2,500,000 shares of Common Stock
NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.
UNDERWRITING AGREEMENT
New York, New York
__________, 1999
▇▇▇▇, ▇▇▇▇ & Co., Inc.
As Representative of the
Several Underwriters listed on Schedule A hereto
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Pennsylvania Merchant Group
As Representative of the
Several Underwriters listed on Schedule A hereto
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
National Medical Health Card Systems, Inc., a New York corporation (the
"Company") and one of the stockholders of the Company, the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Trust (the "Selling Stockholder") confirm their agreement with ▇▇▇▇,
▇▇▇▇ & Co., Inc. ("▇▇▇▇, ▇▇▇▇"), Pennsylvania Merchant Group ("PMG") and each of
the underwriters named in Schedule A hereto (collectively, the "Underwriters"),
which term shall also include any underwriter substituted as hereinafter
provided in Section 11), for whom ▇▇▇▇, ▇▇▇▇ and PMG are acting as
representatives (in such capacity, ▇▇▇▇, ▇▇▇▇ and PMG shall hereinafter be
collectively referred to as "you" or the "Representatives"), with respect to the
sale by the Company and the Selling Stockholder, acting severally and not
jointly, of an aggregate of 2,500,000 shares ("Shares") of the Company's common
stock, $.001 par value per share ("Common Stock"), of which 2,000,000 shares are
to be issued and sold by the Company, and 500,000 shares are to be sold by the
Selling Stockholder (the "Selling Stockholder Shares"), and the purchase by the
Underwriters, acting severally and not jointly, of the respective numbers of
Shares of Common Stock set forth on Schedule A annexed hereto. Such Shares are
collectively hereinafter referred to as the "Firm Securities." Upon your
request, as provided in Section 2(b) of this Agreement, the Company shall sell
to the Underwriters, acting severally and not jointly, up to an additional
375,000 shares of Common Stock for the purpose of covering over-allotments, if
any. Such Shares are
hereinafter referred to as the "Option Securities." The Company also proposes to
issue and sell to you warrants (the "Representatives' Warrants") pursuant to the
Representatives' Warrant Agreement dated as of ______, 1999 between the Company
and the Representatives (the "Representatives' Warrant Agreement") for the
purchase of an additional 250,000 shares of Common Stock. The shares of Common
Stock issuable upon exercise of the Representatives' Warrants are hereinafter
referred to as the "Representatives' Securities." The Firm Securities, the
Option Securities, the Representatives' Warrants and the Representatives'
Securities are more fully described in the Registration Statement and the
Prospectus referred to below.
1. Representations and Warranties of the Company and the Selling Stockholder.
The Company and the Selling Stockholder hereby jointly and severally represent
and warrant to, and agree with, each of the Underwriters as of the date hereof,
and as of the Closing Date (as hereinafter defined) and each Option Closing Date
(as hereinafter defined), if any, as follows:
(a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and an
amendment or amendments thereto, on Form S-1 (No. 333-72209), including
any related preliminary prospectus ("Preliminary Prospectus"), for the
registration of the Firm Securities, the Option Securities, the
Representatives' Warrants and the Representatives' Securities
(collectively, hereinafter referred to as the "Securities"), under the
Securities Act of 1933, as amended (the "Act"), which registration
statement and amendment or amendments have been prepared by the Company
in conformity with the requirements of the Act, and the rules and
regulations (the "Regulations") of the Commission under the Act. The
Company will promptly file a further amendment to said registration
statement in the form heretofore delivered to the Underwriters and will
not file any other amendment thereto to which the Underwriters shall
have objected in writing after having been furnished with a copy
thereof. Except as the context may otherwise require, such registration
statement, as amended, on file with the Commission at the time the
registration statement becomes effective (including the prospectus,
financial statements, schedules, exhibits and all other documents filed
as a part thereof or incorporated therein (including, but not limited
to, those documents or information incorporated by reference therein)
and all information deemed to be a part thereof as of such time
pursuant to paragraph (b) of Rule 430(A) of the Regulations), is
hereinafter called the "Registration Statement," and the form of
prospectus in the form first filed with the Commission pursuant to Rule
424(b) of the Regulations, is hereinafter called the "Prospectus." For
purposes hereof, "Rules and Regulations" mean the rules and regulations
adopted by the Commission under either the Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as applicable.
(b) Neither the Commission nor, to the Company's knowledge, any state
regulatory authority has issued any order preventing or suspending the
use of any Preliminary Prospectus, the Registration Statement or the
Prospectus or any part of any thereof and no proceedings for a stop
order suspending the effectiveness of the Registration Statement or any
of the Company's securities have been instituted or are pending or
threatened. Each of the Preliminary Prospectus, the Registration
Statement and the Prospectus at the time of filing thereof conformed
with the requirements of the Act and the Rules and Regulations,
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and none of the Preliminary Prospectus, the Registration Statement or
the Prospectus at the time of filing thereof contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein and necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that this representation and warranty does not apply
to statements made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters
by or on behalf of the Underwriters expressly for use in such
Preliminary Prospectus, Registration Statement or the Prospectus.
(c) When the Registration Statement becomes effective and at all times
subsequent thereto up to the Closing Date and each Option Closing Date,
if any, and during such longer period as the Prospectus may be required
to be delivered in connection with sales by the Underwriters or a
dealer, the Registration Statement and the Prospectus will contain all
statements which are required to be stated therein in accordance with
the Act and the Rules and Regulations, and will conform in all material
respects to the requirements of the Act and the Rules and Regulations;
neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided,
however, that this representation and warranty does not apply to
statements made in reliance upon and in conformity with written
information furnished to the Company with respect to the Underwriters
by or on behalf of the underwriters expressly for use in the
Preliminary Prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the state of its
incorporation. Except as set forth in the Prospectus, the Company does
not own an interest in any corporation, partnership, trust, joint
venture or other business entity. The Company is duly qualified and
licensed and in good standing as a foreign corporation in each
jurisdiction in which its ownership or leasing of any properties or the
character of its operations require such qualification or licensing,
except where the failure to be so qualified would not have a material
adverse effect on the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value, operation,
properties, business or results of operations of the Company. The
Company has all requisite power and authority (corporate and other),
and has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including, without
limitation, those having jurisdiction over environmental or similar
matters), to own or lease its properties and conduct its business as
described in the Prospectus; the Company is and has been doing business
in compliance with all such authorizations, approvals, orders,
licenses, certificates, franchises and permits and all federal, state,
local and foreign laws, rules and regulations; and the Company has not
received any notice of proceedings relating to the revocation or
modification of any such authorization, approval, order, license,
certificate, franchise, or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
3
materially and adversely affect the condition, financial or otherwise,
or the earnings, position, prospects, value, operation, properties,
business or results of operations of the Company. The disclosures in
the Registration Statement concerning the effects of federal, state,
local, and foreign laws, rules and regulations on the Company's
businesses as currently conducted and as contemplated are correct in
all respects and do not omit to state a material fact necessary to make
the statements contained therein not misleading in light of the
circumstances in which they were made.
(e) The Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, under "Capitalization"
and "Description of Capital Stock" and will have the adjusted
capitalization set forth therein on the Closing Date and the Option
Closing Date, if any, based upon the assumptions set forth therein, and
the Company is not a party to or bound by any instrument, agreement or
other arrangement providing for it to issue any capital stock, rights,
warrants, options or other securities, except for this Agreement and as
described in the Prospectus. The Securities and all other securities
issued or issuable by the Company conform or, when issued and paid for,
will conform, in all respects to all statements with respect thereto
contained in the Registration Statement and the Prospectus. All issued
and outstanding securities of the Company have been duly authorized and
validly issued and are fully paid and non-assessable and the holders
thereof have no rights of rescission with respect thereto, and are not
subject to personal liability by reason of being such holders; and none
of such securities were issued in violation of the preemptive rights of
any holders of any security of the Company or similar contractual
rights granted by the Company. The Securities are not and will not be
subject to any preemptive or other similar rights of any stockholder,
have been duly authorized and, when issued, paid for and delivered in
accordance with the terms hereof, will be validly issued, fully paid
and nonassessable and will conform to the description thereof contained
in the Prospectus; the holders thereof will not be subject to any
liability solely as such holders; all corporate action required to be
taken for the authorization, issue and sale of the Securities has been
duly and validly taken; and the certificates representing the
Securities will be in due and proper form. The Selling Stockholder has
now and will have on the Closing Date, good, valid and marketable title
to the Selling Stockholder Shares, free and clear of any liens,
charges, claims, encumbrances, pledges, security interests, defects or
other restrictions or equities of any kind whatsoever (collectively,
"Liens"), stockholders' agreements, voting trusts or community property
rights. Upon the issuance and delivery pursuant to the terms hereof of
the Securities to be sold by the Company and the Selling Stockholder
hereunder, the Underwriters or the Representatives, as the case may be,
will acquire good and marketable title to such Securities free and
clear of any Liens, stockholders' agreements, voting trusts or
community property rights, other than such as may be created by the
Underwriters. Other than as described in the Registration Statement and
the Prospectus, there are no outstanding options, warrants, rights, or
other agreements or arrangements requiring the Selling Stockholder at
any time to transfer any Common Stock to be sold hereunder by the
Selling Stockholder.
4
(f) The consolidated financial statements of the Company together with
the related notes and schedules thereto, included in the Registration
Statement, each Preliminary Prospectus and the Prospectus fairly
present the consolidated financial position, income, changes in cash
flow, changes in stockholders' equity and the results of operations of
the Company at the respective dates and for the respective periods to
which they apply and such financial statements have been prepared in
conformity with generally accepted accounting principles and the Rules
and Regulations, consistently applied throughout the periods involved.
The pro forma financial statements and other pro forma financial
information (including the notes thereto) included in the Registration
Statement and the Prospectus (A) present fairly, in all material
respects, the information shown therein, (B) have been prepared, in all
material respects, in accordance with the applicable requirements of
Rule 11-02 of Regulation S-X promulgated under the Exchange Act, (C)
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, and (D) have
been properly compiled on the bases described therein, and the
assumptions used in the preparation of the pro forma financial
statements and other pro forma financial information and included in
the Registration Statement and the Prospectus are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein. There has been no
adverse change or development involving a material prospective change
in the condition, financial or otherwise, or in the earnings, position,
prospects, value, operation, properties, business, or results of
operation of the Company whether or not arising in the ordinary course
of business, since the date of the financial statements included in the
Registration Statement and the Prospectus, and the outstanding debt,
the property, both tangible and intangible, and the businesses of the
Company conform in all material respects to the descriptions thereof
contained in the Registration Statement and the Prospectus. Financial
information set forth in the Prospectus under the headings "Summary
Consolidated Financial Information," "Selected Consolidated Financial
Information," "Capitalization," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," fairly
present, on the basis stated in the Prospectus, the information set
forth therein, and have been derived from or compiled on a basis
consistent with that of the audited consolidated financial statements
included in the Prospectus.
(g) The Company (i) has paid all federal, state, local, and foreign
taxes for which it is liable, including, but not limited to,
withholding taxes and amounts payable under Chapters 21 through 24 of
the Internal Revenue Code of 1986 (the "Code"), and has furnished all
information returns it is required to furnish pursuant to the Code,
(ii) has established adequate reserves for such taxes which are not due
and payable, and (iii) does not have any tax deficiency or claims
outstanding, proposed or assessed against it.
(h) No transfer tax, stamp duty or other similar tax is payable by or
on behalf of the Underwriters in connection with (i) the issuance by
the Company or the sale by the Selling Stockholder of the Securities,
(ii) the purchase by the Underwriters of the Securities from the
Company and the Selling Stockholder, and the purchase by the
Representatives of the Representatives' Warrants from the Company,
(iii) the consummation by the Company and the Selling Stockholder of
any of its obligations
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under this Agreement, the Custody Agreement or the Power of Attorney
(as such terms are hereinafter defined), or (iv) resales of the
Securities in connection with the distribution contemplated hereby.
(i) The Company maintains insurance policies, including, but not
limited to, general liability and property insurance, which insures the
Company and its employees, against such losses and risks generally
insured against by comparable businesses. The Company (A) has not
failed to give notice or present any insurance claim with respect to
any matter, including but not limited to the Company's business,
property or employees, under any insurance policy or surety bond in a
due and timely manner, (B) does not have any disputes or claims against
any underwriter of such insurance policies or surety bonds or has
failed to pay any premiums due and payable thereunder, or (C) has not
failed to comply with all conditions contained in such insurance
policies and surety bonds. There are no facts or circumstances under
any such insurance policy or surety bond which would relieve any
insurer of its obligation to satisfy in full any valid claim of the
Company.
(j) There is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding (including,
without limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, pending or threatened against
(or, to the Company's or the Selling Stockholder's knowledge,
circumstances that may give rise to the same), or involving the
properties or business of, the Company which (i) questions the validity
of the capital stock of the Company, this Agreement or the
Representatives' Warrant Agreement (as defined herein), or of any
action taken or to be taken by the Company pursuant to or in connection
with this Agreement or the Representatives' Warrant Agreement, (ii) is
required to be disclosed in the Registration Statement which is not so
disclosed (and such proceedings as are summarized in the Registration
Statement are accurately summarized in all material respects), or (iii)
would materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, stockholders' equity,
value, operation, properties, business or results of operations of the
Company.
(k) Each of the Company and the Selling Stockholder, as applicable, has
full legal right, power and authority to authorize, issue, deliver and
sell the Securities, to enter into this Agreement and the
Representatives' Warrant Agreement and to consummate the transactions
provided for in such agreements; and this Agreement, and the
Representatives' Warrant Agreement have each been duly and properly
authorized, executed and delivered by the Company and the Selling
Stockholder, as applicable. Each of this Agreement and the
Representatives' Warrant Agreement constitutes a legal, valid and
binding agreement of the Company and the Selling Stockholder, as
applicable, enforceable against the Company and the Selling Stockholder
in accordance with its terms, and none of the Company's and, as
applicable, the Selling Stockholder's, issue and sale of the
Securities, the execution or delivery of this Agreement or the
Representatives' Warrant Agreement, its performance hereunder and
thereunder, its consummation of the transactions contemplated herein
and therein, or the conduct of its business as described
6
in the Registration Statement, the Prospectus, and any amendments or
supplements thereto, conflicts with or will conflict with or results or
will result in any breach or violation of any of the terms or
provisions of, or constitutes or will constitute a default under, or
result in the creation or imposition of any Lien of any kind whatsoever
upon, any property or assets (tangible or intangible) of the Company or
the Selling Stockholder pursuant to the terms of (i) the articles of
incorporation or by-laws of the Company, (ii) any license, contract,
indenture, mortgage, deed of trust, voting trust agreement,
stockholders agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company or the Selling Stockholder
is a party or by which it is or may be bound or to which its properties
or assets (tangible or intangible) is or may be subject, or any
indebtedness, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company or the Selling Stockholder of any
arbitrator, court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation, those
having jurisdiction over environmental or similar matters), domestic or
foreign, having jurisdiction over the Company or the Selling
Stockholder or any of its activities or properties.
(l) No consent, approval, authorization or order of, and no filing
with, any court, regulatory body, government agency or other body,
domestic or foreign, is required for the issuance of the Securities
pursuant to the Prospectus and the Registration Statement, the issuance
of the Representatives' Warrants, the performance of this Agreement and
the Representatives' Warrant Agreement and the transactions
contemplated hereby and thereby, including without limitation, any
waiver of any preemptive, first refusal or other rights that any entity
or person may have for the issue and/or sale of any of the Securities,
except such as have been or may be obtained under the Act or may be
required under state securities or blue sky laws (collectively, "Blue
Sky") in connection with the Underwriters' purchase and distribution of
the Securities to be sold by the Company and the Selling Stockholder
hereunder. The Selling Stockholder does not have any registration
rights or other similar rights with respect to any securities of the
Company, and the Selling Stockholder does not have any right of first
refusal or other similar right to purchase any securities of the
Company upon the issuance or sale thereof by the Company or upon the
sale thereof by any other stockholder of the Company. The Selling
Stockholder has not since the filing of the initial Registration
Statement (i) sold, bid for, purchased, attempted to induce any person
to purchase, or paid anyone any compensation for soliciting purchases
of, Common Stock, or (ii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any securities of the
Company.
(m) All executed agreements, contracts or other documents or copies of
executed agreements, contracts or other documents filed as exhibits to
the Registration Statement to which the Company is a party or by which
it may be bound or to which its assets, properties or businesses may be
subject, have been duly and validly authorized, executed and delivered
by the Company and constitute the legal, valid and binding agreements
of the Company, enforceable against the Company, in accordance with
their respective terms. The descriptions in the Registration Statement
of agreements, contracts and other documents are accurate and fairly
present the information required to be shown with respect thereto
7
by Form S-1, and there are no contracts or other documents which are
required by the Act to be described in the Registration Statement or
filed as exhibits to the Registration Statement which are not described
or filed as required, and the exhibits which have been filed are
complete and correct copies of the documents of which they purport to
be copies.
(n) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus, and except as
may otherwise be indicated or contemplated herein or therein, the
Company has not (i) issued any securities or incurred any liability or
obligation, direct or contingent, for borrowed money, (ii) entered into
any transaction other than in the ordinary course of business
consistent with past practice, or (iii) declared or paid any dividend
or made any other distribution on or in respect of its capital stock of
any class, and there has not been any change in the capital stock, or
any change in the debt (long or short term) or liabilities or material
change in or affecting the general affairs, management, financial
operations, stockholders' equity or results of operations of the
Company.
(o) No default exists in the due performance and observance of any
term, covenant or condition of any license, contract, indenture,
mortgage, installment sale agreement, lease, deed of trust, voting
trust agreement, stockholders agreement, partnership agreement, note,
loan or credit agreement, purchase order, or any other material
agreement or instrument evidencing an obligation for borrowed money, or
any other material agreement or instrument to which the Company is a
party or by which the Company may be bound or to which the property or
assets (tangible or intangible) of the Company is subject or affected
which would materially and adversely affect the condition, financial or
otherwise, or the earnings, position, prospects, value, operation,
properties, business or results of operations of the Company.
(p) The Company has generally enjoyed a satisfactory employer-employee
relationship with its employees and is in compliance with all federal,
state, local, and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages
and hours. There are no pending investigations involving the Company by
the U.S. Department of Labor, or any other governmental agency
responsible for the enforcement of such federal, state, local, or
foreign laws and regulations. There is no unfair labor practice charge
or complaint against the Company pending before the National Labor
Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or threatened against or involving the Company, or any
predecessor entity, and none has ever occurred. No representation
question exists respecting the employees of the Company, and no
collective bargaining agreement or modification thereof is currently
being negotiated by the Company. No grievance or arbitration proceeding
is pending under any expired or existing collective bargaining
agreements of the Company. No labor dispute with the employees of the
Company exists, or is imminent.
8
(q) Except as described in the Prospectus, the Company does not
maintain, sponsor or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan,"
or a "multiemployer plan" as such terms are defined in Sections (2),
3(1) and 3(37), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") (the foregoing are
collectively, "ERISA Plans"). The Company does not maintain or
contribute, now or at any time previously, to a defined benefit plan,
as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust
created thereunder) has engaged in a "prohibited transaction," within
the meaning of Section 406 of ERISA or Section 4975 of the Code, which
could subject the Company to any tax penalty on prohibited transactions
and which has not adequately been corrected. Each ERISA Plan is in
compliance with all material reporting, disclosure and other
requirements of the Code and ERISA as they relate to any such ERISA
Plan. Determination letters have been received from the Internal
Revenue Service with respect to each ERISA Plan which is intended to
comply with Code Section 401(a), stating that such ERISA Plan and the
attendant trust are qualified thereunder. The Company has never
completely or partially withdrawn from a "multiemployer plan."
(r) None of the Selling Stockholder, the Company, or any of its
employees, directors, stockholders, partners, or affiliates (within the
meaning of the Rules and Regulations) has taken or will take, directly
or indirectly, any action designed to or which has constituted or which
might be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities or
otherwise.
(s) Except as otherwise disclosed in the Prospectus, none of the
patents, patent applications, trademarks, service marks, trade names
and copyrights, and licenses and rights to the foregoing presently
owned or held by the Company, are in dispute so far as known by the
Company and the Selling Stockholder or are in any conflict with the
right of any other person or entity. To the best of the Company's and
the Selling Stockholder's knowledge, the Company (i) owns or has the
right to use, free and clear of all Liens of any kind whatsoever, all
patents, trademarks, service marks, trade names and copyrights,
technology and licenses and rights with respect to the foregoing, used
in the conduct of its business as now conducted or proposed to be
conducted without infringing upon or otherwise acting adversely to the
right or claimed right of any person, corporation or other entity under
or with respect to any of the foregoing and (ii) except as set forth in
the Prospectus, is not obligated or under any liability whatsoever to
make any payment by way of royalties, fees or otherwise to any owner or
licensee of, or other claimant to, any patent, trademark, service ▇▇▇▇,
trade name, copyright, know-how, technology or other intangible asset,
with respect to the use thereof or in connection with the conduct of
its business or otherwise.
(t) The Company owns and has the unrestricted right to use all trade
secrets, know-how (including all other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
inventions, designs, processes, works of authorship, computer programs
and technical data and information (collectively, "Intellectual
9
Property") that are material to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by
the Company, free and clear of and without violating any right, Lien,
or claim of others, including without limitation, former employers of
its employees; provided, however, that the possibility exists that
other persons or entities, completely independently of the Company, or
its employees or agents, could have developed trade secrets or items of
technical information similar or identical to those of the Company. The
Company and the Selling Stockholder are not aware of any such
development of similar or identical trade secrets or technical
information by others.
(u) The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all its Intellectual Property in
all material aspects.
(v) The Company has good and marketable title to, or valid and
enforceable leasehold estates in, all items of real and personal
property stated in the Prospectus, to be owned or leased by it free and
clear of all Liens, of any kind whatsoever, other than those referred
to in the Prospectus and Liens for taxes not yet due and payable.
(w) BDO ▇▇▇▇▇▇▇, LLP, whose report is filed with the Commission as a
part of the Registration Statement, are independent certified public
accountants as required by the Act and the Rules and Regulations.
(x) The Company has caused to be duly executed legally binding and
enforceable agreements (the "Lock-up Agreements") pursuant to which
holders of substantially all of the shares of Common Stock outstanding
and substantially all holders of securities exchangeable or exercisable
for or convertible into shares of Common Stock, all of whose names are
set forth on Schedule B annexed hereto, have agreed not to, directly or
indirectly, offer to sell, sell, grant any option for the sale of,
assign, transfer, pledge, hypothecate or otherwise encumber or dispose
of any beneficial interest in (either pursuant to Rule 144 of the Rules
and Regulations or otherwise) any securities issued by the Company,
including without limitation any options, warrants or other securities
convertible into or exercisable or exchangeable for shares of Common
Stock, for a period of not less than 180 days following the effective
date of the Registration Statement without the prior written consent of
▇▇▇▇, ▇▇▇▇. Any gift or similar transfer to a family member or trust
for the benefit thereof is exempt from the restrictions set forth in
the Lock-up Agreements provided that (i) no consideration is directly
or indirectly received in connection with such transfer, and (ii) the
transferee delivers to the Representatives, prior to the consummation
of such transfer, an agreement by such transferee to be bound by all of
the terms and conditions of the Lock-up Agreements. The Company will
cause the Transfer Agent, as defined below, to ▇▇▇▇ an appropriate
legend on the face of stock certificates representing all of such
securities and to place "stop transfer" orders on the Company's stock
ledgers.
(y) There are no claims, payments, issuances, arrangements or
understandings, whether oral or written, for services in the nature of
a finder's, consulting or origination fee with respect to the sale of
the Securities hereunder or any other arrangements, agreements,
10
understandings, payments or issuances with respect to the Company or
any of its officers, directors, stockholders, partners, employees or
affiliates that may affect the Underwriters' compensation, as
determined by the National Association of Securities Dealers, Inc.
("NASD").
(z) The Securities have been approved for quotation on the National
Association of Securities Dealers, Inc. Automated Quotation
System/National Market ("NASDAQ- NM") .
(aa) Neither the Company nor any of its officers, employees, agents or
any other person acting on behalf of the Company has, directly or
indirectly, given or agreed to give any money, gift or similar benefit
(other than legal price concessions to customers in the ordinary course
of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any governmental agency
(domestic or foreign) or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or
foreign) or other person who was, is, or may be in a position to help
or hinder the business of the Company (or assist the Company in
connection with any actual or proposed transaction) which (a) might
subject the Company, or any other such person to any damage or penalty
in any civil, criminal or governmental litigation or proceeding
(domestic or foreign), (b) if not given in the past, might have had a
materially adverse effect on the assets, business or operations of the
Company, or (c) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Company. The
Company's internal accounting controls are sufficient to cause the
Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.
(bb) Except as set forth in the Prospectus, no officer, director,
stockholder or partner of the Company, or any "affiliate" or
"associate" (as these terms are defined in Rule 405 promulgated under
the Rules and Regulations) of any of the foregoing persons or entities
has or has had, either directly or indirectly (i) an interest in any
person or entity which (A) furnishes or sells services or products
which are furnished or sold or are proposed to be furnished or sold by
the Company, or (B) purchases from or sells or furnishes to the Company
any goods or services, or (ii) a beneficial interest in any contract or
agreement to which the Company is a party or by which it may be bound
or affected. Except as set forth in the Prospectus under "Certain
Transactions," there are no existing agreements, arrangements,
understandings or transactions, or proposed agreements, arrangements,
understandings or transactions, between or among the Company, and any
officer, director of the Company and any beneficial owner of more than
five (5%) percent of the Company's shares of Common Stock, or any
partner, affiliate or associate of any of the foregoing persons or
entities.
(cc) Any certificate signed by any officer of the Company, or by the
Selling Stockholder, and delivered to the Underwriters or to
Underwriters' Counsel (as defined herein) shall be deemed a
representation and warranty by the Company and by the Selling
Stockholder to the Underwriters as to the matters covered thereby.
11
(dd) The minute books of the Company have been made available to the
Underwriters and contain a complete summary of all meetings and actions
of the directors and stockholders of the Company, since the time of its
incorporation, and reflect all transactions referred to in such minutes
accurately in all material respects.
(ee) Except and to the extent described in the Prospectus, no holders
of any securities of the Company or of any options, warrants or other
convertible or exchangeable securities of the Company have the right to
include any securities issued by the Company in the Registration
Statement or any registration statement to be filed by the Company or
to require the Company to file a registration statement under the Act
and no person or entity holds any anti-dilution rights with respect to
any securities of the Company.
(ff) The Company has as of the effective date of the Registration
Statement, (i) entered into an employment agreement with ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ("▇▇. ▇▇▇▇▇▇▇") in the form filed as Exhibit ___ to the
Registration Statement, and (ii) purchased term key-man insurance on
the life of ▇▇. ▇▇▇▇▇▇▇ in the amount of $1,000,000 which policy names
the Company as the sole beneficiary thereof.
(gg) The Selling Stockholder has duly authorized, executed and
delivered, in the form heretofore furnished to the Representative, a
Power of Attorney (the "Power of Attorney") with _____________ as
attorney-in-fact, (an "Attorney-in-Fact), and a Letter of Transmittal
and Custody Agreement (the "Custody Agreement") with Continental Stock
Transfer & Trust Company as custodian (the "Custodian"); each of the
Power of Attorney and the Custody Agreement constitutes a valid and
binding obligation of the Selling Stockholder, enforceable in
accordance with its terms; the Selling Stockholder's Attorney-in-Fact,
acting alone, is authorized to execute and deliver this Agreement on
behalf of the Selling Stockholder, to authorize the delivery of the
Selling Stockholder Shares and to duly endorse (in blank or otherwise)
the certificate or certificates representing the Selling Stockholder
Shares or a stock power or powers with respect thereto, to accept
payment therefor, and otherwise to act on behalf of the Selling
Stockholder in connection with this Agreement.
(hh) All authorizations, approvals, consents and orders necessary for
the execution and delivery by the Selling Stockholder of the Power of
Attorney and the Custody Agreement, the execution and delivery by or on
behalf of the Selling Stockholder of this Agreement, and the sale and
delivery of the Selling Stockholder Shares have been obtained and are
in full force and effect; the Selling Stockholder has full right, power
and authority to enter into and perform its obligations under this
Agreement and such Power of Attorney and Custody Agreement and to sell,
transfer and deliver the Selling Stockholder Shares.
(ii) Certificates in negotiable form for the Selling Stockholder
Shares, together with a stock power or powers duly endorsed in blank by
the Selling Stockholder, have been placed in
12
custody with the Custodian for the purpose of effecting delivery
hereunder and thereunder.
(jj) There is not pending or threatened against the Selling Stockholder any
action, suit or proceeding (or circumstances that may give rise to the
same) which (i) questions the validity of this Agreement, the Custody
Agreement, the Power of Attorney or any action taken or to be taken by
the Selling Stockholder pursuant to or in connection with any of the
foregoing, or (ii) which is required to be disclosed in the
Registration Statement and the Prospectus which is not so disclosed,
and such proceedings which are summarized in the Registration
Statement and the Prospectus, if any, are accurately summarized in all
material respects.
(kk) The Selling Stockholder has reviewed and will review the Prospectus
and will comply with all agreements and satisfy all conditions on its
part to be complied with or satisfied pursuant to this Agreement, the
Custody Agreement and the Power of Attorney at or prior to each of the
Closing Date and any Option Closing Date, if any.
(ll) Any certificate signed by or on behalf of the Selling Stockholder and
delivered to the Underwriters or to counsel for the Underwriters shall
be deemed a representation and warranty by the Selling Stockholder to
the Underwriters as to the matters covered thereby.
2. Purchase, Sale and Delivery of the Securities and Representatives'
Warrants.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions
herein set forth, the Company and the Selling Stockholder, severally
and not jointly, agree to sell to each Underwriter, and each
Underwriter, severally and not jointly, agrees to purchase from the
Company and the Selling Stockholder at a price of $________[___% of the
public offering price] per Share, that number of Firm Securities set
forth in Schedule A opposite the name of such Underwriter, plus any
additional number of Firm Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 11 hereof.
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase all or any part of
an additional 375,000 shares of Common Stock at a price of $________
[100% of the public offering price] per Share. The option granted
hereby will expire 45 days after (i) the date the Registration
Statement becomes effective, if the Company has elected not to rely on
Rule 430A under the Rules and Regulations, or (ii) the date of this
Agreement if the Company has elected to rely upon Rule 430A under the
Rules and Regulations, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may
be made in connection with the offering and distribution of the Firm
Securities upon notice by ▇▇▇▇, ▇▇▇▇ to the Company setting forth the
number of Option Securities as to which the several Underwriters are
then
13
exercising the option and the time and date of payment and delivery for
any such Option Securities. Any such time and date of delivery (an
"Option Closing Date") shall be determined by Ryan, Beck, but shall not
be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Date, as hereinafter
defined, unless otherwise agreed upon by ▇▇▇▇, ▇▇▇▇ and the Company.
Nothing herein contained shall obligate the Underwriters to make any
over-allotments. No Option Securities shall be delivered unless the
Firm Securities shall be simultaneously delivered or shall theretofore
have been delivered as herein provided.
(c) Payment of the purchase price for, and delivery of certificates
for, the Firm Securities shall be made at the offices of ▇▇▇▇, ▇▇▇▇ at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as shall be agreed upon by ▇▇▇▇, ▇▇▇▇ and the Company. Such
delivery and payment shall be made at 10:00 a.m. (New York City time)
on _______________, 1999 or at such other time and date as shall be
agreed upon by ▇▇▇▇, ▇▇▇▇ and the Company, but not less than three (3)
nor more than four (4) full business days after the effective date of
the Registration Statement (such time and date of payment and delivery
being herein called "Closing Date"). In addition, in the event that any
or all of the Option Securities are purchased by the Underwriters,
payment of the purchase price for, and delivery of certificates for,
such Option Securities shall be made at the above mentioned office of
Ryan, Beck, or at such other place as shall be agreed upon by ▇▇▇▇,
▇▇▇▇ and the Company on each Option Closing Date as specified in the
notice from ▇▇▇▇, ▇▇▇▇ to the Company. Delivery of the certificates for
the Firm Securities and the Option Securities, if any, shall be made to
the Underwriters against payment by the Underwriters, severally and not
jointly, of the purchase price for the Firm Securities and the Option
Securities, if any, by, at the discretion of the Underwriters,
certified or official bank check or checks drawn upon or by a New York
Clearing House bank and payable in next-day funds to the order of the
Company or the Selling Stockholder, as applicable, or wire transfer of
same-day funds according to instructions provided by the Company or the
Selling Stockholder, as applicable. In the event such option is
exercised, each of the Underwriters, acting severally and not jointly,
shall purchase that proportion of the total number of Option Securities
then being purchased which the number of Firm Securities set forth in
Schedule A hereto opposite the name of such Underwriter bears to the
total number of Firm Securities, subject in each case to such
adjustments as ▇▇▇▇, ▇▇▇▇ in its discretion shall make to eliminate any
sales or purchases of fractional shares. Certificates for the Firm
Securities and the Option Securities, if any, shall be in definitive,
fully registered form, shall bear no restrictive legends and shall be
in such denominations and registered in such names as the Underwriters
may request in writing at least two (2) business days prior to the
Closing Date or the relevant Option Closing Date, as the case may be.
The certificates for the Firm Securities and the Option Securities, if
any, shall be made available to the Representatives at such office or
such other place as the Representatives may designate for inspection,
checking and packaging no later than 9:30 a.m. on the last business day
prior to the Closing Date or the relevant Option Closing Date, as the
case may be.
14
(d) On the Closing Date, the Company shall issue and sell to the
Representatives Representatives' Warrants at a purchase price of $.001
per warrant, which warrants shall entitle the holders thereof to
purchase an aggregate of 250,000 shares of Common Stock. The
Representatives' Warrants shall be exercisable for a period of four (4)
years commencing one (1) year from the effective date of the
Registration Statement at a price equaling one hundred twenty percent
(120%) of the public offering price of the Shares. The Representatives'
Warrant Agreement and form of Warrant Certificate shall be
substantially in the form filed as Exhibit __ to the Registration
Statement. Payment for the Representatives' Warrants shall be made on
the Closing Date.
3. Public Offering of the Shares. As soon after the Registration Statement
becomes effective as the Representatives deem advisable, the Underwriters shall
make a public offering of the Shares (other than to residents of or in any
jurisdiction in which qualification of the Shares is required and has not become
effective) at the price and upon the other terms set forth in the Prospectus.
The Representatives may from time to time increase or decrease the public
offering price after distribution of the Shares has been completed to such
extent as the Representatives, in their sole discretion deem advisable. The
Underwriters may enter into one of more agreements as the Underwriters, in each
of their sole discretion, deem advisable with one or more broker-dealers who
shall act as dealers in connection with such public offering.
4. Covenants and Agreements of the Company and the Selling Stockholder.
The Company and the Selling Stockholder covenant and agree with each of the
Underwriters as follows:
(a) Each of the Company and the Selling Stockholder shall use its best
efforts to cause the Registration Statement and any amendments thereto
to become effective as promptly as practicable and will not at any
time, whether before or after the effective date of the Registration
Statement, file any amendment to the Registration Statement or
supplement to the Prospectus or file any document under the Act or
Exchange Act before termination of the offering of the Shares by the
Underwriters of which the Representatives shall not previously have
been advised and furnished with a copy, or to which the Representatives
shall have objected or which is not in compliance with the Act, the
Exchange Act or the Rules and Regulations.
(b) As soon as the Company is advised or obtains knowledge thereof, the
Company will advise the Representatives and confirm the notice in
writing (i) when the Registration Statement, as amended, becomes
effective, if the provisions of Rule 430A promulgated under the Act
will be relied upon, when the Prospectus has been filed in accordance
with said Rule 430A and when any post-effective amendment to the
Registration Statement becomes effective, (ii) of the issuance by the
Commission of any stop order or of the initiation, or the threatening,
of any proceeding, suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the
Preliminary Prospectus or the Prospectus, or any amendment or
supplement thereto, or the institution of proceedings for that
purpose, (iii) of the issuance by the Commission or by any state
securities commission of any proceedings for the suspension of the
qualification of any of
15
the Securities for offering or sale in any jurisdiction or of the
initiation, or the threatening, of any proceeding for that purpose,
(iv) of the receipt of any comments from the Commission; and (v) of any
request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information. If the Commission or any state securities
commission authority shall enter a stop order or suspend such
qualification at any time, each of the Company and the Selling
Stockholder will use its best efforts to obtain promptly the lifting of
such order or suspension.
(c) The Company shall file the Prospectus (in form and substance
satisfactory to the Representatives) or transmit the Prospectus by a
means reasonably calculated to result in filing with the Commission
pursuant to Rule 424(b)(1) (or, if applicable and if consented to by
the Representatives, pursuant to Rule 424(b)(4)) not later than the
Commission's close of business on the earlier of (i) the second
business day following the execution and delivery of this Agreement,
and (ii) the fifth business day after the effective date of the
Registration Statement.
(d) The Company will give the Representatives notice of its intention to
file or prepare any amendment to the Registration Statement (including
any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes
for use by the Underwriters in connection with the offering of the
Securities which differs from the corresponding prospectus on file at
the Commission at the time the Registration Statement becomes
effective, whether or not such revised prospectus is required to be
filed pursuant to Rule 424(b) of the Rules and Regulations), and will
furnish the Representatives with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file any such prospectus to which
the Representatives or ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ("Underwriters'
Counsel"), shall object.
(e) The Company and the Selling Stockholder shall endeavor in good faith,
in cooperation with the Representatives, at or prior to the time the
Registration Statement becomes effective, to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as
the Representatives may designate to permit the continuance of sales
and dealings therein for as long as may be necessary to complete the
distribution, and shall make such applications, file such documents and
furnish such information as may be required for such purpose; provided,
however, the Company shall not be required to qualify as a foreign
corporation or file a general or limited consent to service of process
in any such jurisdiction. In each jurisdiction where such qualification
shall be effected, the Company will, unless the Representatives agree
that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such
times as are or may reasonably be required by the laws of such
jurisdiction to continue such qualification.
(f) During the time when a prospectus is required to be delivered under the
Act, the Company shall use all reasonable efforts to comply with all
requirements imposed upon it
16
by the Act and the Exchange Act, as now and hereafter amended and by
the Rules and Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the
Securities in accordance with the provisions hereof and the Prospectus,
or any amendments or supplements thereto. If at any time when a
prospectus relating to the Securities is required to be delivered under
the Act, any event shall have occurred as a result of which, in the
opinion of counsel for the Company or Underwriters' Counsel, the
Prospectus, as then amended or supplemented, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the
Prospectus to comply with the Act, the Company will notify the
Representatives promptly and prepare and file with the Commission an
appropriate amendment or supplement in accordance with Section 10 of
the Act, each such amendment or supplement to be satisfactory to
Underwriters' Counsel, and the Company will furnish to the Underwriters
copies of such amendment or supplement as soon as available and in such
quantities as the Underwriters may request.
(g) As soon as practicable, but in any event not later than 45 days after
the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of
the Registration Statement occurs (90 days in the event that the end of
such fiscal quarter is the end of the Company's fiscal year), the
Company shall make generally available to its security holders, in the
manner specified in Rule 158(b) of the Rules and Regulations, and to
the Representatives, an earnings statement which will be in the detail
required by, and will otherwise comply with, the provisions of Section
11(a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a
period of at least 12 consecutive months after the effective date of
the Registration Statement.
(h) During a period of three years after the date hereof, the Company will
furnish to its stockholders, as soon as practicable, annual reports
(including financial statements audited by independent public
accountants) of earnings, and will deliver to the Representatives:
i) concurrently with furnishing such annual reports to its
stockholders, a balance sheet of the Company as at the end of
the preceding fiscal year, together with statements of
operations, stockholders equity, and cash flows of the Company
for such fiscal year, accompanied by a copy of the certificate
thereon of independent certified public accountants;
ii) as soon as they are available, copies of all reports (financial
or other) mailed to stockholders;
iii) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission,
the NASD or any securities exchange;
17
iv) every press release and every material news item or article of
interest to the financial community in respect of the Company
or its affairs which was released or prepared by or on behalf
of the Company; and
v) any additional information of a public nature concerning the
Company (and any future subsidiaries) or any of its businesses
which the Representatives may request.
During such three-year period, if the Company has active
subsidiaries, the foregoing financial statements will be on a
consolidated basis to the extent that the accounts of the
Company and its subsidiaries are consolidated, and will be
accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(i) The Company will maintain a transfer agent (the "Transfer Agent") and,
if necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the Transfer Agent) for its
Common Stock.
(j) The Company will furnish or cause to be furnished to the
Representatives, without charge, at such place as the Representatives
may designate, copies of each Preliminary Prospectus, the Registration
Statement and any pre-effective or post-effective amendments thereto
(two of which copies will be manually signed and will include all
financial statements and exhibits), the Prospectus, and all amendments
and supplements thereto, including any prospectus prepared after the
effective date of the Registration Statement, in each case as soon as
available and in such quantities as the Representatives may request.
(k) On or before the effective date of the Registration Statement, the
Company shall provide the Representatives with true copies of the
Lock-up Agreements, which shall have been duly executed, and which
shall be legally binding and enforceable. In addition, except as
provided in paragraph 4(r) hereof, during the thirteen (13) month
period commencing with the effective date of the Registration
Statement, the Company shall not, without the prior written consent of
Ryan, Beck, sell, contract or offer to sell, issue, transfer, assign,
pledge, distribute, or otherwise dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for shares of Common Stock (a "Disposition
of Securities"). Such prior written consent of ▇▇▇▇, ▇▇▇▇ shall not be
required in connection with a Disposition of Securities by the Company
for the purpose of (i) consummating one or more acquisitions of
unaffiliated entities (an "Unaffiliated Acquisition"), or (ii)
repayment of financing related to one or more Unaffiliated Acquisitions
(an "Acquisition Financing"). On or before the Closing Date, the
Company shall deliver instructions to the Transfer Agent authorizing it
to place appropriate legends on the certificates representing the
securities subject to the Lock-up Agreements and to place appropriate
stop transfer orders on the Company's ledgers.
18
(l) None of the Selling Stockholder, the Company or any of its officers,
directors, stockholders, nor any of their respective affiliates (within
the meaning of the Rules and Regulations) will take, directly or
indirectly, any action designed to, or which might in the future
reasonably be expected to cause or result in, stabilization or
manipulation of the price of any securities of the Company.
(m) The Company shall apply the net proceeds from the sale of the
Securities in the manner, and subject to the conditions, set forth
under "Use of Proceeds" in the Prospectus. No portion of the net
proceeds will be used, directly or indirectly, to acquire any
securities issued by the Company.
(n) The Company shall timely file all such reports, forms or other
documents as may be required (including, but not limited to, a Form SR
as may be required pursuant to Rule 463 under the Act) from time to
time, under the Act, the Exchange Act, and the Rules and Regulations,
and all such reports, forms and documents filed will comply as to form
and substance with the applicable requirements under the Act, the
Exchange Act, and the Rules and Regulations.
(o) The Company shall furnish to the Representatives as early as
practicable prior to each of the date hereof, the Closing Date and each
Option Closing Date, if any, but no later than two (2) full business
days prior thereto, a copy of the latest available unaudited interim
financial statements of the Company (which in no event shall be as of a
date more than thirty (30) days prior to the date of the Registration
Statement) which have been read by the Company's independent public
accountants as stated in their letters to be furnished pursuant to
Section 6(k) hereof.
(p) The Company shall cause the Securities to be listed on NASDAQ/NM and
for a period of three (3) years from the date hereof, use its best
efforts to maintain the NASDAQ/NM listing of the Securities to the
extent outstanding.
(q) As soon as practicable but in no event more than 10 business days
before the effective date of the Registration Statement, the Company
shall file a Form 8-A with the Commission providing for the
registration under the Exchange Act of the Securities.
(r) Except in connection with one or more Unaffiliated Acquisitions and/or
the repayment of Acquisition Financings one or more, in which case the
following restrictions shall not apply, the Company hereby agrees that
it will not for a period of 180 days from the effective date of the
Registration Statement (the "Restricted Period"), adopt, propose to
adopt or otherwise permit to exist any employee, officer, director
or consultant, compensation plan or arrangement permitting (i) the
grant, issue, sale or entry into any agreement to grant, issue or sell
any option, warrant or other contract right relating to the issuance of
shares of the Company (collectively, "Options") (x) at an exercise
price that is less than the fair market value on the date of grant or
sale or (y) to any of its executive officers or directors or to any
holder of 5% or more of the Common Stock (collectively, "Insiders"),
provided, however, that, except with regard to ▇▇. ▇▇▇▇▇▇▇,
and subject to the restriction set forth
19
in paragraph (4)(r)(x) hereof, Options may be granted by the Company
and/or Insiders to Insiders during the Restricted Period as long as no
vesting of shares occurs under any such Option until a date following
the expiration of the Restricted Period; and (ii) the maximum number of
shares of Common Stock or other securities of the Company purchasable
at any time during the Restricted Period pursuant to Options issued by
the Company to exceed 1,650,000 shares. Notwithstanding the foregoing,
it is expressly agreed that the Company is permitted to grant Options
to purchase up to an aggregate of 100,000 shares of Common Stock of the
Company to persons eligible to receive Options under the Company's 1999
Stock Option Plan, other than ▇▇. ▇▇▇▇▇▇▇, on or prior to the
consummation of the offering at the public offering price.
(s) Until the completion of the distribution of the Securities, the Company
and the Selling Stockholder shall not, without the prior written
consent of the ▇▇▇▇, ▇▇▇▇ and Underwriters' Counsel, issue, directly or
indirectly any press release or other communication or hold any press
conference with respect to the Company or its activities or the
offering contemplated hereby, other than trade releases issued in the
ordinary course of the Company's business consistent with past
practices with respect to the Company's operations.
(t) For a period equal to the lesser of seven (7) years from (i) the date
hereof, and (ii) the sale to the public of the Representatives'
Securities, the Company will not take any action or actions which may
prevent or disqualify the Company's use of Form S-1 (or other
appropriate form) for the registration under the Act of the
Representatives' Securities.
5. Payment of Expenses.
(a) The Company hereby agrees to pay on each of the Closing Date and the
Option Closing Date (to the extent not paid at the Closing Date) all
expenses and fees (other than fees of Underwriters' Counsel, except as
provided in (iv) below) incident to the performance of the obligations
of the Company under this Agreement and the Representatives' Warrant
Agreement, including, without limitation, (i) the fees and expenses of
accountants and counsel for the Company, (ii) all costs and expenses
incurred in connection with the preparation, duplication, printing
(including mailing and handling charges), filing, delivery and mailing
(including the payment of postage with respect thereto) of the
Registration Statement, and the Prospectus and any amendments and
supplements thereto and the printing, mailing (including the payment of
postage with respect thereto) and delivery of this Agreement, the
Representatives' Warrant Agreement and related documents, including the
cost of all copies thereof and of the Preliminary Prospectuses and of
the Prospectus and any amendments thereof or supplements thereto
supplied to the Underwriters and such dealers as the Underwriters may
request, in quantities as herein above stated, (iii) the printing,
engraving, issuance and delivery of the Securities including, but not
limited to (x) the purchase by the Underwriters of the Securities and
the purchase by the Representatives of the Representatives' Warrants
from the Company, (y) the consummation by the Company of any of its
obligations under this Agreement and the Representatives' Warrant
Agreement, and (z) resale of the Securities by the Underwriters
20
in connection with the distribution contemplated hereby, (iv) the
qualification of the Securities under state or foreign securities or
"Blue Sky" laws and determination of the status of such securities
under legal investment laws, including the costs of printing and
mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue
Sky Memorandum" and "Legal Investments Survey," if any, and
disbursements and fees of counsel in connection therewith, (v)
advertising costs and expenses, including but not limited to costs and
expenses in connection with the "road show," information meetings and
presentations, bound volumes and prospectus memorabilia and
"tomb-stone" advertisement expenses, (vi) costs and expenses in
connection with Company counsel's due diligence investigations,
including but not limited to the fees of any independent counsel or
consultant retained, (vii) fees and expenses of the transfer agent,
registrar and custodian, (viii) the fees payable to the Commission and
the NASD, and (ix) the fees and expenses incurred in connection with
the listing of the Securities on NASDAQ/NM and any other exchange.
(b) If this Agreement is terminated by the Underwriters in accordance with
the provisions of Section 6, 10(a) or 12, the Company shall reimburse
and indemnify the Representatives for all of their actual out-of-pocket
expenses, including the fees and disbursements of Underwriters'
Counsel, less any amounts already paid pursuant to Section 5(c) hereof.
(c) The Company further agrees that, in addition to the expenses payable
pursuant to subsection (a) of this Section 5, it will pay to the
Representatives on the Closing Date and on each Option Closing Date, if
any, by certified or bank cashiers check or, at the election of the
Representatives, by deduction from the proceeds of the offering
contemplated herein, a non-accountable expense allowance equal to one
percent (1%) and a financial advisor's fee equal to one percent (1%) of
the gross proceeds received from the sale of the Firm Securities and
the Option Securities, if any, as applicable, no portion of which has
been paid to date. The Selling Stockholder agrees to pay to the
Representatives on the Closing Date (by certified or bank cashiers
check or, at the Representative's election, by deduction from the
proceeds of the sale of the Selling Stockholder Shares) a
non-accountable expense allowance equal to one percent (1%) and a
financial advisor's fee equal to one percent (1%) of the gross proceeds
received from the sale of the Selling Stockholder Shares.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters hereunder shall be subject to the continuing accuracy of the
representations and warranties of the Company and the Selling Stockholder herein
as of the date hereof and as of the Closing Date and each Option Closing Date,
if any, as if they had been made on and as of the Closing Date or each Option
Closing Date, as the case may be; the accuracy on and as of the Closing Date or
Option Closing Date, if any, of the statements of the Selling Stockholder and
officers of the Company made pursuant to the provisions hereof; and the
performance by the Company and the Selling Stockholder on and as of the Closing
Date and each Option Closing Date, if any, of its covenants and obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall have become effective not later than
12:00 A.M., New York time, on the date of this Agreement or such later
date and time as shall be consented
21
to in writing by the Representatives, and, at the Closing Date and each
Option Closing Date, if any, no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceedings
for that purpose shall have been instituted or shall be pending or
contemplated by the Commission and any request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of Underwriters' Counsel. If the Company
has elected to rely upon Rule 430A of the Rules and Regulations, the
price of the Shares and any price-related information previously
omitted from the effective Registration Statement pursuant to such Rule
430A shall have been transmitted to the Commission for filing pursuant
to Rule 424(b) of the Rules and Regulations within the prescribed time
period, and prior to Closing Date the Company shall have provided
evidence satisfactory to the Representatives of such timely filing, or
a post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the
requirements of Rule 430A of the Rules and Regulations.
(b) The Representatives shall not have advised the Company that the
Registration Statement, or any amendment thereto, contains an untrue
statement of fact which, in the Representatives' opinion, is material,
or omits to state a fact which, in the Representatives' opinion, is
material and is required to be stated therein or is necessary to make
the statements therein not misleading, or that the Prospectus, or any
supplement thereto, contains an untrue statement of fact which, in the
Representatives' opinion, is material, or omits to state a fact which,
in the Representatives' opinion, is material and is required to be
stated therein or is necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(c) On or prior to the Closing Date, the Representatives shall have
received from Underwriters' Counsel, such opinion or opinions with
respect to the organization of the Company, the validity of the
Securities, the Registration Statement, the Prospectus and other
related matters as the Representatives may request and Underwriters'
Counsel shall have received such papers and information as they request
to enable them to pass upon such matters.
(d) At the Closing Date, the Underwriters shall have received the favorable
opinion of Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, LLP, counsel to the Company
("Company Counsel"), dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters, to
the effect that:
i) the Company (A) has been duly organized and is validly
existing as a corporation in good standing under the laws of
its jurisdiction, (B) is duly qualified and in good standing
as a foreign corporation in each jurisdiction in which its
ownership or leasing of any properties or the character of
its operations requires such qualification, except where the
failure to be so qualified would not have a material adverse
effect on the condition, financial or otherwise, or the
earnings, position, prospects, stockholders' equity, value,
operation, properties, business or results of operations of
the Company, and (C) other than with respect to health and
22
insurance law, as to which such counsel does not express an
opinion, has all requisite corporate power and authority, and
has obtained any and all necessary authorizations, approvals,
orders, licenses, certificates, franchises and permits of and
from all governmental or regulatory officials and bodies
(including, without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its
properties and conduct its business as described in the
Prospectus; to the best of such counsel's knowledge, except as
set forth in the Prospectus the Company is and has been doing
business in compliance with all such authorizations, approvals,
orders, licenses, certificates, franchises and permits and all
federal, state and local laws, rules and regulations; and, to
the best of such counsel's knowledge, the Company has not
received any notice of proceedings relating to the revocation
or modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in
the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially adversely affect the
business, operations, condition, financial or otherwise, or the
earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the
Company. Other than with respect to health and insurance law,
as to which such counsel does not express an opinion, the
disclosures in the Registration Statement concerning the
effects of federal and New York State laws, rules and
regulations on the Company's business as currently conducted
and as contemplated are correct in all material respects and do
not omit to state a material fact necessary to make the
statements contained therein not misleading in light of the
circumstances in which they were made.
ii) to the best of such counsel's knowledge, except as set forth in
the Prospectus the Company does not own an interest in any
corporation, partnership, joint venture, trust or other
business entity;
iii) the Company has a duly authorized, issued and outstanding
capitalization as set forth in the Prospectus, and any
amendment or supplement thereto, under "Capitalization," and
"Description of Capital Stock" and the Company is not a party
to or bound by any instrument, agreement or other arrangement
providing for it to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and the
Representatives' Warrant Agreement and as described in the
Prospectus. The Securities and all other securities issued or
issuable by the Company conform in all respects to all
statements with respect thereto contained in the Registration
Statement and the Prospectus. All issued and outstanding
securities of the Company have been duly authorized and validly
issued and are fully paid and non-assessable; the holders
thereof have no rights of rescission with respect thereto, and
are not subject to personal liability by reason of being such
holders; and, to the best of such counsel's knowledge, none of
such securities were issued in violation of the preemptive
rights of any holders of any security of the Company. The
Securities to be sold by the Company hereunder and under the
Representatives' Warrant Agreement are not and will not be
subject to any preemptive or other similar rights of any
stockholder, have been duly authorized
23
and, when issued, paid for and delivered in accordance with the
terms hereof, will be validly issued, fully paid and
non-assessable and conform to the description thereof contained
in the Prospectus; the holders thereof will not be subject to
any liability solely as such holders; all corporate action
required to be taken for the authorization, issue and sale of
the Securities has been duly and validly taken; and the
certificates representing the Securities are in due and proper
form. The Representatives' Warrants constitute valid and
binding obligations of the Company to issue and sell, upon
exercise thereof and payment therefor, the number and type of
securities of the Company called for thereby. Upon the issuance
and delivery pursuant to this Agreement of the Securities to be
sold by the Company, the Underwriters and the Representatives,
respectively, will acquire good and marketable title to the
Securities free and clear of any Lien of any kind whatsoever,
except for any Lien granted by the Underwriters or the
Representatives, as applicable. No transfer tax is payable by
or on behalf of the Underwriters in connection with (A) the
issuance by the Company of the Securities, (B) the purchase by
the Underwriters and the Representatives of the Securities from
the Company, (C) the consummation by the Company of any of its
obligations under this Agreement or the Representatives'
Warrant Agreement, or (D) resales of the Securities in
connection with the distribution contemplated hereby.
iv) the Registration Statement is effective under the Act, and, if
applicable, filing of all pricing information has been timely
made in the appropriate form under Rule 430A, and, to the best
of such counsel's knowledge, no stop order suspending the use
of the Preliminary Prospectus, the Registration Statement or
the Prospectus or any part of any thereof or suspending the
effectiveness of the Registration Statement has been issued,
and, to the best of such counsel's knowledge, no proceedings
for that purpose have been instituted or are pending or, to the
best of such counsel's knowledge, threatened or contemplated
under the Act;
v) each of the Preliminary Prospectus, the Registration Statement,
and the Prospectus and any amendments or supplements thereto
(other than the financial statements and other financial and
statistical data included therein, as to which no opinion need
be rendered) comply as to form in all material respects with
the requirements of the Act and the Rules and Regulations. Such
counsel shall state that such counsel has participated in
conferences with officers and other representatives of the
Company and representatives of the independent public
accountants for the Company, at which conferences such counsel
made inquiries of such officers, representatives and
accountants and discussed the contents of the Preliminary
Prospectus, the Registration Statement, the Prospectus, and
related matters were discussed and, although such counsel is
not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained
in the Preliminary Prospectus, the Registration Statement, and
the Prospectus, on the basis of the foregoing, no facts have
come to the attention of such counsel which lead them to
believe that either the Registration Statement or
24
any amendment thereto, at the time such Registration Statement
or amendment became effective or the Preliminary Prospectus or
the Prospectus or amendment or supplement thereto as of the
date of such opinion contained any untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they were
made (it being understood that such counsel need express no
opinion with respect to the financial statements and schedules
and other financial and statistical data included in the
Preliminary Prospectus, the Registration Statement or the
Prospectus).
vi) to the best of such counsel's knowledge after due inquiry, (A)
there are no agreements, contracts or other documents required
by the Act to be described in the Registration Statement and
the Prospectus and filed as exhibits to the Registration
Statement other than those described in the Registration
Statement (or required to be filed under the Exchange Act if
upon such filing they would be incorporated, in whole or in
part, by reference therein) and the Prospectus and filed as
exhibits thereto, and the exhibits which have been filed are
correct copies of the documents of which they purport to be
copies; (B) the descriptions in the Registration Statement and
the Prospectus and any supplement or amendment thereto of
contracts and other documents to which the Company is a party
or by which it is bound, including any document to which the
Company is a party or by which it is bound, incorporated by
reference into the Prospectus and any supplement or amendment
thereto, are accurate and fairly represent the information
required to be shown by Form S-l in all material respects; (C)
there is not pending or threatened against the Company any
action, arbitration, suit, proceeding, inquiry, investigation,
litigation, governmental or other proceeding (including,
without limitation, those having jurisdiction over
environmental or similar matters), domestic or foreign, pending
or threatened against (or circumstances that may give rise to
the same), or involving the properties or business of the
Company which (x) is required to be disclosed in the
Registration Statement which is not so disclosed (and such
proceedings as are summarized in the Registration Statement are
accurately summarized in all respects), (y) questions the
validity of the capital stock of the Company or this Agreement
or the Representatives' Warrant Agreement, or of any action
taken or to be taken by the Company pursuant to or in
connection with any of the foregoing; (D) other than with
respect to health and insurance law, as to which such counsel
does not express an opinion, no statute or regulation or legal
or governmental proceeding required to be described in the
Prospectus is not described as required; and (E) there is no
action, suit or proceeding pending or threatened against or
affecting the Company before any court or arbitrator or
governmental body, agency or official (or any basis thereof
known to such counsel) in which there is a reasonable
possibility of an adverse decision which may result in a
material adverse change in the condition, financial or
otherwise, or the earnings, position, prospects, stockholders
equity, value, operation, properties, business or results of
operations of the Company which could adversely affect the
present or prospective ability of
25
the Company to perform its obligations under this Agreement or
the Representatives' Warrant Agreement or which in any manner
draws into question the validity or enforceability of this
Agreement or the Representatives' Warrant Agreement.
vii) the Company has full corporate power and authority to enter
into each of this Agreement and the Representatives' Warrant
Agreement, and to consummate the transactions provided for
therein; and each of this Agreement and the Representatives'
Warrant Agreement has been duly authorized, executed and
delivered by the Company. Each of this Agreement and the
Representatives' Warrant Agreement, assuming due authorization,
execution and delivery by each other party thereto, constitutes
a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors'
rights and the application of equitable principles in any
action, legal or equitable, and except as rights to indemnity
or contribution may be limited by applicable law), and none of
the Company's execution or delivery of this Agreement or the
Representatives' Warrant Agreement, its performance hereunder
or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes
or will constitute a default under, or result in the creation
or imposition of any Lien, of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company
pursuant to the terms of (A) the articles of incorporation or
by-laws of the Company, (B) any license, contract, indenture,
mortgage, deed of trust, voting trust agreement, stockholder's
agreement, note, loan or credit agreement or any other
agreement or instrument to which the Company is a party or by
which it is or may be bound or to which any of its properties
or assets (tangible or intangible) is or may be subject, or any
indebtedness, known to such counsel, or (C) other than with
respect to health and insurance law, as to which such counsel
does not express an opinion, any statute, judgment, decree,
order, rule or regulation applicable to the Company of any
arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over
the Company or any of its activities or properties.
viii) except as described in the Prospectus, no consent, approval,
authorization or order, and no filing with, any court,
regulatory body, government agency or other body (other than
such as may be required under Blue Sky laws, as to which no
opinion need be rendered) is required in connection with the
issuance of the Securities pursuant to the Prospectus or the
Registration Statement, the performance of this
26
Agreement and the Representatives' Warrant Agreement and the
transactions contemplated hereby and thereby;
ix) the properties and business of the Company conform to the
description thereof contained in the Registration Statement and
the Prospectus in all material respects; and to the best of
such counsel's knowledge, the Company has good and marketable
title to, or valid and enforceable leasehold estates in, all
items of real and personal property stated in the Prospectus to
be owned or leased by it, in each case free and clear of all
Liens of any kind whatsoever, other than those referred to in
the Prospectus and Liens for taxes not yet due and payable;
x) the statements in the Prospectus under "RISK FACTORS,"
"BUSINESS," "MANAGEMENT," "PRINCIPAL AND SELLING STOCKHOLDERS,"
"CERTAIN TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and
"SHARES ELIGIBLE FOR FUTURE SALE" have been reviewed by such
counsel, and, other than with respect to health and insurance
law, as to which such counsel does not express an opinion,
insofar as they refer to statements of law, descriptions of
statutes, licenses, rules or regulations or legal conclusions,
are correct in all material respects;
xi) the Securities have been accepted for quotation by NASDAQ/NM;
xii) to the best of such counsel's knowledge, the Company owns or
possesses, free and clear of all Liens and rights thereto or
therein by third parties, the requisite licenses or other
rights to use all trademarks, service marks, copyrights,
service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including, without
limitation any such licenses or rights described in the
Prospectus as being owned or possessed by the Company), and to
the best of such counsel's knowledge after due inquiry, there
is no claim or action by or against any person pertaining to,
or proceeding, pending, or threatened, which challenges the
exclusive rights of the Company with respect to any trademarks,
service marks, copyrights, service names, trade names, patents,
patent applications and the licenses used in the conduct of the
Company's businesses (including, without limitation, any such
licenses or rights described in the Prospectus as being owned
or possessed by the Company);
xiii) to the best of such counsel's knowledge, the persons listed
under the caption "PRINCIPAL AND SELLING STOCKHOLDERS" in the
Prospectus are the respective "beneficial owners" (as such
phrase is defined in Rule 13d-3 under the Rules and
Regulations) of the securities set forth opposite their
respective names thereunder as and to the extent set forth
therein;
xiv) to the best of such counsel's knowledge, except as described in
the Prospectus, no person, corporation, trust, partnership,
association or other entity has the right to include and/or
register any securities of the Company in the Registration
27
Statement, require the Company to file any registration
statement or, if filed, to include any security in such
registration statement;
xv) to the best of such counsel's knowledge, except as described in
the Prospectus, there are no claims, payments, issuances,
arrangements or understandings for services in the nature of a
finders or origination fee with respect to the sale of the
Securities hereunder or financial consulting arrangement or any
other arrangements, agreements, understandings, payments or
issuances that may affect the Underwriters' compensation, as
determined by the NASD;
xvi) assuming due execution by the parties thereto other than the
Company, the Lock-up Agreements are legal, valid and binding
obligations of the parties thereto, enforceable against such
parties and any subsequent holders of the securities subject
thereto in accordance with their terms; and
xvii) such counsel has reviewed the opinion (the "Regulatory
Opinion") of Ruskin Moscou ▇▇▇▇▇ & Faltischek, P.C., special
counsel to the Company with respect to health, insurance,
licensing and certain other regulatory matters, dated the
Closing Date and addressed to the Underwriters, such counsel
believes that the Underwriters are justified in relying on the
Regulatory Opinion.
In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws other than the laws
of the United States and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the
extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance satisfactory to Underwriters'
Counsel) of other counsel acceptable to Underwriters' Counsel,
familiar with the applicable laws; (B) as to matters of fact,
to the extent they deem proper, on certificates and written
statements of responsible officers of the Company and
certificates or other written statements of officers of
departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing
of the Company, provided that copies of any such statements or
certificates shall be delivered to Underwriters' Counsel, if
requested. The opinion of such counsel for the Company shall
state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Representatives and
they are justified in relying thereon.
(e) At the Closing Date, the Underwriters shall have received the favorable
opinion of Ruskin Moscou ▇▇▇▇▇ & Faltischek, P.C., special counsel to
the Company with respect to health, insurance, licensing and certain
other regulatory matters ("Regulatory Counsel"), dated the Closing
Date, addressed to the Underwriters and in form and substance
satisfactory to Underwriters' Counsel to the effect that:
28
i) the Company is duly licensed in each jurisdiction in which its
ownership or leasing of any properties or the character of its
operations requires such licensing, and has obtained any and
all necessary authorizations, approvals, orders, licenses,
certificates, franchises and permits of and from all
governmental or regulatory officials and bodies (including,
without limitation, those having jurisdiction over
environmental or similar matters), to own or lease its
properties and conduct its business as described in the
Prospectus; except as set forth in the Prospectus, the Company
is and has been doing business in compliance with all such
authorizations, approvals, orders, licenses, certificates,
franchises and permits and all federal, state and local laws,
rules and regulations; and, the Company has not received any
notice of proceedings relating to the revocation or
modification of any such authorization, approval, order,
license, certificate, franchise, or permit which, singly or in
the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially adversely affect the
business, operations, condition, financial or otherwise, or the
earnings, business affairs, position, prospects, value,
operation, properties, business or results of operations of the
Company;
ii) the disclosures in the Registration Statement concerning the
effects of federal, state and local laws, rules and regulations
on the Company's business as currently conducted and as
contemplated are correct in all material respects and do not
omit to state a fact necessary to make the statements contained
therein not misleading in light of the circumstances in which
they were made;
iii) to the best of such counsel's knowledge after due inquiry, no
statute or regulation or legal or governmental proceeding
required to be described in the Prospectus is not described as
required;
iv) none of the Company's execution or delivery of this Agreement
or the Representatives' Warrant Agreement, its performance
hereunder or thereunder, its consummation of the transactions
contemplated herein or therein, or the conduct of its business
as described in the Registration Statement, the Prospectus, and
any amendments or supplements thereto, conflicts with or will
conflict with or results or will result in any breach or
violation of any of the terms or provisions of, or constitutes
or will constitute a default under, or result in the creation
or imposition of any Lien, of any kind whatsoever upon, any
property or assets (tangible or intangible) of the Company
pursuant to the terms of any statute, judgment, decree, order,
rule or regulation applicable to the Company of any arbitrator,
court, regulatory body or administrative agency or other
governmental agency or body (including, without limitation,
those having jurisdiction over environmental or similar
matters), domestic or foreign, having jurisdiction over the
Company or any of its activities or properties.
v) the statements in the Prospectus under the "RISK FACTORS" and
"BUSINESS" headings have been reviewed by such counsel, and
insofar as they relate to health, insurance, licensing and
regulatory matters (including, without limitation, federal
29
health care law and the laws and applicable regulations of the
State of New York regarding the health care and insurance
industry), descriptions of statutes, licenses, rules or
regulations, or legal conclusions, are correct in all respects;
and
vi) the statements in the Prospectus under the "RISK FACTORS" and
"BUSINESS" headings have been reviewed by such counsel, and
insofar as they relate to health, insurance, licensing and
regulatory matters (including, without limitation, federal
health care law and the laws and applicable regulations of the
State of New York regarding the health care and insurance
industry) do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were
made.
(f) At each Option Closing Date, if any, the Underwriters shall have
received the favorable opinions of Company Counsel and Regulatory
Counsel, dated the Option Closing Date, addressed to the Underwriters
and in form and substance satisfactory to Underwriters' Counsel
confirming as of each Option Closing Date the statements made by each
of Company Counsel and Regulatory Counsel in their respective opinions
delivered on the Closing Date.
(g) On or prior to each of the Closing Date and the Option Closing Date, if
any, Underwriters' Counsel shall have been furnished such documents,
certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to
in subsection (c) of this Section 6, or in order to evidence the
accuracy, completeness or satisfaction of any of the representations,
warranties or conditions of the Company, or herein contained.
(h) Prior to each of the Closing Date and each Option Closing Date, if any
(i) there shall have been no adverse change or development involving a
prospective change in the condition, financial or otherwise, prospects,
stockholders equity or the business activities of the Company, whether
or not in the ordinary course of business consistent with past
practice, from the latest dates as of which such condition is set forth
in the Registration Statement and the Prospectus; (ii) there shall have
been no transaction, not in the ordinary course of business, consistent
with past practice, entered into by the Company, from the latest date
as of which the financial condition of the Company is set forth in the
Registration Statement and the Prospectus which is adverse to the
Company; (iii) the Company shall not be in default under any provision
of any instrument relating to any outstanding indebtedness; (iv) the
Company shall not have issued any securities (other than the
Securities) or declared or paid any dividend or made any distribution
in respect of its capital stock of any class and there has not been any
change in the capital stock or any change in the debt (long or short
term) or liabilities or obligations of the Company (contingent or
otherwise); (v) no material amount of the assets of the Company shall
have been pledged or mortgaged, except as set forth in the Registration
Statement and the Prospectus; (vi) no action, suit or proceeding, at
law or in equity, shall have been pending or threatened (or
circumstances giving rise to same) against the Company, or affecting
30
any of its properties or businesses before or by any court or federal,
state or foreign commission, board or other administrative agency
wherein an unfavorable decision, ruling or finding may adversely affect
the business, operations, prospects or financial condition or income of
the Company, except as set forth in the Registration Statement and the
Prospectus; and (vii) no stop order shall have been issued under the
Act and no proceedings therefor shall have been initiated, threatened
or contemplated by the Commission.
(i) At each of the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received a certificate of the Company signed by
the principal executive officer and by the chief financial or chief
accounting officer of the Company, and a certificate of the Selling
Stockholder, each dated the Closing Date or Option Closing Date, as the
case may be, to the effect that each of such persons has carefully
examined the Registration Statement, the Prospectus and this Agreement,
and that:
i) The representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the
Closing Date or the Option Closing Date, as the case may be,
and the Company has complied with all agreements and covenants
and satisfied all conditions contained in this Agreement on its
part to be performed or satisfied at or prior to the Closing
Date or Option Closing Date, as the case may be;
ii) No stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued, and no
proceedings for that purpose have been instituted or are
pending or, to the best of each of such person's knowledge
after due inquiry, are contemplated or threatened under the
Act;
iii) The Registration Statement and the Prospectus and, if any, each
amendment and each supplement thereto, contain all statements
and information required to be included therein, and none of
the Registration Statement, the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading and neither the Preliminary Prospectus or any
supplement thereto included any untrue statement of a material
fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading; and
iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (a) the
Company has not incurred up to and including the Closing Date
or the Option Closing Date, as the case may be, other than in
the ordinary course of its business consistent with past
practice, any material liabilities or obligations, direct or
contingent; (b) the Company has not paid or declared any
dividends or other distributions on its capital stock; (c) the
Company has not entered into any transactions not in the
ordinary course of
31
business consistent with past practice; (d) there has not been
any change in the capital stock or long-term debt or any
increase in the short-term borrowings (other than any increase
in the short-term borrowings in the ordinary course of business
consistent with past practice) of the Company; (e) the Company
has not sustained any loss or damage to its property or assets,
whether or not insured; (f) there is no litigation which is
pending or threatened (or circumstances giving rise to same)
against the Company or any affiliated party of the Company
which is required to be set forth in an amended or supplemented
Prospectus which has not been set forth; and (g) there has
occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been set forth.
References to the Registration Statement and the Prospectus in
this subsection (i) are to such documents as amended and
supplemented at the date of such certificate.
(j) By the Closing Date, the Underwriters will have received clearance from
the NASD as to the amount of compensation allowable or payable to the
Underwriters, as described in the Registration Statement.
(k) At the time this Agreement is executed, the Underwriters shall have
received a letter, dated the date hereof, addressed to the Underwriters
in form and substance satisfactory (including the non-material nature
of the changes or decreases, if any, referred to in clause (iii) below)
in all respects to the Underwriters and Underwriters' Counsel, from BDO
▇▇▇▇▇▇▇, LLP:
i) confirming that they are independent certified public
accountants with respect to the Company within the meaning of
the Act and the applicable Rules and Regulations;
ii) stating that it is their opinion that the consolidated
financial statements and supporting schedules of the Company
included in the Registration Statement comply as to form in all
material respects with the applicable accounting requirements
of the Act and the Rules and Regulations thereunder and that
the Representatives may rely upon the opinion of BDO ▇▇▇▇▇▇▇,
LLP with respect to the financial statements and supporting
schedules included in the Registration Statement;
iii) stating that, on the basis of a limited review which included a
reading of the latest available unaudited interim consolidated
financial statements of the Company (with an indication of the
date of the latest available unaudited interim financial
statements), a reading of the latest available minutes of the
stockholders and board of directors and the various committees
of the boards of directors of the Company, consultations with
officers and other employees of the Company responsible for
financial and accounting matters and other specified procedures
and inquiries,
32
nothing has come to their attention which would lead them to
believe that (A) the pro forma financial information contained
in the Registration Statement and the Prospectus does not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Rules and
Regulations or is not fairly presented in conformity with
generally accepted accounting principles applied on a basis
consistent with that of the audited consolidated financial
statements of the Company or the unaudited pro forma financial
information included in the Registration Statement, (B) the
unaudited financial statements and supporting schedules of the
Company included in the Registration Statement do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or are
not fairly presented in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with that of the audited consolidated financial
statements of the Company included in the Registration
Statement, or (C) at a specified date not more than five (5)
days prior to the effective date of the Registration Statement,
there has been any change in the capital stock or long-term
debt of the Company, or any decrease in the stockholders'
equity or net current assets or net assets of the Company as
compared with amounts shown in the balance sheet included in
the Registration Statement, other than as set forth in or
contemplated by the Registration Statement, or, if there was
any change or decrease, setting forth the amount of such change
or decrease, and (D) during the period from ________ to a
specified date not more than five (5) days prior to the
effective date of the Registration Statement, there was any
decrease in net revenues, net earnings or increase in net
earnings per common share of the Company, in each case as
compared with the corresponding period beginning
__________other than as set forth in or contemplated by the
Registration Statement, or, if there was any such decrease,
setting forth the amount of such decrease;
iv) setting forth at a date not later than five (5) days prior to
the date of the Registration Statement, the amount of
liabilities of the Company (including a break-down of any notes
payable);
v) stating that they have compared specific dollar amounts,
numbers of shares, percentages of revenues and earnings,
statements and other financial information pertaining to the
Company set forth in the Prospectus in each case to the extent
that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records,
including work sheets, of the Company and excluding any
questions requiring an interpretation by legal counsel, with
the results obtained from the application of specified
readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with
generally accepted auditing standards), set forth in the letter
and found them to be in agreement;
vi) stating that they have not during the immediately preceding
five (5) year period brought to the attention of any of the
Company's management any "weakness," as
33
defined in Statement of Auditing Standard No. 60 "Communication
of Internal Control Structure Related Matters Noted in an
Audit," in any of the Company's internal controls;
vii) stating that they have in addition carried out certain
specified procedures, not constituting an audit, with respect
to certain pro forma financial information which is included in
the Registration Statement and the Prospectus and that nothing
has come to their attention as a result of such procedures that
caused them to believe such unaudited pro forma financial
information does not comply in form in all respects with the
applicable accounting requirements of Rule 11-02 of Regulation
S-X or that the pro forma adjustments have not been properly
applied to the historical amounts in the compilation of that
information; and
viii) statements as to such other matters incident to the transaction
contemplated hereby as the Representatives may request.
(l) At the Closing Date and each Option Closing Date, if any, the
Underwriters shall have received from BDO ▇▇▇▇▇▇▇, LLP a letter, dated
as of the Closing Date or the Option Closing Date, as the case may be,
to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (k) of this Section, except that the
specified date referred to shall be a date not more than five days
prior to Closing Date or the Option Closing Date, as the case may be,
and, if the Company has elected to rely on Rule 430A of the Rules and
Regulations, to the further effect that they have carried out
procedures as specified in clause (v) of subsection (k) of this Section
with respect to certain amounts, percentages and financial information
as specified by the Representatives and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with
the records specified in such clause (v).
(m) On each of the Closing Date and each Option Closing Date, if any, there
shall have been duly tendered to the Representatives for the several
Underwriters' accounts the appropriate number of Securities.
(n) No order suspending the sale of the Securities in any jurisdiction
designated by the Representatives pursuant to subsection (e) of Section
4 hereof shall have been issued on either the Closing Date or the
Option Closing Date, if any, and no proceedings for that purpose shall
have been instituted or shall be contemplated.
(o) On or before the Closing Date, the Company shall have executed and
delivered to the Representatives (i) the Representatives' Warrant
Agreement substantially in the form filed as Exhibit ______ to the
Registration Statement in final form and substance satisfactory to the
Representatives, and (ii) the Representatives' Warrants in such
denominations and to such designees as shall have been provided to the
Company.
34
(p) On or before Closing Date, the Securities shall have been duly approved
for quotation on NASDAQ/NM, subject to official notice of issuance.
(q) On or before Closing Date, there shall have been delivered to the
Representatives all of the Lock-up Agreements, in form and substance
satisfactory to Underwriters' Counsel.
(r) At the Closing Date the Underwriters shall have received the favorable
opinion of Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, LLP, with respect to the
Selling Stockholder, dated the Closing Date, addressed to the
Underwriters and in form and substance satisfactory to Underwriters'
Counsel, to the effect that:
i) this Agreement, the Power of Attorney and the Custody Agreement
have been duly and validly executed and delivered by the
Selling Stockholder, and are the valid and binding obligation
of the Selling Stockholder, enforceable against the Selling
Stockholder in accordance with their terms;
ii) the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby,
including the issuance, sale and delivery of the Securities,
will not result in a breach or violation of, or constitute a
default under, any will, license, contract, indenture,
mortgage, voting trust agreement, stockholders' agreement, deed
of trust, note, loan or credit agreement, or other agreement or
instrument to which the Selling Stockholder is a party or by
which the Selling Stockholder is or may be bound or to which
any of the Selling Stockholder's property is or may be subject
or any indebtedness, statute, judgment, decree, order, rule or
regulation applicable to the Selling Stockholder of any
arbitrator, court, regulatory body or administrative agency or
other governmental agency or body (including, without
limitation, those having jurisdiction over environmental or
similar matters), domestic or foreign, having jurisdiction over
the Selling Stockholder or any of its activities or properties;
iii) to the best of such counsel's knowledge, no consent, approval,
authorization, order, registration, filing, qualification,
license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction
over the Selling Stockholder, or any of its properties or
assets is required for the execution, delivery and performance
of this Agreement, and the consummation of the transactions
contemplated hereby, including the issuance, sale and delivery
of the Securities, except the registration under the Act of the
Securities and such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses and
permits as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the
Securities to be sold by the Underwriters; and
iv) upon delivery of the Securities, and the receipt of payment
therefor pursuant hereto, good, valid and marketable title to
such Securities, free and clear of all
35
Liens, stockholders' agreements, voting trusts, community
property rights, or defects in title whatsoever will pass to
the Underwriters.
(s) At the Closing Date and each Option Closing Date, if any, the
Representatives shall have received a certificate of the
Attorney-in-Fact for the Selling Stockholder, dated as of such date, to
the effect that (i) the representations and warranties of the Selling
Stockholder contained herein and in the Custody Agreement are true and
correct with the same force and effect as though expressly made at and
as of such Closing Date or Option Closing Date, as the case may be,
(ii) the Selling Stockholder has reviewed the Prospectus, and any
supplements thereto, and the information that is set forth in the
Prospectus, and any supplements thereto, does not contain any untrue
statement of a material fact or omit to state any material fact
necessary to make such information not misleading, and all of the
information furnished by or on behalf of the Selling Stockholder for
use in the Prospectus is true, correct and complete in all respects.
If any condition to the Underwriters' obligations hereunder to be fulfilled
prior to or at the Closing Date or the relevant Option Closing Date, as the case
may be, is not so fulfilled, the Representatives may terminate this Agreement
or, if the Representatives so elect, they may waive any such conditions which
have not been fulfilled or extend the time for their fulfillment.
7. Indemnification.
(a) The Company and the Selling Stockholder jointly and severally agree to
indemnify and hold harmless each of the Underwriters (for purposes of
this Section 7 "Underwriter" shall include the officers, directors,
stockholders, partners, employees, agents and counsel of the
Underwriter, including specifically each person who may be substituted
for an Underwriter as provided in Section 11 hereof), and each person,
if any, who controls the Underwriter (a "controlling person") within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, from and against any and all losses, claims, damages, expenses or
liabilities, joint or several (and actions in respect thereof),
whatsoever (including but not limited to any and all expenses
whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever), as
such are incurred, to which the Underwriter or such controlling person
may become subject under the Act, the Exchange Act or any other statute
or at common law or otherwise or under the laws of foreign countries,
arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time
to time amended and supplemented); (ii) in any post-effective amendment
or amendments or any new registration statement and prospectus in which
is included securities of the Company issued or issuable upon exercise
of the Securities; or (iii) in any application or other document or
written communication (in this Section 7 collectively called
"application") executed by the Company or based upon written
information furnished by the Company in any jurisdiction in order to
qualify the Securities under the securities laws thereof or filed with
the Commission, any state securities commission or agency, NASDAQ/NM or
any other securities exchange; or the omission or alleged omission
36
therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading (in the case of the
Prospectus, in the light of the circumstances under which they were
made), unless such statement or omission was made exclusively in
reliance upon and in conformity with written information furnished to
the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, or in any application, as the case may be, or if
the Company sustains the burden of proving that such person was not
sent or given a copy of the Prospectus (or the Prospectus as amended or
supplemented) at or prior to the written confirmation of the sale of
such Securities to such person and the untrue statement contained in or
omission from such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented).
The indemnity agreement in this subsection (a) shall be in addition to
any liability which the Company or the Selling Stockholder may have at
common law or otherwise.
(b) Each of the Underwriters agrees severally, but not jointly, to
indemnify and hold harmless the Selling Stockholder and/or the Company,
each of its directors, each of its officers who has signed the
Registration Statement, and each other person, if any, who controls the
Company within the meaning of the Act, to the same extent as the
foregoing indemnity from the Company and the Selling Stockholder to the
Underwriters but only with respect to statements or omissions, if any,
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any amendment thereof or supplement thereto or in any
application made in reliance upon, and in strict conformity with,
written information furnished to the Company with respect to any
Underwriter by such Underwriter expressly for use in such Preliminary
Prospectus, the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto or in any such application,
provided that such written information or omissions only pertain to
disclosures in the Preliminary Prospectus, the Registration Statement
or the Prospectus directly relating to the transactions effected by the
Underwriters in connection with this offering. Each of the Company and
the Selling Stockholder acknowledge that the statements with respect to
the public offering of the Securities set forth under the heading
"Underwriting" in the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only
information furnished in writing by or on behalf of the Underwriters
for inclusion in the Prospectus.
(c) Promptly after receipt by an indemnified party under this Section 7 of
notice of the commencement of any action, suit or proceeding, such
indemnified party shall, if a claim in respect thereof is to be made
against one or more indemnifying parties under this Section, notify
each party against whom indemnification is to be sought in writing of
the commencement thereof (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section 7 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may
have otherwise). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party or parties of
the commencement thereof, the
37
indemnifying party or parties will be entitled to participate therein,
and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from
such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to
employ its or their own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have
been authorized in writing by the indemnifying party in connection with
the defense of such action at the expense of such indemnifying party,
(ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to such indemnified party to have charge of the defense of
such action within a reasonable period of time after notice of
commencement of the action, or (iii) such indemnified party or parties
shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to
one or all of the indemnifying parties (in which case the indemnifying
parties shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events
such fees and expenses of additional counsel shall be borne by the
indemnifying parties. Anything in this Section 7 to the contrary
notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its written consent;
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for just and equitable contribution in any case in
which (i) an indemnified party makes a claim for indemnification
pursuant to this Section 7, but it is judicially determined (by the
entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in
such case notwithstanding the fact that the express provisions of this
Section 7 provide for indemnification in such case, or (ii)
contribution under the Act may be required on the part of any
indemnified party, then each indemnifying party shall contribute to the
amount paid as a result of such losses, claims, damages, expenses or
liabilities (or actions in respect thereof) (A) in such proportion as
is appropriate to reflect the relative benefits received by each of the
contributing parties, on the one hand, and the party to be indemnified
on the other hand, from the offering of the Securities or (B) if the
allocation provided by clause (A) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above, but also the
relative fault of each of the contributing parties, on the one hand,
and the party to be indemnified on the other hand, in connection with
the statements or omissions that resulted in such losses, claims,
damages, expenses or liabilities, as well as any other relevant
equitable considerations. In any case where each of the Company and the
Selling Stockholder is a contributing party and the Underwriters are
the indemnified party, the relative benefits received by each of the
Company and the Selling Stockholder on the one hand, and the
Underwriters, on the other, shall be deemed to be in the same
proportion as the total net proceeds from the offering of the
Securities (before deducting expenses) bear to the total underwriting
discounts received by the Underwriters hereunder, in each case as set
forth in the table on the cover page of the Prospectus. Relative fault
shall be determined by reference to,
38
among other things, whether the 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 Company, the Selling
Stockholder or by the Underwriters, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses
or liabilities (or actions in respect thereof) referred to above in
this subdivision (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (d) the Underwriters
shall not be required to contribute any amount in excess of the
underwriting discount applicable to the Securities purchased by the
Underwriters hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 7, each
person, if any, who controls the Company within the meaning of the Act,
each officer of the Company who has signed the Registration Statement,
and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to this subparagraph
(d). Any party entitled to contribution will, promptly after receipt of
notice of commencement of any action, suit or proceeding against such
party in respect to which a claim for contribution may be made against
another party or parties under this subparagraph (d), notify such party
or parties from whom contribution may be sought, but the omission so to
notify such party or parties shall not relieve the party or parties
from whom contribution may be sought from any obligation it or they may
have hereunder or otherwise than under this subparagraph (d), or to the
extent that such party or parties were not adversely affected by such
omission. The contribution agreement set forth above shall be in
addition to any liabilities which any indemnifying party may have at
common law or otherwise.
8. Representations and Agreements to Survive Delivery. All representations,
warranties and agreements contained in this Agreement or contained in
certificates of the Selling Stockholder or officers of the Company submitted
pursuant hereto, shall be deemed to be representations, warranties and
agreements at the Closing Date and the Option Closing Date, as the case may be,
and such representations, warranties and agreements of the Company and the
Selling Stockholder, and the respective indemnity agreements contained in
Section 7 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter, the Company, or
any controlling person of any Underwriter or the Company, or the Selling
Stockholder, and shall survive termination of this Agreement or the issuance and
delivery of the Securities to the Underwriters and the Representatives, as the
case may be.
9. Effective Date.
(a) This Agreement shall become effective at 10:00 a.m., New York City time, on
the next full business day following the date hereof, or at such earlier time
after the Registration Statement becomes effective as the Representatives, in
their discretion, shall release the Securities for the sale to the public;
provided, however, that the provisions of Sections 5, 7 and 10 of this
39
Agreement shall at all times be effective. For purposes of this Section 9, the
Securities to be purchased hereunder shall be deemed to have been so released
upon the earlier of dispatch by the Representatives of telegrams to securities
dealers releasing such shares for offering or the release by the Representatives
for publication of the first newspaper advertisement which is subsequently
published relating to the Securities.
10. Termination.
(a) Subject to subsection (b) of this Section 10, the Representatives shall
have the right to terminate this Agreement if (i) any domestic or
international event or act or occurrence has disrupted, or in the
Representatives' opinion will in the immediate future disrupt the
financial markets; or (ii) any material adverse change in the financial
markets shall have occurred; or (iii) trading on the New York Stock
Exchange, the American Stock Exchange, NASDAQ/NM, or in the
over-the-counter market shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required on the over-the-counter
market by the NASD or by order of the Commission or any other
government authority having jurisdiction; or (iv) the United States
shall have become involved in a war or major hostilities, or if there
shall have been an escalation in an existing war or major hostilities
or a national emergency shall have been declared in the United States;
or (v) a banking moratorium has been declared by a state or federal
authority; or (vi) a moratorium in foreign exchange trading has been
declared; or (vii) the Company shall have sustained a loss material or
substantial to the Company by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act which,
whether or not such loss shall have been insured, will, in the
Representatives' opinion, make it inadvisable to proceed with the
delivery of the Securities; or (viii) there shall have been such a
material adverse change in the conditions or prospects of the Company,
or such material adverse change in the general market, political or
economic conditions, in the United States or elsewhere as in the
Representatives' judgment would make it inadvisable to proceed with the
offering, sale and/or delivery of the Securities or (ix) if ▇▇▇▇ ▇. ▇▇.
▇▇▇▇▇▇▇ shall no longer serve the Company in his present capacity.
(b) If this Agreement is terminated by the Representatives in accordance
with the provisions of Section 10(a), the Company shall promptly
reimburse and indemnify the Representatives for all of their actual
out-of-pocket expenses, including the fees and disbursements of counsel
for the Underwriters (less amounts previously paid pursuant to Section
5(c) above). Notwithstanding any contrary provision contained in this
Agreement, if this Agreement shall not be carried out within the time
specified herein, or any extension thereof granted to the
Representatives, by reason of any failure on the part of the Company or
the Selling Stockholder to perform any undertaking or satisfy any
condition of this Agreement by it to be performed or satisfied
(including, without limitation, pursuant to Sections 6 or 12) then, the
Company shall promptly reimburse and indemnify the Representatives for
all of their actual out-of-pocket expenses, including the fees and
disbursements of counsel for the Underwriters (less amounts previously
paid
40
pursuant to Section 5(c) above). In addition, the Company shall remain
liable for all Blue Sky counsel fees and expenses and Blue Sky filing
fees. Notwithstanding any contrary provision contained in this
Agreement, any election hereunder or any termination of this Agreement
(including, without limitation, pursuant to Sections 6, 10, 11 and 12
hereof), and whether or not this Agreement is otherwise carried out,
the provisions of Sections 5 and 7 shall not be in any way affected by
such election or termination or failure to carry out the terms of this
Agreement or any part hereof.
11. Substitution of the Underwriters. If one or more of the Underwriters
shall fail (otherwise than for a reason sufficient to justify the termination of
this Agreement under the provisions of Section 6, Section 10 or Section 12
hereof) to purchase the Securities which it or they are obligated to purchase on
such date under this Agreement (the "Defaulted Securities"), the Representatives
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the total
number of Firm Securities to be purchased on such date, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters; or
(b) if the number of Defaulted Securities exceeds 10% of the total number
of Firm Securities, this Agreement shall terminate without liability on
the part of any nondefaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of any default by such
Underwriter under this Agreement.
In the event of any such default which does not result in a termination
of this Agreement, the Representatives shall have the right to postpone
the Closing Date for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements.
12. Default by the Company or the Selling Stockholder. If the Company or the
Selling Stockholder shall fail at the Closing Date or any Option Closing Date,
as applicable, to sell and deliver the number of Securities which it is
obligated to sell hereunder on such date, then this Agreement shall terminate
(or, if such default shall occur with respect to any Option Securities to be
purchased on an Option Closing Date, the Underwriters' may, at the
Representatives' option, by notice from the Representatives to the Company,
terminate the Underwriters' obligation to purchase Option Securities from the
Company on such date) without any liability on the part of any non-defaulting
party other than pursuant to Section 5, 7 and 10 hereof. No action taken
41
pursuant to this Section shall relieve the Company or the Selling Stockholder
from liability, if any, in respect of such default.
13. Notices. All notices and communications hereunder, except as herein
otherwise specifically provided, shall be in writing and shall be deemed to have
been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be directed to the
Representatives at ▇▇▇▇, ▇▇▇▇ & Co., Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: __________________, and at Pennsylvania
Merchant Group, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: __________________, with a copy to ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. Notices to the Company shall be directed to the Company
at National Medical Health Card Systems, Inc., ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, with a copy to
Certilman, Balin, ▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq. Notices to the Selling Stockholder
shall be directed to the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Revocable Trust,
________________________, Attention: __________________, with a copy to
Certilman, Balin, ▇▇▇▇▇ & ▇▇▇▇▇, LLP, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
14. Parties. This Agreement shall inure solely to the benefit of and shall
be binding upon, the Underwriters, the Company and the controlling persons,
directors and officers referred to in Section 7 hereof, and their respective
successors, legal representatives and assigns, and the Selling Stockholder and
its successors, legal representatives and assigns, and no other person shall
have or be construed to have any legal or equitable right, remedy or claim under
or in respect of or by virtue of this Agreement or any provisions herein
contained. No purchaser of Securities from any Underwriter shall be deemed to be
a successor by reason merely of such purchase.
15. Construction. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without giving
effect to its choice of law or conflict of laws principles.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to be one and the same instrument.
17. Entire Agreement: Amendments. This Agreement and the Representatives'
Warrant Agreement constitute the entire agreement of the parties hereto and
supersede all prior written or oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may not be amended
except in a writing, signed by the Representatives, the Company and the Selling
Stockholder.
42
If the foregoing correctly sets forth the understanding between the
Underwriters, the Company and the Selling Stockholder, please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
NATIONAL MEDICAL HEALTH CARD
SYSTEMS, INC.
By: _______________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
REVOCABLE TRUST
______________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Trustee
▇▇▇▇, ▇▇▇▇ & CO., INC.
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By: ________________________________
Name:
Title:
PENNSYLVANIA MERCHANT GROUP
For itself and as Representative
of the several Underwriters named
in Schedule A hereto.
By: ________________________________
Name:
Title:
43
Schedule A
Name of Underwriter Number of Firm Securities to be
Purchased
▇▇▇▇, ▇▇▇▇ & Co., Inc.
Pennsylvania Merchant Group
44
SCHEDULE B
Name of Stockholder Number of Shares Subject to Lock-up Agreements
45