Exhibit 1
THE PROVIDENCE SERVICE
CORPORATION
(a Delaware Corporation)
1,500,000 Shares of Common
Stock
Par Value $0.001 Per Share
UNDERWRITING
AGREEMENT
April
, 2006
SunTrust Capital Markets,
Inc.
Avondale Partners, LLC
c/o SunTrust Capital Markets,
Inc.
3333 Peachtree Road, NE
Atlanta, GA 30326
Ladies and Gentlemen:
The Providence Service Corporation,
a Delaware corporation (the “Company”), and those
certain stockholders of the Company listed on Schedule I (the
“Selling Stockholders”) propose to sell to the several
underwriters named in Schedule II (collectively, the
“Underwriters”) an aggregate of 1,500,000 shares (the
“Firm Shares”) of the Company’s common stock,
$0.001 par value per share (the “Common Stock”), of
which 1,430,000 shares will be sold by the Company and 70,000
shares will be sold by the Selling Stockholders. The Firm Shares
are to be sold to each Underwriter, acting severally and not
jointly, in such amounts as are set forth in Schedule II opposite
the name of such Underwriter. The respective number of shares to be
sold by the Selling Stockholders is set forth opposite their names
in Schedule I.
Solely for the purpose of covering
over-allotments in the sale of the Firm Shares, the Company grants
to the Underwriters the right to purchase up to an additional
225,000 shares of Common Stock (the “Option Shares”),
which option shall be exercisable in the manner, and such Option
Shares shall be sold in the denominations, set forth in
Section 3(b) below. The Firm Shares and Option Shares are
herein sometimes referred to as the
“Shares.”
Section 1.
Representations and Warranties of
the Company . The Company represents and warrants to, and
agrees with, each of the Underwriters that:
(a) The Company has prepared and
filed with the Securities and Exchange Commission (the
“Commission”) a registration statement on Form S-3
(File No. 333-129518) with respect to the Shares, including a
preliminary form of prospectus subject to completion, in conformity
with the requirements of the Securities Act of 1933, as amended
(the “1933 Act”), and the rules and regulations of the
Commission thereunder (all such rules and regulations, including,
without limitation, Regulation S-X and Regulation S-K to the extent
applicable, referred to as the “1933 Act Regulations”);
and such amendments to such registration statement as may have been
required, if any, prior to the date hereof have been filed with the
Commission, and such amendments have been similarly prepared.
Copies of such registration statement and amendment or amendments
and of each related preliminary prospectus, and the exhibits,
financial statements and schedules, as finally amended and revised,
have been
delivered to you. The Company has prepared in
the same manner, and proposes so to file with the Commission, one
of the following: (i) prior to effectiveness of such
registration statement, a further amendment thereto, including the
form of final prospectus, or (ii) a final prospectus in
accordance with Rules 430A and 424(b) of the 1933 Act Regulations.
The Company also may file a related registration statement with the
Commission pursuant to Rule 462(b) of the 1933 Act Regulations for
the purpose of registering certain additional shares of Common
Stock, which registration statement will be effective upon filing
with the Commission. As filed, such amendment, any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
and the final prospectus, shall include all Rule 430A Information
(as hereinafter defined) and, except to the extent that you shall
agree in writing to a modification, shall be in all respects in the
form furnished to you prior to the date and time that this
Agreement was executed and delivered by the parties hereto, or, to
the extent not completed at such date and time, shall contain only
such specific additional information and other changes (beyond that
contained in the latest preliminary prospectus) as the Company
shall have previously advised you in writing would be included or
made therein.
The term “Registration
Statement” as used in this Agreement shall mean such
registration statement at the time such registration statement
becomes effective and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Time (as hereinafter
defined), shall also mean such registration statement as so
amended; provided, however, that such term shall also include all
Rule 430A Information contained in any Prospectus (as hereinafter
defined) and deemed to be included in such registration statement
at the time such registration statement becomes effective as
provided by Rule 430A of the 1933 Act Regulations. The term
“Preliminary Prospectus” shall mean any preliminary
prospectus referred to in the preceding paragraph and any
preliminary prospectus included in the Registration Statement at
the time it becomes effective that omits Rule 430A Information. The
term “Prospectus” as used in this Agreement shall mean
any prospectus relating to the Shares in the form in which it is
first filed with the Commission pursuant to Rule 424(b) of the 1933
Act Regulations or, if no filing pursuant to Rule 424(b) of the
1933 Act Regulations is required, shall mean the form of final
prospectus included in the Registration Statement at the time such
Registration Statement becomes effective. The term “Free
Writing Prospectus” as used herein shall have the meaning set
forth in Rule 405 of the 1933 Act Regulations. The term
“Issuer Free Writing Prospectus” as used herein shall
have the meaning set forth in Rule 433 of the 1933 Act Regulations.
The term “Disclosure Package” as used herein shall mean
the Preliminary Prospectus as most recently amended or supplemented
prior to the Initial Time of Sale (as defined below) together with
the Issuer Free Writing Prospectuses identified in Schedule III
hereto, if any, and any other Free Writing Prospectus that the
parties hereto shall hereafter expressly agree to treat as part of
the Disclosure Package. The term “Rule 430A
Information” means information with respect to the Shares and
the offering thereof permitted pursuant to Rule 430A of the 1933
Act Regulations to be omitted from the Registration Statement when
it becomes effective. The term “462(b) Registration
Statement” means any registration statement filed with the
Commission pursuant to Rule 462(b) of the 1933 Act Regulations
(including the Registration Statement and any Preliminary
Prospectus, the Disclosure Package, or the Prospectus incorporated
therein at the time such registration statement becomes effective).
Any references in this Agreement to the Registration Statement, the
Rule 462(b) Registration Statement, a preliminary prospectus, the
Disclosure Package, and the Prospectus or any amendments or
supplements to any of the foregoing, shall be deemed to refer to
and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the
effective date of the Registration Statement or the date of
Disclosure Package, or the Prospectus, as the
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case may be, and any reference to any amendment
or supplement to the Registration Statement, the Disclosure
Package, 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 (the “Exchange Act”), which,
upon filing, are incorporated by reference therein unless expressly
stated otherwise, as required by paragraph (b) of Item 12
of Form S-3. As used herein, the term “Incorporated
Documents” means the documents, which are incorporated by
reference in the Prospectus, or any amendment or supplement thereto
during the period the Prospectus is required under the 1933 Act to
be delivered in connection with the sale of the Shares by the
Underwriters or any dealer (the “Prospectus Delivery
Period”).
(b) The Company meets the
requirements for use of Form S-3 under the 1933 Act. The
Registration Statement has become effective under the 1933 Act and
no stop order preventing or suspending the effectiveness of the
Registration Statement or preventing or suspending the use of any
Issuer Free Writing Prospectus or the Disclosure Package has been
issued under the Act and no proceedings for any such purpose have
been instituted or, to the knowledge of the Company, threatened by
the Commission (and any request on the part of the Commission for
additional information has been complied with) or the state
securities authority of any jurisdiction.
(c) The Disclosure Package at its
date of issue and as of 4:00 p.m. Eastern time on the date hereof
(the “Initial Time of Sale”), when the Registration
Statement and any 462(b) Registration Statement shall become
effective, when the Prospectus is first filed pursuant to Rule
424(b) of the 1933 Act Regulations, when any amendment to the
Registration Statement or any 462(b) Registration Statement becomes
effective, when any supplement to the Disclosure Package and the
Prospectus is filed with the Commission, and at each Closing Date
(as hereinafter defined in Section 3), (i) the
Registration Statement, the 462(b) Registration Statement, the
Disclosure Package and the Prospectus and all amendments thereof
and supplements thereto will conform in all respects with the
requirements of the 1933 Act and the 1933 Act Regulations;
(ii) neither the Registration Statement, the 462(b)
Registration Statement, the Disclosure Package, and the Prospectus
nor any amendment or supplement thereto, will contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they
were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statement or
omission made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter expressly for
use in the Registration Statement, any 462(b) Registration
Statement.
(d) All disclosures contained in the
Registration Statement, the Disclosure Package, or the Prospectus
regarding “non-GAAP financial measures” (as such term
is defined by the rules and regulations of the Commission) comply
in all material respects with Regulation G of the Exchange Act, and
Item 10(e) of Regulation S-K under the 1933 Act, to the extent
applicable.
(e) The documents incorporated by
reference in the Disclosure Package and the Prospectus 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 with the requirements of the Exchange Act and the
rules and regulations thereunder, any documents incorporated by
reference in the Disclosure Package and the Prospectus filed after
the date hereof and during the Prospectus Delivery Period will,
when they are filed, conform in all material respects with the
requirements of the Exchange Act and the rules and regulations
thereunder; no such incorporated document when it was filed (or, if
an
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amendment with respect to any such document was
filed, when such amendment was filed) contained or will contain an
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made: and, when read together and with the other
information in each of the Disclosure Package and the Prospectus,
at the time the Registration Statement became effective, at the
Initial Time of Sale and at the Closing Date, each such
incorporated document did not or will not, as the case may be,
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, in the light of the
circumstances under which they were made.
(f) The Company is eligible to use
Issuer Free Writing Prospectuses in connection with the offering of
the Shares pursuant to Rules 164 and 433 of the 1933 Act
Regulations. Any Issuer Free Writing Prospectus that the Company is
required to file pursuant to Rule 433(d) of the 1933 Act
Regulations has been, or will be, timely filed with the Commission
in accordance with the requirements of the 1933 Act Regulations.
Each Issuer Free Writing Prospectus that the Company has filed, or
is required to file, pursuant to Rule 433(d) of the 1933 Act
Regulations or that was prepared by or on behalf of or used by the
Company complies or will comply in all material respects with the
requirements of the 1933 Act Regulations, including but not limited
to legending requirements. Except for the Issuer Free Writing
Prospectuses, if any, identified in Schedule III hereto, the
Company has not prepared, used or referred to, and will not,
without the prior consent of SunTrust Capital Markets, Inc. on
behalf of the Underwriters (“SunTrust”), use any Free
Writing Prospectus. Each Issuer Free Writing Prospectus, as of its
issue date and at all times through the completion of the offering
and sale of the Shares, did not, does not and will not include any
information that materially conflicted, conflicts or will conflict
with the information contained in the Registration Statement. The
Company filed the Registration Statement with the Commission before
using any Free Writing Prospectus.
(g) The Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the state of Delaware, with all
requisite corporate power and authority to own, lease and license
its properties and conduct its business as currently carried on and
as contemplated in the Disclosure Package and the Prospectus. The
Company has qualified to do business and is in good standing as a
foreign corporation in every jurisdiction in which the ownership or
leasing of its properties or the nature or conduct of its business,
as currently carried on and as contemplated in the Disclosure
Package and the Prospectus, requires such qualification, except
where the failure to do so would not reasonably be expected to have
a material adverse effect on the financial condition, results of
operations, or cash flows of the Company and its subsidiaries taken
as a whole (a “Material Adverse Effect”). Other than
the entities listed on Schedule 2(g) hereto (individually a
“Subsidiary” and collectively the
“Subsidiaries”), the Company does not own, directly or
indirectly, any capital stock or other equity securities or
interests of any corporation, partnership, limited liability
company, joint venture association or other entity.
(h) Each subsidiary of the Company
(“Subsidiary”) has been duly incorporated, formed or
organized and is an existing corporation or other entity in good
standing under the laws of the jurisdiction of its state of
incorporation or organization, with all requisite corporate power
and authority to own and lease its properties and conduct its
business as currently carried on and as contemplated in the
Disclosure Package and the Prospectus; and each Subsidiary is duly
qualified to do
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business as a foreign corporation or other
entity in good standing in every jurisdiction in which its
ownership or leasing of property or the conduct of its business
requires such qualification except where the failure to be so
qualified or in good standing would not reasonably be expected to
have a Material Adverse Effect; all of the issued and outstanding
shares of capital stock or other equity interest of each Subsidiary
has been duly authorized and validly issued and is fully paid and
non-assessable; and the capital stock or other equity interest of
each Subsidiary owned by the Company, directly or through its
Subsidiaries, is owned free from liens and encumbrances, except for
those set forth in the Company’s credit facilities with CIT
Healthcare LLC (formerly known as Healthcare Business Credit
Corporation) (“CIT”).
(i) The Company has the full legal
right, power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. The Company has
the full corporate power and authority to issue, sell and deliver
the Shares as provided herein. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes
the valid and binding agreement of the Company enforceable against
the Company in accordance with its terms, except to the extent that
the indemnification provisions set forth in Section 9 of this
Agreement may be limited by federal and state securities laws or
principles of public policy and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the
enforceability of creditors’ rights generally and general
principles of equity and rules of law governing specific
performance, estoppel, waiver, injunctive relief and other
equitable remedies (regardless of whether enforcement is sought in
a proceeding at law or in equity).
(j) Each consent, approval,
authorization, order, designation or filing by or with any
governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Shares, the execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby, has been made or obtained by the
Company, and is in full force and effect, except as may be required
under applicable state securities laws. The issuance, sale and
delivery of the Shares, the execution, delivery and performance of
this Agreement, and the consummation of the transactions
contemplated by this Agreement, (i) will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default by the Company or any Subsidiary under, its
Certificate of Incorporation or Bylaws, each as amended (or similar
corporate, limited partnership, limited liability company or other
organizational documents) and (ii) will not result in a breach
or violation of any of the terms or provisions of, or constitute a
default by the Company or any Subsidiary, under, any provision of
any indenture, mortgage, deed of trust, loan agreement, note, lease
or other agreement or instrument to which the Company or any
Subsidiary is a party or to which it or its properties is subject,
except where such breach, violation or default would not reasonably
be expected to have a Material Adverse Effect, or (iii) will
not result in a breach or violation of any statute, rule or
regulation, or, to the best of the Company’s knowledge, any
judgment, decree or order, of any court or governmental agency or
body applicable to the Company or any Subsidiary or any of their
properties, except where such breach or violation would not
reasonably be expected to have a Material Adverse
Effect.
(k) The authorized, issued and
outstanding capital stock of the Company is as set forth in the
Disclosure Package and the Prospectus under the caption
“Capitalization.” All of the issued and outstanding
shares of Common Stock of the Company have been duly authorized and
validly issued, are fully paid and non-assessable. As of the
Closing Time, the Common Stock of the Company will
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conform to the description of the Common Stock
contained in the Registration Statement, the Disclosure Package,
and the Prospectus. All offers and sales of the Company’s
capital stock prior to the date hereof were at all relevant times
duly registered under the 1933 Act or were exempt from the
registration requirements of the 1933 Act by reason of Sections
3(b), 4(2) or 4(6) thereof and were duly registered or the subject
of an available exemption from the registration requirements of the
applicable state securities or blue sky laws. The Shares to be sold
by the Company, when issued and delivered by the Company and paid
for pursuant to this Agreement, will be validly issued, fully paid
and non-assessable and will conform in all respects to the
description thereof contained in the Disclosure Package and the
Prospectus. No preemptive rights of stockholders exist with respect
to any of the Shares. No person or entity holds a right to require
or participate in the registration of the offer and sale of the
Shares under the 1933 Act, and, no person holds a right to require
registration under the 1933 Act of the offer and sale of any shares
of Common Stock of the Company at any other time, except for those
rights granted to the Geringer Family Trust u/a June 26, 1996
(the “Geringer Trust”) pursuant to that Second Amended
and Restated Registration Rights Agreement, dated July 30,
2003 (the “Registration Rights Agreement”), which
rights have been waived by the Geringer Trust and such waiver has
been accepted by the Company, pursuant to Section 17 of the
Registration Rights Agreement, and those rights granted to Larry J.
Nulton, PhD. pursuant to that Registration Rights Agreement dated
as of June 13, 2005 (the “Nulton Registration Rights
Agreement”), which such shares registrable pursuant to the
Nulton Registration Rights Agreement are subject to a pledge under
the terms of the Nulton Registration Rights Agreement and that
Collateral Pledge Agreement dated as of June 13, 2005 and
therefore as of the date hereof, are not saleable. No person or
entity has a right of participation or first refusal with respect
to the sale of the Shares by the Company or the Selling
Stockholders. None of the issued shares of capital stock of the
Company has been issued in violation of any preemptive or similar
right of any security holder of the Company. Except as described in
the Disclosure Package and the Prospectus, there are no outstanding
options, warrants or other rights calling for the issuance of any
share of capital stock of the Company or any security convertible
into or exchangeable for capital stock of the Company. There is no
commitment, plan or arrangement to issue any share of capital stock
of the Company or any security convertible into or exchangeable for
capital stock of the Company, except as is disclosed in the
Disclosure Package and the Prospectus.
(l) The consolidated historical
financial statements of the Company (including all related notes
and schedules) and the financial statements of acquired businesses
incorporated by reference in the Registration Statement, the
Disclosure Package, and the Prospectus present fairly the financial
position of the Company and its consolidated Subsidiaries, or the
acquired businesses as the case may be, as of the dates indicated
and the results of their operations, stockholders’ equity and
cash flows for the periods specified, all in conformity with
accounting principles generally accepted in the United States
(“GAAP”) applied on a consistent basis throughout the
periods involved (subject, in the case of unaudited financial
statements, to normal year-end adjustments) and in conformity with
Regulation S-X of the Commission. The supporting schedules included
in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The financial
statement schedules included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2005, as amended
(the “Annual Report”) have been compiled on a basis
consistent with the financial statements included in the
Company’s Annual Report incorporated by reference in the
Registration Statement, the Disclosure Package, and the Prospectus.
No other financial statements or schedules are required by Form S-3
or otherwise to be included or incorporated by reference in either
the Registration Statement, the Disclosure Package, or the
Prospectus. The pro forma financial statements
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incorporated by reference in the Prospectus, the
Disclosure Package, and the Registration Statement include
assumptions that provide a reasonable basis for presenting the
significant effects directly attributable to the transactions and
events described therein, the related pro forma adjustments give
appropriate effect to those assumptions, and the pro forma
adjustments reflect the proper application of those adjustments to
the historical financial statement amounts in the pro forma
financial statements incorporated by reference in the Prospectus,
the Disclosure Package, and the Registration Statement. The pro
forma financial statements incorporated by reference in the
Prospectus, the Disclosure Package, and the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of Regulation S-X under the Act.
(m) To the extent relevant, the
accounts receivable of the Company and its Subsidiaries have been
adjusted to reflect material changes in the reimbursement policies
of third party payors such as Medicare, Medicaid, private insurance
companies, health maintenance organizations, preferred provider
organizations, managed care systems and other third party payors.
The Company’s accounts receivable, after giving effect to the
allowance for doubtful accounts, relating to such third party
payors do not exceed amounts the Company and its subsidiaries are
entitled to receive in any material respect.
(n) McGladrey & Pullen,
LLP, Ernst & Young LLP, and Joseph Decosimo and Company,
PLLC, which have examined and is reporting upon certain of the
audited financial statements and schedules incorporated by
reference in the Registration Statement, the Disclosure Package,
and the Prospectus, are, and were during the periods covered by its
reports included in the Registration Statement, the Disclosure
Package, and the Prospectus, independent registered public
accounting firms with respect to the Company and its Subsidiaries
within the meaning of the 1933 Act and the 1933 Act
Regulations.
(o) The Company has obtained, for
the benefit of the Underwriters, from Fletcher J. McCusker a
written agreement (“Lock-Up Agreement”) that for a
period of 90 days from the date of the Prospectus (the
“Lock-Up Period”) Fletcher J. McCusker will not,
without the prior written consent of SunTrust Capital Markets, Inc.
on behalf of the Underwriters, except as permitted in such Lock-Up
Agreement, offer, sell, contract to sell, pledge, grant any option
to purchase, or otherwise dispose of, directly or indirectly, any
shares of Common Stock or other instrument which by its terms is
convertible into, or exercisable or exchangeable for, any shares of
Common Stock except for those shares of Common Stock being sold
pursuant hereto and listed in the Prospectus.
(p) Neither the Company nor any of
its Subsidiaries has sustained, since December 31, 2005, any
material loss or interference with its business from fire,
explosion, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or arbitration,
or from any court or governmental action or inaction (including
action or inaction relating to budget or appropriation matters
materially impacting the Company or any of its Subsidiaries), order
or decree, otherwise than as set forth in the Disclosure Package
and the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement, the Disclosure
Package, and the Prospectus, there has not been (i) any change
in the capital stock, long-term debt, obligations under capital
leases or short-term borrowings of the Company or any of its
Subsidiaries; (ii) any event or development which could
reasonably be seen as having a Material Adverse Effect; or
(iii) any liability or obligation, direct or contingent,
incurred or undertaken by the Company or any of its Subsidiaries,
except for liabilities or obligations incurred in the ordinary
course of business or which otherwise would not reasonably be
expected to have a Material Adverse Effect.
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(q) Neither the Company nor any of
its Subsidiaries is in violation of its Certificate of
Incorporation (or similar organizational document), or its Bylaws
(or similar document governing the internal affairs of the entity)
and, as of the date hereof, no default exists, and no event has
occurred, nor state of facts exists, which, with notice or after
the lapse of time to cure or both, would constitute a default in
the due performance and observance of any obligation, agreement,
covenant, consideration or condition contained in any indenture,
mortgage, deed of trust, loan agreement, note, lease or other
agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which it, any of its Subsidiaries or
any of their respective properties is subject, and no violation of
any law, order, rule, regulation, writ, injunction or decree of any
government, governmental instrumentality or court, domestic or
foreign, has occurred or exists, in any such case where the
consequences of such violation or default would reasonably be
expected to have a Material Adverse Effect.
(r) Except as otherwise disclosed in
the Disclosure Package and the Prospectus, (i) the Company has
not authorized or conducted, and otherwise has no knowledge of the
generation, transportation, storage, presence, use, treatment,
disposal, release or handling of (in an amount or of a type that
has been or must be reported to any governmental agency, violates
any Environmental Law (as hereinafter defined), or has required or
could require remediation expenditures) any hazardous substance,
asbestos, radon, polychlorinated biphenyl (“PCBs”),
petroleum product or waste (including crude oil or any fraction
thereof), natural gas, liquefied gas, synthetic gas or other
material defined, regulated, controlled or potentially subject to
any remediation requirement under any Environmental Law
(collectively, “Hazardous Materials”), on, in or under
any real property owned, leased or used by the Company or any of
its Subsidiaries, (ii) the Company and each of its
Subsidiaries is in compliance with all federal, state and local
laws, ordinances, rules, regulations and other governmental
requirements relating to pollution, control of chemicals,
management of waste, discharges of materials into the environment,
health, safety, natural resources, and the environment
(collectively, “Environmental Laws”), and
(iii) the Company and each of its Subsidiaries has, and is in
compliance with, all licenses, permits, registrations and
government authorizations necessary to operate under all applicable
Environmental Laws, except in the case of clause (i) or
(ii) where such noncompliance would not reasonably be expected
to have a Material Adverse Effect. Except as otherwise disclosed in
the Disclosure Package and the Prospectus, neither the Company nor
any of its Subsidiaries has received any written or oral notice
from any governmental entity or any other person, and there is no
pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened claim, litigation or any administrative
agency proceeding, that: (i) alleges a violation of any
Environmental Laws by the Company or any of its Subsidiaries;
(ii) alleges that the Company or any of its Subsidiaries is a
liable party or a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. §§ 9601, et seq., or any state superfund
law; (iii) has resulted in or could result in the attachment
of an environmental lien on any real property owned, leased or used
by the Company or any of its Subsidiaries; or (iv) alleges the
occurrence of contamination of any of such real property, damage to
natural resources, property damage, or personal injury based on
activities of the Company or any of its Subsidiaries, or the
activities of its predecessors, if any, or third parties (whether
at the real property or elsewhere) involving Hazardous Materials,
whether arising under the Environmental Laws, common law
principles, or other legal standards.
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(s) The Company and its Subsidiaries
have good and marketable title to all real property owned by them,
free and clear of all liens, encumbrances, claims, security
interests, restrictions and defects, except such as are reflected
in the Disclosure Package and the Prospectus. Each parcel of real
property owned or leased by the Company or any of its Subsidiaries,
and each improvement thereon, complies with all applicable codes,
laws and regulations (including, without limitation, building and
zoning codes, laws and regulations and laws relating to access to
facilities located on such real property), except for such failures
to comply that would not reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has
knowledge of any pending or threatened condemnation proceedings,
zoning change, or other proceeding or action that will in any
manner affect the size of, use of, improvements on, construction on
or access to such real property and improvements, except such
proceedings or actions that would not reasonably be expected to
have a Material Adverse Effect.
(t) All real property and buildings
held or occupied under leases by the Company or any of its
Subsidiaries are held or occupied under valid, subsisting and
enforceable leases with such exceptions as are not material and do
not interfere in any material respect with the uses made and
proposed to be made of such property and buildings by the Company
or any of its Subsidiaries; such leases conform to the descriptions
thereof, if any, set forth in the Registration Statement, the
Disclosure Package, and the Prospectus; and no notice has been
given or claim asserted by anyone adverse to the rights of the
Company or any of its Subsidiaries under any of the leases or
affecting the Company’s or any of its Subsidiaries’
rights to the continued possession of the leased
property.
(u) Except as described in the
Disclosure Package and the Prospectus, there is not pending, nor to
the Company’s knowledge threatened, any action, suit,
proceeding, inquiry or investigation, against the Company, any of
its Subsidiaries or any of their respective officers, directors or
stockholders or to which the properties, assets or rights of the
Company or any of its Subsidiaries are subject, before or brought
by any court or governmental agency or body or board of
arbitrators, which would, if adversely determined, reasonably be
expected to have a Material Adverse Effect, or which could prevent
consummation of the transactions contemplated by this
Agreement.
(v) There are no contracts or other
documents required by the 1933 Act or the 1933 Act Regulations to
be described in or incorporated by reference into the Registration
Statement, the Disclosure Package, or the Prospectus or to be filed
as exhibits to the Registration Statement which have not been
accurately described in all material respects in the Disclosure
Package or the Prospectus or incorporated or filed as required. To
the best of the Company’s or any of its Subsidiary’s
knowledge, the agreements to which the Company or any of its
Subsidiaries is a party which are described in the Registration
Statement, the Disclosure Package, and the Prospectus are valid and
enforceable in all material respects by the Company or its
Subsidiary in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws relating to or
affecting the enforceability of creditors’ rights generally
or by general principles of equity and rules of law governing
specific performance, estoppel, waiver, injunctive relief and other
equitable remedies (regardless of whether enforcement is sought in
a proceeding at law or in equity), and no party thereto is in
breach or default under any of such agreements except where such
breach or default would not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received notice by any other party to any contract
to which the Company or any Subsidiary is also a party, of such
party’s
9
intent to terminate such contract, except such
contracts termination of which, individually or in the aggregate
with other contracts with respect to which such notice shall have
been received, would not reasonably be expected to have a Material
Adverse Effect.
(w) The Company and each of its
Subsidiaries owns, possesses or has obtained all permits, licenses,
provider numbers, approvals (including certificate of need
approvals), consents, orders, certifications (including
certification under the Medicare and Medicaid programs),
accreditations (including, accreditation by the Joint Commission on
Accreditation of Healthcare Organizations) and other authorizations
(collectively, “Governmental Licenses”) issued by, and
have made all declarations and filings with, the appropriate
federal, state or local regulatory agencies or bodies as are
necessary to own or lease, as the case may be, and to operate its
properties and to carry on its businesses as presently conducted
and as contemplated by the Disclosure Package and the Prospectus,
except where a failure to so declare, file, own, possess or obtain
such Governmental Licenses would not, singly and in the aggregate,
have a Material Adverse Effect; the Company and its Subsidiaries
are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would
not, singly and in the aggregate, have a Material Adverse Effect;
all of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or
the failure of such Governmental Licenses to be in full force and
effect would not have a Material Adverse Effect; and neither the
Company nor any of its Subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result
in a Material Adverse Effect.
(x) The Company and each of its
Subsidiaries owns or possesses all intangible property rights and
know-how necessary for the conduct of its business as currently
carried on and as contemplated by the Registration Statement
(collectively, the “Intellectual Property”). Except as
described in the Disclosure Package and the Prospectus, (i) no
third parties have received rights to any such Intellectual
Property from the Company or any Subsidiary, other than licenses
granted in the ordinary course of business; (ii) to the
Company’s or any Subsidiary’s knowledge, there is no
infringement by third parties of any such Intellectual Property;
(iii) there is no pending or, to the Company’s or any
Subsidiary’s knowledge, threatened action, suit, proceeding
or claim by others challenging the Company’s or any
Subsidiary’s rights in or to any such Intellectual Property,
and the Company and each Subsidiary is unaware of any facts which
would form a basis for any such claim; and (iv) there is no
pending or, to the Company’s or any Subsidiary’s
knowledge, threatened action, suit, proceeding or claim by others
challenging the validity or scope of any such Intellectual
Property, and the Company and each Subsidiary is unaware of any
facts which would form a basis for any such claim. To the
Company’s and each Subsidiary’s knowledge, none of the
technology employed by the Company or any Subsidiary has been
obtained or is being used by the Company or any Subsidiary in
violation of the rights of any person or third party. Neither the
Company nor any Subsidiary knows of infringement by others of
Intellectual Property owned by or licensed to the Company or any
Subsidiary.
(y) The Company and its Subsidiaries
maintain a system of internal control over financial reporting
sufficient to provide reasonable assurance that financial reporting
is reliable and financial statements for external purposes are
prepared in accordance with GAAP and includes policies and
procedures that (i) pertain to the maintenance of records that
in reasonable detail accurately and fairly
10
reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance with
applicable law and the authorizations of management and trustees of
the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that could have a
material effect on the financial statements.
(z) The Company is in compliance, in
all material respects, with all applicable provisions of the
Sarbanes-Oxley Act of 2002, including the related rules and
regulations promulgated thereunder by the Commission or The Nasdaq
Stock Market’s National Market (the
“Nasdaq”).
(aa) The Company has filed in a
timely manner each document or report required to be filed by it
pursuant to the 1934 Act and the rules and regulations of the
Commission promulgated thereunder (the “1934 Act Rules and
Regulations”); each such document or report at the time it
was filed conformed to the requirements of the 1934 Act and the
1934 Act Rules and Regulations; and none of such documents or
reports when filed contained an untrue statement of any material
fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
(bb) The Company and each Subsidiary
has filed all federal, state, local and foreign income, franchise,
property and other tax returns and tax forms required to be filed
or has duly obtained extensions of time for the filing thereof,
except where the failure to do so would not reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any
Subsidiary is in default in the payment of any taxes that were
payable pursuant to said returns or any assessments with respect
thereto, other than any which the Company or any Subsidiary is
contesting in good faith and as to which adequate reserves have
been provided, except where any such default would not reasonably
be expected to have a Material Adverse Effect. Such returns and
forms are complete and correct in all material respects. The
Company and each Subsidiary have made all payroll withholdings
required to be made by it with respect to employees. The charges,
accruals and reserves on the books of the Company and each
Subsidiary in respect of any tax liability for any year not finally
determined are adequate to meet any assessments or reassessments
for additional taxes. There have been no tax deficiencies asserted
and, to the Company’s and each Subsidiary’s knowledge,
no tax deficiency might be reasonably asserted or threatened
against the Company or any Subsidiary that could individually or in
the aggregate reasonably be expected to have a Material Adverse
Effect.
(cc) The Company and each Subsidiary
maintains insurance (issued by insurers of recognized financial
responsibility) of the types and in the amounts generally deemed
adequate for its business and, to the best of the Company’s
and each Subsidiary’s knowledge, generally consistent with
insurance coverage maintained by similar companies in similar
businesses, including, but not limited to, professional liability
insurance covering the acts and omissions of the Company’s
agents and employees acting in their capacities as agents and/or
employees of the Company, and insurance covering real and personal
property owned or leased by the Company or any Subsidiary against
theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, professional liability and casualty
and liability (including, but not limited to product liability)
insurance covering the Company’s and its Subsidiaries’
operations, all of which insurance is in full force and
effect.
11
(dd) To the Company’s and each
Subsidiary’s knowledge, no labor problem exists with the
Company’s or any Subsidiary’s employees, or is
threatened or imminent, that would reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary is
aware of any existing, threatened or imminent labor disturbance by
the employees of any of its principal suppliers, contractors or
customers that would reasonably be expected to have a Material
Adverse Effect. !
(ee) Neither the Company nor any of
its Subsidiaries, nor any of their officers, directors,
stockholders or affiliates, have taken, and such parties will not
take, directly or indirectly, any action designed to, or that might
be reasonably expected to, cause or result in or constitute, the
stabilization or manipulation of the price of the Shares to
facilitate the sale or resale of the Shares or that violates
Regulation M of the Commission in any respect.
(ff) The Shares have been registered
pursuant to Section 12(g) of the 1934 Act, and the Shares have
been approved for listing on the Nasdaq, subject to official notice
of issuance.
(gg) The Company has not incurred
any liability for a fee, commission or other compensation on
account of the employment of a broker or finder in connection with
the transactions contemplated by this Agreement other than as
contemplated hereby or as described in the Disclosure Package and
the Prospectus.
(hh) The Company is not, will not
become as a result of the transactions contemplated hereby, and
does not intend to conduct its business in a manner that would
cause it to become, an “investment company” or a
company controlled by an “investment company” within
the meaning of the Investment Company Act of 1940, as amended (the
“1940 Act”).
(ii) Except as described in the
Registration Statement, the Disclosure Package, or Prospectus or
the Incorporated Documents, the Company has not sold or issued any
shares of Common Stock during the six-month period preceding the
date of the Prospectus, other than shares of Common Stock issued
upon exercise of stock options granted prior to such period,
including any sales pursuant to Rule 144A under, or Regulations D
or S of, the 1933 Act Regulations.
(jj) The Company and each Subsidiary
has good and marketable title to all personal property owned by it,
free and clear of all encumbrances and defects except for those set
forth in the Company’s credit facilities with CIT as
described in the Disclosure Package and the Prospectus and other
than such as would not reasonably be expected to have a Material
Adverse Effect; and all personal property held under lease by the
Company and each Subsidiary is held by it under valid, subsisting
and enforceable leases, with such exceptions as are not material
and do not interfere with the use made and proposed to be made of
such property by the Company or its Subsidiary.
(kk) No relationship, direct or
indirect, exists between or among the Company or any Subsidiary on
the one hand, and the directors, officers, stockholders, employees,
affiliates, customers or suppliers of the Company or any Subsidiary
on the other hand, which is required to be described in the
Disclosure Package and the Prospectus and which is not so
described.
(ll) The Company and each Subsidiary
is in compliance in all material respects with all currently
applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended,
12
including the regulations and published
interpretations thereunder (herein called “ERISA”); to
the Company’s and each Subsidiary’s knowledge, no
“reportable event” (as defined in ERISA) has occurred
with respect to any “pension plan” (as defined in
Section 3(2) ERISA) for which the Company or any Subsidiary
would have any liability; neither the Company nor any Subsidiary
has incurred, and does not expect to incur, liability under
(i) Title IV of ERISA with respect to termination of, or
withdrawal from, any “pension plan” or
(ii) Sections 412 or 4971 of the Internal Revenue Code of
1986, as amended (the “Code”); and each “pension
plan” for which the Company or any Subsidiary would have any
liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure
to act, that would reasonably be expected to cause the loss of such
qualification.
(mm) Except as set forth in the
Registration Statement, the Disclosure Package, and the Prospectus,
the Company and each of its Subsidiaries is in material compliance
with all of its obligations arising under any contract to which the
Company (or any if its Subsidiaries) is a party or by which it is
bound where the Company (or any of its Subsidiaries) is a prime
contractor to a government entity or agency or a subcontractor or
supplier at any tier to any entity providing services to a
government entity or agency including material compliance with all
statutes, regulations and contractual provisions applicable to the
Company as a government contractor, prime contractor,
subcontractor, service provider or supplier as incorporated into
any prime contracts, subcontracts or supply agreements, except
where such noncompliance would not reasonably be expected to have a
Material Adverse Effect. Except as set forth in the Registration
Statement, the Disclosure Package, and the Prospectus, neither the
Company nor any of its Subsidiaries has questioned or disallowed
costs pending pursuant to any government contract audit of which
the Company or any Subsidiary has knowledge and has no pending or
threatened claims against it as a result of the performance or
non-performance of any government contract, subcontract or supply
agreement.
(nn) Neither the Company nor its
Subsidiaries, nor, to the knowledge of the Company, any officer,
director, stockholder, employee or other agent of the Company or
any of its Subsidiaries, has engaged on behalf of the Company,
directly or indirectly, in (i) any material activities which
are prohibited under Medicare and Medicaid statutes or any
regulations promulgated pursuant to such statutes, or (ii) any
activities which are prohibited under related state or local
statutes or regulations or any rules of professional conduct,
including the following: (A) knowingly and willfully making or
causing to be made a false statement or representation of a
material fact in connection with the receipt of or claim for any
benefit or payment under the Medicare or Medicaid program or from
any other third party payor; (B) failing to disclose knowledge
by a claimant of the occurrence of any event affecting the initial
or continued right to any benefit or payment under the Medicare or
Medicaid program or from any other third party payor on its own
behalf or on behalf of another, with intent to secure such benefit
or payment fraudulently; (C) knowingly and willfully offering,
paying, soliciting or receiving any remuneration, in cash or in
kind (1) in return for referring an individual to a person for
the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part by
Medicare or Medicaid or any other third party payor, or (2) in
return for purchasing, leasing or ordering or arranging for, or
recommending the purchasing, leasing or ordering of, any good,
facility, service, or item for which payment may be made in whole
or in part by Medicare or Medicaid or any other third party payor;
(D) knowingly and willfully referring an individual to a
person or entity with which it has ownership or other financial
arrangements (where applicable federal or state law prohibits such
referrals); and (E) knowingly and willfully violating any
enforcement initiative instituted by any governmental agency
(including the Office of the Inspector General and the Department
of Justice).
13
(oo) The Company acknowledges that
each Underwriter is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice
given by such Underwriter or any of its respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such
Underwriter’s purchase of the Shares. The Company
fur
