Exhibit 1.1
EXECUTION COPY
7,000,000 SHARES(1)
BALANCED CARE CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
February 11, 1998
BANCAMERICA XXXXXXXXX XXXXXXXX
XXXXX XXXXXX, INC.
BT ALEX. XXXXX INCORPORATED
As Representatives of the several Underwriters
c/o BancAmerica Xxxxxxxxx Xxxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies/Gentlemen:
Balanced Care Corporation, a Delaware corporation (the "Company"),
addresses you as the Representatives of each of the persons, firms and
corporations listed in Schedule A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
7,000,000 shares of its authorized and unissued common stock, par value $0.001
per share (the "Firm Shares") to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 1,050,000
additional shares of the Company's common stock, par value $0.001 per share (the
"Option Shares"), as provided in Section 7 hereof. As used in this Agreement,
the term "Shares" shall include the Firm Shares and the Option Shares. All
shares of common stock, par value $0.001 per share, of the Company to be
outstanding after giving effect to the sales of the Shares contemplated hereby,
are hereinafter referred to as "Common Stock."
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1 Plus an option to purchase up to 1,050,000 additional shares from the
Company to cover over-allotments.
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2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company represents and warrants to and agrees with each Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-37833) with
respect to the Shares, including a prospectus subject to completion, has
been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Act and has been filed
with the Commission; amendments to such registration statement, amended
prospectuses subject to completion and abbreviated registration statements
pursuant to Rule 462(b) of the Rules and Regulations as may have been
required prior to the date hereof have been similarly prepared and filed
with the Commission; and the Company will file additional amendments to
such registration statement, such amended prospectuses subject to
completion and such abbreviated registration statements as may hereafter
be required. Copies of such registration statement and amendments, of each
related prospectus subject to completion (the "Preliminary Prospectuses")
and of any abbreviated registration statement pursuant to Rule 462(b) of
the Rules and Regulations have been delivered to you.
If the registration statement relating to the Shares has been
declared effective under the Act by the Commission, the Company will
prepare and promptly file with the Commission the information omitted from
the registration statement pursuant to Rule 430A(a) or, if BancAmerica
Xxxxxxxxx Xxxxxxxx, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations pursuant to subparagraph
(1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as part of
a post-effective amendment to the registration statement (including a
final form of prospectus). If the registration statement relating to the
Shares has not been declared effective under the Act by the Commission,
the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if
BancAmerica Xxxxxxxxx Xxxxxxxx, on behalf of the several Underwriters,
shall agree to the utilization of Rule 434 of the Rules and Regulations,
the information required to be included in any term sheet filed pursuant
to Rule 434(b) or (c), as applicable, of the Rules and Regulations. The
term "Registration Statement" as used in this Agreement shall mean such
registration statement, including financial statements, schedules and
exhibits, in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the
registration statement pursuant to Rule 430A(a) or files a term sheet
pursuant to Rule 434 of the Rules and Regulations, the information deemed
to be a part of the registration statement at the time it became effective
pursuant to Rule 430A(b) or Rule 434(d) of the Rules and Regulations) and,
in the event of any amendment thereto or the filing of any abbreviated
registration statement pursuant to Rule 462(b) of the Rules and
Regulations relating thereto after the effective date of such registration
statement, shall also mean (from and after the effectiveness of such
amendment or the filing of such abbreviated registration statement) such
registration statement as so amended, together with any such abbreviated
registration
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statement. The term "Prospectus" as used in this Agreement shall mean the
prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company
omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part
of the Registration Statement at the time it became effective pursuant to
Rule 430A(b) of the Rules and Regulations); PROVIDED, HOWEVER, that if in
reliance on Rule 434 of the Rules and Regulations and with the consent of
BancAmerica Xxxxxxxxx Xxxxxxxx, on behalf of the several Underwriters, the
Company shall have provided to the Underwriters a term sheet pursuant to
Rule 434(b) or (c), as applicable, prior to the time that a confirmation
is sent or given for purposes of Section 2(10)(a) of the Act, the term
"Prospectus" shall mean the "prospectus subject to completion" (as defined
in Rule 434(g) of the Rules and Regulations) last provided to the
Underwriters by the Company and circulated by the Underwriters to all
prospective purchasers of the Shares (including the information deemed to
be a part of the Registration Statement at the time it became effective
pursuant to Rule 434(d) of the Rules and Regulations). Notwithstanding the
foregoing, if any revised prospectus shall be provided to the Underwriters
by the Company for use in connection with the offering of the Shares that
differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed
with the Commission pursuant to Rule 424(b) of the Rules and Regulations),
the term "Prospectus" shall refer to such revised prospectus from and
after the time it is first provided to the Underwriters for such use. If
in reliance on Rule 434 of the Rules and Regulations and with the consent
of BancAmerica Xxxxxxxxx Xxxxxxxx, on behalf of the several Underwriters,
the Company shall have provided to the Underwriters a term sheet pursuant
to Rule 434(b) or (c), as applicable, prior to the time that a
confirmation is sent or given for purposes of Section 2(10)(a) of the Act,
the Prospectus and the term sheet, together, will not be materially
different from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has, as of its date,
conformed in all material respects to the requirements of the Act and the
Rules and Regulations and, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and at the time the Registration
Statement became or becomes, as the case may be, effective and at all
times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased,
(i) the Registration Statement and Prospectus, and any amendments or
supplements thereto, contained and will contain all material information
required to be included therein by the Act and the Rules and Regulations
and will in all material respects conform to the requirements of the Act
and the Rules and Regulations, (ii) the Registration Statement, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, and (iii) the Prospectus, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material
fact
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or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or the Prospectus,
or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished
to the Company by such Underwriter specifically for use in the preparation
thereof.
(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 of its incorporation with full
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus; except as set forth
on Annex I attached hereto, the Company owns all of the outstanding
capital stock of its subsidiaries free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest; each of the
Company and its subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified
or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise; no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail,
such power and authority or qualification; each of the Company and its
subsidiaries is in possession of and operating in compliance with all
authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and
effect; neither the Company nor any of its subsidiaries is in violation of
its respective charter or bylaws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage,
deed of trust, loan agreement, joint venture or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which it or any of its subsidiaries or their respective properties may
be bound; and neither the Company nor any of its subsidiaries is in
material violation of any law, order, rule, regulation, writ, injunction,
judgment or decree of any court, government or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or over their respective properties of which it has
knowledge. The Company does not own or control, directly or indirectly,
any corporation, association or other entity other than as set forth on
Annex II attached hereto.
(d) The Company has full legal right, power and authority to enter
into this Agreement and perform the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Company
and is a valid and binding agreement on the part of the Company,
enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as
the
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enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; the
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a material breach or violation of
any of the terms and provisions of, or constitute a default under, (i) any
bond, debenture, note or other evidence of indebtedness, or under any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of its subsidiaries or
their respective properties may be bound, (ii) the charter or bylaws of
the Company or any of its subsidiaries, or (iii) any law, order, rule,
regulation, writ, injunction, judgment or decree of any court, government
or governmental agency or body, domestic or foreign, having jurisdiction
over the Company or any of its subsidiaries or over their respective
properties. No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or over their respective properties is required for the
execution and delivery of this Agreement and the consummation by the
Company or any of its subsidiaries of the transactions herein
contemplated, except such as may be required under the Act or under state
or other securities or Blue Sky laws, all of which requirements have been
satisfied in all material respects.
(e) There is no pending or, to the best of the Company's knowledge,
threatened action, suit, claim or proceeding against the Company, any of
its subsidiaries or any of their respective officers or any of their
respective properties, assets or rights before any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over
the Company or any of its subsidiaries or over their respective officers
or properties or otherwise which, if determined adversely to the Company,
such subsidiary or such officer, (i) would likely result in any material
adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise or would likely materially and
adversely affect their properties, assets or rights, (ii) would likely
prevent consummation of the transactions contemplated hereby or (iii) is
required to be disclosed in the Registration Statement or Prospectus and
is not so disclosed; and there are no agreements, contracts, leases or
documents of the Company or any of its subsidiaries of a character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration Statement by
the Act or the Rules and Regulations which have not been accurately
described in all material respects in the Registration Statement or
Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws,
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and the authorized
and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" and conforms in all material
respects to the statements
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relating thereto contained in the Registration Statement and the
Prospectus (and such statements correctly state the substance of the
instruments defining the capitalization of the Company); the Firm Shares
and the Option Shares have been duly authorized for issuance and sale to
the Underwriters pursuant to this Agreement and, when issued and delivered
by the Company against payment therefor in accordance with the terms of
this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest; and no
preemptive right, co-sale right, registration right, right of first
refusal or other similar right of shareholders exists with respect to any
of the Firm Shares or Option Shares or the issuance and sale thereof other
than those that have been expressly waived prior to the date hereof and
those that will automatically expire upon and will not apply to the
consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any shareholder, the Board of
Directors of the Company or others is required for the issuance and sale
or transfer of the Shares except as may be required under the Act or under
state or other securities or Blue Sky laws. All issued and outstanding
shares of capital stock of each subsidiary of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, and
were not issued in violation of or subject to any preemptive right, or
other rights to subscribe for or purchase shares. Except as disclosed in
the Prospectus, neither the Company nor any subsidiary has outstanding any
options to purchase, or any preemptive rights or other rights to subscribe
for or to purchase, any securities or obligations convertible into, or any
contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The
description of the Company's stock option, stock bonus and other stock
plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly
presents the information required to be shown with respect to such plans,
arrangements, options and rights.
(g) KPMG Peat Marwick LLP, which has examined the consolidated
financial statements of the Company, together with the related schedule
and notes, as of June 30, 1997 and 1996 and for each of the years then
ended and for the period April 17, 1995 (date of inception) to June 30,
1995 filed with the Commission as a part of the Registration Statement,
which are included in the Prospectus, are independent accountants within
the meaning of the Act and the Rules and Regulations; the audited
consolidated financial statements of the Company, together with the
related schedule and notes, and the unaudited consolidated financial
statements and financial information, forming part of the Registration
Statement and the Prospectus, fairly present the financial position and
the results of operations of the Company and its subsidiaries at the
respective dates and for the respective periods to which they apply; and
all audited consolidated financial statements of the Company, together
with the related schedule and notes, and the unaudited consolidated
financial statements and financial information, filed with the Commission
as part of the Registration Statement, have been prepared in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved except as may be otherwise stated therein.
The selected and summary financial data included in the Registration
Statement present fairly the information shown therein and have been
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compiled on a basis consistent with the audited consolidated financial
statements presented therein. Except as set forth in paragraphs (h), (i),
(j) and (k) below, no other financial statements or schedules are required
to be included in the Registration Statement. The pro forma financial
statements and the related notes thereto included in the Registration
Statement and Prospectus present fairly the information shown therein,
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the assumptions used
in the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions and circumstances
referred to therein.
(h) Xxxxx, Xxxxx & Xxxxxx, which has examined (i) the combined
financial statements of Xxxxxx Health Care Affiliates ("Xxxxxx
Healthcare"), together with the related notes, as of June 30, 1996 and
1995 and for each of the two (2) years ended June 30, 1996 and (ii) the
combined financial statements of Heavenly Health Care, Inc. d/b/a Xxx
Xxxxx Residential Homes ("Xxx Xxxxx"), together with the related notes as
of December 31, 1996 for the year ended December 31, 1996, filed with the
Commission as a part of the Registration Statement, which are included in
the Prospectus, are independent accountants within the meaning of the Act
and the Rules and Regulations; the audited combined financial statements
of Xxxxxx Healthcare and of Xxx Xxxxx, together with the respective
related notes, forming part of the Registration Statement and Prospectus
fairly present the respective financial positions and the results of
operations of Xxxxxx Healthcare and its affiliates and Xxx Xxxxx and its
subsidiaries at the respective dates and for the respective periods to
which they apply; and all audited combined financial statements of Xxxxxx
Healthcare and of Xxx Xxxxx, together with the respective related
schedules and notes, and the unaudited combined financial information,
filed with the Commission as part of the Registration Statement, have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be
otherwise stated therein.
(i) Xxxxxx & Clemente, which has examined the combined financial
statements of Keystone Affiliates, together with the related notes, as of
December 31, 1996 and 1995 and for the three (3) years ended December 31,
1996 filed with the Commission as a part of the Registration Statement,
which are included in the Prospectus, are independent accountants within
the meaning of the Act and the Rules and Regulations; the audited combined
financial statements of Keystone Affiliates, together with the related
notes, forming part of the Registration Statement and Prospectus, fairly
present the financial position and the results of operations of Keystone
Affiliates and its affiliates at the respective dates and for the
respective periods to which they apply; and all audited combined financial
statements of Keystone Affiliates, together with the related notes, filed
with the Commission as part of the Registration Statement, have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be
otherwise stated therein.
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(j) Coopers & Xxxxxxx, L.L.P., which has examined (i) the combined
financial statements of Gethsemane Affiliates, together with the related
notes, as of June 30, 1997 and 1996 and for the three (3) years ended June
30, 1997, (ii) the financial statements of Xxxxxx Senior Care, Inc.
("Xxxxxx"), together with the related notes, as of June 30, 1997 and 1996
and for each of the three (3) years ended June 30, 1997 and (iii) the
financial statements of Xxxxxxx'x Personal Care Home ("Xxxxxxx"), together
with the related notes, as of June 30, 1997 and 1996 and for the three (3)
years ended June 30, 1997, filed with the Commission as a part of the
Registration Statement, which are included in the Prospectus, are
independent accountants within the meaning of the Act and the Rules and
Regulations; the respective combined financial statements of Gethsemane
Affiliates, Xxxxxx and Xxxxxxx, together with the related notes, forming
part of the Registration Statement and Prospectus, fairly present the
respective financial positions and the results of operations of Gethsemane
Affiliates, Xxxxxx and Xxxxxxx and their respective subsidiaries at the
respective dates and for the respective periods to which they apply; and
all financial statements of Gethsemane Affiliates, Xxxxxx and Xxxxxxx
together with the related notes, filed with the Commission as part of the
Registration Statement, have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved except as may be otherwise stated therein.
(k) Xxxxx, Xxxxxxx & Company, P.A., which has examined the financial
statements of Triangle Retirement Services, together with the related
notes, as of December 31, 1997 and 1996 and for the two (2) years ended
December 31, 1997, filed with the Commission as a part of the Registration
Statement, which are included in the Prospectus, are independent
accountants within the meaning of the Act and the Rules and Regulations;
the financial statements of Triangle Retirement Services, together with
the related notes, forming part of the Registration Statement and
Prospectus, fairly present the financial position and the results of
operations of Triangle Retirement Services and its subsidiaries at the
respective dates and for the respective periods to which they apply; and
all financial statements of Triangle Retirement Services together with the
related notes, filed with the Commission as part of the Registration
Statement, have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved
except as may be otherwise stated therein.
(l) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been (i)
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and
its subsidiaries considered as one enterprise, (ii) any transaction that
is material to the Company and its subsidiaries considered as one
enterprise, except transactions entered into in the ordinary course of
business, (iii) any obligation, direct or contingent, that is material to
the Company and its subsidiaries considered as one enterprise, incurred by
the Company or its subsidiaries, except obligations incurred in the
ordinary course of business, (iv) any change in the capital stock or
outstanding indebtedness of the Company or any of its subsidiaries that is
material to the Company and its subsidiaries considered as one enterprise,
(v) any dividend or distribution of any kind
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declared, paid or made on the capital stock of the Company or any of its
subsidiaries, or (vi) any loss or damage (whether or not insured) to the
property of the Company or any of its subsidiaries which has been
sustained or will have been sustained which has a material adverse effect
on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiaries considered as
one enterprise.
(m) Except as set forth in the Registration Statement and
Prospectus, (i) each of the Company and its subsidiaries has good and
marketable title to all properties and assets described in the
Registration Statement and Prospectus as owned by it free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest,
other than such as would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise, (ii) the agreements to which the Company or any of its
subsidiaries is a party described in the Registration Statement and
Prospectus are valid agreements, enforceable by the Company and its
subsidiaries (as applicable), except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally
or by general equitable principles and, to the best of the Company's
knowledge, the other contracting party or parties thereto are not in
material breach or material default under any of such agreements, and
(iii) each of the Company and its subsidiaries has valid and enforceable
leases for all properties described in the Registration Statement and
Prospectus as leased by it, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally
or by general equitable principles. Except as set forth in the
Registration Statement and Prospectus, the Company owns or leases all such
properties as are necessary to its operations as now conducted or as
proposed to be conducted.
(n) The Company and its subsidiaries have timely filed all necessary
federal, state and foreign income and franchise tax returns and have paid
all taxes shown thereon as due, and there is no tax deficiency that has
been or, to the best of the Company's knowledge, might be asserted against
the Company or any of its subsidiaries that might have a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries
considered as one enterprise; and all tax liabilities are adequately
provided for on the books of the Company and its subsidiaries.
(o) The Company and its subsidiaries maintain insurance with
insurers of recognized financial responsibility of the types and in the
amounts generally deemed adequate for their respective businesses and
consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering real
and personal property owned or leased by the Company or its subsidiaries
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor
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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 materially and adversely
affect the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries
considered as one enterprise.
(p) To the best of Company's knowledge, no labor disturbance by the
employees of the Company or any of its subsidiaries exists or is imminent.
No collective bargaining agreement exists with any employees of the
Company or any of its subsidiaries and, to the best of the Company's
knowledge, no such agreement is imminent.
(q) The Common Stock has been approved for quotation on The American
Stock Exchange, Inc. subject to official notice of issuance.
(r) The Company has been advised concerning the Investment Company
Act of 1940, as amended (the "1940 Act"), and the rules and regulations
thereunder, and conducts, and has in the past conducted, and intends in
the future to conduct, its affairs in such a manner as to ensure that it
will not become an "investment company" or a company "controlled" by an
"investment company" within the meaning of the 1940 Act and such rules and
regulations.
(s) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are
to be purchased, as the case may be, and (ii) completion of the
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any Preliminary Prospectuses,
the Prospectus, the Registration Statement and other materials, if any,
permitted by the Act.
(t) Neither the Company nor any of its subsidiaries has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution
in violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted
by the laws of the United States or any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
(v) Each officer and director of the Company and each beneficial
owner of shares of Common Stock or warrants or options to purchase Common
Stock set forth on Annex III attached hereto has agreed in writing that
such person will not, for a period of 180 days from the date that the
Registration Statement is declared effective by the Commission (the
"Lock-up Period"), offer to sell, contract to sell, or otherwise sell,
dispose of, loan,
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pledge or grant any rights with respect to (collectively, a "Disposition")
any shares of Common Stock, any options or warrants to purchase any shares
of Common Stock or any securities convertible into or exchangeable for
shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has
or hereafter acquires the power of disposition, otherwise than (i) as a
bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to
partners or shareholders of such person, provided that the distributees
thereof agree in writing to be bound by the terms of this restriction, or
(iii) with the prior written consent of BancAmerica Xxxxxxxxx Xxxxxxxx.
The foregoing restriction has been expressly agreed to preclude the holder
of the Securities from engaging in any hedging or other transaction which
is designed to or reasonably expected to lead to or result in a
Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without
limitation, any short sale (whether or not against the box) or any
purchase, sale or grant of any right (including, without limitation, any
put or call option) with respect to any Securities or with respect to any
security (other than a broad-based market basket or index) that includes,
relates to or derives any significant part of its value from, Securities.
Furthermore, such person has also agreed and consented to the entry of
stop transfer instructions with the Company's transfer agent against the
transfer of Securities held by such person except in compliance with this
restriction. The Company has provided to counsel for the Underwriters a
complete and accurate list of all security holders of the Company and the
number and type of securities held by each security holder. The Company
has provided to counsel for the Underwriters true, accurate and complete
copies of all of the agreements pursuant to which its officers, directors
and shareholders have agreed to such or similar restrictions (the "Lock-up
Agreements") presently in effect or effected hereby. The Company hereby
represents and warrants that it will not release any of its officers,
directors or other shareholders from any Lock-up Agreements currently
existing or hereafter effected, without the prior written consent of
BancAmerica Xxxxxxxxx Xxxxxxxx.
(w) Except as set forth in the Registration Statement and
Prospectus, (i) the Company is in compliance in all material respects with
all rules, laws and regulations relating to the use, treatment, storage
and disposal of toxic substances and protection of health or the
environment ("Environmental Laws") which are applicable to its business,
(ii) the Company has received no notice from any governmental authority or
third party of an asserted claim under Environmental Laws, which claim is
required to be disclosed in the Registration Statement and Prospectus,
(iii) the Company will not be required to make future material capital
expenditures to comply with Environmental Laws and (iv) no property which
is owned, leased or occupied by the Company has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. ss. 9601, ET SEQ.), or
otherwise designated as a contaminated site under applicable state or
local law.
12
(aa) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurances
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 accountability for assets,
(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 existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(bb) There are no outstanding loans, advances (except normal
advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of
the officers or directors of the Company or any of the members of the
families of any of them, except as disclosed in the Registration Statement
and the Prospectus and with respect to a loan to Xxxxx Xxxxx of less than
$60,000.
(cc) The Company has complied with all provisions of Section
517.075, Florida Statutes applicable to it relating to doing business with
the Government of Cuba or with any person or affiliate located in Cuba.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $6.045 per share, the
respective number of Firm Shares as hereinafter set forth. The obligation of
each Underwriter to the Company shall be to purchase from the Company that
number of Firm Shares which is set forth opposite the name of such Underwriter
in Schedule A hereto (subject to adjustment as provided in Section 10).
Delivery of definitive certificates for the Firm Shares to be
purchased by the Underwriters pursuant to this Section 3 shall be made against
payment of the purchase price therefor by the several Underwriters by certified
or official bank check or checks drawn in next-day funds, payable to the order
of the Company (and the Company agrees not to deposit any such check in the bank
on which it is drawn, and not to take any other action with the purpose or
effect of receiving immediately available funds, until the business day
following the date of its delivery to the Company, and, in the event of any
breach of the foregoing, the Company shall reimburse the Underwriters for the
interest lost and any other expenses borne by them by reason of such breach), at
the offices of Shearman & Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (or at such other place as may be agreed upon among the Representatives
and the Company), at 7:00 A.M., San Francisco time (a) on the third (3rd) full
business day following the first day that Shares are traded, (b) if this
Agreement is executed and delivered after 1:30 P.M., San Francisco time, the
fourth (4th) full business day following the day that this Agreement is executed
and delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 10
13
hereof), such time and date of payment and delivery being herein called the
"Closing Date"; PROVIDED, HOWEVER, that if the Company has not made available to
the Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives. The certificates for the
Firm Shares to be so delivered will be made available to you at such office or
such other location including, without limitation, in New York City, as you may
reasonably request for checking at least one (1) full business day prior to the
Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the Closing
Date. If the Representatives so elect, delivery of the Firm Shares may be made
by credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public offering
price of $6.50 per share. After the initial public offering, the several
Underwriters may, in their discretion, vary the public offering price.
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), on the inside
front cover concerning stabilization and over-allotment by the Underwriters, and
under the 2nd, 6th, 7th and 9th paragraphs under the caption "Underwriting" in
any Preliminary Prospectus and in the Prospectus constitutes the only
information furnished by the Underwriters to the Company for inclusion in any
Preliminary Prospectus, the Prospectus or the Registration Statement, and you,
on behalf of the respective Underwriters, represent and warrant to the Company
that the statements made therein do not include any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendment thereof, if not effective at the time and date
that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible; the Company will use its best
efforts to cause any abbreviated registration statement pursuant to Rule
462(b) of the Rules and Regulations as may be required subsequent to the
date the Registration Statement is declared effective to become effective
as promptly as
14
possible; the Company will notify you, promptly after it shall receive
notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any abbreviated
registration statement has become effective or any supplement to the
Prospectus has been filed; if the Company omitted information from the
Registration Statement at the time it was originally declared effective in
reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with
the Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the
Rules and Regulations or as part of a post-effective amendment to such
Registration Statement as originally declared effective which is declared
effective by the Commission; if the Company files a term sheet pursuant to
Rule 434 of the Rules and Regulations, the Company will provide evidence
satisfactory to you that the Prospectus and term sheet meeting the
requirements of Rule 434(b) or (c), as applicable, of the Rules and
Regulations, have been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (7) of Rule 424(b) of the Rules and
Regulations; if for any reason the filing of the final form of Prospectus
is required under Rule 424(b)(3) of the Rules and Regulations, it will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed with the Commission within the time period
prescribed; it will notify you promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or supplements to
the Registration Statement or Prospectus which, in the opinion of counsel
for the several Underwriters ("Underwriters' Counsel"), may be necessary
or advisable in connection with the distribution of the Shares by the
Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have
occurred as a result of which the Prospectus or any other prospectus
relating to the Shares as then in effect would include any untrue
statement of a material fact or omit 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 case any Underwriter is required to
deliver a prospectus nine (9) months or more after the effective date of
the Registration Statement in connection with the sale of the Shares, it
will prepare promptly upon request, but at the expense of such
Underwriter, such amendment or amendments to the Registration Statement
and such prospectus or prospectuses as may be necessary to permit
compliance with the requirements of Section 10(a)(3) of the Act; and it
will file no amendment or supplement to the Registration Statement or
Prospectus which shall not previously have been submitted to you a
reasonable time prior to the proposed filing thereof or to which you shall
reasonably object in writing, subject, however, to compliance with the Act
and the Rules and Regulations and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive
notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the
15
effectiveness of the Registration Statement or of the initiation or threat
of any proceeding for that purpose; and it will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be
issued.
(c) The Company will use its best efforts to qualify the Shares for
offering and sale under the securities laws of such jurisdictions as you
may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, except
that the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction in which it is
not otherwise required to be so qualified or to so execute a general
consent to service of process. In each jurisdiction in which the Shares
shall have been qualified as above provided, the Company will make and
file such statements and reports in each year as are or may be required by
the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in
the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later than the first (1st) full business day
following the first day that Shares are traded, copies of the Registration
Statement (three of which will be signed and which will include all
exhibits), each Preliminary Prospectus, the Prospectus and any amendments
or supplements to such documents, including any prospectus prepared to
permit compliance with Section 10(a)(3) of the Act, all in such quantities
as you may from time to time reasonably request. Notwithstanding the
foregoing, if BancAmerica Xxxxxxxxx Xxxxxxxx, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the Company shall provide to you copies of a Preliminary
Prospectus updated in all respects through the date specified by you in
such quantities as you may from time to time reasonably request.
(e) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first
occurring after the first anniversary of the effective date of the
Registration Statement, an earnings statement (which will be in reasonable
detail but need not be audited) complying with the provisions of Section
11(a) of the Act and covering a twelve (12) month period beginning after
the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the
Company will furnish to its shareholders as soon as practicable after the
end of each respective period, annual reports (including financial
statements audited by independent certified public accountants) and
unaudited quarterly reports of operations for each of the first three
quarters of the fiscal year, and will furnish to you and, upon request,
the other several Underwriters hereunder (i) concurrently with furnishing
such reports to its shareholders, statements of operations of the Company
for each of the first three (3) quarters in the form furnished to the
Company's shareholders, (ii) concurrently with furnishing to its
shareholders, a balance
16
sheet of the Company as of the end of such fiscal year, together with
statements of operations, of shareholders' equity, and of cash flows of
the Company for such fiscal year, accompanied by a copy of the certificate
or report thereon of independent certified public accountants, (iii) as
soon as they are available, copies of all reports (financial or other)
mailed to shareholders, (iv) as soon as they are available, copies of all
reports and financial statements furnished to or filed with the
Commission, any securities exchange or the National Association of
Securities Dealers, Inc. ("NASD"), (v) every material press release and
every material news item or article in respect of the Company or its
affairs which was generally released to shareholders or prepared by the
Company or any of its subsidiaries, and (vi) any additional information of
a public nature concerning the Company or its subsidiaries, or its
business which you may reasonably request. During such five (5) year
period, if the Company shall have active subsidiaries, the foregoing
financial statements shall be on a consolidated basis to the extent that
the accounts of the Company and its subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the
Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar (which
may be the same entity as the transfer agent) for its Common Stock.
(i) If the transactions contemplated hereby are not consummated by
reason of any failure, refusal or inability on the part of the Company to
perform any agreement on its parts to be performed hereunder or to fulfill
any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement pursuant to Section 11(a) hereof,
or if the Underwriters shall terminate this Agreement pursuant to Section
11(b)(i), the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel) incurred by the Underwriters in investigating or preparing to
market or marketing the Shares.
(j) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in
your opinion the market price of the Common Stock has been or is likely to
be materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus), the
Company will, after written notice from you advising the Company to the
effect set forth above, forthwith prepare, consult with you concerning the
substance of and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(k) During the Lock-up Period, the Company will not, without the
prior written consent of BancAmerica Xxxxxxxxx Xxxxxxxx, effect the
Disposition of, directly or
17
indirectly, any Securities other than the sale of the Firm Shares and the
Option Shares hereunder and the Company's issuance of options or Common
Stock under the Company's presently authorized 1996 Stock Option Plan (the
"Option Plan").
(l) During a period of forty-five (45) days from the effective date
of the Registration Statement, the Company will not file a registration
statement registering shares under the Option Plan or other employee
benefit plan.
5. EXPENSES. The Company agrees with each Underwriter that:
(a) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits),
Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary Blue Sky
Survey and any Supplemental Blue Sky Survey, the Underwriters'
Questionnaire and Power of Attorney, and any instruments related to any of
the foregoing; the issuance and delivery of the Shares hereunder to the
several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars'
fees; the fees and disbursements of counsel for the Company; all fees and
other charges of the Company's independent certified public accountants;
the cost of furnishing to the several Underwriters copies of the
Registration Statement (including appropriate exhibits), Preliminary
Prospectus and the Prospectus, and any amendments or supplements to any of
the foregoing; NASD filing fees and the cost of qualifying the Shares
under the laws of such jurisdictions as you may designate (including
filing fees and fees and disbursements of Underwriters' Counsel in
connection with such NASD filings and Blue Sky qualifications); and all
other expenses directly incurred by the Company in connection with the
performance of their obligations hereunder.
(b) In addition to its other obligations under Section 8(a) hereof,
the Company agrees that, as an interim measure during the pendency of any
claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
obligation to reimburse the Underwriters for such expenses and the
possibility that such payments might later be held to have been improper
by a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
listed from time to time in The Wall Street Journal which represents the
base rate on corporate loans posted by a substantial majority of the
nation's thirty (30) largest banks (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the
18
Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(c) In addition to their other obligations under Section 8(c)
hereof, the Underwriters severally and not jointly agree that, as an
interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding described in Section 8(c) hereof, they will
reimburse the Company on a monthly basis for all reasonable legal or other
expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding
the absence of a judicial determination as to the propriety and
enforceability of the Underwriters' obligation to reimburse the Company
for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company shall promptly return such payment to the
Underwriters together with interest, compounded daily, determined on the
basis of the Prime Rate. Any such interim reimbursement payments which are
not made to the Company within thirty (30) days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.
(d) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in Sections 5(b) and
5(c) hereof, including the amounts of any requested reimbursement
payments, the method of determining such amounts and the basis on which
such amounts shall be apportioned among the reimbursing parties, shall be
settled by arbitration conducted under the provisions of the Constitution
and Rules of the Board of Governors of the New York Stock Exchange, Inc.
or pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for
arbitration or a written notice of intention to arbitrate, therein
electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in
such demand or notice, then the party responding to said demand or notice
is authorized to do so. Any such arbitration will be limited to the
operation of the interim reimbursement provisions contained in Sections
5(b) and 5(c) hereof and will not resolve the ultimate propriety or
enforceability of the obligation to indemnify for expenses which is
created by the provisions of Sections 8(a) and 8(c) hereof or the
obligation to contribute to expenses which is created by the provisions of
Section 8(d) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein shall
be subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company herein, to the performance by
the Company of its obligations hereunder and to the following additional
conditions:
(a) The Registration Statement shall have become effective not later
than 2:00 P.M., San Francisco time, on the date following the date of this
Agreement, or such later
19
date as shall be consented to in writing by you; and no stop order
suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by
the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the
Prospectus or otherwise) shall have been complied with to the satisfaction
of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the
Prospectus, and the registration, authorization, issue, sale and delivery
of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass
upon the matters referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to
be purchased, as the case may be, there shall not have been any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to proceed
with the public offering of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, the
following opinion of counsel for the Company, dated the Closing Date or
such later date on which Option Shares are to be purchased addressed to
the Underwriters and with reproduced copies or signed counterparts thereof
for each of the Underwriters, to the effect that:
(i) The Company and each subsidiary listed on Annex IV
attached hereto (each a "Significant Subsidiary") has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Prospectus;
(iii) The Company and each Significant Subsidiary is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction, if any, in which the ownership or
leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified or
be in good standing, individually or in the aggregate, would not
have a material adverse effect on the condition (financial or
otherwise), earnings, operations or business of the Company and its
subsidiaries considered as one enterprise. To such counsel's
20
knowledge, the Company does not own a majority of the voting power
of or directly or indirectly possess majority voting control over,
any corporation, association or other entity other than those
identified in Annex II of this Agreement (collectively, the
"Subsidiaries");
(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein. All of the issued
and outstanding shares of capital stock of the Company (a) have been
authorized and are duly and validly issued, fully paid and
nonassessable, and (b) to such counsel's knowledge, have not have
been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right existing under statute, the Company's charter or
by-laws, or the terms of any agreement or instrument to which the
Company is a party;
(v) (a) The Company is the record holder of all issued and
outstanding shares of capital stock of each Significant Subsidiary
of the Company, (b) all the issued and outstanding stock of each
Significant Subsidiary has been authorized and are duly and validly
issued, fully paid and nonassessable, and (c) to such counsel's
knowledge, such shares have not been issued in violation of or
subject to any preemptive right, co-sale right, registration right,
right of first refusal or other similar right, existing under
statute, such subsidiary's charter or by-laws or any agreement or
instrument to which the Company or any such subsidiary is a party,
and, except as set forth in Annex I to this Agreement, are owned by
the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be,
to be issued by the Company pursuant to the terms of this Agreement
have been duly authorized and, upon issuance and delivery against
payment therefor in accordance with the terms hereof, will be duly
and validly issued and fully paid and nonassessable, and will not
have been issued in violation of or subject to any preemptive right,
co-sale right, registration right, right of first refusal or other
similar right, existing under statute, the Company's charter or
by-laws or any agreement or instrument to which the Company is a
party; the capital stock of the Company conforms as to legal matters
to the descriptions thereof contained in the Prospectus under the
caption "Description of Capital Stock"; and the forms of
certificates evidencing the Common Stock and filed as exhibits to
the Registration Statement comply with Delaware law;
(vii) The Company has the corporate power and authority to
enter into this Agreement and to issue, sell and deliver to the
Underwriters the Shares to be issued and sold by it hereunder;
21
(viii) This Agreement has been duly authorized by all
necessary corporate action on the part of the Company and has been
duly executed and delivered by the Company and, assuming due
authorization, execution and delivery by you, is a valid and binding
agreement of the Company, enforceable in accordance with its terms,
except insofar as indemnification provisions may be limited by
applicable law and except as enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization,
receivership, moratorium and similar laws relating to or affecting
creditors' rights or remedies generally or by general equitable
principles;
(ix) The Registration Statement and all post-effective
amendments (if any) have become effective under the Act. To such
counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for
that purpose have been instituted or are pending or threatened under
the Act. Any required filings of the Prospectus pursuant to Rule
424(b) have been made in accordance with Rule 424(b);
(x) The Registration Statement and the Prospectus and any
further amendment or supplement thereto (other than the financial
statements (including supporting schedules) and financial data
derived therefrom as to which such counsel need express no opinion),
as of the effective date of the Registration Statement, complied as
to form in all material respects with the requirements of the Act
and the applicable Rules and Regulations;
(xi) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes,
legal and governmental proceedings, contracts and other documents
are accurate and fairly present the information required to be
disclosed with respect thereto pursuant to the Act and the
applicable Rules and Regulations; and such counsel does not know of
any statutes or legal or governmental proceedings required to be
described in the Prospectus that are not described as required, or
of any contracts or documents of a character required to be
described or referred to or be filed as an exhibit to the
Registration Statement or the Prospectus that has not been described
or referred to therein or filed as required;
(xii) The statements under the captions "Risk
Factors--Government Regulation," "Risk Factors--Health Care Reform,"
"Risk Factors--Environmental Risks," "Risk Factors--Shares Eligible
for Future Sale," "Business--Government Regulation,"
"Management--Certain Relationships and Related Transactions,"
"Description of Capital Stock" and "Shares Eligible for Future Sale"
in the Prospectus and in items 14 and 15 of the Registration
Statement, insofar as such statements constitute a summary of
documents referred to therein or of matters of law, are accurate
summaries and fairly and correctly present the information called
for with respect to such documents and matters;
22
(xiii) The performance of this Agreement and the consummation
of the transactions herein contemplated (other than performance of
the Company's indemnification obligations hereunder concerning which
no opinion need be expressed) do not (a) violate the Company's
charter or bylaws or (b) constitute a material breach or violation
of any existing obligation of the Company, or constitute a default
under, any bond, debenture, note or other evidence of indebtedness,
or any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument known to
such counsel to which the Company or any Subsidiary is a party or by
which its or their respective properties are bound, or any
applicable statute, rule or regulation known to such counsel or, to
such counsel's knowledge, any order, writ or decree of any court,
government or governmental agency or body having jurisdiction over
the Company or any of its Subsidiaries, or over any of their
properties or operations;
(xiv) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or
body having jurisdiction over the Company or any of its
Subsidiaries, or over any of their properties or operations is
necessary as a condition to the performance by the Company of the
transactions contemplated by this Agreement, except such as have
been obtained under the Act or such as may be required under state
or other securities or Blue Sky laws in connection with the purchase
and the distribution of the Shares by the Underwriters;
(xv) To such counsel's knowledge, no legal or governmental
proceedings are pending or threatened against the Company or any of
its Subsidiaries, of a character required to be described in the
Registration Statement or the Prospectus by the Act or the Rules and
Regulations, other than those described therein;
(xvi) To such counsel's knowledge, none of the Company or any
of its subsidiaries is presently (a) in violation of its respective
charter or bylaws or (b) in breach of any applicable statute, rule
or regulation known to such counsel or, to such counsel's knowledge,
any order, writ or decree of any court or governmental agency or
body having jurisdiction over the Company or any of its respective
subsidiaries, or over any of their properties or operations, in each
case except as would not likely result in any material adverse
effect on the condition (financial or otherwise), earnings,
operations or business of the Company and its subsidiaries
considered as one enterprise (this opinion may be give by in-house
counsel);
(xvii) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder; and
(xviii) To such counsel's knowledge, except as set forth in
the Registration Statement and Prospectus, no holders of Common
Stock or other securities of the Company have registration rights
with respect to securities of the Company
23
pursuant to the terms of any agreement or instrument to which the
Company is a party and, except as set forth in the Registration
Statement and Prospectus, all holders of securities of the Company
having rights known to such counsel to registration of such shares
of Common Stock or other securities, because of the filing of the
Registration Statement by the Company have, with respect to the
offering contemplated thereby, waived such rights or such rights
have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement or have
included securities in the Registration Statement pursuant to the
exercise of and in full satisfaction of such rights.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of
the Company, the Representatives, Underwriters' Counsel and the
independent certified public accountants of the Company, at which such
conferences the contents of the Registration Statement and Prospectus and
related matters were discussed, and although they have not verified the
accuracy or completeness of the statements contained in the Registration
Statement or the Prospectus, nothing has come to the attention of such
counsel which leads them to believe that, at the time the Registration
Statement became effective and at all times subsequent thereto up to and
on the Closing Date and on any later date on which Option Shares are to be
purchased, as the case may be, the Registration Statement and any
amendment or supplement thereto (other than the financial statements,
including supporting schedules and other financial and statistical data or
information derived therefrom, as to which such counsel need express no
comment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, or at the Closing Date or any later
date on which the Option Shares are to be purchased, as the case may be,
the Registration Statement, the Prospectus and any amendment or supplement
thereto (except as aforesaid) contained any untrue statement of a material
fact or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
Counsel rendering the foregoing opinion may rely as to questions of
fact upon representations or certificates of officers of the Company and
of government officials, in which case their opinion is to state that they
are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such representation or certificate.
Copies of any representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to
Underwriters' Counsel.
The foregoing opinions shall be limited to the laws of the United
States of America, the States of Pennsylvania and New York and the
corporate law of the State of Delaware.
(e) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, an
opinion of Shearman & Sterling, in form and substance satisfactory to you,
with respect to the sufficiency of all such corporate proceedings and
other legal matters relating to this Agreement and the
24
transactions contemplated hereby as you may reasonably require,
and the Company shall have furnished to such counsel such documents
and certificates as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
letter from KPMG Peat Marwick LLP addressed to the Underwriters, dated the
Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, confirming that they are independent
certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and
based upon the procedures described in such letter delivered to you
concurrently with the execution of this Agreement (herein called the "KPMG
Original Letter"), but carried out to a date not more than five (5)
business days prior to the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, (i) confirming, to the
extent true, that the statements and conclusions set forth in the KPMG
Original Letter are accurate as of the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, and (ii)
setting forth any revisions and additions to the statements and
conclusions set forth in the KPMG Original Letter which are necessary to
reflect any changes in the facts described in the KPMG Original Letter
since the date of such letter, or to reflect the availability of more
recent financial statements, data or information. The letter shall not
disclose any change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. The KPMG Original Letter shall
be addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent
true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published
Rules and Regulations, (ii) set forth their opinion with respect to their
examination of the consolidated balance sheet of the Company as of June
30, 1997 and 1996 and related consolidated statements of operations,
shareholders' equity, and cash flows for the years then ended and for the
period from April 17, 1995 (date of inception) to June 30, 1995 and (iii)
address other matters agreed upon by KPMG Peat Marwick LLP and you. In
addition, you shall have received from KPMG Peat Marwick LLP a letter
addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing
the scope of their audit of the Company's consolidated financial
statements as of June 30, 1997, did not disclose any weaknesses in
internal controls that they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
letter from Xxxxx, Xxxxx & Xxxxxx addressed to the Underwriters, dated the
Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, confirming that they are independent
25
certified public accountants with respect to Xxxxxx Healthcare and Xxx
Xxxxx within the meaning of the Act and the applicable published Rules and
Regulations and based upon the procedures described in such letter
delivered to you concurrently with the execution of this Agreement (herein
called the "Xxxxx Original Letter"), but carried out to a date not more
than five (5) business days prior to the Closing Date or such later date
on which Option Shares are to be purchased, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set
forth in the Xxxxx Original Letter are accurate as of the Closing Date or
such later date on which Option Shares are to be purchased, as the case
may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Xxxxx Original Letter which
are necessary to reflect any changes in the facts described in the Xxxxx
Original Letter since the date of such letter, or to reflect the
availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of Xxxxxx
Health Care or Xxx Xxxxx from that set forth in the Registration Statement
or Prospectus, which, in your sole judgment, is material and adverse and
that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus. The Xxxxx Original Letter shall be addressed to or for the use
of the Underwriters in form and substance satisfactory to the Underwriters
and shall (i) represent, to the extent true, that they are independent
certified public accountants with respect to Xxxxxx Healthcare and Xxx
Xxxxx within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their audits of:
(A) the combined balance sheets of Xxxxxx Healthcare as of June 30, 1996
and 1995 and related combined statements of operations, shareholders'
equity, and cash flows for the two (2) years ended June 30, 1996 and (B)
the balance sheet of Xxx Xxxxx as of December 31, 1996 and related
statements of income, shareholders' equity and cash flows for the year
ended December 31, 1996, and (iii) address other matters agreed upon by
Xxxxx, Xxxxx & Xxxxxx and you.
(h) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
letter from Xxxxxx & Clemente addressed to the Underwriters, dated the
Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, confirming that they are independent
certified public accountants with respect to Keystone Affiliates within
the meaning of the Act and the applicable published Rules and Regulations
and based upon the procedures described in such letter delivered to you
concurrently with the execution of this Agreement (herein called the
"Xxxxxx Original Letter"), but carried out to a date not more than five
(5) business days prior to the Closing Date or such later date on which
Option Shares are to be purchased, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the
Xxxxxx Original Letter are accurate as of the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be, and
(ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Xxxxxx Original Letter which are necessary to
reflect any changes in the facts described in the Xxxxxx Original Letter
since the date of such letter, or to reflect the availability of more
recent financial statements, data or information. The letter shall not
disclose any
26
change in the condition (financial or otherwise), earnings,
operations, business or business prospects of Keystone Affiliates
from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed
with the public offering of the Shares as contemplated by the
Prospectus. The Xxxxxx Original Letter shall be addressed to or for
the use of the Underwriters in form and substance satisfactory to
the Underwriters and shall (i) represent, to the extent true, that
they are independent certified public accountants with respect to
Keystone Affiliates within the meaning of the Act and the applicable
published Rules and Regulations, (ii) set forth their opinion with
respect to their audit of the combined financial statements of
Keystone Affiliates, together with the related notes, as of December
31, 1996 and 1995 and for the three (3) years ended December 31,
1996 and (iii) address other matters agreed upon by Xxxxxx &
Clemente and you.
(i) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
letter from Xxxxx, Xxxxxxx & Company, P.A. addressed to the Underwriters,
dated the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, confirming that they are independent
certified public accountants with respect to Triangle Retirement Services
within the meaning of the Act and the applicable published Rules and
Regulations and based upon the procedures described in such letter
delivered to you concurrently with the execution of this Agreement (herein
called the "Xxxxx Original Letter"), but carried out to a date not more
than five (5) business days prior to the Closing Date or such later date
on which Option Shares are to be purchased, as the case may be, (i)
confirming, to the extent true, that the statements and conclusions set
forth in the Xxxxx Original Letter are accurate as of the Closing Date or
such later date on which Option Shares are to be purchased, as the case
may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Xxxxx Original Letter which
are necessary to reflect any changes in the facts described in the Xxxxx
Original Letter since the date of such letter, or to reflect the
availability of more recent financial statements, data or information. The
letter shall not disclose any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of
Triangle Retirement Services from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or
inadvisable to proceed with the public offering of the Shares as
contemplated by the Prospectus. The Xxxxx Original Letter shall be
addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent
true, that they are independent certified public accountants with respect
to Triangle Retirement Services within the meaning of the Act and the
applicable published Rules and Regulations, (ii) set forth their opinion
with respect to their audit of the combined balance sheet of Triangle
Retirement Services as of December 31, 1996 and 1995 and related combined
statements of operations, shareholders' equity, and cash flows for the two
(2) years ended December 31, 1996 and (iii) address other matters agreed
upon by Xxxxx, Xxxxxxx & Company, P.A, and you.
27
(j) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be,
letters from Coopers & Xxxxxxx, L.L.P. addressed to the Underwriters,
dated the Closing Date or such later date on which Option Shares are to be
purchased, as the case may be, confirming that they are independent
certified public accountants with respect to Gethsemane Affiliates, Xxxxxx
and Xxxxxxx within the meaning of the Act and the applicable published
Rules and Regulations and based upon the procedures described in such
letter delivered to you concurrently with the execution of this Agreement
(herein called the "Coopers Original Letters"), but carried out to a date
not more than five (5) business days prior to the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be,
(i) confirming, to the extent true, that the statements and conclusions
set forth in the Coopers Original Letters are accurate as of the Closing
Date or such later date on which Option Shares are to be purchased, as the
case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Coopers Original Letters which
are necessary to reflect any changes in the facts described in the Coopers
Original Letters since the date of such letter, or to reflect the
availability of more recent financial statements, data or information. The
letters shall not disclose any change in the condition (financial or
otherwise), earnings, operations, business or business prospects of
Gethsemane Affiliates, Xxxxxx or Xxxxxxx from that set forth in the
Registration Statement or Prospectus, which, in your sole judgment, is
material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. The Coopers Original Letters
shall be addressed to or for the use of the Underwriters in form and
substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with
respect to Gethsemane Affiliates, Xxxxxx and Xxxxxxx within the meaning of
the Act and the applicable published Rules and Regulations, (ii) set forth
their opinion with respect to their audits of: (A) the combined financial
statements of Gethsemane Affiliates, together with the related notes, as
of June 30, 1997 and 1996 and for the three (3) years ended June 30, 1997,
(B) the financial statements of Xxxxxx, together with the related notes,
as of June 30, 1997 and for each of the three (3) years ended June 30,
1997 and (C) the financial statements of Xxxxxxx, together with the
related notes, as of June 30, 1997 and for the three (3) years ended June
30, 1997 and (iii) address other matters agreed upon by Coopers & Xxxxxxx,
L.L.P. and you.
(k) You shall have received on the Closing Date and on any later
date on which Option Shares are to be purchased, as the case may be, a
certificate of the Company, dated the Closing Date or such later date on
which Option Shares are to be purchased, as the case may be, signed by the
Chief Executive Officer and Chief Financial Officer of the Company, to the
effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the Closing
Date or any later date on which Option Shares are to be purchased,
as the case may be, and the Company has complied with all the
agreements and satisfied all the conditions on its
28
part to be performed or satisfied at or prior to the Closing Date or
any later date on which Option Shares are to be purchased, as the
case may be;
(ii) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or threatened under the
Act;
(iii) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate,
the Registration Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information required to
be included therein by the Act and the Rules and Regulations and in
all material respects conformed to the requirements of the Act and
the Rules and Regulations, the Registration Statement, and any
amendment or supplement thereto, did not and does not include any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and, since
the effective date of the Registration Statement, there has occurred
no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus,
there has not been (a) any material adverse change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one
enterprise, (b) any transaction that is material to the Company and
its subsidiaries considered as one enterprise, except transactions
entered into in the ordinary course of business, (c) any obligation,
direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company
or its subsidiaries, except obligations incurred in the ordinary
course of business, (d) any change in the capital stock or
outstanding indebtedness of the Company or any of its subsidiaries
that is material to the Company and its subsidiaries considered as
one enterprise, (e) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or any of
its subsidiaries, or (f) any loss or damage (whether or not insured)
to the property of the Company or any of its subsidiaries which has
been sustained or will have been sustained which has a material
adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(l) The Company shall have obtained and delivered to you an
agreement from each officer and director of the Company and each
beneficial owner shares of Common
29
Stock or warrants or options to acquire shares of Common Stock (set forth
on Annex III attached hereto) in writing prior to the date hereof that
such person will not, during the Lock-up Period, effect the Disposition of
any Securities now owned or hereafter acquired directly by such person or
with respect to which such person has or hereafter acquires the power of
disposition, otherwise than (i) as a bona fide gift or gifts, provided the
donee or donees thereof agree in writing to be bound by this restriction,
(ii) as a distribution to partners or shareholders of such person,
provided that the distributees thereof agree in writing to be bound by the
terms of this restriction, or (iii) with the prior written consent of
BancAmerica Xxxxxxxxx Xxxxxxxx. The foregoing restriction shall have been
expressly agreed to preclude the holder of the Securities from engaging in
any hedging or other transaction which is designed to or reasonably
expected to lead to or result in a Disposition of Securities during the
Lock-up Period, even if such Securities would be disposed of by someone
other than the such holder. Such prohibited hedging or other transactions
would including, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to any Securities
or with respect to any security (other than a broad-based market basket or
index) that includes, relates to or derives any significant part of its
value from Securities. Furthermore, such person will have also agreed and
consented to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by such person
except in compliance with this restriction.
(m) The Company shall have furnished to you such further
certificates and documents as you shall reasonably request (including
certificates of officers of the Company), as to the accuracy of the
representations and warranties of the Company herein, as to the
performance by the Company of its obligations hereunder and as to the
other conditions concurrent and precedent to the obligations of the
Underwriters hereunder.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with
such number of conformed copies of such opinions, certificates, letters
and documents as you shall reasonably request.
30
7. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, for the
purpose of covering over-allotments in connection with the distribution
and sale of the Firm Shares only, a nontransferable option to purchase up
to an aggregate of 1,050,000 Option Shares at the purchase price per share
for the Firm Shares set forth in Section 3 hereof. Such option may be
exercised by the Representatives on behalf of the several Underwriters on
one (1) or more occasions in whole or in part during the period of thirty
(30) days after the date on which the Firm Shares are initially offered to
the public, by giving written notice to the Company. The number of Option
Shares to be purchased by each Underwriter upon the exercise of such
option shall be the same proportion of the total number of Option Shares
to be purchased by the several Underwriters pursuant to the exercise of
such option as the number of Firm Shares purchased by such Underwriter
(set forth in Schedule A hereto) bears to the total number of Firm Shares
purchased by the several Underwriters (set forth in Schedule A hereto),
adjusted by the Representatives in such manner as to avoid fractional
shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the
option granted by this Section 7 shall be made against payment of the
purchase price therefor by the several Underwriters by certified or
official bank check or checks drawn in next-day funds, payable to the
order of the Company (and the Company agrees not to deposit any such check
in the bank on which it is drawn, and not to take any other action with
the purpose or effect of receiving immediately available funds, until the
business day following the date of its delivery to the Company). In the
event of any breach of the foregoing, the Company shall reimburse the
Underwriters for the interest lost and any other expenses borne by them by
reason of such breach. Such delivery and payment shall take place at the
offices of Shearman & Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 or at such other place as may be agreed upon among the
Representatives and the Company (i) on the Closing Date, if written notice
of the exercise of such option is received by the Company at least two (2)
full business days prior to the Closing Date, or (ii) on a date which
shall not be later than the third (3rd) full business day following the
date the Company receives written notice of the exercise of such option,
if such notice is received by the Company less than two (2) full business
days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be
made available to you at such office or such other location including,
without limitation, in New York City, as you may reasonably request for
checking at least one (1) full business day prior to the date of payment
and delivery and will be in such names and denominations as you may
request, such request to be made at least two (2) full business days prior
to such date of payment and delivery. If the Representatives so elect,
delivery of the Option Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
31
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be
obligated to) make payment of the purchase price on behalf of any
Underwriter or Underwriters whose check or checks shall not have been
received by you prior to the date of payment and delivery for the Option
Shares to be purchased by such Underwriter or Underwriters. Any such
payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares
will be subject (as of the date hereof and as of the date of payment and
delivery for such Option Shares) to the accuracy of and compliance with
the representations, warranties and agreements of the Company herein, to
the accuracy of the statements of the Company and officers of the Company
made pursuant to the provisions hereof, to the performance by the Company
of its obligations hereunder, to the conditions set forth in Section 6
hereof, and to the condition that all proceedings taken at or prior to the
payment date in connection with the sale and transfer of such Option
Shares shall be satisfactory in form and substance to you and to
Underwriters' Counsel, and you shall have been furnished with all such
documents, certificates and opinions as you may request in order to
evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any of the covenants or
agreements of the Company or the satisfaction of any of the conditions
herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified
independent underwriter" within the meaning of Schedule E of the Bylaws of
the NASD), under the Act, the Exchange Act or otherwise, specifically
including, but not limited to, losses, claims, damages or liabilities (or
actions in respect thereof) arising out of or based upon (i) any breach of
any representation, warranty, agreement or covenant of the Company herein
contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or
alleged untrue statement of any material fact contained in any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
agrees to reimburse each Underwriter for any legal or other expenses
reasonably incurred by it in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that
the Company shall not be liable in any such case to the extent that any
such
32
loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, such Preliminary Prospectus
or the Prospectus, or any such amendment or supplement thereto, in
reliance upon, and in conformity with, written information relating to any
Underwriter furnished to the Company by such Underwriter, directly or
through you, specifically for use in the preparation thereof and PROVIDED
FURTHER that the indemnity agreement provided in this Section 8(a) with
respect to any Preliminary Prospectus shall not inure to the benefit of
any Underwriter from whom the person asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or
alleged omission was corrected had not been sent or given to such person
within the time required by the Act and the Rules and Regulations, unless
such failure is the result of noncompliance by the Company with Section
4(d) hereof.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject
under the Act or otherwise, specifically including, but not limited to,
losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or based upon (i) any breach of any representation,
warranty, agreement or covenant of such Underwriter herein contained, (ii)
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, in the case of subparagraphs (ii) and (iii) of
this Section 8(b) to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to the Company by such Underwriter, directly or through you, specifically
for use in the preparation thereof, and agrees to reimburse the Company
for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each
officer of the Company who signed the Registration Statement and each
director of the Company, and each person, if any, who controls the Company
within the meaning of the Act or the Exchange Act. This indemnity
agreement shall be in addition to any liabilities which each Underwriter
may otherwise have.
33
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this Section 8. In case
any such action is brought against any indemnified party, and it notified
the indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it shall
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party; PROVIDED, HOWEVER, that if the defendants in 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,
the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense of
such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with
the proviso to the next preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more
than one separate counsel (together with appropriate local counsel)
approved by the indemnifying party representing all the indemnified
parties under Section 8(a), 8(b) or 8(c) hereof who are parties to such
action), (ii) 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 commencement of the action or
(iii) the indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party. In no
event shall any indemnifying party be liable in respect of any amounts
paid in settlement of any action unless the indemnifying party shall have
approved the terms of such settlement; PROVIDED that such consent shall
not be unreasonably withheld. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of
any pending or threatened proceeding in respect of which any indemnified
party is or could have been a party and indemnification could have been
sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all
liability on all claims that are the subject matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this
Section 8 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
34
indemnification may not be enforced in such case notwithstanding the fact
that this Section 8 provides for indemnification in such case, all the
parties hereto shall contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution from
others) in such proportion so that the Underwriters severally and not
jointly are responsible pro rata for the portion represented by the
percentage that the underwriting discount bears to the initial public
offering price, and the Company is responsible for the remaining portion,
PROVIDED, however, that (i) no Underwriter shall be required to contribute
any amount in excess of the amount by which the underwriting discount
applicable to the Shares purchased by such Underwriter exceeds the amount
of damages which such Underwriter has otherwise required to pay and (ii)
no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. The
contribution agreement in this Section 8(d) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter or the Company within the meaning of
the Act or the Exchange Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 8, and are fully informed
regarding said provisions. They further acknowledge that the provisions of
this Section 8 fairly allocate the risks in light of the ability of the
parties to investigate the Company and its business in order to assure
that adequate disclosure is made in the Registration Statement and
Prospectus as required by the Act and the Exchange Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter within the meaning of the Act or the Exchange Act, or by or on
behalf of the Company or any of its officers, directors or controlling persons
within the meaning of the Act or the Exchange Act, and shall survive the
delivery of the Shares to the several Underwriters hereunder or termination of
this Agreement.
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or Underwriters
shall fail to take up and pay for the number of Firm Shares agreed by such
Underwriter or Underwriters to be purchased hereunder upon tender of such Firm
Shares in accordance with the terms hereof, and if the aggregate number of Firm
Shares which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
35
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or underwriters
shall have been substituted as aforesaid by such postponed Closing Date, the
Closing Date may, at the option of the Company, be postponed for a further
twenty-four (24) hours, if necessary, to allow the Company the privilege of
finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Shares which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement, supplements to the Prospectus
or other such documents which may thereby be made necessary, and (ii) the
respective number of Firm Shares to be purchased by the remaining Underwriters
and substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and pay
for all such Firm Shares so agreed to be purchased by the defaulting Underwriter
or Underwriters or substitute another underwriter or underwriters as aforesaid
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company shall be liable to
any Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than for
some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which Underwriter
shall remain liable to the Company, and the other Underwriters for damages, if
any, resulting from such default) be liable to the Company (except to the extent
provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i) 6:30
A.M., San Francisco time, on the first full business day following the
effective date of the Registration
36
Statement, or (ii) the time of the initial public offering of any of the
Shares by the Underwriters after the Registration Statement becomes
effective. The time of the initial public offering shall mean the time of
the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the time at which the Shares are first
generally offered by the Underwriters to the public by letter, telephone,
telegram or telecopy, whichever shall first occur. By giving notice as set
forth in Section 12 before the time this Agreement becomes effective, you,
as Representatives of the several Underwriters, or the Company, may
prevent this Agreement from becoming effective without liability of any
party to any other party, except as provided in Sections 4(i), 5 and 8
hereof.
(b) You, as Representatives of the several Underwriters, shall have
the right to terminate this Agreement by giving notice as hereinafter
specified at any time on or prior to the Closing Date or on or prior to
any later date on which Option Shares are to be purchased, as the case may
be, (i) if the Company shall have failed, refused or been unable to
perform any agreement on its part to be performed, or because any other
condition of the Underwriters' obligations hereunder required to be
fulfilled is not fulfilled, including, without limitation, any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse, or (ii)
if additional material governmental restrictions, not in force and effect
on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock
Exchange or in the over the counter market by the NASD, or trading in
securities generally shall have been suspended on either such exchange or
in the over the counter market by the NASD, or if a banking moratorium
shall have been declared by federal, New York or California authorities,
or (iii) if the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of
the Company regardless of whether or not such loss shall have been
insured, or (iv) if there shall have been a material adverse change in the
general political or economic conditions or financial markets as in your
reasonable judgment makes it inadvisable or impracticable to proceed with
the offering, sale and delivery of the Shares, or (v) if there shall have
been an outbreak or escalation of hostilities or of any other insurrection
or armed conflict or the declaration by the United States of a national
emergency which, in the reasonable opinion of the Representatives, makes
it impracticable or inadvisable to proceed with the public offering of the
Shares as contemplated by the Prospectus. In the event of termination
pursuant to subparagraph (i) above, the Company shall remain obligated to
pay costs and expenses pursuant to Sections 4(i), 5 and 8 hereof. Any
termination pursuant to any of subparagraphs (ii) through (v) above shall
be without liability of any party to any other party except as provided in
Sections 5 and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall
promptly notify the Company by
37
telephone, telecopy or telegram, in each case confirmed by letter. If the
Company shall elect to prevent this Agreement from becoming effective, the
Company shall promptly notify you by telephone, telecopy or telegram, in
each case, confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by letter) to you c/o BancAmerica Xxxxxxxxx Xxxxxxxx, 000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, telecopier
number (000) 000-0000, Attention: General Counsel; if sent to the Company, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to Balanced Care Corporation, 0000 Xxxxxx
Xxxxx, Xxxxx 000, Xxxxxxxxxxxxx, Xxxxxxxxxxxx 00000, telecopier number (717)
796-6150, Attention: Xxxx X. Xxxxxxxxx, Chief Executive Officer.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
or entity, other than the parties hereto and their respective executors,
administrators, successors and assigns, and the controlling persons within the
meaning of the Act or the Exchange Act, officers and directors referred to in
Section 8 hereof, any legal or equitable right, remedy or claim in respect of
this Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company under this Agreement, you shall act
on behalf of each of the several Underwriters, and the Company shall be entitled
to act and rely upon any statement, request, notice or agreement made or given
by you jointly or by BancAmerica Xxxxxxxxx Xxxxxxxx on behalf of you.
14. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
38
If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement among the Company and the several Underwriters.
Very truly yours,
BALANCED CARE CORPORATION
By /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Xxxx X. Xxxxxxxxx
President and Chief Executive
Officer
Accepted as of the date first above written:
BANCAMERICA XXXXXXXXX XXXXXXXX
XXXXX XXXXXX, INC.
BT ALEX. XXXXX INCORPORATED
On their behalf and on behalf of each of the several Underwriters named in
Schedule A hereto.
By BANCAMERICA XXXXXXXXX XXXXXXXX
By /s/ Xxxxxxx X. Xxxxxxxxxxx
---------------------------
Authorized Signatory
SCHEDULE A
Number of Firm Shares
UNDERWRITERS TO BE PURCHASED
------------ ---------------
BancAmerica Xxxxxxxxx Xxxxxxx 3,050,000
Xxxxx Xxxxxx, Inc. 1,525,000
BT Alex. Xxxxx Incorporated 1,525,000
Xxxxxx, Xxxxx Xxxxx, Inc. 180,000
Xxxxxx Xxxx LLC 180,000
Xxxxxx Brothers Inc. 180,000
XxXxxxxx & Company Securities, 180,000
Inc.
Wheat First Securities, Inc. 180,000
-------
7,000,000
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