Draft of 4/20/99
United Payors & United Providers, Inc.
2,500,000 Shares
Common Stock
($0.01 par value)
Underwriting Agreement
New York, New York
, 1999
Warburg Dillon Read LLC
BT Alex. Brown Incorporated
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
c/o Warburg Dillon Read LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
United Payors & United Providers, Inc., a Delaware corporation (the
"Company"), proposes to sell to the several underwriters named in Schedule I
hereto (the "Underwriters") 1,250,000 shares of Common Stock, $0.01 par value
("Common Stock"), of the Company, and Principal Health Care, Inc. ("PHC"), an
indirect wholly-owned subsidiary of Principal Mutual Holding Company (together
with PHC, "Principal Mutual"), proposes to sell to the several Underwriters
1,250,000 shares of Common Stock (said shares to be issued and sold by the
Company and shares to be sold by Principal Mutual collectively being hereinafter
called the "Underwritten Securities"). The Company and certain other
stockholders identified in Schedule II hereto (the "Option Selling
Stockholders") also propose to grant to the Underwriters an option to purchase
up to an aggregate of 375,000 additional shares of Common Stock to cover over-
allotments (the "Option Securities"; the Option Securities, together with the
Underwritten Securities, being hereinafter called the "Securities"). Each of
Principal Mutual and the Option Selling Stockholders is referred to herein
individually as a "Selling Stockholder" and collectively as the "Selling
Stockholders." The use of the neuter in this Agreement shall include the
feminine and masculine wherever appropriate. Any reference herein to the
Registration Statement, a Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Form S-3 which were filed under the Exchange Act on or before the
Effective Date of the Registration Statement or the issue date of such
Preliminary Prospectus or the Prospectus, as the case may be; and any reference
herein to the terms "amend", "amendment" or "supplement" with respect to the
Registration Statement, any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the filing of any
document under the Exchange Act after the Effective Date of the Registration
Statement, or the issue date of any Preliminary Prospectus or the Prospectus, as
the case may be, deemed to be incorporated therein by reference. Certain terms
used herein are defined in Section 17 hereof.
1. Representations and Warranties.
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(i) The Company represents and warrants to, and agrees with, each
Underwriter as set forth below in this Section 1.
(a) The Company meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration statement
(file number 333-74425) on Form S-3, including a related preliminary prospectus,
for registration under the Act of the offering and sale of Securities. The
Company may have filed one or more amendments thereto, including a related
preliminary prospectus, each of which has previously been furnished to you. The
Company will next file with the Commission one of the following: either (1)
prior to the Effective Date of such registration statement a further amendment
to such registration statement, (including the form of final prospectus) or (2)
after the Effective Date of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b). In the case of clause (2), the Company
has included in such registration statement, as amended at the Effective Date,
all information (other than Rule 430A Information) required by the Act and the
rules thereunder to be included in such registration statement and the
Prospectus. As filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together with all other
such required information, and, except to the extent the Underwriters shall
agree in writing to a modification, shall be in all substantive respects in the
form furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific additional
information and other changes (beyond that contained in the latest Preliminary
Prospectus) as the Company has advised you, prior to the Execution Time, will be
included or made therein.
(b) On the Effective Date, the Registration Statement did or will, and
when the Prospectus is first filed (if required) in accordance with Rule 424(b)
and on the Closing Date (as defined herein) and on any date on which Option
Securities are purchased, if such date is not the Closing Date (a "settlement
date"), the Prospectus (and any supplements thereto) will, comply in all
material respects with the applicable requirements of the Act and the Exchange
Act and the respective rules thereunder; on the Effective Date and at the
Execution Time, the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Prospectus, if not filed pursuant to
Rule 424(b), will not, and on the date of any filing pursuant to Rule 424(b) and
on the Closing Date and any settlement date, the Prospectus (together with any
supplement thereto) will not,
include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
-------- ------
that the Company makes no representations or warranties as to the information
contained in or omitted from the Registration Statement or the Prospectus (or
any supplement thereto) in reliance upon and in conformity with information
furnished herein or in writing to the Company by or on behalf of any Underwriter
specifically for inclusion in the Registration Statement or the Prospectus (or
any supplement thereto).
(c) Each of the Company and its subsidiaries has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full corporate power and
authority to own or lease, as the case may be, and to operate its properties and
conduct its business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification;
(d) All the outstanding shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of the Company's subsidiaries are owned by
the Company either directly or through wholly owned subsidiaries free and clear
of any perfected security interest or any other security interests, claims,
liens or encumbrances;
(e) The Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; the outstanding
shares of Common Stock (including the Securities being sold hereunder by the
Selling Stockholders) have been duly and validly authorized and issued and are
fully paid and nonassessable; the Securities being sold hereunder by the Company
have been duly and validly authorized, and, when issued and delivered to and
paid for by the Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Securities being sold by the Selling Stockholders are duly
listed, and admitted and authorized for trading, on the Nasdaq Stock Market's
National Market and the Securities being sold hereunder by the Company are duly
listed, and admitted and authorized for trading, subject to official notice of
issuance, on the Nasdaq Stock Market's National Market; the certificates for the
Securities are in valid and sufficient form; the holders of outstanding shares
of capital stock of the Company are not entitled to preemptive or other rights
to subscribe for the Securities; and, except as set forth in the Prospectus, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or rights to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the Company are
outstanding;
(f) There is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus, or to be
filed as an exhibit thereto, which is not described or filed as required; and
the statements in the Prospectus under the headings "Risk Factors--If UP & UP
Acquires a Savings Bank, as Proposed, It Will Become Subject to Extensive
Federal Regulations Which Could Limits Its Future Operations," "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Readiness Disclosure," "Business--Federal Savings Bank," "Business-- Health
Extras," "Business--Contracts with Payors and Providers," "Business--Government
Regulation," "Business--Legal Proceedings," "Management--Executive
Compensation," "Management--Employment Agreements," "Management--Stock Option
and Stock Purchase Plans," "Certain Transactions," "Principal and Selling
Stockholders" and "Shares Eligible for Future Sale" fairly summarize the matters
therein described.
(g) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms.
(h) The Company is not and, after giving effect to the offering and sale
of the Securities and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" as defined in the Investment
Company Act of 1940, as amended.
(i) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under the
Act and such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters in the manner contemplated herein and in the Prospectus.
(j) Neither the issue and sale of the Securities nor the consummation of
any other of the transactions herein contemplated nor the fulfillment of the
terms hereof will conflict with, result in a breach or violation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company or
any of its subsidiaries pursuant to, (i) the charter or by-laws of the Company
or any of its subsidiaries, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the Company or any of its
subsidiaries is a party or bound or to which its or their property is subject,
or (iii) any statute, law, rule, regulation, judgment, order or decree
applicable to the Company or any of its subsidiaries of any court, regulatory
body, administrative agency, governmental body, arbitrator or other authority
having jurisdiction over the Company or any of its subsidiaries or any of its or
their properties.
(k) No holders of securities of the Company have rights to the
registration of such securities under the Registration Statement, except for
273,000 shares of
Common Stock issuable upon the exercise of stock options held by ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ that have been registered on a registration statement on Form S-8 under
the Securities Act that became effective on March 16, 1999.
(l) The consolidated historical financial statements and schedules of
the Company and its consolidated subsidiaries included in the Prospectus and the
Registration Statement present fairly in all material respects the consolidated
financial condition, results of operations and cash flows of the Company, as of
the dates and for the periods indicated, comply as to form with the applicable
accounting requirements of the Act and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as otherwise noted therein). The summary
financial data set forth under the caption "SummarySummary Consolidated
Financial Data" and the selected financial data set forth under the caption
"Selected Financial Information" in the Prospectus and Registration Statement
each fairly present, on the basis stated in the Prospectus and the Registration
Statement, the information included therein. There are no financial statements
or pro forma financial statements required to be included in the Registration
Statement or Prospectus that are not included as required.
(m) No action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries or its or their property is pending or, to the best knowledge of
the Company, threatened that (i) could reasonably be expected to have a material
adverse effect on the performance of this Agreement or the consummation of any
of the transactions contemplated hereby or (ii) could reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto).
(n) Each of the Company and each of its subsidiaries owns or leases all
such properties as are necessary to the conduct of its operations as presently
conducted.
(o) Neither the Company nor any of its subsidiaries is in violation or
default of (i) any provision of its charter or bylaws, (ii) the terms of any
indenture, contract, lease, mortgage, deed of trust, note agreement, loan
agreement or other agreement, obligation, condition, covenant or instrument to
which it is a party or bound or to which its property is subject, or (iii) any
statute, law, rule, regulation, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company or such subsidiary or any of its
properties, as applicable.
(p) PricewaterhouseCoopers LLP, who has certified certain financial
statements of the Company and its consolidated subsidiaries and has delivered
its
report with respect to the audited consolidated financial statements included in
the Prospectus, are independent public accountants with respect to the Company
within the meaning of the Act and the applicable published rules and regulations
thereunder.
(q) There are no transfer taxes or other similar fees or charges under
Federal law or the laws of any state, or any political subdivision thereof,
required to be paid in connection with the execution and delivery of this
Agreement or the issuance by the Company or sale by the Company of the
Securities being sold by it hereunder.
(r) The Company has filed all foreign, federal, state and local tax
returns that are required to be filed or has requested extensions thereof
(except in any case in which the failure so to file would not have a material
adverse effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto)), such returns are correct and complete in all material
respects and the Company has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent that any of
the foregoing is due and payable, except for any such assessment, fine or
penalty that is currently being contested in good faith or as would not have a
material adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus (exclusive of
any supplement thereto).
(s) No labor problem or dispute with the employees of the Company or any
of its subsidiaries exists or is threatened, or, to the knowledge of the
Company, imminent, and the Company is not aware of any existing, threatened or
imminent labor disturbance by the employees of any of its or its subsidiaries'
principal suppliers, contractors or customers, that could have a material
adverse effect on the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary course of business,
except as set forth in or contemplated in the Prospectus (exclusive of any
supplement thereto).
(t) The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; all policies of insurance and fidelity or surety bonds insuring the
Company or any of its subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and effect; the Company and
its subsidiaries are in compliance with the terms of such policies and
instruments in all material respects; and there are no claims by the Company or
any of its subsidiaries under any such policy or instrument as to which any
insurance
company is denying liability or defending under a reservation of rights clause;
neither the Company nor any such subsidiary has been refused any insurance
coverage sought or applied for; and neither the Company nor any such subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
cost that would not have a material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(u) No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(v) The Company and its subsidiaries possess all licenses, certificates,
permits and other authorizations issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective businesses,
and neither the Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole, whether or not
arising from transactions in the ordinary course of business, except as set
forth in or contemplated in the Prospectus (exclusive of any supplement
thereto).
(w) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(x) The Company has not taken, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected to
cause or result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.
(y) The Company and its subsidiaries are (i) in compliance with any and
all applicable foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental Laws"),
(ii) have received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) have not received notice of any actual or
potential liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or contaminants,
except where such non-compliance with Environmental Laws, failure to receive
required permits, licenses or other approvals, or liability would not,
individually or in the aggregate, have a material adverse change in the
condition (financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto). Except as
set forth in the Prospectus, neither the Company nor any of the subsidiaries has
been named as a "potentially responsible party" under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended.
(z) The Company has reviewed the effect of Environmental Laws on the
business, operations and properties of the Company and its subsidiaries, in the
course of which it identified and evaluated associated costs and liabilities
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws, or
any permit, license or approval, any related constraints on operating activities
and any potential liabilities to third parties). On the basis of such review,
the Company has reasonably concluded that such associated costs and liabilities
would not, singly or in the aggregate, have a material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or properties
of the Company and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto).
(aa) Each of the Company and its subsidiaries has fulfilled its
obligations, if any, under the minimum funding standards of Section 302 of the
United States Employee Retirement Income Security Act of 1974 ("ERISA") and the
regulations and published interpretations thereunder with respect to each "plan"
(as defined in Section 3(3) of ERISA and such regulations and published
interpretations) in which employees of the Company and its subsidiaries are
eligible to participate and each such plan is in compliance in all material
respects with the presently applicable provisions of ERISA and such regulations
and published interpretations. The Company and its subsidiaries have not
incurred any unpaid liability to the Pension Benefit Guaranty Corporation (other
than for the payment of premiums in the ordinary course) or to any such plan
under Title IV of ERISA.
(ab) The Company and its subsidiaries own, possess, license or have
other rights to use, on reasonable terms, all patents, patent applications,
trade and service marks, trade and service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets, technology, know-how and other
intellectual property (collectively, the "Intellectual Property") necessary for
the conduct of the Company's business as now conducted or as proposed in the
Prospectus to be conducted. Except as set forth in the Prospectus, (a) there are
no rights of third parties to any such Intellectual Property; (b) there is no
material infringement by third parties of any such Intellectual Property; (c)
there is no pending or threatened action, suit, proceeding or claim by others
challenging the Company's rights in or to any such Intellectual Property, and
the Company is unaware of any facts which would form a reasonable basis for any
such claim; (d) there is no pending or threatened action, suit, proceeding or
claim by others challenging the validity or scope of any such Intellectual
Property, and the Company is unaware of any facts which would form a reasonable
basis for any such claim; (e) there is no pending or threatened action, suit,
proceeding or claim by others that the Company infringes or otherwise violates
any patent, trademark, copyright, trade secret or other proprietary rights of
others, and the Company is unaware of any other fact which would form a
reasonable basis for any such claim; (f) there is no U.S. patent or published
U.S. patent application which contains claims that dominate or may dominate any
Intellectual Property described in the Prospectus as being owned by or licensed
to the Company or that interferes with the issued or pending claims of any such
Intellectual Property; and (g) there is no prior art of which the Company is
aware that may render any U.S. patent held by the Company invalid or any U.S.
patent application held by the Company unpatentable which has not been disclosed
to the U.S. Patent and Trademark Office.
(ac) Except as disclosed in the Registered Statement and the
Prospectus, (i) neither the Company nor any of its subsidiaries has any material
lending or other relationship with any bank or lending affiliate of any
Underwriter and (ii) the Company does not intend to use any of the proceeds from
the sale of the Securities being sold by the Company hereunder to repay any
outstanding debt owed to any affiliate of any Underwriter.
(ad) The Company and its subsidiaries have implemented a
comprehensive, detailed program to analyze and address the risk that the
computer hardware and software used by them may be unable to recognize and
properly execute date-sensitive functions involving certain dates prior to and
any dates after December 31, 1999 (the "Year 2000 Problem"), and the Company
reasonably believes that such risk will be remedied on a timely basis without
material expense and will not have a material adverse effect upon the financial
condition and results of operations of the Company and its subsidiaries, taken
as a whole; and the Company reasonably believes that each supplier, vendor,
customer or financial service organization used or serviced by the Company and
its subsidiaries and each health care payor and health care provider with which
the Company or any of its subsidiaries has a contractual relationship has
remedied or
will remedy on a timely basis the Year 2000 Problem, except to the extent that a
failure to remedy by any such supplier, vendor, customer or financial service
organization or health care payor or health care provider would not have a
material adverse effect on the Company and its subsidiaries, taken as a whole.
The Company is in compliance with Release No. 33-7558 promulgated by the
Commission and relating to Year 2000 compliance.
(ae) Each health care provider (including without limitation
individual hospitals, physicians and health care facilities) whose services have
been made available to any health care payor client of the Company pursuant to a
direct contractual relationship between such provider and the Company or a
subsidiary of the Company (i) has received timely notice of each health care
payor entitled to access the discounts offered by such health care provider, and
(ii) has contracted to allow access by each such health care payor to the
discounts offered by such health care provider. Each health care provider
(including without limitation hospitals, physicians and health care facilities)
whose services have been made available to any health care payor client of the
Company through any entity that the Company or any of its subsidiaries has
entered into contractual arrangements with for such purpose (including without
limitation any health care group, system, network or preferred provider
organization or any entity providing services similar to those provided by the
Company and its subsidiaries) has been identified to the Company or a subsidiary
of the Company as a provider that has contracted to allow access by each such
health care payor to the discounts offered by such health care provider.
Further, the contracts entered into by the Company or its subsidiaries that
allow such access obligate the group, system, network, preferred provider
network or other entity, as the case may be, to give timely notice to each such
health care provider of each health care payor entitled to access such
discounts. It is the Company's intent that each such health care provider
(including without limitation individual hospitals, physicians and health care
facilities that are members of health care groups, systems or networks) whose
services will be made available to any health care payor through the Company, a
subsidiary of the Company or any entity that the Company or any of its
subsidiaries has entered or will enter into contractual arrangements with for
such purpose (A) shall receive timely notice of each health care payor entitled
to access the discounts offered by such health care provider and (B) shall
contract to allow access by each such health care payor to the discounts offered
by such health care provider. The Company and its subsidiaries do not allow
access to provider discounts other than pursuant to contractual arrangements.
(af) The Company reasonably believes that each contract entered into
by the Company or any of its subsidiaries with a health care or other provider
organization is a valid, binding and enforceable obligation of both the
contracting entity and of the individual hospitals, physicians and health care
facilities which are members of such contracting entity.
(ag) The Company, either directly or through a subsidiary of the
Company, has contracted with each health care payor to which it permits access
to its provider network or otherwise only permits such access pursuant to a
contract between the Company or a subsidiary of the Company and another entity
maintaining a provider network with which the relevant health care payor has
contracted. The Company reasonably believes that each contract entered into by
the Company or any of its subsidiaries with such health care payors or entities
maintaining provider networks is a valid, binding and enforceable obligation of
the relevant health care payor or entity maintaining such provider network.
(ah) The Company is not required to obtain licensure or other
regulatory approval as a third party administrator, preferred provider
organization or risk-bearing entity (including, but not limited to, licensure as
an HMO) with respect to any of its contractual arrangements as currently in
existence or contemplated at this time.
(ai) The Company and its subsidiaries are in compliance with all
applicable federal and state requirements regarding health care service discount
practices by health care payors and service companies, including without
limitation Section 5 of the Federal Employees Health Care Protection Act of
1998, P.L. 105-266, and Section 70. N.C.Gen.Stat.58-63.
(aj) The documents incorporated by reference in the Registration
Statement and the Prospectus and heretofore filed with the Commission were filed
in a timely manner and, when they were filed (or, if any amendment with respect
to any such document was filed, when such amendment was filed), conformed in all
material respects to the requirements of the Exchange Act and did not contain an
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;
and any further documents incorporated by reference in the Registration
Statement and the Prospectus will, when so filed, be filed in a timely manner
and conform in all material respects to the requirements of the Exchange Act and
will not contain an 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.
Any certificate signed by any officer of the Company and delivered to
the Underwriters or counsel for the Underwriters in connection with the offering
of the Securities shall be deemed a representation and warranty by the Company,
as to matters covered thereby, to each Underwriter.
(ii) Each Selling Stockholder represents and warrants to, and agrees
with, each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Securities to be
sold by such Selling Stockholder hereunder and upon sale and delivery of, and
payment for, such Securities to be sold by such Selling Stockholder hereunder,
as provided herein, such Selling Stockholder will convey to the Underwriters
good and marketable title to such Securities, free and clear of all liens,
encumbrances, equities and claims whatsoever.
(b) Such Selling Stockholder has not taken, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities.
(c) Certificates in negotiable form for such Selling Stockholder's
Securities have been placed in custody, for delivery of such Selling
Stockholder's Securities pursuant to the terms of this Agreement, under a
Custody Agreement and Power of Attorney duly authorized, executed and delivered
by such Selling Stockholder, in the form heretofore furnished to you (the
"Custody Agreement") with American Stock Transfer & Trust Company, as Custodian
(the "Custodian"); the Securities represented by the certificates are subject to
the interests hereunder of the Underwriters; the arrangements for custody and
delivery of such certificates made by such Selling Stockholder hereunder and
under the Custody Agreement, are not subject to termination by any acts of such
Selling Stockholder, or by operation of law, whether by the occurrence of any
event; and if any such event shall occur before the delivery of such Securities
hereunder, certificates for the Securities will be delivered by the Custodian in
accordance with the terms and conditions of this Agreement and the Custody
Agreement as if such event had not occurred, regardless of whether or not the
Custodian shall have received notice of such event.
(d) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such Selling
Stockholder of the transactions contemplated herein, except such as may have
been obtained under the Act and such as may be required under the blue sky laws
of any jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals as have been obtained.
(e) Neither the sale of the Securities being sold by such Selling
Stockholder nor the consummation of any other of the transactions herein
contemplated by such Selling Stockholder or the fulfillment of the terms hereof
by such Selling Stockholder will conflict with, result in a breach or violation
of, or constitute a default under any law or, if applicable, the charter or by-
laws of such Selling Stockholder or the terms of any indenture or other
agreement or instrument to which such Selling Stockholder or, if applicable, any
of its subsidiaries is a party or bound, or any judgment, order or decree
applicable to such Selling Stockholder or, if applicable, any of its
subsidiaries of any court, regulatory body, administrative agency, governmental
body or arbitrator having jurisdiction over such Selling Stockholder or, if
applicable, any of its subsidiaries.
(f) Such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in this Section 1 are
not true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Prospectus or any supplement thereto which has adversely affected or may
adversely affect the
business of the Company or any of its subsidiaries; and the sale of Securities
by such Selling Stockholder pursuant hereto is not prompted by information
concerning the Company or any of its subsidiaries which is not set forth in the
Prospectus or any supplement thereto.
(g) In respect of any statements in or omissions from the Registration
Statement or the Prospectus or any supplements thereto made in reliance upon and
in conformity with information furnished in writing to the Company by such
Selling Stockholder specifically for use in connection with the preparation
thereof, such Selling Stockholder hereby makes the same representations and
warranties to each Underwriter as the Company makes to such Underwriter under
paragraph (i)(b) of this Section.
Any certificate signed by any Selling Stockholder or any officer thereof
and delivered to the Underwriters or counsel for the Underwriters in connection
with the offering of the Securities shall be deemed a representation and
warranty by such Selling Stockholder as to matters covered thereby, to each
Underwriter.
2. Purchase and Sale.
-----------------
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company and Principal
Mutual agree, severally and not jointly, to sell to each Underwriter, and each
Underwriter agrees, severally and not jointly, to purchase from the Company and
Principal Mutual, at a purchase price of $ per share, the amount of the
Underwritten Securities set forth opposite such Underwriter's name in Schedule I
hereto.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company and the Option
Selling Stockholders hereby grant an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 375,000 Option
Securities at the same purchase price per share as the Underwriters shall pay
for the Underwritten Securities. Said option may be exercised only to cover
over-allotments in the sale of the Underwritten Securities by the Underwriters.
Said option may be exercised in whole or in part at any time (but not more than
once) on or before the 30th day after the date of the Prospectus upon written or
telegraphic notice by the Underwriters to the Company and the Attorney-in-Fact
(as defined in the Custody Agreement) setting forth the number of shares of the
Option Securities as to which the several Underwriters are exercising the option
and the settlement date. Of the Option Securities, up to 39,000 shares may be
sold by the Option Selling Stockholders and up to 336,000 may be sold by the
Company. The maximum number of Option Securities that each Option Selling
Stockholder agrees to sell upon any exercise by the Underwriters of the over-
allotment option is set forth opposite the name of such Option Selling
Stockholder in Schedule II hereto. If the Underwriters exercise the over-
allotment option, Option Securities will be purchased by the Underwriters first
pro rata from the Option Selling Stockholders and second, after the Option
Selling Stockholders have sold all additional shares which may be sold by them
pursuant to this Agreement, from the Company. The number of Option Securities to
be purchased by
each Underwriter shall be the same percentage of the total number of shares of
the Option Securities to be purchased by the several Underwriters as such
Underwriter is purchasing of the Underwritten Securities, subject to such
adjustments as you in your absolute discretion shall make to eliminate any
fractional shares.
3. Delivery and Payment. Delivery of and payment for the Underwritten
--------------------
Securities and the Option Securities (if the option provided for in Section 2(b)
hereof shall have been exercised on or before the third Business Day prior to
the Closing Date) shall be made at 10:00 AM, New York City time, on
, 1999, or at such time on such later date not more than three Business Days
after the foregoing date as the Underwriters shall designate, which date and
time may be postponed by agreement among the Underwriters, the Company and
Principal Mutual or as provided in Section 9 hereof (such date and time of
delivery and payment for the Securities being herein called the "Closing Date").
Delivery of the Securities shall be made to the Underwriters for their
respective accounts against payment by the several Underwriters of the
respective aggregate purchase prices of the Securities being sold by the Company
and Principal Mutual to or upon the order of the Company and Principal Mutual by
wire transfer payable in same-day funds to the accounts specified by the Company
and the Attorney-in-Fact. Delivery of the Underwritten Securities and the
Option Securities shall be made through the facilities of The Depository Trust
Company unless the Underwriters shall otherwise instruct.
If the option provided for in Section 2(b) hereof is exercised after
the third Business Day prior to the Closing Date, the Company and the Option
Selling Stockholders will deliver the Option Securities (at the expense of the
Company) to the Underwriters on the date specified by the Underwriters (which
shall be within three Business Days after exercise of said option) for their
respective accounts, against payment by the several Underwriters of the purchase
price thereof to or upon the order of the Option Selling Stockholders and the
Company, as applicable, by wire transfer payable in same-day funds to the
accounts specified by the Company or the Attorney-in-Fact. If settlement for the
Option Securities occurs after the Closing Date, the Company and the Option
Selling Stockholders will deliver to the Underwriters on the settlement date for
the Option Securities, and the obligation of the Underwriters to purchase the
Option Securities shall be conditioned upon receipt of, supplemental opinions,
certificates and letters confirming as of such date the opinions, certificates
and letters delivered on the Closing Date pursuant to Section 6 hereof.
Each Selling Stockholder will pay all applicable state transfer
taxes, if any, involved in the transfer to the several Underwriters of the
Securities to be purchased by them from such Selling Stockholder and the
respective Underwriters will pay any additional stock transfer taxes involved in
further transfers .
4. Offering by Underwriters. It is understood that the several
------------------------
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements.
----------
(i) The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment thereof, to
become effective. Prior to the termination of the offering of the Securities,
the Company will not file any amendment of the Registration Statement or
supplement to the Prospectus or any Rule 462(b) Registration Statement unless
the Company has furnished you a copy for your review prior to filing and will
not file any such proposed amendment or supplement to which you reasonably
object. Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will cause the Prospectus,
properly completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Underwriters of such
timely filing. The Company will promptly advise the Underwriters (1) when the
Registration Statement, if not effective at the Execution Time, shall have
become effective, (2) when the Prospectus, and any supplement thereto, shall
have been filed (if required) with the Commission pursuant to Rule 424(b) or
when any Rule 462(b) Registration Statement shall have been filed with the
Commission, (3) when, prior to termination of the offering of the Securities,
any amendment to the Registration Statement shall have been filed or become
effective, (4) of any request by the Commission or its staff for any amendment
of the Registration Statement, or any Rule 462(b) Registration Statement, or for
any supplement to the Prospectus or for any additional information, (5) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or threatening of any proceeding for
that purpose and (6) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities for sale in any
jurisdiction or the institution or threatening of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order or the suspension of any such qualification and, if issued, to
obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend the Registration Statement
or supplement the Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Company promptly will (1) notify the
Underwriters of such event, (2) prepare and file with the Commission, subject to
the second sentence of paragraph (i)(a) of this Section 5, an amendment or
supplement which will correct such statement or omission or effect such
compliance and (3) supply any supplemented Prospectus to you in such quantities
as you may reasonably request.
(c) As soon as practicable, the Company will make generally available to
its security holders and to the Underwriters an earnings statement or statements
of the Company and its subsidiaries which will satisfy the provisions of Section
11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to the Underwriters and counsel for the
Underwriters, without charge, signed copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of each
Preliminary Prospectus and the Prospectus and any supplement thereto as the
Underwriters may reasonably request. The Company will pay the expenses of
printing or other production of all documents relating to the offering.
(e) The Company will arrange, if necessary, for the qualification of the
Securities for sale under the laws of such jurisdictions as the Underwriters may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities and will pay any fee of the National
Association of Securities Dealers, Inc., in connection with its review of the
offering; provided that in no event shall the Company be obligated to qualify to
do business in any jurisdiction where it is not now so qualified or to take any
action that would subject it to service of process in suits, other than those
arising out of the offering or sale of the Securities, in any jurisdiction where
it is not now so subject.
(f) The Company will not, without the prior written consent of Warburg
Dillon Read LLC, for a period of 180 days following the Execution Time, offer,
sell or contract to sell, or otherwise dispose of (or enter into any transaction
which is designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition or effective economic disposition due
to cash settlement or otherwise) by the Company or any affiliate of the Company
or any person in privity with the Company or any affiliate of the Company)
directly or indirectly, or announce the offering of, any other shares of Common
Stock or any securities convertible into, or exchangeable for, shares of Common
Stock; provided, however, that the Company may issue Common Stock (i) pursuant
to any employee stock option plan, stock ownership plan or dividend reinvestment
plan of the Company in effect at the Execution Time and the Company may issue
Common Stock issuable upon the conversion of securities or the exercise of
warrants outstanding at the Execution Time and (ii) as consideration in
connection with acquisitions, provided that each recipient of Common Stock in
any such acquisition agrees to execute a letter substantially in the form of
Exhibit A hereto.
(g)The Company agrees to pay the costs and expenses relating to the
following matters: (i) the preparation, printing or reproduction and filing with
the Commission of the Registration Statement (including financial statements and
exhibits thereto), each Preliminary Prospectus, the Prospectus, and each
amendment or supplement to any of them; (ii) the printing (or reproduction) and
delivery (including postage, air freight charges and charges for counting and
packaging) of such copies of the Registration Statement, each Preliminary
Prospectus, the Prospectus, and all amendments or supplements to any of them, as
may, in each case, be reasonably requested for use in connection with the
offering and sale of the Securities; (iii) the preparation, printing,
authentication, issuance and delivery of certificates for the Securities,
including any stamp or transfer taxes in connection with the original issuance
and sale of the Securities; (iv) the printing (or reproduction) and delivery of
this Agreement, any blue sky memorandum and all other agreements or documents
printed (or reproduced) and delivered in connection with the offering of the
Securities; (v) the listing of the Securities on the Nasdaq National Market;
(vi) any registration or qualification of the Securities for offer and sale
under the securities or blue sky laws of the several states (including filing
fees and the reasonable fees and expenses of counsel for the Underwriters
relating to such registration and qualification); (vii) any filings required to
be made with the National Association of Securities Dealers, Inc. (including
filing fees and the reasonable fees and expenses of counsel for the Underwriters
relating to such filings); (viii) the transportation and other expenses incurred
by or on behalf of Company representatives in connection with presentations to
prospective purchasers of the Securities; (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company; and (x) all other costs and expenses incident
to the performance by the Company of its obligations hereunder.
(h) The Company will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected to
cause or result, under the Exchange Act or otherwise, in stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.
(ii) Each Selling Stockholder agrees with the several Underwriters that:
(a) Neither such Selling Stockholder, nor, in the case of Principal
Mutual, any entity controlled by, under common control with or controlling such
Selling Stockholder, will, without the prior written consent of Warburg Dillon
Read LLC, offer, sell, contract to sell, pledge or otherwise dispose of, or file
(or participate in the filing of) a registration statement with the Commission
in respect of, or establish or increase a put equivalent position or liquidate
or decrease a call equivalent position within the meaning of Section 16 of the
Exchange Act with respect to, any shares of capital stock of the Company or any
securities convertible into or exercisable or exchangeable for such capital
stock, or publicly announce an intention to effect any such transaction, for a
period of 180 days after the date of this Agreement, other than shares of Common
Stock disposed of as bona fide gifts approved by Warburg Dillon Read LLC.
(b) Such Selling Stockholder will not take any action designed to or
which has constituted or which might reasonably be expected to cause or result,
under the Exchange Act or otherwise, in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Securities.
(c) Such Selling Stockholder will advise you promptly, and if requested
by you, will confirm such advice in writing, so long as delivery of a prospectus
relating to the Securities by an underwriter or dealer may be required under the
Act, of (i) any material change in the Company's condition (financial or
otherwise), prospects, earnings, business or properties, (ii) any change in
information in the Registration Statement or the Prospectus relating to such
Selling Stockholder or (iii) any new material information relating to the
Company or relating to any matter stated in the Prospectus which comes to the
attention of such Selling Stockholder.
(d) Such Selling Stockholder will pay the fees and expenses of counsel
(including local and special counsel) for such Selling Stockholder and all other
costs and expenses incident to the performance by it of its obligations
hereunder.
6. Conditions to the Obligations of the Underwriters. The obligations of
-------------------------------------------------
the Underwriters to purchase the Underwritten Securities and the Option
Securities, as the case may be, shall be subject to the accuracy of the
representations and warranties on the part of the Company and the Selling
Stockholders contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 3 hereof, to the accuracy of the statements
of the Company and the Selling Stockholders made in any certificates pursuant to
the provisions hereof, to the performance by the Company and the Selling
Stockholders of their respective obligations hereunder and to the following
additional conditions:
(a) If the Registration Statement has not become effective prior to the
Execution Time, unless the Underwriters agree in writing to a later time, the
Registration Statement will become effective not later than (i) 6:00 PM New York
City time on the date of determination of the public offering price, if such
determination occurred at or prior to 3:00 PM New York City time on such date or
(ii) 9:30 AM on the Business Day following the day on which the public offering
price was determined, if such determination occurred after 3:00 PM New York City
time on such date; if filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b), the Prospectus, and any such supplement, will
be filed in the manner and within the time period required by Rule 424(b); and
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 threatened.
(b) The Company shall have caused ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
counsel for the Company, to have furnished to the Underwriters their opinion,
dated the Closing Date and addressed to the Underwriters, to the effect that:
(i) the Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to own or lease,
as the case may be, and to operate its properties and conduct its business as
described in the Prospectus; and the Company is duly qualified to do business as
a
foreign corporation and is in good standing under the laws of each jurisdiction
which requires such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material adverse effect on
the condition (financial or otherwise), prospects, earnings, business or
properties of the Company and its subsidiaries, taken as a whole;
(ii) the Company's authorized equity capitalization is as set forth in
the Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; the outstanding
shares of Common Stock (including the Securities being sold hereunder by the
Selling Stockholders) have been duly and validly authorized and issued and are
fully paid and nonassessable; the Securities being sold hereunder by the Company
have been duly and validly authorized, and, when issued and delivered to and
paid for by the Underwriters pursuant to this Agreement, will be fully paid and
nonassessable; the Securities being sold by the Selling Stockholders are duly
listed, and admitted and authorized for trading, on the Nasdaq Stock Market's
National Market and the Securities being sold hereunder by the Company are duly
listed, and admitted and authorized for trading, subject to official notice of
issuance, on the Nasdaq Stock Market's National Market; the certificates for the
Securities are in valid and sufficient form; the holders of outstanding shares
of capital stock of the Company are not entitled to preemptive or other rights
to subscribe for the Securities; and, to the knowledge of such counsel, except
as set forth in the Prospectus, no options, warrants or other rights to
purchase, agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital stock of or
ownership interests in the Company are outstanding;
(iii) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries or its or their property of a character required to be disclosed in
the Registration Statement which is not adequately disclosed in the Prospectus,
and there is no franchise, contract or other document of a character required to
be described in the Registration Statement or Prospectus, or to be filed as an
exhibit thereto, which is not described or filed as required; and the statements
included in the Prospectus under the headings "Risk Factors--If UP&UP Acquires a
Savings Bank, as Proposed, It Will Become Subject to Extensive Federal
Regulations Which Could Limit Its Future Operations," "Business--Federal Savings
Bank," "Business--Health Extras," "Business--Contracts with Payors and
Providers," "Business--Government Regulation," "Business--Legal Proceedings,"
"Management--Employment Agreements," "Management--Stock Option and Stock
Purchase Plans," "Certain Transactions," "Principal and Selling Stockholders"
and "Shares Eligible for Future Sale," to the extent that such statements
constitute matters of law or legal conclusions or summaries of contracts or
other legal documents, fairly summarize the matters therein described; and such
counsel does not know of any laws, rules, or regulations applicable to the
business of the Company and its subsidiaries required to be
described in the Registration Statement or the Prospectus that are not described
as required;
(iv) the Registration Statement has become effective under the Act; any
required of the Prospectus, and any supplements thereto, pursuant to Rule 424(b)
has been made in the manner and within the time period required by Rule 424(b);
to the knowledge of such counsel, no stop order suspending the effectiveness of
the Registration Statement has been issued, no proceedings for that purpose have
been instituted or threatened and the Registration Statement and the Prospectus
(other than the financial statements and other financial information contained
therein, as to which such counsel need express no opinion) comply as to form in
all material respects with the applicable requirements of the Act and the rules
thereunder; and such counsel has no reason to believe that on the Effective Date
or at the Execution Time the Registration Statement contained 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 not misleading or
that the Prospectus as of its date and on the Closing Date included or includes
any untrue statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (in each case, other than the
financial statements and other financial information contained therein, as to
which such counsel need express no opinion);
(v) this Agreement has been duly authorized, executed and delivered by
the Company;
(vi) the Company is not and, after giving effect to the offering and
sale of the Securities and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as defined in the
Investment Company Act of 1940, as amended;
(vii) no consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under the
Act and such as may be required under the blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Securities by the
Underwriters in the manner contemplated in this Agreement and in the Prospectus
and such other approvals (specified in such opinion) as have been obtained;
(viii) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation of or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or its subsidiaries pursuant to, (i) the charter or by-
laws of the Company or its subsidiaries, (ii) the terms of any indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which the
Company or its subsidiaries is a party or
bound or to which its or their property is subject and which is filed as an
exhibit to the Registration Statement (or any document incorporated by reference
therein) or, to the knowledge of such counsel, any other such agreements to
which the Company or any of its subsidiaries is a party, or (iii) any statute,
law, rule, regulation, judgment, order or decree applicable to the Company or
its subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over the
Company or its subsidiaries or any of its or their properties;
(ix) to the knowledge of such counsel, no holders of securities of the
Company have registration rights entitling them to inclusion of such securities
in the Registration Statement;
(x) to the knowledge of such counsel, neither the Company nor any
subsidiary is in violation or default of (i) any provision of its charter or
bylaws, (ii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its property
is subject, or (iii) any statue, law, rule, regulation, judgment, order or
decree of any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over the Company or such
subsidiary or any of its properties, as applicable;
(xi) to the knowledge of such counsel, the Company and its subsidiaries
possess all licenses, certificates, permits and other authorizations issued by
the appropriate federal state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect on the condition (financial or otherwise),
prospects, earnings, business or properties of the Company and its subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Prospectus
(exclusive of any supplement thereto); and
(xii) the documents incorporated by reference in the Registration
Statement and the Prospectus (other than the financial statements and the other
financial information contained therein, as to which such counsel need express
no opinion) appeared on their face, at the time at which they were filed with
the Commission, to comply as to form in all material respects with the
requirements of the Exchange Act.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than Maryland and the District of
Columbia, the Federal laws of the United States and the corporation law of the
State of Delaware, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Underwriters and (B) as to
matters of fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus in
this paragraph (b) include any supplements thereto at the Closing Date.
(c) The Company shall have caused ▇▇▇▇▇▇ ▇. ▇▇▇▇, General Counsel of the
Company, to have furnished to the Underwriters his opinion, dated the Closing
Date and addressed to the Underwriters, to the effect that:
(i) each Subsidiary (as defined below) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate power
and authority to own or lease, as the case may be, and to operate its properties
and conduct its business as described in the Prospectus; and each Subsidiary is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such qualification, except
where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), prospects, earnings, business or properties of the Company and its
subsidiaries, taken as a whole; and
(ii) all the outstanding shares of capital stock of each Subsidiary have
been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Prospectus, all
outstanding shares of capital stock of the Subsidiaries are owned by the Company
either directly or through wholly owned subsidiaries free and clear of any
perfected security interest and, to the knowledge of such counsel, after due
inquiry, any other security interest, claim, lien or encumbrance.
Such counsel shall indicate on a schedule to such opinion each subsidiary (as
defined in Rule 1-02 of Regulation S-X under the Act) of the Company other than
those subsidiaries which when considered in the aggregate as a single subsidiary
would not constitute a significant subsidiary (as defined in Rule 1-02 of
Regulation S-X); provided, however, that if any subsidiary would not be included
in such schedule based on financial information as of or for the year ended
December 31, 1998 but would be included based on financial information as of or
for the quarter ended March 31, 1999, such subsidiary shall nonetheless be
included in such schedule. For purposes of such opinion, "Subsidiary" shall mean
any subsidiary listed on such schedule. In rendering such opinion, such counsel
may rely (A) as to matters involving the application of laws of any jurisdiction
other than Maryland and the District of Columbia, the Federal laws of the United
States and the corporation law of the State of Delaware, to the extent such
counsel deems proper and specified in such opinion, upon the opinion of other
counsel of good standing whom such counsel believes to be reliable and who are
satisfactory to counsel for the Underwriters and (B) as to matters of fact, to
the extent such counsel deems proper, on certificates of responsible officers of
the Company and
public officials. References to the Prospectus in this paragraph (C) include any
supplements thereto at the Closing Date.
(d) Each Selling Stockholder shall have caused counsel for such Selling
Stockholder (which shall be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President and General
Counsel-Principal Life Insurance Company, in the case of Principal Mutual, and
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, in the case of the Option Selling Stockholders),
to have furnished to the Underwriters such counsel's opinion dated the Closing
Date and addressed to the Underwriters, to the effect that:
(i) this Agreement and the Custody Agreement and Power of Attorney have
been duly authorized, executed and delivered by such Selling Stockholder, the
Custody Agreement is valid and binding on such Selling Stockholder and such
Selling Stockholder has full legal right and authority to sell, transfer and
deliver in the manner provided in this Agreement and the Custody Agreement the
Securities being sold by such Selling Stockholder hereunder;
(ii) the delivery by such Selling Stockholder to the several
Underwriters of certificates for the Securities being sold hereunder by such
Selling Stockholder, against payment therefor as provided herein, will pass good
and marketable title to such Securities to the several Underwriters, free and
clear of all liens, encumbrances, equities and claims whatsoever;
(iii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by such Selling
Stockholder of the transactions contemplated herein, except such as may have
been obtained under the Act and such as may be required under the blue sky laws
of any jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters and such other approvals (specified in such
opinion) as have been obtained; and
(iv) neither the sale of the Securities being sold by such Selling
Stockholder nor the consummation of any other of the transactions herein
contemplated by such Selling Stockholder or the fulfillment of the terms hereof
by such Selling Stockholder will conflict with, result in a breach or violation
of, or constitute a default under any law or, if applicable, the charter or By-
laws of such Selling Stockholder or the terms of any indenture or other
agreement or instrument known to such counsel and to which such Selling
Stockholder or, if applicable, any of its subsidiaries is a party or bound, or
any judgment, order or decree known to such counsel to be applicable to such
Selling Stockholder or, if applicable, any of its respective subsidiaries of any
court, regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over such Selling Stockholder or, if applicable, any of its
subsidiaries.
In rendering such opinion, such counsel may rely (A) as to matters involving the
application of laws of any jurisdiction other than the Federal laws of the
United States, the corporation law of the State of Delaware and the laws of
Iowa, in the
case of counsel for Principal Mutual, and Maryland, in the case of counsel for
the Option Selling Stockholders, to the extent such counsel deems proper and
specified in such opinion, upon the opinion of other counsel of good standing
whom such counsel believes to be reliable and who are satisfactory to counsel
for the Underwriters, and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of the Selling Stockholders, responsible officers
thereof and public officials.
(e) The Underwriters shall have received from ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP,
counsel for the Underwriters, such opinion or opinions, dated the Closing Date
and addressed to the Underwriters, with respect to the issuance and sale of the
Securities by the Company, the Registration Statement, the Prospectus (together
with any supplement thereto) and other related matters as the Underwriters may
reasonably require, and the Company and the Selling Stockholders shall have
furnished to such counsel such documents as they request for the purpose of
enabling them to pass upon such matters.
(f) The Company shall have furnished to the Underwriters a certificate
of the Company, signed by the Chairman of the Board or the President and the
principal financial or accounting officer of the Company, dated the Closing
Date, to the effect that the signers of such certificate have carefully examined
the Registration Statement, the Prospectus, any supplements to the Prospectus
and this Agreement and that:
(i) the representations and warranties of the Company in this Agreement
are true and correct on and as of the Closing Date with the same effect as if
made on the Closing Date and the Company has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Company's knowledge, threatened; and
(iii) since the date of the most recent financial statements included or
incorporated by reference in the Prospectus (exclusive of any supplement
thereto), there has been no material adverse effect on the condition (financial
or otherwise), prospects, earnings, business or properties of the Company and
its subsidiaries, taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(g) Each Selling Stockholder shall have furnished to the Underwriters a
certificate, signed by such Selling Stockholder or a responsible officer hereof,
dated the Closing Date, to the effect that the signer of such certificate has
carefully examined the Registration Statement, the Prospectus, any supplement to
the Prospectus and this Agreement and that the representations and warranties of
such Selling Stockholder in this Agreement are true and correct in all material
respects on and as of the Closing Date to the same effect as if made on the
Closing Date.
(h) The Underwriters shall have received letters addressed to the
Underwriters dated the date hereof and the Closing Date from
PricewaterhouseCoopers LLP, independent certified public accountants,
substantially in the form heretofore approved by the Underwriters.
(i) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement thereto),
there shall not have been (i) any change or decrease specified in the letters
referred to in paragraph (h) of this Section 6 or (ii) any change, or any
development involving a prospective change, in or affecting the condition
(financial or otherwise), prospects, earnings, business or properties of the
Company and its subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth in or
contemplated in the Prospectus (exclusive of any supplement thereto) the effect
of which, in any case referred to in clause (i) or (ii) above, is, in the sole
judgment of the Underwriters, so material and adverse as to make it impractical
or inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Registration Statement (exclusive of any amendment thereof)
and the Prospectus (exclusive of any supplement thereto).
(j) The Securities shall have been listed and admitted and authorized
for trading on the Nasdaq Stock Market's National Market, and satisfactory
evidence of such actions shall have been provided to the Underwriters.
(k) At the Execution Time, the Company shall have furnished to the
Underwriters a letter substantially in the form of Exhibit A hereto from each
officer and five percent stockholder of the Company addressed to the
Underwriters.
(l) Prior to the Closing Date, the Company and the Selling Stockholders
shall have furnished to the Underwriters such further information, certificates
and documents as the Underwriters may reasonably request.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Underwriters and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Underwriters. Notice of such
cancellation shall be given to the Company and the Attorney-in-Fact in writing
or by telephone or facsimile confirmed in writing.
The documents required to be delivered by this Section 6 shall be
delivered at the office of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LLP, counsel for the Underwriters,
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, on the Closing Date.
7. Reimbursement of Underwriters' Expenses. If the sale of the
---------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company or any Selling
Stockholder to perform any agreement herein or comply with any provision hereof
other than by reason of a default by any of the Underwriters, the Company will
reimburse the Underwriters severally through Warburg Dillon Read LLC on demand
for all out-of-pocket expenses (including reasonable fees and expenses of
counsel) that shall have been incurred by them in connection with the proposed
purchase and sale of the Securities. If the Company is required to make any
payments to the Underwriters under this Section 7 because of any Selling
Stockholder's refusal, inability or failure to satisfy any condition to the
obligations of the Underwriters set forth in Section 6, such Selling Stockholder
shall reimburse the Company on demand for all amounts so paid.
8. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless each Underwriter,
the directors, officers, employees and agents of each Underwriter and each
person who controls any Underwriter within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the registration
statement for the registration of the Securities as originally filed or in any
amendment thereof, or in any Preliminary Prospectus or the Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Selling Stockholder agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person who controls any Underwriter within the meaning of either the
Act or the Exchange Act to the same extent as the foregoing indemnity from the
Company to each Underwriter, but only with reference to written information
furnished to the Company by or on behalf of such Selling Stockholder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
the Selling Stockholders may otherwise have.
(c) Each Underwriter severally and not jointly agrees to indemnify and
hold harmless the Company, each of its directors, each of its officers who signs
the Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act and each Selling Stockholder, to
the same extent as the foregoing indemnity from the Company and the Selling
Stockholders to each Underwriter, but only with reference to written information
relating to such Underwriter furnished to the Company by or on behalf of such
Underwriter specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which any Underwriter may otherwise have. The Company and the Selling
Stockholders acknowledge that the statements set forth in the last paragraph of
the cover page regarding delivery of the Securities and, under the heading
"Underwriting," (i) the sentences related to concessions and reallowances and
(ii) the paragraph related to stabilization, syndicate covering transactions and
penalty bids in any Preliminary Prospectus and the Prospectus, constitute the
only information furnished in writing by or on behalf of the several
Underwriters for inclusion in any Preliminary Prospectus or the Prospectus.
(d) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a), (b) or (c) above unless and to the extent it did
not otherwise learn of such action and such failure results in the forfeiture by
the indemnifying party of substantial rights and defenses and (ii) will not, in
any event, relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a), (b) or (c) above. The indemnifying party shall be entitled to
appoint counsel of the indemnifying party's choice at the indemnifying party's
expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the
indemnified party would present such counsel with a conflict of interest, (ii)
the actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(e) In the event that the indemnity provided in paragraph (a), (b) or
(c) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Selling Stockholders,
jointly and severally, and the Underwriters severally agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company, the Selling Stockholders and one
or more of the Underwriters may be subject in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and by the Underwriters on the other from the
offering of the Securities; provided, however, that in no case shall any
Underwriter (except as may be provided in any agreement among underwriters
relating to the offering of the Securities) be responsible for any amount in
excess of the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Company and
the Selling Stockholders, jointly and severally, and the Underwriters severally
shall contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company and the Selling
Stockholders on the one hand and of the Underwriters on the other in connection
with the statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the Company and
the Selling Stockholders shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses) received by the Company and the
Selling Stockholders, and benefits received by the Underwriters shall be deemed
to be equal to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether any untrue or any
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information
provided by the Company or any Selling Stockholder on the one hand or the
Underwriters on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contribution were
determined by pro rata allocation or any other method of allocation which does
not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (e), 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 8, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter, and each person who controls
the Company within the meaning of either the Act or the Exchange Act, each
officer of the Company who shall have 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 the applicable terms and conditions of this
paragraph (e).
(f) The liability of each Selling Stockholder under its representations
and warranties contained in Section 1 hereof and under the indemnity and
contribution agreements contained in this Section 8 shall be limited to an
amount equal to the initial public offering price of the Securities sold by such
Selling Stockholder to the Underwriters. The Company and the Selling
Stockholders may agree, as between themselves and without limiting the rights of
the Underwriters under this Agreement, as to the respective amounts of such
liability for which they each shall be responsible.
9. Default by an Underwriter. If any one or more Underwriters shall
-------------------------
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the amount of Securities set
forth opposite their names in Schedule I hereto bears to the aggregate amount of
Securities set forth opposite the names of all the remaining Underwriters) the
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase; provided, however, that in the event that the aggregate amount of
-------- -------
Securities which the defaulting Underwriter or Underwriters agreed but failed to
purchase shall exceed 10% of the aggregate amount of Securities set forth in
Schedule I hereto, the remaining Underwriters shall have the right to purchase
all, but shall not be under any obligation to purchase any, of the Securities,
and if such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter, any
Selling Stockholder or the Company. In the event of a default by any Underwriter
as set forth in this Section 9, the Closing Date shall be postponed for such
period, not exceeding five Business Days, as the Underwriters shall determine in
order that the required changes in the Registration Statement and the Prospectus
or in any other documents or arrangements may be effected. Nothing
contained in this Agreement shall relieve any defaulting Underwriter of its
liability, if any, to the Company, any Selling Stockholder and any nondefaulting
Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in the
-----------
absolute discretion of the Underwriters, by notice given to the Company prior to
delivery of and payment for the Securities, if at any time prior to such time
(i) trading in the Company's Common Stock shall have been suspended by the
Commission or the Nasdaq Stock Market's National Market or trading in securities
generally on the New York Stock Exchange or the Nasdaq Stock Market's National
Market shall have been suspended or limited or minimum prices shall have been
established on either of such Exchange or National Market, (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war, or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Underwriters, impractical or inadvisable to
proceed with the offering or delivery of the Securities as contemplated by the
Prospectus (exclusive of any supplement thereto).
11. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements representations, warranties, indemnities and other statements of the
Company or its officers, of the Selling Stockholders and of the Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
any Selling Stockholder or the Company or any of the officers, directors or
controlling persons referred to in Section 8 hereof, and will survive delivery
of and payment for the Securities. The provisions of Sections 7 and 8 hereof
shall survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Underwriters, will be mailed,
delivered or telefaxed to the Warburg Dillon Read LLC General Counsel (fax no.:
(▇▇▇) ▇▇▇-▇▇▇▇) and confirmed to the General Counsel, Warburg Dillon Read LLC,
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel; or, if
sent to the Company, will be mailed, delivered or telefaxed to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Chairman and Chief Executive Officer of the Company, (fax no.: (▇▇▇) ▇▇▇-▇▇▇▇)
and confirmed to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman of the Board and Chief
Executive Officer; or if sent to any Selling Stockholder, will be mailed,
delivered or telefaxed and confirmed to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Attorney-in-Fact,
at United Payors & United Providers, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed in
--------------
accordance with the laws of the State of New York applicable to contracts made
and to be performed within the State of New York.
15. Counterparts. This Agreement may be signed in one or more
------------
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
16. Headings. The section headings used herein are for convenience only
--------
and shall not affect the construction hereof.
17. Definitions. The terms which follow, when used in this Agreement,
-----------
shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City or the State of
Maryland.
"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(i)(a) above and any preliminary prospectus included
in the Registration Statement at the Effective Date that omits Rule 430A
Information.
"Prospectus" shall mean the prospectus relating to the Securities that
is first filed pursuant to Rule 424(b) after the Execution Time or, if no filing
pursuant to Rule 424(b) is required, shall mean the form of final prospectus
relating to the Securities included in the Registration Statement at the
Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(i)(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the
form in which it shall become effective) and, in the event any post-effective
amendment thereto or any Rule 462(b) Registration Statement becomes effective
prior to the Closing Date, shall also mean such registration statement as so
amended or such Rule 462(b) Registration Statement, as the case may be. Such
term shall include any Rule 430A Information deemed to be included therein at
the Effective Date as provided by Rule 430A.
"Rule 424", "Rule 430A" and "Rule 462" refer to such rules under the
Act.
"Rule 430A Information" shall mean information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" shall mean a registration
statement and any amendments thereto filed pursuant to Rule 462(b) relating to
the offering covered by the registration statement referred to in Section 1(a)
hereof.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
United Payors & United Providers, Inc.
By:
-----------------------------------
Name:
Title:
Principal Health Care, Inc.
By:
__________________________________
Name:
Title:
Principal Mutual Holding Company
By:
-----------------------------------
Name:
Title:
Each of the Option Selling Stockholders
named in Schedule II
By:
-----------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Warburg Dillon Read LLC
BT Alex. Brown Incorporated
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
By: Warburg Dillon Read LLC
By:
-----------------------------
Name:
Title:
For themselves and the other
several Underwriters
SCHEDULE I
----------
Number of
Underwritten
Securities to be
Underwriters Purchased
------------- -----------------
Warburg Dillon Read LLC .................
BT ▇▇▇▇. ▇▇▇▇▇ Incorporated .............
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc. ..............
-----------------
Total ................................... $2,500,000
=================
SCHEDULE II
-----------
Maximum Number
Option Selling Stockholder of Option Securities
-------------------------- --------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. 30,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 9,000
------
Total 39,000
======
[Form of Lock-Up Agreement] EXHIBIT A
United Payors & United Providers, Inc.
--------------------------------------
Public Offering of Common Stock
-------------------------------
,1999
Warburg Dillon Read LLC
BT Alex. Brown Incorporated
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇▇, Inc.
c/o Warburg Dillon Read LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
This letter is being delivered to you in connection with the proposed
Underwriting Agreement (the "Underwriting Agreement"), between United Payors &
United Providers, Inc., a Delaware corporation (the "Company"), and each of you
as Underwriters with respect to an underwritten public offering of Common Stock,
$0.01 par value (the "Common Stock"), of the Company.
In order to induce you to enter into the Underwriting Agreement, the
undersigned will not, without the prior written consent of Warburg Dillon Read
LLC, offer, sell, contract to sell, pledge or otherwise dispose of, or file (or
participate in the filing of) a registration statement with the Securities and
Exchange Commission in respect of, or establish or increase a put equivalent
position or liquidate or decrease a call equivalent position within the meaning
of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission promulgated thereunder
with respect to, any shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for such capital stock, or
publicly announce an intention to effect any such transaction, for a period of
180 days after the date of this Agreement, other than shares of Common Stock
disposed of as bona fide gifts approved by Warburg Dillon Read LLC.