initial Public Offering; and
(ii)all executive officers of the Company enter into similar agreements.
If requested by the underwriters, such Investors shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of the period referenced above.
(q)Lost, etc. Certificates Evidencing Shares; Exchange. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any certificate evidencing any Shares owned by an Investor and (in the case of loss, theft or destruction) of a bond or an indemnity satisfactory to it, and upon surrender and cancellation of such certificate, if mutilated, the Company will make and deliver in lieu of such certificate a new certificate of like tenor and for the number of securities evidenced by such certificate which remain outstanding. Upon surrender of any certificate representing any Shares for exchange at the office of the Company, the Company at its expense will cause to be issued in exchange therefor new certificates in such denomination or denominations as may be requested for the same aggregate number of Shares represented by the certificate so surrendered and registered as such holder may request.
(r)Terms Generally. The words “hereby,” “herein,” “hereof,” “hereunder” and words of similar import refer to this Agreement as a whole and not merely to the specific section, paragraph or clause in which such word appears. All references herein to Articles and Sections shall be deemed references to Articles and Sections of this Agreement unless the context shall otherwise require. The words “include,” “includes ” and “including” shall be deemed to be followed by the phrase “without limitation.” The definitions given for terms in this Agreement shall apply equally to both the singular and plural forms of the terms defined. References herein to any agreement or letter shall be deemed references to such agreement or letter as it may be amended, restated or otherwise revised from time to time. Whenever required by the context hereof, the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; and the neuter gender shall include the masculine and feminine genders. When calculating the period before which, within which or
35
after 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.
(s)Draftsmanship. Each of the parties signing this Agreement on the date first set forth above has been represented by his, her or its own counsel and acknowledges that he, she or it has participated in the drafting of this Agreement, and any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in connection with the construction or interpretation of this Agreement. Each of the parties joining this Agreement after the date first set forth above has been represented by his, her or its own counsel, has read and understands the terms of this Agreement and has been afforded the opportunity to ask questions concerning the Company and this Agreement, and any applicable rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in connection with the construction or interpretation of this Agreement.
(t)State of Residence. Each Other Investor that is a natural person represents and warrants that it is a resident of the state set forth on such Other Investor’s signature page hereto or across such Other Investor’s name on Schedule I hereto, as the case may be. In the event an Other Investor changes its state of residence, such Other Investor shall promptly inform the Company of its new state of residence.
(u)Consent of Spouse. If any Other Investor that is a natural person is married or marries or remarries after the date of this Agreement, at the request of the Company such Other Investor shall cause his or her spouse to execute and deliver to the Company a consent of spouse in the form reasonably requested by the Company and consistent with spousal consent forms for investments of the type contemplated by this Agreement.
(v)Costs and Attorneys’ Fees. In the event that any action, suit or other proceeding is instituted concerning or arising out of this Agreement or any transaction contemplated hereunder, the prevailing party in any final, non-appealable order shall recover all of such party’s costs and attorneys’ fees incurred in each such action, suit or other proceeding.
(w)Adjustments for Stock Splits, Etc. Wherever in this Agreement there is a reference to a specific number of shares of common stock or preferred stock of the Company of any class or series or a specific price per share, or a specific percentage ownership or similar provision tied to the number of shares, then, upon the occurrence of any subdivision, combination or stock dividend of any class or series of stock, such reference in this Agreement shall automatically be proportionally adjusted to reflect the effect on the outstanding shares of such class or series of stock by such subdivision, combination or stock dividend, if any.
(x)Aggregation of Stock. All shares held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
COMPANY:
THE FORTEGRA GROUP INC.
By: /s/ Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
Title: President and Chief Executive Officer
[Signature Page to Stockholders Agreement]
THE TIPTREE INVESTOR:
TIPTREE HOLDINGS LLC
By: /s/ Jonathan Ilany
Name: Jonathan Ilany
Title: Chief Executive Officer
WARBURG INVESTOR:
WP FALCON AGGREGATOR, L.P.
By: Warburg Pincus Financial Sector II GP, L.P., its
general partner
By: WP Global LLC, its general partner
By: Warburg Pincus Partners II, L.P., its
managing member
By: Warburg Pincus Partners GP LLC, its
general partner
By: Warburg Pincus & Co., its managing
Member
By:/s/Eric Friedman
Name: Eric Friedman
Title: Partner
OTHER INVESTOR:
By:/s/ Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
OTHER INVESTOR:
By:/s/ Mark Rattner
Name: Mark Rattner
OTHER INVESTOR:
By:/s/ Michael Grasher
Name: Michael Grasher
OTHER INVESTOR:
By:/s/ Scott McLaren
Name: Scott McLaren
OTHER INVESTOR:
By:/s/ John Short
Name: John Short
OTHER INVESTOR:
By:/s/ Sanjay Vara
Name: Sanjay Vara
OTHER INVESTOR:
Romaine Children’s Trust UAD 4/5/17
By: /s/ Gaeann Romaine
Name: Gaeann Romaine, Trustee
OTHER INVESTOR:
By:/s/ Louis Rich
Name: Louis Rich
OTHER INVESTOR:
By:/s/ Steve Davidson
Name: Steve Davidson
OTHER INVESTOR:
By:/s/ Michael Ferris
Name: Michael Ferris
OTHER INVESTOR:
By:/s/ Leigh Mascherin
Name: Leigh Mascherin
OTHER INVESTOR:
By:/s/ Howard Fishbein
Name: Howard Fishbein
Schedule I
Other Investors
Rick Kahlbaugh
Mark Rattner
Mike Grasher
Scott McLaren
John Short
Sanjay Vara
Chris Romaine
Lou Rich
Steve Davidson
Mike Ferris
Leigh Mascherin
Howard Fishbein
Schedule I - 1
Schedule II
Protective Covenants
The following actions may not be taken by the Company or any of its Subsidiaries without the prior written consent of the Majority Warburg Investors and/or the Majority Tiptree Investors (as applicable):
1.(a) purchase, exchange, lease, license, or make any other acquisition of any equity securities or assets of any third party or (b) sell or make any disposition of any equity securities or assets of the Company or any of its Subsidiaries (other than in the ordinary course of business), in each case with an aggregate value in excess of $75 million (taking into account all deferred purchase price, earn-out and similar obligations at the maximum amount payable without any discount for net present value and assuming no escrow or other holdback will be released to the Company or its Subsidiaries); provided that the value of any actions set forth in clauses (a) and (b) taken by the Company following the date of the Agreement and on or prior to the Closing shall be counted towards the aggregate value of $75 million; provided, further, that following a Qualified Public Offering, this threshold shall become a fair market value (as reasonably determined by the Board) in excess of ten percent (10%) of the Company’s total market capitalization, with such market capitalization calculated based on the volume weighted average trading price of the Company’s shares for the ninety (90) consecutive trading days prior the end of each fiscal year multiplied by the average number of shares outstanding as of the close of trading on each date during such ninety (90) day measurement period;
2.undergo a Change of Control of the Company, effect a Deemed Liquidation Event, sell all or substantially of the Company’s and its Subsidiaries’ assets on a consolidated basis, or any of the Company’s material Subsidiaries whether by merger, consolidation, exchange, sale of all or substantially all assets of the applicable entity or otherwise prior to June 21, 2025 unless as a result of foregoing transactions the quotient derived by dividing the Warburg Returns by the Warburg Investments is equal to or greater than 2.0x;
3.effect an Initial Public Offering of the Company that is not both (i) a Qualified Public Offering and (ii) at a price per share of Common Stock that is equal to or greater than $15.00, which price per Share valuation shall, for the avoidance of doubt, be adjusted as set forth in Section 8(w) of the Agreement;
4.at any time (1) prior to a Qualified Public Offering, and (solely with respect to clause (i) of this clause (4)) other than pursuant to the credit facilities or other arrangements (including intercompany arrangements) existing as of the date of the Purchase Agreement, (i) incur or agree to incur or guarantee any Indebtedness or issue any Preferred Stock that would increase aggregate Indebtedness and Preferred Stock by more $50,000,000 (including any Indebtedness incurred or guaranteed from and after the date of the Purchase Agreement and on or prior to the Closing) or (ii) incur or agree to incur or guarantee any Indebtedness or Non-Recourse Indebtedness or other obligation, liability or security to the extent (and only to the extent) it would be included as debt by “AM Best” (or comparable rating agency if the Company and its Subsidiaries are not then rated by AM Best) or issue any Preferred Stock that would result in any downgrading of the financial strength rating accorded to the Company or its Subsidiaries by “AM Best” (or comparable rating agency if the Company and its Subsidiaries are not then rated by AM Best) as of immediately prior to such incurrence, guarantee or issuance and (2) following a Qualified Public Offering, (i) incur or agree to incur or guarantee any Indebtedness or issue any Preferred Stock if after giving effect to such Indebtedness or issuance, the ratio of Indebtedness to Total Capital, adjusting Indebtedness to include the liquidation preference of any preferred stock or similar security issued and
outstanding (provided that in the event such preferred stock, similar security or convertible debt is, directly or indirectly, convertible into Common Stock, only that portion of such preferred stock, similar security or convertible debt that is treated as Indebtedness by AM Best (or comparable rating agency if the Company and its Subsidiaries are not then rated by AM Best) shall be treated as Indebtedness) would exceed thirty-five percent (35%) or (ii) incur or agree to incur or guarantee any Indebtedness or Non-Recourse Indebtedness or other obligation, liability or security to the extent (and only to the extent) it would be included as debt by “AM Best” (or comparable rating agency if the Company and its Subsidiaries are not then rated by AM Best) or issue any Preferred Stock that would result in any downgrading of the financial strength rating accorded to the Company or its Subsidiaries by “AM Best” (or comparable rating agency if the Company and its Subsidiaries are not then rated by AM Best) as of immediately prior to such incurrence, guarantee or issuance;
5.offer any product or service that is materially different from the existing products and services offered by the Company or any of its Subsidiaries as of the date hereof or that have been approved pursuant to this clause (5) other than as contemplated in the Company’s and its Subsidiaries’ business plan in effect on the date hereof, or other business plan approved by the Board, including the approval of at least one Warburg Director;
6.create, or authorize the creation of, or issue or obligate itself to issue shares of, any class or series of capital stock or evidences of Indebtedness, shares, rights, options, interests, warrants or other securities directly or indirectly convertible into or exchangeable for Common Stock, Preferred Stock or other types of securities or capital stock (each a “Security” and collectively, “Securities”), including any additional shares of Preferred Stock or any Security that is senior to the Common Stock or Preferred Shares (except for the issuance of Common Stock pursuant to the exercise of stock options granted pursuant to the 2021 Equity Incentive Plan or any other stock bonus, stock incentive or similar plans that have been approved by the Board, including the approval of at least one Warburg Director (collectively, with the 2021 Equity Incentive Plan, “Approved Plans”); provided that, for the avoidance of doubt, any amendment or modification to any Approved Plan that increases the number of authorized shares thereunder shall require the prior written consent of the Majority Warburg Investors and/or the Majority Tiptree Investors (as applicable));
7.(i) enter into, or amend, modify, terminate or waive any rights under, any contract, transaction, understanding or arrangement that would constitute a Related Person Transaction (as defined in the Purchase Agreement), (ii) enter into any contract, transaction, understanding or arrangement between the Company and any of its Subsidiaries, on the one hand, and Tiptree or any of its Affiliates (other than the Company and its Subsidiaries), on the other hand, or (iii) enter into any contract, transaction, understanding or arrangement between the Company or any of its Subsidiaries, on the one hand, and an immediate family member or affiliated entity of a director or officer of the Company (or an entity affiliated with a director or officer of the Company), on the other hand (an “Affiliate Arrangement”); provided that this clause (7) shall not prevent or limit any issuance of equity or debt securities to an Affiliate in accordance with Section 2(e) or compliance by the Company with any of its obligations under this Agreement;
8.dismiss, terminate or appoint the Chief Executive Officer or the Chief Financial Officer of the Company;
9.agree to any annual budget (including the capital expenditure budget), multi-year projections or strategic, operating or business plan or related business policies of the Company or its Subsidiaries or any material amendments or deviations from any multi-year projections;
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10.reclassify any Preferred Stock or Common Stock or amend, modify or alter any of the rights, preferences or privileges thereof, or otherwise any of the terms applicable thereto; provided that this clause (10) shall not apply to any such reclassification, amendment, modification or alteration in respect of Common Stock (but not, for clarity, the Preferred Stock) pursuant to a Qualified Public Offering;
11.amend, change, waive, alter or terminate any provision of the Certificate of Incorporation or the Bylaws or the organizational documents of any subsidiary if such amendment, change, waiver, alteration or termination would adversely alter or change the rights, preference or privileges of a Warburg Investor or its Shares (or the directors appointed by it);
12.change the Company’s or any material Subsidiaries’ auditor or change its methods of accounting or accounting practices (including with respect to reserves) in effect as of the date of the Agreement, except as required by changes in GAAP; and
13.initiate or adopt any plan of complete or partial liquidation, dissolution, receivership, bankruptcy or other insolvency proceeding involving the Company or any Subsidiary of that Company that is a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X under the Exchange Act.
- 3 -
Exhibit A
FORM OF
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the “Agreement”) is made as of the ____ day of ____________ by _________________, having an address at ____________________________ (the “Joining Party”).
W I T N E S S E T H
WHEREAS, The Fortegra Group Inc., a Delaware corporation (the “Company”), is a party to that certain Stockholders Agreement, dated as of __________, 2022 (as the same may be amended from time to time, the “Stockholders Agreement”) (capitalized terms used but not defined herein shall have the meanings ascribed to them in the Stockholders Agreement);
WHEREAS, the Stockholders Agreement provides that as a condition to becoming an Investor, a Person must execute and deliver to the Company a Joinder Agreement pursuant to which such Person agrees to be bound by the terms and conditions of the Stockholders Agreement;
WHEREAS, the Joining Party desires to become an Investor of the Company by executing a copy of the Agreement; and
WHEREAS, the Joining Party has reviewed the terms of the Stockholders Agreement and determined that it is desirable and in the Joining Party’s best interests to execute the Agreement.
NOW, THEREFORE, the Joining Party hereby agrees as follows:
1.Joinder of Stockholders Agreement. By executing this Joinder Agreement, the Joining Party (i) accepts and agrees to be bound by all of the terms and provisions of the Stockholders Agreement as if he, she or it were an original signatory thereto, (ii) shall be deemed to be, and shall be entitled to all of the rights and subject to all of the obligations of a[n] [Tiptree Investor][Warburg Investor][Other Investor] thereunder, [(iii) acknowledges its grant of an irrevocable proxy pursuant to Sections 1(a)(iii) and 2(c)(viii) of the Stockholders Agreement] and [(iv) shall be added to Schedule I, as applicable, of the Stockholders Agreement]. If the Joining Party is a Permitted Transferee of an Other Investor, the Joining Party shall be subject to all of the obligations of the transferor.
2.Representations and Warranties.
(a)The Agreement constitutes a valid and binding obligation enforceable against the Joining Party in accordance with its terms.
(b)The Joining Party has received a copy of the Stockholders Agreement. The Joining Party has read and understands the terms of the Stockholders Agreement and has been afforded the opportunity to ask questions concerning the Company and the Stockholders Agreement.
(c)The Joining Party hereby represents that none of the “bad actor” disqualifying events described in Rule 506(d)(1)(i)-(viii) promulgated under the Securities Act (a “Disqualification Event”) is applicable to such Person or any of its Rule 506(d) Related Parties,
except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable.
3.Full Force and Effect. Except as expressly modified by the Agreement, all of the terms, covenants, agreements, conditions and other provisions of the Stockholders Agreement shall remain in full force and effect in accordance with its terms.
4.Notices. All notices provided to the Joining Party shall be sent or delivered to the Joining Party at the address set forth on the signature page hereto unless and until the Company has received written notice from the Joining Party of a changed address.
5.Governing Law. The Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed entirely within such state. The parties hereto hereby irrevocably submit to the exclusive jurisdiction of the United States District Court for the District of Delaware and the Court of Chancery of the State of Delaware, in respect of the interpretation and enforcement of the provisions of the Agreement, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that the Agreement may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in either the United States District Court for the District of Delaware or the Court of Chancery of the State of Delaware.
[Signature page follows]
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IN WITNESS WHEREOF, the Joining Party has executed and delivered the Agreement as of the date first above written.
JOINING PARTY
__________________________________
Name:
Address:
___________________________________
___________________________________
Facsimile:___________________________
Resident of the State of:________________
Acknowledged and Accepted:
THE FORTEGRA GROUP INC.
By:______________________________
Name:________________________
Title:_________________________
[Signature Page to Joinder Agreement]
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
BY AND AMONG
TIPTREE HOLDINGS LLC,
WP FALCON AGGREGATOR, L.P.,
THE HOLDERS SET FORTH ON SCHEDULE B HERETO
AND
THE FORTEGRA GROUP, INC.
Dated as of June 21, 2022
TABLE OF CONTENTS
Page
i
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the “Agreement”) is made, entered into and effective June 21, 2022 (the “Effective Date”) by and among Tiptree Holdings LLC, a Delaware limited liability company (“Tiptree”), WP Falcon Aggregator, L.P., a Delaware limited partnership (“Warburg”), and the Holders (as defined herein) set forth on Schedule A hereto, and The Fortegra Group, Inc., a Delaware corporation (including any of its successors by merger, acquisition, reorganization, conversion or otherwise (the “Company”)).
WITNESSETH:
WHEREAS, as of the date hereof, the Holders own Registrable Securities of the Company; and
WHEREAS, the parties desire to set forth certain registration rights applicable to the Registrable Securities.
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, promises, covenants and agreements of the parties hereto, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:
Article I
DEFINITIONS
DEFINITIONS
Section 1.01.Defined Terms. As used in this Agreement, the following terms shall have the following meanings:
“Adverse Disclosure” means public disclosure of material nonpublic information that, in the Board of Directors’ good-faith determination, after consultation with independent outside counsel to the Company, (a) would be required to be made in any Registration Statement filed with the SEC by the Company so that such Registration Statement would not be materially misleading, (b) would not be required to be made at such time but for the filing of such Registration Statement, and (c) the Company has a bona fide business purpose for not disclosing publicly.
“Affiliate” has the meaning specified in Rule 12b-2 under the Exchange Act; provided that no Holder shall be deemed an Affiliate of the Company or its Subsidiaries for purposes of this Agreement; provided further that no portfolio company (as such term is commonly used in the private equity industry) of a Warburg Investor nor limited partners, non-managing members or other similar direct or indirect investors in a Warburg Investor shall be deemed to be Affiliates of such Warburg Investor. The term “Affiliated” has a correlative meaning.
“Agreement” has the meaning set forth in the preamble.
“Black-Out Period” has the meaning set forth in Section 2.04(b).
“Board of Directors” means the board of directors of the Company.
“Business Day” means any day other than a Saturday, Sunday or a day on which commercial banks located in New York, New York are required or authorized by law or executive order to be closed.
“Common Stock” means the common stock of the Company, par value $0.01 per share.
“Company” has the meaning set forth in the preamble.
“Company Indemnitee” or “Company Indemnitees” has the meaning set forth in Section 2.09(f).
“Company Share Equivalent” means securities exercisable, exchangeable or convertible into Company Shares.
“Company Shares” means the shares of common stock, par value $0.01 per share, of the Company, any securities into which such shares of common stock shall have been changed, reorganized, reclassified, converted or exchanged, or any securities resulting from any reclassification, recapitalization or similar transactions with respect to such shares of common stock or security.
“Demand Company Notice” has the meaning set forth in Section 2.01(d).
“Demand Notice” has the meaning set forth in Section 2.01(a).
“Demand Party” has the meaning set forth in Section 2.01(a).
“Demand Period” has the meaning set forth in Section 2.01(c).
“Demand Registration” has the meaning set forth in Section 2.01(a).
“Demand Registration Statement” has the meaning set forth in Section 2.01(a).
“Demand Suspension” has the meaning set forth in Section 2.01(e).
“Effective Date” has the meaning set forth in the preamble.
“Effectiveness Date” means the date on which the applicable Tiptree Investor or Warburg Investor is no longer subject to any underwriter’s lock-up or other similar contractual restriction (excluding the Stockholders Agreement) on the sale of Registrable Securities in connection with an IPO.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto, and any rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.
“FINRA” means the Financial Industry Regulatory Authority.
“Form S-1” means a registration statement on Form S-1 under the Securities Act, or any comparable or successor form or forms thereto.
“Form S-3” means a registration statement on Form S-3 under the Securities Act, or any comparable or successor form or forms thereto.
“Holder” means any holder of Registrable Securities that is a party hereto or that succeeds to rights hereunder pursuant to Section 3.05, including any holder of Registrable Securities issued in exchange for equity interests in LOTS Intermediate Co.
“Initial S-3 Holders” has the meaning set forth in Section 2.02(a)(i).
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“Initiating Holder” has the meaning set forth in Section 2.02(a)(ii).
“Initiating Shelf Take-Down Holder” has the meaning set forth in Section 2.02(e)(i).
“Investor” or “Investors” means the Tiptree Investors, the Warburg Investors and the Holders set forth on Schedule A hereto, if any.
“IPO” means the first underwritten public offering and sale of Company Shares for cash pursuant to an effective registration statement (other than on Form S-4, S-8 or a comparable form) under the Securities Act, or any transaction in which the Company, a parent or subsidiary of the Company, or a counterparty in a business combination by the Company with a special purpose acquisition company becomes a listed, public reporting company in the United States.
“IPO Black-Out Period” has the meaning set forth in Section 2.04(a).
“Issuer Free Writing Prospectus” means an issuer free writing prospectus, as defined in Rule 433 under the Securities Act, relating to an offer of Registrable Securities.
“Long-Form Registration” has the meaning set forth in Section 2.01(a).
“Loss” or “Losses” has the meaning set forth in Section 2.09(a).
“Marketed Underwritten Offering” means any Underwritten Offering (including a Marketed Underwritten Shelf Take-Down, but, for the avoidance of doubt, not including any Shelf Take-Down that is not a Marketed Underwritten Shelf Take-Down) that involves a customary “road show” (including an “electronic road show”) or other substantial marketing effort by the Company and the underwriters over a period of at least 48 hours.
“Marketed Underwritten Shelf Take-Down” has the meaning set forth in Section 2.02(e)(iii).
“Marketed Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2.02(e)(iii).
“Non-Marketed Underwritten Shelf Take-Down” has the meaning set forth in Section 2.02(e)(iii).
“Non-Marketed Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2.02(e)(iii).
“Participating Holder” means, with respect to any Registration, any Holder of Registrable Securities covered by the applicable Registration Statement.
“Participating Investor” means, with respect to any Registration, any Investor that is a Holder of Registrable Securities covered by the applicable Registration Statement.
“Participating Tiptree Investor” means, with respect to any Registration, any Tiptree Investor that is a Holder of Registrable Securities covered by the applicable Registration Statement.
“Participating Warburg Investor” means, with respect to any Registration, any Warburg Investor that is a Holder of Registrable Securities covered by the applicable Registration Statement.
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“Permitted Assignee” has the meaning set forth in Section 3.05.
“Permitted Registration Demands” has the meaning set forth in Section 2.11(c).
“Person” means any individual, partnership, corporation, limited liability company, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof or any other entity.
“Piggyback Registration” has the meaning set forth in Section 2.03(a).
“Pro Rata Investor Shelf Percentage” means, as of the date that an Initiating Holder delivers a Shelf Notice to the Company pursuant to Section 2.02(a), any other Participating Investor delivers a written notice to the Company with respect to such Shelf Notice pursuant to Section 2.02(c) or the Initial S-3 Holders deliver S-3 Shelf Notices to the Company pursuant to Section 2.02(a), an amount equal to the fraction (expressed as a percentage) determined by dividing (i) the number of Registrable Securities held by such Initiating Holder (and its respective Affiliates and Permitted Assignees), any other Participating Investor (and its Affiliates and Permitted Assignees) or the Initial S-3 Holders (and their Affiliates and Permitted Assignees), respectively, requested by such Initiating Holder, other Participating Investor or Initial S-3 Holders, respectively, to be registered on the applicable Shelf Registration Statement as of such date by (ii) the total number of Registrable Securities held as of such date by such Initiating Holder (and its Affiliates and Permitted Assignees), any other Participating Investor (and its Affiliates and Permitted Assignees) or Initial S-3 Holders (and their respective Affiliates and Permitted Assignees), respectively.
“Pro Rata Shelf Percentage” means, as of any date, with respect to a Holder, a number of Registrable Securities equal to (i) the number of Registrable Securities held by such Holder as of such date multiplied by (ii) the largest Pro Rata Investor Shelf Percentage with respect to the Participating Investor(s) for the applicable Shelf Registration Statement.
“Prospectus” means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including pre- and post-effective amendments to such Registration Statement, and all other material incorporated by reference in such prospectus.
“Registrable Securities” means any Company Shares, all Company Shares issued or issuable upon exercise, conversion or exchange of any Company Share Equivalents and any securities that may be issued or distributed or be issuable or distributable in respect of, or in substitution for, any Company Shares or Company Share Equivalents by way of conversion, exercise, dividend, stock split or other distribution, merger, consolidation, exchange, recapitalization or reclassification or similar transaction, in each case whether now owned or hereinafter acquired; provided, however, that any such Registrable Securities shall cease to be Registrable Securities to the extent (i) a Registration Statement with respect to the sale of such Registrable Securities has been declared effective under the Securities Act and such Registrable Securities have been disposed of in accordance with the plan of distribution set forth in such Registration Statement, (ii) such Registrable Securities have been distributed pursuant to Rule 144 or Rule 145 of the Securities Act (or any successor rule) and new certificates or book-entry positions for them not bearing a legend restricting transfer shall have been delivered by the Company, (iii) a Registration Statement on Form S-8 (or any successor form) covering such securities is effective, (iv) in the case of a Holder who is not a Tiptree Investor or a Warburg Investor or an Affiliate of the Company, all remaining Registrable Securities held by such Holder may immediately be sold under Rule 144 (or any similar provision then in force) under the Securities Act and without any volume or manner of sale restrictions or (v) such security ceases to be outstanding. Vested but unexercised options or other Company Share Equivalents
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exercisable for, convertible into or exchangeable for Company Shares, will be included as Registrable Securities (on an as-if exercised or on an as-converted or as-exchanged basis, as applicable, on a cashless exercise basis) for purposes of calculating the Pro Rata Investor Shelf Percentage, Pro Rata Shelf Percentage or any other percentage or pro rata calculation that is dependent on the number of Registrable Securities hereunder; it being understood that to the extent that such Registrable Securities are to be sold pursuant to this Agreement, such Holder must exercise the relevant option or exercise, convert or exchange such other relevant Company Share Equivalent and transfer the underlying Registrable Securities (in each case, net of any amounts required to be withheld by the Company in connection with such exercise).
“Registration” means a registration with the SEC of the Company’s securities for offer and sale to the public under a Registration Statement. The terms “Register” and “Registered” shall have correlative meanings.
“Registration Expenses” has the meaning set forth in Section 2.08.
“Registration Statement” means any registration statement of the Company that covers Registrable Securities pursuant to the provisions of this Agreement filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including pre- and post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement.
“Representatives” means, with respect to any Person, any of such Person’s officers, directors, employees, agents, attorneys, accountants, actuaries, consultants, equity financing partners or financial advisors or other Person associated with, or acting on behalf of, such Person.
“Restricted Period” means a broadly applicable period during which trading in the Company’s securities would not be permitted under the Company’s insider trading policy.
“Rule 144” means Rule 144 (or any successor provisions) under the Securities Act.
“S-3 Eligibility Date” means the date on which the Company becomes eligible to Register on Form S-3.
“S-3 Shelf Notice” has the meaning set forth in Section 2.02(a)(i).
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended, and any successor thereto, and any rules and regulations promulgated thereunder, all as the same shall be in effect from time to time.
“Shelf Holder” has the meaning set forth in Section 2.02(c).
“Shelf Notice” has the meaning set forth in Section 2.02(a)(ii).
“Shelf Period” has the meaning set forth in Section 2.02(b).
“Shelf Registration” means a Registration effected pursuant to Section 2.02.
“Shelf Registration Statement” means a Registration Statement of the Company filed with the SEC on either (i) Form S-3 or (ii) if the Company is not permitted to file a Registration
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Statement on Form S-3, an evergreen Registration Statement on Form S-1, in each case for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act (or any successor provision) covering all or any portion of the Registrable Securities, as applicable.
“Shelf Suspension” has the meaning set forth in Section 2.02(d).
“Shelf Take-Down” has the meaning set forth in Section 2.02(e)(i).
“Short-Form Registration” has the meaning set forth in Section 2.01(a).
“Subsidiary” means, with respect to any Person, (a) any other Person of which an aggregate of more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such other Person (or comparable body in the case of a Person that is not a corporation) is at the time, directly or indirectly, owned legally or beneficially by such Person and/or one or more Subsidiaries of such Person, (b) any partnership, limited liability company or other entity in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%), and (c) any other Person, the management of which is controlled, directly or indirectly, by such Person.
“Special Registration” has the meaning set forth in Section 2.12.
“Stockholders Agreement” means the Stockholders Agreement of the Company, dated as of the date hereof, by and among Tiptree, Warburg and the Persons listed, and whose names and addresses appear from time to time, on Schedule I thereto, and the Company, as amended, modified or supplemented from time to time.
“Tiptree” has the meaning set forth in the preamble.
“Tiptree Investor” or “Tiptree Investors” means Tiptree, any successor entity thereto, and their respective Affiliates that are direct or indirect equity investors in the Company.
“Trading Day” means a day on which the securities exchange on which the Registrable Securities are listed is open for the buying and selling of securities.
“Underwritten Offering” means a Registration in which securities of the Company are sold to an underwriter or underwriters on a firm commitment basis for reoffering to the public.
“Underwritten Shelf Take-Down Notice” has the meaning set forth in Section 2.02(e)(ii).
“Underwritten Shelf Take-Downs” has the meaning set forth in Section 2.02(e)(iii).
“Warburg” has the meaning set forth in the preamble.
“Warburg Investor” or “Warburg Investors” means Warburg, any successor entity thereto, and their respective Affiliates that are direct or indirect equity investors in the Company.
Section 1.02.Other Interpretive Provisions.
(a)In this Agreement, except as otherwise provided:
(i)A reference to an Article, Section, Schedule or Exhibit is a reference to an Article or Section of, or Schedule or Exhibit to, this Agreement, and references to this Agreement include any recital in or Schedule or Exhibit to this Agreement.
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(ii)The Schedules and Exhibits form an integral part of and are hereby incorporated by reference into this Agreement.
(iii)Headings and the Table of Contents are inserted for convenience only and shall not affect the construction or interpretation of this Agreement.
(iv)Unless the context otherwise requires, words importing the singular include the plural and vice versa, words importing the masculine include the feminine and vice versa, and words importing persons include corporations, associations, partnerships, joint ventures and limited liability companies and vice versa.
(v)Unless the context otherwise requires, the words “hereof” and “herein,” and words of similar meaning refer to this Agreement as a whole and not to any particular Article, Section or clause. The words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation.”
(vi)A reference to any legislation or to any provision of any legislation shall include any amendment, modification or reenactment thereof and any legislative provision substituted therefor.
(vii)All determinations to be made by the Tiptree Investors or the Warburg Investors hereunder may be made by the Tiptree Investors or the Warburg Investors, respectively, in their sole discretion, and the Tiptree Investors and the Warburg Investors may determine, in their sole discretion, whether or not to take actions that are permitted, but not required, by this Agreement to be taken by the Tiptree Investors or the Warburg Investors, respectively, including the giving of consents required hereunder.
(b)The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intention or interpretation arises, this Agreement shall be construed as if drafted jointly 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 provisions of this Agreement.
Article II
REGISTRATION RIGHTS
REGISTRATION RIGHTS
Section 1.01.Demand Registration.
(a)Demand by a Tiptree Investor or Warburg Investor. At any time following the Effectiveness Date if there is no currently effective Shelf Registration Statement on file with the SEC, any Tiptree Investor or Warburg Investor (such Tiptree Investor or Warburg Investor, a “Demand Party”) may, subject to Section 2.11, make a written request (a “Demand Notice”) to the Company for Registration of all or part of the Registrable Securities held by such Demand Party (i) on Form S-1 (a “Long-Form Registration”) or (ii) on Form S-3 (a “Short-Form Registration”) if the Company qualifies to use such short form (any such requested Long-Form Registration or Short-Form Registration, a “Demand Registration”). Each Demand Notice shall specify the aggregate amount of Registrable Securities of the Demand Party to be registered and the intended methods of disposition thereof. Subject to Section 2.11, after delivery of such Demand Notice, the Company (A) shall file promptly (and, in any event, within (I) ninety (90) days in the case of a request for a Long-Form Registration or (II) thirty (30) days in the case of a request for a Short-Form Registration, in each case, following delivery of such Demand Notice) with the SEC a Registration Statement relating to such Demand Registration (a “Demand Registration Statement”), and (B) shall use its reasonable best efforts to cause such Demand
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Registration Statement to promptly be declared effective under (I) the Securities Act and (II) the “Blue Sky” laws of such jurisdictions as any Participating Holder or any underwriter, if any, reasonably requests.
(b)Demand Withdrawal. A Demand Party may withdraw its Registrable Securities from a Demand Registration at any time prior to the effectiveness of the applicable Demand Registration Statement. Upon delivery of a notice by the Demand Party to such effect, the Company shall cease all efforts to secure effectiveness of the applicable Demand Registration Statement, and such Registration shall not be deemed to be a Demand Registration with respect to such Demand Party for purposes of Section 2.11.
(c)Effective Registration. The Company shall be deemed to have effected a Demand Registration with respect to the applicable Demand Party for purposes of Section 2.11 if the Demand Registration Statement is declared effective by the SEC and remains effective for not less than two hundred seventy (270) days (or such shorter period as shall terminate when all Registrable Securities covered by such Registration Statement have been sold or withdrawn), or if such Registration Statement relates to an Underwritten Offering, such longer period as, in the opinion of counsel for the underwriter or underwriters, a Prospectus is required by law to be delivered in connection with a sale of Registrable Securities by an underwriter or dealer (the applicable period, the “Demand Period”). No Demand Registration shall be deemed to have been effected for purposes of Section 2.11 if (i) during the Demand Period such Registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court, (ii) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Registration are not satisfied other than by reason of a wrongful act, misrepresentation or breach of such applicable underwriting agreement by a Demand Party or (iii) there is a Demand Suspension (as defined below) or a demand withdrawal pursuant to Section 2.01(b).
(d)Demand Company Notice. Subject to Section 2.11, promptly upon delivery of any Demand Notice (but in no event more than three (3) Business Days thereafter), the Company shall deliver a written notice (a “Demand Company Notice”) of any such Registration request to all Holders (other than the Demand Party), and the Company shall include in such Demand Registration all such Registrable Securities of such Holders which the Company has received written requests for inclusion therein within five (5) Business Days after the date that such Demand Company Notice has been delivered. All requests made pursuant to this Section 2.01(e) shall specify the aggregate amount of Registrable Securities of such Holder to be registered.
(e)Delay in Filing; Suspension of Registration. If the Company shall furnish to the Participating Holders a certificate signed by the Chief Executive Officer or equivalent senior executive officer of the Company stating that the filing, effectiveness or continued use of a Demand Registration Statement would require the Company to make an Adverse Disclosure, then the Company may delay the filing (but not the preparation of) or initial effectiveness of, or suspend use of, the Demand Registration Statement (a “Demand Suspension”); provided, however, that the Company, unless otherwise approved in writing by the Tiptree Investors and Warburg Investors, shall not be permitted to exercise aggregate Demand Suspensions and Shelf Suspensions more than once for more than an aggregate of thirty (30) days during any six (6) month period; provided further that in the event of a Demand Suspension, the Company shall use its reasonable best efforts to cause any Demand Registration Statement to be filed, declared effective and/or made available for continued use as soon as possible. Each Participating Holder shall keep confidential the fact that a Demand Suspension is in effect, the certificate referred to above and its contents (provided that in no event shall the Company include any material nonpublic information in such communications) unless and until otherwise notified by the Company, except (i) for disclosure to such Participating Holder’s Affiliates and its and their
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respective employees, agents and professional advisers who reasonably need to know such information for purposes of assisting the Participating Holder with respect to its investment in the Company Shares and agree to keep it confidential, (ii) if and to the extent such matters are publicly disclosed by the Company or any of its Subsidiaries or any other Person that, to the actual knowledge of such Participating Holder, was not subject to an obligation or duty of confidentiality to the Company and its Subsidiaries and (iii) if such Participating Holder is advised by counsel that disclosure is required by law, rule or regulation. In the case of a Demand Suspension, the Participating Holders agree to suspend use of the applicable Prospectus and any Issuer Free Writing Prospectus in connection with any sale or purchase of, or offer to sell or purchase, Registrable Securities, upon delivery of the notice referred to above. The Company shall immediately notify the Participating Holders upon the termination of any Demand Suspension, amend or supplement the Prospectus and any Issuer Free Writing Prospectus, if necessary, so they do not contain any untrue statement or omission and furnish to the Participating Holders such numbers of copies of the Prospectus and any Issuer Free Writing Prospectus as so amended or supplemented as the Participating Holders may reasonably request. The Company agrees to supplement or make amendments to the Demand Registration Statement if required by the registration form used by the Company for the applicable Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder, or as may reasonably be requested by any Demand Party.
(f)Underwritten Offering. If a Demand Party so requests, an offering of Registrable Securities pursuant to a Demand Registration shall be in the form of an Underwritten Offering, and such Demand Party shall have the right to select the managing underwriter or underwriters to administer the offering; provided that such underwriter or underwriters shall be nationally recognized investment banks reasonably acceptable to the Company. If the Demand Party intends to sell the Registrable Securities covered by its demand by means of an Underwritten Offering, such Demand Party shall so advise the Company as part of its Demand Notice, and the Company shall include such information in the Demand Company Notice.
(g)Priority of Securities Registered Pursuant to Demand Registrations. The Company shall use its reasonable best efforts to cause the managing underwriter or underwriters of an Underwritten Offering of the Registrable Securities to permit Investors that have requested a Demand Registration to include in such Demand Registration all Registrable Securities so requested by such Demand Party. If the managing underwriter or underwriters of a proposed Underwritten Offering of the Registrable Securities included in a Demand Registration advise the Board of Directors in writing that, in its or their opinion, the number of securities requested to be included in such Demand Registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, the securities to be included in such Demand Registration (i) first, shall be allocated pro rata among the Investors that have requested to participate in such Demand Registration based on the number of Registrable Securities then held by each such Investor relative to the number of Registrable Securities then held by all Investors (provided that any securities thereby allocated to an Investor that exceed such Investor’s request shall be reallocated among the remaining requesting Investors in like manner), (ii) second, and only if all the securities referred to in the foregoing clause (i) have been included in such Registration, shall be allocated pro rata among the Holders (excluding the Investors, as applicable) that have requested to participate in such Demand Registration based on the relative number of Registrable Securities then held by each such Holder (provided that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining requesting Holders in like manner), (iii) third, and only if all the securities referred to in the foregoing clauses (i) and (ii) have been included in such Registration, the number of securities that the Company proposes to include in such Registration that, in the opinion of the managing underwriter or underwriters, can be sold without having such adverse effect and (iv) fourth, and only if all of the securities referred to in
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the foregoing clause (iii) have been included in such Registration, any other securities eligible for inclusion in such Registration that, in the opinion of the managing underwriter or underwriters, can be sold without having such adverse effect.
Section 1.02.Shelf Registration.
(a)Filing.
(i)At any time following the Effectiveness Date, subject to Section 2.11, the Tiptree Investors and the Warburg Investors shall each have the right to deliver a written notice to the Company, which notice shall specify the aggregate amount of Registrable Securities held by such Tiptree Investor or Warburg Investor to be covered by a Shelf Registration Statement and the intended methods of distribution thereof (the “S-3 Shelf Notice” and such Tiptree Investor or Warburg Investor, the “Initial S-3 Holders”). Following delivery of the S-3 Shelf Notices, the Company (x) shall file promptly (and, in any event, within thirty (30) days of receipt of the S-3 Shelf Notices with the SEC) such Shelf Registration Statement (which shall be an automatic Shelf Registration Statement if the Company qualifies at such time to file such a Shelf Registration Statement) relating to the offer and sale of all Registrable Securities requested for inclusion therein by the Initial S-3 Holders and, to the extent requested under Section 2.02(c), the other Holders from time to time in accordance with the methods of distribution elected by such Holders (to the extent permitted in this Section 2.02) and set forth in the Shelf Registration Statement and (y) shall use its reasonable best efforts to cause such Shelf Registration Statement to be promptly declared effective under the Securities Act (including upon the filing thereof if the Company qualifies to file an automatic Shelf Registration Statement); provided, however, that if the Tiptree Investors or Warburg Investors reasonably believe that the Company will become S-3 eligible and the Tiptree Investors or Warburg Investors, as applicable, deliver a S-3 Shelf Notice following the IPO but prior to the S-3 Eligibility Date, the Company shall not be obligated to file (but shall be obligated to prepare) such Shelf Registration Statement on Form S-3 until the later of (i) the S-3 Eligibility Date or (ii) thirty (30) days of receipt of the S-3 Shelf Notice.
(ii)Subject to the right to deliver a Shelf Notice in the manner contemplated by the first proviso below, at any time following the Effective Date, to the extent that the Company is not eligible to file or maintain a Shelf Registration Statement on Form S-3 as contemplated by Section 2.02(a)(i), any Tiptree Investor or Warburg Investor (such Tiptree Investor or Warburg Investor, the “Initiating Holder”) may, subject to Section 2.11, make a written request to the Company to file a Shelf Registration Statement on Form S-1 (a “Shelf Notice”), which Shelf Notice shall specify the aggregate amount of Registrable Securities of the Initiating Holder to be registered therein and the intended methods of distribution thereof. Following the delivery of a Shelf Notice, the Company (x) shall file promptly (and, in any event, within sixty (60) days following delivery of such Shelf Notice) with the SEC such Shelf Registration Statement relating to the offer and sale of all Registrable Securities requested for inclusion therein by the Initiating Holder and, to the extent requested under Section 2.02(c), the other Holders from time to time in accordance with the methods of distribution elected by such Holders (to the extent permitted in this Section 2.02) and set forth in the Shelf Registration Statement and (y) shall use its reasonable best efforts to cause such Shelf Registration Statement to be promptly declared effective under the Securities Act; provided, however, that any such Shelf Registration Statement request shall be deemed to be, for purposes of Section 2.11, a Demand Registration effected by the Initiating Holder and subject to the limitations set forth therein. If, on the date of any such request the Company does not qualify to file a Shelf Registration Statement under the Securities Act, the provisions of this Section 2.02 shall not apply, and the provisions of Section 2.01 shall apply instead.
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(b)Continued Effectiveness. The Company shall use its reasonable best efforts to keep any Shelf Registration Statement filed pursuant to Section 2.01(a) continuously effective under the Securities Act in order to permit the Prospectus forming a part thereof to be usable by Shelf Holders until the earlier of (i) the date as of which all Registrable Securities have been sold pursuant to the Shelf Registration Statement or another Registration Statement filed under the Securities Act (but in no event prior to the applicable period referred to in Section 4(a)(3) of the Securities Act and Rule 174 thereunder), or (ii) such shorter period as the Initiating Investor or Initial S-3 Holder, as applicable, with respect to such Shelf Registration shall agree in writing (such period of effectiveness, the “Shelf Period”). Subject to Section 2.01(d), the Company shall not be deemed to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the Shelf Period if the Company voluntarily takes any action or omits to take any action that would result in Shelf Holders not being able to offer and sell any Registrable Securities pursuant to such Shelf Registration Statement during the Shelf Period, unless such action or omission is (x) a Shelf Suspension permitted pursuant to Section 2.01(d) or (y) required by applicable law, rule or regulation.
(c)Company Notices. Promptly upon delivery of any Shelf Notice pursuant to Section 2.02(a)(ii) (but in no event more than five (5) Business Days thereafter), the Company shall deliver a written notice of such Shelf Notice to the Investors (other than the Initiating Holder) and the Company shall include in such Shelf Registration all such Registrable Securities of such other Investors which the Company has received a written request for inclusion therein within three (3) Business Days after such written notice is delivered to such other Investors. Promptly after (i) delivery of any such written request by the other Investors or (ii) after delivery of the S-3 Shelf Notices pursuant to Section 2.02(a) (but in no event more than five (5) Business Days after delivery of the S-3 Shelf Notices or the Shelf Notice, as applicable), the Company shall deliver a written notice of the S-3 Shelf Notices or the Shelf Notice, as applicable, to all Holders other than the Investors (which notice shall specify the Pro Rata Investor Shelf Percentage applicable to such Shelf Registration) and the Company shall include in such Shelf Registration all such Registrable Securities of such Holders which the Company has received written requests for inclusion therein within ten (10) Business Days after such written notice is delivered to such Holders (each such Holder delivering such a request and the other Investors if Participating Investors, together with the Initiating Holder or Initial S-3 Holder, if applicable, a “Shelf Holder”); provided that the Company shall not include in such Shelf Registration Registrable Securities of any Holder (other than an Investor) in an amount in excess of such Holder’s Pro Rata Shelf Percentage. If the Company is permitted by applicable law, rule or regulation to add selling stockholders to a Shelf Registration Statement without filing a post-effective amendment, a Holder may request the inclusion of an amount of such Holder’s Registrable Securities not to exceed, in the case of a Holder that is not an Investor, such Holder’s Pro Rata Shelf Percentage in such Shelf Registration Statement at any time or from time to time after the filing of a Shelf Registration Statement, and the Company shall add such Registrable Securities to the Shelf Registration Statement as promptly as reasonably practicable, and such Holder shall be deemed a Shelf Holder.
(d)Suspension of Registration. If the Company shall furnish to the Shelf Holders a certificate signed by the Chief Executive Officer or equivalent senior executive officer of the Company stating that the continued use of a Shelf Registration Statement filed pursuant to Section 2.02(a) would require the Company to make an Adverse Disclosure, then the Company may suspend use of the Shelf Registration Statement (a “Shelf Suspension”); provided, however, that the Company, unless otherwise approved in writing by the Tiptree Investors and the Warburg Investors, shall not be permitted to exercise aggregate Demand Suspensions and Shelf Suspensions more than once for more than an aggregate of thirty (30) days during any six (6)-month period; provided further that in the event of a Shelf Suspension, the Company shall use its reasonable best efforts to cause any Shelf Registration Statement to be made available for continued use as soon as possible. Each Shelf Holder shall keep confidential the fact that a Shelf
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Suspension is in effect, the certificate referred to above and its contents (provided that in no event shall the Company include any material nonpublic information in such communications) unless and until otherwise notified by the Company, except (i) for disclosure to such Shelf Holder’s Affiliates and its and their respective employees, agents and professional advisers who reasonably need to know such information for purposes of assisting the Holder with respect to its investment in the Company Shares and agree to keep it confidential, (ii) if and to the extent such matters are publicly disclosed by the Company or any of its Subsidiaries or any other Person that, to the actual knowledge of such Shelf Holder, was not subject to an obligation or duty of confidentiality to the Company and its Subsidiaries and (iii) if such Shelf Holder is advised by counsel that disclosure is required by law, rule or regulation. In the case of a Shelf Suspension, the Holders agree to suspend use of the applicable Prospectus and any Issuer Free Writing Prospectus in connection with any sale or purchase of, or offer to sell or purchase, Registrable Securities, upon delivery of the notice referred to above. The Company shall immediately notify the Shelf Holders upon the termination of any Shelf Suspension, amend or supplement the Prospectus and any Issuer Free Writing Prospectus, if necessary, so they do not contain any untrue statement or omission and furnish to the Shelf Holders such numbers of copies of the Prospectus and any Issuer Free Writing Prospectus as so amended or supplemented as the Shelf Holders may reasonably request. The Company agrees to supplement or make amendments to the Shelf Registration Statement if required by the registration form used by the Company for the applicable Registration or by the instructions applicable to such registration form or by the Securities Act or the rules or regulations promulgated thereunder, or as may reasonably be requested by any Initial S-3 Holder or Initiating Holder.
(e)Shelf Take-Downs.
(i)An offering or sale of Registrable Securities pursuant to a Shelf Registration Statement (each, a “Shelf Take-Down”) may be initiated only by a Tiptree Investor or Warburg Investor (an “Initiating Shelf Take-Down Holder”).
(ii)Subject to Section 2.11, if the Initiating Shelf Take-Down Holder elects by written request to the Company, a Shelf Take-Down shall be in the form of an Underwritten Offering (an “Underwritten Shelf Take-Down Notice”) and the Company shall amend or supplement the Shelf Registration Statement for such purpose as soon as practicable. Such Initiating Shelf Take-Down Holder shall have the right to select the managing underwriter or underwriters to administer such offering; provided that such managing underwriter or underwriters are nationally recognized investment bank(s) reasonably acceptable to the Company. The provisions of Section 2.01(g) shall apply to any Underwritten Offering pursuant to this Section 2.02(e).
(iii)If the plan of distribution set forth in any Underwritten Shelf Take-Down Notice includes a customary “road show” (including an “electronic road show”) or other substantial marketing effort by the Company and the underwriters over a period expected to exceed forty-eight (48) hours (a “Marketed Underwritten Shelf Take-Down”), promptly upon delivery of such Underwritten Shelf Take-Down Notice (but in no event more than three (3) Business Days thereafter), the Company shall deliver a written notice (a “Marketed Underwritten Shelf Take-Down Notice”) of such Marketed Underwritten Shelf Take-Down to all Shelf Holders (other than the Initiating Shelf Take-Down Holder), and the Company shall include in such Marketed Underwritten Shelf Take-Down all such Registrable Securities of such Shelf Holders that are Registered on such Shelf Registration Statement for which the Company has received written requests, which requests must specify the aggregate amount of such Registrable Securities of such Holder to be offered and sold pursuant to such Marketed Underwritten Shelf Take-Down, for inclusion therein within five (5) Business Days after the date that such Marketed Underwritten Shelf Take-Down Notice has been delivered. If the plan of distribution set
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forth in any Underwritten Shelf Take-Down Notice includes a customary “road show” (including an “electronic road show”) by the Company and the underwriters over a period expected to be less than forty-eight (48) hours (a “Non-Marketed Underwritten Shelf Take-Down” and, together with a Marketed Underwritten Shelf Take-Down, “Underwritten Shelf Take-Downs”), concurrently with the delivery of such Underwritten Shelf Take-Down Notice, the Initiating Shelf Take-Down Holder shall deliver a written notice (a “Non-Marketed Underwritten Shelf Take-Down Notice”) of such Non-Marketed Underwritten Shelf Take-Down to the Investors (other than the Initiating Shelf Take-Down Holder), and the Company shall include in such Non-Marketed Underwritten Shelf Take-Down all such Registrable Securities of such Investors that are Registered on such Shelf Registration Statement for which the Company has received written requests, which requests must specify the aggregate amount of such Registrable Securities of such Investor to be offered and sold pursuant to such Non-Marketed Underwritten Shelf Take-Down, for inclusion therein within twenty-four (24) hours after such Non-Marketed Underwritten Shelf Take-Down Notice has been delivered; provided that any Investor’s participation in such Non-Marketed Underwritten Shelf Take-Down is conditioned on such Investor reasonably cooperating with the Initiating Shelf Take-Down Holder with respect thereto and taking any and all actions as may be reasonably necessary so that the Investor may participate in the Non-Marketed Underwritten Shelf Take-Down on the timeline set forth in the Non-Marketed Underwritten Shelf Take-Down Notice or otherwise proposed by the Initiating Shelf Take-Down Holder. In the event that an Investor’s participation in a Non-Marketed Underwritten Shelf Take-Down would materially and adversely impact or delay (it being agreed that time is of the essence with respect thereto) the Non-Marketed Underwritten Shelf Take-Down, the Initiating Shelf Take-Down Holder shall have the right, in its reasonable discretion, to reject any written request received by the Company from an Investor to be included in a Non-Marketed Underwritten Shelf Take-Down and the Company shall remove the Registrable Securities of such Investor to be offered and sold pursuant to such Non-Marketed Underwritten Shelf Take-Down.
Section 1.03.Piggyback Registration.
(a)Participation. If the Company at any time proposes to file a Registration Statement with respect to any offering of its equity securities for its own account or for the account of any other Persons (other than (i) a Registration under Section 2.01 or Section 2.02, it being understood that this clause (i) does not limit the rights of Holders to make written requests pursuant to Section 2.01 or Section 2.02 or otherwise limit the applicability thereof), (ii) a Registration Statement on Form S-4 or S-8 (or such other similar successor forms then in effect under the Securities Act), (iii) a registration of securities solely relating to an offering and sale to employees, directors or consultants of the Company or its Subsidiaries pursuant to any employee stock plan or other employee benefit plan arrangement, (iv) a registration not otherwise covered by clause (ii) above pursuant to which the Company is offering to exchange its own securities for other securities, (v) a Registration Statement relating solely to dividend reinvestment or similar plans or (vi) a Shelf Registration Statement pursuant to which only the initial purchasers and subsequent transferees of debt securities of the Company or any of its Subsidiaries that are convertible or exchangeable for Company Shares and that are initially issued pursuant to Rule 144A and/or Regulation S (or any successor provisions) of the Securities Act may resell such notes and sell the Company Shares into which such notes may be converted or exchanged), then, (A) as soon as practicable (but in no event less than thirty (30) days prior to the proposed date of filing of such Registration Statement), the Company shall give written notice of such proposed filing to the Investors, and such notice shall offer each Investor the opportunity to Register under such Registration Statement such number of Registrable Securities as such Investor may request in writing delivered to the Company within ten (10) days of delivery of such written notice by the Company, and (B) subject to Section 2.03(c), as soon as practicable
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after the expiration of such ten (10)-day period (but in no event less than fifteen (15) days prior to the proposed date of filing of such Registration Statement), the Company shall give written notice of such proposed filing to the Holders (other than the Investors), and such notice shall offer each such Holder the opportunity to Register under such Registration Statement such number of Registrable Securities as such Holder may request in writing within ten (10) days of delivery of such written notice by the Company. Subject to Section 2.03(b) and (c), the Company shall include in such Registration Statement all such Registrable Securities that are requested by Holders to be included therein in compliance with the immediately foregoing sentence (a “Piggyback Registration”); provided that if at any time after giving written notice of its intention to Register any equity securities and prior to the effective date of the Registration Statement filed in connection with such Piggyback Registration, the Company shall determine for any reason not to Register or to delay Registration of the equity securities covered by such Piggyback Registration, the Company shall give written notice of such determination to each Holder that had requested to Register its, his or her Registrable Securities in such Registration Statement and, thereupon, (1) in the case of a determination not to Register, shall be relieved of its obligation to Register any Registrable Securities in connection with such Registration (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of the Tiptree Investors or the Warburg Investors to request that such Registration be effected as a Demand Registration under Section 2.01, and (2) in the case of a determination to delay Registering, in the absence of a request by the Tiptree Investors or the Warburg Investors to request that such Registration be effected as a Demand Registration under Section 2.01, shall be permitted to delay Registering any Registrable Securities, for the same period as the delay in Registering the other equity securities covered by such Piggyback Registration. If the offering pursuant to such Registration Statement is to be underwritten, the Company shall have the right to select the managing underwriter or underwriters to administer such offering; provided that such underwriter is reasonably acceptable to Holders holding a majority of the Registrable Securities participating in such Underwritten Offering, the Company shall so advise the Holders as a part of the written notice given pursuant to this Section 2.03(a), and each Holder making a request for a Piggyback Registration pursuant to this Section 2.03(a) must, and the Company shall make such arrangements with the managing underwriter or underwriters so that each such Holder may, participate in such Underwritten Offering, subject to the conditions of Section 2.03(b) and (c). If the offering pursuant to such Registration Statement is to be on any other basis, the Company shall so advise the Holders as a part of the written notice given pursuant to this Section 2.03(a), and each Holder making a request for a Piggyback Registration pursuant to this Section 2.03(a) must, and the Company shall make such arrangements so that each such Holder may, participate in such offering on such basis, subject to the conditions of Section 2.03(b) and (c). Each Holder shall be permitted to withdraw all or part of its Registrable Securities from a Piggyback Registration at any time prior to execution of the underwriting agreement in connection with such Piggyback Registration.
(b)Priority of Piggyback Registration. The Company shall use its reasonable best efforts to cause the managing underwriter or underwriters of an Underwritten Offering of the Registrable Securities included in a Piggyback Registration to permit Holders that have requested to be included in such Piggyback Registration to include in such Piggyback Registration all Registrable Securities so requested by such Holder. If the managing underwriter or underwriters of any proposed Underwritten Offering of Registrable Securities included in a Piggyback Registration inform the Company and the Holders that have requested to participate in such Piggyback Registration in writing that, in its or their opinion, the number of securities which such Holders and any other Persons intend to include in such offering exceeds the number which can be sold in such offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the securities to be included in such Registration shall be (i) first, 100% of the securities that the Company or (subject to Section 2.07) any Person (other than a Holder) exercising a contractual right to demand Registration, as the case may be, proposes to sell, (ii) second, and only if all the
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securities referred to in the foregoing clause (i) have been included, the number of Registrable Securities that, in the opinion of such managing underwriter or underwriters, can be sold without having such adverse effect in such Registration, which such number shall be allocated pro rata among the Investors that have requested to participate in such Registration based on the relative number of Registrable Securities then held by each such Investor (provided that any securities thereby allocated to an Investor that exceed such Investor’s request shall be reallocated among the remaining requesting Investors in like manner), (iii) third, and only if all the securities referred to in the foregoing clause (ii) have been included, the number of Registrable Securities that, in the opinion of such managing underwriter or underwriters, can be sold without having such adverse effect in such Registration, which such number shall be allocated pro rata among the Holders (excluding the Investors) that have requested to participate in such Registration based on the relative number of Registrable Securities then held by each such Holder (provided that any securities thereby allocated to a Holder that exceed such Holder’s request shall be reallocated among the remaining requesting Holders in like manner) and (iv) fourth, and only if all of the Registrable Securities referred to in the foregoing clause (iii) have been included in such Registration, any other securities eligible for inclusion in such Registration that, in the opinion of the managing underwriter or underwriters, can be sold without having such adverse effect in such Registration.
(c)No Effect on Demand Registrations. No Registration of Registrable Securities effected pursuant to a request under this Section 2.03 shall be deemed to have been effected pursuant to Section 2.01 or Section 2.02 or shall relieve the Company of its obligations under Section 2.01 or Section 2.02.
Section 1.04.Black-out Periods.
(a)Black-out Periods for Holders. In the event of an IPO, each of the Holders (including, without limitation, the Tiptree Investors and the Warburg Investors) agrees, if requested by the managing underwriter or underwriters in such Underwritten Offering, not to (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any Person at any time in the future of) any Company Shares (including Company Shares that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the SEC and Company Shares that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Company Shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Company Shares, whether any such transaction described in clause (1) above or this clause (2) is to be settled by delivery of Company Shares or other securities, in cash or otherwise, but excluding, in the case of clause (1) and this clause (2), any pledge, encumbrance or similar transaction of any Company Shares in connection with a bona fide financing transaction and any exercise of remedies by the lender in such transaction or a subsequent transaction (including any transaction contemplated by clause (1) or (2)) following the time such lender (or any of its designees) takes possession of any Company Shares, (3) make any demand for or exercise any right or cause to be filed a Registration Statement, including any amendments thereto, with respect to the registration of any Company Shares or securities convertible into or exercisable or exchangeable for Company Shares or any other securities of the Company or (4) publicly disclose the intention to do any of the foregoing prohibited actions, in each case, during the period beginning seven (7) days before and ending one hundred eighty (180) days after the date of the underwriting agreement entered into in connection with such IPO, to the extent timely notified in writing by the Company or the managing underwriter or underwriters (such period, the “IPO Black-Out Period”); provided that without limiting the right of an underwriter to release any Investor from any such requirements or restrictions, no Tiptree Investor or Warburg Investor shall be subject to any such requirements or restrictions unless each other Investor is subject to the same requirements and restrictions. If requested by the managing
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underwriter or underwriters of any such IPO, the Holders (including, without limitation, the Tiptree Investors and the Warburg Investors) shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the Company Shares (or other securities) subject to the foregoing restriction until the end of the period referenced above.
(b)Black-out Period for the Company and Others. In the case of an offering of Registrable Securities pursuant to Section 2.01 or Section 2.02 that is a Marketed Underwritten Offering, the Company and each of the Holders (including, without limitation, the Tiptree Investors and the Warburg Investors) agree, if requested by a Participating Tiptree Investor, or Participating Warburg Investor or the managing underwriter or underwriters with respect to such Marketed Underwritten Offering, not to (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any Person at any time in the future of) any Company Shares (including Company Shares that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the SEC and Company Shares that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Company Shares, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of Company Shares, whether any such transaction described in clause (1) above or this clause (2) is to be settled by delivery of Company Shares or other securities, in cash or otherwise but excluding, in the case of clause (1) and this clause (2), any pledge, encumbrance or similar transaction of any Company Shares in connection with a bona fide financing transaction and any exercise of remedies by the lender in such transaction or a subsequent transaction (including any transaction contemplated by clause (1) or this clause (2)) following the time such lender (or any of its designees) takes possession of any Company Shares, (3) make any demand for or exercise any right or cause to be filed a Registration Statement, including any amendments thereto, with respect to the registration of any Company Shares or securities convertible into or exercisable or exchangeable for Company Shares or any other securities of the Company (other than as permitted pursuant to Section 2.01 or Section 2.02) or (4) publicly disclose the intention to do any of the foregoing prohibited actions (other than as permitted pursuant to Section 2.01 or Section 2.02), in each case, during the period beginning seven (7) days before, and ending ninety (90) days (or such lesser period as may be agreed by a Participating Tiptree Investor or Participating Warburg Investor and the managing underwriter or underwriters, each such period or the IPO Black-Out Period, (a “Black-Out Period”)) after, the date of the underwriting agreement entered into in connection with such Marketed Underwritten Offering, to the extent timely notified in writing by a Participating Tiptree Investor or Participating Warburg Investor or the managing underwriter or underwriters, as the case may be; provided that without limiting the right of an underwriter to release any investor from any such requirements of restrictions, no Holder shall be subject to any such Black-Out Period of longer duration than that applicable to any Tiptree Investor or Warburg Investor. Notwithstanding the foregoing, the Company may effect a public sale or distribution of securities of the type described above and during the periods described above if such sale or distribution is made pursuant to Registrations on Form S-4 or S-8 or any successor form to such Forms or as part of any Registration of securities for offering and sale to employees, directors or consultants of the Company and its Subsidiaries pursuant to any employee stock plan or other employee benefit plan arrangement. The Company agrees to use its reasonable best efforts to obtain from each of its directors and officers and each other holder of restricted securities of the Company which securities are the same as or similar to the Registrable Securities being Registered, or any restricted securities convertible into or exchangeable or exercisable for any of such securities, an agreement not to effect any public sale or distribution of such securities during any such period referred to in this paragraph, except as part of any such Registration, if permitted. Without limiting the foregoing (but subject to Section 2.07), if after the date hereof the Company or any of its Subsidiaries grants any Person (other than a Holder) any rights to demand or participate in a Registration, the Company shall, and shall
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cause its Subsidiaries to, provide that the agreement with respect thereto shall include such Person’s agreement to comply with any Black-Out Period required by this Section 2.04 as if it were a Holder hereunder. If requested by the managing underwriter or underwriters of any such Marketed Underwritten Offering, the Holders shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the Company Shares (or other securities) subject to the foregoing restriction until the end of the period referenced above.
(c)Black-Out Period Release. Notwithstanding the provisions of this Section 2.04, the Company and the Holders will agree, and use commercially reasonable efforts to cause the underwriter(s) to agree, to the earlier termination of an IPO Black-Out Period:
(i)if (1) a Black-Out Period is scheduled to end during a Restricted Period or within five (5) Trading Days prior to a Restricted Period and (2) the Company shall have publicly released its earnings results for the quarterly period during which the IPO occurred, in which case, the IPO Black-Out Period shall end ten (10) Trading Days prior to the commencement of the Restricted Period; provided that in no event may the Restricted Period end prior to one hundred twenty (120) days after the date of the IPO; provided further, that in the event that ten (10) Trading Days (referred to in clause (2) of this Section 2.04(c)(i)) prior to the commencement of the Restricted Period is earlier than one hundred twenty (120) days after the date of the IPO, the IPO Black-Out Period shall end on the one hundred twentieth (120th) day after date of the IPO but only if such one hundred twentieth (120th) day is at least five (5) Trading Days prior to the commencement of the Black-Out Period (and, if not, then the provisions of Section 2.04(a) shall remain in place); and
(ii)if, beginning at the commencement of the second (2nd) Trading Day after the date on which the last reported closing price of the Common Stock on the exchange on which the Common Stock is listed is at least thirty-three percent (33%) greater than the IPO price per share set forth on the cover page of the applicable Prospectus for any ten (10) Trading Days out of a fifteen (15)-consecutive full Trading Day period ending on or after the closing of the first full Trading Day immediately after the Company publicly announces its earnings results for the quarterly period during which the IPO occurred, in which case, to fifteen percent (15%) of the Company Shares beneficially owned by each Investor as of the date hereof, before giving effect to any sales of Common Stock by the Tiptree Investors or Warburg Investors to the underwriters, if any, pursuant to an underwriting agreement, shall be released from the IPO Black-Out Period.
Section 1.05.Registration Procedures.
(a)In connection with the Company’s Registration obligations under Section 2.01, Section 2.02 and Section 2.03 and subject to the applicable terms and conditions set forth therein, the Company shall use its reasonable best efforts to effect such Registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof as expeditiously as reasonably practicable, and in connection therewith the Company shall:
(i)prepare the required Registration Statement including all exhibits and financial statements required under the Securities Act to be filed therewith, and before filing a Registration Statement, Prospectus or any Issuer Free Writing Prospectus, or any amendments or supplements thereto, (A) furnish to the underwriters, if any, and the Participating Investors, if any, copies of all documents prepared to be filed, which documents shall be subject to the review of such underwriters and the Participating Investors and their respective counsel and (B) except in the case of a Registration
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under Section 2.03, not file any Registration Statement or Prospectus or amendments or supplements thereto to which any Participating Investor or the underwriters, if any, shall reasonably object;
(ii)as promptly as practicable file with the SEC a Registration Statement relating to the Registrable Securities including all exhibits and financial statements required by the SEC to be filed therewith, and use its reasonable best efforts to cause such Registration Statement to become effective under the Securities Act as soon as practicable;
(iii)prepare and file with the SEC such pre- and post-effective amendments to such Registration Statement, supplements to the Prospectus and such amendments or supplements to any Issuer Free Writing Prospectus as may be (A) reasonably requested by any Participating Investor, (B) reasonably requested by any other Participating Holder (to the extent such request relates to information relating to such Participating Holder), or (C) necessary to keep such Registration effective for the period of time required by this Agreement, and comply with provisions of the applicable securities laws with respect to the sale or other disposition of all securities covered by such Registration Statement during such period in accordance with the intended method or methods of disposition by the sellers thereof set forth in such Registration Statement;
(iv)promptly notify the Participating Holders and the managing underwriter or underwriters, if any, and (if requested) confirm such advice in writing and provide copies of the relevant documents, as soon as reasonably practicable after notice thereof is received by the Company (A) when the applicable Registration Statement or any amendment thereto has been filed or becomes effective, and when the applicable Prospectus or Issuer Free Writing Prospectus or any amendment or supplement thereto has been filed, (B) of any written comments by the SEC or any request by the SEC or any other federal or state governmental authority for amendments or supplements to such Registration Statement, Prospectus or Issuer Free Writing Prospectus or for additional information, (C) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or any order by the SEC or any other regulatory authority preventing or suspending the use of any preliminary or final Prospectus or any Issuer Free Writing Prospectus or the initiation or threatening of any proceedings for such purposes, (D) if, at any time, the representations and warranties of the Company in any applicable underwriting agreement cease to be true and correct in all material respects, (E) of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction and (F) of any notification with respect to the initiation or threatening of any proceeding for the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction;
(v)promptly notify the Participating Holders and the managing underwriter or underwriters, if any, when the Company becomes aware of the happening of any event as a result of which the applicable Registration Statement, the Prospectus included in such Registration Statement (as then in effect) or any Issuer Free Writing Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of such Prospectus, any preliminary Prospectus or any Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, when any Issuer Free Writing Prospectus includes information that may conflict with the information contained in the Registration Statement, or, if for any other reason it shall be necessary during such time period to amend or supplement such Registration Statement, Prospectus or Issuer Free Writing Prospectus in order to comply with the Securities Act and, in either case as promptly as reasonably practicable
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thereafter, prepare and file with the SEC, and furnish without charge to the Participating Holders and the managing underwriter or underwriters, if any, an amendment or supplement to such Registration Statement, Prospectus or Issuer Free Writing Prospectus which shall correct such misstatement or omission or effect such compliance;
(vi)use its reasonable best efforts to prevent, or obtain the withdrawal of, any stop order or other order suspending the use of any preliminary or final Prospectus or any Issuer Free Writing Prospectus;
(vii)promptly incorporate in a Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment to the applicable Registration Statement such information as the managing underwriter or underwriters and the Participating Investor(s) agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, and make all required filings of such Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment as soon as reasonably practicable after being notified of the matters to be incorporated in such Prospectus supplement, Issuer Free Writing Prospectus or post-effective amendment;
(viii)furnish to each Participating Holder and each underwriter, if any, without charge, as many conformed copies as such Participating Holder or underwriter may reasonably request of the applicable Registration Statement and any amendment or post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference);
(ix)deliver to each Participating Holder and each underwriter, if any, without charge, as many copies of the applicable Prospectus (including each preliminary Prospectus), any Issuer Free Writing Prospectus and any amendment or supplement thereto as such Participating Holder or underwriter may reasonably request (it being understood that the Company consents to the use of such Prospectus, any Issuer Free Writing Prospectus and any amendment or supplement thereto by such Participating Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities thereby) and such other documents as such Participating Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Participating Holder or underwriter;
(x)on or prior to the date on which the applicable Registration Statement is declared effective, use its reasonable best efforts to register or qualify, and cooperate with the Participating Holders, the managing underwriter or underwriters, if any, and their respective counsel, in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or “Blue Sky” laws of each state and other jurisdiction of the United States as any Participating Holder or managing underwriter or underwriters, if any, or their respective counsel reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to keep such registration or qualification in effect for such period as required by Section 2.01(c) or Section 2.02(b), whichever is applicable, provided that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to taxation or general service of process in any such jurisdiction where it is not then so subject;
(xi)cooperate with the Participating Holders and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates or book-entry positions representing Registrable Securities to be sold and not bearing any restrictive legends, and enable such Registrable Securities to be in such denominations
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and registered in such names as the managing underwriters may request at least two (2) Business Days prior to any sale of Registrable Securities to the underwriters;
(xii)use its reasonable best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities;
(xiii)not later than two (2) Business Days after the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities and provide the applicable transfer agent with printed certificates, if applicable, for the Registrable Securities which are in a form eligible for deposit with The Depository Trust Company;
(xiv)make such representations and warranties to the Participating Holders and the underwriters or agents, if any, in form, substance and scope as are customarily made by issuers in secondary underwritten public offerings;
(xv)enter into such customary agreements (including underwriting and indemnification agreements) and take all such other actions as any Participating Investor or the managing underwriter or underwriters, if any, reasonably request in order to expedite or facilitate the registration and disposition of such Registrable Securities;
(xvi)obtain for delivery to the Participating Holders and to the underwriter or underwriters, if any, an opinion or opinions from counsel for the Company dated the effective date of the Registration Statement or, in the event of an Underwritten Offering, the date of the closing under the underwriting agreement, in customary form, scope and substance, which opinions shall be reasonably satisfactory to such Participating Holders or underwriters, as the case may be, and their respective counsel;
(xvii)in the case of an Underwritten Offering, obtain for delivery to the Company and the managing underwriter or underwriters, with copies to the Participating Holders, a cold comfort letter from the Company’s independent certified public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters as the managing underwriter or underwriters reasonably request, dated the date of execution of the underwriting agreement and brought down to the closing under the underwriting agreement;
(xviii)cooperate with each Participating Holder and each underwriter, if any, participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the FINRA;
(xix)use its reasonable best efforts to comply with all applicable securities laws and make available to its security holders, as soon as reasonably practicable, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder;
(xx)provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by the applicable Registration Statement from and after a date not later than the effective date of such Registration Statement;
(xxi)use its reasonable best efforts to cause all Registrable Securities covered by the applicable Registration Statement to be listed on each securities exchange on
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which any of the Company Shares is then listed or quoted and on each interdealer quotation system on which any of the Company Shares is then quoted;
(xxii)make available upon reasonable notice at reasonable times and for reasonable periods for inspection by any Participating Investor, by any underwriter participating in any disposition to be effected pursuant to such Registration Statement and by any attorney, accountant or other agent retained by such Participating Investor(s) or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company’s officers, directors and employees and the independent public accountants who have certified its financial statements to make themselves available, upon reasonable notice at reasonable times, to discuss the business of the Company and to supply all information reasonably requested by any such Person in connection with such Registration Statement as shall be necessary to enable them to exercise their due diligence responsibility; provided that any such Person gaining access to information regarding the Company pursuant to this Section 2.05(a)(xxii) shall agree to hold in strict confidence and shall not make any disclosure or use any information regarding the Company that the Company determines in good faith to be confidential, and of which determination such Person is notified, unless (A) the release of such information is required by law or by deposition, interrogatory, requests for information or documents by a governmental entity, subpoena or similar process, (B) such information is or becomes publicly known other than through a breach of this or any other agreement of which such Person has actual knowledge, (C) such information is or becomes available to such Person on a nonconfidential basis from a source other than the Company, (D) such information is independently developed by such Person or (E) such Person is advised by counsel that disclosure is required by law, rule or regulation; and
(xxiii)in the case of an Underwritten Offering, cause the senior executive officers of the Company to participate in the customary “road show” presentations that may be reasonably requested by the managing underwriter or underwriters in any such Underwritten Offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto.
(b)The Company may require each Participating Holder to furnish to the Company such information regarding the distribution of such securities and such other information relating to such Participating Holder and its ownership of Registrable Securities as the Company may from time to time reasonably request in writing. Each Participating Holder agrees to furnish such information to the Company and to cooperate with the Company as reasonably necessary to enable the Company to comply with the provisions of this Agreement.
(c)Each Participating Holder agrees that, upon delivery of any notice by the Company of the happening of any event of the kind described in Section 2.05(a)(iv)(C), (D), or (E) or Section 2.05(a)(v), such Participating Holder will forthwith discontinue disposition of Registrable Securities pursuant to such Registration Statement until (i) such Participating Holder’s receipt of the copies of the supplemented or amended Prospectus or Issuer Free Writing Prospectus contemplated by Section 2.05(a)(v), (ii) such Participating Holder is advised in writing by the Company that the use of the Prospectus or Issuer Free Writing Prospectus, as the case may be, may be resumed, (iii) such Participating Holder is advised in writing by the Company of the termination, expiration or cessation of such order or suspension referenced in Section 2.05(a)(iv)(C), (D), or (E) or Section 2.05(a)(v), such Participating Holder is advised in writing by the Company that the representations and warranties of the Company in such applicable underwriting agreement are true and correct in all material respects. In the event the Company shall give any such notice, the period during which the applicable Registration Statement is required to be maintained effective shall be extended by the number of days during
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the period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended Prospectus or Issuer Free Writing Prospectus contemplated by Section 2.05(a)(v) or is advised in writing by the Company that the use of the Prospectus or Issuer Free Writing Prospectus may be resumed.
Section 1.06.Underwritten Offerings.
(a)Demand and Shelf Registrations. If requested by the underwriters for any Underwritten Offering requested by any Participating Tiptree Investor or Participating Warburg Investor pursuant to a Registration under Section 2.01 or Section 2.02, the Company shall enter into an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to the Company, each Participating Warburg Investor or Participating Tiptree Investor, as applicable, and the underwriters, and to contain such representations and warranties by the Company and such other terms as are generally prevailing in agreements of that type, including indemnities no less favorable to the recipient thereof than those provided in Section 2.09. Each Participating Warburg Investor and Participating Tiptree Investor, as applicable, shall reasonably cooperate with the Company in the negotiation of such underwriting agreement and shall give consideration to the reasonable suggestions of the Company regarding the form thereof. The Participating Holders shall be parties to such underwriting agreement, which underwriting agreement shall (i) contain such representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such Participating Holders as are customarily made by issuers to selling stockholders in secondary underwritten public offerings and (ii) provide that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also shall be conditions precedent to the obligations of such Participating Holders. Any such Participating Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters in connection with such underwriting agreement other than representations, warranties or agreements regarding such Participating Holder, such Participating Holder’s title to the Registrable Securities, such Participating Holder’s authority to sell the Registrable Securities, such Participating Holder’s intended method of distribution, absence of liens with respect to the Registrable Securities, enforceability of the applicable underwriting agreement as against such Participating Holder, receipt of all consents and approvals with respect to the entry into such underwriting agreement and the sale of such Registrable Securities and any other representations required to be made by such Participating Holder under applicable law, rule or regulation, and the aggregate amount of the liability of such Participating Holder in connection with such underwriting agreement shall not exceed such Participating Holder’s net proceeds from such Underwritten Offering.
(b)Piggyback Registrations. If the Company proposes to register any of its securities under the Securities Act as contemplated by Section 2.03 and such securities are to be distributed in an Underwritten Offering through one or more underwriters, the Company shall, if requested by any Holder pursuant to Section 2.03 and subject to the provisions of Section 2.03(a), Section 2.03(b) and Section 2.03(c), use its reasonable best efforts to arrange for such underwriters to include on the same terms and conditions that apply to the other sellers in such Registration all the Registrable Securities to be offered and sold by such Holder among the securities of the Company to be distributed by such underwriters in such Registration. The Participating Holders shall be parties to the underwriting agreement between the Company and such underwriters, which underwriting agreement shall (i) contain such representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such Participating Holders as are customarily made by issuers to selling stockholders in secondary underwritten public offerings and (ii) provide that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also shall be conditions precedent to the obligations of such Participating Holders. Any such Participating
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Holder shall not be required to make any representations or warranties to, or agreements with the Company or the underwriters in connection with such underwriting agreement other than representations, warranties or agreements regarding such Participating Holder, such Participating Holder’s title to the Registrable Securities, such Participating Holder’s authority to sell the Registrable Securities, such Holder’s intended method of distribution, absence of liens with respect to the Registrable Securities, enforceability of the applicable underwriting agreement as against such Participating Holder, receipt of all consents and approvals with respect to the entry into such underwriting agreement and the sale of such Registrable Securities or any other representations required to be made by such Participating Holder under applicable law, rule or regulation, and the aggregate amount of the liability of such Participating Holder in connection with such underwriting agreement shall not exceed such Participating Holder’s net proceeds from such Underwritten Offering.
(c)Participation in Underwritten Registrations. Subject to the provisions of Section 2.06(a) and (b) above, no Person may participate in any Underwritten Offering hereunder unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.
(d)Price and Underwriting Discounts. In the case of an Underwritten Offering under Section 2.01 or Section 2.02, the price, underwriting discount and other financial terms for the Registrable Securities shall be determined by the Investor(s) that constitute the Demand Party, Initial S-3 Holder or Initiating Holder, as applicable, in such Registration.
Section 1.07.No Inconsistent Agreements; Additional Rights. The Company is not currently a party to, and shall not hereafter enter into without the prior written consent of the Tiptree Investors and the Warburg Investors, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders by this Agreement, including allowing any other holder or prospective holder of any securities of the Company (a) registration rights in the nature or substantially in the nature of those set forth in Section 2.01, Section 2.02 or Section 2.03 that would have priority over or pari passu with the Registrable Securities with respect to the inclusion of such securities in any Registration (except to the extent such registration rights are solely related to registrations of the type contemplated by Sections 2.03(a)(ii) through (iv)) or Section 2.03(b) demand registration rights in the nature or substantially in the nature of those set forth in Section 2.01 or Section 2.02 that are exercisable at or prior to such time as the Investors can first exercise their rights under Section 2.01 or Section 2.02.
Section 1.08.Registration Expenses. All expenses incident to the Company’s performance of or compliance with this Agreement shall be paid by the Company, including (i) all registration and filing fees, and any other fees and expenses associated with filings required to be made with the SEC, FINRA and if applicable, the fees and expenses of any “qualified independent underwriter,” as such term is defined in FINRA Rule 5121 (or any successor provision), and of its counsel, (ii) all fees and expenses in connection with compliance with any securities or “Blue Sky” laws (including fees and disbursements of counsel for the underwriters in connection with “Blue Sky” qualifications of the Registrable Securities), (iii) all printing, duplicating, word processing, messenger, telephone, facsimile and delivery expenses (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses and Issuer Free Writing Prospectuses), (iv) all fees and disbursements of counsel for the Company and of all independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance), (v) Securities Act liability insurance or similar insurance if the Company so desires, (vi) all fees and expenses incurred in connection with the listing of Registrable Securities on any securities exchange or quotation of
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the Registrable Securities on any interdealer quotation system, (vii) all applicable rating agency fees with respect to the Registrable Securities, (viii) all reasonable fees and disbursements of one legal counsel as selected by the Demand Party (in the case of a Demand Registration) or (otherwise) the Holders of a majority of the Registrable Securities included in such Registration, (ix) any reasonable fees and disbursements of underwriters customarily paid by issuers or sellers of securities, (x) all fees and expenses of any special experts or other Persons retained by the Company in connection with any Registration, (xi) all of the Company’s internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), (xii) all expenses related to the “road-show” for any Underwritten Offering, including all travel, meals and lodging and (xiii) any other fees and disbursements customarily paid by the issuers of securities. All such expenses are referred to herein as “Registration Expenses.” The Company shall not be required to pay any underwriting discounts and commissions and transfer taxes, if any, attributable to the sale of Registrable Securities.
Section 1.09.Indemnification.
(a)Indemnification by the Company. The Company agrees to indemnify, defend, reimburse and hold harmless, to the full extent permitted by law, each of the Holders, each of their respective direct or indirect partners, members or shareholders and each of such partner’s, member’s or shareholder’s partners, members or shareholders and, with respect to all of the foregoing Persons, each of their respective Affiliates, employees, directors, officers, trustees or agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons and each of their respective Representatives from and against any and all losses, penalties, judgments, suits, costs, claims, damages, liabilities and expenses, joint or several (including reasonable costs of investigation and legal expenses) (each, a “Loss” and collectively, “Losses”) arising out of or relating to (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which such Registrable Securities were Registered under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment or supplement thereto or any documents incorporated by reference therein), any Issuer Free Writing Prospectus or amendment or supplement thereto, or any other disclosure document produced by or on behalf of the Company or any of its Subsidiaries including reports and other documents filed under the Exchange Act, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, preliminary Prospectus or Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, (iii) any violation or alleged violation by the Company of any federal, state or common law rule or regulation applicable to the Company or any of its Subsidiaries in connection with any such registration, qualification, compliance or sale of Registrable Securities, (iv) any failure to register or qualify Registrable Securities in any state where the Company or its agents have affirmatively undertaken or agreed in writing that the Company (the undertaking of any underwriter being attributed to the Company) will undertake such registration or qualification on behalf of the Holders of such Registrable Securities (provided that in such instance the Company shall not be so liable if it has undertaken its reasonable best efforts to so register or qualify such Registrable Securities) or (v) any actions or inactions or proceedings in respect of the foregoing whether or not such indemnified party is a party thereto, and the Company will reimburse, as incurred, each such Holder and each of its respective direct or indirect partners, members or shareholders and each of such partner’s, member’s or shareholder’s partners members or shareholders and, with respect to all of the foregoing Persons, each of their respective Affiliates, employees, directors, officers, trustees or agents and controlling Persons and each of their respective Representatives, for any legal and any other expenses incurred in connection with investigating or defending any such claim, loss, damage, liability or action; provided that the Company shall not be liable to any particular indemnified party to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration
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Statement or other document in reliance upon and in conformity with written information furnished to the Company by such indemnified party expressly for use in the preparation thereof. This indemnity shall be in addition to any liability the Company may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any indemnified party or any of its respective Affiliates or representatives and regardless of any indemnity agreed to in the underwriting agreement that is less favorable to the Holders. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the indemnified parties.
(b)Indemnification by the Participating Holders. Each Participating Holder agrees (severally and not jointly) to indemnify and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act or the Exchange Act), and each other Holder, each of such other Holder’s respective direct or indirect partners, members or shareholders and each of such partner’s, member’s or shareholder’s partners, members or shareholders and, with respect to all of the foregoing Persons, each of their respective Affiliates, employees, directors, officers, trustees or agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Persons and each of their respective Representatives from and against any Losses resulting from (i) any untrue statement of a material fact in any Registration Statement under which such Registrable Securities were Registered under the Securities Act (including any final, preliminary or summary Prospectus contained therein or any amendment or supplement thereto or any documents incorporated by reference therein) or any Issuer Free Writing Prospectus or amendment or supplement thereto, or (ii) any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, preliminary Prospectus or Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by such Holder or its Affiliates or their respective representatives to the Company specifically for inclusion in such Registration Statement and has not been corrected in a subsequent writing prior to or concurrently with the sale of the Registrable Securities to the Person asserting the claim, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) was made in such Registration Statement, Prospectus, Issuer Free Writing Prospectus or other document, in reliance upon and in conformity with written information furnished to the Company by such Holder or its Affiliates or their respective representatives expressly for use therein. In no event shall the liability of such Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder under the sale of Registrable Securities giving rise to such indemnification obligation.
(c)Conduct of Indemnification Proceedings. Any Person entitled to indemnification under this Section 2.09 shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that any delay or failure to so notify the indemnifying party shall relieve the indemnifying party of its obligations hereunder only to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (A) the indemnifying party has agreed in writing to pay such fees or expenses, (B) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after delivery of notice of such claim from the Person entitled to
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indemnification hereunder and employ counsel reasonably satisfactory to such Person, (C) the indemnified party has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, or (D) in the reasonable judgment of any such Person (based upon advice of its counsel) a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person). If the indemnifying party assumes the defense, the indemnifying party shall not have the right to settle such action, consent to entry of any judgment or enter into any settlement, in each case without the prior written consent of the indemnified party, unless the entry of such judgment or settlement (i) includes as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party and its Affiliates and representatives of an unconditional release from all liability in respect to such claim or litigation, (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of such indemnified party, and (iii) does not provide for any relief other than monetary damages, and provided that any sums payable in connection with such settlement are paid in full by the indemnifying party. If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its prior written consent, but such consent may not be unreasonably withheld. It is understood that the indemnifying party or parties shall not, except as specifically set forth in this Section 2.09(c), in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements or other charges of more than one separate firm admitted to practice in such jurisdiction at any one time unless (x) the employment of more than one counsel has been authorized in writing by the indemnifying party or parties, (y) an indemnified party has reasonably concluded (based on the advice of counsel) that there may be legal defenses available to it that are different from or in addition to those available to the other indemnified parties, or (z) a conflict or potential conflict exists or may exist (based upon advice of counsel to an indemnified party) between such indemnified party and the other indemnified parties, in each of which cases the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel or counsels.
(d)Contribution. If for any reason the indemnification provided for in paragraphs (a) and (b) of this Section 2.09(a) is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party or parties on the other hand in connection with the acts, statements or omissions that resulted in such losses, as well as any other relevant equitable considerations. In connection with any Registration Statement filed with the SEC by the Company, the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 2.09(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 2.09(d). No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The amount paid or payable by an indemnified party as a result of the Losses referred to in Section 2.09(a) and Section 2.09(b) shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action
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or claim. Notwithstanding the provisions of this Section 2.09(d), in connection with any Registration Statement filed by the Company, a Participating Holder shall not be required to contribute any amount in excess of the dollar amount of the net proceeds received by such Holder under the sale of Registrable Securities giving rise to such contribution obligation less any amount paid by such Holders pursuant to Section 2.09(b). If indemnification is available under this Section 2.09(b), the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 2.09(a) and Section 2.09(b) hereof without regard to the provisions of this Section 2.09(d).
(e)No Exclusivity. The remedies provided for in this Section 2.09 are not exclusive and shall not limit any rights or remedies which may be available to any indemnified party at law or in equity or pursuant to any other agreement.
(f)Indemnification Priority. The Company hereby acknowledges and agrees that any of the Persons entitled to indemnification pursuant to this Section 2.09 (each, a “Company Indemnitee” and collectively, the “Company Indemnitees”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by other sources. The Company hereby acknowledges and agrees (i) that it is the indemnitor of first resort (i.e., its obligations to a Company Indemnitee are primary and any obligation of such other sources to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Company Indemnitee are secondary) and (ii) that it shall be required to advance the full amount of expenses incurred by a Company Indemnitee and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement without regard to any rights a Company Indemnitee may have against such other sources. The Company further agrees that no advancement or payment by such other sources on behalf of a Company Indemnitee with respect to any claim for which such Company Indemnitee has sought indemnification, advancement of expenses or insurance from the Company shall affect the foregoing, and that such other sources shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Company Indemnitee against the Company.
(g)Survival. The indemnities provided in this Section 2.09 shall survive the transfer of any Registrable Securities by such Holder and the termination of this Agreement.
Section 1.10.Rules 144 and 144A and Regulation S. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the reasonable request of a Tiptree Investor or a Warburg Investor, promptly make publicly available such necessary information for so long as necessary to permit sales pursuant to Rules 144, 144A or Regulation S under the Securities Act), and it will take such further action as any Tiptree Investor or Warburg Investor may reasonably request, following the IPO, all to the extent required from time to time to enable the Holders to sell Registrable Securities without Registration under the Securities Act within the limitation of the exemptions provided by (i) Rules 144, 144A or Regulation S under the Securities Act, as such Rules may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the reasonable request of a Holder, the Company will promptly deliver to such Holder a written statement as to whether it has complied with such requirements and, if not, the specifics thereof.
Section 1.11.Limitation on Registrations and Underwritten Offerings.
(a)Notwithstanding the rights and obligations set forth in Section 2.01 and Section 2.02, in no event shall the Company be obligated to take any action to effect any Demand Registration at the request of a Tiptree Investor or a Warburg Investor (or their
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respective Affiliates and Permitted Assignees) after the Company has effected such number of Demand Registrations at the request of the Tiptree Investors or the Warburg Investors, as applicable, and their respective Affiliates and Permitted Assignees equal to the number of Permitted Registration Demands in respect to such applicable Investors.
(b)Notwithstanding the rights and obligations set forth in Section 2.01 and Section 2.02, in no event shall the Company be obligated to take any action to (i) effect more than two (2) Long-Form Registrations or Marketed Underwritten Offerings in any 6 (six)-month period, or (ii) effect any Underwritten Offering unless the Registrable Securities proposed to be sold in such Underwritten Offering having a reasonably anticipated gross aggregate price (before deduction of underwriter commissions and offering expenses) of at least $25,000,000.
(c)For purposes of this Agreement “Permitted Registration Demands” means three (3); provided, however, that with respect to Registrations pursuant to Section 2.02(a), if the Company is eligible to file a Short-Form Registration, such Short-Form Registrations (and any Shelf Take-Downs, including any Underwritten Shelf Take-Downs) shall not be limited or count as one (1) of the three (3) Permitted Registration Demands for purposes of Section 2.11(a); provided further that a Demand Registration shall not count as one (1) of the three (3) Permitted Registration Demands unless the applicable Demand Party is able to Register and sell at least ninety percent (90%) of the Registrable Securities requested to be included in such Demand Registration as so included.
Section 1.12.Clear Market. With respect to any Underwritten Offerings of Registrable Securities, the Company agrees not to effect (other than pursuant to the Registration applicable to such Underwritten Offering or pursuant to a Special Registration or pursuant to the exercise by a Tiptree Investor or Warburg Investor of any of its rights under Section 2.01 or Section 2.02) any public sale or distribution, or to file any Registration Statement (other than pursuant to the Registration applicable to such Underwritten Offering or pursuant to a Special Registration or pursuant to the exercise by a Tiptree Investor or Warburg Investor of any of its rights under Section 2.01 or Section 2.02) covering any of its equity securities or any securities convertible into or exchangeable or exercisable for such securities, during the period not to exceed ten (10) days prior and sixty (60) days following the effective date of such offering or such longer period up to ninety (90) days as may be requested by the managing underwriter for such Underwritten Offering. “Special Registration” means the registration of (A) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or successor form) or (B) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, employees, consultants, customers, lenders or vendors of the Company or its Subsidiaries or in connection with dividend reinvestment plans.
Section 1.13.In-Kind Distributions. If any Holder seeks to effectuate an in-kind distribution of all or part of its Company Shares to its direct or indirect equityholders, the Company will reasonably cooperate with and assist such Holder, such equityholders and the Company’s transfer agent to facilitate such in-kind distribution in the manner reasonably requested by such Holder (including the delivery of instruction letters by the Company or its counsel to the Company’s transfer agent, the delivery of customary legal opinions by counsel to the Company and the delivery of Company Shares without restrictive legends, to the extent no longer applicable).
Section 1.14.Reasonable Assistance. If requested by any Tiptree Investor or Warburg Investor in connection with any transaction involving any Registrable Securities (including any sale or other transfer of such securities without registration under the Securities Act, any margin loan with respect to such securities and any pledge of such securities), the Company agrees to provide such Tiptree Investor or Warburg Investor, as applicable, with customary and reasonable assistance to facilitate such transaction, including, without limitation, (i) such action as a Tiptree
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Investor or Warburg Investor, as applicable, may reasonably request from time to time to enable such Investor to sell Registrable Securities without registration under the Securities Act and (ii) entering into an “issuer’s agreement” in connection with any margin loan with respect to such securities in customary form.
Article III
MISCELLANEOUS
MISCELLANEOUS
Section 1.01.Term. This Agreement shall terminate with respect to any Holder (a) for those Holders that beneficially own less than five percent (5%) of the Company’s outstanding Company Shares, if all of the Registrable Securities then owned by such Holder could be sold in any ninety (90)-day period pursuant to Rule 144 (assuming for this purpose that such Holder is an Affiliate of the Company) or (b) if such Holder no longer holds any Registrable Securities. Notwithstanding the foregoing, the provisions of Section 2.09, Section 2.10 and Section 2.13 and all of this Article III shall survive any such termination. Upon the written request of the Company, each Holder agrees to promptly deliver a certificate to the Company setting forth the number of Registrable Securities then beneficially owned by such Holder.
Section 1.02.Injunctive Relief. It is hereby agreed and acknowledged that it will be impossible to measure in money the damage that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved Person will be irreparably damaged and will not have an adequate remedy at law. Any such Person shall, therefore, be entitled (in addition to any other remedy to which it may be entitled in law or in equity) to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.
Section 1.03.Notices. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (a) at the time of personal delivery, if delivery is in person; (b) one (1) Business Day after deposit with an express overnight courier for U.S. deliveries (marked for overnight delivery), or three (3) Business Days after such deposit for deliveries outside of the U.S., with proof of delivery from the courier requested; (c) three (3) Business Days after deposit in the U.S. mail by certified mail (return receipt requested) for United States deliveries or (d) when sent via email if sent prior to 5:00 p.m. (local time of the recipient) on a Business Day, or at 9:00 a.m. (local time of the recipient) on the next succeeding Business Day otherwise. All notices not delivered personally or email will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address or email address as follows, or at such other address, email address or facsimile number as such other party may designate by one of the indicated means of notice herein to the other parties hereto as follows:
If to the Company, at Fortegra Group Inc. 10751 Deerwood Park Blvd., Suite 200 Jacksonville, FL 32256, Attention: General Counsel, Email: CRomaine@fortegra.com, or at such other address as it may have furnished to the Investors in writing.
(a)If to the Tiptree Investors, at c/o Tiptree Inc. 299 Park Avenue, 13th FL, New York, NY 10171, Attention: Jonathan Ilany and Neil C. Rifkind, Email: JIlany@tiptreeinc.com and NRifkind@tiptreeinc.com, with a copy (which shall not constitute notice) to Ropes & Gray LLP, 1211 Avenue of Americas, New York, NY 10036-8704, Attention: Michael Littenberg and William Michener, Email:
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Michael.Littenberg@ropesgray.com and William.Michener@ropesgray.com, or at such other address as it may have furnished to the Investors in writing.
(b)If to the Warburg Investors, at c/o Warburg Pincus & Co., 450 Lexington Avenue, New York, NY 10019, Attention: Eric Friedman and Brett K. Shawn, Email: brett.shawn@warburgpincus.com and notices@warburgpincus.com, with a copy (which shall not constitute notice) to Willkie Farr & Gallagher LLP, 787 Seventh Avenue, New York, NY 10019, Attention: Mark A. Cognetti and Dvir Oren, Email: Mcognetti@willkie.com and Doren@willkie.com, or at such other address as it may have furnished to the Investors in writing.
(c)If to any of the other Holders, at the address or facsimile number of such Investor shown on Schedule A, or at such other address as the Investor may have furnished the Company and the other Investors in writing.
Section 1.04.Amendment. The terms and provisions of this Agreement may only be amended, modified or waived at any time and from time to time by a writing executed by the Company, the Tiptree Investors and the Warburg Investors; provided that any amendment, modification or waiver that would affect the rights, benefits or obligations of any Investor shall require the written consent of such Investor only if such amendment, modification or waiver would materially and adversely affect such rights, benefits or obligations of such Investor. Any amendment, termination, or waiver effected in accordance with this Section 3.04 shall be binding on all parties hereto, regardless of whether any such party has consented thereto.
Section 1.05.Successors, Assigns and Transferees. The rights and obligations of each party hereto may not be assigned, in whole or in part, without the written consent of (a) the Company, (b) the Tiptree Investors (for so long as the Tiptree Investors hold any Registrable Securities) and (c) the Warburg Investors (for so long as the Warburg Investors hold any Registrable Securities); provided, however, that notwithstanding the foregoing, the rights and obligations set forth herein may be assigned, in whole or in part, without such written consent (x) by any Tiptree Investor to any transferee of Registrable Securities, and such transferee shall, with the consent of the transferring Tiptree Investor, be treated as a Tiptree Investor for all purposes of this Agreement, and (y) by the Warburg Investors to any transferee of Registrable Securities, and such transferee shall, with the consent of the transferring Warburg Investor, be treated as a Warburg Investor for all purposes of this Agreement; provided further that such transfer to the extent applicable is otherwise effected pursuant to, and in accordance with, the Stockholders Agreement (each Person to whom the rights and obligations are assigned in compliance with this Section 3.05 is a “Permitted Assignee” and all such Persons, collectively, are “Permitted Assignees”); provided further that any such transferee shall only be admitted as a party hereunder upon its, his or her execution and delivery of a joinder agreement, in form and substance reasonably acceptable to each Tiptree Investor and Warburg Investor, agreeing to be bound by the terms and conditions of this Agreement as if such Person were a party hereto (together with any other documents the Tiptree Investors and Warburg Investors reasonably determine are necessary to make such Person a party hereto), whereupon such Person will be treated as a Holder for all purposes of this Agreement, with the same rights, benefits and obligations hereunder as the transferring Holder with respect to the transferred Registrable Securities (except that if the transferee was a Holder prior to such transfer, such transferee shall have the same rights, benefits and obligations with respect to such transferred Registrable Securities as were applicable to Registrable Securities held by such transferee prior to such transfer). Nothing herein shall operate to permit a transfer of Registrable Securities otherwise restricted by the Stockholders Agreement or any other agreement to which any Holder may be a party.
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Section 1.06.Binding Effect. Except as otherwise provided in this Agreement, the terms and provisions of this Agreement shall be binding on and inure to the benefit of each of the parties hereto and their respective successors.
Section 1.07.Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended or shall be construed to confer upon any Person not a party hereto (other than those Persons entitled to indemnity or contribution under Section 2.09, each of whom shall be a third-party beneficiary thereof) any right, remedy or claim under or by virtue of this Agreement.
Section 1.08.Governing Law; Jurisdiction. THIS AGREEMENT AND ALL CLAIMS, DISPUTES, CONTROVERSIES OR PROCEEDINGS HEREUNDER (OR IN CONNECTION WITH THE NEGOTIATION HEREOF) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE (DISREGARDING ANY RULE OR LAW REQUIRING THE APPLICATION OF THE LAW OF ANY OTHER STATE). THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE AND, IF SUCH COURT LACKS JURISDICTION, THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND, IF SUCH COURT LACKS JURISDICTION, ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF DELAWARE, IN RESPECT OF THE INTERPRETATION AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND ALL CLAIMS, DISPUTES, CONTROVERSIES OR PROCEEDINGS HEREUNDER (OR IN CONNECTION WITH THE NEGOTIATION HEREOF), AND HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING FOR THE INTERPRETATION OR ENFORCEMENT HEREOF, THAT THEY ARE NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT THE VENUE THEREOF MAY NOT BE APPROPRIATE OR THAT THIS AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH RESPECT TO SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH A UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE OR THE COURT OF CHANCERY OF THE STATE OF DELAWARE.
Section 1.09.Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTIONS, SUITS, DEMAND LETTERS, JUDICIAL, ADMINISTRATIVE OR REGULATORY PROCEEDINGS, OR HEARINGS, NOTICES OF VIOLATION OR INVESTIGATIONS ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER AND (B) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY.
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Section 1.10.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 1.11.Counterparts. This Agreement may be executed in two or more counterparts (including by facsimile), each of which shall be deemed an original and all of which together shall be considered one and the same agreement.
Section 1.12.Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof.
Section 1.13.Joinder. Any Person that holds Company Shares may, with the prior written consent of each Tiptree Investor and Warburg Investor, be admitted as a party to this Agreement upon its execution and delivery of a joinder agreement, in form and substance acceptable to the Tiptree Investors and Warburg Investors, agreeing to be bound by the terms and conditions of this Agreement as if such Person were a party hereto (together with any other documents the Tiptree Investors determine are necessary to make such Person a party hereto), whereupon such Person will be treated as a Holder for all purposes of this Agreement.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
COMPANY:
THE FORTEGRA GROUP, INC.
By: /s/ Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
Title: President and Chief Executive Officer
Title: President and Chief Executive Officer
[Registration Rights Agreement]
THE TIPTREE INVESTORS:
TIPTREE HOLDINGS LLC
By:/s/Jonathan Ilany
Name: Jonathan Ilany
Title: Chief Executive Officer
WARBURG INVESTORS:
WP FALCON AGGREGATOR, L.P.
By:/s/ Eric Friedman
Name: Eric Friedman
Title: Partner
Title: Partner
OTHER INVESTOR:
By:/s/ Richard S. Kahlbaugh
Name: Richard S. Kahlbaugh
OTHER INVESTOR:
By:/s/ Mark Rattner
Name: Mark Rattner
OTHER INVESTOR:
By:/s/ Michael Grasher
Name: Michael Grasher
OTHER INVESTOR:
By:/s/ Scott McLaren
Name: Scott McLaren
OTHER INVESTOR:
By:/s/ John Short
Name: John Short
OTHER INVESTOR:
By:/s/ Sanjay Vara
Name: Sanjay Vara
OTHER INVESTOR:
Romaine Children’s Trust UAD 4/5/17
By: /s/ Gaeann Romaine
Name: Gaeann Romaine, Trustee
OTHER INVESTOR:
By:/s/ Louis Rich
Name: Louis Rich
OTHER INVESTOR:
By:/s/ Steve Davidson
Name: Steve Davidson
OTHER INVESTOR:
By:/s/ Michael Ferris
Name: Michael Ferris
OTHER INVESTOR:
By:/s/ Leigh Mascherin
Name: Leigh Mascherin
OTHER INVESTOR:
By:/s/ Howard Fishbein
Name: Howard Fishbein
Schedule A
EXHIBIT 99.1
TIPTREE ANNOUNCES CLOSING OF STRATEGIC INVESTMENT IN FORTEGRA FROM WARBURG PINCUS LLC
NEW YORK--(BUSINESS WIRE) -- Tiptree Inc. (NASDAQ:TIPT) (“Tiptree” or the “Company”), today announced the closing of the previously announced $200 million strategic investment in its insurance subsidiary, The Fortegra Group, Inc. (“Fortegra”) from Warburg Pincus, a leading global growth investor.
The investment gives Warburg Pincus an approximately 24% ownership in Fortegra on an as-converted basis. Up to $60 million of the proceeds will be used to support Fortegra’s growth opportunities with the remainder used to repay Tiptree’s existing indebtedness and for general corporate purposes.
This transaction highlights the underlying intrinsic value of Fortegra to Tiptree shareholders, representing a significant milestone for the Company. Fortegra is a rapidly growing and consistently profitable specialty insurer, underwriting over $2.3 billion of gross written premiums and premium equivalents annually. The business underwrites and administers a variety of specialty insurance products and warranty solutions across the United States and Europe.
Fortegra’s strong financial performance in 2021 and the first quarter of 2022 demonstrates the growth trajectory and consistent underwriting results of the business. With the backing of Tiptree and Warburg Pincus, Fortegra enters its next phase of growth focused on the specialty admitted and E&S lines, while maintaining its historically strong underwriting principles.
Advisors
Barclays acted as exclusive financial advisor and Ropes & Gray LLP and Sidley Austin LLP provided legal counsel to Tiptree and Fortegra. BofA Securities acted as exclusive financial advisor and Willkie Farr & Gallagher LLP provided legal counsel to Warburg Pincus.
About Tiptree
Tiptree Inc. (NASDAQ: TIPT) allocates capital to select small and middle market companies with the mission of building long-term value. Established in 2007, we have a significant track record investing in the insurance sector and across a variety of other industries, including mortgage origination, specialty finance and shipping. With proprietary access and a flexible capital base, we seek to uncover compelling investment opportunities and support management teams in unlocking the full value potential of their businesses. For more information, please visit tiptreeinc.com and follow us on LinkedIn.
About Fortegra
The Fortegra Group, LLC is a global specialty insurer. Fortegra and its subsidiaries underwrite and administer a comprehensive and diverse set of admitted and surplus insurance products and warranty solutions across the United States and around the world. For over 40 years, Fortegra's collaborative approach, experienced team, and innovative products have fueled consistent growth and increasing demand from both domestic and international
partners. The Company holds an A.M. Best Financial Strength Rating of A- (Excellent). For more information on Fortegra, visit: https://www.fortegra.com.
About Warburg Pincus
Warburg Pincus is a leading global growth investor. The firm has more than $80 billion in assets under management. The firm’s active portfolio of more than 245 companies is highly diversified by stage, sector, and geography. Warburg Pincus is an experienced partner to management teams seeking to build durable companies with sustainable value. Founded in 1966, Warburg Pincus has raised 21 private equity and 2 real estate funds, which have invested more than $100 billion in over 1,000 companies in more than 40 countries. The firm is headquartered in New York with offices in Amsterdam, Beijing, Berlin, Hong Kong, Houston, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo, Shanghai, and Singapore. For more information please visit www.warburgpincus.com. Follow us on LinkedIn.
Special Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements" which involve risks, uncertainties and contingencies, many of which are beyond Tiptree's control, which may cause actual results, performance, or achievements to differ materially from anticipated results, performance, or achievements. All statements contained herein that are not clearly historical in nature are forward-looking, and the words "anticipate," "believe," "estimate," "expect,“ “intend,” “may,” “might,” "plan," “project,” “should,” "target,“ “will,” "view," “confident,” or similar expressions are intended to identify forward-looking statements. Such forward-looking statements include, but are not limited to, statements about Tiptree's plans, objectives, expectations and intentions. The forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, many of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecast in the forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to those described in the section entitled “Risk Factors” in Tiptree’s Annual Report on Form 10-K, and as described in the Tiptree’s other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as to the date of this release. The factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could affect our forward-looking statements. Consequently, our actual performance could be materially different from the results described or anticipated by our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by the federal securities laws, we undertake no obligation to update any forward-looking statements.
Contacts
Tiptree
Scott McKinney
smckinney@tiptreeinc.com
Fortegra
Holly Bohn
hbohn@fortegra.com
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Warburg Pincus
Kerrie Cohen
Kerrie.Cohen@warburgpincus.com
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