EXHIBIT 1.1
6,000,000 Shares
PSYCHIATRIC SOLUTIONS, INC.
COMMON STOCK
FORM OF UNDERWRITING AGREEMENT
December 18, 2003
Xxxxxx Brothers Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
As Representative of the
several underwriters named in Schedule I hereto
Ladies and Gentlemen:
Psychiatric Solutions, Inc., a Delaware corporation (the
"COMPANY"), proposes to sell 3,000,000 shares (the "PRIMARY FIRM STOCK") of the
Company's common stock, par value $0.01 per share (the "COMMON STOCK"), and each
stockholder of the Company listed on Schedule II hereto (the "SELLING
STOCKHOLDERS") proposes to sell the number of shares of Common Stock set forth
opposite such Selling Stockholder's name on Schedule II hereto, representing in
the aggregate 3,000,000 shares (the "SECONDARY FIRM STOCK," and together with
the Primary Firm Stock, the "FIRM STOCK") of Common Stock.
In addition, the Company and certain of the Selling
Stockholders (as indicated on Schedule II hereto) propose to grant to the
Underwriters named in Schedule I hereto (the "UNDERWRITERS") an option to
purchase up to an additional 900,000 shares of the Common Stock on the terms and
for the purposes set forth in Section 3 (the "OPTION STOCK"). The Firm Stock and
the Option Stock, if purchased, are hereinafter collectively called the "STOCK."
This is to confirm the agreement concerning the purchase of the Stock from the
Company and the Selling Stockholders by the Underwriters.
SECTION 1. Representations, Warranties and Agreements of the
Company. The Company represents, warrants and agrees that:
(a) A registration statement on Form S-2 (File No. 333-110206),
including a Prospectus, with respect to, among other things, the Firm Stock has
(i) been prepared by the Company in conformity in all material respects with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
and the rules and regulations (the "RULES AND REGULATIONS") of the Securities
and Exchange Commission (the "COMMISSION") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become effective under the
Securities Act. Copies of such registration statement and each of the amendments
thereto have been delivered by the Company to you as the representative (the
"REPRESENTATIVE") of the Underwriters. As used in this Agreement, "EFFECTIVE
TIME" means the date and the time as of which such registration statement, or
the most recent post-effective amendment thereto, if any, was declared effective
by the Commission; "EFFECTIVE DATE" means the date of each Effective Time;
"PRELIMINARY PROSPECTUS" means each prospectus included in such registration
statement, or amendments thereof, before it became effective under the
Securities Act and any prospectus
filed with the Commission by the Company with the consent of the Representative
pursuant to Rule 424(a) of the Rules and Regulations; "REGISTRATION STATEMENT"
means such registration statement, as amended at the Effective Time, including
all information contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations and deemed to be a part of
the registration statement as of the Effective Time pursuant to Rule 430A of the
Rules and Regulations; and "PROSPECTUS" means the prospectus in the form first
used to confirm sales of the Stock. If the Company has filed an abbreviated
registration statement to register additional shares of the Common Stock
pursuant to Rule 462(b) under the Securities Act (the "RULE 462 REGISTRATION
STATEMENT"), then any reference herein to the term "REGISTRATION STATEMENT"
shall be deemed to include such Rule 462 Registration Statement.
(b) In the case of the Registration Statement, the conditions for
the use of Form S-2, as set forth in the General Instructions thereto have been
satisfied.
(c) The Commission has not issued any order preventing or
suspending the use of the Registration Statement.
(d) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the Commission, as
the case may be, conform in all material respects to the requirements of the
Securities Act and the Rules and Regulations and do not and will not, as of the
Effective Date (as to the Registration Statement and any amendment thereto) and
as of the applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that no representation or
warranty is made as to information contained in or omitted from the Registration
Statement or the Prospectus in reliance upon and in conformity with written
information furnished to the Company through (i) the Representative by or on
behalf of any Underwriter or (ii) any Selling Stockholder specifically for
inclusion therein.
(e) The documents incorporated by reference in the Prospectus and
Registration Statement, when they were filed with the Commission, conformed in
all material respects to the requirements of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), the rules and regulations thereunder (the
"EXCHANGE ACT RULES") and the Rules and Regulations, and none of such documents
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein not misleading in light of the
circumstances in which they were made; and any further documents so filed and
incorporated by reference in each Prospectus, when such documents are filed with
the Commission, will conform in all material respects to the requirements of the
Exchange Act, the Exchange Act Rules and the Rules and Regulations and will not
contain an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading in light of the
circumstances in which they were made.
(f) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its business requires such qualification, except such
failures to qualify as are not, either individually or in the aggregate,
material to the Company and its subsidiaries, taken as a whole, affecting the
management, condition, financial or
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otherwise, stockholders' equity, results of operations, business or prospects of
the Company and its subsidiaries, taken as a whole (a "MATERIAL ADVERSE
EFFECT"), and has all corporate power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged.
(g) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter or by-laws, (ii) is in default, and no event has
occurred that, with notice or lapse of time or both, would constitute such a
default, in the due performance or observance of any term, covenant, condition
or other obligation contained in any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it
is bound or to which any of its properties or assets is subject, except for such
violations or defaults that do not have a Material Adverse Effect, or (iii) is
in violation of any law, ordinance, governmental rule, regulation or court
decree to which it or its property or assets may be subject or has failed to
obtain or maintain any license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of its property
or to the conduct of its business, except for such violations or defaults that
do not have a Material Adverse Effect.
(h) The Company has an authorized capitalization as set forth in
the Prospectus (and on the First Delivery Date (as defined in Section 5) will
have the authorized capitalization so set forth in the Prospectus as of that
date) under the caption "Description of Capital Stock." All of the issued shares
of capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; and all of the issued shares of capital stock
of each subsidiary of the Company have been duly authorized and validly issued
and are fully paid and non-assessable and (except for directors' qualifying
shares) are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims, other than liens, encumbrances,
equities or claims under the Company's existing credit facility, and none of
such shares of capital stock were issued in violation of preemptive or other
similar rights arising by operation of law, under the charter and bylaws (or
similar organizational documents) of the Company or any of its subsidiaries or
under any agreement to which the Company or any of its subsidiaries is a party
or otherwise.
(i) The shares of the Primary Firm Stock to be issued and sold by
the Company to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided in this
Agreement, will be duly and validly issued, fully paid and non-assessable. The
Stock conforms to the description thereof in the Prospectus in all material
respects.
(j) The Company has all requisite corporate power and authority to
enter into this Agreement. This Agreement has been duly authorized, executed and
delivered by the Company.
(k) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated hereby (i)
will not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, except for such conflicts,
breaches, violations or defaults that do not have a Material Adverse Effect,
(ii) will not result in any violation of the provisions of the charter or
by-laws of the Company or any of its subsidiaries or (iii) will not violate any
applicable statute,
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order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties or assets, except for such conflicts, breaches, violations or
defaults that do not have a Material Adverse Effect; and except for filings with
NASDAQ, the National Association of Securities Dealers, Inc. (the "NASD") and
under the Securities Act and applicable state or foreign securities laws in
connection with the purchase and distribution of the Stock by the Underwriters,
no consent, approval, authorization or order of, or filing, registration or
qualification with, any such court or governmental agency or body is required
for the execution of this Agreement by the Company and the consummation of the
transactions contemplated hereby other than such consents, approvals,
authorizations, orders, filings, registrations or qualifications the failure to
make or obtain would not have a Material Adverse Effect.
(l) Except as set forth in the Prospectus and except as required
by that certain Registration Rights Agreement, dated as of January 6, 2003,
between the Company and the holders of the Company's Series A Convertible
Preferred Stock and that certain Third Amended and Restated Investor Rights
Agreement, dated as of January 6, 2003, among the Company, The 1818 Mezzanine
Fund II, L.P. and CapitalSource Holdings LLC, there are no contracts, agreements
or understandings between the Company, any of its subsidiaries and any person
granting such person the right to require the Company or any subsidiary to file
a registration statement under the Securities Act with respect to any securities
of the Company or any subsidiary owned or to be owned by such person or to
require the Company or any such subsidiary to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company or any subsidiary under the Securities Act.
(m) Except as set forth in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period preceding
the date of the Prospectus, including any sales pursuant to Regulation D or
Regulation S of the Securities Act, other than shares issued pursuant to
employee benefit plans, qualified stock options plans or other employee
compensation plans or pursuant to outstanding options, rights or warrants.
(n) The historical financial statements of the Company (including
the related notes and supporting schedules) included in or incorporated by
reference in the Registration Statement and the Prospectus present fairly in all
material respects the financial condition and results of operations of the
entities purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved.
(o) The historical financial statements of the six facilities
acquired from The Xxxxx Schools, Inc. in April 2003 (including the related notes
and supporting schedules) included in the Registration Statement and the
Prospectus present fairly in all material respects the financial condition and
results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(p) The historical financial statements of Ramsay Youth Services,
Inc. ("RAMSAY") (including the related notes and supporting schedules) included
in the Registration Statement and the Prospectus present fairly in all material
respects the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods indicated,
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and have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods involved.
(q) The other financial data, operating data and statistical
information and data included in the Registration Statement and the Prospectus
is presented fairly in all material respects and, to the extent derived
therefrom, has been prepared on a basis consistent with such financial
statements and the books and records of the Company and its subsidiaries.
(r) The pro forma data included in the Registration Statement and
Prospectus include assumptions that provide a reasonable basis for presenting
the significant effects directly attributable to the transactions and events
described therein, the related pro forma adjustments give appropriate effect to
those assumptions, and the pro forma adjustments reflect the proper application
of those adjustments to the historical financial data.
(s) The historical financial statements (including the related
notes and supporting schedules) of (1) Cypress Creek Hospital Inc., West Oaks
Hospital, Inc. and Healthcare Rehabilitation Center of Austin, Inc., (2) Xxxxx
Xxxx/Charter Behavioral Health System, LLC, (3) Aeries Healthcare Corporation
and Subsidiary (d/b/a Riveredge Hospital), and (4) PMR Corporation, included in
and/or incorporated by reference in the Registration Statement and Prospectus
present fairly in all material respects the financial condition and results of
operations of the entities purported to be shown thereby, at the dates and for
the periods indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(t) The historical interim financial statements of Aeries
Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital) for the
three-month period ended June 30, 2002 (including the related notes and
supporting schedules) included in and/or incorporated by reference in the
Registration Statement and Prospectus present fairly the financial condition and
results of operations of the entity purported to be shown thereby, at the dates
and for the periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(u) Ernst & Young LLP who has certified certain historical and pro
forma financial statements of (i) the Company, (ii) five of the six facilities
acquired from The Xxxxx Schools, Inc. in April 2003, including The Xxxxx Schools
of Virginia, Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San
Antonio, Inc., The Xxxxx Schools of San Marcos, Inc. and The Oaks Psychiatric
Hospital, Inc., (iii) Cypress Creek Hospital Inc., West Oaks Hospital, Inc. and
Healthcare Rehabilitation Center of Austin, Inc., (iv) Xxxxx Xxxx/Charter
Behavioral Health System, LLC, and (v) PMR Corporation, whose reports appear or
are incorporated by reference in the Registration Statement and Prospectus and
who have delivered (a) the initial letter referred to in Section 9(f)(i) hereof,
and (b) the bring-down letters referred to in Section 9(g)(i) hereof, are
independent public accountants as required by the Securities Act and the Rules
and Regulations during the periods covered by the financial statements on which
they reported contained or incorporated by reference in the Registration
Statement and Prospectus.
(v) Deloitte & Touche LLP who has certified certain historical
financial statements of Ramsay, whose report appears in the Registration
Statement and Prospectus and who have delivered (a) the initial letter referred
to in Section 9(f)(ii) hereof, and (b) the bring-down letter referred to in
Section 9(g)(ii) hereof, are independent public accountants as required by the
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Securities Act and the Rules and Regulations during the periods covered by the
financial statements on which they reported contained in the Registration
Statement and Prospectus.
(w) BDO Xxxxxxx, LLP who has certified certain financial
statements of (i) The Xxxxx Schools of Oklahoma, Inc., and (ii) Aeries
Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital), whose reports
appear or are incorporated by reference in the Registration Statement and
Prospectus and who have delivered (a) the initial letter referred to in Section
9(f)(iii) hereof, and (b) the bring-down letter referred to in Section 9(g)(iii)
hereof, are independent public accountants as required by the Securities Act and
the Rules and Regulations promulgated thereunder during the periods covered by
the financial statements on which they reported contained in or incorporated by
reference in the Registration Statement and Prospectus.
(x) The Company and each subsidiary (i) makes and keeps accurate
books and records and (ii) maintains internal accounting controls that provide
reasonable assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability for its
assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(y) Since the date as of which information is given in the
Preliminary Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, neither the Company nor any subsidiary has (i)
issued or granted any securities, other than shares issued pursuant to employee
benefit plans, qualified stock options plans or other employee compensation
plans or pursuant to outstanding options, rights or warrants, (ii) incurred any
liability or obligation, direct or contingent, other than liabilities and
obligations that were incurred in the ordinary course of business, (iii) entered
into any transaction not in the ordinary course of business or (iv) declared or
paid any dividend on its capital stock.
(z) There are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any property
or assets of the Company or any of its subsidiaries is the subject that, if
determined adversely to the Company or any of its subsidiaries, could have a
Material Adverse Effect, and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(aa) The Company and each of its subsidiaries own or possess
adequate rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service xxxx registrations,
copyrights and licenses necessary for the conduct of their respective businesses
and have no reason to believe that the conduct of their respective businesses
will conflict with, and have not received any notice of any claim of conflict
with, any such rights of others, except for such conflicts that do not or would
not have a Material Adverse Effect.
(bb) The Company and each of its subsidiaries have good and
marketable title to all real property and good title to all personal property
owned by them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Registration Statement and
Prospectus and such as do not materially affect the value of the property of the
Company and its subsidiaries taken as a whole and do not materially interfere
with the use made and proposed to be made of such property by the Company or any
of its subsidiaries; and all real property and
6
buildings held under lease by the Company or any of its subsidiaries are held by
them under valid, subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company or any of its subsidiaries.
(cc) No relationship, direct or indirect, exists between or among
the Company or any of its subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any of its
subsidiaries on the other hand, which is required to be described in the
Prospectus or filed or incorporated by reference as exhibits in the Registration
Statement that is not described in the Prospectus or filed or incorporated by
reference as exhibits in the Registration Statement.
(dd) The Company and each of its subsidiaries has filed all
federal, state and local income and franchise tax returns required to be filed
through the date hereof and has paid all taxes due thereon, and no tax
deficiency has been determined adversely to the Company or any of its
subsidiaries that has had (nor does the Company or any subsidiary have any
knowledge of any tax deficiency that, if determined adversely to the Company or
any of its subsidiaries, might have) a Material Adverse Effect.
(ee) The Company and each of its subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is customary for
companies engaged in similar businesses in similar industries.
(ff) No labor disturbance by the employees of the Company or any of
its subsidiaries exists or, to the knowledge of the Company or any of its
subsidiaries, is imminent that could be expected to have a Material Adverse
Effect.
(gg) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"); no "REPORTABLE EVENT" (as defined in ERISA) has occurred
with respect to any "PENSION PLAN" (as defined in ERISA) for which the Company
or any of its subsidiaries would have any liability; neither the Company nor any
of its subsidiaries has incurred and does not expect to incur liability under
(i) Title IV of ERISA with respect to the termination of, or withdrawal from,
any "PENSION PLAN" or (ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "CODE"); and each "PENSION PLAN" for which the Company or any of
its subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and nothing
has occurred, whether by action or by failure to act, which would cause the loss
of such qualification.
(hh) Set forth on Exhibit B hereto is a list of each employee
pension or benefit plan with respect to which the Company or any corporation
considered an affiliate of the Company within the meaning of Section 407(d)(7)
of ERISA is a party in interest or disqualified person.
(ii) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is
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in violation of any provision of the Foreign Corrupt Practices Act of 1977; or
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(jj) Except for such matters as would not, individually or in the
aggregate, either result in a Material Adverse Effect or require disclosure in
the Prospectus, the Company and its subsidiaries (or, to the knowledge of the
Company, any of their predecessors in interest) (1) are conducting and have
conducted their businesses, operations and facilities in compliance with
Environmental Law (as defined below); (2) possess, and are in compliance with,
any and all permits, licenses or registrations required under Environmental Law
("ENVIRONMENTAL PERMITS"); (3) will not require material expenditures to
maintain such compliance with Environmental Law or their Environmental Permits
or to remediate, clean up, xxxxx or remove any Hazardous Substance (as defined
below); and (4) are not subject to any pending or, to the best knowledge of the
Company and its subsidiaries, threatened claim or other legal proceeding under
any Environmental Laws against the Company or its subsidiaries, and have not
been named as a "potentially responsible party" under or pursuant to any
Environmental Law. As used in this paragraph, "ENVIRONMENTAL LAW" means any and
all applicable federal, state, local and foreign laws, ordinances, regulations
and common law, or any administrative or judicial order, consent, decree or
judgment thereof, relating to pollution or the protection of human health or the
environment, including, without limitation, those related to (i) emissions,
discharges, releases or threatened releases of, or exposure to, Hazardous
Substances, (ii) the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances, or
(iii) the investigation, remediation or cleanup of any Hazardous Substances. As
used in this paragraph, "HAZARDOUS SUBSTANCES" means pollutants, contaminants or
hazardous, dangerous, toxic, biohazardous or infectious substances, materials or
wastes or any other chemical substance regulated under Environmental Laws.
(kk) Except as set forth in the Prospectus, neither the Company nor
any of its subsidiaries nor, to the knowledge of the Company, any other person
who has a direct or indirect ownership or control interest in the Company or any
of its subsidiaries or who is an officer, director, agent or managing employee
of the Company or any of its subsidiaries (1) has engaged in any activities
which are prohibited, or are cause for criminal or civil penalties and/or
mandatory or permissive exclusion from Medicare or Medicaid, under Section
1320a-7, 1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United States Code,
the federal TRICARE statute, the Federal False Claims Act 31 U.S.C.
ss.3729-3733, or the regulations promulgated pursuant to such statutes or
regulations or related state or local statutes or by generally recognized
professional standards of care or conduct, except for such activities as would
not, individually or in the aggregate, result in a Material Adverse Effect; (2)
has had a civil monetary penalty assessed against it under Section 1128A of the
Social Security Act ("SSA"); (3) is currently excluded from participation under
the Medicare program or a Federal Health Care Program (as that term is defined
in SSA Section 1128(B)(f)); or (4) has been convicted (as that term is defined
in 42 C.F.R. ss.1001.2) of any of the categories of offenses described in SSA
Section 1128(a) and (b)(1), (2) and (3).
(ll) Neither the Company nor any subsidiary is, or, after giving
effect to the offering and sale of the Stock as described in the Prospectus,
will be, an "INVESTMENT COMPANY" as defined in the Investment Company Act of
1940, as amended.
(mm) Prior to the date hereof, neither the Company and its
subsidiaries nor any of their respective affiliates nor any person acting on its
or their behalf (other than you, as to whom the
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Company and its subsidiaries make no representation) has taken nor will take any
action that is designed to or that has constituted or that might have been
expected to cause or result in stabilization or manipulation of the price of any
security of the Company or its subsidiaries to facilitate the sale or resale of
the Common Stock.
(nn) The minute books and records of the Company relating to
proceedings of its shareholders, board of directors and committees of its board
of directors made available to Weil, Gotshal & Xxxxxx LLP, counsel for the
Underwriters, are the original minute books and records or are true, correct and
complete copies thereof, with respect to all proceedings of said shareholders,
board of directors and committees since January 1, 1999 through the date hereof.
In the event that definitive minutes have not been prepared with respect to any
proceedings of such shareholders, board of directors or committees, the Company
has provided Weil, Gotshal & Xxxxxx LLP with originals or true, correct and
complete copies of draft minutes or written agendas relating thereto, which
drafts and agendas, if any, reflect all events that occurred in connection with
such proceedings.
(oo) The statements set forth in the Prospectus under the caption
"Description of Capital Stock" insofar as it purports to constitute a summary of
the terms of the Common Stock and under the captions "Certain U.S. Federal
Income Tax Considerations for Non-U.S. Holders of Our Common Stock" and "Certain
Relationships and Related Party Transactions" insofar as they relate solely to
factual matters, are accurate in all material respects.
(pp) The Company is subject to and in full compliance with the
reporting requirements of Section 13 or 15(d) of the Exchange Act. All reports
filed by the Company with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act comply as to form in all material respects with the Exchange Act
and the Exchange Act Rules.
(qq) The Company has established and maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15 under the Exchange Act),
which (i) are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported and is made known to the Company's
principal executive officer and its principal financial officer by others within
those entities, particularly during the periods in which the periodic reports
required under the Exchange Act are being prepared; (ii) have been evaluated for
effectiveness as of the end of the last fiscal quarter; and (iii) are effective
in all material respects to perform the functions for which they were
established.
(rr) Based on the evaluation of its disclosure controls and
procedures, the Company is not aware of (i) any significant deficiency in the
design or operation of internal controls which could adversely affect the
Company's ability to record, process, summarize and report financial data or any
material weaknesses in internal controls; or (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal controls.
(ss) Since the date of the most recent evaluation of such
disclosure controls and procedures, there have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
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(tt) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would give
rise to a valid claim against the Company or any Underwriter for a brokerage
commission, finder's fee or other like payment in connection with this offering.
(uu) The Stock has been approved for listing subject to notice of
issuance on the NASDAQ National Market.
(vv) The market-related and industry data included in the
Prospectus and the Registration Statement are based upon estimates by the
Company derived from sources that the Company believes to be reliable and
accurate.
Section 2. Representations, Warranties and Agreements of each of
the Selling Stockholders. Each of the Selling Stockholders, severally and not
jointly represents, warrants and agrees that:
(a) Immediately prior to each applicable Delivery Date, such
Selling Stockholder will have full right, power and authority to sell, assign,
transfer and deliver the shares of Stock to be sold by the Selling Stockholder
hereunder on such date; and upon delivery of such shares and payment therefor
pursuant hereto, assuming each purchaser thereof is otherwise a bona fide
purchaser and has no notice of any "adverse claim" (within the meaning of the
New York Uniform Commercial Code), each purchaser thereof will receive title to
the shares of Stock purchased by it from such Selling Stockholder free and clear
of any adverse claim.
(b) Pursuant to an Irrevocable Power of Attorney and Custody
Agreement (the "CUSTODY AGREEMENT"), such Selling Stockholder (i) has placed in
custody with StockTrans, Inc., as custodian (the "CUSTODIAN"), for delivery
under this Agreement, certificates in negotiable form representing the shares of
the Stock to be sold by such Selling Stockholder hereunder; and (ii) has duly
and irrevocably appointed Xxxx X. Xxxxxx and Xxxxx Xxxxxx, as attorneys-in-fact
(the "ATTORNEYS-IN-FACT"), with full power of substitution, and with full
authority (exercisable by any one or more of them) to execute and deliver this
Agreement and to take such other actions as set forth in such Custody Agreement.
(c) Such Selling Stockholder has full right, power and authority,
corporate or otherwise, to enter into this Agreement and the Custody Agreement;
the execution, delivery and performance of this Agreement and the Custody
Agreement by such Selling Stockholder and the consummation by such Selling
Stockholder of the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is bound or to which
any of the property or assets of such Selling Stockholder is subject, other than
such breaches, violations or defaults that, singly or in the aggregate, could
not materially adversely affect such Selling Stockholder's ability to consummate
the transactions contemplated hereby, nor will such actions result in any
violation of the provisions of the constituent documents of such Selling
Stockholder (if other than a natural person) or any statute or any order, rule
or regulation of any court or governmental agency or body having jurisdiction
over such Selling Stockholder or the property or assets of such Selling
Stockholder; and, except for filings with NASDAQ, the NASD and under the
Securities Act, the Exchange Act and applicable state or foreign securities laws
in connection with the purchase and distribution of the
10
Stock by the Underwriters, no consent, approval, authorization or order of, or
filing, registration or qualification with, any such court or governmental
agency or body is required for the execution, delivery and performance of this
Agreement or the Custody Agreement by such Selling Stockholder and the
consummation by such Selling Stockholder of the transactions contemplated hereby
and thereby.
(d) The Registration Statement, as of the Effective Date, and the
Prospectus, as of its date, do not and will not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which made) not misleading; provided that no
representation or warranty is made as to the information contained in or omitted
from the Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter specifically for inclusion therein, and provided further that
this paragraph (d) shall apply to each of the Selling Stockholders only to the
extent that the statements or omissions from the Registration Statement or the
Prospectus were made in conformity with written information relating to such
Selling Shareholder and provided by such Selling Stockholders specifically for
inclusion therein.
(e) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Selling Stockholder and any person that
would give rise to a valid claim against the Selling Stockholder or any
Underwriter for a brokerage commission, finder's fee or other like payment in
connection with this offering.
(f) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has constituted
or which might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the shares of Stock.
SECTION 3. Purchase of the Stock by the Underwriters. On the
basis of the representations and warranties contained in, and subject to all the
terms and conditions of, this Agreement, the Company agrees to sell 3,000,000
shares of the Primary Firm Stock and each Selling Stockholder, severally and not
jointly, hereby agrees to sell the number of shares of the Secondary Firm Stock
set opposite its name in Schedule II hereto to the several Underwriters and upon
the basis of the representations, warranties and agreements of the Company and
the Selling Stockholders herein contained and subject to all the terms and
conditions set forth herein, each of the Underwriters, severally and not
jointly, agrees to purchase the number of shares of the Firm Stock set forth
opposite that Underwriter's name in Schedule I hereto.
In addition, on the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Company grants to the Underwriters an option to purchase up to [
] shares of Option Stock and certain of the Selling Stockholders set forth on
Schedule II hereto hereby grant to the Underwriters an option to purchase up to
the number of shares of the Option Stock set opposite their respective names on
Schedule II hereto. Such option is granted solely for the purpose of covering
over-allotments in the sale of Firm Stock and is exercisable as provided in
Section 5 hereof. Shares of Option Stock shall be purchased severally for the
account of the Underwriters in proportion to the number of shares of Firm Stock
set forth opposite the name of such Underwriters in Schedule I hereto. The
respective purchase obligations of each Underwriter with respect to the Option
Stock shall be adjusted by
11
the Representative so that no Underwriter shall be obligated to purchase Option
Stock other than in 100 share amounts.
The price of both the Firm Stock and any Option Stock shall be
$[ ] per share.
Neither the Company nor the Selling Stockholders shall be
obligated to deliver any of the Stock to be delivered on any Delivery Date (as
hereinafter defined), except upon payment for all the Stock to be purchased on
such Delivery Date as provided herein.
SECTION 4. Offering of Stock by the Underwriters. Upon
authorization by the Representative of the release of the Firm Stock, the
several Underwriters propose to offer the Firm Stock for sale upon the terms and
conditions set forth in the Prospectus.
SECTION 5. Delivery of and Payment for the Stock. Delivery of
and payment for the Firm Stock shall be made at the offices of Weil, Gotshal &
Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 A.M., New York
City time, on the third full business day following the date of this Agreement
or at such other date or place as shall be determined by agreement among the
Representative, an Attorney-in-Fact and the Company. This date and time are
sometimes referred to as the "FIRST DELIVERY DATE." On the First Delivery Date,
the Company shall deliver or cause to be delivered certificates representing the
Primary Firm Stock, and each Selling Stockholder, severally and not jointly,
shall deliver or cause to be delivered certificates representing the Secondary
Firm Stock that such Selling Stockholder is obligated to sell pursuant to
Section 3 above, to the Representative for the account of each Underwriter
against payment to or upon the order of the Company and each Selling
Stockholder, respectively, of the purchase price by wire transfer in immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Firm Stock shall be
registered in such names and in such denominations as the Representative shall
request in writing not less than two full business days prior to the First
Delivery Date. For the purpose of expediting the checking and packaging of the
certificates for the Firm Stock, the Company and the Selling Stockholders (or
the Custodian) shall make the certificates representing the Firm Stock available
for inspection by the Underwriters in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the First Delivery Date.
The option granted in Section 3 will expire 30 days after the
date of this Agreement and may be exercised in whole or in part from time to
time by written notice being given to the Company and the applicable Selling
Stockholders by the Representative. Such notice shall set forth the aggregate
number of shares of Option Stock as to which the option is being exercised, the
names in which the shares of Option Stock are to be registered, the
denominations in which the shares of the Option Stock are to be issued and the
date and time, as determined by the Representative, when the shares of the
Option Stock are to be delivered; provided, however, that this date and time
shall not be earlier than the First Delivery Date nor earlier than the second
business day after the date on which the option shall have been exercised nor
later than the fifth business day after the date on which the option shall have
been exercised. The date and time the shares of Option Stock are delivered are
sometimes referred to as a "SECOND DELIVERY DATE" and the First Delivery Date
and any Second Delivery Date are sometimes each referred to as a "DELIVERY
DATE."
12
Delivery of and payment for the Option Stock shall be made at
the place specified in the first sentence of the first paragraph of this Section
5 (or at such other place as shall be determined by agreement among the
Representative, an Attorney-in-Fact and the Company) at 10:00 A.M., New York
City time, on such Second Delivery Date. On such Second Delivery Date, the
Company and each applicable Selling Stockholder identified on Schedule II (or
the Custodian) shall deliver or cause to be delivered the certificates
representing the Option Stock to the Representative for the account of each
Underwriter against payment to or upon the order of the Company and such Selling
Stockholders of the purchase price by wire transfer in immediately available
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each Underwriter hereunder. Upon delivery, the Option Stock shall be registered
in such names and in such denominations as the Representative shall request in
the aforesaid written notice. For the purpose of expediting the checking and
packaging of the certificates for the Option Stock, the Company and such Selling
Stockholders (or the Custodian) shall make the certificates representing the
Option Stock available for inspection by the Representative in New York, New
York, not later than 2:00 P.M., New York City time, on the business day prior to
such Second Delivery Date.
SECTION 6. Further Agreements of the Company. The Company
agrees:
(a) To prepare the Prospectus in a form approved by the
Representative and to file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement, to make no
further amendment or any supplement to the Registration Statement or to the
Prospectus except as permitted herein or otherwise required by law; to advise
the Representative, promptly after it receives notice thereof, of the time when
any amendment to the Registration Statement has been filed or becomes effective
or any supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Representative with copies thereof; to file promptly all reports
and any definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Stock; to advise the Representative, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of the Registration Statement or the
Prospectus, of the suspension of the qualification of the Stock for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal.
(b) To furnish promptly to the Representative and to counsel for
the Underwriters a signed copy of the Registration Statement as originally filed
with the Commission, and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith.
(c) To deliver promptly to the Representative such number of the
following documents as the Representative shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto (in each case excluding exhibits) and (ii)
each Preliminary Prospectus, the Prospectus and any amended or supplemented
Prospectus; and, if the delivery of a Prospectus is required at any time
13
after the Effective Time in connection with the offering or sale of the Stock,
or any other securities relating thereto and if at such time any events shall
have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be necessary
to amend or supplement the Prospectus in order to comply with the Securities
Act, to notify the Representative and, upon its request, to prepare and furnish
without charge to each Underwriter and to any dealer in securities as many
copies as the Representative may from time to time reasonably request of an
amended or supplemented Prospectus which will correct such statement or omission
or effect such compliance.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the Prospectus
that may, in the judgment of the Company or the reasonable judgment of the
Representative, be required by the Securities Act or requested by the
Commission.
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish a copy thereof to
the Representative and counsel for the Underwriters and obtain the consent of
the Representative to the filing, which consent shall not be unreasonably
withheld.
(f) As soon as practicable, but not later than 16 months, after
the date of this Agreement, to make generally available to the Company's
security holders and to deliver to the Representative an earnings statement of
the Company and its subsidiaries (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations (including, at
the option of the Company, Rule 158).
(g) For a period of five years following the Effective Date, to
furnish to the Representative copies of all materials furnished by the Company
to its stockholders and all public reports and all reports and financial
statements furnished by the Company to the NASDAQ National Market or the
principal national securities exchange upon which the Common Stock may be listed
pursuant to requirements of or agreements with such exchange or to the
Commission pursuant to the Exchange Act or the Exchange Act Rules; provided,
however, that, notwithstanding the foregoing, the Company shall not be required
to provide any reports or financial statements that are available on the
Commission's XXXXX system.
(h) Promptly from time to time to take such action as the
Representative may reasonably request to qualify the Stock for offering and sale
under the securities laws of such jurisdictions as the Representative may
request and to comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Stock; provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction.
(i) For a period of 90 days from the date of the Prospectus, not
to, directly or indirectly, (1) offer for sale, sell, pledge or otherwise
dispose of (or enter into any transaction or device that is designed to, or
could be expected to, result in the disposition by any person within
14
such 90-day period) any shares of the Common Stock or securities convertible
into or exchangeable for the Common Stock (other than the Stock and shares
issued pursuant to employee benefit plans, qualified stock option plans or other
employee compensation plans existing on the date hereof or pursuant to currently
outstanding options, warrants or rights), or sell or grant options, rights or
warrants with respect to any shares of the Common Stock or securities
convertible into or exchangeable for the Common Stock (other than the grant of
options pursuant to option plans existing on the date hereof) or (2) enter into
any swap or other derivatives transaction that transfers to another, in whole or
in part, any of the economic benefits or risks of ownership of such shares of
the Common Stock, whether any such transaction described in clause (1) or (2)
above is to be settled by delivery of the Common Stock or other securities, in
cash or otherwise, in each case without the prior written consent of the
Representative on behalf of the Underwriters; and to cause each person
identified on Schedule III hereto to furnish to the Representative, prior to the
First Delivery Date, a letter or letters, substantially in the form of Exhibit A
hereto (the "LOCK-UP LETTER AGREEMENT").
(j) To take such steps as shall be necessary to ensure that
neither the Company nor any subsidiary becomes an "INVESTMENT COMPANY" as
defined in the Investment Company Act of 1940, as amended.
SECTION 7. Further Agreements of the Selling Stockholders. Each
of the Selling Stockholders severally and not jointly agrees:
(a) To comply with its obligations under its respective Lock-up
Letter Agreement and the Custody Agreement.
(b) To deliver to the Representative prior to the First Delivery
Date a properly completed and executed United States Treasury Department Form
W-8 (if the Selling Stockholder is a non-United States person) or Form W-9 (if
the Selling Stockholder is a United States person).
SECTION 8. Expenses. Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement becomes
effective or is terminated, the Company agrees to pay all costs, expenses, fees
and taxes incident to and in connection with: (i) the authorization, issuance,
sale and delivery of the Stock; (ii) the preparation, printing and filing under
the Securities Act of the Registration Statement and any amendments and exhibits
thereto (including, without limitation, financial statements and exhibits);
(iii) the distribution of the Registration Statement as originally filed and any
amendment thereto and any post-effective amendments thereof (including, in each
case, exhibits), any Preliminary Prospectus, the Prospectus and any amendment or
supplement to the Prospectus or any document incorporated by reference therein,
all as provided in this Agreement and the costs of delivering and distributing
copies of any documents incorporated by reference in the Prospectus; (iv) the
preparation, printing (including, without limitation, word processing and
duplication costs) and delivery of this Agreement and any other related
documents in connection with the offering, purchase, sale and delivery of the
Stock; (v) the delivery and distribution of the Custody Agreement and the fees
of the Custodian set forth therein; (vi) the filing fees incident to securing
any required review by the National Association of Securities Dealers, Inc. of
the terms of sale of the Stock; (vii) any applicable listing or other fees;
(viii) qualifying the Stock under the securities laws of the several
jurisdictions as provided in Section 6(h) and of preparing, printing and
distributing a Blue Sky Memorandum (including, without limitation, the
reasonable fees and expenses of counsel to the
15
Underwriters); (ix) investor presentations on any "ROAD SHOW" undertaken in
connection with the marketing of the offering of the Stock, including, without
limitation, expenses associated with the production of road show slides and
graphics, fees and expenses of any consultants engaged in connection with the
road show presentations with the prior approval of the Company, and 25% of the
cost of any aircraft chartered in connection with the road show and (x) all
other costs and expenses incident to the performance of the obligations of the
Company and the Selling Stockholders under this Agreement; provided that except
as provided in this Section 8 and in Section 13, the Underwriters shall pay
their own costs and expenses, including the costs and expenses of their counsel,
any transfer taxes on the Stock which they may sell and the expenses of
advertising any offering of the Stock made by the Underwriters.
SECTION 9. Conditions of Underwriters' Obligations. The
respective obligations of the Underwriters hereunder are subject to the
accuracy, when made and on each Delivery Date, of the representations and
warranties of the Company and the Selling Stockholders participating in a sale
of Common Stock on such Delivery Date contained herein, to the performance by
the Company and such Selling Stockholders of their obligations hereunder, and to
each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(a); no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and any request of the Commission for inclusion of
additional information in either the Registration Statement or the Prospectus or
otherwise shall have been complied with.
(b) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Stock, the
Registration Statement and the Prospectus, and all other legal matters relating
to this Agreement, the Custody Agreements and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to counsel for
the Underwriters, and the Company and the Selling Stockholders shall have
furnished to such counsel all documents and information that they may reasonably
request to enable them to pass upon such matters.
(c) Xxxxxx Xxxxxxx Xxxxxx & Xxxxx PLLC shall have furnished to the
Underwriters its written opinion, or letter or letters, as counsel to the
Company, addressed to the Underwriters and dated each Delivery Date,
substantially in the form of Exhibit C hereto.
(d) The Underwriters shall have received from counsel for each of
the Selling Stockholders that are not natural persons their written opinion, as
counsel to each of such Selling Stockholders for whom they are acting as
counsel, with respect to their ownership of the Stock and other related matters
as the Underwriters may reasonably require..
(e) The Underwriters shall have received from Weil, Gotshal &
Xxxxxx LLP, counsel for the Underwriters, such opinion or opinions, dated such
Delivery Date, with respect to the issuance and sale of the Stock, the
Registration Statement, the Prospectus and other related matters as the
Underwriters may reasonably require, and the Company shall have furnished to
such counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
16
(f) At the time of the execution of this Agreement, the
Underwriters shall have received from:
(i) Ernst & Young LLP, a letter with respect to the
financial information of the Company, five of the six facilities acquired from
The Xxxxx Schools, Inc. in April 2003, including The Xxxxx Schools of Virginia,
Inc., Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio,
Inc., The Xxxxx Schools of San Marcos, Inc. and The Oaks Psychiatric Hospital,
Inc. and Ramsay (with respect to the six month period ended June 30, 2003)
included in the Prospectus, in form and substance satisfactory to the
Representative, addressed to the Underwriters and dated the date hereof (A)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (B) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of which
specified financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and findings of
such firm with respect to the financial information and other matters ordinarily
covered by accountants' "COMFORT LETTERS" to underwriters in connection with
registered public offerings;
(ii) Deloitte & Touche LLP, a letter with respect to the
financial information of Ramsay, in form and substance satisfactory to the
Representative, addressed to the Underwriters and dated the date hereof (A)
confirming that they are independent public accountants within the meaning of
the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (B) stating, as of the date hereof, the conclusions and
findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants' "COMFORT LETTERS" to underwriters in
connection with registered public offerings; and
(iii) BDO Xxxxxxx, LLP, a letter with respect to the
financial information of The Xxxxx Schools of Oklahoma, Inc., included in the
Prospectus in form and substance satisfactory to the Underwriters, addressed to
the Underwriters and dated the date hereof (A) confirming that they are
independent public accountants within the meaning of the Securities Act and are
in compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (B) stating, as
of the date hereof (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date hereof), the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily covered by
accountants' "COMFORT LETTERS" to underwriters in connection with registered
public offerings.
(g) With respect to the letters referred to in the immediately
preceding paragraph and delivered to the Underwriters concurrently with the
execution of this Agreement (each, an "INITIAL LETTER"), the Underwriters shall
have received a letter (each, a "BRING-DOWN LETTER") addressed to the
Underwriters and dated as of the Delivery Date from:
(i) Ernst & Young LLP, with respect to the financial
information of the Company, five of the six facilities acquired from The Xxxxx
Schools, Inc. in April 2003, including The Xxxxx Schools of Virginia, Inc.,
Cedar Springs Behavioral Health System, Inc., Healthcare San Antonio, Inc., The
Xxxxx Schools of San Marcos, Inc. and The Oaks Psychiatric
17
Hospital, Inc. and Ramsay (with respect to the six month period ended June 30,
2003) included in the Prospectus, (A) confirming that they are independent
public accountants within the meaning of the Securities Act and are in
compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (B) stating, as
of the date of the bring-down letter (or, with respect to matters involving
changes or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not more than
five days prior to the date of the bring-down letter), the conclusions and
findings of such firm with respect to the financial information and other
matters covered by the initial letter and (C) confirming in all material
respects the conclusions and findings set forth in the initial letter;
(ii) Deloitte & Touche LLP, with respect to the financial
information of Ramsay, included in the Prospectus, (A) confirming that they are
independent public accountants within the meaning of the Securities Act and are
in compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (B) stating, as
of the date of the bring-down letter, the conclusions and findings of such firm
with respect to the financial information and other matters covered by the
initial letter; and
(iii) BDO Xxxxxxx, LLP, with respect to the financial
information of The Xxxxx Schools of Oklahoma, Inc., included in the Prospectus,
(A) confirming that they are independent public accountants within the meaning
of the Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (B) stating, as of the date of the bring-down letter (or,
with respect to matters involving changes or developments since the respective
dates as of which specified financial information is given in the Prospectus, as
of a date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (C) confirming
in all material respects the conclusions and findings set forth in the initial
letter.
(h) At the time of the execution of this Agreement and on each
Delivery Date, the Company shall have requested and caused Ernst & Young LLP, to
furnish to the Underwriters letters in form and substance satisfactory to the
Representative consenting to the incorporation by reference in the Registration
Statement and the Prospectus of the audited and interim, as applicable,
financial statements of each of (i) Cypress Creek Hospital Inc., West Oaks
Hospital, Inc. and Healthcare Rehabilitation Center of Austin, Inc., (ii) Xxxxx
Xxxx/Charter Behavioral Health System, LLC and (iii) PMR Corporation, dated
respectively as of the time of execution of this Agreement and as of each
Delivery Date, in form and substance satisfactory to the Underwriters,
confirming that (A) they are independent accountants within the meaning of the
Securities Act, the Exchange Act, the Rules and Regulations and Exchange Act
Rules, (B) in their opinion, the audited financial statements incorporated by
reference in the Registration Statement and Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the Rules and Regulations, (C) nothing has come to their attention as a
result of performing the procedures as described in SAS No. 100, Interim
Financial Information, that causes them to believe that the interim financial
statements incorporated by reference in the Registration Statement and the
Prospectus do not comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules and Regulations, and
(D) consenting to the incorporation by reference in the Registration
18
Statement and the Prospectus of their report with respect to the audited
financial statements for the relevant periods.
(i) At the time of the execution of this Agreement and on each
Delivery Date, the Company shall have requested and caused BDO Xxxxxxx LLP, to
furnish to the Underwriters letters in form and substance satisfactory to the
Representative consenting to the incorporation by reference in the Registration
Statement and the Prospectus of the audited and interim, as applicable,
financial statements of Aeries Healthcare Corporation and Subsidiary (d/b/a
Riveredge Hospital) dated as of the time of execution of this Agreement and as
of each Delivery Date, in form and substance satisfactory to the Underwriters,
confirming that (A) they are independent accountants within the meaning of the
Securities Act, the Exchange Act, the Rules and Regulations and Exchange Act
Rules, (B) in their opinion, the audited financial statements incorporated by
reference in the Registration Statement and Prospectus comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the Rules and Regulations, (C) nothing has come to their attention as a
result of performing the procedures as described in SAS No. 100, Interim
Financial Information, that causes them to believe that the interim financial
statements incorporated by reference in the Registration Statement and the
Prospectus do not comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Rules and Regulations, and
(D) consenting to the incorporation by reference in the Registration Statement
and the Prospectus of their report with respect to the audited financial
statements for the relevant periods.
(j) The Company shall have furnished to the Representative a
certificate from the Company, dated each Delivery Date, signed by its Chief
Executive Officer and Chief Accounting Officer stating, as applicable, that:
(i) The representations, warranties and agreements of the
Company contained herein, as applicable, are true and correct (after giving
effect to all materiality qualifiers herein) as if made on and as of such
Delivery Date (other than to the extent any such representation or warranty is
made expressly to a certain date), and the Company has performed all covenants
and agreements and satisfied all conditions (after giving effect to all
materiality qualifiers herein) on their part to be performed or satisfied
hereunder, to the extent a party hereto, at or prior to the Delivery Date; and
the conditions set forth in Sections 9(a) and (m) have been fulfilled;
(ii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of the Effective Date,
the Registration Statement did not include, and as of its date and as of the
Delivery Date, the Prospectus did not include any untrue statement of a material
fact and did not omit to state a material fact required to be stated therein or
necessary (in the case of the Prospectus in the light of the circumstances under
which made) to make the statements therein not misleading, and (B) since the
Effective Date no event has occurred which should have been set forth in an
amendment to the Registration Statement or supplement to the Prospectus.
(k) Each Selling Stockholder participating in a sale of Common
Stock on a Delivery Date (or the Custodian or one or more attorneys-in-fact on
behalf of the Selling Stockholders) shall have furnished to the Underwriters on
each Delivery Date a certificate, dated such Delivery Date, signed by, or on
behalf of, such Selling Stockholder (or one or more attorneys-in-fact) stating
that the representations, warranties and agreements of such Selling Stockholder
contained
19
herein are true and correct (after giving effect to all materiality qualifiers
herein) as of that Delivery Date (other than to the extent any such
representation or warranty is made expressly to a certain date), and that the
Selling Stockholders have complied in all material respects with all agreements
contained herein to be performed by the Selling Stockholders at or prior to that
Delivery Date.
(l) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus (i) any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus
or (ii) since such date there shall not have been any change in the capital
stock or increase in the long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is, in the
judgment of the Representative, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Stock being delivered on such Delivery Date on the terms and in the
manner contemplated herein and in the Prospectus.
(m) Subsequent to the execution and delivery of this Agreement (i)
no downgrading shall have occurred in the rating accorded the Company's debt
securities by any "NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION," as
that term is defined by the Commission for purposes of Rule 436(g)(2) of the
Rules and Regulations and (ii) no such organization shall have publicly
announced that it is under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities.
(n) The Underwriters shall have received a certificate from the
Company and Aeries Healthcare of Illinois, Inc. at the time of the execution of
this Agreement and each Delivery Date, signed by the Chief Accounting Officer of
the Company and the Chief Financial Officer of Aeries Healthcare of Illinois,
Inc. in respect of the unaudited condensed consolidated statement of income of
Aeries Healthcare Corporation and Subsidiary (d/b/a Riveredge Hospital)
("RIVEREDGE HOSPITAL") for the quarterly period ended June 30, 2002, stating, as
applicable, that:
(1) The financial statement attached to the
certificate is, in fact, a true and accurate copy of the unaudited
condensed consolidated statement of income of Riveredge Hospital for
the quarterly period ended June 30, 2002;
(2) As members of management of Riveredge
Hospital, they are responsible for the fair presentation of its
financial statements and they believe the statements of financial
position and results of operations are fairly presented in conformity
with accounting principles generally accepted in the United States
applied on a basis consistent with that of the preceding periods;
(3) There are no unadjusted audit differences
identified during the current audit and pertaining to the period
presented;
20
(4) No plans or intentions exist that may
materially affect the carrying value or classification of assets and
liabilities;
(5) There are no material transactions that have
not been properly recorded in the accounting records underlying the
financial statement;
(6) There are no material weaknesses in internal
control, including any for which they believe the cost of corrective
actions exceeds the benefits, and there have been no significant
changes in internal control since March 31, 2002;
(7) Except for the acquisition of Riveredge
Hospital by the Company on July 1, 2002, no events or transactions have
occurred since March 31, 2002 or are pending that would have a material
effect on the financial statements at that date or for the period then
ended, or that are of such significance in relation to Riveredge
Hospital's affairs to require mention in a note to the financial
statement in order to make them not misleading regarding the financial
position, results of operations or cash flows of the Riveredge
Hospital.
(o) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the Nasdaq National Market or in the
over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or the
settlement of such trading generally shall have been materially disrupted or
minimum prices shall have been established on any such exchange or such market
by the Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a material disruption in
securities settlement, payment or clearance services in the United States; (iii)
a banking moratorium shall have been declared by Federal or state authorities;
(iv) any attack on, outbreak or escalation of hostilities or act of terrorism
involving the United States, any declaration of war by Congress or any other
national or international calamity, crisis or emergency if, in the judgment of
the Representative, the effect of any such attack, outbreak, escalation, act,
declaration, calamity, crisis or emergency makes it impractical or inadvisable
to proceed with completion of the offering or sale of and payment for the Stock;
or (v) the occurrence of any other calamity, crisis (including without
limitation as a result of terrorist activities), or material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Representative, impracticable or
inadvisable to proceed with the public offering or delivery of the Stock being
delivered on such Delivery Date on the terms and in the manner contemplated in
the Prospectus or that, in the judgment of the Representative, would materially
and adversely affect the financial markets or the markets for the Stock.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
SECTION 10. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Underwriter, its directors, officers, and employees and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and
21
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of the Stock), to which that
Underwriter, director, officer, employee or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A) in any
Preliminary Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto or (B) in any Blue Sky application or other
document prepared or executed by the Company (or based upon written information
furnished by the Company) specifically for the purpose of qualifying any or all
of the Stock under the securities laws of any state or other jurisdiction (any
such application, document or information hereinafter called a "BLUE SKY
APPLICATION") or (C) in any materials or information provided to investors by,
or with the approval of, the Company in connection with the marketing of the
offering of the Stock (the "MARKETING MATERIALS"), including any roadshow or
investor presentations made to investors by the Company (whether in person or
electronically), or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky Application or in any
Marketing Materials, any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and shall reimburse each Underwriter
and each such director, officer, or (iii) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or relating
in any manner to, the Stock or the offering contemplated hereby, and that is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii) above
(provided that the Company shall not be liable under this clause (iii) to the
extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be taken
by such Underwriter through its gross negligence or willful misconduct), and
shall reimburse each Underwriter and each such director, officer, employee or
controlling person promptly upon demand for any legal or other expenses
reasonably incurred by that Underwriter, director, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or in any such amendment or
supplement thereto, or in any Blue Sky Application or in any Marketing
Materials, in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the Representative
by or on behalf of any Underwriter specifically for inclusion therein. The
foregoing indemnity agreement is in addition to any liability that the Company
may otherwise have to any Underwriter or to any director, officer, employee or
controlling person of that Underwriter.
(b) Each Selling Stockholder, severally and not jointly, shall
indemnify and hold harmless each of the Company and each Underwriter, and their
respective directors, officers, employees or controlling persons, if any, who
control the Company or any Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any loss,
claim, damage, liability, joint or several, or any action in respect thereto
(including, but not limited to, any loss, claim, damage or liability or action
relating to purchases and sales of the Stock), to which the Company or that
Underwriter, director, officer, employee, or controlling person may become
subject, insofar as such loss, claim, damage, liability or action arises out of,
22
or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (ii)
the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, any material fact required to be stated therein or necessary to make
the statements therein not misleading and shall reimburse the Company and each
Underwriter, their respective directors, officers, employees and controlling
persons promptly upon demand for any legal or other expenses reasonably incurred
by the Company and such Underwriter, and their directors, officers, employees or
controlling persons in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that such Selling Stockholder shall be
liable in any such case only to the extent that the untrue statement or alleged
untrue statement or the omission or alleged omission was made in conformity with
written information concerning such Selling Stockholder furnished to the Company
by or on behalf of such Selling Stockholder specifically for inclusion therein;
provided further, however, that the indemnification contained in this Section
10(b) with respect to the Preliminary Prospectus shall not inure to the benefit
of the Company or any Underwriter (or to the benefit of any directors, officers,
employees or controlling persons of the Company or such Underwriter) on account
of any such loss, claim, damage, liability or action arising from the sale of
the Stock by such Underwriter to any person if the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
the Preliminary Prospectus was corrected in the Prospectus and the Underwriter
sold the Stock to that person, without sending or giving at or prior to the
written confirmation of such sale, a copy of such Prospectus (as then amended or
supplemented) if the Company has previously furnished sufficient copies thereof
to the Underwriter on a timely basis to permit such sending or giving. The
foregoing indemnity agreement is in addition to any liability that the Selling
Stockholders may otherwise have to the Company or any Underwriter or any
officer, employee or controlling person of the Company or that Underwriter.
Notwithstanding any other provision of this Agreement, the liability of each
Selling Stockholder under this Section 10(b) to all such indemnified parties
shall not exceed the net amount received by each such Selling Stockholder (after
deducting any underwriting discount) from the sale of the Stock by such Selling
Stockholder pursuant to this Agreement.
(c) Each Underwriter, severally and not jointly, shall indemnify
and hold harmless the Company and the Selling Stockholders, each of their
respective directors, officers, partners and employees and each person, if any,
who controls the Company and each Selling Stockholder within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of Stock), to which the
Selling Stockholders, the Company or any such director, officer, partner,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto, (B) in
any Blue Sky Application, or (C) in any Marketing Materials or (ii) the omission
or alleged omission to state in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any amendment or supplement thereto, or in
any Blue Sky Application or in any Marketing Materials, any material fact
required to be stated therein or necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning such Underwriter
furnished to the Company by
23
or on behalf of that Underwriter specifically for inclusion therein, and shall
reimburse the Company, the Selling Stockholders and any such director, officer,
partner, employee or controlling person for any legal or other expenses
reasonably incurred by the Company, the Selling Stockholders or any such
director, officer, partner, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability that any Underwriter may
otherwise have to the Company, the Selling Stockholders or any such director,
officer, partner, employee or controlling person.
(d) Promptly after receipt by an indemnified party under this
Section 10 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 10, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 10 except to the extent it has
been materially prejudiced by such failure and; provided, further, that the
failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party otherwise than under this Section 10.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 10 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Representative shall have the right to employ counsel to represent jointly
the Representative and those other Underwriters and their respective directors,
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Underwriters against the Company or any Selling Stockholder under this Section
10 if, in the reasonable judgment of the Representative, it is advisable for the
Representative and those Underwriters, officers, employees and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Company. No
indemnifying party shall (i) without prior written consent of the indemnified
parties (which consent shall not be unreasonably withheld), settle or compromise
or consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but if
settled with the consent of the indemnifying party or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(e) If the indemnification provided for in this Section 10 shall
for any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 10(a), 10(b) or 10(c) in respect of any loss, claim, damage
or liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
24
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the [indemnifying] Selling Stockholders on the one
hand and the Underwriters on the other from the offering of the Stock or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the [indemnifying] Selling Stockholders on the one hand and the Underwriters on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the [indemnifying] Selling Stockholders on the one hand and the
Underwriters on the other with respect to such offering shall be deemed to be in
the same proportion as the total net proceeds (after deducting underwriting
discounts) from the offering of the Stock purchased under this Agreement (before
deducting expenses) received by the Company and the [indemnifying] Selling
Stockholders on the one hand, and the total underwriting discounts and
commissions received by the Underwriters with respect to the Stock purchased
under this Agreement, on the other hand, bear to the total gross proceeds from
the offering of the Stock under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, the [indemnifying] Selling Stockholders
or the Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
10(e) were to be determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section 10(e) shall be deemed to include, for purposes
of this Section 10(e), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 10(e), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Stock underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages that such
Underwriter has otherwise paid or become liable to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission and no Selling
Stockholder shall be required to contribute any amount in excess of the net
proceeds (after deducting any underwriting discounts) from the sale of the Stock
by such Selling Stockholder pursuant to this Agreement. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 10(e) are several in proportion to their
respective underwriting obligations and not joint.
(f) The Underwriters severally confirm and the Company
acknowledges that the statements with respect to the public offering of the
Stock by the Underwriters set forth on the cover page and the first and second
sentences of the fourth paragraph appearing under the caption "Underwriting" in
the Prospectus are correct and constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
25
SECTION 11. Defaulting Underwriters.
If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Underwriters shall be obligated to purchase the Stock that the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions that the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule I
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule I hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total number
of shares of the Stock that the defaulting Underwriter or Underwriters agreed
but failed to purchase on such date exceeds 9.09% of the total number of shares
of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of shares of the Stock that it agreed to purchase on such Delivery
Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded,
the remaining non-defaulting Underwriters, shall have the right, but shall not
be obligated, to purchase, in such proportion as may be agreed upon among them,
all the Stock to be purchased on such Delivery Date. If the remaining
Underwriters or other Underwriters satisfactory to the Representative do not
elect to purchase the shares that the defaulting Underwriter or Underwriters
agreed but failed to purchase on such Delivery Date, this Agreement (or, with
respect to the Second Delivery Date, the obligation of the Underwriters to
purchase, and of the Selling Stockholders to sell, the Option Stock) shall
terminate without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Stockholders, except that the Company will continue to be
liable for the payment of expenses to the extent set forth in Sections 8 and 13.
As used in this Agreement, the term "Underwriter" includes, for all purposes of
this Agreement unless the context requires otherwise, any party not listed in
Schedule I hereto who, pursuant to this Section 11, purchases Stock that a
defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to the Company for damages caused by
its default. If other Underwriters are obligated or agree to purchase the Stock
of a defaulting or withdrawing Underwriter, either the Underwriters or the
Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement, the
Prospectus or in any other document or arrangement.
SECTION 12. Termination. The obligations of the Underwriters
hereunder may be terminated by the Representative by notice given to and
received by the Company and Selling Stockholders prior to delivery of and
payment for the Firm Stock if, prior to that time, any of the events described
in Sections 9(l), 9(m) or 9(o) shall have occurred or if the Underwriters shall
decline to purchase the Stock for any reason permitted under this Agreement.
SECTION 13. Reimbursement of Underwriters' Expenses. If the
Company or Selling Stockholders fail to tender the Stock for delivery to the
Underwriters by reason of any failure, refusal or inability on the part of the
Company or such Selling Stockholder to perform any agreement on its part to be
performed, or because any other condition of the Underwriters' obligations
hereunder required to be fulfilled by the Company or any Selling Stockholder is
not fulfilled, the Company and/or any such Selling Stockholders, as applicable,
shall reimburse the
26
Underwriters for its pro rata portion of all reasonable out-of-pocket expenses
(including fees and disbursements of counsel) incurred by the Underwriters in
connection with this Agreement and the proposed purchase of the Stock, and upon
demand the Company and any such Selling Stockholders shall pay such amount
thereof to the Underwriters. If this Agreement is terminated pursuant to Section
11 by reason of the default of one or more Underwriters, the Company and the
Selling Stockholders shall not be obligated to reimburse any defaulting
Underwriter on account of those expenses.
SECTION 14. Notices, Etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to any Underwriters, shall be delivered or sent by hand
delivery, mail, telex, overnight courier or facsimile transmission to Xxxxxx
Brothers Inc., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Syndicate Department (Fax: (000) 000-0000), with a copy to Weil, Gotshal &
Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxx Xxxxxx,
Esq. (Fax: (000) 000-0000), and with a copy, in the case of any notice pursuant
to Section 10(d), to the Director of Litigation, Office of the General Counsel,
Xxxxxx Brothers Inc., 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Fax: (000) 000-0000;
(b) if to the Company, shall be delivered or sent by mail, telex,
overnight courier or facsimile transmission to Psychiatric Solutions, Inc., 000
Xxxxxxxx Xxxx, Xxxxx X-000, Xxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxx Xxxxxx
(Fax: (000) 000-0000), with a copy to Xxxxxx Xxxxxxx Xxxxxx & Xxxxx, PLLC, 000
Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx, Xxxxxxxxx 00000, Attention: Xxxxxxxxxxx X.
Xxxxxx, Esq. (Fax: (000) 000-0000);
(c) if to a Selling Stockholder, shall be delivered or sent by
mail, telex or facsimile transmission to the address of such Selling Stockholder
set forth on Schedule II hereto or to such other address as such Selling
Stockholder notifies the Underwriters and the Company of in writing in
accordance with the provisions of this Section 14;
provided, however, that any notice to an Underwriter pursuant to Section 10(d)
shall be delivered or sent by hand delivery, mail, telex or facsimile
transmission to such Underwriter at its address set forth in its acceptance
telex, overnight courier to Xxxxxx Brothers, which address will be supplied to
any other party hereto by Xxxxxx Brothers upon request. Any such statements,
requests, notices or agreements shall take effect at the time delivered by hand,
if personally delivered; two business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery. The Company and the Selling
Stockholders shall be entitled to act and rely upon any request, consent, notice
or agreement given or made on behalf of the Underwriters by Xxxxxx Brothers Inc.
SECTION 15. Persons Entitled to Benefit of Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriters,
the Company, the Selling Stockholders and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and
agreements of the Company and the Selling Stockholders contained in this
Agreement shall also be deemed to be for the benefit of the person or persons
controlling any Underwriter within the meaning of Section 15 of the Securities
Act and (B) the indemnity agreement of the Underwriters contained in Section
10(c) of this Agreement shall be deemed to be for the benefit of directors of
27
the Company and the Selling Stockholders, the officers of the Company and the
Selling Stockholders and any person controlling the Company or the Selling
Stockholders within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 15, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein.
SECTION 16. Survival. The respective indemnities,
representations, warranties and agreements of the Company, the Selling
Stockholders and the Underwriters contained in this Agreement or made by or on
behalf on them, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Stock and shall remain in full force and effect,
regardless of any investigation made by or on behalf of any of them or any
person controlling any of them.
SECTION 17. Definition of the Terms "Business Day" and
"Subsidiary". For purposes of this Agreement, (a) "business day" means any day
on which the New York Stock Exchange, Inc. is open for trading and (b)
"subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations.
SECTION 18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK.
SECTION 19. Counterparts. This Agreement may be executed in one
or more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
SECTION 20. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
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If the foregoing correctly sets forth the agreement between
the Company, the Selling Stockholders and the Underwriters, please indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
PSYCHIATRIC SOLUTIONS, INC.
By:
--------------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman, CEO and President
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE II
By:
--------------------------------------
Attorney-in-Fact
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Accepted:
XXXXXX BROTHERS INC.
By
-----------------------------
For themselves and as Representative
of the several Underwriters named
in Schedule I hereto
30