Exhibit 1.1
J.P. MORGAN SECURITIES INC.
MAGELLAN HEALTH SERVICES, INC.
4,250,000 Shares of Ordinary Common Stock
Underwriting Agreement
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May 16, 2005
J.P. Morgan Securities Inc.
As Representative of the
several Underwriters listed
in Schedule I hereto
c/o J.P. Morgan Securities Inc.
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
The stockholders named in Schedule II hereto (the "Selling
Stockholders") of Magellan Health Services, Inc., a Delaware corporation
(including its predecessors, the "Company"), propose to sell to the several
Underwriters listed in Schedule I hereto (the "Underwriters"), for whom you are
acting as representative (the "Representative"), on the terms and conditions as
provided below, an aggregate of 4,250,000 shares (the "Underwritten Shares")
and, at the option of the Underwriters, up to an additional 637,500 shares (the
"Option Shares"), of Ordinary Common Stock, par value $0.01 per share (the
"Ordinary Common Stock") or Multiple and Variable Vote Restricted Convertible
Common Stock par value $0.01 per share (the "Multi-Vote Common Stock") as set
forth with respect to each Selling Stockholder on Schedule II, which Multi-Vote
Common Stock pursuant to the Company's amended and restated certificate of
incorporation will immediately and automatically convert to Ordinary Common
Stock as of the date of purchase by the Underwriters (collectively, the
"Stock"), of the Company. The Underwritten Shares and the Option Shares are
herein referred to as the "Shares".
1. Registration Statement. The Company hereby confirms its agreement
with the several Underwriters concerning the purchase and sale of the Shares, as
follows. A registration statement on Form S-3 (File No. 333-120271) relating to
the Shares has been filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Securities Act"), and has become effective. Such registration statement, as
amended prior to the date hereof, is hereinafter referred to as the
"Registration Statement"; and as used herein, the term "Base Prospectus" means
the prospectus included in such Registration Statement. Copies of the
Registration Statement and each of the amendments thereto have been delivered by
the Company to the Underwriters. As provided in Section 5(a), a preliminary
prospectus supplement (the "Preliminary Prospectus Supplement") and a final
prospectus supplement (the "Final Prospectus Supplement"), in each case, to the
Base Prospectus reflecting terms of the offering of the Shares and the other
matters set forth therein, in the case of Preliminary Prospectus Supplement, has
been and, in the case of the Final Prospectus Supplement, will be prepared and
filed pursuant to Rule 424(b) under the Securities Act ("Rule 424(b)"). As used
herein, "Preliminary Prospectus" means the Base Prospectus together with the
Preliminary Prospectus Supplement, in the form filed on May 9, 2005 pursuant to
Rule 424(b) and "Prospectus" means the Final Prospectus Supplement, together
with the accompanying Base Prospectus. If the Company has filed an abbreviated
registration statement pursuant to Rule 462(b) under the Securities Act (the
"Rule 462 Registration Statement"), then any reference herein to the term
"Registration Statement" shall be deemed to include such Rule 462 Registration
Statement. Any reference in this Agreement to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Securities Act, as of the effective date of the Registration Statement
or the date of such Preliminary Prospectus or the Prospectus, as the case may
be, and any reference to "amend", "amendment" or "supplement" with respect to
the Registration Statement, any Preliminary 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") that are deemed to
be incorporated by reference therein. Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Registration Statement
and the Prospectus.
2. Purchase of the Shares by the Underwriters. (a) Each of the
Selling Stockholders agrees, severally and not jointly, to sell the Shares to
the several Underwriters as provided in this Agreement, and each Underwriter, on
the basis of the representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, agrees, severally and not jointly,
to purchase from each of the Selling Stockholders at a purchase price per share
of $29.356 (the "Purchase Price") the number of Underwritten Shares (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
the aggregate number of Underwritten Shares to be sold by each of the Selling
Stockholders as set forth opposite their respective names in Schedule II hereto
by a fraction, the numerator of which is the aggregate number of Underwritten
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Underwritten Shares to be purchased by all the Underwriters
from all of the Selling Stockholders hereunder.
In addition, Magellan Holdings L.P., as and to the extent indicated
in Schedule II hereto agrees to sell the Option Shares to the several
Underwriters and the Underwriters shall have the option to purchase at their
election up to 637,500 Option Shares at the Purchase Price. The Underwriters, on
the basis of the representations and warranties herein contained, but subject to
the conditions hereinafter stated, shall have the option to purchase, severally
and not jointly, from Magellan Holdings L.P. at the Purchase Price that portion
of the number of Option Shares as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Option Shares by a fraction the
numerator of which is the maximum number of Option Shares which such Underwriter
is entitled to purchase and the denominator of which is the maximum number of
Option Shares which all of the Underwriters are entitled to purchase hereunder.
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The Underwriters may exercise the option to purchase the Option
Shares at any time and from time to time on or before the thirtieth day
following the date of this Agreement, by written notice from the Representative
to Magellan Holdings L.P. Such notice shall set forth the aggregate number of
Option Shares as to which the option is being exercised and the date and time
when the Option Shares are to be delivered and paid for which may be the same
date and time as the Closing Date (as hereinafter defined) but shall not be
earlier than the Closing Date nor later than the tenth full business day (as
hereinafter defined) after the date of such notice (unless such time and date
are postponed in accordance with the provisions of Section 11 hereof). Any such
notice shall be given at least two business days prior to the date and time of
delivery specified therein.
(b) The Selling Stockholders understand that the Underwriters intend
to complete a public offering of the Shares as soon after the date of this
Agreement as in the judgment of the Representative is advisable, and initially
to offer the Shares on the terms set forth in the Prospectus. The Selling
Stockholders acknowledge and agree that the Underwriters may offer and sell
Shares to or through any affiliate of an Underwriter and that any such affiliate
may offer and sell Shares purchased by it to or through any Underwriter.
(c) Payment for the Shares shall be made by wire transfer in
immediately available funds to the accounts specified by the Selling
Stockholders at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue,
New York, NY at 10:00 A.M. New York City time on May 20, 2005, or at such other
time or place on the same or such other date, not later than the fifth business
day thereafter, as the Representative and the Selling Stockholders may agree
upon in writing or, in the case of the Option Shares, on the date and at the
time and place specified by the Representative in any written notice of the
Underwriters' election to purchase such Option Shares. The time and date of such
payment for the Underwritten Shares are referred to herein as the "Closing Date"
and the time and date for such payment for the Option Shares, if other than the
Closing Date, are herein referred to as the "Additional Closing Date."
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representative for the respective accounts of the several Underwriters of
the Shares to be purchased on such date in definitive form registered in such
names and in such denominations as the Representative shall request in writing
not later than two full business days prior to the Closing Date or the
Additional Closing Date, as the case may be, with any transfer taxes payable in
connection with the sale of the Shares duly paid by the Selling Stockholders.
3. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter and the Selling Stockholders that:
(a) Preliminary Prospectus. No order preventing or suspending the use
of any Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, complied in all material
respects with the Securities Act and did not 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
under which they were made, not misleading; provided that the Company makes no
representation and warranty with respect to any statements or omissions made in
reliance upon and in conformity with information relating to any Underwriter or
Selling Stockholder furnished to the Company in writing by such Underwriter
through the Representative or such Selling Stockholder expressly for use in any
Preliminary Prospectus.
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(b) Registration Statement and Prospectus. No order suspending the
effectiveness of the Registration Statement has been issued by the Commission
and no proceeding for that purpose has been initiated or, to the knowledge of
the Company, threatened by the Commission; as of the applicable effective date
of the Registration Statement and any amendment thereto, the Registration
Statement complied and will comply in all material respects with the Securities
Act, and did not and will not 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 not misleading; and as of the applicable
filing date of the Prospectus and any amendment or supplement thereto and as of
the Closing Date and as of the Additional Closing Date, as the case may be, the
Prospectus will not 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 under which they were
made, not misleading; provided that the Company makes no representation and
warranty with respect to any statements or omissions made in reliance upon and
in conformity with information relating to any Underwriter or any Selling
Stockholder furnished to the Company in writing by such Underwriter through the
Representative or such Selling Stockholder expressly for use in the Registration
Statement and the Prospectus and any amendment or supplement thereto.
(c) Incorporated Documents. The documents incorporated by reference
in the Prospectus, when they become effective or were filed with the Commission,
as the case may be, conformed in all material respects to the requirements of
the Securities Act or the Exchange Act, as applicable, and none of such
documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and any further documents so filed prior to the termination of
the Prospectus Delivery Period (as defined below) and incorporated by reference
in the Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) Financial Statements. The financial statements and the related
notes thereto of the Company and its consolidated subsidiaries included or
incorporated by reference in the Registration Statement and the Prospectus
comply in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as applicable, and present fairly in all
material respects the consolidated financial position of the Company and its
subsidiaries as of the dates indicated and the results of their operations and
the changes in their cash flows for the periods specified; such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods covered thereby,
and the supporting schedules included or incorporated by reference in the
Registration Statement present fairly in all material respects the information
required to be stated therein; the other financial information included or
incorporated by reference in the Registration Statement and the Prospectus has
been derived from the accounting records of the Company and its subsidiaries and
presents fairly in all material respects the information shown thereby.
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(e) No Material Adverse Change. Since the date of the most recent
financial statements of the Company included or incorporated by reference in the
Registration Statement and the Prospectus, (i) there has not been any change in
the capital stock or long-term debt of the Company or any of its subsidiaries,
or any dividend or distribution of any kind declared, set aside for payment,
paid or made by the Company on any class of capital stock, or any material
adverse change, or any development that would reasonably be expected to have a,
or to result in a prospective, material adverse change, in or affecting the
business, properties, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a whole; (ii)
neither the Company nor any of its subsidiaries has entered into any transaction
or agreement that is material to the Company and its subsidiaries taken as a
whole or incurred any liability or obligation, direct or contingent, that is
material to the Company and its subsidiaries taken as a whole; and (iii) neither
the Company nor any of its subsidiaries has sustained any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor disturbance or dispute or
any action, order or decree of any court or arbitrator or governmental or
regulatory authority, except in each case as otherwise disclosed in the
Registration Statement and the Prospectus.
(f) Organization and Good Standing. The Company and each of its
subsidiaries have been duly organized and are validly existing and in good
standing under the laws of their respective jurisdictions of organization, are
duly qualified to do business and are in good standing in each jurisdiction in
which their respective ownership or lease of property or the conduct of their
respective businesses requires such qualification, and have all power and
authority necessary to own or hold their respective properties and to conduct
the businesses in which they are engaged, except where the failure to be so
qualified or have such power or authority would not, individually or in the
aggregate, reasonably be expected to have a prospective material adverse effect
on the business, properties, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect"). The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in Exhibit 21 to the Registration Statement. The
subsidiaries listed in Schedule III to this Agreement are the only significant
subsidiaries of the Company.
(g) Capitalization. The Company has an authorized capitalization as
set forth in the Prospectus under the heading "Capitalization"; all the
outstanding shares of capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable and are not subject
to any pre-emptive or similar rights; the shares of Ordinary Common Stock to be
issued upon the conversion of the shares of Multi-Vote Common Stock, included
among the Shares to be sold by the Selling Stockholders, have been duly and
validly authorized and, when delivered to the Underwriters pursuant hereto, will
be duly and validly issued and fully paid and non-assessable and will not be
subject to any pre-emptive or similar rights; except as described in or
expressly contemplated by the Prospectus, there are no outstanding rights
(including, without limitation, pre-emptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interest in the Company or any of its
subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of the
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Company or any such subsidiary, any such convertible or exchangeable securities
or any such rights, warrants or options; the capital stock of the Company
conforms in all material respects to the description thereof contained in the
Registration Statement and the Prospectus; and all the outstanding shares of
capital stock or other equity interests of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and non-assessable
and are owned directly or indirectly by the Company, free and clear of any lien,
charge, encumbrance, security interest, restriction on voting or transfer or any
other claim of any third party, except as otherwise referred to in the
Prospectus.
(h) Due Authorization. The Company has full right, power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder; and all action required to be taken for the due and proper
authorization, execution and delivery by it of this Agreement and the
consummation by it of the transactions contemplated hereby has been duly and
validly taken.
(i) Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by the Company.
(j) Descriptions of Agreements and other matters. This Agreement
conforms in all material respects to the description thereof contained in the
Registration Statement and the Prospectus. The descriptions in the Prospectus of
statutes, legal, governmental and regulatory proceedings and contracts and other
documents are accurate in all material respects; and the statements in the
Prospectus under the heading "Certain U.S. federal income tax consequences for
non U.S. holders", to the extent that they constitute summaries of matters of
law or regulation or legal conclusions, fairly summarize the matters described
therein in all material respects.
(k) No Violation or Default. Neither the Company nor any of its
subsidiaries is (i) in violation of its charter or by-laws or similar
organizational documents; (ii) in default, and no event has occurred that, with
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject; or
(iii) in violation of any law or statute or any judgment, order, rule or
regulation of any court or arbitrator or governmental or regulatory authority,
except, in the case of clauses (ii) and (iii) above, for any such default or
violation that would not, individually or in the aggregate, have a Material
Adverse Effect.
(l) Disclosure Controls and Procedures. The Company has established
and maintains "disclosure controls and procedures" (as defined in Rule 13a-15(e)
and 15d-15(e) of the Exchange Act); the Company's "disclosure controls and
procedures" are reasonably designed to ensure (i) that information required to
be disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Rules and Regulations, and (ii) that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
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(m) No Conflicts. The execution, delivery and performance by the
Company of this Agreement, and the consummation by the Company of the
transactions contemplated hereunder will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its subsidiaries is
subject, (ii) result in any violation of the provisions of the charter or
by-laws or similar organizational documents of the Company or any of its
subsidiaries or (iii) result in the violation of any law or statute or any
judgment, order, rule or regulation of any court or arbitrator or governmental
or regulatory authority except in the case of clauses (i) and (iii) for any such
conflicts or violations that would not individually or in the aggregate have a
Material Adverse Effect.
(n) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for the execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated by this Agreement, except for the registration of the
Shares under the Securities Act and such consents, approvals, authorizations,
orders and registrations or qualifications as may be required under applicable
state securities laws in connection with the purchase and distribution of the
Shares by the Underwriters, except that the Company gives no representation as
to approvals that may be required under the rules of the National Association of
Securities Dealers, Inc.
(o) Legal Proceedings. Except as described in the Prospectus, there
are no legal, governmental or regulatory investigations, actions, suits or
proceedings pending to which the Company or any of its subsidiaries is or may be
a party or to which any property of the Company or any of its subsidiaries is or
may be the subject that, individually or in the aggregate, if determined
adversely to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect or materially and adversely affect
the ability of the Company to perform its obligations under this Agreement; to
the knowledge of the Company, no such investigations, actions, suits or
proceedings are threatened or contemplated by any governmental or regulatory
authority or threatened by others; and (i) there are no current or pending
legal, governmental or regulatory actions, suits or proceedings that are
required under the Securities Act to be described in the Prospectus that are not
so described and (ii) there are no statutes, regulations or contracts or other
documents that are required under the Securities Act to be filed as exhibits to
the Registration Statement or described in the Registration Statement or the
Prospectus that are not so filed or described.
(p) Independent Accountants. Ernst & Young, LLP, who have certified
certain financial statements of the Company and its subsidiaries are independent
public accountants with respect to the Company and its subsidiaries as required
by the Securities Act and are registered with the Public Company Accounting
Oversight Board (United States).
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(q) Title to Real and Personal Property. The Company and its
subsidiaries have good and marketable title in fee simple to, or have valid
rights to lease or otherwise use, all items of real and personal property that
are material to the respective businesses of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances, claims and defects and
imperfections of title except those that (i) are referred to in the Prospectus,
(ii) do not materially interfere with the use made and proposed to be made of
such property by the Company and its subsidiaries or (iii) could not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(r) Title to Intellectual Property. The Company and its subsidiaries
own or possess adequate rights to use all material patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective businesses
except where the failure to possess or own such rights would not have a Material
Adverse Effect; and the conduct of their respective businesses will not conflict
in any material respect with any such rights of others, and the Company and its
subsidiaries have not received any notice of any claim of infringement or
conflict with any such rights of others.
(s) No Undisclosed Relationships. No relationship, direct or
indirect, exists between or among the Company or any of its subsidiaries, on the
one hand, and the directors, officers, stockholders, customers or suppliers of
the Company or any of its subsidiaries, on the other, that is required by the
Securities Act to be described in the Registration Statement and the Prospectus
and that is not so described.
(t) Investment Company Act. The Company is not and will not be
required to register as an "investment company" or an entity "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations of the Commission thereunder
(collectively, "Investment Company Act").
(u) Taxes. The Company and its subsidiaries have paid all federal,
state, local and foreign taxes and filed all material tax returns required to be
paid or filed through the date hereof unless duly contested in good faith by the
Company within the periods prescribed by applicable law; and except as otherwise
disclosed in the Prospectus, there is no material tax deficiency that has been,
or could reasonably be expected to be, asserted against the Company or any of
its subsidiaries or any of their respective properties or assets.
(v) Licenses and Permits. The Company and its subsidiaries possess
all licenses, certificates, permits and other authorizations issued by, and have
made all declarations and filings with, the appropriate federal, state, local or
foreign governmental or regulatory authorities that are necessary for the
ownership or lease of their respective properties or the conduct of their
respective businesses as described in the Registration Statement and the
Prospectus, except where the failure to possess or make the same would not,
individually or in the aggregate, have a Material Adverse Effect; and except as
described in the Prospectus, neither the Company nor any of its subsidiaries has
received notice of any revocation or modification of any such license,
certificate, permit or authorization or has any reason to believe that any such
license, certificate, permit or authorization will not be renewed in the
ordinary course.
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(w) No Labor Disputes. No labor disturbance by or dispute with
employees of the Company or any of its subsidiaries exists or, to the best
knowledge of the Company, is contemplated or threatened.
(x) Compliance With ERISA. Each employee benefit plan, within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), that is maintained, administered or contributed to by the
Company or any of its affiliates for employees or former employees of the
Company and its affiliates has been maintained in compliance with its terms and
the requirements of any applicable statutes, orders, rules and regulations,
including but not limited to ERISA and the Internal Revenue Code of 1986, as
amended (the "Code"); to the Company's knowledge, no prohibited transaction,
within the meaning of Section 406 of ERISA or Section 4975 of the Code, has
occurred with respect to any such plan excluding transactions effected pursuant
to a statutory or administrative exemption; and for each such plan that is
subject to the funding rules of Section 412 of the Code or Section 302 of ERISA,
no "accumulated funding deficiency" as defined in Section 412 of the Code has
been incurred, whether or not waived, and the fair market value of the assets of
each such plan (excluding for these purposes accrued but unpaid contributions)
exceeds the present value of all benefits accrued under such plan determined
using reasonable actuarial assumptions.
(y) Internal Controls Over Financial Reporting. The Company and its
subsidiaries maintain systems of internal controls over financial reporting
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (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 the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences that could have a material effect on the financial statements.
(z) Insurance. Except as could not reasonably be expected to have a
Material Adverse Effect, the Company and its subsidiaries have insurance
covering their respective properties, operations, personnel and businesses,
which insurance is in amounts and insures against such losses and risks as are
adequate to protect the Company and its subsidiaries and their respective
businesses; and except as could not reasonably be expected to have a Material
Adverse Effect, neither the Company nor any of its subsidiaries has (i) received
notice from any insurer or agent of such insurer that capital improvements or
other expenditures are required or necessary to be made in order to continue
such insurance or (ii) any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage at reasonable cost from similar insurers as may be necessary to
continue its business.
(aa) No Unlawful Payments. To the knowledge of the Company's
management, neither the Company nor any of its subsidiaries nor, to the
knowledge of the Company, any director, officer, agent, employee or other person
associated with or acting on behalf of the Company or any of its subsidiaries
has (i) used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
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(bb) No Broker's Fees. Neither the Company nor any of its
subsidiaries is a party to any contract, agreement or understanding with any
person (other than this Agreement) that would give rise to a valid claim against
the Company or any of its subsidiaries or any Underwriter for a brokerage
commission, finder's fee or like payment in connection with the offering and
sale of the Shares.
(cc) No Registration Rights. Except for the Registration Rights
Agreement by and among the Company, Magellan Holdings L.P. and Aetna Inc., dated
as of January 5, 2004 (the "Registration Rights Agreement"), no person has the
right to require the Company or any of its subsidiaries to register any
securities for sale under the Securities Act by reason of the filing of the
Registration Statement with the Commission or the issuance and sale of the
Shares to be sold by the Company hereunder or, to the best knowledge of the
Company, the sale of the Shares to be sold by the Selling Stockholder hereunder.
(dd) No Stabilization. The Company has not taken, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
(ee) Business With Cuba. The Company has complied with all provisions
of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida) relating
to doing business with the Government of Cuba or with any person or affiliate
located in Cuba.
(ff) Forward-Looking Statements. No forward-looking statement (within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Registration Statement and the Prospectus has been made or
reaffirmed without a reasonable basis or has been disclosed other than in good
faith.
(gg) Statistical and Market Data. Nothing has come to the attention
of the Company that has caused the Company to believe that the statistical and
market-related data included in the Registration Statement and the Prospectus is
not based on or derived from sources that are reliable and accurate in all
material respects.
(hh) Sarbanes-Oxley Act. There is and has been no failure on the part
of the Company or any of the Company's directors or officers, in their
capacities as such, to comply with any provision of the Sarbanes-Oxley Act of
2002 and the rules and regulations promulgated in connection therewith (the
"Sarbanes-Oxley Act"), including Section 402 related to loans and Sections 302
and 906 related to certifications.
4. Representations and Warranties of the Selling Stockholders. Each
of the Selling Stockholders severally represents and warrants to each
Underwriter and the Company that:
(a) Required Consents; Authority. All consents, approvals,
authorizations and orders necessary for the execution and delivery by such
Selling Stockholder of this Agreement and for the sale and delivery of the
Shares to be sold by such Selling Stockholder hereunder, have been obtained,
except that the Selling Stockholders give no representation as to approvals that
10
may be required under the Securities Act, state securities laws and the rules of
National Association of Securities Dealers, Inc.; and such Selling Stockholder
has full right, power and authority to enter into this Agreement and to sell,
assign, transfer and deliver the Shares to be sold by such Selling Stockholder
hereunder; this Agreement has been duly authorized, executed and delivered by
such Selling Stockholder.
(b) No Conflicts. The execution, delivery and performance by such
Selling Stockholder of this Agreement, the sale of the Shares to be sold by such
Selling Stockholder and the consummation by such Selling Stockholder of the
transactions herein contemplated will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of such Selling Stockholder pursuant to,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Selling Stockholder is a party or by which such Selling
Stockholder is bound or to which any of the property or assets of such Selling
Stockholder is subject, other than conflicts, breaches or violations, defaults,
liens, charges or encumbrances which would not impair the ability of such
Selling Stockholder to perform its obligations under this Agreement (ii) result
in any violation of the provisions of the charter or by-laws or similar
organizational documents of such Selling Stockholder or (iii) result in the
violation of any law or statute or any judgment, order, rule or regulation of
any court or arbitrator or governmental or regulatory agency applicable to such
Selling Stockholder or the property of such Selling Stockholder other than
violations which would not impair the ability of such Selling Stockholder to
perform its obligations under this Agreement.
(c) Title to Shares. Such Selling Stockholder has good and valid
title to the Shares to be sold at the Closing Date or the Additional Closing
Date, as the case may be, by such Selling Stockholder hereunder, free and clear
of all liens, encumbrances, or adverse claims; such Selling Stockholder will
have, immediately prior to the Closing Date or the Additional Closing Date, as
the case may be, good and valid title to the Shares to be sold at the Closing
Date or the Additional Closing Date, as the case may be, by such Selling
Stockholder, free and clear of all liens, encumbrances, or adverse claims; and,
upon delivery of the certificates representing such Shares and payment therefor
pursuant hereto, good and valid title to such Shares, free and clear of all
liens, encumbrances or adverse claims, will pass to the several Underwriters.
(d) No Stabilization. Such Selling Stockholder has not taken and will
not take, directly or indirectly, any action designed to or that could
reasonably be expected to cause or result in any stabilization or manipulation
of the price of the Shares.
(e) Material Information. The sale of the Securities by such Selling
Stockholder is not prompted by any material information concerning the Company
which is not set forth in the Registration Statement or the Prospectus.
(f) Registration Statement and Prospectus. The Registration Statement
did not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary to the make the statements therein not
misleading; and as of the applicable filing date of any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto and as of the Closing Date
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and as of the Additional Closing Date, as the case may be, the Preliminary
Prospectus and the Prospectus did not and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that the representations of the Selling Stockholders
set forth in this Section 4(f) are limited to statements or omissions made in
reliance upon and in conformity with any information relating to such Selling
Stockholder furnished in writing by such Selling Stockholder expressly for use
in the Registration Statement and the Prospectus (or any amendment or supplement
thereto), or any Preliminary Prospectus (which the Parties agree consists only
of information specifically relating to the Selling Stockholders as described in
Section 8(b) herein).
5. Further Agreements of the Company. The Company covenants and
agrees with each Underwriter that:
(a) Effectiveness of the Registration Statement. The Company will use
its reasonable best efforts to maintain the effectiveness of the Registration
Statement and, if required, will file the Prospectus with the Commission within
the time periods specified by Rule 424(b) under the Securities Act and will file
promptly all reports and any definitive proxy or information statements required
to be filed by the Company with the Commission pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for
so long as the delivery of a prospectus is required in connection with the
offering or sale of the Shares; and the Company will furnish copies of the
Prospectus to the Underwriters in New York City prior to 10:00 A.M., New York
City time, on the business day next succeeding the date of this Agreement in
such quantities as the Representative may reasonably request.
(b) Delivery of Copies. The Company will deliver, without charge,
during the Prospectus Delivery Period, as many copies of the Prospectus
(including all amendments and supplements thereto) as the Representative may
reasonably request. As used herein, the term "Prospectus Delivery Period" means
such period of time after the first date of the public offering of the Shares as
in the opinion of counsel for the Underwriters a prospectus relating to the
Shares is required by law to be delivered in connection with sales of the Shares
by any Underwriter or dealer.
(c) Amendments or Supplements. Before filing any amendment or
supplement to the Registration Statement or the Prospectus during the Prospectus
Delivery Period, the Company will furnish to the Representative and counsel for
the Underwriters a copy of the proposed amendment or supplement for review and
will not file any such proposed amendment or supplement to which the
Representative reasonably objects, provided, that this Section 5(c) shall not
apply to documents filed pursuant to the Exchange Act.
(d) Notice to the Representative. During the Prospectus Delivery
Period, the Company will advise the Representative promptly, and confirm such
advice in writing, (i) when any amendment to the Registration Statement has been
filed or becomes effective; (ii) when any supplement to the Prospectus or any
amendment to the Prospectus has been filed; (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or the receipt of any comments from the Commission
relating to the Registration Statement or any other request by the Commission
12
for any additional information; (iv) of the issuance by the Commission of any
order suspending the effectiveness of the Registration Statement or preventing
or suspending the use of any Preliminary Prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose; (v) of the
occurrence of any event as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances existing when the Prospectus is delivered to a
purchaser, not misleading; and (vi) of the receipt by the Company of any notice
with respect to any suspension of the qualification of the Shares for offer and
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and the Company will use its best efforts to prevent the issuance
of any such order suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectus or the Prospectus
or suspending any such qualification of the Shares and, if any such order is
issued, will obtain as soon as possible the withdrawal thereof.
(e) Ongoing Compliance of the Prospectus. If during the Prospectus
Delivery Period (i) any event shall occur or condition shall exist as a result
of which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances existing when the Prospectus is delivered to a purchaser, not
misleading or (ii) it is necessary to amend or supplement the Prospectus to
comply with law, the Company will immediately notify the Underwriters thereof
and forthwith prepare and, subject to paragraph (c) above, file with the
Commission and furnish to the Underwriters and to such dealers as the
Representative may designate, such amendments or supplements to the Prospectus
as may be necessary so that the statements in the Prospectus as so amended or
supplemented will not, in light of the circumstances existing when the
Prospectus is delivered to a purchaser, be misleading or so that the Prospectus
will comply with law.
(f) Blue Sky Compliance. To the extent required, the Company will
qualify the Shares for offer and sale under the securities or Blue Sky laws of
such jurisdictions as the Representative shall reasonably request and will
continue such qualifications in effect so long as required for distribution of
the Shares; provided that the Company shall not be required to (i) qualify as a
foreign corporation or other entity or as a dealer in securities in any such
jurisdiction where it would not otherwise be required to so qualify, (ii) file
any general consent to service of process in any such jurisdiction or (iii)
subject itself to taxation in any such jurisdiction if it is not otherwise so
subject.
(g) Earning Statement. The Company will make generally available to
its security holders and the Representative as soon as practicable an earning
statement that satisfies the provisions of Section 11(a) of the Securities Act
and Rule 158 of the Commission promulgated thereunder covering a period of at
least twelve months beginning with the first fiscal quarter of the Company
occurring after the "effective date" (as defined in Rule 158) of the
Registration Statement.
(h) Clear Market. For a period of 90 days after the date of the
public offering of the Shares, the Company will not (i) offer, pledge, announce
the intention to sell, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
13
or file with the Securities and Exchange Commission a registration statement
under the Securities Act relating to, any shares of Stock or any securities
convertible into or exercisable or exchangeable for Stock or (ii) enter into any
swap or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Stock, whether any such transaction described
in clause (i) or (ii) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise, without the prior written consent of the
Representative. Notwithstanding the foregoing, if (1) during the last 17 days of
the 90-day restricted period, the Company issues an earnings release or material
news or a material event relating to the Company occurs; or (2) prior to the
expiration of the 90-day restricted period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of
the 90-day period, the restrictions imposed by this Agreement shall continue to
apply until the expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material event.
Notwithstanding the foregoing, during the restricted period described above the
Company may (i) issue shares of Ordinary Common Stock pursuant to exercises of
options and warrants outstanding on the date hereof, (ii) issue not more than
93,128 shares of Ordinary Common Stock upon the resolution of certain disputed
claims, referred to herein as the disputed claims, remaining from the Company's
and its subsidiaries' Third Joint Amended Plan of Reorganization, as modified
and confirmed (as described in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2005), (iii) issue not more than 29,119 shares of
Multi-Vote Common Stock to Onex Corporation or one of its affiliates upon the
resolution of the disputed claims (as described in the Company's Annual Report
on Form 10-K for the year ended December 31, 2004), (iv) issue shares of
Ordinary Common Stock in connection with acquisitions of, or business
combination transactions with, companies that are not subject to the periodic
reporting requirements of the Exchange Act, provided that the persons receiving
such shares agree in writing to be bound by the restrictions of this section
5(h), (v) file registration statements on Form S-4 registering shares of
Ordinary Common Stock to be issued in connection with acquisitions or business
combinations provided that such registration statements may not be declared
effective or the shares of Ordinary Common Stock be issued until the expiration
of the restricted period described above and (vi) issue options to purchase
shares of Ordinary Common Stock and restricted shares of Ordinary Common Stock
in each case under employee benefit or director compensation plans provided that
any such options do not vest and any shares of restricted Ordinary Common Stock
do not become transferable until the expiration of the 30-day restricted period
described in Annexes C and D hereto.
(i) No Stabilization. The Company will not take, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Shares.
(j) Exchange Listing. To the extent applicable, the Company will use
its best efforts to maintain for quotation the Shares on the National
Association of Securities Dealers Automated Quotations National Market (the
"Nasdaq National Market").
(k) Reports. So long as the Shares are outstanding, the Company will
furnish to the Representative, as soon as they are available, copies of all
reports or other communications (financial or other) furnished to holders of the
Shares, and copies of any reports and financial statements furnished to or filed
with the Commission or any national securities exchange or automatic quotation
system provided that the filing of such reports and communications with the
Commission through the Commission's EDGAR system shall be deemed to satisfy the
requirements of this Section 5(k).
14
6. Further Agreements of the Selling Stockholders. Each of the
Selling Stockholders covenants and agrees with each Underwriter that:
(a) Clear Market. For a period of 90 days after the date of the
public offering of the Shares, such Selling Stockholder will not (i) offer,
pledge, announce the intention to sell, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of Stock or any securities convertible into
or exercisable or exchangeable for Stock or (ii) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the Stock, whether any such transaction described in clause (i)
or (ii) above is to be settled by delivery of Stock or such other securities, in
cash or otherwise or (iii) make any demand for or exercise any right with
respect to the registration of any shares of Stock or any security convertible
into or exercisable or exchangeable for Stock without the prior written consent
of the Representative, in each case other than the Shares to be sold by such
Selling Stockholder hereunder. Notwithstanding the foregoing, if (1) during the
last 17 days of the 90-day restricted period, the Company issues an earnings
release or material news or a material event relating to the Company occurs; or
(2) prior to the expiration of the 90-day restricted period, the Company
announces that it will release earnings results during the 16-day period
beginning on the last day of the 90-day period, the restrictions imposed by this
Agreement shall continue to apply until the expiration of the 18-day period
beginning on the issuance of the earnings release or the occurrence of such
material news or material event. Notwithstanding the foregoing, during the
restricted period described above, each Selling Stockholder may transfer shares
of Stock to any of its affiliates provided that the transferee agrees in writing
to be bound by the restrictions of this section 6(a).
(b) Tax Form. It will deliver to the Representative prior to or at
the Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by the
Treasury Department regulations in lieu thereof) in order to facilitate the
Underwriters' documentation of their compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
with respect to the transactions herein contemplated.
7. Conditions of Underwriters' Obligations. The obligation of each
Underwriter to purchase the Underwritten Shares on the Closing Date or the
Option Shares on the Additional Closing Date, as the case may be as provided
herein is subject to the performance by the Company and each of the Selling
Stockholders of their respective covenants and other obligations hereunder and
to the following additional conditions:
(a) No Stop Order. No order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceeding for such purpose
shall be pending before or threatened by the Commission; the Prospectus shall
have been timely filed with the Commission under the Securities Act and in
accordance with Section 5(a) hereof; and all requests by the Commission for
additional information shall have been complied with.
15
(b) Representations and Warranties. The respective representations
and warranties of the Company and the Selling Stockholders contained herein
shall be true and correct, in all material respects for those representations
and warranties not already qualified by materiality, on the date hereof and on
and as of the Closing Date or the Additional Closing Date, as the case may be;
and the statements of the Company and its officers and of each of the Selling
Stockholders made in any certificates delivered pursuant to this Agreement shall
be true and correct on and as of the Closing Date or the Additional Closing
Date, as the case may be.
(c) No Downgrade. Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded any
securities or preferred stock of or guaranteed by the Company or any of its
subsidiaries by any "nationally recognized statistical rating organization", as
such term is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act and (ii) no such organization shall have publicly announced that
it has under surveillance or review, or has changed its outlook with respect to,
its rating of any securities or preferred stock of or guaranteed by the Company
or any of its subsidiaries (other than an announcement with positive
implications of a possible upgrading).
(d) No Material Adverse Change. Subsequent to the execution and
delivery of this Agreement, no event or condition of a type described in Section
3(e) hereof shall have occurred or shall exist, which event or condition is not
described in the Prospectus (excluding any amendment or supplement thereto) and
the effect of which in the judgment of the Representative makes it impracticable
or inadvisable to proceed with the offering, sale or delivery of the Shares on
the Closing Date or the Additional Closing Date, as the case may be, on the
terms and in the manner contemplated by this Agreement and the Prospectus.
(e) Officer's Certificate. The Representative shall have received on
and as of the Closing Date or the Additional Closing Date, as the case may be, a
certificate (i) of the chief financial officer or chief accounting officer of
the Company and one additional senior executive officer of the Company who is
reasonably satisfactory to the Representative (A) confirming that such officers
have carefully reviewed the Registration Statement and the Prospectus and, to
the best knowledge of such officers, the representation of the Company set forth
in Section 3(b) hereof is true and correct, (B) confirming that to the knowledge
of such officer, the other representations and warranties of the Company in this
Agreement are true and correct and that the Company has complied in all material
respects with all agreements and satisfied in all material respects all
conditions on its part to be performed or satisfied hereunder at or prior to
such Closing Date and (C) to the effect set forth in paragraphs (a), (c) and (d)
above and (ii) of the Selling Stockholders, in form and substance reasonably
satisfactory to the Representative, (A) confirming that the representation of
such Selling Stockholders set forth in Section 4(e) hereof is true and correct
and (B) confirming that the other representations and warranties of such Selling
Stockholders in this agreement are true and correct and that the such Selling
Stockholders have complied with all agreements and satisfied all conditions on
their part to be performed or satisfied hereunder at or prior to such Closing
Date.
(f) Comfort Letters. On the date of this Agreement and on the Closing
Date or the Additional Closing Date, as the case may be, Ernst & Young, LLP
shall have furnished to the Representative, at the request of the Company,
letters, dated the respective dates of delivery thereof and addressed to the
Underwriters, in form and substance reasonably satisfactory to the
16
Representative, containing statements and information of the type customarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained or incorporated
by reference in the Registration Statement and the Prospectus; provided, that
the letter delivered on the Closing Date or the Additional Closing Date, as the
case may be shall use a "cut-off" date no more than three business days prior to
such Closing Date or such Additional Closing Date, as the case may be.
(g) Opinion of Counsel for the Company. Weil, Gotshal & Manges LLP,
counsel for the Company, shall have furnished to the Representative, at the
request of the Company, their written opinion, dated the Closing Date or the
Additional Closing Date, as the case may be, and addressed to the Underwriters,
in form and substance reasonably satisfactory to the Representative, to the
effect set forth in Annex A hereto.
(h) Opinion of Counsel for the Selling Stockholders. Kaye Scholer
LLP, counsel for the Selling Stockholders, shall have furnished to the
Representative, at the request of the Selling Stockholders, their written
opinion, dated the Closing Date or the Additional Closing Date, as the case may
be, and addressed to the Underwriters, in form and substance reasonably
satisfactory to the Representative, to the effect set forth in Annex B hereto.
(i) Opinion of Counsel for the Underwriters. The Representative shall
have received on and as of the Closing Date or the Additional Closing Date, as
the case may be, an opinion of Cravath, Swaine & Moore LLP, counsel for the
Underwriters, with respect to such matters as the Representative may reasonably
request, and such counsel shall have received such documents and information as
they may reasonably request to enable them to pass upon such matters.
(j) No Legal Impediment to Sale. No action shall have been taken and
no statute, rule, regulation or order shall have been enacted, adopted or issued
by any federal, state or foreign governmental or regulatory authority that
would, as of the Closing Date or the Additional Closing Date, as the case may
be, prevent the sale of the Shares; and no injunction or order of any federal,
state or foreign court shall have been issued that would, as of the Closing Date
or the Additional Closing Date, as the case may be, prevent the sale of the
Shares.
(k) Good Standing. The Representative shall have received on and as
of the Closing Date or the Additional Closing Date, as the case may be,
satisfactory evidence of the good standing of the Company and its Significant
Subsidiaries in their respective jurisdictions of organization, in each case in
writing or any standard form of telecommunication from the appropriate
Governmental Authorities of such jurisdictions.
(l) Exchange Listing. The Shares to be delivered on the Closing Date
or Additional Closing Date, as the case may be, shall have been approved for
listing on the Nasdaq National Market, to the extent such approval is required
under the rules of the Nasdaq National Market for the Shares to trade on the
Nasdaq National Market.
(m) Lock-up Agreements. On or before the date hereof, you shall have
received the "lock-up" agreements between you and certain officers and directors
of the Company listed on Schedule IV to this Agreement, relating to sales and
certain other dispositions of shares of Stock or certain other securities, in
the form identified for each such person on Schedule IV, which shall be in full
force and effect on the Closing Date or the Additional Closing Date, as the case
may be.
17
(n) Additional Documents. On or prior to the Closing Date or the
Additional Closing Date, as the case may be, the Company and the Selling
Stockholders shall have furnished to the Representative such further
certificates and documents as the Representative may reasonably request.
All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriters.
8. Indemnification and Contribution.
(a) Indemnification of the Underwriters by the Company. The Company
agrees to indemnify and hold harmless each Underwriter, its affiliates,
directors and officers and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, reasonable legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted, as such reasonable fees and expenses are incurred), joint or several,
that arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (or any amendment or supplement thereto) or any Preliminary
Prospectus, or caused by any omission or alleged omission to state therein 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,
not misleading, except insofar as such losses, claims, damages or liabilities
arise out of, or are based upon, any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with any
information relating to the Selling Stockholders or any Underwriter furnished to
the Company in writing by such Selling Stockholder or such Underwriter through
the Representative expressly for use therein, it being understood and agreed
that the only such information furnished by the Selling Stockholders or any
Underwriter consists of the information described as such in subsections (b) and
(c) below; provided, however, that the foregoing indemnity agreement with
respect to any Preliminary Prospectus shall not inure to the benefit of an
Underwriter if it failed to deliver a Prospectus (as then amended or
supplemented, provided by the Company to such Underwriter in the requisite
quantity and on a timely basis to permit proper delivery on or prior to the
Closing Date) to the person asserting any losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, or caused by 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, if such
material misstatement or omission or alleged misstatement or omission was cured
in such Prospectus and such Prospectus was required by law to be delivered at or
prior to the written confirmation of sale to such person.
(b) Indemnification of the Underwriters by the Selling Stockholders.
Each of the Selling Stockholders severally in proportion to the number of Shares
to be sold by such Selling Stockholder hereunder agrees to indemnify and hold
harmless each Underwriter, its affiliates, directors and officers and each
person, if any, who controls such Underwriter within the meaning of Section 15
18
of the Securities Act or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages and liabilities (including, without limitation,
the reasonable legal fees and other expenses incurred in connection with any
suit, action or proceeding or any claim asserted, as such fees and expenses are
incurred), joint or several, that arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) or any Preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, but only with respect to any losses,
claims, damages or liabilities that arise out of, or are based upon, any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with any information relating to such Selling Stockholder
furnished in writing by such Selling Stockholder expressly for use in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), or any Preliminary Prospectus, it being understood and agreed upon
that the only such information furnished by any Selling Stockholder consists of
the following information in the Prospectus furnished on behalf of the Selling
Stockholders: the description of such Selling Stockholder appearing in the table
and the footnotes thereto set forth under the caption "Selling stockholders"
and, in the case of Magellan Holdings L.P., the last sentence of the first
paragraph under the caption "Shares eligible for future sale"; provided,
however, that the foregoing indemnity agreement with respect to any Preliminary
Prospectus shall not inure to the benefit of an Underwriter if it failed to
deliver a Prospectus (as then amended or supplemented, provided by the Company
to such Underwriter in the requisite quantity and on a timely basis to permit
proper delivery on or prior to the Closing Date) to the person asserting any
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, or caused by 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, if such material misstatement or omission or alleged
misstatement or omission was cured in such Prospectus and such Prospectus was
required by law to be delivered at or prior to the written confirmation of sale
to such person. The liability of such Selling Stockholder under the indemnity
agreement contained in this paragraph shall be limited to an amount equal to the
aggregate Purchase Price of the Shares sold by such Selling Stockholder under
this Agreement.
(c) Indemnification of the Company and the Selling Stockholders by
each other. The obligations of the Company to indemnify the Selling Stockholders
and the several obligations of the Selling Stockholders to indemnify the Company
shall be governed by the Registration Rights Agreement; for purposes of such
obligations the information furnished by each Selling Stockholder shall be as
set forth in Section 8(b) hereof. The obligations of the Company and Morgan
Noble LLC to indemnify each other shall be governed by the applicable provisions
of the Registration Rights Agreement as if Morgan Noble LLC was a party to such
Registration Rights Agreement.
(d) Indemnification of the Company and the Selling Stockholders. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, its directors, its officers who signed the Registration Statement
and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act and each of the
Selling Stockholders to the same extent as the indemnity set forth in paragraph
19
(a) above, but only with respect to any losses, claims, damages or liabilities
that arise out of, or are based upon, any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with any information relating to such Underwriter furnished to the Company in
writing by such Underwriter through the Representative expressly for use in the
Registration Statement and the Prospectus (or any amendment or supplement
thereto) or any Preliminary Prospectus, it being understood and agreed upon that
the only such information furnished by any Underwriter consists of the following
information in the Prospectus furnished on behalf of each Underwriter: the
concession and reallowance figures appearing in the third paragraph under the
caption "Underwriting" and the information set forth in the seventh, twelfth,
thirteenth, last two sentences of the fourteenth and second sentence of the
fifteenth paragraphs under the caption "Underwriting".
(e) Notice and Procedures. If any suit, action, proceeding (including
any governmental or regulatory investigation), claim or demand shall be brought
or asserted against any person in respect of which indemnification may be sought
pursuant to the preceding paragraphs of this Section 8, such person (the
"Indemnified Person") shall promptly notify the person against whom such
indemnification may be sought (the "Indemnifying Person") in writing; provided
that the failure to notify the Indemnifying Person shall not relieve it from any
liability that it may have under this Section 8 except to the extent that it has
been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and provided, further, that the failure to notify the
Indemnifying Person shall not relieve it from any liability that it may have to
an Indemnified Person otherwise than under this Section 8. If any such
proceeding shall be brought or asserted against an Indemnified Person and it
shall have notified the Indemnifying Person thereof, the Indemnifying Person
shall retain one counsel (in addition to any local counsel) reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
shall pay the fees and expenses of such counsel related to such proceeding, as
incurred. In any such proceeding, any Indemnified Person shall have the right to
retain its own counsel, but the reasonable fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless (i) the Indemnifying
Person and the Indemnified Person shall have mutually agreed to the contrary;
(ii) the Indemnifying Person has failed within a reasonable time to retain
counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified
Person shall have reasonably concluded that there may be legal defenses
available to it that are different from or in addition to those available to the
Indemnifying Person; or (iv) the named parties in any such proceeding (including
any impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood and agreed that the Indemnifying Person shall not, in connection with
any proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be paid or reimbursed as they are incurred. Any such separate firm for any
Underwriter, its affiliates, directors and officers and any control persons of
such Underwriter shall be designated in writing by J.P. Morgan Securities Inc.,
any such separate firm for the Company, its directors, its officers who signed
the Registration Statement and any control persons of the Company shall be
designated in writing by the Company and any such separate firm for the Selling
Stockholders shall be designated in writing by the Selling Stockholder. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
20
indemnify each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested that an Indemnifying
Person reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by this paragraph, the Indemnifying Person shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by the Indemnifying
Person of such request and (ii) the Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement. No Indemnifying Person shall, without the written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnification could have been sought hereunder by such
Indemnified Person, unless such settlement (x) includes an unconditional release
of such Indemnified Person, in form and substance reasonably satisfactory to
such Indemnified Person, from all liability on claims that are the subject
matter of such proceeding and (y) does not include any statement as to or any
admission of fault, culpability or a failure to act by or on behalf of any
Indemnified Person.
(f) Contribution. If the indemnification provided for in paragraphs
(a), (b) and (c) above is unavailable to an Indemnified Person or insufficient
in respect of any losses, claims, damages or liabilities referred to therein,
then each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other from the offering of the Shares or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Stockholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
respective proportions as the net proceeds (before deducting expenses) received
by the Selling Stockholders from the sale of the Shares and the total
underwriting discounts and commissions received by the Underwriters in
connection therewith, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate offering price of the Shares. The relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other 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 and the Selling Stockholders or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
(g) Limitation on Liability. The Company, the Selling Stockholders
and the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Selling Stockholders or 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
21
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in paragraph (e) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses incurred by such Indemnified Person in connection with any such
action or claim. Notwithstanding the provisions of this Section 8, in no event
shall an Underwriter be required to contribute any amount in excess of the
amount by which the total underwriting discounts and commissions received by
such Underwriter with respect to the offering of the Shares exceeds the amount
of any damages that such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission, and in no event shall a Selling Stockholder be required to contribute
any amount in excess of the amount by which the net proceeds from the offering
actually received by it under this Agreement exceeds the amount of any damages
that such Selling Stockholder 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 Securities 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 8 are several in proportion
to their respective purchase obligations hereunder and not joint. The Selling
Stockholders' obligations to contribute pursuant to this Section 8 are several
in proportion to their respective sale obligations and not joint.
(h) Non-Exclusive Remedies. The remedies provided for in this Section
8 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any Indemnified Person at law or in equity.
9. Effectiveness of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by the parties hereto.
10. Termination. This Agreement may be terminated in the absolute
discretion of the Representative, by notice to the Company and the Selling
Stockholders, if after the execution and delivery of this Agreement and prior to
the Closing Date or, in the case of the Option Shares, prior to the Additional
Closing Date (i) trading generally shall have been suspended or materially
limited on or by any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., the Chicago
Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of
Trade; (ii) trading of any securities issued or guaranteed by the Company shall
have been suspended on any exchange or in any over-the-counter market; (iii) a
general moratorium on commercial banking activities shall have been declared by
federal or New York State authorities; or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis, either within or outside the United States, that, in the
judgment of the Representative, is material and adverse and makes it
impracticable or inadvisable to proceed with the offering, sale or delivery of
the Shares on the Closing Date or the Additional Closing Date, as the case may
be, on the terms and in the manner contemplated by this Agreement and the
Prospectus.
11. Defaulting Underwriter. (a) If, on the Closing Date or the
Additional Closing Date, as the case may be, any Underwriter defaults on its
obligation to purchase the Shares that it has agreed to purchase hereunder on
such date, the non-defaulting Underwriters may in their discretion arrange for
the purchase of such Shares by other persons satisfactory to the Company and the
Selling Stockholders on the terms contained in this Agreement. If, within 36
hours after any such default by any Underwriter, the non-defaulting Underwriters
do not arrange for the purchase of such Shares, then the Company and the Selling
22
Stockholders shall be entitled to a further period of 36 hours within which to
procure other persons satisfactory to the non-defaulting Underwriters to
purchase such Shares on such terms. If other persons become obligated or agree
to purchase the Shares of a defaulting Underwriter, either the non-defaulting
Underwriters or the Company and the Selling Stockholders may postpone the
Closing Date or the Additional Closing Date, as the case may be, for up to five
full business days in order to effect any changes that in the opinion of counsel
for the Company, counsel for the Selling Stockholders or counsel for the
Underwriters may be necessary in the Registration Statement and the Prospectus
or in any other document or arrangement, and the Company agrees to promptly
prepare any amendment or supplement to the Registration Statement and the
Prospectus that effects any such changes. As used in this Agreement, the term
"Underwriter" includes, for all purposes of this Agreement unless the context
otherwise requires, any person not listed in Schedule I hereto that, pursuant to
this Section 11, purchases Shares that a defaulting Underwriter agreed but
failed to purchase.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters, the Company and the Selling Stockholders as provided in paragraph
(a) above, the aggregate number of Shares that remain unpurchased on the Closing
Date or the Additional Closing Date, as the case may be, does not exceed
one-eleventh of the aggregate number of Shares to be purchased on such date,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of Shares that such
Underwriter agreed to purchase hereunder on such date plus such Underwriter's
pro rata share (based on the number of Shares that such Underwriter agreed to
purchase on such date) of the Shares of such defaulting Underwriter or
Underwriters for which such arrangements have not been made.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by the non-defaulting
Underwriters, the Company and the Selling Stockholders as provided in paragraph
(a) above, the aggregate number of Shares that remain unpurchased on the Closing
Date or the Additional Closing Date, as the case may be, exceeds one-eleventh of
the aggregate amount of Shares to be purchased on such date, or if the Company
and the Selling Stockholders shall not exercise the right described in paragraph
(b) above, then this Agreement or, with respect to any Additional Closing Date,
the obligation of the Underwriters to purchase Shares on the Additional Closing
Date, as the case may be, shall terminate without liability on the part of the
non-defaulting Underwriters. Any termination of this Agreement pursuant to this
Section 11 shall be without liability on the part of the Company and the Selling
Stockholders, except that the Company will continue to be liable for the payment
of expenses as set forth in Section 12 hereof and except that the provisions of
Section 8 hereof shall not terminate and shall remain in effect.
(d) Nothing contained herein shall relieve a defaulting Underwriter
of any liability it may have to the Company, the Selling Stockholders or any
non-defaulting Underwriter for damages caused by its default.
23
12. Payment of Expenses. (a) Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company will pay or cause to be paid all costs and expenses incident to the
performance of its and the Selling Stockholders' obligations hereunder,
including without limitation, (i) the costs incident to the authorization,
issuance, sale, preparation and delivery of the Shares and any taxes payable in
that connection; (ii) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement, the Preliminary
Prospectus and the Prospectus (including all exhibits, amendments and
supplements thereto) and the distribution thereof; (iii) the costs of
reproducing and distributing this Agreement; (iv) the fees and expenses of the
Company's counsel and independent accountants and the Selling Stockholders'
counsel (in addition to the Company's counsel); (v) the cost of preparing stock
certificates; (vi) the costs and charges of any transfer agent and any
registrar; (vii) all expenses incurred by the Company in connection with any
"road show" presentation to potential investors; and (viii) all expenses and
application fees related to the listing of the Shares on the Nasdaq National
Market.
(b) If (i) this Agreement is terminated pursuant to Section 10, (ii)
the Company or the Selling Stockholders for any reason fail to tender the Shares
for delivery to the Underwriters or (iii) the Underwriters decline to purchase
the Shares for any reason permitted under this Agreement, the Company agrees to
reimburse the Underwriters for all reasonable out-of-pocket costs and expenses
(including the reasonable fees and expenses of their counsel) reasonably
incurred by the Underwriters in connection with this Agreement and the offering
contemplated hereby.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and the officers and directors and any controlling persons
referred to in Section 8 hereof. Nothing in this Agreement is intended or shall
be construed to give any other person any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
No purchaser of Shares from any Underwriter shall be deemed to be a successor
merely by reason of such purchase.
14. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company, the Selling
Stockholders and the Underwriters contained in this Agreement or made by or on
behalf of the Company, the Selling Stockholders or the Underwriters pursuant to
this Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Shares and shall remain in full force and
effect, regardless of any termination of this Agreement or any investigation
made by or on behalf of the Company, the Selling Stockholders or the
Underwriters.
15. Certain Defined Terms. For purposes of this Agreement, (a) except
where otherwise expressly provided, the term "affiliate" has the meaning set
forth in Rule 405 under the Securities Act; (b) the term "business day" means
any day other than a day on which banks are permitted or required to be closed
in New York City; (c) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act; and (d) the term "significant subsidiary" has the
meaning set forth in Rule 1-02 of Regulation S-X under the Exchange Act.
16. Miscellaneous. (a) Authority of the Representative. Any action by
the Underwriters hereunder may be taken by J.P. Morgan Securities Inc. on behalf
of the Underwriters, and any such action taken by J.P. Morgan Securities Inc.
shall be binding upon the Underwriters.
24
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if mailed or transmitted
and confirmed by any standard form of telecommunication. Notices to the
Underwriters shall be given to the Representative c/o J.P. Morgan Securities
Inc., 277 Park Avenue, New York, New York 10172 (Fax: (212) 622-8358);
Attention: Syndicate Desk, with a copy to: Cravath, Swaine & Moore LLP, 825
Eighth Avenue, New York, New York 10019 (Fax: (212) 474-3700); Attention:
William V. Fogg . Notices to the Company shall be given to it at Magellan Health
Services, Inc., 16 Munson Road, Farmington, Connecticut 06032, (Fax: (860)
507-1990); Attention: General Counsel, with a copy to: Weil, Gotshal & Manges
LLP, 707 Fifth Avenue, New York, New York 10153 (Fax: (212) 310-8007);
Attention: Robert L. Messineo. Notices to the Selling Stockholders shall be
given to Magellan Holdings L.P., 712 Fifth Avenue, New York, New York 10019,
(Fax: (212) 582-0909) Attention: Robert M. Le Blanc, with a copy to: Kaye
Scholer LLP, 425 Park Avenue, New York, New York 10022, (Fax: (212) 836-8211);
Attention: Joel I. Greenberg.
(c) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(d) Counterparts. This Agreement may be signed in counterparts (which
may include counterparts delivered by any standard form of telecommunication),
each of which shall be an original and all of which together shall constitute
one and the same instrument.
(e) Amendments or Waivers. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
(f) Headings. The headings herein are included for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
25
If the foregoing is in accordance with your understanding, please
indicate your acceptance of this Agreementby signing in the space provided
below.
Very truly yours,
MAGELLAN HEALTH SERVICES, INC.
By: /s/ Mark S. Demilio
---------------------------------------
Name: Mark S. Demilio
Title: Executive Vice President and
Chief Financial Officer
MAGELLAN HOLDINGS, L.P.
By: /s/ Robert Le Blanc
---------------------------------------
Name: Robert Le Blanc
Title: Managing Director
MORGAN NOBLE LLC
By: /s/ Robert Haft
---------------------------------------
Name: Robert Haft
Title: Manager
Accepted: May 16, 2005
J.P. MORGAN SECURITIES INC.
For itself and on behalf of the
several Underwriters listed
in Schedule I hereto.
By: /s/ Adam Beshara
-----------------------------
Authorized Signatory
26
SCHEDULE I
Underwriter Number of
----------- ---------
Underwritten Shares
-------------------
J.P. Morgan Securities Inc. 2,337,500
Banc of America Securities LLC 722,500
Deutsche Bank Securities Inc. 595,000
Lehman Brothers Inc. 595,000
------------
Total 4,250,000
SCHEDULE II
Number of Number of
Selling Stockholders: Underwritten Shares: Option Shares:
- --------------------- -------------------- --------------
Magellan Holdings L.P. 4,209,000 (1) 637,500 (1)
Morgan Noble LLC 41,000 _---
Total 4,250,000 637,500
- --------------------
(1) Multi-Vote Common Stock, until the consummation of the transactions
contemplated hereby at which time the shares will be automatically
converted to the same number of shares of Ordinary Common Stock.
SCHEDULE III
Significant Subsidiaries of the Company
---------------------------------------
Magellan Behavioral Care of Iowa, Inc.
Magellan Behavioral Health, Inc.
Magellan Behavioral Health of Pennsylvania, Inc.
Magellan Financial Capital, Inc.
Magellan HRSC, Inc.
SCHEDULE IV
Persons Executing Lock-up Agreements
------------------------------------
Steven J. Shulman (1)
Rene Lerer, M.D. (1)
Mark S. Demilio (1)
Jeff West (2)
Daniel N. Gregoire (2)
Jeff D. Emerson (2)
Robert Haft (2)
Robert M. Le Blanc (2)
- ----------------------------
(1) Lock-up to be in the form of Annex D hereto.
(2) Lock-up to be in the form of Annex C hereto.
ANNEX C
FORM OF LOCK-UP AGREEMENT [Directors]
________ ____, 2005
J.P. MORGAN SECURITIES INC.
As Representative of
the several Underwriters listed in
Schedule I to the Underwriting
Agreement referred to below
c/o J.P. Morgan Securities Inc.
277 Park Avenue
New York, NY 10172
Re: Magellan Health Services, Inc. --- Public Offering
Ladies and Gentlemen:
The undersigned understands that you, as Representative of the
several Underwriters, propose to enter into an Underwriting Agreement (the
"Underwriting Agreement") with Magellan Health Services, Inc., a Delaware
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the several Underwriters named in Schedule I to the Underwriting
Agreement (the "Underwriters"), of Ordinary Common Stock, of the Company (the
"Securities"). Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Underwriting Agreement.
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Securities, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of J.P. Morgan Securities Inc. on
behalf of the Underwriters, the undersigned will not, during the period ending
30 days after the date of the prospectus relating to the Public Offering (the
"Prospectus"), (1) offer, pledge, announce the intention to sell, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Ordinary Common
Stock, $0.01 per share par value, of the Company (the "Common Stock") or any
securities convertible into or exercisable or exchangeable for Common Stock
(including without limitation, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission and securities which may
be issued upon exercise of a stock option or warrant) or (2) enter into any swap
or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. In addition, the
undersigned agrees that, without the prior written consent of J.P. Morgan
Securities Inc. on behalf of the Underwriters, it will not, during the
restricted period, make any demand for or exercise any right with respect to,
the registration of any shares of Common Stock or any security convertible into
or exercisable or exchangeable for Common Stock. Notwithstanding the foregoing,
the restricted period will not extend beyond June 15, 2005.
In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Letter Agreement.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Letter Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement does
not become effective prior to May 20, 2005, or if the Underwriting Agreement
(other than the provisions thereof which survive termination) shall terminate or
be terminated prior to payment for and delivery of the Common Stock to be sold
thereunder, the undersigned shall be released from all obligations under this
Letter Agreement.
The undersigned understands that the Underwriters are entering into
the Underwriting Agreement and proceeding with the Public Offering in reliance
upon this Letter Agreement.
This Letter Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of laws principles thereof.
Very truly yours,
[NAME OF STOCKHOLDER]
By: _________________________________
Name:
Title:
ANNEX D
FORM OF LOCK-UP AGREEMENT [Executive Officers]
________ ____, 2005
J.P. MORGAN SECURITIES INC.
As Representative of
the several Underwriters listed in
Schedule I to the Underwriting
Agreement referred to below
c/o J.P. Morgan Securities Inc.
277 Park Avenue
New York, NY 10172
Re: Magellan Health Services, Inc. --- Public Offering
Ladies and Gentlemen:
The undersigned understands that you, as Representative of the
several Underwriters, propose to enter into an Underwriting Agreement (the
"Underwriting Agreement") with Magellan Health Services, Inc., a Delaware
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the several Underwriters named in Schedule I to the Underwriting
Agreement (the "Underwriters"), of Ordinary Common Stock, of the Company (the
"Securities"). Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Underwriting Agreement.
In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Securities, and for other good and valuable
consideration receipt of which is hereby acknowledged, the undersigned hereby
agrees that, without the prior written consent of J.P. Morgan Securities Inc. on
behalf of the Underwriters, the undersigned will not, during the period ending
30 days after the date of the prospectus relating to the Public Offering (the
"Prospectus"), (1) offer, pledge, announce the intention to sell, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Ordinary Common
Stock, $0.01 per share par value, of the Company (the "Common Stock") or any
securities convertible into or exercisable or exchangeable for Common Stock
(including without limitation, Common Stock which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission and securities which may
be issued upon exercise of a stock option or warrant) or (2) enter into any swap
or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of Common
Stock or such other securities, in cash or otherwise. In addition, the
undersigned agrees that, without the prior written consent of J.P. Morgan
Securities Inc. on behalf of the Underwriters, it will not, during the
restricted period, make any demand for or exercise any right with respect to,
the registration of any shares of Common Stock or any security convertible into
or exercisable or exchangeable for Common Stock. Notwithstanding the foregoing,
the restricted period will not extend beyond June 15, 2005.
Notwithstanding the foregoing, the undersigned shall be permitted
during the restricted period to establish a written plan which meets the
criteria of Rule 10b5-1(c) under the Exchange Act to sell Common Stock after the
expiration of the restricted period.
In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Letter Agreement.
The undersigned hereby represents and warrants that the undersigned
has full power and authority to enter into this Letter Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement does
not become effective prior to May 20, 2005, or if the Underwriting Agreement
(other than the provisions thereof which survive termination) shall terminate or
be terminated prior to payment for and delivery of the Common Stock to be sold
thereunder, the undersigned shall be released from all obligations under this
Letter Agreement.
The undersigned understands that the Underwriters are entering into
the Underwriting Agreement and proceeding with the Public Offering in reliance
upon this Letter Agreement.
This Letter Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
conflict of laws principles thereof.
Very truly yours,
[NAME OF STOCKHOLDER]
By: ___________________________
Name:
Title: