<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 14, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ROTECH MEDICAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-2115892
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4506 L. B. MCLEOD ROAD, SUITE F, ORLANDO, FLORIDA 32811
(407) 841-2115
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
WILLIAM P. KENNEDY, CHIEF EXECUTIVE OFFICER
ROTECH MEDICAL CORPORATION
4506 L.B. MCLEOD ROAD, SUITE F, ORLANDO, FLORIDA 32811
(407) 841-2115
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
THOMAS A. SIMSER, JR. FREDERICK W. KANNER
WINDERWEEDLE, HAINES, WARD & WOODMAN, P.A. DEWEY BALLANTINE
390 NORTH ORANGE AVENUE, SUITE 600 1301 AVENUE OF THE AMERICAS
ORLANDO, FLORIDA 32801(407) 423-4246 NEW YORK, NEW YORK 10019
(212) 259-8000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.0002 par
value per share........ 2,300,000 $29.63 $68,149,000 $23,500
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Includes 300,000 shares that may be purchased by the Underwriters solely to
cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE AS SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 14, 1995
PROSPECTUS
2,000,000 SHARES
[LOGO OF ROTECH MEDICAL CORPORATION APPEARS HERE]
ROTECH MEDICAL CORPORATION
COMMON STOCK
--------
Of the 2,000,000 shares of Common Stock offered hereby, 1,700,000 shares are
being offered by RoTech Medical Corporation ("RoTech" or the "Company") and
300,000 shares are being offered by the Selling Shareholder named under
"Selling Shareholder." The Company will not receive any of the proceeds from
the sale of shares by the Selling Shareholder.
The Common Stock of the Company is traded on The Nasdaq National Market under
the symbol ROTC. On April 12, 1995, the last sale price for the Common Stock as
reported by Nasdaq was $30 1/4 per share.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDER(2)
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $ $ $ $
- -------------------------------------------------------------
Total(3) $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company and the Selling
Shareholder, estimated at $ and $ , respectively.
(3) The Company and the Selling Shareholder have granted the Underwriters a
30-day option to purchase up to 300,000 additional shares of Common Stock
on the same terms as set forth above solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Shareholder will be $ , $ , $ and $ ,
respectively. See "Underwriting."
--------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them, and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1995, at the offices of Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013.
--------
SMITH BARNEY INC. NEEDHAM & COMPANY, INC.
, 1995
<PAGE>
ROTECH MEDICAL CORPORATION--NUMBER OF LOCATIONS BY STATE
[MAP OF THE UNITED STATES ILLUSTRATING THE NUMBER OF LOCATIONS BY STATE AND THE
TYPE OF BUSINESSES PERFORMED IN SUCH STATES.]
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") are incorporated by
reference in this Prospectus: (1) Annual Report on Form 10-K for the fiscal
year ended July 31, 1994; (2) Quarterly Report on Form 10-Q for the quarter
ended October 31, 1994; (3) Quarterly Report on Form 10-Q for the quarter ended
January 31, 1995; (4) Current Report on Form 8-K as filed with the Commission
on July 14, 1994; (5) Current Report on Form 8-KA as filed with the Commission
on September 10, 1994; and (6) Current Report on Form 8-K as filed with the
Commission on March 16, 1995. Certain portions of the above-referenced
documents have been modified or superseded by the information contained herein.
In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
time of the completion of the offering are hereby deemed to be incorporated by
reference. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus. Any person receiving a
copy of this Prospectus may obtain without charge, upon written or oral
request, a copy of any of the documents incorporated by reference herein,
except for the exhibits to such documents (unless such exhibits are
specifically incorporated by reference into the documents which this Prospectus
incorporates). Written or telephone requests for such copies should be directed
to RoTech Medical Corporation, P.O. Box 536576, Orlando, Florida 32853-6576,
Attention: Rebecca R. Irish, telephone (407) 841-2115.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEM-
BERS OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANS-
ACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET SYSTEM IN ACCORDANCE
WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING".
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this prospectus or
incorporated by reference.
THE COMPANY
RoTech Medical Corporation ("RoTech" or the "Company") provides comprehensive
home health care and primary care physician services to patients in non-urban
areas. RoTech currently operates 149 home health care locations and 19 primary
care physician practices, employing 26 physicians. The Company's home health
care business provides a diversified range of products and services, with
emphasis on respiratory and home infusion therapies. RoTech has pursued an
aggressive acquisition strategy since 1988 which included in fiscal 1994
acquisitions of 46 locations of smaller home health care companies and the
opening of 19 new locations. Current industry estimates indicate that
approximately half of the nation's home health care industry remains fragmented
and is run by either single operators or small, local chains. These smaller
providers are RoTech's main competition and main acquisition opportunities. The
Company plans to continue to enter new home health care markets through
acquisition or start-up as competitive and pricing pressures encourage
consolidation and economies of scale. In January 1994, the Company expanded
this strategy to include the acquisition of primary care physician practices in
certain markets to enable the ultimate development of an integrated primary
health care delivery system capable of providing a broad range of non-
institutional care to patients in these markets. The Company believes this
system will facilitate managed care concepts and pricing in these markets,
where managed care currently has little penetration, and should prevent the
outmigration of the non-urban population to urban health care facilities and
service providers. The Company's revenues have grown from $18 million for the
fiscal year ended July 31, 1990 to $71 million for the fiscal year ended July
31, 1994 and $59 million for the six months ended January 31, 1995.
Recent data suggests that there is a shortage of health care services in non-
urban markets. According to the United States Census Bureau, in 1990 non-urban
areas of the United States accounted for roughly 25% of the national
population, or approximately 62 million people. However, according to the
American Medical Association, just 11% of physicians, or approximately 75,000
physicians, practice in non-metropolitan markets. This data indicates that
rural markets are underserved, and suggests that there may be opportunities for
improvement in access to primary care physicians, as well as specialty
services. The Company believes that these needs result in significant
opportunities for companies such as RoTech, which can attract, retain and
network physicians in non-urban settings while offering ancillary services such
as home health care, to become a full-service non-institutional based primary
health care provider.
RoTech was founded in 1981 to provide home respiratory and home medical
equipment products and services to patients in Florida. With its founders'
roots in pharmacy and pharmaceutical sales, the Company's marketing directive
has always been to consult with primary care physicians in utilizing home
health care techniques, products and services for their patient base.
Counseling these physicians as to disease management leads to earlier
identification and treatment of patients, enhancing the patient's quality of
life and longevity. The Company has not targeted specialists, as their patients
are more acute and since specialists have historically been tied to the
hospital systems which results in higher hospitalizations. RoTech's philosophy
and practice is to assist in identifying patients of primary care physicians
prior to hospitalization and prior to an acuity level that would require
utilizing a specialist.
3
<PAGE>
The Company's strategy is to develop integrated health care delivery systems
through the acquisition of smaller local home health care companies and primary
care physician practices in non-urban areas. The Company targets non-urban
markets of smaller cities and rural areas, due to the dominance of primary care
physicians in these markets, reduced competition and a tendency to care for
patients in the home setting. The Company believes that acquisitions of home
health care companies will continue to expand the base of relationships with
primary care physicians in these markets. Primary care physicians in these
markets typically have long-standing relationships with loyal patient bases.
These physicians are usually solo practitioners and are the key decision makers
in the treatment of their patients. The Company believes that making home
health care products and services available to these physicians will result in
better, less expensive health care that provides an improved quality of life
for the patients and their caregivers in these communities.
RoTech expanded its strategy in 1994 to acquire primary care physician
practices in two specific markets, northern Mississippi and central Florida,
where it has strong market presence in its home health care business. The
Company believes that networking these acquired primary care physicians, who
are predominantly solo practitioners, will allow economies of scale,
justification for advanced equipment to be shared among physicians, and
standardization of protocols. The Company believes that assertive patient
management at the primary care level, which would include the use of home
health care techniques, should result in patient retention and higher quality
of care. Aggregation of patient lives under the treatment of these physicians
who can comprehensively manage patients is currently attractive to managed care
entities and could eventually enable the Company to provide a managed care
product in non-urban America.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company........................ 1,700,000 shares
The Selling Shareholder............ 300,000 shares
Common Stock outstanding after the
offering........................... 11,367,000 shares
Use of proceeds..................... To repay indebtedness, for working capital
and to finance the Company's expansion
internally and through acquisition of home
health care providers and physician
practices
Nasdaq National Market symbol....... ROTC
</TABLE>
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31 JANUARY 31
--------------------------------------- -----------------
1990 1991 1992 1993 1994 1994 1995
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenue....... $18,458 $26,321 $37,122 $48,383 $71,470 $ 29,893 $ 59,305
Operating profit (1).... 2,722 4,014 5,994 8,159 12,843 5,022 9,516
Net income.............. 1,371 2,169 3,686 5,127 8,112 3,222 5,796
Earnings per share:
Net income............. $ .30 $ .43 $ .60 $ .77 $ .99 $ .44 $ .59
Weighted average shares
outstanding........... 4,565 5,090 6,175 6,692 8,147 7,406 9,880
OTHER DATA:
Number of home care op-
erations open at end of
period................. 26 38 48 71 120 90 147
Number of physician
practices at end of pe-
riod................... -- -- -- -- 14 7 18
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31, 1995
-----------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital......................................... $ 13,197 $ 61,881
Total assets............................................ 126,962 149,148
Total debt.............................................. 26,498 -- (3)
Shareholders' equity.................................... 91,322 140,006
</TABLE>
- --------
(1) Represents income from operations before interest expense and income taxes.
(2) Adjusted to give effect to the sale of the 1,700,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $30.25 per
share and the anticipated use of the net proceeds therefrom. See "Use of
Proceeds."
(3) The Company reduced its short-term notes payable subsequent to January 31,
1995. The Company intends to repay total bank borrowings outstanding upon
receipt of the net proceeds of the sale of the shares of Common Stock
offered by the Company hereby.
QUARTERLY FINANCIAL RESULTS
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------
APRIL 30 JULY 31 OCTOBER 31 JANUARY 31 APRIL 30 JULY 31 OCTOBER 31 JANUARY 31
1993 1993 1993 1994 1994 1994 1994 1995
-------- ------- ---------- ---------- -------- ------- ---------- ----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue....... $12,403 $13,471 $14,013 $15,880 $18,138 $23,438 $26,723 $32,582
Operating profit........ 2,162 2,498 2,223 2,795 3,440 4,317 4,271 4,934
Net income.............. 1,388 1,546 1,456 1,799 2,215 2,641 2,691 3,104
Earnings per share...... $ 0.20 $ 0.21 $ 0.20 $ 0.24 $ 0.26 $ 0.28 $ 0.28 $ 0.31
Weighted average shares
outstanding............ 7,092 7,339 7,256 7,478 8,596 9,433 9,666 9,897
</TABLE>
Unless otherwise indicated, the information in this Prospectus assumes (i) no
exercise of the Underwriters' option to purchase up to 300,000 additional
shares of Common Stock to cover over-allotments, if any, and (ii) no exercise
of outstanding options to purchase Common Stock.
5
<PAGE>
THE COMPANY
The Company's principal executive offices are located at 4506 L.B. McLeod
Road, Suite F, Orlando, Florida 32811; its telephone number is (407) 841-2115.
The Company conducts its business through operating subsidiaries and, unless
the context requires otherwise, the terms "RoTech" and "Company" refer to
RoTech Medical Corporation and its operating subsidiaries.
USE OF PROCEEDS
The net proceeds to RoTech from the sale of the 1,700,000 shares of Common
Stock offered by the Company hereby (at an assumed public offering price of
$30.25 per share) are estimated to be $48.7 million ($51.6 million if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the net proceeds to repay indebtedness, to provide working capital and
to support the expansion of the Company's business internally and through
acquisitions. The Company continually seeks acquisition opportunities, although
it has no specific commitments regarding any future acquisitions.
The Company expects that approximately $25.5 million of the net proceeds will
be used to reduce debt, due on demand, and with an average interest rate of
approximately 6.72% at January 31, 1995. This debt was incurred principally to
finance acquisitions completed within the last year. Pending utilization of the
net proceeds for expansion and acquisitions, the remaining net proceeds will be
invested in high-grade, short- term interest-bearing obligations.
The Company will not receive any of the proceeds from the sale of any shares
of Common Stock by the Selling Shareholder. See "Selling Shareholder."
CAPITALIZATION
The following table sets forth the capitalization of RoTech at January 31,
1995 and as adjusted to give effect to the sale of the 1,700,000 shares of the
Common Stock offered by the Company hereby (at an assumed offering price of
$30.25 per share) and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
<TABLE>
<CAPTION>
JANUARY 31, 1995
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term notes payable to banks and current portion of
long-term debt(1)........................................ $26,498 $ --
======= ========
Long-term debt, less current portion(1)................... $ -- $ --
Shareholders' equity:
Common stock, $.0002 par value; 50,000,000 shares autho-
rized, 9,660,400 shares issued and outstanding;
11,360,400 shares issued and outstanding as adjusted... 2 2
Treasury stock, at cost................................. (815) (815)
Additional paid-in capital.............................. 66,726 115,410
Retained earnings....................................... 25,409 25,409
------- --------
Total shareholders' equity............................ 91,322 140,006
------- --------
Total long-term capitalization........................ $91,322 $140,006
======= ========
</TABLE>
- --------
(1) See Notes 6 and 13 of Notes to Consolidated Financial Statements of RoTech
for further information regarding its current notes payable and long-term
debt. The Company reduced its short-term notes payable subsequent to
January 31, 1995. The Company intends to repay total bank borrowings
outstanding upon receipt of the net proceeds of the sale of the shares of
Common Stock offered by the Company hereby.
6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data for the five years in the period ended
July 31, 1994, are derived from the respective consolidated financial
statements of RoTech Medical Corporation. The financial data for the six month
periods ended January 31, 1994 and 1995 are derived from unaudited consolidated
financial statements. The unaudited consolidated financial statements include
all adjustments, consisting of normal recurring accruals, which the Company's
management considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the six months ended January 31, 1995 are not necessarily indicative of the
results that may be expected for the entire year ending July 31, 1995. The data
should be read in conjunction with the consolidated financial statements,
related notes, and other financial information included and incorporated by
reference herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31 JANUARY 31
--------------------------------------- -----------------
1990 1991 1992 1993 1994 1994 1995
------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DA-
TA:
Operating revenue:
Home respiratory and
other medical equip-
ment................. $11,575 $14,688 $15,706 $23,857 $41,579 $ 17,260 $ 38,658
Home infusion therapy. 5,393 10,886 19,959 21,715 25,492 11,601 15,700
Physician practices... 0 0 0 0 3,226 747 4,947
Other................. 1,490 747 1,457 2,811 1,173 285 0
------- ------- ------- ------- ------- -------- --------
Total operating revenue. 18,458 26,321 37,122 48,383 71,470 29,893 59,305
Cost and expenses:
Cost of revenue....... 5,301 5,766 8,434 12,359 17,409 7,612 16,394
Selling, general and
administrative....... 9,254 14,992 20,208 25,064 35,880 15,326 29,534
Depreciation and amor-
tization............. 1,181 1,549 2,486 2,801 5,338 1,932 3,861
Interest.............. 333 610 305 76 67 4 310
------- ------- ------- ------- ------- -------- --------
Total cost and expenses. 16,069 22,917 31,433 40,300 58,694 24,874 50,099
------- ------- ------- ------- ------- -------- --------
Income from operations
before income taxes.... 2,389 3,404 5,689 8,083 12,776 5,019 9,206
Income tax expense...... 1,018 1,235 2,003 2,956 4,664 1,797 3,410
------- ------- ------- ------- ------- -------- --------
Net income.............. $ 1,371 $ 2,169 $ 3,686 $ 5,127 $ 8,112 $ 3,222 $ 5,796
======= ======= ======= ======= ======= ======== ========
Earnings Per Share:
Net income............. $ 0.30 $ 0.43 $ 0.60 $ 0.77 $ 0.99 $ 0.44 $ 0.59
======= ======= ======= ======= ======= ======== ========
Weighted average shares
outstanding........... 4,565 5,090 6,175 6,692 8,147 7,406 9,880
<CAPTION>
JULY 31 JANUARY 31
--------------------------------------- -----------------
1990 1991 1992 1993 1994 1994 1995
------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........ $ 2,186 $ 6,621 $ 9,617 $18,203 $27,783 $ 14,119 $ 13,197
Total assets........... 12,294 20,961 25,137 40,019 94,433 52,294 126,962
Long-term debt (less
current portion)(1)... 2,029 1,538 1,053 0 0 0 0
Shareholders' equi-
ty(2)................. 4,463 13,673 17,518 36,197 83,320 42,383 91,322
</TABLE>
- --------
(1) Amounts shown at July 31, 1993 (-0-), January 31, 1994 (4,649), July 31,
1994 (4,098), and January 31, 1995 (26,498) are short term borrowings from
banks; no long-term borrowings were outstanding at these respective dates.
(2) The Company did not pay any dividends for any of the periods shown.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents certain statement of income data as a percentage
of certain items relative to total operating revenue:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JULY 31 JANUARY 31
---------------------- ------------
1992 1993 1994 1994 1995
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Operating revenue:
Home respiratory and other medical
equipment............................. 42.3% 49.3% 58.1% 57.7% 65.2%
Home infusion therapy.................. 53.8 44.9 35.7 38.8 26.5
Physician practices.................... 0.0 0.0 4.5 2.5 8.3
Other.................................. 3.9 5.8 1.7 1.0 0.0
------ ------ ------ ----- -----
Total operating revenue.................. 100.0 100.0 100.0 100.0 100.0
Cost and expenses:
Cost of revenue........................ 22.7 25.5 24.4 25.5 27.7
Selling, general and administrative.... 54.5 51.8 50.2 51.2 49.8
Depreciation and amortization.......... 6.7 5.8 7.5 6.5 6.5
Interest............................... 0.8 0.2 0.1 0.0 0.5
------ ------ ------ ----- -----
Total cost and expenses.................. 84.7 83.3 82.2 83.2 84.5
------ ------ ------ ----- -----
Income before income taxes............... 15.3 16.7 17.8 16.8 15.5
Income tax expense....................... 5.4 6.1 6.5 6.0 5.7
------ ------ ------ ----- -----
Net income............................... 9.9 10.6 11.3 10.8 9.8
====== ====== ====== ===== =====
</TABLE>
FOR THE SIX MONTHS ENDED JANUARY 31, 1995 AND 1994
Operating revenue increased 98% to $59.3 million for the six months ended
January 31, 1995 from $29.9 million for the six months ended January 31, 1994.
The increase in operating revenue is attributable to acquisitions and expanded
product and service lines in existing areas of operation. The Company continues
to employ a single sales force to maintain and develop both the home
respiratory and other medical equipment and home infusion therapy and other
pharmacy related lines of business.
Operating revenue from home respiratory and other medical equipment increased
124% to $38.7 million for the six months ended January 31, 1995 from $17.3
million for the six months ended January 31, 1994. The increase was due mainly
to increases in patient bases throughout the Company's locations and increased
marketing efforts in certain locations acquired during fiscal year 1994 and the
first six months of fiscal year 1995.
Operating revenue from home infusion therapy and pharmacy related services
increased 35% to $15.7 million for the six months ended January 31, 1995 from
$11.6 million for the six months ended January 31, 1994. Growth in this line of
business should continue as the Company expands both its service areas and
available products and services along with coverage for certain home infusion
therapies not previously paid for by the Medicare program.
Operating revenue from physician practices represented 8% of total operating
revenue for the six month period ended January 31, 1995, compared to less than
3% for the six month period ended January 31, 1994. The Company currently owns
18 physician practices and employs 25 primary care physicians. These practices
are clustered in two rural marketplaces. Growth in this line of business should
continue as the Company continues to acquire primary care physician practices.
Cost of revenue as a percentage of operating revenue increased to 28% for the
six months ended January 31, 1995 from 26% for the six months ended January 31,
1994 due to changes in the product mix in
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the last year. Selling, general and administrative expenses as a percentage of
operating revenue remained relatively stable at 51% for the six months ended
January 31, 1995 and January 31, 1994, respectively. Changes in the Company's
mix of business affect these categories, for example, physician practices have
no cost of revenue, all expenses are of a selling, general and administrative
nature.
Depreciation and amortization expense increased 99% to $3.9 million for the
six months ended January 31, 1995 from $1.9 million for the six months ended
January 31, 1994. Depreciation and amortization expense as a percentage of
operating revenue was 6.5% for the six months ended January 31, 1995 and for
the six months ended January 31, 1994. The increase was attributable to the
Company's purchase of fixed and intangible assets resulting from various
acquisitions and the fixed assets needed for the increased rentals of
equipment.
Interest expense, net of interest income, increased to $310,000 for the six
months ended January 31, 1995 from $4,000 for the six months ended January 31,
1994. This increase resulted from the Company borrowing monies to fund certain
acquisitions.
Income tax expense was provided at a 37% effective rate, comparable to actual
rates experienced in prior periods.
Net income for the six months ended January 31, 1995 was $5.8 million, an 80%
increase over the same period in fiscal 1994. Net income per share increased
34% to $0.59 for the six months ended January 31, 1995 compared to $0.44 for
the same period in fiscal 1994. The weighted average number of shares increased
33% to 9.9 million at January 31, 1995 from 7.4 million at January 31, 1994,
primarily as a result of the March 1994 public stock offering and shares issued
in conjunction with certain acquisitions.
FOR THE FISCAL YEARS ENDED JULY 31, 1994 AND 1993
Operating revenue for the fiscal year ended July 31, 1994 increased to $71.5
million from $48.4 million for the fiscal year ended July 31, 1993. The 48%
increase in operating revenue is attributable primarily to the increase from 71
locations to 134 locations in fiscal 1994 with approximately one-third of the
increase resulting from the acquired home respiratory and other medical
equipment companies. The balance of the growth in operating revenue was from
existing locations, inclusion of fiscal 1993 acquisitions for a full year and
locations internally developed in fiscal 1994.
Operating revenue from home respiratory and other medical equipment grew 74%
to $41.6 million for fiscal 1994 from $23.9 million for fiscal 1993. This 74%
increase was due mainly to a continued focus of the Company's sales force
toward home respiratory products and services and acquisitions of companies
predominantly in this line of business.
Operating revenue from home infusion therapy increased 17% to $25.5 million
for fiscal 1994 from $21.7 million for fiscal 1993. The slower growth is due to
the fiscal 1994 direction of the Company's single sales force toward home
respiratory products and services, and unit growth in home infusion therapy
products and services in spite of some pricing pressures experienced during the
year.
Cost of revenue as a percentage of operating revenue decreased to 24.4% for
fiscal 1994 from 25.5% for fiscal 1993. The Company continued to obtain better
volume pricing with the addition of new entities and refocused its acquisition
efforts on the home respiratory and other medical equipment line of business,
which has a lower cost of revenue as a percentage of operating revenue.
Selling, general and administrative expenses as a percentage of operating
revenue decreased to 50.2% from 51.8% for the same two periods.
Depreciation and amortization expense increased 91% to $5.3 million for
fiscal 1994 from $2.8 million for fiscal 1993, and increased as a percentage of
operating revenue during the same periods. This dollar increase is attributable
to the Company's purchases of fixed and intangible assets resulting from
various acquisitions and the fixed assets needed for the increased rentals of
equipment.
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Net interest expense decreased to $67,000 for fiscal 1994 from $76,000 for
fiscal 1993. This decrease resulted from the payment of outstanding debt
balances in March 1994 with proceeds from the public offering and lower
interest rates charged on borrowings from banks prior to March 1994. The
decrease was also due to the interest income earned on short-term investments.
The effective tax rate was 36.5% for fiscal 1994, compared to 36.6% for
fiscal 1993.
As a result of the foregoing, net income increased 58% to $8.1 million from
$5.1 million and net income as a percentage of operating revenue increased to
11.3% for fiscal 1994 from 10.6% for fiscal 1993.
The Company was required to adopt Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," in the first quarter of fiscal 1994 as
more fully described in Note 8 of the consolidated financial statements.
FOR THE FISCAL YEARS ENDED JULY 31, 1993 AND 1992
Operating revenue for the fiscal year ended July 31, 1993 increased to $48.4
million from $37.1 million for the fiscal year ended July 31, 1992. The 30%
increase in operating revenue is attributable primarily to the increase from 48
locations to 71 locations in fiscal 1993 with approximately one-third of this
increase from acquired home respiratory and other medical equipment companies.
The balance of the growth in operating revenue was from existing locations,
inclusion of fiscal 1992 acquisitions for a full year and locations internally
developed in fiscal 1993.
Operating revenue from home respiratory and other medical equipment grew 52%
to $23.9 million for fiscal 1993 from $15.7 million for fiscal 1992. This 52%
increase was due mainly to a renewed focus of the Company's sales force toward
home respiratory products and services and acquisitions of companies
predominantly in this line of business.
Operating revenue from home infusion therapy increased 9% to $21.7 million
for fiscal 1993 from $20.0 million for fiscal 1992. The slower growth is due to
the fiscal 1993 direction of the Company's single sales force toward home
respiratory products and services, and unit growth in home infusion therapy
products and services in spite of some pricing pressures experienced during the
year.
Cost of revenue as a percentage of operating revenue increased to 25.5% for
fiscal 1993 from 22.7% for fiscal 1992 while selling, general and
administrative expenses as a percentage of operating revenue decreased to 51.8%
from 54.5% for the same two periods, resulting in slightly higher margins of
income before income taxes. These offsetting changes in cost of revenue and
selling, general and administrative expenses are largely the result of the
inclusion of a large home infusion therapy entity acquired in mid-fiscal 1992
with a higher cost of revenue as a percentage of operating revenue than the
remainder of the Company.
Depreciation and amortization expense increased 13% to $2.8 million for
fiscal 1993 from $2.5 million for fiscal 1992, yet decreased as a percentage of
operating revenue during the same periods. This dollar increase is attributable
to the Company's purchases of fixed and intangible assets resulting from
various acquisitions and the fixed assets needed for the increased rentals of
equipment.
Net interest expense decreased 75% to $76,000 for fiscal 1993 from $305,000
for fiscal 1992. This decrease resulted from the payment of the outstanding
debt balances in February 1993 with proceeds from the public offering and lower
interest rates charged on borrowings from banks prior to February 1993. The
decrease was also due to the interest income earned on short-term investments.
The effective tax rate was 36.6% for fiscal 1993, compared to 35.2% for
fiscal 1992. The increase is primarily attributable to increased amortization
of non-deductible intangible assets.
As a result of the foregoing, net income increased 39% to $5.1 million from
$3.7 million and net income as a percentage of operating revenue increased to
10.6% for fiscal 1993 from 9.9% for fiscal 1992.
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LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1995, total current assets were $48.0 million and total
current liabilities were $34.8 million, resulting in working capital of $13.2
million. The Company's current ratio was 1.38 to 1 at January 31, 1995 compared
to 3.68 to 1 at July 31, 1994. Net trade accounts receivable increased $5.9
million in the six months ended January 31, 1995, or 20%. This increase is
attributable to acquisitions of the net assets of many home health care
companies in the first six months and the 98% increase in operating revenue
over the same period in the prior year. As a result, the Company's days revenue
outstanding on net accounts receivable decreased to 100 days at January 31,
1995 from 116 days at July 31, 1994. Acquired receivables remaining outstanding
account for approximately 10 days revenue outstanding at January 31, 1995 and
21 days revenue outstanding at July 31, 1994.
Current liabilities increased $24.4 million in the six months ended January
31, 1995, or 236%, as $22.4 million was borrowed on the working capital line of
credit and the balance of the change was due to the timing of payments to
vendors.
During the six months ended January 31, 1995, the Company generated cash of
$4.3 million from operating activities primarily as a result of net income of
$5.8 million. Advances on the working capital and acquisition line of credit
were utilized to reduce acquired accounts payable, to fund internal expansion
and acquisitions. The Company has been financing its revenue growth and
increased working capital requirements with positive net cash provided by
operating activities and short-term borrowings.
As of January 31, 1995, the Company had a working capital and acquisition
line of credit of $50.0 million, with approximately $23.5 million available for
future borrowing. The working capital and acquisition line of credit carries a
negative pledge on all Company assets, is payable on demand and provides for
interest rates, at the Company's election, of LIBOR plus .75% or prime rate
minus 1% for the first $20.0 million advanced to the Company and LIBOR plus
.875% or prime rate minus 1% for any advances in excess of the first $20.0
million. The line of credit requires compliance by the Company with certain
financial and negative covenants, including a restriction on dividends.
Management believes that the net proceeds from this offering, in addition to
its credit capacity and cash flow from operations, will be sufficient for the
Company's projected growth in the near future.
For fiscal 1994, the Company's operating activities provided $4.8 million in
cash, compared to $1.6 million in fiscal 1993. The primary component of this
change was an increase in net income to $8.1 million for fiscal 1994, compared
to $5.1 million for fiscal 1993, offset by increased accounts receivable and
decreased amounts payable on operating liabilities. The Company has generated
positive net cash flow from operating activities in each of its last six fiscal
years despite increases in accounts receivable in each period resulting from
the similar growth in operating revenue.
During fiscal 1994, investing activities used $47.1 million in cash, compared
to $6.4 million during fiscal 1993. During fiscal 1994, the Company spent $9.4
million to purchase property and equipment (primarily rental equipment) for
operations and general equipment needs, compared to $4.0 million in fiscal
1993. Purchases of property and equipment typically represent the major
component of the Company's investing activities. The Company paid $38.6 million
to acquire various home health care companies in fiscal 1994. Aside from
increased purchases of home respiratory and other medical equipment to support
its revenue growth in its home respiratory and other medical equipment
operations, the Company does not require significant fixed capital investment.
Financing activities provided $40.0 million in cash during fiscal 1994,
compared to $7.2 million during fiscal 1993. The increase in cash provided by
financing activities resulted from proceeds of the March 23, 1994 stock
offering and bank borrowings, net of amounts used to pay off outstanding debts.
The Company's strategy has been to use net cash flow from operations,
borrowings and equity offerings to finance expansion of its business.
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BUSINESS
GENERAL
RoTech Medical Corporation ("RoTech" or the "Company") provides comprehensive
home health care and primary care physician services to patients in non-urban
areas. RoTech currently operates 149 home health care locations and 19 primary
care physician practices, employing 26 physicians. The Company's home health
care business provides a diversified range of products and services, with
emphasis on respiratory and home infusion therapies. RoTech has pursued an
aggressive acquisition strategy since 1988 which included in fiscal 1994
acquisitions of 46 locations of smaller home health care companies and the
opening of 19 new locations. Current industry estimates indicate that
approximately half of the nation's home health care industry remains fragmented
and is run by either single operators or small, local chains. These smaller
providers are RoTech's main competition and main acquisition opportunities. The
Company plans to continue to enter new home health care markets through
acquisition or start-up as competitive and pricing pressures encourage
consolidation and economies of scale. In January 1994, the Company expanded
this strategy to include the acquisition of primary care physician practices in
certain markets to enable the ultimate development of an integrated primary
health care delivery system capable of providing a broad range of non-
institutional care to patients in these markets. The Company believes this
system will facilitate managed care concepts and pricing in these markets,
where managed care currently has little penetration, and should prevent the
outmigration of the non-urban population to urban health care facilities and
service providers. The Company's revenues have grown from $18 million for the
fiscal year ended July 31, 1990 to $71 million for the fiscal year ended July
31, 1994 and $59 million for the six months ended January 31, 1995.
SALES AND MARKETING
RoTech believes that the sales and marketing skills of its employees have
been instrumental in its growth to date and are critical to its future success.
RoTech emphasizes to its employees the importance of patient base growth and
retention by providing quality service to physicians and their patients.
Approximately 28% of RoTech's employees are actively involved in sales and
marketing. The sales representatives employed by the Company include registered
or certified respiratory therapists, registered pharmacists and registered
nurses who market all of the Company's services and products and are
responsible for maintaining and expanding the Company's relationships with
physicians, targeting primary care physicians in non-urban areas.
RoTech provides formal marketing, training, product and service information
to all of its technical and sales personnel so they can communicate effectively
with physicians about the Company's services and products. These personnel are
instructed on methods of serving the physicians by counseling them on new
procedures and medical technologies. Each technical and sales person must
attend periodic seminars conducted on a Company-wide basis. The Company
emphasizes the cross-marketing of all its products to physicians with which its
salespeople have already developed professional relationships. The Company
believes its marketing approach allows the primary care physician to identify
acute and chronic patients earlier in the disease process. Treatment is done at
the primary care level and accordingly at less cost than the advanced treatment
of the disease by specialists or in a hospital setting.
HOME HEALTH CARE PRODUCTS AND SERVICES
HOME RESPIRATORY CARE AND OTHER HOME MEDICAL EQUIPMENT PRODUCTS AND SERVICES
RoTech provides a variety of home respiratory therapy products and services
on a monthly rental or sale basis. Home respiratory care and other home medical
equipment represented 65% of the Company's revenues for the six months ended
January 31, 1995. RoTech focuses on serving patients of primary care physicians
with chronic pulmonary diseases in their pre-acute stages. Early identification
and retention of these patients at the primary care level reduces the cost of
health care and should improve the quality of life of the patients and their
families. RoTech also enjoys patient retention post-hospitalization at the
patient's or
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physician's request and does not rely on referrals of patients by hospital
discharge planners or case managers. Overall home respiratory market revenues
were approximately $1.6 billion in 1993.
The Company's home respiratory care product line includes oxygen
concentrators, portable liquid oxygen systems, nebulizers, and ventilator care.
Oxygen concentrators extract oxygen from room air and generally provide the
least expensive supply of oxygen for patients who require a continuous supply
of oxygen, are not ambulatory and who do not require excessive flow rates.
Liquid oxygen systems store oxygen under pressure in a liquid form. The liquid
oxygen is stored in a stationary unit that can be easily refilled at the
patient's home and can be used to fill a portable device that permits greatly
enhanced patient mobility. Nebulizers are devices which aerosolize medications,
allowing them to be inhaled directly into the patient's lungs. Ventilator
therapy is used for the individual that suffers from respiratory failure by
mechanically assisting the individual to breathe. The Company provides
technicians who deliver and/or install the respiratory care equipment, instruct
the patient in its use, refill the high pressure and liquid oxygen systems as
necessary and provide continuing maintenance of the equipment.
RoTech provides a full line of equipment and supplies of home medical
equipment and supplies for convalescents, including custom pieces required for
rehabilitation patients. Provision of home medical equipment enables the
Company to provide a "one-stop shopping" presence in its non-urban markets,
which is required for full patient service satisfaction. These products are
provided on a monthly rental or sale basis and include wheelchairs, hospital
beds, walkers, patient lifts, orthopedic supplies, catheters, syringes and
bathroom aids.
HOME INFUSION THERAPY
Home infusion therapy involves the administration of antibiotics, nutrients
or other medications intravenously, intramuscularly, subcutaneously or through
a feeding tube. The Company focuses on providing home infusion therapy to
patients prior to or in lieu of hospitalization, which generally offers
significant cost savings and preferable logistics for patients, their families
and caregivers over hospital-based treatments. RoTech believes that its
marketing methods of consulting with primary care physicians on home infusion
therapies and the continuing evolution of related technological advances should
enable further growth of this portion of the business. Focus on the referring
primary care physician facilitates the identification of patients requiring
sub-acute antibiotic treatments, which constitute 39% of the home infusion
therapy market. Home infusion therapies accounted for 27% of RoTech's revenues
for the six months ended January 31, 1995, which includes the following types
and percentage mix of therapies for the same period:
Antibiotic Therapy, 72% of home infusion therapy revenues. Antibiotic therapy
requires the infusion of antibiotic drugs into the patient's bloodstream to
treat infections and diseases, such as osteomyelitis (bone infections),
bacterial endocarditis (infection of the lining around the heart), wound
infections, infections associated with HIV/AIDS, and infections of the kidneys
and urinary tract. Antibiotics are generally believed to be more effective when
infused directly into the bloodstream than when taken orally. These treatments
can be prescribed by primary care physicians, are short-term in nature and
recur occasionally.
Enteral Nutrition Therapy, 12% of home infusion therapy revenues. Enteral
nutrition therapy is administered to patients who cannot eat as a result of an
obstruction to the upper gastrointestinal tract or because they are otherwise
unable to be fed orally. As with total parenteral nutrition therapy, enteral
nutrition therapy is often administered over a long period.
Pain Management and Chemotherapy, 6% of home infusion therapy revenues. Pain
management therapy is the administration of pain controlling drugs to
terminally or chronically ill patients and is often administered in conjunction
with intravenous chemotherapy. Chemotherapy is the continuous or intermittent
intravenous administration of anti-cancer drugs. Chemotherapy generally is
administered periodically for several weeks or months.
Total Parenteral Nutrition Therapy, 5% of home infusion therapy revenues.
Total parenteral nutrition (TPN) therapy involves the intravenous feeding of
nutrients to patients with impaired digestive tracts due to
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gastrointestinal illnesses or conditions, due to underlying conditions
including cancer or HIV/AIDS. TPN is usually longer in duration than other
forms of infusion therapy, and can be lifelong.
Other Therapies. Other therapies and services include therapies such as
congestive heart failure therapy, hydration therapy and related nursing
services.
The Company's home infusion therapy business is dependent in large measure
upon physicians continuing to prescribe the administration of drugs and
nutrients through intravenous and other infusion methods. Orally administered
drugs and alternative drug delivery systems may have an effect upon the demand
for certain infusion therapies. The Company can predict neither the ultimate
impact of these treatments on the Company's business nor the nature of future
medical advances or their eventual impact on the Company's business.
PRIMARY CARE PHYSICIANS PRACTICES
RoTech believes that acquisitions of primary care physician practices in its
service areas present substantial opportunities. The Company believes that it
will be able to increase the profitability of the individual practices through
economies of scale and greater efficiencies, and that its centralized billing
and reimbursement functions will typically result in lower costs per claim and
quicker reimbursement. Based upon its many years of marketing to primary care
physicians, RoTech believes that the additional training and responsibility of
certain key personnel in a practice, typically a nurse, result in more
efficiency and allow physicians to spend more time practicing medicine. Not
only does this increased efficiency boost profitability, it also usually
results in greater physician satisfaction. In a medical practice owned by
RoTech, RoTech has the opportunity to instill the philosophy of patient
retention whereby primary care physicians can help patients maintain control
over their health care expenditures. The Company believes this increases the
profitability of the primary care physician practice and reduces the total
amount of money spent to treat a patient with no reduction in the overall level
of care. RoTech currently provides home health care products and services to
the patients of more than 2,000 primary care physicians. The Company believes
that many of these physicians could ultimately become part of RoTech through
its acquisitions of such practices. Physician practices currently represent 8%
of the Company's revenues.
RoTech has been a proponent of physician independence and autonomy through
its long-standing marketing to primary care physicians. This position is
counter to the role of the hospitals and managed care organizations who have
historically served to limit access and reimbursement of these physicians. By
partnering with RoTech, primary care physicians are able to obtain purchasing
power, administrative services, management, information systems and capital for
expanded staffing needed to service a larger patient base and improve the
medical practice and quality of life of the physician. As RoTech creates
networks of primary care physicians in these non-urban markets, additional
services can be justified and facilitated such as introduction of specialists
(pulmonologist, cardiologist, oncologist, or obstetrician) or mobile diagnostic
equipment. The Company expects that these specialists will serve to educate,
support and consult with the primary care physician; will be salaried,
contracted or possibly capitated; and will provide hands-on treatment of more
complex cases. The expected economies of scale and information systems strength
will result in a better, more cost effective system for disease management,
including early detection and treatment, preventive care and wellness programs.
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REIMBURSEMENT FOR SERVICES
A substantial percentage of RoTech's revenue is attributable to third-party
payors, including private insurers, Medicare and, to a lesser extent, Medicaid.
The Company has substantial expertise at processing claims and continues to
create and improve systems to manage third-party reimbursements, to produce
clean claims and obtain timely reimbursements by third-party payors. RoTech has
an incentive compensation program for its claims collection employees which is
keyed to the percentage of claims reimbursed and the timeliness of the
reimbursement. The Company has developed distinct billing and collection
departments for Medicare and Medicaid reimbursements and for private insurance
company claims which are supported by customized computer systems. These
departments work closely with reimbursement officers at branch locations and
third-party payors and are responsible for the review of patient coverage, the
adequacy and timeliness of documentation and the follow-up with third-party
payors to expedite reimbursement payments. Reimbursement from the Medicare
program as a percentage of RoTech's total operating revenue approximated 36%
for fiscal 1992, 39% for fiscal 1993, 35% for fiscal 1994 and 47% for the six
months ended January 31, 1995.
RoTech has achieved increased operating revenue in home respiratory and other
medical equipment operations despite increased regulation and corresponding
reimbursement reductions. While the increased regulation tends to reduce the
amount of reimbursement from government sources for individual cases, the
Company believes the continued increased regulation also benefits the Company
by reducing the competition from joint ventures and fee revenue sharing
arrangements, which the Company has historically avoided.
The levels of operating revenue and profitability of the Company, like those
of other health care companies, are affected by the continuing efforts of
third-party payors to contain or reduce the costs of health care by lowering
reimbursement rates, increasing case management review of services and
negotiating reduced contract pricing. Home health care, which is generally less
costly to third-party payors than hospital-based care, has benefitted from
those cost containment objectives. However, as expenditures in the home health
care market continue to grow, initiatives aimed at reducing the costs of health
care delivery at non-hospital sites are increasing. Changes in reimbursement
policies by third-party payors, or the reduction in or elimination of such
reimbursement programs, could have a material adverse impact on the Company's
revenues. Various state and federal health reform initiatives may lead to
additional changes in reimbursement programs.
GOVERNMENT REGULATION
The home care industry is subject to extensive government regulation at the
federal level through the Medicare program and at the state level through the
Medicaid program. Medicare is a federally funded health insurance program which
provides health insurance coverage for persons age 65 and older and certain
disabled persons, and generally provides reimbursement at specified rates for
sales and rentals of specified medical equipment and supplies, provided such
equipment and supplies are determined to be medically necessary by the treating
physician. Medicaid is a health insurance program administered by state
governments which provides reimbursements for health care for certain
financially or medically needy persons regardless of age.
The Company is subject to government audits of its Medicare and Medicaid
reimbursement claims and has not, to date, experienced any material loss as a
result of any such government audits. Under existing federal law, the knowing
and willful offer or payment of any remuneration (including any kickback, bribe
or rebate) of any kind to another person to induce the referral of Medicare or
Medicaid beneficiaries for whom medical supplies and services may be reimbursed
by the Medicare or Medicaid programs is prohibited and could subject the
parties to such an arrangement to substantial criminal and civil penalties,
including exclusion from participation in these programs, for Medicare or
Medicaid fraud. The Office of Inspector General of the Department of Health and
Human Services ("OIG") has promulgated regulatory "safe harbors" that describe
certain practices and business arrangements that comply with Medicare and
Medicaid
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regulations. The OIG and law enforcement authorities have recently increased
their investigatory efforts to determine whether various business practices
constitute remuneration for, or to induce, referrals. Certain states have also
passed statutes and regulations that prohibit payments for referral of
patients. These laws vary significantly from state to state. Possible sanctions
for violation of these restrictions include loss of licensure, civil and
criminal penalties. The Company has been aware that the OIG has made informal
inquiries, from time to time, about certain business practices which occurred
in 1988 and 1989, as they relate to particular services then offered by one of
the Company's subsidiaries. The Company believes the issue of inquiry to
involve the technical requirements of Medicare billing for certain components
of a diagnostic test. This inquiry was commenced by the Orlando office of the
OIG in mid-1989. In 1993, the Company learned that the OIG had concluded its
inquiry and submitted its findings to the Office of the U.S. Attorney for the
Middle District of Florida for review. After meeting with the U.S. Attorneys
office in early 1994, the Company has not been notified of any further
developments, although there can be no assurance that this matter will not be
pursued further. The Company is confident that it is in compliance with all
material Medicare requirements.
The types of services and products delivered by the Company, the required
quality of such services and products and the manner in which such services and
products are delivered and billed are each subject to significant and complex
regulations promulgated, interpreted and administered by the appropriate
federal or state governmental agency. Although the Company believes that its
products, services and procedures comply in all respects with such regulations
applicable to reimbursement eligibility, the unavailability of advance formal
administrative rulings in most regulated areas subjects the Company to possible
subsequent adverse interpretations and rulings which may affect the eligibility
of some or all of the Company's services and products for reimbursement. Such
an adverse interpretation or ruling could have a substantial adverse impact on
the Company's business.
In addition, the Company is required to obtain federal and state licenses and
permits relating to the distribution of pharmaceutical products, including a
federal Controlled Dangerous Substance Registration Certificate and Florida
State Wholesaler License. The Company is required to obtain similar licenses
from each state in which it does business.
The Company's acquisitions of primary care physician practices are structured
to attempt to comply with federal and state law restrictions on business
relationships between the Company and persons who may be in a position to refer
patients to the Company for the provision of health care related items or
services. Accordingly, the Company endeavors to undertake such acquisitions in
a manner where the consideration offered and paid is consistent with fair
market value in arms-length transactions and is not determined in a manner that
takes into account the volume or value of any referrals or business that might
otherwise be generated between the Company and the physician whose practice to
be acquired and for which payment may be made under Medicare or Medicaid. While
the Company believes that its acquisitions do not entail any form of unlawful
remuneration, there can be no assurances that enforcement authorities will not
attempt to construe the consideration exchanged in certain acquisition
transactions as entailing unlawful remuneration and to challenge such
transactions on such basis.
In many states, the "corporate practice of medicine doctrine" prohibits
business corporations from providing, or holding themselves out as providers
of, medical care through the employment of physicians. Although the two states
in which the Company has acquired practices of primary care physicians, Florida
and Mississippi, have not adopted this prohibition, there can be no assurance
that either state will not adopt this doctrine in the future or that the
Company will not acquire a primary care medical practice in a state that has
enacted or adopted through case law the corporate practice of medicine
doctrine. While the Company intends to structure future acquisitions to comply
with the corporate practice of medicine doctrine where it exists, there can be
no assurance that, given varying and uncertain interpretations of such laws,
the Company would be found to be in compliance with restrictions on the
corporate practice of medicine in all states. Enforcement of such doctrine
could require divestiture of acquired practices or restructuring of physician
relationships.
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Health care is an area of extensive and dynamic regulatory change. Changes in
the law or new interpretations of existing laws can have a dramatic effect on
permissible activities, the relative costs associated with doing business, and
the amount of reimbursement by government and third-party payors. The Omnibus
Budget Reconciliation Act of 1987 ("OBRA 1987") created six categories of
durable medical equipment for purposes of reimbursement under the Medicare Part
B program. There is a separate fee schedule for each category. OBRA 1987 also
controls whether durable medical equipment products will be paid for on a
rental or sale basis and established fixed payment rates for oxygen service as
well as a 15-month rental ceiling on certain medical equipment. An interim
final rule implementing the payment methodology under the fee schedules
recently was published in the Federal Register. Payment based on the fee
schedules is effective with covered items furnished on or after January 1,
1989. Generally, Medicare pays 80% of the lower of the supplier's actual charge
for the item or the fee schedule amount, after adjustment for the annual
deductible amount. OBRA 1990 made changes to Medicare Part B reimbursement that
were implemented in 1991. The substantive change was the standardization of
Medicare rates for certain equipment categories. Laws and regulations often are
adopted to regulate new products, services and industries. There can be no
assurances that either the states or the federal government will not impose
additional regulations upon the Company's activities which might adversely
affect the Company's business.
Political, economic and regulatory influences are subjecting the health care
industry in the United States to fundamental change. Although Congress has
failed to pass comprehensive health care reform legislation thus far, the
Company anticipates that Congress and state legislatures will continue to
review and assess alternative health care delivery and payment systems and may
in the future propose and adopt legislation effecting fundamental changes in
the health care delivery system. Legislative debate is expected to continue in
the future, and the Company cannot predict what impact the adoption of any
federal or state health care reform measures or future private sector reform
may have on its industry or business.
Pursuant to federal legislation (commonly known as "Stark II") enacted as
part of The Omnibus Budget Reconciliation Act of 1993, and effective January 1,
1995, physicians are prohibited from making referrals to entities in which they
(or immediate family members) have an investment interest or compensation
arrangement, where such referral is for any "designated health service" covered
by Medicare/Medicaid, including parenteral and enteral nutrients, equipment and
supplies, and home health services. Ownership by a physician of investment
securities in a publicly-held corporation with stockholders' equity exceeding
$75 million at the end of the corporation's most recent fiscal year or on
average during the previous three fiscal years is exempt from the investment
prohibition if the securities are traded on the New York, American or a
regional stock exchange, or The Nasdaq National Market. Exemptions from the
compensation arrangement prohibition include (i) amounts paid by an employer to
a physician pursuant to a bona fide employment relationship meeting specified
requirements, including payments being unrelated to referrals and consistent
with the fair market value of the services provided and (ii) other personal
service arrangements if certain requirements are met, including that
compensation be paid over the term of a written agreement with a term of one
year or more, be set in advance, not exceed fair market value, and be unrelated
to referrals. While RoTech intends to structure its acquisitions and operations
to comply with Stark II, there can be no assurance that future interpretations
of that law will not require structural and organizational modifications of the
Company's existing relationships with physicians, nor can assurance be given
that present or future relationships between the Company and physicians will be
found to be in compliance with such law.
INSURANCE
In recent years, participants in the health care market have become subject
to an increasing number of malpractice and product liability lawsuits, many of
which involve large claims and significant defense costs. As a result of the
liability risks inherent in the Company's lines of business, including the risk
of liability due to the negligence of physicians or other health care
professionals employed by or otherwise under contract to the Company, the
Company maintains liability insurance intended to cover such claims. There can
be no assurance that the coverage limits of the Company's insurance policies
will be adequate, or that the Company can obtain liability insurance in the
future on acceptable terms or at all.
17
<PAGE>
The Company currently has in force general liability and products liability
insurance policies, with coverage limits of $2.0 million per occurrence and in
the aggregate annually (with a deductible of $25,000 per occurrence, and a
deductible aggregate of $125,000). The Company also has in force a professional
liability insurance policy, with a coverage limit of $1.0 million per
occurrence and $3.0 million in the aggregate annually. The Company has in
force, with respect to physicians employed by the Company, individual
professional liability insurance policies, with coverage limits ranging from
$250,000 per occurrence to $1 million per occurrence, and ranges from $750,000
in the aggregate annually to $3 million in the aggregate annually. The
Company's insurance policies are subject to annual renewal.
18
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names and ages of the executive officers and directors of RoTech, and the
positions held by each, are as follows:
<TABLE>
<CAPTION>
HELD OFFICE/
POSITION
NAME AGE POSITION SINCE
---- --- -------- ------------
<C> <S> <C> <C>
William P. Kennedy 51 Chief Executive Officer and Chairman, Board of Directors 1981
Stephen P. Griggs 37 Chief Operating Officer, President and Director 1988
Rebecca R. Irish 33 Chief Financial Officer and Treasurer 1991
William A. Walker II 53 Secretary and Director 1984
Leonard E. Williams 64 Director 1988
Jack T. Weaver 61 Director 1992
</TABLE>
William P. Kennedy is Chairman of the Board of Directors of the Company and
also serves as its Chief Executive Officer. Mr. Kennedy graduated from the
University of South Carolina, School of Pharmacy in 1966 and has been qualified
as a Florida registered pharmacist since that time. Mr. Kennedy is also the
sole owner of Thayer's Colonial Pharmacy, Inc. ("Thayer's") in Orlando,
Florida, and serves as its President, Treasurer and Chairman of its Board of
Directors.
William A. Walker II is the Secretary and a Director of the Company. Mr.
Walker has been an attorney with the Winter Park and Orlando, Florida law firm
of Winderweedle, Haines, Ward & Woodman, P.A., since July, 1967, and is a
shareholder and member in that professional association. Winderweedle, Haines,
Ward & Woodman, P.A. serves as general counsel to the Company.
Stephen P. Griggs is the President, Chief Operating Officer and a Director of
the Company. Mr. Griggs is also the President or Vice President and a Director
of the subsidiaries of the Company. Mr. Griggs is a Certified Public Accountant
with undergraduate degrees in business management from East Tennessee State
University and in accounting from the University of Central Florida. Mr. Griggs
practiced as a Certified Public Accountant before entering private business.
Rebecca R. Irish is the Treasurer and Chief Financial Officer of the Company.
Ms. Irish is also the Secretary, Treasurer and a Director of the subsidiaries
of the Company. Ms. Irish is a Certified Public Accountant and practiced with
Ernst & Young LLP before joining the Company.
Leonard E. Williams is a Director of the Company. Mr. Williams is the
President, Chief Executive Officer and Chairman of the Board of Directors of
Wayne Densch, Inc., President of Leonard E. Williams Company and serves as a
director of First Union National Bank of Orlando.
Jack T. Weaver is a physician and a Director of the Company. Dr. Weaver is
Chairman of the Board of Trustees and Acting President of The University of
Health Sciences College of Osteopathic Medicine in Kansas City, Missouri and
Chairman of Medical Affairs and Academic Committee.
SELLING SHAREHOLDER
The following table sets forth certain information with respect to the
Selling Shareholder as of April 13, 1995, and after giving effect to the sale
of the shares of Common Stock offered hereby. Except as otherwise indicated,
the person named below has sole voting and investment power with respect to the
shares of Common Stock beneficially owned by him.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
------------------------- -----------------------
NO. OF
SHARES
NO. OF TO BE NO. OF
NAME SHARES PERCENT SOLD SHARES PERCENT
---- ------------- ---------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
William P. Kennedy... 1,244,048(1) 12.9% 300,000 944,048 8.3%
</TABLE>
- --------
(1) Includes shares owned by Thayer's, of which Mr. Kennedy is the sole
shareholder.
19
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement, each Underwriter named below has severally agreed to purchase, and
the Company and the Selling Shareholder have agreed to sell to each
Underwriter, shares of Common Stock which equal the number of shares set forth
opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Smith Barney Inc. .................................................
Needham & Company, Inc. ...........................................
Total.............................................................. 2,000,000
=========
</TABLE>
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc. and Needham & Company, Inc. are
acting as Representatives, have advised the Company that they propose initially
to offer part of the shares of Common Stock directly to the public at the
public offering price set forth on the cover page hereof and part to certain
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to certain other
dealers. After the public offering of the shares of Common Stock offered
hereby, the public offering price and such concessions may be changed by the
Underwriters.
The Company and the Selling Shareholder have granted to the Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase
up to an aggregate of 300,000 additional shares of Common Stock at the public
offering price set forth on the cover page hereof less underwriting discounts
and commissions. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
incurred in connection with the sale of the shares offered hereby. To the
extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
such additional shares as the number set forth next to such Underwriter's name
in the preceding table bears to the total number of shares in such table.
The Company, the Selling Shareholder and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The Company, the Company's directors and executive officers and the Selling
Shareholder have agreed that, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent
20
<PAGE>
of Smith Barney Inc., sell, offer to sell, contract to sell or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exchangeable for any shares of Common Stock.
In general, the rules of the Commission will prohibit the underwriters from
making a market in the Common Stock during the "cooling off" period immediately
preceding the commencement of sales in the offering. The Commission has,
however, adopted exemptions from these rules that permit passive market making
under certain conditions. These rules permit an underwriter to continue to make
a market subject to the conditions, among others, that its bid not exceed the
highest bid by a market maker not connected with the offering and that its net
purchases on any one trading day not exceed prescribed limits. Pursuant to
these exemptions, the Underwriters, selling group members (if any) or their
respective affiliates may engage in passive market making in the Common Stock
during the cooling off period.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for RoTech by Winderweedle, Haines, Ward & Woodman, P.A., Winter Park and
Orlando, Florida. William A. Walker II, Secretary, a Director and a shareholder
of the Company, is a shareholder and officer of Winderweedle, Haines, Ward &
Woodman, P.A. Such firm has acted as counsel to the Company, its subsidiaries,
and certain of its affiliates in other matters. Certain legal matters in
connection with the Common Stock offered hereby will be passed upon for the
Underwriters by Dewey Ballantine, New York, New York.
EXPERTS
The consolidated financial statements and the related consolidated financial
statement schedules incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K at July 31, 1994 and for the year ended
July 31, 1994 have been audited by Deloitte & Touche LLP, independent certified
public accountants, and at July 31, 1993, and for each of the two years in the
period ended July 31, 1993, by Ernst & Young LLP, independent certified public
accountants, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firms given upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 under the Securities Act of
1933 with respect to the Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits and schedules filed therewith.
The Registration Statement may be examined without charge, and copies thereof
may be obtained upon payment of a prescribed fee, at the principal office of
the Commission in Washington, D.C.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission. Reports, proxy statements and other
information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: New York Regional Office, 7 World Trade
Center, New York, New York 10048; and Chicago Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such reports, proxy statements and other information can also be
inspected at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington,
D.C. 20006.
21
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA-
TION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THOSE SPECIFICALLY OFFERED HEREBY OR AN OFFER TO SOLICITATION IN ANY JURISDIC-
TION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE OR THE DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Information by Reference......................... 2
Prospectus Summary........................................................ 3
The Company............................................................... 6
Use of Proceeds........................................................... 6
Capitalization............................................................ 6
Selected Consolidated Financial Data...................................... 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 8
Business.................................................................. 12
Management................................................................ 19
Selling Shareholder....................................................... 19
Underwriting.............................................................. 20
Legal Matters............................................................. 21
Experts................................................................... 21
Available Information..................................................... 21
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,000,000 SHARES
[LOGO OF ROTECH MEDICAL CORPORATION APPEARS HERE]
ROTECH MEDICAL CORPORATION
COMMON STOCK
--------
PROSPECTUS
, 1995
--------
SMITH BARNEY INC.
NEEDHAM & COMPANY, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the SEC Registration Fee, NASD Filing Fee and the Nasdaq National Market
Listing Fee. The Selling Shareholder will bear a pro-rata share of all of the
following expenses of the offering:
<TABLE>
<S> <C>
SEC Registration Fee............................................... $23,500
NASD Filing Fee.................................................... 7,315
Nasdaq National Market Listing Fee................................. 17,500
Printing and Engraving Expenses.................................... 40,000
Accounting Fees and Expenses....................................... 35,000
Legal Fees and Expenses............................................ 65,000
Blue Sky Fees and Expenses......................................... 15,000
Transfer Agent and Registrar Fees.................................. 3,000
Fee of Custodian for Selling Shareholder........................... 2,000
Miscellaneous Expenses............................................. 21,685
--------
Total............................................................ $230,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to authority contained in the laws of the state of Florida, Article
IX of the Company's Articles of Incorporation, as amended, and Article IV of
the Company's By-Laws, as amended, provide that the Company shall indemnify
each of its officers and directors, whether or not then in office, and his
executor, administrator or heirs, against any and all actual expenses actually
and necessarily incurred by him, including, but not limited to, attorney's fees
in connection with the defense of any litigation, administrative procedure or
suit to which he may have been a party because of his status as a present or
past director or officer, if he acted in good faith and in a manner not opposed
to the best interests of the Company. He shall have no right to reimbursement,
however, in relation to matters as to which he had been adjudged liable to the
Company for negligence or misconduct in the performance of his duties unless,
and to the extent that, a court of equity shall deem such reimbursement proper
in view of all the circumstances. The right to indemnity for expenses shall
also apply to expenses of suits which are compromised or settled if the court
having jurisdiction of the action shall approve such settlement. The foregoing
right of indemnification shall be in addition to, and not exclusive of, all
other rights to which such officer or director may be entitled.
Section 607.0850(1), Florida Statutes, provides that a corporation may
indemnify any person who is or was a party to any proceeding, by reason of his
current or past status as director, officer, employee or agent of the
corporation, against liability incurred by such person if, in connection with
his activity out of which arises the indemnifiable matter, he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 607.0850(2), Florida Statutes, authorizes a corporation to indemnify
any person who is or was a party to any proceeding by or on behalf of the
corporation to procure a judgment in its favor under circumstances similar to
those identified in Section 607.0850(1) above against expenses and amounts paid
in settlement up to the estimated cost of litigation provided that no
indemnification shall be made in respect of any matter as to which the
potential indemnitee shall have been adjudged to be liable unless, and only to
the extent that, a court of competent jurisdiction shall determine that, in
view of all circumstances, the potential indemnitee is fairly and reasonably
entitled to indemnity for such expenses.
II-1
<PAGE>
Section 607.0850(7), Florida Statutes, prohibits indemnification or
advancement of expenses made to or on behalf of any director, officer or agent
of a corporation if a judgment or final adjudication establishes that his
actions, or omissions to act, were material to the matter adjudicated and which
constitute: a) a violation of the criminal law, unless he had reasonable cause
to believe his conduct was lawful or had no reasonable cause to believe his
conduct was unlawful; b) a transaction from which he derived an improper
personal benefit either directly or indirectly; c) in the case of a director, a
circumstance triggering the liability provisions of Section 607.0834, dealing
with dividends and distributions and/or purchases, of the corporation's own
shares; or d) willful misconduct or conscious disregard for the best interests
of the corporation in a proceeding by it or on its behalf to procure a judgment
in its favor or in a proceeding by or on behalf of a shareholder.
Section 607.0850(9), Florida Statutes, permits courts to order
indemnification of those who are or were a party to a proceeding based on their
status as directors or officers of the corporation.
Reference is made to the Underwriting Agreement, the proposed form to be
filed as Exhibit 1.1, in which the Underwriter agrees to indemnify the
directors and certain officers of the Registrant and certain other persons
against certain civil liabilities.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Proposed form of the Underwriting Agreement
*4.1 Provisions of Articles of Incorporation of RoTech Medical Corporation.
*4.2 Provisions of By-Laws of RoTech Medical Corporation.
5.1 Opinion of Winderweedle, Haines, Ward & Woodman, P.A.
23.1 Consent of Winderweedle, Haines, Ward & Woodman, P.A., counsel to the
Company (included in Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP, Independent Certified Public
Accountants.
23.3 Consent of Ernst & Young LLP, Independent Certified Public
Accountants.
24.1 Power of Attorney (included on Page II-4 of this Registration
Statement)
</TABLE>
- --------
* Filed as an Exhibit to the Company's Registration Statement on Form S-1 (SEC
File No. 33-8711) and incorporated by reference thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
The Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
2. For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
3. For purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF ORLANDO, STATE OF FLORIDA, ON APRIL 13, 1995.
RoTech Medical Corporation, a
Florida Corporation
/s/ Stephen P. Griggs
By: _________________________________
STEPHEN P. GRIGGS,
PRESIDENT
POWER OF ATTORNEY
WE, THE UNDERSIGNED OFFICERS AND DIRECTORS OF ROTECH MEDICAL CORPORATION,
HEREBY SEVERALLY AND INDIVIDUALLY CONSTITUTE AND APPOINT WILLIAM P. KENNEDY,
STEPHEN P. GRIGGS, REBECCA R. IRISH AND THOMAS A. SIMSER, JR., THE TRUE AND
LAWFUL ATTORNEYS AND AGENTS OF EACH OF US TO EXECUTE IN THE NAME, PLACE AND
STEAD OF EACH OF US (INDIVIDUALLY AND IN ANY CAPACITY STATED BELOW) ANY AND ALL
AMENDMENTS TO THIS REGISTRATION STATEMENT ON FORM S-3 AND ALL INSTRUMENTS
NECESSARY OR ADVISABLE IN CONNECTION THEREWITH AND TO FILE THE SAME WITH THE
SECURITIES AND EXCHANGE COMMISSION, SAID ATTORNEYS AND AGENTS TO HAVE FULL
POWER AND AUTHORITY TO DO AND PERFORM IN THE NAME AND ON BEHALF OF EACH OF THE
UNDERSIGNED EVERY ACT WHATSOEVER NECESSARY OR ADVISABLE TO BE DONE IN THE
PREMISES AS FULLY AND TO ALL INTENTS AND PURPOSES AS ANY OF THE UNDERSIGNED
MIGHT OR COULD DO IN PERSON, AND WE HEREBY RATIFY AND CONFIRM OUR SIGNATURES AS
THEY MAY BE SIGNED BY OUR SAID ATTORNEYS AND AGENTS AND ALL SUCH AMENDMENTS AND
INSTRUMENTS.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ William P. Kennedy Chief Executive April 13, 1995
- ------------------------------------- Officer (Principal
WILLIAM P. KENNEDY Executive Officer)
and Director
/s/ Stephen P. Griggs President, Chief April 13, 1995
- ------------------------------------- Operating Officer
STEPHEN P. GRIGGS and Director
/s/ William A. Walker II Secretary and April 13, 1995
- ------------------------------------- Director
WILLIAM A. WALKER II
/s/ Leonard E. Williams Director April 13, 1995
- -------------------------------------
LEONARD E. WILLIAMS
/s/ Jack T. Weaver Director April 13, 1995
- -------------------------------------
JACK T. WEAVER
/s/ Rebecca R. Irish Treasurer and Chief April 13, 1995
- ------------------------------------- Financial Officer
REBECCA R. IRISH (Principal
Financial and
Accounting Officer)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBER PAGE
------- ----------- ------------
<C> <S> <C>
1.1 Proposed form of the Underwriting Agreement
*4.1 Provisions of Articles of Incorporation of RoTech
Medical Corporation.
*4.2 Provisions of By-Laws of RoTech Medical Corporation.
5.1 Opinion of Winderweedle, Haines, Ward & Woodman, P.A.
23.1 Consent of Winderweedle, Haines, Ward & Woodman, P.A.,
counsel to the Company (included in Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP, Independent Certified
Public Accountants.
23.3 Consent of Ernst & Young LLP, Independent Certified
Public Accountants.
24.1 Power of Attorney (included on Page II-4 of this
Registration Statement)
</TABLE>
- --------
* Filed as an Exhibit to the Company's Registration Statement on Form S-1 (SEC
File No. 33-8711) and incorporated by reference thereto.
<PAGE>
Draft of April 14, 1995
2,000,000 Shares
ROTECH MEDICAL CORPORATION
Common Stock
UNDERWRITING AGREEMENT
----------------------
_______, 1995
Smith Barney Inc.
Needham & Company, Inc.
As Representatives of the Several Underwriters
c/o Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
RoTech Medical Corporation, a Florida corporation (the "Company"),
proposes, upon the terms and conditions set forth herein, to issue and sell an
aggregate of 1,700,000 shares of its common stock, $.0002 par value per share
(the "Common Stock"), to the several Underwriters named in Schedule II hereto
(the "Underwriters"), and the person named in Schedule I hereto as selling
stockholder (the "Selling Stockholder") proposes to sell to the several
Underwriters an aggregate of 300,000 shares of Common Stock. The 1,700,000
shares of Common Stock to be issued and sold to the Underwriters by the Company
and the 300,000 shares of Common Stock to be sold to the Underwriters by the
Selling Stockholder are hereinafter referred to as the "Firm Shares." The
Company and Selling Stockholder also propose to sell to the several
Underwriters, upon the terms and conditions set forth in Section 2 hereof, up to
an aggregate of 300,000 additional shares (the "Additional Shares"). The Firm
Shares and the Additional Shares are hereinafter collectively referred to as the
"Shares." The Company and the Selling Stockholder are hereinafter sometimes
referred to as the "Sellers."
The Company and the Selling Stockholder wish to confirm as follows their
respective agreements with you (the "Representatives") and the other several
Underwriters on whose behalf you are acting in connection with the several
purchases of the Shares by the Underwriters.
1. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 under the Act (the "registration
statement"), including a prospectus subject to completion relating to the
Shares. The term "Registration Statement" as used in this Agreement means the
registration statement (including all financial schedules and exhibits), as
amended at the time it becomes
<PAGE>
effective, or, if the registration statement became effective prior to the
execution of this Agreement, as supplemented or amended prior to the execution
of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed and must be declared effective before the offering of the Shares may
commence, the term "Registration Statement" as used in this Agreement means the
registration statement as amended by said post-effective amendment. The term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. Any reference herein to the registration statement, the
Registration Statement, any Prepricing Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Form S-3 under the Act, as of the date of the registration
statement, the Registration Statement, such Prepricing Prospectus or the
Prospectus, as the case may be, and any reference to any amendment or supplement
to the registration statement, the Registration Statement, any Prepricing
Prospectus or the Prospectus shall be deemed to refer to and include any
documents filed after such date under the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act") and so incorporated by reference. As used
herein, the term "Incorporated Documents" means the documents which at the time
are incorporated by reference in the registration statement, the Registration
Statement, any Prepricing Prospectus, the Prospectus or any amendment or
supplement thereto.
2. Agreements to Sell and Purchase. Subject to such adjustments as you
may determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholder herein contained and
subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of $[______] per share (the "Purchase Price Per Share"), that number of
Firm Shares which bears the same proportion to the aggregate number of Firm
Shares to be issued and sold by the Company as the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule II hereto (or such
number of Firm Shares increased as set forth in Section 12 hereof) bears to the
aggregate number of Firm Shares to be sold by the Sellers.
Subject to such adjustments as you may determine in order to avoid
fractional shares, the Selling Stockholder agrees, subject to all the terms and
conditions set forth herein, to sell to each Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Stockholder herein contained and subject to all the terms and conditions set
forth herein, each Underwriter agrees to purchase from the Selling Stockholder
at the Purchase Price Per Share that number of Firm Shares which bears the same
proportion to the number of Firm Shares set forth opposite the name of the
Selling Stockholder in Schedule I hereto as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule II hereto (or such number of
Firm Shares increased as set forth in Section 12 hereof) bears to the aggregate
number of Firm Shares to be sold by the Sellers.
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The Company and the Selling Stockholder also agree, subject to all the
terms and conditions set forth herein, to sell to the Underwriters and, upon the
basis of the representations, warranties and agreements of the Company and the
Selling Stockholder herein contained and subject to all the terms and conditions
set forth herein, the Underwriters shall have the right to purchase from the
Company and the Selling Stockholder, at the Purchase Price Per Share, pursuant
to an option (the "over-allotment option") which may be exercised at any time
and from time to time prior to 9:00 P.M., New York City time, on the 30th day
after the date of the Prospectus (or, if such 30th day shall be a Saturday or
Sunday or a holiday, on the next business day thereafter when the New York Stock
Exchange is open for trading), up to an aggregate of 300,000 Additional Shares,
of which up to an aggregate of 200,000 Additional Shares may be sold by the
Selling Stockholder and of which up to 100,000 Additional Shares may be sold by
the Company. If the Underwriters exercise the over-allotment option, Additional
Shares will be purchased by the Underwriters from the Selling Stockholder and
the Company on a pro-rata basis. Upon any exercise of the over-allotment option,
each Underwriter, severally and not jointly, agrees to purchase from the Company
and Selling Stockholder the number of Additional Shares (subject to such
adjustments as you may determine in order to avoid fractional shares) which
bears the same proportion to the number of Additional Shares to be sold by the
Company and the Selling Stockholder as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule II hereto (or such number of
Firm Shares increased as set forth in Section 12 hereof) bears to the aggregate
number of Firm Shares to be sold by the Sellers.
Certificates in transferable form for the Shares, which the Selling
Stockholder agrees to sell pursuant to this Agreement have been placed in
custody with [_____________] (the "Custodian") for delivery under this Agreement
pursuant to a Custody Agreement and Power of Attorney (the "Custody Agreement")
executed by the Selling Stockholder appointing ________________________ and
_______________________ as agents and attorneys-in-fact (the "Attorneys-in-
Fact"). The Selling Stockholder agrees that (i) the Shares represented by the
certificates exercisable for such Shares, held in custody pursuant to the
Custody Agreement, are subject to the interests of the Underwriters and the
Company, (ii) the arrangements made by the Selling Stockholder for such custody
are, except as specifically provided in the Custody Agreement, irrevocable and
(iii) the obligations of the Selling Stockholder hereunder and under the Custody
Agreement shall not be terminated by any act of such Selling Stockholder or by
operation of law, whether by the death or incapacity of the Selling Stockholder
or the occurrence of any other event. If the Selling Stockholder shall die or
be incapacitated or if any other event shall occur before the delivery of the
Shares hereunder, certificates for the Shares of the Selling Stockholder shall
be delivered to the Underwriters by the Attorneys-in-Fact in accordance with the
terms and conditions of this Agreement and the Custody Agreement as if such
death or incapacity or other event had not occurred, regardless of whether or
not the Attorneys-in-Fact or any Underwriter shall have received notice of such
death, incapacity or other event. Each Attorney-in-Fact represents that he is
authorized, on behalf of the Selling Stockholder, to execute this Agreement and
any other documents necessary or desirable in connection with the sale of the
Shares to be sold hereunder by the Selling Stockholder, to make delivery of the
certificates for such Shares, to receive the proceeds of the sale of such
Shares, to give receipts for such proceeds, to pay therefrom any expenses to be
borne by the Selling Stockholder in connection with the sale and public offering
of such Shares, to distribute the balance thereof to such Selling Stockholder,
and to take such other actions as may be necessary or desirable in connection
with the transactions contemplated by this Agreement. Each Attorney-in-Fact
agrees to perform his duties under the Custody Agreement.
3. Terms of Public Offering. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, at 10:00
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A.M., New York City time, on [_______], 1995 (the "Closing Date"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
among you, the Company and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
Smith Barney Inc. at such time on such date (the "Option Closing Date"), which
may be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor earlier than three nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company and the
Attorneys-in-Fact of the Underwriters' determination to purchase a number,
specified in such notice, of Additional Shares. The place of closing for any
Additional Shares and the Option Closing Date for such Additional Shares may be
varied by agreement among you, the Company and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 1:00 P.M., New York City time, on the third
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks payable in New York
Clearing House (next day) funds to the order of the Company and the
Attorneys-in-Fact, as the case may be.
5. Agreements of the Company. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.
(b) The Company will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event which makes any statement made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus
(as then amended or supplemented) in order to state a material fact required by
the Act or the regulations thereunder to be stated therein or necessary in order
to make the statements therein not misleading, or of the necessity to amend or
supplement the Prospectus (as then amended or supplemented) to comply with the
Act or any other law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
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(c) The Company will furnish to each of you, without charge, three signed
copies of the registration statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits to
the registration statement, and will also furnish to you, without charge, such
number of conformed copies of the registration statement as originally filed and
of each amendment, without exhibits, and Incorporated Documents thereto as you
may request.
(d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or to which you shall object after being
so advised or (ii) so long as, in the opinion of counsel for the Underwriters, a
Prospectus is required to be delivered in connection with sales by any
Underwriter or dealer, file any information, documents or reports which upon
filing becomes an Incorporated Document, without delivering a copy of such
information, documents or reports to you, as Representatives of the several
Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the Company has
delivered or will deliver to you, without charge, in such quantities as you have
requested or may hereafter request, copies of each form of the Prepricing
Prospectus. The Company consents to the use, in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by dealers, prior
to the date of the Prospectus, of each Prepricing Prospectus so furnished by the
Company.
(f) As soon after the execution and delivery of this Agreement as possible
and thereafter from time to time for such period as in the opinion of counsel
for the Underwriters a Prospectus is required by the Act to be delivered in
connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may reasonably request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer.
If during such period of time any event shall occur that in the judgment of the
Company or in the opinion of counsel for the Underwriters is required to be set
forth in the Prospectus (as then amended or supplemented) or should be set forth
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus, or to file under the Exchange Act any
document which upon filing becomes an Incorporated Document, to comply with the
Act, the Exchange Act or any other law, the Company will forthwith prepare and,
subject to the provisions of paragraph (d) above, file with the Commission an
appropriate supplement or amendment thereto or such document, and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you, as Representatives of
the several Underwriters, agree that the Prospectus should be amended or
supplemented, or that a document should be filed under the Exchange Act which
upon filing becomes an Incorporated Document, the Company, if requested by you,
will promptly issue a press release announcing or disclosing the matters to be
covered by the proposed amendment or supplement or such document.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents
5
<PAGE>
necessary or appropriate in order to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject.
(h) The Company will make generally available to its security holders a
consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable after the
end of such period, which consolidated earnings statement shall satisfy the
provisions of Section 11(a) of the Act.
(i) During the period of five years hereafter, the Company will furnish to
you (i) as soon as available, a copy of each report of the Company mailed to
stockholders or filed with the Commission, and (ii) from time to time such other
information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than
pursuant to the second paragraph of Section 12 hereof or by notice given by you
terminating this Agreement pursuant to Section 12 or Section 13 hereof) or if
this Agreement shall be terminated by the Underwriters because of any failure or
refusal on the part of the Company or the Selling Stockholder to comply with the
terms or fulfill any of the conditions of this Agreement, the Company agrees to
reimburse you for all out-of-pocket expenses (including fees and expenses of
counsel for the Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of the Shares to
be sold by it hereunder substantially in accordance with the description set
forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will timely file the
Prospectus pursuant to Rule 424(b) under the Act and will advise you of the time
and manner of such filing.
(m) Except as stated in this Agreement and in the Prepricing Prospectus
and Prospectus, the Company has not taken, nor will it take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(n) Except as provided in this Agreement, the Company will not sell, offer
to sell, contract to sell or otherwise transfer or dispose of any Common Stock
(or any securities convertible into or exercisable or exchangeable for Common
Stock), or grant any options or warrants to purchase Common Stock, for a period
of 180 days after the date of the Prospectus, without the prior written consent
of Smith Barney Inc.
(o) The Company will use its best efforts to have the Shares listed,
subject to notice of issuance, on the Nasdaq National Market prior to or
concurrently with the effectiveness of the registration statement.
(p) The Company has furnished or will furnish to you "lock-up" letters, in
form and substance satisfactory to you, signed by each of its current executive
officers and directors and each of its stockholders designated by you,
including the Selling Stockholder.
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6. Agreements of the Selling Stockholder. The Selling Stockholder agrees
with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the extent necessary to
cause the registration statement or any post-effective amendment thereto to
become effective at the earliest possible time.
(b) Such Selling Stockholder will pay all Federal and other taxes, if any,
on the transfer or sale of any Shares that are sold by the Selling Stockholder
to the Underwriters.
(c) Such Selling Stockholder will do or perform all things required to be
done or performed by the Selling Stockholder prior to the Closing Date or any
Option Closing Date, as the case may be, to satisfy all conditions precedent to
the delivery of the Shares by it pursuant to this Agreement.
(d) Such Selling Stockholder will not offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock (or any securities convertible
into or exercisable or exchangeable for Common Stock) owned by such Selling
Stockholder, except for the sale of Shares to the Underwriters pursuant to this
Agreement, without your prior written consent for a period of [90] days after
the date of the Prospectus.
(e) Except as stated in this Agreement and in the Prepricing Prospectus
and the Prospectus, such Selling Stockholder will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you promptly, and if requested by
you, will confirm such advice in writing, within the period of time referred to
in Section 5(f) hereof, of any change in the Company's condition (financial or
other), business, prospects, properties, net worth or results of operations or
of any change in information relating to such Selling Stockholder or the Company
or any new information relating to the Company or relating to any matter stated
in the Prospectus or any amendment or supplement thereto which comes to the
attention of such Selling Stockholder that suggests that any statement made in
the Registration Statement or the Prospectus (as then amended or supplemented,
if amended or supplemented) is or may be untrue in any material respect or that
the Registration Statement or Prospectus (as then amended or supplemented, if
amended or supplemented) omits or may omit to state a material fact or a fact
necessary to be stated therein in order to make the statements therein not
misleading in any material respect, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented, if amended or supplemented) in
order to comply with the Act or any other law.
7. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act. The Commission has not issued
any order preventing or suspending the use of any Prepricing Prospectus.
(b) The Company meets the requirements for use of Form S-3 under the Act.
The registration statement in the form in which it became or becomes effective
and also in such form as it may be when any post-effective amendment thereto
shall become effective and the prospectus and any supplement or amendment
thereto when filed with the Commission under
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Rule 424(b) under the Act, complied or will comply in all material respects with
the provisions of the Act and did not or will not at any such times 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,
except that this representation and warranty does not apply to statements in or
omissions from the registration statement or the prospectus made in reliance
upon and in conformity with information relating to any Underwriter furnished to
the Company in writing by or on behalf of any Underwriter through you expressly
for use therein.
(c) The Incorporated Documents heretofore filed were filed in a timely
manner and, when they were filed (or, if any amendment with respect to any such
document was filed, when such amendment was filed), conformed in all material
respects to the requirements of the Exchange Act and did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; and
any further Incorporated Documents will, when so filed, be filed in a timely
manner and conform in all material respects to the requirements of the Exchange
Act and will not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(d) All the outstanding shares of capital stock of the Company have been
duly authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights and were issued and sold in compliance
with all applicable Federal and state securities laws; the Shares have been duly
authorized and, when issued and delivered to the Underwriters against payment
therefor in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable and free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the Registration
Statement and the Prospectus.
(e) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, prospects, properties, net worth or
results of operations of the Company, the Subsidiaries (as hereinafter defined)
and taken as a whole (a "Material Adverse Effect").
(f) All the Company's [material] subsidiaries are listed on Schedule III
hereto and are referred to herein individually as a "Subsidiary" and
collectively as the "Subsidiaries." Each Subsidiary is a corporation duly
organized, validly existing and in good standing in the jurisdiction of its
incorporation, with full corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify or be in good standing does not have a Material Adverse Effect. All the
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and are wholly
owned by the Company [directly or indirectly through one of the other
Subsidiaries,] free and clear of any lien, adverse claim, security interest,
equity or other encumbrance.
(g) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any of the
Subsidiaries, or to which the
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Company or any of the Subsidiaries, or to which any of their respective
properties, is subject, that are required to be described in the Registration
Statement or the Prospectus but are not described as required, and there are no
agreements, contracts, indentures, leases or other instruments that are required
to be described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement or any Incorporated Document that
are not described or filed as required by the Act or the Exchange Act. Neither
the Company nor any Subsidiary is involved in any strike, job action or labor
dispute with any group of employees, and, to the Company's knowledge, no such
action or dispute is threatened.
(h) Neither the Company nor any of the Subsidiaries is (i) in violation of
its certificate or articles of incorporation or by-laws or other organizational
documents, or of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of any decree
of any court or governmental agency or body having jurisdiction over the Company
or any of the Subsidiaries or (ii) in default in any material respect in the
performance of any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any material
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their respective
properties may be bound.
(i) Neither the issuance, offer, sale or delivery of the Shares by the
Company, the execution, delivery or performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby (i)
requires any consent, approval, authorization or other order of, or registration
or filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required for the
registration of the Shares under the Act and the Exchange Act, and except for
compliance with the securities or Blue Sky laws of various jurisdictions, all of
which have been or will be effected in accordance with this Agreement) or
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, the certificate or articles of incorporation or bylaws, or
other organizational documents, of the Company or any of the Subsidiaries or
(ii) conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, any agreement, indenture, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties may be bound, or violates or will violate
any statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiaries or any of their respective
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
(j) The accountants, Deloitte & Touche, who have certified or shall
certify the financial statements filed or to be filed as part of the
Registration Statement or the Prospectus (or any amendment or supplement
thereto), are independent public accountants as required by the Act.
(k) The historical financial statements, together with related schedules
and notes forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), comply with the requirements of the Act and
present fairly the consolidated financial position, results of operations and
changes in financial position of the Company and the Subsidiaries on the basis
stated in the Registration Statement at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; the pro forma financial information, and the assumptions used
in preparing such information, and the related notes and schedules
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included in the Registration Statement are reasonable; and the other financial
and statistical information and data set forth in the Registration Statement and
Prospectus (and any amendment or supplement thereto) is accurately presented
and, to the extent such information and data is derived from the financial books
and records of the Company, is prepared on a basis consistent with such
financial statements and the books and records of the Company.
(l) The execution and delivery of, and the performance by the Company of
its obligations under, this Agreement have been duly and validly authorized by
the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy and subject to the qualification
that the enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors' rights generally and by general
equitable principles.
(m) Except as disclosed in the Registration Statement and the Prospectus
(or any amendment or supplement thereto), subsequent to the respective dates as
of which such information is given in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), neither the Company nor any
of the Subsidiaries has incurred any liability or obligation, direct or
contingent, or entered into any transaction, not in the ordinary course of
business, that is material to the Company and the Subsidiaries taken as a whole,
and there has not been any change in the capital stock, or material increase in
the short-term or long-term debt, of the Company or any of the Subsidiaries, or
any material adverse change, or any development involving or which could
reasonably be expected to involve a prospective material adverse change, in the
condition (financial or other), business, properties, net worth or results of
operations of the Company and the Subsidiaries taken as a whole.
(n) Each of the Company and the Subsidiaries has good and marketable title
to all property (real and personal) described in the Prospectus as being owned
by it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Registration Statement and the
Prospectus or in a document filed as an exhibit to the Registration Statement or
an Incorporated Document, and all the property described in the Prospectus as
being held under lease by each of the Company and the Subsidiaries is held by it
under valid, subsisting and enforceable leases.
(o) The Company has not distributed and, prior to the later to occur of
(i) the Closing Date and (ii) completion of the distribution of the Shares, will
not distribute any offering material in connection with the offering and sale of
the Shares other than the Registration Statement, the Prepricing Prospectus, the
Prospectus or other materials, if any, permitted by the Act.
[To be reviewed by DB health care group:] (p) Each of the Company and the
Subsidiaries has such permits, licenses, franchises, certificates of need and
other approvals or authorizations of governmental or regulatory authorities
("Permits") including [__________], as are necessary to own, lease or operate
their respective properties and to conduct their respective business in the
manner described in the Prospectus and with respect to those facilities that
participate in Medicare and/or Medicaid, to receive reimbursement under Medicare
and Medicaid; the Company and each of the Subsidiaries have fulfilled and
performed all their respective material obligations with respect to the Permits,
and no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other material
impairment of the rights of the holder of any such Permit, subject to such
qualification as may be set forth in the Prospectus; and, except as described in
the Prospectus, none of the
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Permits contains any restriction that is materially burdensome to the Company or
the Subsidiaries.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) Neither the Company nor any of the Subsidiaries nor, to the Company's
knowledge, any employee or agent of the Company or any Subsidiary has made any
payment of funds of the Company or any Subsidiary or received or retained any
funds in violation of any law, rule or regulation, which payment, receipt or
retention of funds is of a character required to be disclosed in the Prospectus.
(s) The Company and each of the Subsidiaries have filed all tax returns
required to be filed, which returns are true and correct, and neither the
Company nor any Subsidiary is in default in the payment of any taxes which were
payable pursuant to said returns or any assessments with respect thereto.
(t) No holder of any security of the Company has any right, contractual or
otherwise, to require registration of shares of Common Stock or any other
security of the Company because of the filing of the registration statement or
consummation of the transactions contemplated by this Agreement or otherwise and
no person has the right to require registration under the Act of any shares of
Common Stock or other securities of the Company. Except as described in or
contemplated by the Prospectus, there are no outstanding options, warrants or
other rights calling for the issuance of, and there are no commitments, plans or
arrangements to issue, any shares of capital stock of the Company or any
security convertible into or exchangeable or exercisable for capital stock of
the Company. No person has the right, contractual or otherwise, to cause the
Company to permit such person to underwrite the sale of any of the Shares.
(u) The Company and the Subsidiaries own or possess all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by any of them or necessary for the
conduct of their respective businesses, and the Company is not aware of any
claim to the contrary or any challenge by any other person to the rights of the
Company and the Subsidiaries with respect to the foregoing.
(v) Neither the Company nor any of the Subsidiaries is, and, upon sale of
the Shares to be issued and sold thereby in accordance herewith and the
application of the net proceeds to the Company of such sale as described in the
Prospectus under the caption "Use of Proceeds," will be an "investment company"
or a person "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(w) The Company has complied and will continue to comply with all
provisions of Florida Statutes Section 517.075 and the regulations thereunder,
relating to issuers doing business with Cuba.
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(x) The Company and the Subsidiaries maintain insurance of the types and
in amounts generally deemed adequate for its business and consistent with
insurance coverage maintained by similar companies and businesses, all of which
insurance is in full force and effect.
[following diligence underwriters to consider adding environmental rep]
8. Representations and Warranties of the Selling Stockholder. The Selling
Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder now has or has the right to acquire, and on
the Closing Date will have, valid and marketable title to the Shares to be sold
by such Selling Stockholder, free and clear of any lien, claim, security
interest or other encumbrance, including, without limitation, any restriction on
transfer.
(b) Such Selling Stockholder now has, and on the Closing Date will have,
full legal right, power and authorization, and any approval required by law
(except such as may be required under the Act or such as may be required under
state securities or Blue Sky laws governing the purchase and distribution of the
Shares), to sell, assign, transfer and deliver such Shares in the manner
provided in this Agreement, and upon delivery of and payment for such Shares
hereunder, the several Underwriters will acquire valid and marketable title to
such Shares, free and clear of any lien, claim, security interest, or other
encumbrance.
(c) This Agreement and the Custody Agreement have been duly authorized,
and in the case of this Agreement, when executed and delivered on behalf of such
Selling Stockholder in accordance with the Custody Agreement, have been duly
executed and delivered by or on behalf of such Selling Stockholder and are the
valid and binding agreements of such Selling Stockholder enforceable against
such Selling Stockholder in accordance with their terms, except as enforcement
hereof and thereof may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles.
(d) Neither the execution and delivery of this Agreement or the Custody
Agreement by or on behalf of such Selling Stockholder nor the consummation of
the transactions herein or therein contemplated by or on behalf of such Selling
Stockholder requires any consent, approval, authorization or order of, or filing
or registration with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required under the
Act or such as may be required under state securities or Blue Sky laws governing
the purchase and distribution of the Shares) or conflicts or will conflict with
or constitutes or will constitute a breach of, or default under, or violates or
will violate, any agreement, indenture or other instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is or may be bound
or to which any of such Selling Stockholder's property or assets is subject, or
any statute, law, rule, regulation, ruling, judgement, injunction, order or
decree applicable to such Selling Stockholder or to any property or assets of
such Selling Stockholder.
(e) Such Selling Stockholder has reviewed the Registration Statement and
the Prospectus. The Registration Statement and the Prospectus, insofar as they
relate to such Selling Stockholder, do not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(f) Such Selling Stockholder does not have any knowledge or any reason to
believe that the Registration Statement or the Prospectus (or any amendment or
supplement thereto)
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contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(g) The representation and warranties of such Selling Stockholder in the
Custody Agreement are, and on the Closing Date will be, true and correct, unless
such Selling Stockholder has notified the Attorneys-in-Fact and the
Representatives in writing of any change that would make any representation or
warranty no longer true and correct on the Closing Date.
(h) Such Selling Stockholder has not taken, directly or indirectly, any
action designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate the
sale or resale of the Shares, except for the lock-up arrangements described in
the Prospectus.
9. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each of you and each other Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any Prepricing Prospectus or in the Registration
Statement or the Prospectus or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
relating to such Underwriter furnished in writing to the Company by or on behalf
of any Underwriter through you expressly for use in connection therewith;
provided, however, that the indemnification contained in this paragraph (a) with
- -------- -------
respect to any Prepricing Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Shares by such Underwriter to any person if a copy of the Prospectus
shall not have been delivered or sent to such person within the time required by
the Act and the regulations thereunder, and the untrue statement or alleged
untrue statement or omission or alleged omission of a material fact contained in
such Prepricing Prospectus was corrected in the Prospectus, provided that the
--------
Company has delivered the Prospectus to the several Underwriters in requisite
quantity on a timely basis to permit such delivery or sending. The foregoing
indemnity agreement shall be in addition to any liability which the Company may
otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or any such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing to pay such fees and expenses, (ii) the indemnifying parties have failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the
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<PAGE>
same counsel has been proposed) due to actual or potential differing interests
between them (in which case the indemnifying party shall not have the right to
assume the defense of such action, suit or proceeding on behalf of such
Underwriter or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed as they are incurred. The indemnifying parties shall not be liable
for any settlement of any such action, suit or proceeding effected without their
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
indemnifying parties agree to indemnify and hold harmless any Underwriter, to
the extent provided in paragraph (a), and any such controlling person from and
against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) The Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act; the Company, each of its directors and each of its
officers who signs the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act to the same extent as the indemnity from the Company to each
Underwriter set forth in paragraph (a) hereof, but only with respect to
information relating to such Selling Stockholder contained in the Registration
Statement or the Prospectus. In case any action or claim shall be brought or
asserted against any Underwriter, the Company, its directors or such officers or
any such controlling person in respect of which indemnity may be sought against
such Selling Stockholder, such Selling Stockholder shall have the rights and
duties given to the Company, and each Underwriter, the Company, its directors
and such officers, and any such controlling person shall have the rights and
duties given to the Underwriters under paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which the Selling
Stockholder may otherwise have.
(d) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, and any person who controls the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act and the Selling Stockholder to
the same extent as the indemnity from the Company to each Underwriter set forth
in paragraph (a) hereof, but only with respect to information relating to such
Underwriter furnished in writing by or on behalf of such Underwriter through you
expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against the Company, any of its directors or
officers, any such controlling person or the Selling Stockholder based on the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against any Underwriter pursuant to this paragraph (d), such Underwriter shall
have the rights and duties given to the Company by paragraph (b) above (except
that if the Company shall have assumed the defense thereof such Underwriter
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at such Underwriter's expense), and the Company, its directors, any
such officer, any such controlling person and any such Selling Stockholder shall
have the rights and duties given to the Underwriters by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Underwriters may otherwise have.
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(e) If the indemnification provided for in this Section 9 is unavailable
to an indemnified party under paragraphs (a), (c) or (d) hereof in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
an indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Selling Stockholder on the one hand and the Underwriters on the other hand
from the offering of the Shares, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholder on
the one hand and the Underwriters on the other in connection with the statements
or omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Company and the Selling Stockholder bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus; provided that, in the event the
--------
Underwriters shall have purchased any Additional Shares hereunder, any
determination of the relative benefits received by the Company, the Selling
Stockholder and the Underwriters from the offering of the Shares shall include
the net proceeds (before deducting expenses) received by the Company and the
Selling Stockholder and the underwriting discounts and commissions received by
the Underwriters from the sale of such Additional Shares, in each case computed
on the basis of the respective amounts set forth in the notes to the table on
the cover page of the Prospectus. The relative fault of the Company and the
Selling Stockholder on the one hand and the Underwriters on the other hand shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholder on the one hand or by the Underwriters on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(f) The Company, the Selling Stockholder and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
were determined by a pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (e)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (e)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 9, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of 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 Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 9 are several
in proportion to the respective numbers of Firm Shares set forth opposite their
names in Schedule II hereto (or such numbers of Firm Shares increased as set
forth in Section 12 hereof) and not joint.
(g) Notwithstanding any other provision of this Section 9, the liability
of the Selling Stockholder for indemnification or contribution under this
Section 9 shall not exceed an
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amount equal to the number of Shares sold by such Selling Stockholder hereunder
multiplied by the Purchase Price Per Share set forth in Section 2 hereof.
(h) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
(i) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholder set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company, its directors or officers,
any person controlling the Company or the Selling Stockholder, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Company, its directors or officers or any person
controlling the Company or the Selling Stockholder, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 9.
10. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase the Firm Shares hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
registration statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424 and 430A under the Act shall have been
made; no stop order suspending the effectiveness of the registration statement
shall have been issued and no proceeding for that purpose shall have been
instituted or, to the knowledge of the Company or any Underwriter, threatened by
the Commission, and any request of the Commission for additional information (to
be included in the registration statement or the prospectus or otherwise) shall
have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change, or any development involving a prospective change,
in or affecting the condition (financial or other), business, properties, net
worth, or results of operations of the Company or the Subsidiaries not
contemplated by the Prospectus, which in your opinion, as Representatives of the
several Underwriters, would materially adversely affect the market for the
Shares, or (ii) any event or development relating to or involving the Company,
any of the Subsidiaries, any officer or director of the Company or the Selling
Stockholder which makes any statement made in the Prospectus untrue or which, in
the opinion of the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the Act or any other law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, as Representatives of the several Underwriters,
materially adversely affect the market for the Shares.
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(c) You shall have received on the Closing Date an opinion of
Winderweedle, Haines, Ward & Woodman, P.A., counsel for the Company, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Florida with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is duly registered and
qualified to conduct its business and is in good standing in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure to so
register or qualify does not have a Material Adverse Effect;
(ii) Each Subsidiary is a corporation duly organized and validly
existing and in good standing under the laws of the jurisdiction of its
organization, with full corporate power and authority to own, lease, and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement thereto); and all
the outstanding shares of capital stock of each of the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable, and are
wholly owned by the Company directly, or indirectly through one of the other
Subsidiaries, free and clear of any security interest, lien, adverse claim,
equity or other encumbrance; each Subsidiary is duly registered and qualified to
conduct its business and is in good standing as a foreign corporation in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify or to be in good standing does not have a Material
Adverse Effect;
(iii) Each Subsidiary is duly registered and qualified to conduct its
business and is in good standing as a foreign corporation in each jurisdiction
or place where the nature of its properties or the conduct of its business
requires such registration or qualification, except where the failure so to
register or qualify or to be in good standing does not have a Material Adverse
Effect;
(iv) The authorized and outstanding capital stock of the Company is as
set forth under the caption "Capitalization" in the Prospectus;
(v) All the shares of capital stock of the Company outstanding prior
to the issuance of the Shares to be issued and sold by the Company hereunder
have been duly authorized and validly issued, are fully paid and nonassessable;
(vi) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable and free of
any (A) preemptive rights or (B) to the best knowledge of such counsel, similar
rights that entitle or will entitle any person to acquire any Shares upon the
issuance thereof by the Company;
(vii) The form of certificates for the Shares conforms to the
requirements of the [Florida General Corporation Law];
(viii) The Registration Statement and all post-effective amendments,
if any, have become effective under the Act and, to the knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings
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for that purpose are pending before or contemplated by the Commission; and any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
accordance with Rule 424(b);
(ix) The Company has corporate power and authority to enter into this
Agreement and to issue, sell and deliver the Shares to be sold by it to the
Underwriters as provided herein, and this Agreement has been duly authorized,
executed and delivered by the Company and is a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as enforcement of rights to indemnity and contribution hereunder
may be limited by federal or state securities laws or principles of public
policy and subject to the qualification that the enforceability of the Company's
obligations hereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles;
(x) Neither the Company nor any of the Subsidiaries is in violation of
its certificate of incorporation or bylaws, or other organizational documents,
or, to the best knowledge of such counsel, is in default in the performance of
any material obligation, agreement or condition contained in any bond,
debenture, note or other evidence of indebtedness;
(xi) Neither the offer, sale or delivery of the Shares, nor the
execution, delivery or performance by the Company of this Agreement, nor
compliance by the Company with the provisions hereof nor consummation by the
Company of the transactions contemplated hereby conflicts or will conflict with
or constitutes or will constitute a breach of, or a default under, in any
material respect, the certificate or articles of incorporation or bylaws or
other organizational documents of the Company or any of the Subsidiaries or any
agreement, indenture, lease or other instrument to which the Company or any of
the Subsidiaries is a party or by which any of them or any of their respective
properties is bound that is an exhibit to the Registration Statement or any
Incorporated Document or is known to such counsel, or will result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of the Subsidiaries, nor will any such action
result in any violation of any existing law, or any regulation, ruling (assuming
compliance with all applicable state securities and Blue Sky laws), judgment,
injunction, order or decree known to such counsel, and applicable to the
Company, the Subsidiaries or any of their respective properties;
(xii) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency, or official is required on the part of the
Company (except as have been obtained under the Act and the Exchange Act, or
such as may be required under state securities or Blue Sky laws governing the
purchase and distribution of the Shares) for the valid issuance and sale of the
Shares to the Underwriters as contemplated by this Agreement;
(xiii) The Registration Statement and the Prospectus (including the
Incorporated Documents) and any supplements or amendments thereto (except for
the financial statements and the notes thereto and the schedules and other
financial and statistical data included therein, as to which such counsel need
not express any opinion) comply as to form in all material respects with the
requirements of the Act and, with respect to the Incorporated Documents, the
Exchange Act;
(xiv) To the best knowledge of such counsel, (A) other than as
described or contemplated in the Prospectus (or any supplement thereto), there
are no legal or governmental proceedings pending or threatened against the
Company or any of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or any of their property, are subject, which are required to be
described in the Registration Statement or Prospectus (or any amendment or
supplement
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thereto) and (B) there are no agreements, contracts, indentures, leases or other
instruments, that are required to be described in the Registration Statement or
Prospectus (or any amendment or supplement thereto) or to be filed as an exhibit
to the Registration Statement or any Incorporated Document that are not
described or filed as required, as the case may be;
(xv) [To be revised by healthcare:] The Company and each Subsidiary
has full corporate power and authority, and all Permits as are required under
such Federal and state healthcare laws as specifically regulate the operation of
the facilities owned or leased by the Company or any Subsidiary (A) to own their
respective properties and to conduct their respective businesses as now being
conducted as described in the Prospectus and (B) with respect to those
facilities owned or leased by the Company, any Subsidiary that participates in
Medicare and/or Medicaid, to receive reimbursement thereunder (collectively, the
"Health Care Permits"), subject to such qualifications as may be set forth in
the Prospectus and except where the failure to have such Health Care Permits,
individually or in the aggregate, would not have a Material Adverse Effect; and
nothing had come to the attention of such counsel which causes it to believe
that the Company and each of the Subsidiaries do not have all such other Permits
as are necessary under applicable law to own their respective properties and to
conduct their respective businesses as now being conducted as described in the
Prospectus;
(xvi) To the best knowledge of such counsel, neither the Company nor
any of the Subsidiaries is in violation of any law, ordinance, administrative or
governmental rule or regulation applicable to them, respectively, or of any
decree of any court or governmental agency or body having jurisdiction over
them, respectively;
(xvii) The statements in the Registration Statement and Prospectus,
insofar as they are descriptions of contracts, agreements or other legal
documents, or refer to statements of law or legal conclusions, are accurate in
all material respects and present fairly the information required to be shown;
(xviii) Such counsel does not know of any outstanding option, warrant
or other right calling for the issuance of, and such counsel does not know of
any commitment, plan or arrangement to issue, any share of capital stock of the
Company or any security convertible into or exchangeable or exercisable for
capital stock of the Company; and such counsel does not know of any holder of
any security of the Company or any other person who has the right, contractual
or otherwise, to cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Shares or the right to have
any Common Stock or other securities of the Company included in the registration
statement or the right, as a result of the filing of the registration statement,
to require registration under the Act of any shares of Common Stock or other
securities of the Company; and
(xix) Neither the Company nor any of the Subsidiaries is an
"investment company" or a person "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
In addition, such counsel shall state that although such counsel has
not undertaken, except as otherwise indicated in their opinion, to determine
independently, and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements in the Registration Statement, such
counsel has participated in the preparation of the Registration Statement and
the Prospectus, including review and discussion of the contents thereof, and has
reviewed the Incorporated Documents, and nothing has come to the attention of
such counsel that has caused it to believe that the Registration Statement at
the time the Registration Statement became effective contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
19
<PAGE>
that the Prospectus, as of its date, and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted or omits 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 or that any amendment or supplement to the Prospectus, as
of its date, and as of the Closing Date or the Option Closing Date, as the case
may be, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion with
respect to the financial statements and the notes thereto and the schedules and
other financial and statistical data included in the Registration Statement or
the Prospectus).
In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date or the Option Closing Date, as
the case may be, of other counsel retained by them or the Company as to the laws
of any jurisdiction other than [the United States or the State of Florida],
provided that (1) each such local counsel is acceptable to the Representatives,
(2) such reliance is expressly authorized by each opinion so relied upon and a
copy of each such opinion is delivered to the Representatives and is, in form
and substance satisfactory to them and their counsel, and (3) counsel shall
state in their opinion that they believe that they and the Underwriters are
justified in relying thereon.
(d) You shall have received on the Closing Date, an opinion of
Winderweedle, Haines, Ward & Woodman, P.A., counsel for the Selling
Stockholders, dated the Closing Date and addressed to you, as Representatives of
the several Underwriters, to the effect that:
(i) This Agreement and the Custody Agreement have each been duly
executed and delivered by or on behalf of the Selling Stockholder and are valid
and binding agreements of the Selling Stockholder enforceable against the
Selling Stockholder in accordance with their terms, except (A) as enforcement of
rights to indemnity and contribution hereunder and thereunder may be limited by
federal or state securities laws or principles of public policy and (B) subject
to the qualification that the enforceability of each of their obligations
hereunder and thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and by general equitable principles;
(ii) To the best knowledge of such counsel, the Selling Stockholder
has full legal right, power and authorization, and any approval required by law,
to sell, assign, transfer and deliver good and marketable title to the Shares
which such Selling Stockholder has agreed to sell pursuant to this Agreement;
upon delivery of such Shares pursuant to this Agreement and payment therefor as
contemplated herein the Underwriters will acquire good and marketable title to
such Shares free and clear of any lien, claim, security interest, or other
encumbrance, restriction on transfer or other defect in title; and
(iii) To the best knowledge of such counsel, the execution and
delivery of this Agreement and the Custody Agreement by the Selling Stockholder
and the consummation of the transactions contemplated hereby and thereby will
not conflict with, violate, result in a breach of or constitute a default under
the terms or provisions of any agreement, indenture, mortgage or other
instrument known to such counsel to which the Selling Stockholder is a party or
by which it or any of its assets or property is bound, or any court order or
decree or any law, rule, or regulation known to such counsel applicable to the
Selling Stockholder or to any of the property or assets of the Selling
Stockholder.
20
<PAGE>
In rendering such opinion, such counsel may rely as to factual matters
upon (i) certificates of the Selling Stockholder and (ii) the representations of
the Selling Stockholders contained herein and in the Custody Agreement.
(e) You shall have received on the Closing Date an opinion of Dewey
Ballantine, counsel for the Underwriters, dated the Closing Date, and addressed
to you, as Representatives of the several Underwriters, with respect to the
matters referred to in clauses (vi) (other than subclause (B) thereof), (viii),
(ix), (xii) and (xvii) of the foregoing paragraph (c) and such other related
matters as you may request.
(f) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Deloitte & Touche, independent certified public accountants,
substantially in the forms heretofore approved by you.
(g)(i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth or contemplated in the Registration Statement
or the Prospectus (or any amendment or supplement thereto); (iii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
the Prospectus (or any amendment or supplement thereto), any material adverse
change in the condition (financial or other), business, prospects, properties,
net worth or results of operations of the Company and the Subsidiaries taken as
a whole; (iv) the Company and the Subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement and the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief accounting officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 10(h) and in Section
10(i) hereof.
(h) The Company shall not have failed at or prior to the Closing Date
to have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(i) You shall have received certificates dated the date hereof and
the Closing Date signed by the chief accounting officer of the Company
substantially in the forms heretofore approved by you, respecting the Company's
compliance with the financial covenants contained in agreements to which the
Company is a party.
(j) All the representations and warranties of the Selling Stockholder
contained in this Agreement shall be true and correct on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date, and you shall have received a certificate, dated the Closing Date and
signed by the Selling Stockholder to the effect set forth in this Section 10(k)
and in Section 10(l) hereof.
21
<PAGE>
(k) The Selling Stockholder shall not have failed at or prior to the
Closing Date to have performed or complied with any of their agreements herein
contained and required to be performed or complied with by them hereunder at or
prior to the Closing Date.
(l) The Shares shall have been approved for listing, subject to
notice of issuance, on the Nasdaq National Market.
(m) The Sellers shall have furnished or caused to be furnished to you
such further certificates and documents as you shall have requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company or
any Attorney-in-Fact or the Selling Stockholder and delivered to you, as
Representatives of the several Underwriters, or to counsel for the Underwriters,
shall be deemed a representation and warranty by the Company or the Selling
Stockholder, as the case may be, to each Underwriter as to the statements made
therein.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 10, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs [(_) through (_)] shall be dated the Option
Closing Date in question and the opinions called for by paragraphs [(c), (d) and
(f)] shall be revised to reflect the sale of Additional Shares.
11. Expenses. The Company and the Selling Stockholder agree to pay
the following costs and expenses and all other costs and expenses incident to
the performance by them of their obligations hereunder on a pro rata basis:
(i) the preparation, printing or reproduction, and filing with the Commission of
the registration statement (including financial statements and exhibits
thereto), each Prepricing Prospectus, the Prospectus, and each amendment or
supplement to any of them; (ii) the printing (or reproduction) and delivery
(including postage, air freight charges and charges for counting and packaging)
of such copies of the registration statement, each Prepricing Prospectus, the
Prospectus, the Incorporated Documents, and all amendments or supplements to any
of them as may be reasonably requested for use in connection with the offering
and sale of the Shares; (iii) the preparation, printing, authentication,
issuance and delivery of certificates for the Shares, including any stamp taxes
in connection with the original issuance and sale of the Shares; (iv) the
printing (or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Shares; (v)
the listing of the Shares on the Nasdaq National Market; (vi) the registration
or qualification of the Shares for offer and sale under the securities or Blue
Sky laws of the several states as provided in Section 5(g) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of the
preliminary and supplemental Blue Sky Memoranda and such registration and
qualification); (vii) the filing fees and the reasonable fees and expenses of
counsel for the Underwriters in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. in connection with the
offering; (viii) the fees and expenses of the Company's accountants and the fees
and expenses of counsel (including local and special counsel) for the Company;
and (ix) the performance by the Company of its other obligations under this
Agreement.
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<PAGE>
12. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by all the parties
hereto; or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such post-
effective amendment has been released by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the Company,
by notifying you, or by you, as Representatives of the several Underwriters, by
notifying the Company and the Selling Stockholder.
If any one or more of the Underwriters shall fail or refuse to
purchase Firm Shares which it or they have agreed to purchase hereunder, and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of the Firm Shares, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Firm Shares
set forth opposite its name in Schedule II bears to the aggregate number of Firm
Shares set forth opposite the names of all non-defaulting Underwriters or in
such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney, Harris Upham & Co.
Incorporated (predecessor to Smith Barney Inc.), to purchase the Firm Shares
which such defaulting Underwriter or Underwriters agreed, but failed or refused,
to purchase. If any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares and arrangements satisfactory to you and the Company for the purchase of
such Firm Shares are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Underwriter
or the Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
such default of any such Underwriter under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule II hereto who, with your approval
and the approval of the Company, purchases Firm Shares which a defaulting
Underwriter agreed, but failed or refused, to purchase.
Any notice under this Section 12 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
13. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or the Selling Stockholder, by notice to the Company,
if prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be, (i)
trading in securities generally on the NYSE, American Stock Exchange or the
Nasdaq National Market shall have been suspended or materially limited, (ii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or state authorities, or (iii) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in your judgment, impracticable or inadvisable to commence
or continue the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the resale
of the Shares by the Underwriters. Notice of such termination may be given to
the Company by telegram, telecopy or telephone and shall be subsequently
confirmed by letter.
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<PAGE>
14. Information Furnished by the Underwriters. The statements set
forth in the last paragraph on the cover page, the stabilization legend on the
inside front cover page, and in the first and third paragraphs under the caption
"Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute
the only information furnished by or on behalf of the Underwriters as such
information is referred to in Sections 7(b) and 9 hereof.
15. Miscellaneous. Except as otherwise provided in Sections 5, 12
and 13 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to the Company, at the office of the
Company at 4506 L.B. McLeod Road, Suite F, Orlando, Florida 32811, Attention:
Stephen P. Griggs, President, Chief Executive Officer, with a copy to
Winderweedle, Haines, Ward & Woodman, P.A., Attention: Thomas A. Simser, Esq.;
(ii) if to the Selling Stockholder, in care of the Attorneys-in-Fact at the
office of the Company, 4506 L.B. McLeod Road, Suite F, Orlando, Florida 32811,
with a copy to Winderweedle, Haines, Ward & Woodman, P.A., Attention: Thomas A.
Simser, Esq., at the address given in clause (i); or (iii) if to you, as
Representatives of the several Underwriters, to Smith Barney Inc., 388 Greenwich
Street, New York, NY 10013, Attention: Manager, Investment Banking Division,
with a copy to Dewey Ballantine, 1301 Avenue of the Americas, New York, NY
10019, Attention: Frederick W. Kanner, Esq.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors, its officers, the controlling
persons referred to in Section 9 hereof and the Selling Stockholder and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from any Underwriter of any of the
Shares in his status as such purchaser.
16. Applicable Law; Counterparts. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to contracts made and to be performed within the State of New York without
giving effect to the choice of laws or conflict of laws principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
24
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
ROTECH MEDICAL CORPORATION
By
------------------------------
THE SELLING STOCKHOLDER NAMED IN
SCHEDULE I HERETO
By
------------------------------
By
------------------------------
Attorney-in-Fact
Confirmed as of the date first
above mentioned on behalf of themselves
and the other several Underwriters named
in Schedule II hereto
SMITH BARNEY INC.
NEEDHAM & COMPANY, INC.
As Representatives of the Several Underwriters
By
--------------------------------------------
Managing Director
25
<PAGE>
SCHEDULE I
Selling Stockholder Number of
- ------------------- Firm Shares
-----------
<PAGE>
SCHEDULE II
Underwriters Number of
- ------------ Firm Shares
-----------
Smith Barney Inc. .......................................
<PAGE>
SCHEDULE III
Subsidiaries [List to be discussed]
------------
<PAGE>
[LETTERHEAD OF WINDERWEEDLE, HAINES, WARD & WOODMAN, P.A.]
April 14, 1995
Orlando
RoTech Medical Corporation
4506 L. B. McLeod Road, Suite F
Orlando, Florida 32811
Re: RoTech Medical Corporation; Registration Statement
on Form S-3
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the Form S-3 Registration Statement (the "Registration
Statement") which you have filed this date with the Securities and Exchange
Commission for the registration of 2,300,000 shares of the common stock, par
value $.0002 (the "Stock"), of RoTech Medical Corporation ("RoTech"), with
1,700,000 shares to be sold by RoTech to the several Underwriters named in the
Registration Statement (the "Underwriters") for resale to the public, with
300,000 shares to be sold by a certain selling shareholder (the "Selling
Shareholder") to the Underwriters for resale to the public, and with 300,000
shares to be subject to an over-allotment option granted to the Underwriters by
RoTech and the Selling Shareholder.
As your counsel in connection with this transaction, we have examined the
proceedings taken and are familiar with the proceedings proposed to be taken by
you in connection with the sale and issuance of the Stock.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Stock, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Stock to be sold by RoTech, will be, when
issued and sold in the manner referred to in the Registration Statement, duly
authorized, legally and validly issued, fully paid and nonassessable, and the
<PAGE>
RoTech Medical Corporation
Re: Registration Statement
April 14, 1995
Page Two
Stock to be sold by the Selling Shareholder was, when acquired by the Selling
Stockholder,duly authorized, legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to said Registration
Statement, and further consent to the use of our name wherever appearing in said
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WINDERWEEDLE, HAINES, WARD & WOODMAN, P.A.
By: /s/ Thomas A. Simser, Jr.
___________________________
Thomas A. Simser, Jr.
TAS:kw
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement of RoTech Medical Corporation on Form S-3 of our report dated
September 20, 1994, except for Note 13 as to which the date is October 7, 1994,
appearing and incorporated by reference in the Annual Report on Form 10-K of
RoTech Medical Corporation for the year ended July 31, 1994, and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
such Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Orlando, Florida
April 14, 1995
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of RoTech Medical
Corporation for the registration of 2,000,000 shares of its common stock and to
the incorporation by reference therein of our report dated September 15, 1993,
with respect to the consolidated financial statements and schedules of RoTech
Medical Corporation as of July 31, 1993 and for each of the two years in the
period ended July 31, 1993 included in its Annual Report (Form 10-K) for the
year ended July 31, 1994, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Orlando, Florida
April 11, 1995
