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EXHIBIT 1.1
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SPECIALTY LABORATORIES, INC.
(a California corporation)
Shares of Common Stock
PURCHASE AGREEMENT
Dated: , 2000
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PURCHASE AGREEMENT ....................................................................................1
SECTION 1. Representations and Warranties.........................................................2
(a) Representations and Warranties by the Company..........................................2
(b) Officer's Certificates................................................................13
SECTION 2. Sale and Delivery to Underwriters; Closing............................................13
(a) Initial Securities....................................................................13
(b) Option Securities.....................................................................13
(c) Payment...............................................................................14
(d) Denominations; Registration...........................................................14
SECTION 3. Covenants of the Company..............................................................14
(a) Compliance with Securities Regulations and Commission Requests........................14
(b) Filing of Amendments..................................................................15
(c) Delivery of Registration Statements...................................................15
(d) Delivery of Prospectus................................................................15
(e) Continued Compliance with Securities Laws.............................................15
(f) Blue Sky Qualifications...............................................................16
(g) Rule 158..............................................................................16
(h) Use of Proceeds.......................................................................16
(i) Listing...............................................................................16
(j) Restriction on Sale of Securities.....................................................16
(k) Reporting Requirements................................................................17
(l) Compliance with NASD Rules............................................................17
(m) Compliance with Rule 463..............................................................17
SECTION 4. Payment of Expenses...................................................................17
(a) Expenses..............................................................................17
(b) Termination of Agreement..............................................................18
SECTION 5. Conditions of Underwriters' Obligations...............................................18
(a) Effectiveness of Registration Statement...............................................18
(b) Opinion of Counsel for the Company....................................................18
(c) Opinion of Counsel for the Underwriters...............................................19
(d) Officers' Certificate.................................................................19
(e) Accountant's Comfort Letter...........................................................19
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(f) Bring-down Comfort Letter.............................................................19
(g) Approval of Listing...................................................................19
(h) No Objection..........................................................................20
(i) Lock-up Agreements....................................................................20
(j) Recapitalization......................................................................20
(k) Conditions to Purchase of Option Securities...........................................20
(l) Additional Documents..................................................................20
(m) Termination of Agreement..............................................................21
SECTION 6. Indemnification.......................................................................21
(a) Indemnification of the Underwriters...................................................21
(b) Indemnification of Company, Directors and Officers....................................22
(c) Actions against Parties; Notification.................................................22
(d) Settlement without Consent if Failure to Reimburse....................................23
(e) Indemnification for Reserved Securities...............................................23
SECTION 7. Contribution..........................................................................23
SECTION 8. Representations, Warranties and Agreements to Survive Delivery........................25
SECTION 9. Termination of Agreement..............................................................25
(a) Termination; General..................................................................25
(b) Liabilities...........................................................................25
SECTION 10. Default by One or More of the Underwriters............................................25
SECTION 11. Notices...............................................................................26
SECTION 12. Parties...............................................................................26
SECTION 13. Governing Law and Time................................................................27
SECTION 14. Effect of Headings....................................................................27
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SCHEDULES
Schedule A - List of Underwriters.............................................................Sch A-1
Schedule B - Pricing Information..............................................................Sch B-1
Schedule C - List of Persons subject to Lock-up...............................................Sch C-1
EXHIBITS
Exhibit A-1 - Form of Opinion of Brobeck, Phleger & Harrison LLP ................................A-1-1
Exhibit A-2 - Form of Opinion of Hooper, Lundy & Bookman, Inc. ..................................A-2-1
Exhibit B - Form of Lock-up Letter ............................................................B-1-1
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SPECIALTY LABORATORIES, INC.
(a California corporation)
Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
, 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
UBS Warburg, LLC
U.S. Bancorp Piper Jaffray
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Specialty Laboratories, Inc., a California corporation (the
"Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters",
which term shall also include any underwriter substituted as hereinafter
provided in Section 10 hereof), for whom Merrill Lynch, UBS Warburg, LLC and
U.S. Bancorp Piper Jaffray are acting as representatives (in such capacity,
the "Representatives"), with respect to the issue and sale by the Company and
the purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, no par value per share, of the
Company ("Common Stock") set forth in said Schedule A, and with respect to
the grant by the Company to the Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase all or
any part of up to additional shares of Common Stock to cover
over-allotments, if any. The aforesaid shares of Common Stock (the
"Initial Securities") to be purchased by the Underwriters and all or any part
of the shares of Common Stock subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities".
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
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The Company and the Underwriters agree that up to shares of the
Initial Securities to be purchased by the Underwriters (collectively, the
"Reserved Securities") shall be reserved for sale by the Underwriters to certain
of the Company's directors, officers, employees, business associates and related
persons (collectively, "Eligible Persons"), as part of the distribution of the
Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. (the "NASD"), the 1933 Act (as defined below), the 1933
Act Regulations (as defined below) and all other applicable laws, rules and
regulations. To the extent that such Reserved Securities are not orally
confirmed for purchase by such Eligible Persons by the end of the first business
day after the date of this Agreement, such Reserved Securities may be offered to
the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-45588) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in any such prospectus that
was omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each Form of prospectus used before such registration statement
became effective, and any prospectus that omitted the Rule 430A Information that
was used after such effectiveness and prior to the execution and delivery of
this Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final form of
prospectus in the form first furnished to the Underwriters for use in connection
with the offering of the Securities is herein called the "Prospectus." For
purposes of this Agreement, all references to the Registration Statement, any
preliminary prospectus, the Prospectus, or any amendment or supplement to any of
the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
On [October 30, 2000, the Company declared a 2.2 for one split (the
"Stock Split"). The Stock Split was achieved through an amendment of the
Company's Articles of Incorporation. The Stock Split is hereinafter referred to
as the "Recapitalization".]
SECTION 1 REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and if any Option Securities
are purchased, as of each Date of Delivery referred to in Section 2(b) hereof,
and agrees with each Underwriter, as follows:
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(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information has
been complied with.
At the respective times the Registration Statement, any
Rule 462(b) Registration Statement and any post-effective amendments
thereto became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations for
such filings and did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
the Prospectus, any preliminary prospectus and any supplement thereto or
prospectus wrapper prepared in connection therewith, at their respective
times of issuance and at the Closing Time, complied and will comply in
all material respects with any applicable laws or regulations of foreign
jurisdictions in which the Prospectus and such preliminary prospectus,
as amended or supplemented, if applicable, are distributed in connection
with the offer and sale of Reserved Securities. Neither of the
Prospectus nor any amendments or supplements thereto (including any
prospectus wrapper), at the time the Prospectus or any amendments or
supplements thereto were issued and at the Closing Time (and, if any
Option Securities are purchased, at each Date of Delivery), included or
will include an untrue statement of a material fact or omitted or will
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. The representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any Underwriter
through the Representatives expressly for use in the Registration
Statement or the Prospectus.
Each preliminary prospectus and the Prospectus filed as part of
the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424(b) under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus delivered
to the Underwriters for use in connection with this offering was
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(ii) INDEPENDENT ACCOUNTANTS. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
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(iii) FINANCIAL STATEMENTS. The consolidated financial
statements included in the Registration Statement and the Prospectus,
together with the related schedules and notes, present fairly the
financial position of the Company and its consolidated Subsidiaries at
the dates indicated and the statement of operations, shareholders'
equity and cash flows of the Company [and its consolidated Subsidiaries]
for the periods specified; said financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
supporting schedules included in the Registration Statement present
fairly, in accordance with GAAP the information required to be stated
therein. The selected consolidated financial and other data and the
summary consolidated financial and other data included in the Prospectus
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited consolidated financial
statements included in the Registration Statement. The as adjusted and
pro forma financial information included in the Registration Statement
and the Prospectus present fairly the information shown therein, and
have been properly compiled on the bases described therein, and the
assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein.
(iv) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated or contemplated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions entered
into by the Company or any of its Subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its Subsidiaries considered as one enterprise, and (C) there
has been no dividend or distribution of any kind declared, paid or made
by the Company on any class of its capital stock.
(v) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of California and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing in
each other jurisdiction in which such qualification is required, whether
by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect.
(vi) GOOD STANDING OF SUBSIDIARIES.
(A) Each subsidiary of the Company (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly organized and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to
own, lease and operate its properties and to conduct its business as
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described in the Prospectus and is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business,
except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect; except as otherwise disclosed
in the Registration Statement, all of the issued and outstanding capital
stock of each such Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and is owned by the Company,
directly or through Subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; and none
of the outstanding shares of capital stock of any Subsidiary was issued
in violation of the preemptive or similar rights of any securityholder
of such Subsidiary. The only Subsidiaries of the Company are the
Subsidiaries listed on Exhibit 21 to the Registration Statement. The
Company does not currently conduct business through any of its
Subsidiaries and no Subsidiary is, or owns or possesses any properties,
assets or rights which are, material to the condition, financial or
otherwise, or the earnings, business affairs or business prospectus of
the Company.
(B) Except to the extent disclosed in the Registration
Statement, there are no encumbrances or restrictions on the ability of
any Subsidiary (i) to pay any dividends or make any distributions on
such Subsidiary's capital stock, (ii) to make any loans or advances to,
or investments in, the Company or any other Subsidiary, or (iii) to
transfer any of its property or assets to the Company or any other
Subsidiary; provided that, such representation is, with respect to any
subsidiary formed under the laws of a foreign country, to the Company's
knowledge.
(vii) CAPITALIZATION. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus). The shares of issued and
outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company. The shares of issued and outstanding
capital stock of the Company have been issued in compliance with all
applicable federal and state securities laws. Except as disclosed in the
Prospectus, there are no outstanding options or warrants 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 the Company's capital stock or
any such options, warrants, rights, convertible securities or
obligations. The description of the Company's stock option and purchase
plans and the options or other rights granted and exercised thereunder
set forth in the Prospectus accurately and fairly describe, in all
material respects, the information required to be shown with respect to
such plans, arrangements, options and rights.
(viii) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Company.
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(ix) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement and, when issued and delivered by the Company pursuant
to this Agreement against payment of the consideration set forth herein
will be validly issued, fully paid and non-assessable; the Common Stock
conforms to all statements relating thereto contained in the Prospectus
and such description conforms to the rights set forth in the Company's
Articles of Incorporation, no holder of the Securities will be subject
to personal liability by reason of being such a holder; and the issuance
of the Securities is not subject to the preemptive or other similar
rights of any securityholder of the Company.
(x) RECAPITALIZATION. The consummation of the
Recapitalization has been duly authorized by the Company's board of
directors and security holders, and no other corporate proceedings on
the part of the Company are needed to authorize the Recapitalization.
(xi) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company
nor any of its Subsidiaries is in violation of its charter or by-laws or
in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which it or any of them may be bound, or to which any
of the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments"), except for such defaults
under Agreements and Instruments that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated in this
Agreement, and in the Registration Statement (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectus under the caption "Use of
Proceeds" and the completion of the Recapitalization) and compliance by
the Company with its obligations under this Agreement have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event
(as defined below) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company
or any subsidiary pursuant to, the Agreements and Instruments (except
for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the
charter or by-laws of the Company, or any subsidiary or, any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations (excluding state securities or blue sky
laws or the rules and regulations of the NASD as to which we make no
representation. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder's behalf)
the right to require the repurchase, redemption or repayment of all or a
portion of such indebtedness by the Company or any subsidiary.
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(xii) ABSENCE OF LABOR DISPUTE. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its or
any of its Subsidiaries' principal suppliers, customers or contractors,
which would reasonably be expected to result in a Material Adverse
Effect.
(xiii) ABSENCE OF PROCEEDINGS. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, including, but not
limited to the United States Healthcare Financing Administration
("HCFA"), the Department of Health and Human Services (the "HHS"), the
Department of Justice (the "DOJ"), the Office of the Inspector General
(the "OIG") and the United States Food and Drug Administration (the
"FDA"), now pending, or, to the knowledge of the Company, threatened,
against or affecting the Company or any of its Subsidiaries, which is
required to be disclosed in the Registration Statement (other than as
disclosed therein), or which would reasonably be expected to result in a
Material Adverse Effect, or which would reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement or the
Recapitalization, or the performance by the Company of its obligations
hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any of its Subsidiaries
is a party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement, including
ordinary routine litigation incidental to the business, would not
reasonably be expected to result in a Material Adverse Effect.
(xiv) ACCURACY OF EXHIBITS. There are no contracts or
documents which are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement which have not been so described and/or filed as
required.
(xv) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its
Subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property")
necessary to carry on the business now operated by them, (including,
without limitation, (i) all Intellectual Property related to each
assay performed or developed by the Company and any of its
Subsidiaries, (ii) all Intellectual Property related to the Company's
information technology systems, including DataPassportMD-TM-,
DataPassport-TM- Client Interface, DataPassport-TM- Interface Module
with Repository and Router, Outreach Express-TM- and
DataPassportII-TM- (collectively, the "Information Intellectual
Property") and (iii) all Intellectual Property related to the
Company's automation systems including Total TARO-TM- (collectively,
the "Automation Intellectual Property")); provided that, such
representation is, with respect to Intellectual Property other than
the Information Intellectual Property, the Automation Intellectual
Property and the assays identified on Schedule D to this Agreement,
(i) to the Company's knowledge and (ii) limited to Intellectual
Property the failure of which to own or possess would not, singly or
in the aggregate, reasonably be expected to result in a Material
Adverse Effect. Other than as specifically disclosed in the
Prospectus, none of the Company or any of its Subsidiaries has
received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which could
render any Intellectual Property invalid or inadequate to protect the
interest of the Company, or any of its
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Subsidiaries therein, except for such infringements or conflicts (if the
subject of any unfavorable decision, ruling or finding) or invalidities
or inadequacies which would not, singly or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
(xvi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities under this Agreement and the consummation of the
Recapitalization or the transactions contemplated by this Agreement
except (i) other than with regard to offers and sales of Reserved
Securities, such as have been already obtained or as may be required
under the 1933 Act or the 1933 Act Regulations and foreign or state
securities or blue sky laws or the rules and regulations of the NASD
(ii) with regard to offers and sales of Reserved Securities, such as
have been obtained under the laws and regulations of jurisdictions
outside the United States in which the Reserved Securities are offered.
(xvii) POSSESSION OF LICENSES AND PERMITS. The Company and its
Subsidiaries are duly licensed as independent clinical laboratories and
the Company and its Subsidiaries now possess and at the Closing Time
will possess, all permits, licenses, provider numbers, certificates,
approvals, consents, orders, certifications (including, without
limitation, certification under the Clinical Laboratories Improvement
Act of 1967, as amended in 1988 ("CLIA") and certifications required by
the FDA, the State of California and the State of New York and under the
Medicare, Medi-Cal and Medicaid programs), accreditations (including,
without limitation, accreditation by CLIA and the College of American
Pathologists ("CAP")) and other authorizations (collectively,
"Governmental Licenses") issued by, and have made all declarations and
filings with, the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now
operated by them (including, without limitation, Governmental Licenses
as are required (i) under such federal and state healthcare laws as are
applicable to the Company and its Subsidiaries and (ii) with respect to
those clinical laboratories operated by the Company or any of its
Subsidiaries that participate in the Medicare, Medi-Cal and/or Medicaid
programs, to receive reimbursement thereunder), except where the failure
to possess such Government Licenses or to make such declarations and
filings would not reasonably be expected to result in a Material Adverse
Effect; the Company and its Subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses, except where the
failure so to comply would not reasonably be expected to, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not
reasonably be expected to have a Material Adverse Effect; and none of
the Company or any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would reasonably be
expected to result in a Material Adverse Effect.
(xviii) COMPLIANCE WITH SOCIAL SECURITY ACT, CLIA AND OTHER
FEDERAL ENFORCEMENT INITIATIVES. Neither the Company nor, to the
knowledge of the Company,
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any officer, director, stockholder controlled by or related to Dr.
Peters, employee or other agent of the Company, or any of its
Subsidiaries or the clinical laboratories operated by them, has
engaged in any activity which is prohibited under Federal Medicare
and Medicaid statutes including, but not limited to, 42 U.S.C.
Sections 1320a-7 (Program Exclusion), 1320a-7a (Civil Monetary
Penalties), 1320a-7b (the Anti-kickback Statute), 42 U.S.C. Sections
1395nn and 1396b (the "Stark" law, prohibiting certain
self-referrals), or any other federal health care or other law,
including, but not limited to the Federal Civil False Claims Act, 31
U.S.C. Sections 3729-32, Federal Criminal False Claims Act, 18 U.S.C.
Section 287, False Statements Relating to Health Care Matters, 18
U.S.C. Section 1035, Health Care Fraud, 18 U.S.C. Section 1347, Theft
or Embezzlement in Connection with Health Care, 18 U.S.C. Section
669, or the federal Food, Drug & Cosmetics Act, 21 U.S.C. Section
360aaa, or any regulations promulgated pursuant to such statutes, or
related state or local statutes or regulations or any rules of
professional conduct, including but not limited to the following: (i)
knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any applications
for any benefit or payment under the Medicare or Medicaid program or
from any third party (where applicable federal or state law prohibits
such payments to third parties); (ii) knowingly and willfully making
or causing to be made any false statement or representation of a
material fact for use in determining rights to any benefit or payment
under the Medicare or Medicaid program or from any third party (where
applicable federal or state law prohibits such payments to third
parties); (iii) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to
any benefit or payment under the Medicare or Medicaid program or from
any third party (where applicable federal or state law prohibits such
payments to third parties) on its own behalf or on behalf of another,
with intent to secure such benefit or payment fraudulently; (iv)
knowingly and willfully offering, paying, soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (a) in return for
referring an individual to a Person for the furnishing or arranging
for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid or any third party
(where applicable federal or state law prohibits such payments to
third parties), or (b) in return for purchasing, leasing or ordering
or arranging for or recommending the purchasing, leasing or ordering
of any good, facility, service, or item for which payment may be made
in whole or in part by Medicare or Medicaid or any third party (where
applicable federal or state law prohibits such payments to third
parties); (v) knowingly and willfully referring an individual to a
person with which they have ownership or certain other financial
arrangements (where applicable federal law prohibits such referrals);
and (vi) knowingly and willfully violating any enforcement initiative
instituted by any governmental agency (including, without limitation,
the OIG and the DOJ), except for any such activities which are
specifically described in the Prospectus or which would not, singly
or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(xix) REGULATORY FILINGS. None of the Company or any of its
Subsidiaries has failed to file with applicable regulatory authorities
(including, but not limited to, CLIA, the FDA, the CAP, Medicare,
Medi-Cal and Medicaid) any statement, report, information or form
required by any applicable law, regulation or order, except where the
failure to be so in compliance would not reasonably be expected to ,
individually or in the aggregate,
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have a Material Adverse Effect. Except as described in the Prospectus,
all such filings or submissions were in compliance with applicable laws
when filed and no deficiencies have been asserted by any regulatory
commission, agency or authority with respect to any such filings or
submissions, except for any such failures to be in compliance or
deficiencies which would not reasonably be expected to, singly or in the
aggregate, have a Material Adverse Effect.
(xx) COMPLIANCE PROGRAM. The Company has established and
shall administer, except to the extent that a failure to do so would not
reasonably be expected to result in a Material Adverse Effect, a
compliance program (including a written compliance policy) applicable to
the Company and its Subsidiaries, to assist the Company, its
Subsidiaries and the directors, officers and employees of the Company
and its Subsidiaries, in complying with applicable regulatory agency
guidelines (including, but not limited to, those regulations and
guidelines published by CLIA and HCFA), and to provide compliance
policies governing applicable areas for independent clinical
laboratories (including, but not limited to, patient confidentiality,
diagnosis coding, anti-kickback statutes, professional courtesy,
Advanced Beneficiary Notice and CPT-4 coding.)
(xxi) ACCOUNTS RECEIVABLE. The accounts receivable of the
Company and its Subsidiaries have been adjusted to reflect material
changes in the reimbursement policies of third party payors such as
Medicare, Medicaid, Medi-Cal, private insurance companies, health
maintenance organizations, preferred provider organizations, managed
care systems and other third party payors (including, without
limitation, Blue Cross plans). The accounts receivable, after giving
effect to the allowance for doubtful accounts, relating to such third
party payors do not materially exceed amounts the Company and its
Subsidiaries are entitled to receive.
(xxii) TITLE TO PROPERTY. The Company and its Subsidiaries have
good and marketable title to all real property owned by them and good
title to all other properties owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) do not, singly or in the aggregate,
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company or any of its
Subsidiaries; and all of the leases and subleases of the Company and its
Subsidiaries, considered as one enterprise, and under which the Company
or any of its Subsidiaries holds properties described in the Prospectus,
are in full force and effect, and none of the Company or any of its
Subsidiaries has any notice of any claim of any sort that has been
asserted by anyone adverse to the rights of the Company or any of its
Subsidiaries under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such subsidiary to
the continued possession of the leased or subleased premises under any
such lease or sublease.
(xxiii) INVESTMENT COMPANY ACT. None of the Company or its
Subsidiaries is, and upon the issuance and sale of the Securities as
herein contemplated and the application of the net proceeds therefrom as
described in the Prospectus none of them will be, an "investment
company" or an entity "controlled" by an "investment company"
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as such terms are defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
(xxiv) ENVIRONMENTAL LAWS. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect, (A) none of the Company, its Subsidiaries, or any of the
clinical laboratories owned, leased or operated by them, is in violation
of any federal, state, local or foreign statute, law, rule, regulation,
standard, guide, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any
judicial or administrative order, consent, decree or judgment, relating
to pollution or protection of human health or safety, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances (including, without limitation,
asbestos, polychlorinated biphenyls, urea-formaldehyde insulation,
petroleum or petroleum products) (collectively, "Hazardous Materials")
or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, release or threatened release
of Hazardous Materials (collectively, "Environmental Laws"), (B) the
Company, its Subsidiaries, and each of the clinical laboratories owned,
leased or operated by them, have all permits and approvals required
under any applicable Environmental Laws and are each in compliance with
their requirements, (C) there are no pending or threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
the Company, its Subsidiaries, or any of the clinical laboratories
owned, leased or operated by them, and (D) there are no events or
circumstances known to the Company that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an action,
suit or proceeding by any private party or governmental body or agency,
against or affecting the Company, any of its Subsidiaries or any of the
clinical laboratories owned, leased or operated by them relating to
Hazardous Materials or any Environmental Laws.
(xxv) REGISTRATION RIGHTS. There are no persons with
registration rights or other similar rights to have any securities of
the Company or any of its Subsidiaries registered pursuant to the
Registration Statement or otherwise registered by the Company or any
other person under the 1933 Act, except for such rights that have been
waived in writing, a copy of such waiver having been delivered to the
Underwriters.
(xxvi) INSURANCE. The Company and each of its Subsidiaries and
each of the clinical laboratories and related laboratory facilities
owned, leased or operated by them, are insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as the Company believes are prudent and customary in the
clinical laboratory segment of the healthcare industry; none of the
Company, its Subsidiaries or any of the clinical laboratories owned, by
them has been refused any material insurance coverage sought or applied
for since January 1, 1999; and the Company has no reason to believe that
it or any of the clinical laboratories owned by it, will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar
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coverage from similar insurers as may be necessary to continue its
operations, except where the failure to renew or maintain such coverage
would not reasonably be expected to result in a Material Adverse Effect.
The officers and directors of the Company are insured by insurers of
recognized financial responsibility against such losses and risks and in
such amounts as the Company believes are prudent and customary for
officers' and directors' liability insurance of a public company and as
the Company believes would cover claims which would reasonably be
expected to be made in connection with the issuance of the Securities;
and the Company has no reason to believe that it will not be able to
renew its existing directors' and officers' liability insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to cover its officers and
directors.
(xxvii) TAX RETURNS AND PAYMENT OF TAXES. The Company and its
Subsidiaries have timely filed all federal, state, local and foreign tax
returns that are required to be filed or have duly requested extensions
thereof and all such tax returns are true, correct and complete, except
to the extent that any failure to file or request an extension, or any
incorrectness would not reasonably be expected to result in a Material
Adverse Effect. The Company and its Subsidiaries have timely paid all
taxes shown as due on such filed tax returns (including any related
assessments, fines or penalties), except to the extent that any such
taxes are being contested in good faith and by appropriate proceedings,
or to the extent that any failure to pay would not reasonably be
expected to result in a Material Adverse Effect; and adequate charges,
accruals and reserves have been provided for in the financial statements
referred to in Section 1(a)(iii) above in accordance with GAAP in
respect of all Federal, state, local and foreign taxes for all periods
as to which the tax liability of the Company [and its Subsidiaries] has
not been finally determined or remains open to examination by applicable
taxing authorities except (A) for taxes incurred after the date of the
financial statements referred to in Section 1(a)(iii) or (B) where the
failure to provide for such charges, accruals and reserves could not
result in a Material Adverse Effect. None of the Company, or its
Subsidiaries is a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Internal Revenue Code of
1986, as amended (the "Code").
(xxviii) NO STABILIZATION OR MANIPULATION. None of the Company
or its Subsidiaries or, to the best of their knowledge, any of their
directors, officers or affiliates has taken or will take, directly or
indirectly, any action designed to, or that could be reasonably expected
to, cause or result in stabilization or manipulation of the price of the
Securities in violation of Regulation M under the Securities Exchange
Act of 1934, as amended (the "1934 Act").
(xxix) CERTAIN TRANSACTIONS. Except as disclosed in the
Prospectus, there are no outstanding loans, advances, or guarantees of
indebtedness by the Company or any of its Subsidiaries to or for the
benefit of any of the executive officers or directors of the Company or
any of the members of the families of any of them that would be required
to be so disclosed under the 1933 Act, the 1933 Act Regulations or Form
S-1.
(xxx) STATISTICAL AND MARKET DATA. The statistical and
market-related data included in the Prospectus are derived from sources
which the Company reasonably and
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in good faith believes to be accurate, reasonable and reliable in all
material respects and the statistical and market-related data included
in the Prospectus agrees with the sources from which it was derived in
all material respects.
(xxxi) ACCOUNTING AND OTHER CONTROLS. The Company has
established a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions were, are and will
be executed in accordance with management's general or specific
authorization; (ii) transactions were, are and will be recorded as
necessary to permit preparation of financial statements in conformity
with GAAP and to maintain accountability for assets; (iii) access to
assets was, is and will be permitted only in accordance with a
management's general or specific authorizations; and (iv) the recorded
accountability for assets was, is and will be compared with existing
assets at reasonable intervals and appropriate action was, is and will
be taken with respect to any differences.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any officer of
the Company or any of its Subsidiaries delivered to Merrill Lynch, the
Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
SECTION 2 SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) OPTION SECURITIES. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional
shares of Common Stock at the price per share set forth in Schedule B, less an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
The option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial Securities upon notice by Merrill Lynch to the
Company setting forth the number of Option Securities as to which the several
Underwriters are then exercising the option and the time and date of payment and
delivery for such Option Securities. Any such time and date of delivery for the
Option Securities (a "Date of Delivery") shall be determined by Merrill Lynch,
but shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Securities, each
of the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter bears to the total number of Initial Securities, subject in
each case to
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such adjustments as Merrill Lynch in its discretion shall make to eliminate any
sales or purchases of fractional shares.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022, or at such
other place as shall be agreed upon by Merrill Lynch and the Company, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by
Merrill Lynch and the Company (such time and date of payment and delivery being
herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by Merrill Lynch and the
Company, on each Date of Delivery as specified in the notice from Merrill Lynch
to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3 COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A and will notify Merrill Lynch immediately, and confirm the notice in
writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed, (ii) of the receipt of any comments from the
Commission, (iii) of any request by the Commission for any amendment to the
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Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) FILING OF AMENDMENTS. The Company will give Merrill Lynch notice
of its intention to file or prepare any amendment to the Registration Statement
(including any filing under Rule 462(b)), or any amendment, supplement or
revision to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectus, will furnish Merrill Lynch with
copies of any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such document to
which Merrill Lynch or counsel for the Underwriters shall reasonably object.
(c) DELIVERY OF REGISTRATION STATEMENTS. The Company has furnished
or will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(d) DELIVERY OF PROSPECTUS. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required by
the 1933 Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the Underwriters or for the Company, to amend the
Registration Statement or amend or supplement any Prospectus in order that the
Prospectus will not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend
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or supplement any Prospectus in order to comply with the requirements of the
1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or supplement as
may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus complies with such requirements, and
the Company will furnish to the Underwriters such number of copies of such
amendment or supplement as the Underwriters may reasonably request.
(f) BLUE SKY QUALIFICATIONS. The Company will use its best efforts,
in cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as Merrill Lynch may designate and to maintain such
qualifications in effect for a period of not less than one year from the later
of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification of the Securities in effect for a
period of not less than one year from the effective date of the Registration
Statement and any Rule 462(b) Registration Statement.
(g) RULE 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) USE OF PROCEEDS. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds".
(i) LISTING. The Company will use its best efforts to effect and
maintain the listing of the securities on the New York Stock Exchange (the
"NYSE") and will file with the NYSE all document and notices required by the
NYSE of companies that have securities that are listed on the NYSE.
(j) RESTRICTION ON SALE OF SECURITIES. During a period of 180 days
from the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of
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ownership of the Common Stock, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the Securities to be sold hereunder, (B) any shares of Common Stock
issued by the Company upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof and referred to in the
Prospectus, (C) any shares of Common Stock issued or options to purchase Common
Stock granted pursuant to employee benefit plans of the Company referred to in
the Prospectus, (D) any shares of Common Stock issued pursuant to any
non-employee director stock plan or dividend reinvestment plan, or (E) the
issuance by the Company of shares of Common Stock pursuant to the
Recapitalization.
(k) REPORTING REQUIREMENTS. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(l) COMPLIANCE WITH NASD RULES. The Company hereby agrees that it
will ensure that the Reserved Securities will be restricted as required by the
NASD or the NASD rules from sale, transfer, assignment, pledge or hypothecation
for a period of three months following the date of this Agreement or any other
periods required by the NASD or the NASD rules in the reasonable judgment of
counsel for the Underwriters. The Underwriters will notify the Company as to
which persons will need to be so restricted. At the request of the Underwriters,
the Company will direct the transfer agent to place a stop transfer restriction
upon such securities for such period of time. Should the Company release, or
seek to release, from such restrictions any of the Reserved Securities, the
Company agrees to reimburse the Underwriters for any reasonable expenses
(including, without limitation, legal expenses) they incur in connection with
such release.
(m) COMPLIANCE WITH RULE 463. The Company will comply with the
requirements of Rule 463 of the 1933 Act Regulations.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable
documented fees and disbursements of counsel for the Underwriters in connection
therewith and in connection with the preparation of the Blue Sky Survey and any
supplement thereto, (vi) the printing and delivery to the Underwriters of copies
of each preliminary
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prospectus and of the Prospectus and any amendments or supplements thereto,
(vii) the preparation, printing and delivery to the Underwriters of copies of
the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of
any transfer agent or registrar for the Securities, (ix) the filing fees
incident to, and the reasonable documented fees and disbursements of counsel to
the Underwriters in connection with, the review by the NASD of the terms of the
sale of the Securities, (x) the fees and expenses incurred in connection with
the listing of the Securities on the NYSE, (xi) all costs and expenses of the
Underwriters, including the reasonable documented fees and disbursements of
outside counsel for the Underwriters, in connection with matters related to the
Reserved Securities which are designated by the Company for sale to Eligible
Persons.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable documented fees and
disbursements of counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any of its Subsidiaries
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefore initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
(b) OPINION OF COUNSEL FOR THE COMPANY. At Closing Time, the
Representatives shall have received the opinion, dated as of Closing Time, of:
(i) Hooper, Lundy & Bookman, Inc., special regulatory
counsel of the Company, in form and substance satisfactory to counsel
for the Underwriters, together with signed or reproduced copies of such
letter for each of the other Underwriters to the effect set forth in
Exhibit A-1 hereto and to such further effect as counsel to the
Underwriters may reasonably request;
(ii) Brobeck Phleger & Harrison LLP, special counsel for the
Company, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters to the effect set forth in Exhibit
A-2 hereto and to such further effect as counsel to the Underwriters may
reasonably request;
18
<PAGE>
(iii) Christie, Parker & Hale, special intellectual property
counsel for the Company, in form and substance satisfactory to counsel
for the Underwriters, together with signed originals or reproduced
copies of such letter for each of the other Underwriters to the effect
set forth in Exhibit A-3 hereto and to such further effect as counsel to
the underwriters may reasonably request; and
(iv) [Investment Company Act Counsel], special Investment
Company Act Counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, together with signed originals or
reproduced copies of such letter for each of the other Underwriters to
the effect set forth in Exhibit A-3 hereto and to such further effect as
counsel to the underwriters may reasonably request.
(c) OPINION OF COUNSEL FOR THE UNDERWRITERS. At Closing Time, the
Representatives shall have received the opinion, dated as of Closing Time, of
Debevoise & Plimpton, counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters in form and
substance reasonably satisfactory to the Underwriters.
(d) OFFICERS' CERTIFICATE. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the Chief Executive
Officer, President and Chief Operating Officer and Chief Financial Officer dated
as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1(a) hereof
are true and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) 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 are contemplated by the Commission.
(e) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of
this Agreement, the Representatives shall have received from Ernst & Young LLP a
letter, dated such date, in form and substance reasonably satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(f) BRING-DOWN COMFORT LETTER. At Closing Time, the Representatives
shall have received from Ernst & Young LLP a letter, dated as of Closing Time,
to the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(g) APPROVAL OF LISTING. At Closing Time, the Securities shall have
been approved for listing on the NYSE, subject only to official notice of
issuance.
19
<PAGE>
(h) NO OBJECTION. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(i) LOCK-UP AGREEMENTS. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule C hereto.
(j) RECAPITALIZATION. Prior to the purchase of the Securities by the
Underwriters, the Recapitalization shall have been consummated.
(k) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the relevant Date
of Delivery, the Representatives shall have received:
(i) OFFICERS' CERTIFICATE. A certificate, dated such Date of
Delivery, of the President and Chief Operating Officer and Chief
Financial Officer of the Company, confirming that the certificate
delivered at the Closing Time pursuant to Section 5(d) hereof remains
true and correct as of such Date of Delivery.
(ii) OPINION OF COUNSEL FOR COMPANY. The opinion of Brobeck,
Phleger, Harrison, LLP, special counsel for the Company, together with
the favorable opinion of Hooper, Lundy & Bookman, Inc., special
regulatory counsel of the Company, each in form and substance
satisfactory to counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinions required by
Section 5(b) hereof.
(iii) OPINION OF COUNSEL FOR UNDERWRITERS. The opinion of
Debevoise & Plimpton, counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.
(iv) BRING-DOWN COMFORT LETTER. A letter from Ernst & Young
LLP, in form and substance reasonably satisfactory to the
Representatives and dated such Date of Delivery, substantially in the
same form and substance as the letter furnished to the Representatives
pursuant to Section 5(f) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date not more
than five days prior to such Date of Delivery.
(l) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of
Delivery, counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them to
pass upon the issuance and sale of the Securities as herein contemplated, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein
20
<PAGE>
contemplated shall be satisfactory in form and substance to the Representatives
and counsel for the Underwriters.
(m) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Securities
on a Date of Delivery which is after the Closing Time, the obligations of the
several Underwriters to purchase the relevant Option Securities, may be
terminated by the Representatives by notice to the Company at any time at or
prior to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except as
provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any
such termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF THE UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement
or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of (A) the violation of any
applicable laws or regulations of any jurisdiction where Reserved
Securities have been offered and (B) any untrue statement or alleged
untrue statement of a material fact included in the supplement or
prospectus wrapper material distributed in any jurisdiction in
connection with the reservation and sale of the Reserved Securities to
Eligible Persons or the omission or alleged omission therefrom of a
material fact necessary to make the statements therein, when considered
in conjunction with the Prospectus or preliminary Prospectus, not
misleading;
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission or in connection with any
violation of the nature referred to in Section 6(a)(ii)(A) hereof;
provided that (subject to Section 6(d) below) any such settlement is
effected with the written consent of the Company; and
21
<PAGE>
(iv) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation
of the nature referred to in Section 6(a)(ii)(A) hereof, to the extent
that any such expense is not paid under (i), or (ii) or (iii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent (x) arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information, or
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) or (y) resulting from the fact that such loss, liability, claim, damage
or expense resulted from an untrue statement or omission of a material fact in
or omitted from the preliminary prospectus and a court of competent jurisdiction
having made a final, non-appealable determination that (1) the untrue statement
or omission was corrected in the Prospectus, (2) that at a time sufficiently
prior to the Closing Time, the Company furnished copies of the Prospectus in
sufficient quantities to such Underwriter, (3) that the Company shall have
sustained the burden of proving that such Underwriter failed to send or give a
copy of the Prospectus to the person asserting such loss, liability, claim,
damage or expense prior to the written confirmation or the sale of Securities to
such person by such Underwriter as required by the 1933 Act or the 1933 Act
Regulations, and (4) that the sending of the Prospectus to the person asserting
such loss, liability, claim, damage or expense would have constituted a defense
to the claim asserted by such person or persons.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS. Each
Underwriter severally agrees to indemnify and hold harmless the Company and its
respective directors, each of the officers of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against
any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 6(a)
above, counsel to the indemnified parties
22
<PAGE>
shall be selected by Merrill Lynch, and, in the case of parties indemnified
pursuant to Section 6(b) above, counsel to the indemnified parties shall be
selected by the Company. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 6 or Section 7 hereof (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(iii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement. Notwithstanding the immediately preceding sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel, an
indemnifying party shall not be liable for any settlement of the nature
contemplated by Section 6(a)(ii) effected without its consent if such
indemnifying party (i) reimburses such indemnified party in accordance with such
request to the extent it considers such request to be reasonable and (ii)
provides written notice to the indemnified party specifying the basis for its
claim that the unpaid balance is unreasonable, in each case prior to the date of
such settlement.
(e) INDEMNIFICATION FOR RESERVED SECURITIES. In connection with the
offer and sale of the Reserved Securities, the Company agrees, promptly upon a
request, in writing, to indemnify and hold harmless the Underwriters from and
against any and all losses, liabilities, claims, damages and expenses incurred
by them as a result of the failure of Eligible Persons who have expressed an
interest in purchasing the Reserved Securities to pay for and accept delivery of
Reserved Securities which, by the end of the first business day following the
date of this Agreement, were subject to a properly confirmed agreement to
purchase.
SECTION 7. CONTRIBUTION. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party
23
<PAGE>
shall contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof, which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of the Securities
pursuant to this Agreement (before deducting expenses) received by the Company
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus bear to the aggregate initial public
offering price of the Securities as set forth on such cover.
The relative fault of the Company, on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission or any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof.
The Company, and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
24
<PAGE>
For purposes of this Section 7, each person, if any, who controls a
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company, or any of its
Subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company, and shall
survive delivery of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States or the international
financial markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective change
in national or international political, financial or economic conditions, in
each case the effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce contracts
for the sale of the Securities, or (iii) if trading in any securities of the
Company has been suspended or materially limited by the Commission or the
Nasdaq, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or
25
<PAGE>
more of the non-defaulting Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Securities in such amounts as may
be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after Closing Time, the obligation of the
Underwriters to purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery, shall terminate without liability
on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which occurs after
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company shall have the
right to postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for a Underwriter under this Section 10.
SECTION 11. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at 4 World Financial
Center, New York, New York 10080, attention of Jim Jackson and Syndicate
Operations, with a copy to Debevoise & Plimpton, 875 Third Avenue, New York, New
York, attention of Michael W. Blair; and notices to the Company shall be
directed to them at 2211 Michigan Avenue, Santa Monica, California 90404,
attention of Paul F. Beyer, President and Chief Operating Officer, with a copy
to Brobeck, Phleger & Harrison LLP, 550 S. Hope Street, Los Angeles, California
90071, attention of Kenneth R. Bender.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the Underwriters and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Underwriters
and the Company and its respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters and the Company
26
<PAGE>
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES THEREOF. EXCEPT AS OTHERWISE SET
FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
27
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and, the Company in accordance with its terms.
Very truly yours,
SPECIALTY LABORATORIES, INC.
By
-------------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
UBS WARBURG, LLC
U.S. BANCORP PIPER JAFFRAY
BY: MERRILL LYNCH, PIERCE, FENNER
& SMITH INCORPORATED
By
-------------------------------------------
Authorized Signatory
For themselves and as Representatives of the
other Underwriters named in Schedule A hereto.
28
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NAME OF UNDERWRITER NUMBER OF
INITIAL
SECURITIES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..........................................
UBS Warburg, LLP......................................................
U.S. Bancorp Piper Jaffray............................................
------------
Total.................................................................
=======================
</TABLE>
29
<PAGE>
SCHEDULE B
SPECIALTY LABORATORIES, INC.
Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $ .
2. The purchase price per share for the Securities to be paid by
the several Underwriters shall be $ , being an amount equal to the initial
public offering price set forth above less $. per share; provided
that the purchase price per share for any Option Securities purchased upon
the exercise of the over-allotment option described in Section 2(b) shall be
reduced by an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities but not payable
on the Option Securities.
30
<PAGE>
SCHEDULE C
[List]
31
<PAGE>
SCHEDULE D
[List]
32
<PAGE>
Exhibit A-1
FORM OF OPINION OF,
HOOPER, LUNDY & BOOKMAN, INC.
SPECIAL REGULATORY COUNSEL OF SPECIALTY LABORATORIES, INC.
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(i)
33
<PAGE>
Exhibit A-2
FORM OF OPINION OF
BROBECK, PHLEGER & HARRISON
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(ii)
34
<PAGE>
Exhibit A-3
FORM OF OPINION OF
CHRISTIE, PARKER & HALE
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(iii)
35
<PAGE>
Exhibit A-4
FORM OF OPINION OF
INVESTMENT COMPANY ACT COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(iv)
36
<PAGE>
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER SHAREHOLDERS PURSUANT TO
SECTION 5(i)]
Exhibit B
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
UBS Warburg, LLC
U.S. Bancorp Piper Jaffray
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
Re: Proposed Public Offering by Specialty Laboratories, Inc.
Dear Sirs:
The undersigned, a stockholder and/or an officer and/or a director of Specialty
Laboratories, Inc., a Delaware corporation (the "Company"), understands that (i)
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), UBS Warburg, LLC and U.S. Bancorp Piper Jaffray propose to
enter into a Purchase Agreement (the "Purchase Agreement") with the Company
providing for the public offering of shares (the "Securities") of the Company's
common stock, par value $.01 per share (the "Common Stock"). In recognition of
the benefit that such an offering will confer upon the undersigned as a
stockholder and/or an officer and/or a director of the Company, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned agrees with each underwriter to be named in the
Purchase Agreement that, during a period of 180 days from the date of the
Purchase Agreement, the undersigned will not, without the prior written consent
of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant for the sale of, or otherwise
dispose of or transfer any shares of the Company's Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise.
In addition, the undersigned agrees that the Company and/or Merrill Lynch may,
and the undersigned will, (i) with respect to any shares of Common Stock for
which the undersigned is the record holder, cause the transfer agent for the
Company to note stop transfer instructions with respect to such shares of Common
Stock on the transfer books and records of the Company and (ii) with respect to
any shares of Common Stock for which the undersigned is the beneficial holder
but not the record holder, cause the record holder of such shares of Common
Stock to
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cause the transfer agent for the Company to note stop transfer instructions with
respect to such shares of Common Stock on the transfer books and records of the
Company.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this letter agreement, and that, upon request,
the undersigned will execute any additional documents necessary or desirable in
connection with the enforcement hereof. All authority herein conferred or agreed
to be conferred shall survive the death or incapacity of the undersigned and any
obligations of the undersigned shall be binding upon the heirs, personal
representatives, successors, and assigns of the undersigned.
Very truly yours,
Signature:
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Print Name:
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