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Exhibit 1
Draft of October 29, 1997
4,500,000 Shares
NOVACARE EMPLOYEE SERVICES, INC.
Common Stock
UNDERWRITING AGREEMENT
November , 1997
BANCAMERICA XXXXXXXXX XXXXXXXX
XXXXX XXXXXX INC.
As Representatives of the several Underwriters
c/o BancAmerica Xxxxxxxxx Xxxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Ladies/Gentlemen:
NovaCare Employee Services, Inc., a Delaware corporation (the
"Company"), and NovaCare, Inc., a Delaware corporation ("NovaCare"), address you
as the Representatives of each of the persons, firms and corporations listed in
Schedule A hereto (collectively, the "Underwriters") and hereby confirm their
respective agreements with the several Underwriters as follows:
1. Description of Shares. The Company proposes to issue and sell
4,500,000 shares of its authorized and unissued Common Stock, $.01 par
value (the "Firm Shares"), to the several Underwriters. The Company also
proposes to grant to the Underwriters an option to purchase up to 675,000
additional shares of the Company's Common Stock, $.01 par value (the
"Option Shares"), as provided in Section hereof. As used in this
Agreement, the term "Shares" shall include the Firm Shares and the Option
Shares. All shares of Common Stock, $.01 par value, of the Company to be
outstanding after giving effect to the sales contemplated hereby, including
the Shares, are hereinafter referred to as "Common Stock."
2. Representations, Warranties and Agreements of the Company and NovaCare. Each
of the Company and NovaCare represents and warrants to, and agrees with, each
Underwriter that:
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(a) A registration statement on Form S-1 (File No. 333-35071) with respect
to the Shares, including a prospectus subject to completion, has been
prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Act and has been filed
with the Commission; such amendments to such registration statement, such
amended prospectuses subject to completion and such abbreviated
registration statements pursuant to Rule 462(b) of the Rules and
Regulations as may have been required prior to the date hereof have been
similarly prepared and filed with the Commission; and the Company will file
such additional amendments to such registration statement, such amended
prospectuses subject to completion and such abbreviated registration
statements as may hereafter be required. Copies of such registration
statement and amendments thereto, of each related prospectus subject to
completion (the "Preliminary Prospectuses"), including all documents
incorporated by reference therein, and of any abbreviated registration
statement pursuant to Rule 462(b) of the Rules and Regulations have been
delivered to you.
(b) If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and
promptly file with the Commission the information omitted from the
registration statement pursuant to Rule 430A(a) or, if BancAmerica
Xxxxxxxxx Xxxxxxxx, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations pursuant to subparagraph
(1), (4) or (7) of Rule 424(b) of the Rules and Regulations or as part of a
post-effective amendment to the registration statement (including a final
form of prospectus). If the registration statement relating to the Shares
has not been declared effective under the Act by the Commission, the
Company will prepare and promptly file an amendment to the registration
statement, including a final form of prospectus, or, if BancAmerica
Xxxxxxxxx Xxxxxxxx, on behalf of the several Underwriters, shall agree to
the utilization of Rule 434 of the Rules and Regulations, the information
required to be included in any term sheet filed pursuant to Rule 434(b) or
(c), as applicable, of the Rules and Regulations. The term "Registration
Statement" as used in this Agreement shall mean such registration
statement, including financial statements, schedules and exhibits, in the
form in which it became or becomes, as the case may be, effective
(including, if the Company omitted information from the registration
statement pursuant to Rule 430A(a) or files a term sheet pursuant to Rule
434 of the Rules and Regulations, the information deemed to be a part of
the registration statement at the time it became effective pursuant to Rule
430A(b) or Rule 434(d) of the Rules and Regulations) and, in the event of
any amendment thereto or the filing of any abbreviated registration
statement pursuant to Rule 462(b) of the Rules and Regulations relating
thereto after the effective date of such registration statement, shall also
mean (from and after the effectiveness of such amendment or the filing of
such abbreviated registration statement) such registration statement as so
amended, together with any such abbreviated registration statement. The
term "Prospectus" as used in this Agreement shall mean the prospectus
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relating to the Shares as included in such Registration Statement at the
time it becomes effective (including, if the Company omitted information
from the Registration Statement pursuant to Rule 430A(a) of the Rules and
Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the
Rules and Regulations); provided, however, that if in reliance on Rule 434
of the Rules and Regulations and with the consent of BancAmerica Xxxxxxxxx
Xxxxxxxx, on behalf of the several Underwriters, the Company shall have
provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c),
as applicable, prior to the time that a confirmation is sent or given for
purposes of Section 2(10)(a) of the Act, the term "Prospectus" shall mean
the "prospectus subject to completion" (as defined in Rule 434(g) of the
Rules and Regulations) last provided to the Underwriters by the Company and
circulated by the Underwriters to all prospective purchasers of the Shares
(including the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 434(d) of the
Rules and Regulations). Notwithstanding the foregoing, if any revised
prospectus shall be provided to the Underwriters by the Company for use in
connection with the offering of the Shares that differs from the prospectus
referred to in the immediately preceding sentence (whether or not such
revised prospectus is required to be filed with the Commission pursuant to
Rule 424(b) of the Rules and Regulations), the term "Prospectus" shall
refer to such revised prospectus from and after the time it is first
provided to the Underwriters for such use. If in reliance on Rule 434 of
the Rules and Regulations and with the consent of BancAmerica Xxxxxxxxx
Xxxxxxxx, on behalf of the several Underwriters, the Company shall have
provided to the Underwriters a term sheet pursuant to Rule 434(b) or (c),
as applicable, prior to the time that a confirmation is sent or given for
purposes of Section 2(10)(a) of the Act, the Prospectus and the term sheet,
together, will not be materially different from the prospectus in the
Registration Statement.
(c) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and,
as of its date, has not included any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; and at the time the Registration Statement became or becomes,
as the case may be, effective and at all times subsequent thereto up to and
on the Closing Date (hereinafter defined) and on any later date on which
Option Shares are to be purchased, (i) the Registration Statement and the
Prospectus, and any amendments or supplements thereto, contained and will
contain all material information required to be included therein by the Act
and the Rules and Regulations and will in all material respects conform to
the requirements of the Act and the Rules and Regulations, (ii) the
Registration Statement, and any amendments or supplements thereto, did not
and will not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
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they were made, not misleading; provided, however, that none of the
representations and warranties contained in this subparagraph shall apply to
information contained in or omitted from the Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon, and in
conformity with, written information relating to any Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof.
(d) Each of the Company and its subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation with full corporate power and authority to
own, lease and operate its properties and conduct its business as described in
the Prospectus; the Company owns all of the outstanding capital stock of its
subsidiaries free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest, except as set forth in the Registration Statement
and the Prospectus; each of the Company and its subsidiaries is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the ownership or leasing of its properties or the conduct
of its business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise; no
proceeding has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification; each of the Company and its subsidiaries is in possession of and
operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities which are material to the conduct of its business, all of which are
valid and in full force and effect; neither the Company nor any of its
subsidiaries is in violation of its respective charter or bylaws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness, or in any material lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective properties may be bound, except for any such
violations and defaults which individually or in the aggregate would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise; and neither the Company nor any of its
subsidiaries is in material violation of any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or NovaCare or over any of their respective properties of which it
has knowledge. The Company does not own or control, directly or indirectly, any
corporation, association or other entity other than those listed on Schedule B
to this Agreement.
(e) Each of the Company and NovaCare has full legal right, power and authority
to enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and
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delivered by each of the Company and NovaCare and is a valid and binding
agreement on the part of the Company and NovaCare, enforceable against each of
the Company and NovaCare in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles; the performance
of this Agreement and the consummation of the transactions herein contemplated
will not result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (i) any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any of its subsidiaries or NovaCare is a party or by which the
Company or any of its subsidiaries, NovaCare, or any of their respective
properties may be bound, (ii) the charter or bylaws of the Company or any of its
subsidiaries or NovaCare, or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental agency
or body, domestic or foreign, having jurisdiction over the Company or any of its
subsidiaries or NovaCare or over any of their respective properties, except for
any breaches, violations and defaults which individually or in the aggregate
would not have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise. No consent, approval,
authorization or order of or qualification with any court, government or
governmental agency or body, domestic or foreign, having jurisdiction over the
Company or NovaCare or any of their subsidiaries or over any of their respective
properties is required for the execution and delivery of this Agreement and the
consummation by the Company or NovaCare or any of their subsidiaries of the
transactions herein contemplated, except such as may be required under the Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or under
state or other securities or Blue Sky laws, all of which requirements have been
satisfied in all material respects.
(f) There is not any pending or, to the best of the Company's or NovaCare's
knowledge, overtly threatened action, suit, claim or proceeding against the
Company, NovaCare, any of their subsidiaries or any of their respective officers
or any of their respective properties, assets or rights before any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company, NovaCare or any of their subsidiaries or over any
of their respective officers or properties or otherwise which, if adversely
decided, (i) is reasonably likely to result in any material adverse change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise or might materially and adversely affect their properties, assets or
rights, (ii) is reasonably likely to prevent consummation of the transactions
contemplated hereby or (iii) is required to be disclosed in the Registration
Statement or Prospectus and is not so disclosed; and there are no agreements,
contracts, leases or documents of the Company or any of its subsidiaries of a
character required to be described or referred to in the Registration Statement
or Prospectus or to be filed as an exhibit to the Registration Statement by the
Act or the Rules and Regulations or by the Exchange Act or the rules and
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regulations of the Commission thereunder which have not been accurately
described in all material respects in the Registration Statement or Prospectus
or filed as exhibits to the Registration Statement.
(g) All outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not issued
in violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and the authorized and outstanding capital stock of
the Company is as set forth in the Prospectus under the caption "Capitalization"
and conforms in all material respects to the statements relating thereto
contained in the Registration Statement and the Prospectus (and such statements
correctly state the substance of the instruments defining the capitalization of
the Company); the Firm Shares and the Option Shares have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right,
co-sale right, registration right, right of first refusal or other similar right
of shareholders exists with respect to any of the Firm Shares or Option Shares
or the issuance and sale thereof other than those that have been expressly
waived prior to the date hereof and those that will automatically expire upon
and will not apply to the consummation of the transactions contemplated on the
Closing Date. No further approval or authorization of any shareholder, the Board
of Directors of the Company or others is required for the issuance and sale or
transfer of the Shares except as may be required under the Act, the Exchange Act
or under state or other securities or Blue Sky laws. All issued and outstanding
shares of capital stock of each subsidiary of the Company have been duly
authorized and validly issued and are fully paid and nonassessable, and were not
issued in violation of or subject to any preemptive right, or other rights to
subscribe for or purchase shares and are owned by the Company free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest,
except as disclosed in the Registration Statement and the Prospectus. Except as
disclosed in the Prospectus and the financial statements of the Company, and the
related notes thereto, included in the Prospectus, neither the Company nor any
subsidiary has outstanding any options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly presents
the information required to be shown with respect to such plans, arrangements,
options and rights.
(h) Each of Price Waterhouse LLP, Brewer, Beemer, Kuehnhackl & Xxxx, P.A.,
Varnadore, Tyler, Hoffner, King, Hawthorne, Hammer & Xxxxxxx, P.A. and Xxxxx,
Xxxxxx & Company LLP, which has examined the consolidated financial statements
of the Company, Resource One, Inc., Employee Services of America, Inc. and The
TPI Group, Ltd., respectively, together with the
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related schedules and notes thereto filed with the Commission as a part of the
Registration Statement, which are in the Prospectus, are independent accountants
within the meaning of the Act and the Rules and Regulations; the audited
consolidated financial statements of the Company, Resource One, Inc., Employee
Services of America, Inc. and The TPI Group, Ltd., respectively, together with
the related schedules and notes, and the unaudited consolidated financial
information, forming part of the Registration Statement and Prospectus, fairly
present in all material respects the financial position and the results of
operations of the Company, Resource One, Inc., Employee Services of America,
Inc. and The TPI Group, Ltd., respectively, and their respective subsidiaries at
the respective dates and for the respective periods to which they apply; all
audited consolidated financial statements of the Company, together with the
related schedules and notes, and the unaudited consolidated financial
information, filed with the Commission as part of the Registration Statement,
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved except as may be otherwise
stated therein; and the pro forma financial information included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) has been prepared in accordance with the applicable published rules and
regulations of the Commission with respect to pro forma financial information
and the assumptions used in preparing such information are reasonable. The
selected and summary financial and statistical data included in the Registration
Statement present fairly in all material respects the information shown therein
and, to the extent applicable, have been compiled on a basis consistent with the
audited financial statements presented therein. No other financial statements or
schedules are required to be included in the Registration Statement.
(i) Subsequent to the respective dates as of which information is given in the
Registration Statement and Prospectus, there has not been (i) any material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise, (ii) any transaction that is material to the Company and its
subsidiaries considered as one enterprise, except transactions entered into in
the ordinary course of business, (iii) any obligation, direct or contingent,
that is material to the Company and its subsidiaries considered as one
enterprise, incurred by the Company or its subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of the Company or any of its subsidiaries that
is material to the Company and its subsidiaries considered as one enterprise,
(v) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or any of its subsidiaries, or (vi) any loss or
damage (whether or not insured) to the property of the Company or any of its
subsidiaries which has been sustained or will have been sustained which has a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise.
(j) Except as set forth in the Registration Statement and Prospectus, (i) each
of the Company and its subsidiaries has good and marketable title to all
properties and assets described in the Registration Statement and
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Prospectus as owned by it, free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest, other than such as would not
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (ii) the agreements to which the
Company or any of its subsidiaries is a party described in the Registration
Statement and Prospectus are valid agreements, enforceable by the Company and
its subsidiaries (as applicable), except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles and, to the best of the Company's knowledge, the
other contracting party or parties thereto are not in material breach or
material default under any of such agreements, and (iii) each of the Company and
its subsidiaries has valid and enforceable leases for all properties described
in the Registration Statement and Prospectus as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles. Except as set
forth in the Registration Statement and Prospectus, the Company owns or leases
all such properties as are necessary to its operations as now conducted or as
proposed to be conducted as described in the Registration Statement and the
Prospectus.
(k) The Company and its subsidiaries have timely filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes shown
thereon as due, and there is no tax deficiency that has been or, to the best of
the Company's knowledge, might reasonably be asserted against the Company or any
of its subsidiaries that, if adversely decided, would be reasonably likely to
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise; and all tax liabilities are
adequately provided for on the books of the Company and its subsidiaries.
(l) The Company and its subsidiaries maintain insurance with insurers of
recognized financial responsibility of the types and in the amounts generally
deemed adequate for their respective businesses and consistent with insurance
coverage maintained by similar companies in similar businesses, including, but
not limited to, insurance covering workers compensation liability, health care
benefits, real and personal property owned or leased by the Company or its
subsidiaries against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against, all of which insurance is in full force and
effect; neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any such
subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise.
(m) To the best of Company's and NovaCare's knowledge, no labor
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disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and neither the Company nor NovaCare is aware of any existing or
imminent labor disturbance by the employees of any of the principal suppliers of
the Company and its subsidiaries, that might be expected to result in a material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise. No collective bargaining agreement exists with any of the
non-worksite employees of the Company and its subsidiaries and, to the best of
the Company's knowledge, no such agreement is imminent.
(n) Each of the Company and its subsidiaries owns or possesses adequate rights
to use all patents, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names and copyrights which are necessary to
conduct its businesses as described in the Registration Statement and
Prospectus, except where the failure to have any such patents, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names and
copyrights would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiaries considered as one
enterprise; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise; neither the Company nor NovaCare has received any notice of, and
has no knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights; and
neither the Company nor NovaCare has received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, might
have a material adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise.
(o) The Common Stock has been approved for quotation on The Nasdaq National
Market, subject to official notice of issuance.
(p) The Company has been advised concerning the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules and regulations thereunder, and has
in the past conducted, and intends in the future to conduct, its affairs in such
a manner as to ensure that it will not become an "investment company" or a
company "controlled" by an "investment company" within the meaning of the 1940
Act and such rules and regulations.
(q) Neither the Company nor NovaCare has distributed and neither of them will
distribute prior to the later of (i) the Closing Date, or any date on which
Option Shares are to be purchased, as the case may be, and (ii) completion of
the distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than any
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Preliminary Prospectuses, the Prospectus, the Registration Statement and other
materials, if any, permitted by the Act.
(r) The Company and each of its subsidiaries has such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("Permits") as are necessary to own its respective properties and to conduct its
business in the manner described in the Prospectus, including, without
limitation, all Permits required under federal and state licensure, labor,
health care and insurance laws and regulations applicable to the Company and its
subsidiaries and their respective operations, except where the failure to have
any such Permit has not and will not, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its subsidiaries
considered as one enterprise, the Company and each of its subsidiaries has
fulfilled and performed all its material obligations with respect to such
Permits and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject in each case
to such qualification as may be set forth in the Prospectus; and, except as
described in the Prospectus, none of such Permits contains any restriction that
is materially burdensome to the Company or any of the subsidiaries. The Company
has complied and complies with the requirements of the Americans with
Disabilities Act of 1990, the Family Medical Leave Act of 1993, the Civil Rights
Act of 1964 (Title VII) as amended, the Age Discrimination in Employment Act and
other applicable federal and state employment and labor laws, and the various
other federal and state employment regulations to which the Company and its
subsidiaries are subject (including, without limitation, the laws and
regulations referenced in the Prospectus regarding insurance, the provision of
managed care services and regulation of professional employer organizations),
except where lack of any such compliance has not had and will not have,
individually or in the aggregate, a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise.
(s) The Company and its subsidiaries are 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 or any of the 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 the 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.
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(t) Neither the Company nor any of its subsidiaries has at any time during the
last five (5) years (i) made any unlawful contribution to any candidate for
foreign office or failed to disclose fully any contribution in violation of law,
or (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof.
(u) Neither the Company nor NovaCare has taken nor will either the Company or
NovaCare take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(v) Each officer and director of the Company and each beneficial owner of Common
Stock has agreed in writing that such person will not, for a period of 180 days
from the date that the Registration Statement is declared effective by the
Commission (the "Lock-up Period"), offer to sell, contract to sell, or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities") now
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners or
shareholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of BancAmerica Xxxxxxxxx Xxxxxxxx; provided, however, that such
agreements need not be obtained from persons holding solely employee stock
options to purchase less than 5,000 shares of Common Stock. The foregoing
restriction has been expressly agreed to preclude the holder of the Securities
from engaging in any hedging or other transaction which is designed to or
reasonably expected to lead to or result in a Disposition of Securities during
the Lock-up Period, even if such Securities would be disposed of by someone
other than such holder. Such prohibited hedging or other transactions would
include, without limitation, any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any Securities or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from Securities. Furthermore, such
person has also agreed and consented to the entry of stop transfer instructions
with the Company's transfer agent against the transfer of the Securities held by
such person except in compliance with this restriction. The Company has provided
to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company and the number and type of securities held by
each securityholder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the agreements pursuant to which
its officers, directors and shareholders have agreed to such or similar
restrictions (the "Lock-up Agreements") presently in effect or effected hereby.
The Company hereby represents and warrants that it
12
will not release any of its officers, directors or other shareholders from any
Lock-up Agreements currently existing or hereafter effected and to which the
Company is a party without the prior written consent of BancAmerica Xxxxxxxxx
Xxxxxxxx.
(w) Except as set forth in the Registration Statement, the properties, assets
and operations of the Company and its subsidiaries are in compliance with all
applicable federal, state, local and foreign laws (including, without
limitation, common law), rules and regulations, orders, decrees, judgments,
permits and licenses relating to worker health and safety, and to the protection
and clean-up of the natural environment and to the protection or preservation of
natural resources, including, without limitation, those relating to the
processing, manufacturing, generation, handling, disposal, transportation or
release of hazardous materials (collectively, "Environmental Laws"), except
where the failure to comply has not and will not, individually or in the
aggregate, have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the Company
and its subsidiaries considered as one enterprise. With respect to such
properties, assets and operations, there are no events, conditions,
circumstances, activities, practices, incidents, actions or plans of the
Company, or its subsidiaries of which the Company or NovaCare is aware that may
interfere with or prevent compliance or continued compliance in all material
respects with applicable Environmental Laws or otherwise result in liability to
the Company or its subsidiaries pursuant to applicable Environmental Law. Except
as set forth in the Registration Statement, (A) to the Company's and NovaCare's
knowledge, none of the Company or its subsidiaries is the subject of any
federal, state, local or foreign investigation pursuant to Environmental Laws,
(B) none of the Company or any of its subsidiaries has received any written
notice or claim pursuant to Environmental Laws and (C) there are no pending, or,
to the knowledge of the Company or NovaCare, overtly threatened actions, suits
or proceedings against the Company or any of its subsidiaries or their
properties, assets or operations, in connection with any Environmental Laws. The
term "hazardous materials" shall mean those substances that are regulated by or
pursuant to any applicable Environmental Laws.
(x) The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company or NovaCare or any of their respective subsidiaries
to or for the benefit of any of the officers or directors of the Company or any
of the members of the families of any of them, except as disclosed in the
Registration Statement and the Prospectus.
13
3. Purchase, Sale and Delivery of Shares. On the basis of the representations,
warranties and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the Underwriters, and
each Underwriter agrees, severally and not jointly, to purchase from the
Company, at a purchase price of $ per share, the respective number of Firm
Shares as hereinafter set forth. The obligation of each Underwriter to the
Company shall be to purchase from the Company that number of Firm Shares which
is set forth opposite the name of such Underwriter in Schedule A hereto (subject
to adjustment as provided in Section 10).
Delivery of the Firm Shares to be purchased by the Underwriters
pursuant to this Section 3 shall be made by credit through full FAST transfer to
the accounts at The Depository Trust Company designated by the Representatives
against payment of the purchase price therefor by the several Underwriters by
wire transfer of immediately available funds to the Company. Such delivery and
payment shall take place at the offices of Xxxxx Xxxxxxxxxx LLP, 1301 Avenue of
the Americas, New York, New York (or at such other place as may be agreed upon
among the Representatives and the Company) at 7:00 A.M., San Francisco time (a)
on the third (3rd) full business day following the first day that Shares are
traded, (b) if this Agreement is executed and delivered after 1:30 P.M., San
Francisco time, the fourth (4th) full business day following the day that this
Agreement is executed and delivered or (c) at such other time and date not later
than seven (7) full business days following the first day that Shares are traded
as the Representatives and the Company may determine (or at such time and date
to which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date;" provided, however, that if the Company has not made available to
the Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives. The certificates for the
Firm Shares to be so delivered will be made available to you at such office or
such other location including, without limitation, in New York City, as you may
reasonably request for verification at least one (1) full business day prior to
the Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the Closing
Date.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose payment for firm shares shall not have been received by you prior to the
Closing Date for the Firm Shares to be purchased by such Underwriter or
Underwriters. Any such payment by you shall not relieve any such Underwriter or
Underwriters of any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public
14
offering price of $ per share. After the initial public offering, the
several Underwriters may, in their discretion, vary the public offering
price.
The information set forth in the last paragraph on the front cover
page (insofar as such information relates to the Underwriters), on page 3
concerning stabilization and over-allotment by the Underwriters, and under the
second, sixth and seventh paragraphs under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitutes the only information
furnished by the Underwriters to the Company for inclusion in any Preliminary
Prospectus, the Prospectus or the Registration Statement and you, on behalf of
the respective Underwriters, represent and warrant to the Company that the
statements made therein do not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
4. Further Agreements of the Company and NovaCare. Each of the Company
and NovaCare agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration Statement
and any amendment thereof, if not effective at the time and date that this
Agreement is executed and delivered by the parties hereto, to become effective
as promptly as possible; the Company will use its best efforts to cause any
abbreviated registration statement pursuant to Rule 462(b) of the Rules and
Regulations as may be required subsequent to the date the Registration Statement
is declared effective to become effective as promptly as possible; the Company
will notify you, promptly after it shall receive notice thereof, of the time
when the Registration Statement, any subsequent amendment to the Registration
Statement or any abbreviated registration statement has become effective or any
supplement to the Prospectus has been filed; if the Company omitted information
from the Registration Statement at the time it was originally declared effective
in reliance upon Rule 430A(a) of the Rules and Regulations, the Company will
provide evidence satisfactory to you that the Prospectus contains such
information and has been filed, within the time period prescribed, with the
Commission pursuant to subparagraph (1) or (4) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to such Registration
Statement as originally declared effective which is declared effective by the
Commission; if the Company files a term sheet pursuant to Rule 434 of the Rules
and Regulations, the Company will provide evidence reasonably satisfactory to
you that the Prospectus and term sheet meeting the requirements of Rule 434(b)
or (c), as applicable, of the Rules and Regulations, have been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (7) of Rule
424(b) of the Rules and Regulations; if for any reason the filing of the final
form of Prospectus is required under Rule 424(b)(3) of the Rules and
Regulations, it will provide evidence reasonably satisfactory to you that the
Prospectus contains such information and has been filed with the Commission
within the time period prescribed; it will notify you promptly of any request by
the Commission for the amending or supplementing of the Registration Statement
or the Prospectus or for additional information; promptly upon your request, it
will prepare and file with the Commission any amendments or
15
supplements to the Registration Statement or Prospectus which, in the reasonable
opinion of counsel for the several Underwriters ("Underwriters' Counsel"), may
be necessary or advisable in connection with the distribution of the Shares by
the Underwriters; it will promptly prepare and file with the Commission, and
promptly notify you of the filing of, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary to correct any
statements or omissions, if, at any time when a prospectus relating to the
Shares is required to be delivered under the Act, any event shall have occurred
as a result of which the Prospectus or any other prospectus relating to the
Shares as then in effect would include any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; in
case any Underwriter is required to deliver a prospectus nine (9) months or more
after the effective date of the Registration Statement in connection with the
sale of the Shares, it will prepare promptly upon request, but at the expense of
such Underwriter, such amendment or amendments to the Registration Statement and
such prospectus or prospectuses as may be necessary to permit compliance with
the requirements of Section 10(a)(3) of the Act; and it will file no amendment
or supplement to the Registration Statement or Prospectus which shall not
previously have been submitted to you a reasonable time prior to the proposed
filing thereof or to which you shall reasonably object in writing, subject,
however, to compliance with the Act and the Rules and Regulations, the Exchange
Act and the rules and regulations of the Commission thereunder and the
provisions of this Agreement.
(b) The Company will advise you, promptly after it shall receive notice or
obtain knowledge, of the issuance of any stop order by the Commission suspending
the effectiveness of the Registration Statement or of the initiation or threat
of any proceeding for that purpose; and it will promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal at the
earliest possible moment if such stop order should be issued.
(c) The Company will use its best efforts to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as you may designate and to
continue such qualifications in effect for so long as may be required for
purposes of the distribution of the Shares, except that the Company shall not be
required in connection therewith or as a condition thereof to qualify as a
foreign corporation or to execute a general consent to service of process in any
jurisdiction in which it is not otherwise required to be so qualified or to so
execute a general consent to service of process. In each jurisdiction in which
the Shares shall have been qualified as above provided, the Company will make
and file such statements and reports in each year as are or may be required by
the laws of such jurisdiction.
(d) The Company will furnish to you, as soon as available, and, in the case of
the Prospectus and any term sheet or abbreviated term sheet under Rule 434, in
no event later than the first (1st) full business day following the first day
that Shares are traded, copies of the Registration Statement (three of which
will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments
16
or supplements to such documents, including any prospectus prepared to permit
compliance with Section 10(a)(3) of the Act, all in such quantities as you may
from time to time reasonably request. Notwithstanding the foregoing, if
BancAmerica Xxxxxxxxx Xxxxxxxx, on behalf of the several Underwriters, shall
agree to the utilization of Rule 434 of the Rules and Regulations, the Company
shall provide to you copies of a Preliminary Prospectus updated in all respects
through the date specified by you in such quantities as you may from time to
time reasonably request.
(e) The Company will make generally available to its securityholders as soon as
practicable, but in any event not later than the forty-fifth (45th) day
following the end of the fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement, an earnings
statement (which will be in reasonable detail but need not be audited) complying
with the provisions of Section 11(a) of the Act and covering a twelve (12) month
period beginning after the effective date of the Registration Statement.
(f) During a period of five (5) years after the date hereof, the Company will
furnish to its shareholders as soon as practicable after the end of each
respective period, annual reports (including financial statements audited by
independent certified public accountants) and unaudited quarterly reports of
operations for each of the first three quarters of the fiscal year, and will
furnish to you and the other several Underwriters hereunder, upon request (i)
concurrently with furnishing such reports to its shareholders, statements of
operations of the Company for each of the first three (3) quarters in the form
furnished to the Company's shareholders, (ii) concurrently with furnishing to
its shareholders, a balance sheet of the Company as of the end of such fiscal
year, together with statements of operations, of shareholders' equity, and of
cash flows of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent certified public accountants, (iii)
as soon as they are available, copies of all reports (financial or other) mailed
to shareholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or the National Association of Securities Dealers, Inc. ("NASD"), (v)
every material press release and every material news item or article in respect
of the Company or its affairs which was generally released to shareholders by
the Company, and (vi) any additional information of a public nature concerning
the Company or its subsidiaries, or its business which you may reasonably
request. During such five (5) year period, if the Company shall have active
subsidiaries, the foregoing financial statements shall be on a consolidated
basis to the extent that the accounts of the Company and its subsidiaries are
consolidated, and shall be accompanied by similar financial statements for any
significant subsidiary which is not so consolidated.
(g) The Company will apply the net proceeds from the sale of the Shares being
sold by it in all material respects in the manner set forth under the caption
"Use of Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar (which may be the same
entity as the transfer agent) for its Common Stock.
17
(i) If the transactions contemplated hereby are not consummated by reason of any
failure, refusal or inability on the part of the Company or NovaCare to perform
any agreement on its part to be performed hereunder or to fulfill any condition
of the Underwriters' obligations hereunder, or if the Company shall terminate
this Agreement pursuant to Section 11(a) hereof, or if the Underwriters shall
terminate this Agreement pursuant to Section 11(b), the Company will reimburse
the several Underwriters for all out-of-pocket expenses (including reasonable
fees and disbursements of Underwriters' Counsel) incurred by the Underwriters in
investigating or preparing to market or marketing the Shares.
(j) If at any time during the ninety (90) day period after the Registration
Statement becomes effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price of the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(k) During the Lock-up Period, the Company will not, without the prior written
consent of BancAmerica Xxxxxxxxx Xxxxxxxx, effect the Disposition of, directly
or indirectly, any Securities other than the sale of the Firm Shares and the
Option Shares hereunder, the Company's issuance of options or Common Stock under
the Company's presently authorized Stock Option Plan (the "Option Plan") and the
issuance of Securities on a private placement basis in connection with the
acquisition of professional employer organizations and other human resource
related businesses (both previously consummated and consummated after the date
hereof).
(l) During a period of ninety (90) days from the effective date of the
Registration Statement, the Company will not file a registration statement
registering shares under the Option Plan or other employee benefit plan.
5. Expenses.
(a) Each of the Company and NovaCare agrees with each Underwriter that:
(i) The Company will pay and bear all costs and expenses in connection with the
preparation, printing and filing of the Registration Statement (including
financial statements, schedules and exhibits), Preliminary Prospectuses and the
Prospectus and any amendments or supplements thereto; the printing of this
Agreement, the Agreement Among Underwriters, the Selected Dealer Agreement, the
Preliminary Blue Sky Survey and any Supplemental Blue Sky Survey, the
Underwriters' Questionnaire and Power of Attorney, and any instruments related
to any of the foregoing; the issuance and delivery of the Shares hereunder to
the several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars' fees;
the fees and disbursements of counsel for the Company; all fees and other
charges of the
18
Company's independent certified public accountants; the cost of furnishing to
the several Underwriters copies of the Registration Statement (including
appropriate exhibits), Preliminary Prospectus and the Prospectus and any
amendments or supplements to any of the foregoing; NASD filing fees and the cost
of qualifying the Shares under the laws of such jurisdictions as you may
designate (including filing fees and reasonable fees and disbursements of
Underwriters' Counsel in connection with such NASD filings and Blue Sky
qualifications); and all other expenses directly incurred by the Company in
connection with the performance of its obligations hereunder; provided, however,
that the Underwriters shall reimburse NovaCare for the reasonable value of the
use of NovaCare's corporate jet in connection with the roadshow and the
Underwriters shall pay all reasonable expenses relating to the meals and lodging
of management of the Company in connection with the roadshow.
(ii) In addition to their other obligations under Section 8(a) hereof, each of
the Company and NovaCare agrees that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligation of the Company or NovaCare, as the case may be,
to reimburse the Underwriters for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, the Underwriters shall promptly return such payment
to the Company or NovaCare, as the case may be, together with interest,
compounded daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) listed from time to
time in The Wall Street Journal which represents the base rate on corporate
loans posted by a substantial majority of the nation's thirty (30) largest banks
(the "Prime Rate"). Any such interim reimbursement payments which are not made
to the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under Section hereof, the
Underwriters severally and not jointly agree that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding
described in Section hereof, they will reimburse the Company on a monthly basis
for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Underwriters' obligation to reimburse
the Company for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Company shall promptly return such payment to the Underwriters
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made to the Company
within thirty (30) days of a request for reimbursement shall bear interest at
the
19
Prime Rate from the date of such request.
(c) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in Sections and hereof, including
the amounts of any requested reimbursement payments, the method of determining
such amounts and the basis on which such amounts shall be apportioned among the
reimbursing parties, shall be settled by arbitration conducted by JAMS/ENDISPUTE
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or a written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
arbitration does not make such designation of an arbitration tribunal in such
demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections and hereof and will
not resolve the ultimate propriety or enforceability of the obligation to
indemnify for expenses which is created by the provisions of Sections and hereof
or the obligation to contribute to expenses which is created by the provisions
of Section hereof.
6. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters to purchase and pay for the Shares as provided herein shall be
subject to the accuracy, as of the date hereof and the Closing Date and any
later date on which Option Shares are to be purchased, as the case may be, of
the representations and warranties of the Company and NovaCare herein, to the
performance by the Company and NovaCare in all material respects of their
respective obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than 2:00
P.M., San Francisco time, on the date following the date of this Agreement, or
such later date as shall be consented to in writing by you; and no stop order
suspending the effectiveness thereof shall have been issued and no proceedings
for that purpose shall have been initiated or, to the knowledge of the Company,
NovaCare or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection with this
Agreement, the form of Registration Statement and the Prospectus, and the
registration, authorization, issue, sale and delivery of the Shares, shall have
been reasonably satisfactory to Underwriters' Counsel, and such counsel shall
have been furnished with such papers and information as they may reasonably have
requested to enable them to pass upon the matters referred to in this Section.
(c) Subsequent to the execution and delivery of this Agreement and prior to the
Closing Date, or any later date on which Option Shares are to be purchased, as
the case may be, there shall not have been any change in the
20
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later date on which
Option Shares are to be purchased, as the case may be, the following opinion of
counsel for the Company, dated the Closing Date or such later date on which
Option Shares are to be purchased addressed to the Underwriters and with
reproduced copies or signed counterparts thereof for each of the Underwriters,
to the effect that:
(i) The Company and each subsidiary of the Company that is a significant
subsidiary as that term is defined in Regulation S-X of the Act (a "Significant
Subsidiary") has been duly incorporated and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Prospectus;
(iii) The Company and each Significant Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction,
if any, in which the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or business of the
Company and its subsidiaries considered as one enterprise. To such counsel's
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than the subsidiaries listed on
Schedule B hereto;
(iv) The authorized, and, based solely upon a review of the corporate minute
books and the corporate stock ledger of the Company, issued and outstanding
capital stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" as of the dates stated therein, the issued and outstanding
shares of capital stock of the Company have been duly and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, will not have
been issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of each Significant
Subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable, and, to such counsel's knowledge, have not been
issued in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right and are owned
by the Company free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, except as set forth in the
Registration Statement and the Prospectus;
21
(vi) The Firm Shares or the Option Shares, as the case may be, to be issued by
the Company pursuant to the terms of this Agreement have been duly authorized
and, upon issuance and delivery against payment therefor in accordance with the
terms hereof, will be duly and validly issued and fully paid and nonassessable,
and will not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or other
similar right;
(vii) Each of the Company and NovaCare has the corporate power and authority to
enter into this Agreement and the Company has the corporate power and authority
to issue, sell and deliver to the Underwriters the Shares to be issued and sold
by it hereunder;
(viii) This Agreement has been duly authorized by all necessary corporate action
on the part of the Company and NovaCare and has been duly executed and delivered
by the Company and NovaCare and, assuming due authorization, execution and
delivery by you, is a valid and binding agreement of the Company and NovaCare,
enforceable against each of the Company and NovaCare in accordance with its
terms, except insofar as indemnification provisions may be limited by applicable
law and except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally or by general equitable principles;
(ix) The Registration Statement has become effective under the Act and, to such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or overtly threatened under the Act;
(x) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements (including supporting
schedules) and the other financial and statistical data included therein, as to
which such counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects with the
requirements of the Act and the applicable Rules and Regulations;
(xi) The information in the Prospectus under the caption "Description of Capital
Stock," to the extent that it constitutes matters of law or legal conclusions,
has been reviewed by such counsel and is a fair summary of such matters and
conclusions; and the forms of certificates evidencing the Common Stock comply
with Delaware law;
(xii) The description in the Registration Statement and the Prospectus of the
charter and bylaws of the Company and of statutes are accurate and fairly
present the information required to be presented by the Act and the applicable
Rules and Regulations;
(xiii) To such counsel's knowledge, there are no agreements, contracts, leases
or documents to which the Company is a party of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
22
(xiv) The performance of this Agreement and the consummation of the transactions
herein contemplated (other than performance of the indemnification obligations
of the Company and NovaCare hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default under,
any bond, debenture, note or other evidence of indebtedness, or any lease,
contract, indenture, mortgage, deed of trust, loan agreement, joint venture or
other agreement or instrument known to such counsel to which the Company is a
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of their
properties or operations;
(xv) No consent, approval, authorization or order of or qualification with any
court, government or governmental agency or body having jurisdiction over the
Company, NovaCare or any of their subsidiaries, or over any of their properties
or operations is necessary in connection with the consummation by the Company
and NovaCare of the transactions herein contemplated, except such as have been
obtained under the Act or such as may be required under state or other
securities or Blue Sky laws in connection with the purchase and the distribution
of the Shares by the Underwriters;
(xvi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or overtly threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Act or the Rules and Regulations or by the
Exchange Act or the applicable rules and regulations of the Commission
thereunder other than those described therein;
(xvii) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is presently (a) in material violation of its respective charter or
bylaws, or (b) in material breach of any applicable statute, rule or regulation
known to such counsel or, to such counsel's knowledge, any order, writ or decree
of any court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries, or over any of their properties or operations; and
(xviii) To such counsel's knowledge, except as set forth in the Registration
Statement and Prospectus, no holders of Common Stock or other securities of the
Company have registration rights relating to securities of the Company and,
except as set forth in the Registration Statement and Prospectus, all holders of
securities of the Company having rights known to such counsel to registration of
such shares of Common Stock or other securities, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by reason
of lapse of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights.
23
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives and Underwriters' Counsel at which such conferences
the contents of the Registration Statement and Prospectus and related matters
were discussed, and although they have not verified the accuracy or completeness
of the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on which
Option Shares are to be purchased, the Registration Statement and any amendment
or supplement thereto (other than the financial statements including supporting
schedules and the other financial and statistical information included therein,
as to which such counsel need express no comment) contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or at the
Closing Date or any later date on which the Option Shares are to be purchased,
as the case may be, the Registration Statement, the Prospectus and any amendment
or supplement thereto (except as aforesaid) contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
Counsel rendering the foregoing opinion may rely as to questions of
law not involving the laws of the United States or the States of New York and
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company and NovaCare and of
government officials, in which case their opinion is to state that they are so
relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to
you, as Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date on which
Option Shares are to be purchased, as the case may be, an opinion of Xxxxx
Xxxxxxxxxx LLP, counsel for the Underwriters, in form and substance satisfactory
to you, with respect to the sufficiency of all such corporate proceedings and
other legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later date on which
Option Shares are to be purchased, as the case may be, a letter from Price
Waterhouse LLP addressed to the Underwriters, dated the Closing Date or such
later date on which Option Shares are to be purchased, as the case may be,
confirming that they are independent certified public accountants within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to you concurrently with
the execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than three (3) business days prior to the Closing
Date or such later date on
24
which Option Shares are to be purchased, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter delivered by such firm are accurate as of the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letters shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its subsidiaries considered as one enterprise or any other
entity to which such letter relates from that set forth in the Registration
Statement or Prospectus, which, in your sole judgment, is material and adverse
and that makes it, in your sole judgment, impracticable or inadvisable to
proceed with the public offering of the Shares as contemplated by the
Prospectus. The Original Letter from Price Waterhouse LLP, shall be addressed to
or for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants within the meaning of the Act and the
applicable published Rules and Regulations, (ii) set forth their opinion with
respect to their examination of the consolidated balance sheet of the Company or
any other entity to which such letter relates and related consolidated
statements of operations, shareholders' equity, and cash flows, (iii) state that
the firm delivering such letter has performed the procedures set out in
Statement on Auditing Standards No. 71 ("SAS 71") for a review of interim
financial information and provide the report of the firm delivering such letter
as described in SAS 71 on the interim financial statements (the "Quarterly
Financial Statements"), (iv) state that in the course of such review, nothing
came to their attention that leads them to believe that any material
modifications need to be made to any of the Quarterly Financial Statements in
order for them to be in compliance with generally accepted accounting principles
consistently applied across the periods presented and (v) address other matters
agreed upon by the firm delivering such letter and you. In addition, you shall
have received from Price Waterhouse LLP a letter addressed to the Company and
made available to you for the use of the Underwriters stating that their review
of the Company's system of internal accounting controls, to the extent they
deemed necessary in establishing the scope of their examination of the Company's
consolidated financial statements as of June 30, 1997 did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
(g) You shall have received on the Closing Date and on any later date on which
Option Shares are to be purchased, as the case may be, certificates of the
Company and NovaCare, dated the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, signed by the Chief Executive
Officer and Chief Financial Officer of the Company and NovaCare, as the case may
be, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company or NovaCare, as the case
may be, in this Agreement are true and correct, as if made on and as of the
Closing Date or any later date on which Option Shares are to be
25
purchased, as the case may be, and the Company or NovaCare, as the case may be,
has complied in all material respects with all the agreements and satisfied all
the conditions on its part to be performed or satisfied in all material respects
at or prior to the Closing Date or any later date on which Option Shares are to
be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or are
pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
contained all material information required to be included therein by the Act
and the Rules and Regulations and in all material respects conformed to the
requirements of the Act and the Rules and Regulations or the Exchange Act and
the applicable rules and regulations of the Commission thereunder, as the case
may be, the Registration Statement, and any amendment or supplement thereto, did
not and does not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and, since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is given in the
Registration Statement and Prospectus, there has not been (a) any material
adverse change in the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries considered as
one enterprise, (b) any transaction that is material to the Company and its
subsidiaries considered as one enterprise, except transactions entered into in
the ordinary course of business, (c) any obligation, direct or contingent, that
is material to the Company and its subsidiaries considered as one enterprise,
incurred by the Company or its subsidiaries, except obligations incurred in the
ordinary course of business, (d) any change in the capital stock or outstanding
indebtedness of the Company or any of its subsidiaries that is material to the
Company and its subsidiaries considered as one enterprise, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its subsidiaries, or (f) any loss or damage (whether or not
insured) to the property of the Company or any of its subsidiaries which has
been sustained or will have been sustained which has a material adverse effect
on the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise.
(h) The Company shall have obtained and delivered to you an agreement from each
officer and director of the Company, and each beneficial owner of Common Stock
in writing prior to the date hereof that such person will not, during the
Lock-up Period, effect the Disposition of any Securities now
26
owned or hereafter acquired directly by such person or with respect to which
such person has or hereafter acquires the power of disposition, otherwise than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to partners or
shareholders of such person, provided that the distributees thereof agree in
writing to be bound by the terms of this restriction, or (iii) with the prior
written consent of BancAmerica Xxxxxxxxx Xxxxxxxx; provided, however, that such
agreements need not be obtained from persons holding solely employee stock
options to purchase less than 5,000 shares of Common Stock. The foregoing
restriction shall have been expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than the such holder. Such prohibited hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from
Securities. Furthermore, such person will have also agreed and consented to the
entry of stop transfer instructions with the Company's transfer agent against
the transfer of the Securities held by such person except in compliance with
this restriction.
(i) The Company shall have furnished to you such further certificates and
documents as you shall reasonably request (including certificates of officers of
the Company and NovaCare as to the accuracy of the representations and
warranties of the Company and NovaCare herein, as to the performance by the
Company and NovaCare of their obligations hereunder and as to the other
conditions concurrent and precedent to the obligations of the Underwriters
hereunder).
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory to Underwriters' Counsel. The Company will furnish you with
such number of conformed copies of such opinions, certificates, letters and
documents as you shall reasonably request.
7. Option Shares.
(a) On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
hereby grants to the several Underwriters, for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Shares
only, a nontransferable option to purchase up to an aggregate of 675,000 Option
Shares at the purchase price per share for the Firm Shares set forth in Section
3 hereof. Such option may be exercised by the Representatives on behalf of the
several Underwriters on one (1) or more occasions in whole or in part during the
period of thirty (30) days after the date on which the Firm Shares are initially
offered to the public, by giving written notice to the Company. The number of
Option Shares to be
27
purchased by each Underwriter upon the exercise of such option shall be the same
proportion of the total number of Option Shares to be purchased by the several
Underwriters pursuant to the exercise of such option as the number of Firm
Shares purchased by such Underwriter (set forth in Schedule A hereto) bears to
the total number of Firm Shares purchased by the several Underwriters (set forth
in Schedule A hereto), adjusted by the Representatives in such manner as to
avoid fractional shares.
Delivery of definitive certificates for the Option Shares to be
purchased by the several Underwriters pursuant to the exercise of the option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by wire transfer of immediately available
funds to the Company. Such delivery and payment shall take place at the offices
of Xxxxx Xxxxxxxxxx LLP, 1301 Avenue of the Americas, New York, New York or at
such other place as may be agreed upon among the Representatives and the Company
(i) on the Closing Date, if written notice of the exercise of such option is
received by the Company at least two (2) full business days prior to the Closing
Date, or (ii) on a date which shall not be later than the third (3rd) full
business day following the date the Company receives written notice of the
exercise of such option, if such notice is received by the Company less than two
(2) full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location including, without
limitation, in New York City, as you may reasonably request for checking at
least one (1) full business day prior to the date of payment and delivery and
will be in such names and denominations as you may request, such request to be
made at least two (2) full business days prior to such date of payment and
delivery. If the Representatives so elect, delivery of the Option Shares may be
made by credit through full FAST transfer to the accounts at The Depository
Trust Company designated by the Representatives.
It is understood that you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section hereof, the
obligations of the several Underwriters to purchase such Option Shares will be
subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company and NovaCare herein, to the accuracy of
the statements of the Company and NovaCare and their respective officers made
pursuant to the provisions hereof, to the performance in all material respects
by the Company and NovaCare of their respective obligations hereunder, to
satisfaction of the conditions set forth in Section 6 hereof, and to the
condition that all proceedings taken at or prior to the payment date in
connection with the sale and transfer of such Option Shares shall be reasonably
satisfactory in form and substance
28
to you and to Underwriters' Counsel, and you shall have been furnished with all
such documents, certificates and opinions as you may reasonably request in order
to evidence the accuracy and completeness of any of the representations,
warranties or statements, the performance of any of the covenants or agreements
of the Company and NovaCare or the satisfaction of any of the conditions herein
contained.
8. Indemnification and Contribution.
(a) Each of NovaCare and the Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter or as a "qualified independent
underwriter" within the meaning of Schedule E of the Bylaws of the NASD), under
the Act, the Exchange Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or based upon (i) any breach of any representation, warranty,
agreement or covenant of the Company herein contained, (ii) any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any untrue
statement or alleged untrue statement of any material fact contained in any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and each of
NovaCare and the Company agrees to reimburse each Underwriter for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that neither NovaCare nor the Company shall 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 an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, such Preliminary Prospectus
or the Prospectus, or any such amendment or supplement thereto, in reliance
upon, and in conformity with, written information relating to any Underwriter
furnished to the Company by such Underwriter, directly or through you,
specifically for use in the preparation thereof and, provided further, that the
indemnity agreement provided in this Section 8(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any losses, claims, damages, liabilities or actions
based upon any untrue statement or alleged untrue statement of material fact or
omission or alleged omission to state therein a material fact purchased Shares,
if a copy of the Prospectus in which such untrue statement or alleged untrue
statement or omission or alleged omission was corrected had not been sent or
given to such person within the time required by the Act and the Rules and
Regulations, unless such failure is the result of noncompliance by the Company
with Section 4(d) hereof.
The indemnity agreement in this Section shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each
29
person, if any, who controls any Underwriter within the meaning of the Act or
the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which NovaCare or the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify and hold
harmless the Company against any losses, claims, damages or liabilities, joint
or several, to which the Company may become subject under the Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of such
Underwriter herein contained, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any untrue statement or alleged
untrue statement of any material fact contained in any Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in the case of subparagraphs (ii) and (iii) of this
Section 8 to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter, directly or through you, specifically for use in the preparation
thereof, and agrees to reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending
any such loss, claim, damage, liability or action.
The indemnity agreement in this Section shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each officer of the
Company who signed the Registration Statement and each director of the Company,
and each person, if any, who controls the Company and NovaCare within the
meaning of the Act or the Exchange Act. This indemnity agreement shall be in
addition to any liabilities which each Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it shall elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available
30
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assume such legal defenses
and to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of the indemnifying party's election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) approved by the
indemnifying party representing all the indemnified parties under Sections and
hereof who are parties to such action), (ii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved the
terms of such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnification could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on all claims that are the subject matter of such
proceeding.
(d) In order to provide for just and equitable contribution in any action in
which a claim for indemnification is made pursuant to this Section 8 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that this Section 8 provides for indemnification in
such case, all the parties hereto (including, without limitation, NovaCare)
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) in such proportion so
that the Underwriters severally and not jointly are responsible pro rata for the
portion represented by the percentage that the underwriting discount bears to
the initial public offering price, and the Company is responsible for the
remaining portion; provided, however, that (i) no Underwriter shall be required
to contribute any amount in excess of the amount by which the underwriting
discount applicable to the Shares purchased by such Underwriter exceeds the
amount of damages which such Underwriter has otherwise been required to pay and
(ii) no person guilty of a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
is not guilty of such fraudulent misrepresentation. The contribution agreement
in this Section 8
31
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter, the Company or
NovaCare within the meaning of the Act or the Exchange Act and each officer of
the Company who signed the Registration Statement and each director of the
Company.
(e) The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations
regarding the provisions hereof including, without limitation, the provisions of
this Section 8, and are fully informed regarding said provisions. They further
acknowledge that the provisions of this Section 8 fairly allocate the risks in
light of the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the Registration
Statement and Prospectus as required by the Act and the Exchange Act.
9. Representations, Warranties, Covenants and Agreements to Survive Delivery.
All representations, warranties, covenants and agreements of the Company,
NovaCare and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter within the meaning of the Act or the Exchange Act, or by or on
behalf of the Company or NovaCare or any of their respective officers, directors
or controlling persons within the meaning of the Act or the Exchange Act, and
shall survive the delivery of the Shares to the several Underwriters hereunder
or termination of this Agreement.
10. Substitution of Underwriters. If any Underwriter or Underwriters shall fail
to take up and pay for the number of Firm Shares agreed by such Underwriter or
Underwriters to be purchased hereunder upon tender of such Firm Shares in
accordance with the terms hereof, and if the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters so agreed but failed to
purchase does not exceed 10% of the Firm Shares, the remaining Underwriters
shall be obligated, severally in proportion to their respective commitments
hereunder, to take up and pay for the Firm Shares of such defaulting Underwriter
or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate
number of Firm Shares which such defaulting Underwriter or Underwriters agreed
but failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or
underwriters shall have been substituted as aforesaid by such postponed Closing
Date, the Closing Date may, at the option of the Company, be
32
postponed for a further twenty-four (24) hours, if necessary, to allow the
Company the privilege of finding another underwriter or underwriters,
satisfactory to you, to purchase the Firm Shares which the defaulting
Underwriter or Underwriters so agreed but failed to purchase. If it shall be
arranged for the remaining Underwriters or substituted underwriter or
underwriters to take up the Firm Shares of the defaulting Underwriter or
Underwriters as provided in this Section 10, (i) the Company shall have the
right to postpone the time of delivery for a period of not more than seven (7)
full business days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement, supplements to the Prospectus or other
such documents which may thereby be made necessary, and (ii) the respective
number of Firm Shares to be purchased by the remaining Underwriters and
substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and
pay for all such Firm Shares so agreed to be purchased by the defaulting
Underwriter or Underwriters or substitute another underwriter or underwriters as
aforesaid and the Company shall not find or shall not elect to seek another
underwriter or underwriters for such Firm Shares as aforesaid, then this
Agreement shall terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, neither the Company shall be
liable to any Underwriter (except as provided in Sections 5 and 8 hereof) nor
shall any Underwriter (other than an Underwriter who shall have failed,
otherwise than for some reason permitted under this Agreement, to purchase the
number of Firm Shares agreed by such Underwriter to be purchased
hereunder, which Underwriter shall remain liable to the Company, and the
other Underwriters for damages, if any, resulting from such default) be
liable to the Company (except to the extent provided in Sections 5 and 8
hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at the earlier of (i) 6:30 A.M.,
San Francisco time, on the first full business day following the effective
date of the Registration Statement, or (ii) the time of the initial public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the initial public offering shall
mean the time of the release by you, for publication, of the first
newspaper advertisement relating to the Shares, or the time at which the
Shares are first generally offered by the Underwriters to the public by
letter, telephone, telegram or telecopy, whichever shall first occur. By
giving notice as set forth in Section 12 before the time this Agreement
becomes effective, you, as Representatives of the several Underwriters, or
the Company, may prevent this Agreement from becoming effective without
liability of any party to any other party, except as provided in Sections,
5 and 8 hereof.
(b) You, as Representatives of the several Underwriters, shall have the
33
right to terminate this Agreement by giving notice as hereinafter specified
at any time on or prior to the Closing Date or on or prior to any later
date on which Option Shares are to be purchased, as the case may be, (i) if
the Company or NovaCare shall have failed, refused or been unable to
perform any agreement on its respective part to be performed, or because
any other condition of the Underwriters' obligations hereunder required to
be fulfilled is not fulfilled, including, without limitation, any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse, or (ii) if
additional material governmental restrictions, not in force and effect on
the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock
Exchange or in the over the counter market by the NASD, or trading in
securities generally shall have been suspended on either such exchange or
in the over the counter market by the NASD, or if a banking moratorium
shall have been declared by federal, New York or California authorities, or
(iii) if the Company shall have sustained a loss by strike, fire, flood,
earthquake, accident or other calamity of such character as to interfere
materially with the conduct of the business and operations of the Company
regardless of whether or not such loss shall have been insured, or (iv) if
there shall have been a material adverse change in the general political or
economic conditions or financial markets as in your reasonable judgment
makes it inadvisable or impracticable to proceed with the offering, sale
and delivery of the Shares, or (v) if there shall have been an outbreak or
escalation of hostilities or of any other insurrection or armed conflict or
the declaration by the United States of a national emergency which, in the
reasonable opinion of the Representatives, makes it impracticable or
inadvisable to proceed with the public offering of the Shares as
contemplated by the Prospectus. In the event of termination pursuant to
subparagraph (i) above, the Company shall remain obligated to pay costs and
expenses pursuant to Sections 4, 5 and 8 hereof. Any termination pursuant
to any of subparagraphs (ii) through (v) above shall be without liability
of any party to any other party except as provided in Sections 5 and 8
hereof.
If you elect to prevent this Agreement from becoming effective or
to terminate this Agreement as provided in this Section 11, you shall
promptly notify the Company by telephone, telecopy or telegram, in each
case confirmed by letter. If the Company shall elect to prevent this
Agreement from becoming effective, the Company shall promptly notify you by
telephone, telecopy or telegram, in each case, confirmed by letter.
12. Notices. All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to you shall be mailed,
delivered, telegraphed (and confirmed by letter) or telecopied (and confirmed by
letter) to you c/o BancAmerica Xxxxxxxxx Xxxxxxxx, 000 Xxxxxxxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, telecopier number (000) 000-0000,
Attention: General Counsel, with copies to Xxxxx Xxxxxxxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000; if sent to the Company, such notice
shall be mailed, delivered, telegraphed (and confirmed by letter) or telecopied
(and confirmed by
34
letter) to NovaCare Employee Services, Inc., 0000 Xxx Xxxxx Xxxxxx, Xxxxxxxxxx,
XX 00000, telecopier number (000) 000-0000, Attention: Xxxxx X. Xxxxxx, Chief
Executive Officer, with copies to Xxxxxx & Xxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 and to NovaCare, Inc., 0000 Xxxx Xxxxx Xxxxxx, Xxxx xx Xxxxxxx,
Xxxxxxxxxxxx 00000, Attention: General Counsel; and if sent to NovaCare, such
notice shall be mailed, delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to NovaCare, Inc., 0000 Xxxx Xxxxx Xxxxxx,
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000, Attention: General Counsel.
13. Parties. This Agreement shall inure to the benefit of and be binding upon
the several Underwriters, the Company and NovaCare and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any person
or entity, other than the parties hereto and their respective executors,
administrators, successors and assigns, and the controlling persons within the
meaning of the Act or the Exchange Act, officers and directors referred to in
Section 8 hereof, any legal or equitable right, remedy or claim in respect of
this Agreement or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the sole and
exclusive benefit of the parties hereto and their respective executors,
administrators, successors and assigns and said controlling persons and said
officers and directors, and for the benefit of no other person or entity. No
purchaser of any of the Shares from any Underwriter shall be construed a
successor or assign by reason merely of such purchase.
In all dealings with the Company under this Agreement, you shall
act on behalf of each of the several Underwriters, and the Company shall be
entitled to act and rely upon any statement, request, notice or agreement
made or given by you jointly or by BancAmerica Xxxxxxxxx Xxxxxxxx on behalf
of you.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
15. Counterparts. This Agreement may be signed in several counterparts, each of
which will constitute an original.
If the foregoing correctly sets forth the understanding among the
Company, NovaCare and the several Underwriters, please so indicate in the
space provided below for that purpose, whereupon this letter shall
constitute a binding agreement among the Company, NovaCare and the several
Underwriters.
Very truly yours,
NOVACARE EMPLOYEE SERVICES, INC.
35
By
NOVACARE, INC.
By
Accepted as of the date first above written:
BANCAMERICA XXXXXXXXX XXXXXXXX
XXXXX XXXXXX INC.
On their behalf and on behalf of each of the
several Underwriters named in Schedule A hereto.
By BANCAMERICA XXXXXXXXX XXXXXXXX
By
Authorized Signatory
SCHEDULE A
------------------------------------------------------------
Underwriter
------------------------------------------------------------
Number of Firm Shares
to be Purchased
---------------------------
------------------------------------------------------------
BancAmerica Xxxxxxxxx
Xxxxxxxx. . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . .
36
------------------------------------------------------------
---------------------------
---------------------------
------------------------------------------------------------
Xxxxx Xxxxxx Inc. . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
. . . . . . . . . . . . . .
.
------------------------------------------------------------
---------------------------
---------------------------
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---------------------------
---------------------------
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-----------------------------------------------------------
---------------------------
---------------------------
-----------------------------------------------------------
-----------------------------------------------------------
---------------------------
---------------------------
-----------------------------------------------------------
-----------------------------------------------------------
---------------------------
---------------------------
-----------------------------------------------------------
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37
---------------------------
---------------------------
-----------------------------------------------------------
-----------------------------------------------------------
---------------------------
---------------------------
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---------------------------
---------------------------
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---------------------------
---------------------------
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Total
-----------------------------------------------------------
38
---------------------------
4,500,000
---------------------------
SCHEDULE B
