1
2,630,000 Shares
ENVOY CORPORATION
Common Stock
(Without Par Value)
UNDERWRITING AGREEMENT
, 1996
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
J.C. Bradford & Co.
Southcoast Capital Corporation
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Envoy Corporation, a Tennessee corporation (the "Company"), and certain
shareholders of the Company named in Schedule II hereto (the "Selling
Shareholders") propose to sell to the several underwriters (the "Underwriters")
named in Schedule I hereto for whom you are acting as representatives (the
"Representatives") an aggregate of 2,630,000 shares of the Company's Common
Stock, without par value (the "Firm Shares"), of which 2,500,000 shares will be
sold by the Company and 130,000 shares will be sold by the Selling
Shareholders. The respective amounts of the Firm Shares to be so purchased by
the several Underwriters are set forth opposite their names in Schedule I
hereto, and the respective amounts to be sold by the Selling Shareholders are
set forth opposite their names in Schedule II hereto. The Company and the
Selling Shareholders are sometimes referred to herein collectively as the
"Sellers." The Company also proposes to sell at the Underwriters' option an
aggregate of up to 394,500 additional shares of the Company's Common Stock (the
"Option Shares") as set forth below.
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As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata
portion of the Option Shares if you elect to exercise the over-allotment option
in whole or in part for the accounts of the several Underwriters. The Firm
Shares and the Option Shares (to the extent the aforementioned option is
exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
Shareholders
(a) The Company represents and warrants as follows:
(i) A registration statement on Form S-3 (File No. 333-04433) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission under the Act. The Company has complied with the conditions for the
use of Form S-3. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses contained therein and the
exhibits, financial statements and schedules, as finally amended and revised,
have heretofore been delivered by the Company to you. Such registration
statement, together with any registration statement filed by the Company
pursuant to Rule 462(b) of the Act, herein referred to as the "Registration
Statement," which shall be deemed to include all information omitted therefrom
in reliance on Rule 430A and contained in the Prospectus referred to below, has
become effective under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
"Prospectus" mean (a) the form of prospectus first filed by the Company with
the Commission pursuant to its Rule 424(b) or (b) the last preliminary
prospectus included in the Registration Statement filed prior to the time it
becomes effective or filed pursuant to Rule 424(a) under the Act that is
delivered by the Company to the Underwriters for delivery to purchasers of the
Shares together with any term sheet filed with the Commission pursuant to Rule
424(b)(7) under the Act. Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein
referred to as a "Preliminary Prospectus." Any reference herein to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein,
as of the date of such Registration Statement, Preliminary Prospectus or
Prospectus, as the case may be, and, in the case of any reference herein to any
Prospectus, also shall be deemed to include any documents incorporated by
reference therein, and any supplements or amendments relating to the Shares
being issued and sold pursuant hereto, filed with the Commission after the date
of filing of the Prospectus under Rules 424(b) or 430A, and prior to the
termination of the offering of the Shares by the Underwriters.
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(ii) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Tennessee, with
corporate power and authority to own or lease its properties and conduct its
business as described in the Registration Statement. Each of the subsidiaries
of the Company as listed in Exhibit A hereto (collectively the "Subsidiaries")
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation with corporate
power and authority to own or lease its properties and conduct its respective
businesses as described in the Registration Statement. The Company and each of
the Subsidiaries are duly qualified to transact business in all jurisdictions
in which the conduct of its business requires such qualification, except where
the failure to be so qualified would not result in a material adverse effect
upon the Company and its Subsidiaries taken as a whole. The outstanding shares
of capital stock of each of the Subsidiaries has been duly authorized and
validly issued, are fully paid and non-assessable and (other than shares of
NEIC Preferred Stock) are owned by the Company free and clear of all liens,
encumbrances, security interests and claims; and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other rights to
convert any obligations into shares of capital stock or ownership interests of
the Subsidiaries are outstanding. Except for the Subsidiaries and investments
in securities as described in the Registration Statement, the Company has no
equity or other interest in, or right to acquire, an equity or other interest
in, any corporation, partnership, trust or other entity.
(iii) The outstanding shares of the Company's Common Stock, Series A
Preferred Stock and Series B Convertible Preferred Stock have been duly
authorized and validly issued and are fully paid and non-assessable; the Shares
to be issued and sold by the Company have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully-paid and
non-assessable; and no preemptive rights of stockholders exist with respect to
any of the Shares or the issue and sale thereof. Neither the filing of the
Registration Statement nor the offering or sale of Shares as contemplated by
this Agreement gives rise to any rights other than those which have been waived
or satisfied, relating to the registration of any shares of Common Stock.
(iv) The information set forth under the caption "Capitalization" in the
Prospectus is true and correct. All of the Shares conform to the descriptions
thereof contained in the Registration Statement. The form of certificates for
the Shares conforms to the corporate law of the jurisdiction of the Company's
incorporation.
(v) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Shares nor
instituted proceedings for that purpose and each Preliminary Prospectus, at the
time of filing thereof, did not contain any untrue statement of a material fact
or omit to state any material fact required to be contained therein or
necessary to make the statements therein in light of the circumstances in which
they were made, not misleading. The Registration Statement contains and the
Prospectus and any amendments or supplements thereto will contain all
statements which are required to be stated
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therein by, and in all respects conform or will conform, as the case may be, to
the requirements of, the Act and the Rules and Regulations. The documents
incorporated by reference in the Prospectus, at the time they were filed or
will be filed with the Commission, conformed or will conform at the time of
filing, in all respects to the requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the Act, as applicable, and the Rules
and Regulations of the Commission thereunder. Neither the Registration
Statement nor any amendment thereto, and neither the Prospectus nor any
supplement thereto, including any documents incorporated by reference therein,
contains or will contain, as the case may be, any untrue statement of a
material fact or omits or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to information
contained in or omitted from the Registration Statement or the Prospectus, or
any such amendment or supplement, or any documents incorporated by reference
therein, in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of any Underwriter through the
Representatives, specifically for use in the preparation thereof.
(vi) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules, as set forth or
incorporated by reference in the Registration Statement, present fairly the
consolidated financial position and the consolidated results of operations and
cash flows of the Company and the Subsidiaries at the indicated dates and for
the indicated periods. Such financial statements and related schedules have
been prepared in accordance with generally accepted principles of accounting,
consistently applied throughout the periods involved (except to the extent
otherwise disclosed in the Registration Statement), and all adjustments
necessary for a fair presentation of results for such periods have been made.
The summary and selected consolidated financial and statistical data included
or incorporated by reference in the Registration Statement presents fairly the
information shown therein and such data have been compiled on a basis
consistent with the financial statements presented therein.
(vii) The pro forma financial statements and other pro forma financial
information of the Company as set forth or incorporated by reference in the
Registration Statement have been prepared in accordance with the Commission's
rules and guidelines with respect to pro forma financial statements, have been
properly compiled on the pro forma basis described therein, and, in the opinion
of the Company, the assumptions used in the preparation thereof are reasonable
and the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein.
(viii) The consolidated financial statements for National Electronic
Information Corporation and its subsidiaries ("NEIC"), together with related
notes and schedules, as set forth or incorporated in the Registration
Statement, present fairly the financial position, results of operations and
cash flows of NEIC at the indicated dates and for the indicated periods. Such
financial statements have been prepared in accordance with generally accepted
principles of
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accounting, consistently applied throughout the periods involved, and all
adjustments necessary for a fair presentation of results for such periods have
been made.
(ix) The financial statements for Teleclaims, Inc. ("Teleclaims"),
together with related notes and schedules as set forth or incorporated in the
Registration Statement, present fairly the financial position, results of
operations and cash flows of Teleclaims at the indicated dates and for the
indicated periods. Such financial statements have been prepared in accordance
with generally accepted principles of accounting, consistently applied
throughout the periods involved, and all adjustments necessary for a fair
presentation of results for such periods have been made.
(x) Except as otherwise set forth in the Registration Statement, there is
no action, suit, claim or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of the Subsidiaries before any
court, administrative agency, regulatory authority or otherwise which might
result in any material adverse change in the earnings, business, management,
properties, assets, rights, operation, condition or prospects of the Company
and the Subsidiaries taken as a whole or prevent the consummation of the
transactions contemplated hereby.
(xi) The Company and the Subsidiaries have good and marketable title to
all of the properties and assets reflected in the financial statements (or as
described in the Registration Statement) herein above described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The Company and the
Subsidiaries occupy their leased properties under valid and binding leases.
(xii) The Company and the Subsidiaries have filed all Federal, State,
local and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due and are not
being contested in good faith. All tax liabilities have been adequately
provided for in all material respects in the financial statements of the
Company.
(xiii) Since the respective dates as of which information is given in the
Registration Statement, as it may be amended or supplemented, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the earnings, business, management,
properties, assets, rights, operations, condition, financial or otherwise, or
prospects of the Company and the Subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business, and there has not been any
material transaction entered into by the Company or the Subsidiaries, other
than transactions in the ordinary course of business and changes and
transactions contemplated by the Registration Statement, as it may be amended
or supplemented. The Company and the Subsidiaries have no material contingent
obligations which are not disclosed in the Company's financial statements which
are included in the Registration Statement.
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(xiv) Neither the Company nor any of the Subsidiaries is, nor with the
giving of notice, lapse of time or both, will be in violation or default under
its Articles of Incorporation or By-Laws or any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it or any of its properties is bound and which default is of material
significance in respect of condition (financial or otherwise) of the Company
and its Subsidiaries taken as a whole. The execution and delivery of this
Agreement and the consummation of the transactions herein contemplated and the
fulfillment of the terms hereof will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other material agreement or instrument to
which the Company or any Subsidiary is a party, or of the Articles of
Incorporation or By-Laws of the Company or any Subsidiary or any order, rule or
regulation applicable to the Company or any Subsidiary of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction.
(xv) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by
the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the National
Association of Securities Dealers, Inc. (the "NASD") or may be necessary to
qualify the Shares for public offering by the Underwriters under state
securities or Blue Sky laws) has been obtained or made and is in full force and
effect.
(xvi) The Company and each of the Subsidiaries hold all material licenses,
certificates and permits from governmental authorities which are necessary to
the conduct of its business; and neither the Company nor any of the
Subsidiaries has, to the best knowledge of the Company, infringed any patents,
patent rights, trade names, trademarks or copyrights, which infringement is
material to the business of the Company and the Subsidiaries taken as a whole.
The Company knows of no material infringement by others of patents, patent
rights, trade names, trademarks or copyrights owned by or licensed to the
Company or any Subsidiary.
(xvii) Neither the Company, nor to the Company's best knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock to facilitate the sale or resale of the
Shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on the NASDAQ National Market in
accordance with Rule 10b-6A under the Exchange Act.
(xviii) Ernst & Young LLP, Deloitte & Touche LLP and Hardman Guess Frost &
Cummings, P.C., who have certified certain of the financial statements filed
with the Commission as part of, or incorporated by reference in, the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations.
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(xix) Neither the Company nor any Subsidiary has ever been, is now, and
immediately after the sale of the Shares under this Agreement will not be, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended and the rules and regulations of the Commission thereunder.
(xx) The Company and its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxi) The Company and each of its Subsidiaries is in compliance in all
material respects with all presently applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended, including the regulations
and published interpretations thereunder ("ERISA"); no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension plan" (as defined
in ERISA) for which the Company or any of its Subsidiaries would have any
liability; neither the Company nor any if its Subsidiaries has incurred nor
expects to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and each
"pension plan" for which the Company would have any liability that is intended
to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification.
(xxii) The Shares of the Company to be sold under this Agreement have been
approved for listing on the NASDAQ National Market System.
(b) Each of the Selling Shareholders severally and not jointly represents
and warrants as follows:
(i) Such Selling Shareholder now has and at the Closing Date (as such date
is hereinafter defined) will have good and marketable title to the Firm Shares
to be sold by such Selling Shareholder, free of any liens, encumbrances,
equities and claims, and full right, power and authority to effect the sale and
delivery of such Firm Shares; and upon the delivery of and payment for such
Firm Shares pursuant to this Agreement, the Underwriters will acquire good and
marketable title thereto, free of any liens, encumbrances, equities and claims.
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(ii) Such Selling Shareholder has full right, power and authority to
execute and deliver this Agreement and the Custodian Agreement and Power of
Attorney referred to below, and to perform its obligations under such
agreements. The consummation by such Selling Shareholder of the transactions
herein contemplated and the fulfillment by such Selling Shareholder of the
terms hereof will not result in a breach of any of the terms and provisions of,
or constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which such Selling Shareholder is a party, or of any
order, rule or regulation applicable to such Selling Shareholder of any court
or of any regulatory body or administrative agency or other governmental body
having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to, or which has constituted, or which might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock of the Company.
(iv) No offering, sale or other disposition of any Common Stock of the
Company will be made for a period of 90 days after the date of this Agreement,
directly or indirectly, by such Selling Shareholder otherwise than hereunder or
with the prior written consent of the Representatives.
(v) The Power of Attorney appointing certain individuals as such Selling
Shareholders' attorney-in-fact to the extent set forth therein and the
Custodian Agreement (as defined in Section 2) have been duly executed and
delivered by such Selling Shareholder and are the valid and binding agreements
of such Selling Shareholder.
(vi) Without having undertaken to determine independently the accuracy or
completeness of either the representations and warranties of the Company
contained herein or the information contained in the Registration Statement and
documents incorporated by reference therein, such Selling Shareholder has no
reason to believe that the representations and warranties of the Company
contained in this Section 1 are not true and correct, is familiar with the
Registration Statement and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement or the documents
incorporated by reference therein which has adversely affected or may adversely
affect the business of the Company or the Subsidiary; and the sale of the Firm
Shares by such Selling Shareholder pursuant hereto is not prompted by any
information concerning the Company or the Subsidiary which is not set forth in
the Registration Statement or the documents incorporated by reference therein.
The information pertaining to such Selling Shareholder under the caption
"Selling Shareholders" in the Prospectus is complete and accurate in all
material respects.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
and the Interest and Dividend Tax Compliance Act of 1983 with respect to the
transactions herein contemplated, each of the Selling Shareholders agrees to
deliver to you prior to or at the Closing Date a properly completed
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and executed United States Treasury Department Form W-9 (or other applicable
from or statement specified by Treasury Department regulations in lieu
thereof).
2. Purchase, Sale and Delivery of the Firm Shares.
(a) On the basis of the representations, warranties and covenants herein
contained, and subject to the conditions herein set forth, the Sellers agree to
sell to the Underwriters and each Underwriter agrees, severally and not
jointly, to purchase, at a price of $________ per share, the number of Firm
Shares set forth opposite the name of each Underwriter in Schedule I hereof,
subject to adjustments in accordance with Section 9 hereof. The number of
Firm Shares to be purchased by each Underwriter from each Seller shall be as
nearly as practicable in the same proportion to the total number of Firm Shares
being sold by each Seller as the number of Firm Shares being purchased by each
Underwriter bears to the total number of Firm Shares to be sold hereunder. The
obligations of each of the Sellers shall be several and not joint.
(b) Certificates in negotiable form for the total number of the Shares to
be sold hereunder by the Selling Shareholders have been placed in custody with
___________ (the "Custodian") pursuant to the Custodian Agreement executed by
each Selling Shareholder for delivery of all Firm Shares to be sold hereunder
by the Selling Shareholders. Each of the Selling Shareholders specifically
agrees that the Firm Shares represented by the certificates held in custody for
the Selling Shareholders under the Custodian Agreement are subject to the
interests of the Underwriters hereunder, that the arrangements made by the
Selling Shareholders for such custody and the power of attorney represented by
the Power of Attorney are to that extent irrevocable, and that the obligations
of the Selling Shareholders hereunder shall not be terminable by any act or
deed of the Selling Shareholders (or by any other person, firm or corporation
including the Company, the Custodian or the Underwriters) or by operation of
law (including the death of an individual Selling Shareholder or the
dissolution of a corporate Selling Shareholder) or by the occurrence of any
other event or events, except as set forth in the Custodian Agreement. If any
such event should occur prior to the delivery to the Underwriters of the Shares
hereunder, certificates for the Shares shall be delivered by the Custodian in
accordance with the terms and conditions of this Agreement as if such event has
not occurred. The Attorneys or either of them are authorized to receive and
acknowledge receipt of the proceeds of sale of the Shares held by it against
delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in same
day funds by wire transfer for the account of the Company for the shares to be
sold by it and to the order of "__________, Custodian for the Envoy Selling
Shareholders" for the shares to be sold by the Selling Shareholders, in each
case against delivery of certificates therefor to the Representatives for the
several accounts of the Underwriters. Such payment and delivery are to be made
at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, Maryland 21202, at 9:00 A.M., Baltimore time, on the third business
day after the date of this Agreement or at such other time and date not later
than three business days thereafter
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as you and the Company shall agree upon, such time and date being herein
referred to as the "Closing Date." (As used herein, "business day" means a day
on which the New York Stock Exchange is open for trading and on which banks in
New York are open for business and are not permitted by law or executive order
to be closed.) The certificates for the Firm Shares will be delivered in such
denominations and in such registrations as the Representatives request in
writing not later than the second full business day prior to the Closing Date,
and will be made available for inspection by the Representatives at least one
business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The option granted hereby may be exercised in whole or in part but
only once and at any time upon written notice (i) at any time before the
Closing Date and (ii) only once thereafter within 30 days after the date of
this Agreement, by you, as Representatives of the several Underwriters, to the
Company setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in which
the Option Shares are to be registered and the time and date at which such
certificates are to be delivered. The time and date at which certificates for
Option Shares are to be delivered shall be determined by the Representatives
but shall not be earlier than three nor later than 10 full business days after
the exercise of such option, nor in any event prior to the Closing Date (such
time and date being herein referred to as the "Option Closing Date"). If the
date of exercise of the option is three or more days before the Closing Date,
the notice of exercise shall set the Closing Date as the Option Closing Date.
The number of Option Shares to be purchased by each Underwriter shall be in the
same proportion to the total number of Option Shares being purchased as the
number of Firm Shares being purchased by such Underwriter bears to the total
number of Firm Shares, adjusted by you in such manner as to avoid fractional
shares. The option with respect to the Option Shares granted hereunder may be
exercised only to cover over-allotments in the sale of the Firm Shares by the
Underwriters. You, as Representatives of the several Underwriters, may cancel
such option at any time prior to its expiration by giving written notice of
such cancellation to the Company. To the extent, if any, that the option is
exercised, payment for the Option Shares shall be made on the Option Closing
Date in same day funds by wire transfer to the order of the Company against
delivery of certificates therefor at the offices of Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland.
3. Offering by the Underwriters. It is understood that the several
Underwriters are to make a public offering of the Firm Shares as soon as the
Representatives deem it advisable to do so. The Firm Shares are to be
initially offered to the public at the initial public offering price set forth
in the Prospectus. The Representatives may from time to time thereafter change
the public offering price and other selling terms. To the extent, if at all,
that any Option Shares are purchased pursuant to Section 2 hereof, the
Underwriters will offer them to the public on the foregoing terms.
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It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
The Company covenants and agrees with the several Underwriters that:
(a) The Company will (A) use its best efforts to cause the Registration
Statement to become effective or, if the procedure in Rule 430A of the Rules
and Regulations is followed, to prepare and timely file with the Commission
under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved
by the Representatives containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations, (B) not file any amendment to the Registration Statement
or supplement to the Prospectus or document incorporated by reference therein
of which the Representatives shall not previously have been advised and
furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Rules and
Regulations and (C) file on a timely basis all reports and any definitive proxy
or information statements required to be filed by the Company with the
Commission subsequent to the date of the Prospectus and prior to the
termination of the offering of the Shares by the Underwriters.
(b) The Company will advise the Representatives promptly (A) when the
Registration Statement or any post effective amendment thereto shall have
become effective, (B) of receipt of any comments from the Commission, (C) of
any request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, or (D) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the
institution of any proceedings for that purpose. The Company will use its best
efforts to prevent the issuance of any such stop order preventing or suspending
the use of the Prospectus and to obtain as soon as possible the lifting
thereof, if issued.
(c) The Company will cooperate with the Representatives in endeavoring to
qualify the Shares for sale under the securities laws of such jurisdictions as
the Representatives may reasonably have designated in writing and will make
such applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction where it is not now so qualified or
required to file such a consent. The Company will, from time to time, prepare
and file such statements, reports, and other documents, as are or may be
required to continue such qualifications in effect for so long a period as the
Representatives may reasonably request for distribution of the Shares.
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(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, four signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such number of copies of the
Registration Statement (including such number of copies of the exhibits filed
therewith that may reasonably be requested), including documents incorporated
by reference therein, and of all amendments thereto, as the Representatives may
reasonably request.
(e) If during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer any event shall occur as a result of
which it becomes necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances existing at the
time the Prospectus is delivered to a purchaser, not misleading, or, if it is
necessary at any time to amend or supplement the Prospectus to comply with any
law, the Company promptly will either (i) prepare and file with the Commission
an appropriate amendment to the Registration Statement or supplement to the
Prospectus or (ii) prepare and file with the Commission an appropriate filing
under the Exchange Act which shall be incorporated by reference in the
Prospectus so that the Prospectus as so amended or supplemented will not, in
the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with law.
(f) The Company will make generally available to its security holders, as
soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earning statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the Closing Date,
deliver to the Representatives copies of annual reports and copies of all other
documents, reports and information furnished by the Company to its stockholders
or filed with any securities exchange pursuant to the requirements of such
exchange or with the Commission pursuant to the Act or the Exchange Act.
(h) No offering, sale or other disposition of any Common Stock of the
Company will be made for a period of 90 days after the date of this Agreement,
directly or indirectly, by the Company otherwise than hereunder or with the
prior written consent of the Representatives except that the Company may,
without such consent, issue shares upon the exercise of options outstanding on
the date of this Agreement issued pursuant to the Company's incentive stock
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13
option plan or issued as consideration for future acquisitions if the recipient
of shares issued as consideration for such acquisition is obligated to refrain
from offering, selling or otherwise disposing of such shares for the remainder
of the period of 90 days after the date of this agreement.
(i) The Company will use its best efforts to list, subject to notice of
issuance, the Shares on the NASDAQ National Market.
(j) The Company shall apply the net proceeds of its sale of the Shares as
set forth in the Prospectus.
(k) The Company shall not invest, or otherwise use the proceeds received
by the Company from its sale of the Shares in such a manner as would require
the Company or any of the Subsidiaries to register as an investment company
under the Investment Company Act of 1940, as amended.
(l) The Company will maintain a transfer agent and, if necessary under the
jurisdiction of incorporation of the Company, a registrar for the Common Stock.
(m) The Company will not take, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably be expected
to constitute, the stabilization or manipulation of the price of any securities
of the Company.
5. Costs and Expenses. The Company will pay all costs, expenses and fees
incident to the performance of the obligations of the Sellers under this
Agreement, including, without limiting the generality of the foregoing, the
following: accounting fees of the Company; the fees and disbursements of
counsel for the Company; the cost of printing and delivering to, or as
requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, this Agreement, the Agreement Among
Underwriters, the Underwriters' Selling Memorandum, the Underwriters'
Questionnaire, the Underwriters' Invitation Letter, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the
filing fees and expenses incident to securing any required review by the
National Association of Securities Dealers, Inc. (the "NASD") of the terms of
the sale of the Shares; the fees and expenses incurred with respect to the
listing of the Shares on the NASDAQ National Market; and the expenses,
including the fees and disbursements of counsel for the Underwriters, incurred
in connection with the qualification of the Shares under State securities or
Blue Sky laws. Any transfer taxes imposed on the sale of the Shares to the
several Underwriters will be paid by the Sellers pro rata. The Sellers shall
not, however, be required to pay for any of the Underwriters' expenses (other
than those related to qualification under NASD regulation and State securities
or Blue Sky laws) except that, if this Agreement shall not be consummated
because the conditions in Section 6 hereof are not satisfied, or because this
Agreement is terminated by the Representatives pursuant to Section 11 hereof,
or by reason of any failure, refusal or inability on the part of the Company or
the Selling Shareholders to perform any undertaking or satisfy any
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14
condition of this Agreement or to comply with any of the terms hereof on its
part to be performed, unless such failure to satisfy said condition or to
comply with said terms is due to the default or omission of any Underwriter,
then the Company shall reimburse the several Underwriters for reasonable
out-of-pocket expenses, including fees and disbursements of counsel, reasonably
incurred in connection with investigating, marketing and proposing to market
the Shares or in contemplation of performing their obligations hereunder; but
the Company and the Selling Shareholders shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.
6. Conditions of Obligations of the Underwriters. The several obligations
of the Underwriters to purchase the Firm Shares on the Closing Date and the
Option Shares, if any, on the Option Closing Date are subject to the accuracy,
as of the Closing Date or the Option Closing Date, as the case may be, of the
representations and warranties of the Company and the Selling Shareholders
contained herein, and to the performance by the Company and the Selling
Shareholders of their covenants and obligations hereunder and to the following
additional conditions:
(a) The Registration Statement and all post-effective amendments thereto
shall have become effective and any and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made, and any request of
the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time,
shall have been issued and no proceedings for that purpose shall have been
taken or, to the knowledge of the Company, shall be contemplated by the
Commission.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Bass, Berry & Sims PLC,
counsel for the Company, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied on by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Tennessee, with
corporate power and authority to own its properties and conduct its business as
described in the Prospectus; each of the Subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation with corporate power and authority to own its
properties and conduct its business as described in the Prospectus; the Company
and each of the Subsidiaries is duly qualified to transact business in all
jurisdictions in which the conduct of its business requires such qualification,
or in which the failure to qualify would have a materially adverse effect upon
the business of the Company and the Subsidiaries taken as a whole; the
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and
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15
validly issued, are fully paid and non-assessable; and, except for NEIC
Preferred Stock, the outstanding shares of capital stock of each of the
Subsidiaries are, to such counsel's knowledge, owned free and clear of all
liens, encumbrances and security interests, and no options, warrants or other
rights to purchase, agreements or other obligations to issue or other rights to
convert any obligations into shares of capital stock or ownership interests of
the Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital stock as set forth
under the caption "Capitalization" in the Prospectus; the authorized shares of
its Common Stock and Preferred Stock have been duly authorized; the outstanding
shares of its Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable
(iii) All of the Shares conform to the description thereof contained in
the Prospectus; the certificates for the Shares, assuming they are in the form
filed with the Commission, comply in all material respects with all applicable
requirements of Tennessee law; the shares of Common Stock, including the Option
Shares, if any, to be sold by the Company pursuant to this Agreement have been
duly authorized and will be validly issued, fully paid and non-assessable when
issued and paid for as contemplated by this Agreement; and no preemptive rights
of stockholders exist with respect to any of the Shares or the issue and sale
thereof under applicable law or the Charter or Bylaws of the Company, or to
such counsel's knowledge, under any agreement or instrument to which the
Company is a party.
(iv) The Registration Statement has become effective under the Act and, to
the knowledge of such counsel, no stop order proceedings with respect thereto
have been instituted or are pending or threatened under the Act.
(v) The Registration Statement, all Preliminary Prospectuses, the
Prospectus and each amendment or supplement thereto and document incorporated
by reference therein comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial
statements, schedules and other financial information included or incorporated
by reference therein).
(vi) To the knowledge of such counsel, the conditions for the use of Form
S-3, set forth in the General Instructions thereto, have been satisfied.
(vii) Each document, as amended, incorporated by reference to the
Registration Statement complies as to form in all material respects with the
applicable requirements of the Exchange Act, and the applicable rules and
regulations thereunder (except that such counsel need express no opinion as to
the financial statements, schedules and other financial information included or
incorporated by reference therein.
(viii) The statements under the captions "BUSINESS--Litigation" and
"Description of Capital Stock," in the Prospectus, insofar as such statements
constitute a
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16
summary of documents referred to therein or matters of law, are accurate
summaries and fairly and correctly present the information called for with
respect to such documents and matters.
(ix) Such counsel does not know of any contracts or documents required to
be filed as exhibits to or incorporated by reference in the Registration
Statement or described in the Registration Statement or the Prospectus which
are not so filed, incorporated by reference or described as required, and such
contracts and documents as are summarized in the Registration Statement or the
Prospectus are fairly summarized in all material respects.
(x) Such counsel knows of no material legal proceedings or regulatory or
other claims pending or threatened against the Company or any of the
Subsidiaries except as set forth in the Prospectus.
(xi) The execution and delivery of this Agreement and the consummation of
the transactions herein contemplated do not and will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a
default under, the Charter or By-Laws of the Company, or any agreement or
instrument known to such counsel to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries may
be bound.
(xii) This Agreement has been duly authorized, executed and delivered by
the Company.
(xiii) No approval, consent, order, authorization, designation,
declaration or filing by or with any Tennessee or federal regulatory,
administrative or other governmental body is necessary in connection with the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated (other than as may be required by the National
Association of Securities Dealers, Inc. or as required by State securities and
Blue Sky laws as to which such counsel need express no opinion) except such as
have been obtained or made, specifying the same.
(xiv) The Company is not, and will not become as a result of the
consummation of the transactions contemplated by this Agreement, and the
application of the net proceeds therefrom as described in the Prospectus, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(xv) This Agreement has been duly authorized, executed and delivered on
behalf of the Selling Shareholders.
(xvi) Each Selling Shareholder has full legal right, power and authority,
and any approval required by law (other than as required by State securities
and Blue Sky laws as to which such counsel need express no opinion), to sell,
assign, transfer and deliver the portion of the Shares to be sold by such
Selling Shareholder.
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17
(xvii) The Custodian Agreement and Power of Attorney executed and
delivered by each Selling Shareholder are legal, valid and binding obligations
of such Selling Shareholder, enforceable in accordance with their respective
terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights generally
and to the exercise of judicial discretion in accordance with general
principles of equity.
(xviii) The Underwriters (assuming that they are bona fide purchasers
within the meaning of the Uniform Commercial Code) will have acquired good and
marketable title to the Shares being sold by each Selling Shareholder on the
Closing Date, free and clear of all claims, liens, encumbrances and security
interests whatsoever.
In rendering such opinion, Bass, Berry & Sims PLC may rely as to matters
governed by the laws of states other than Tennessee or Federal laws on local
counsel in such jurisdictions provided that in each case Bass, Berry & Sims PLC
shall state that they believe that they and the Underwriters are justified in
relying on such other counsel and such other counsel's opinion is also
addressed to the Underwriters. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing has come
to the attention of such counsel which leads them to believe that the
Registration Statement, as of the time it became effective under the Act, the
Prospectus or any amendment or supplement thereto, on the date it was filed
pursuant to Rule 424(b) or any of the documents incorporated by reference
therein, as of the date of effectiveness of the Registration Statement or, in
the case of documents incorporated by reference in the Prospectus after the
date of effectiveness of the Registration Statement, as of the respective dates
when such documents were filed with the Commission and the Registration
Statement and the Prospectus, or any amendment or supplement thereto, as of the
Closing Date or the Option Closing Date, as the case may be, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading (except that such counsel
need express no view as to financial statements, schedules and other financial
information included or incorporated by reference therein). With respect to
such statement, Bass, Berry & Sims PLC may state that their belief is based
upon the procedures set forth therein, but is without independent check and
verification.
(c) The Representatives shall have received from Piper & Marbury L.L.P.,
counsel for the Underwriters, an opinion dated the Closing Date or the Option
Closing Date, as the case may be, substantially to the effect specified in
subparagraphs (iii), (iv), (v), (vi) and (xii) of Paragraph (b) of this Section
6, and that the Company is a validly organized and existing corporation under
the laws of the State of Tennessee. In rendering such opinion Piper & Marbury
L.L.P. may rely as to all matters governed other than by the laws of the State
of Maryland or Federal laws on the opinion of counsel referred to in paragraph
(b) of this Section 6. In addition to the matters set forth above, such
opinion shall also include a statement to the effect that nothing has come to
the attention of such counsel which leads them to believe that the Registration
Statement, as of the time it became effective under the Act, the Prospectus or
any amendment or supplement thereto,
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18
on the date it was filed pursuant to Rule 424(b) or any of the documents
incorporated by reference therein, as of the date of effectiveness of the
Registration Statement or, in the case of documents incorporated by reference
in the Prospectus after the date of effectiveness of the Registration
Statement, as of the respective dates when such documents were filed with the
Commission and the Registration Statement and the Prospectus, or any amendment
or supplement thereto, as of the Closing Date or the Option Closing Date, as
the case may be, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no
view as to financial statements, schedules and other financial information
included or incorporated by reference therein). With respect to such
statement, Piper & Marbury L.L.P. may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(d) The Representatives shall have received at or prior to the Closing
Date from Piper & Marbury L.L.P. a memorandum or summary, in form and substance
satisfactory to the Representatives, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the State securities
or Blue Sky laws of such jurisdictions as the Representatives may reasonably
have designated to the Company.
(e) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a signed letter from Ernst & Young
LLP, dated the Closing Date or the Option Closing Date, as the case may be, in
form and substance satisfactory to you confirming that they are independent
public accountants within the meaning of the Act and the applicable published
Rules and Regulations thereunder and stating that in their opinion the
financial statements and schedules examined by them and included in the
Registration Statement comply in form in all material respects with the
applicable accounting requirements of the Act and the related published Rules
and Regulations; and containing such other statements and information as is
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial and statistical
information contained in the Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of one
of the Co-Chief Executive Officers and the Chief Financial Officer of the
Company to the effect that, as of the Closing Date or the Option Closing Date,
as the case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the Act and
no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or
are, to his knowledge, contemplated by the Commission.
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19
(ii) The representations and warranties of the Company contained in
Section 1(a) hereof are true and correct as of the Closing Date or the
Option Closing Date, as the case may be.
(iii) All filings required to have been made pursuant to Rules 424 or
430A under the Act have been made;
(iv) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration
Statement, including any document incorporated by reference therein, were
true and correct, and such Registration Statement and Prospectus or any
document incorporated by reference therein did not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading and, in his opinion, since the effective
date of the Registration Statement, no event has occurred which should have
been set forth in a supplement to or an amendment of the Prospectus which
has not been so set forth in such supplement or amendment.
(v) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, there has not been any material
adverse change or any development involving a prospective material adverse
change in or affecting the condition, financial or otherwise, of the
Company and its Subsidiaries taken as a whole or the earnings, business,
management, properties, assets, rights, operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a
whole, whether or not arising in the ordinary course of business.
(g) The Company and the Selling Shareholders shall have furnished to the
Representatives such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representatives may reasonably have requested.
(h) The Firm Shares, and Option Shares, if any, have been approved for
listing upon official notice of issuance on the NASDAQ National Market.
(i) The Representatives shall have received from each officer, director
and Selling Shareholder of the Company a letter or letters, in form and
substance satisfactory to the Underwriters, pursuant to which such person shall
agree not to offer, sell, sell short or otherwise dispose of any shares of
Common Stock of the Company or other capital stock of the Company, or any other
securities convertible, exchangeable or exercisable for Common Stock or
derivative of Common Stock owned by such person (or as to which such person has
the right to direct the disposition of) for a period of 90 days after the date
of this Agreement, except with the prior written consent of the
Representatives.
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20
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to Piper & Marbury L.L.P.,
counsel for the Underwriters.
If any of the conditions herein above provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
In such event, the Company, the Selling Shareholders and the Underwriters
shall not be under any obligation to each other (except to the extent provided
in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Sellers. The obligations of the
Sellers to sell and deliver the portion of the Shares required to be delivered
as and when specified in this Agreement are subject to the conditions that at
the Closing Date or the Option Closing Date, as the case may be, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
8. Indemnification
(a) The Company and the Selling Shareholders, jointly and severally, agree
to indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of the Act against any losses,
claims, damages or liabilities to which such Underwriter or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the 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 in which they were
made, not misleading; and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company and the Selling Shareholders will not be
liable in any such case to the extent that (i) any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission made or incorporated by reference in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof; or (ii) such statement or
omission was contained or made in any Preliminary Prospectus and corrected in
the Prospectus and (a) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who
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21
controls any Underwriter) resulted from an action, claim or suit by any person
who purchased Shares which are the subject thereof from such Underwriter in the
offering and (b) such Underwriter failed to deliver or provide a copy of the
Prospectus to such person at or prior to the confirmation of the sale of such
Shares in any case where such delivery is required by the Act. In no event,
however, shall the liability of any Selling Shareholder for indemnification
under this Section 8(a) exceed the lesser of (i) that proportion of the total
of such losses, claims, damages or liabilities indemnified against equal to the
proportion of the total Shares sold hereunder which is being sold by such
Selling Shareholder, or (ii) the proceeds received by such Selling Shareholder
from the Underwriters in the offering. This indemnity agreement will be in
addition to any liability which the Company or the Selling Shareholders may
otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders and each person, if
any, who controls the Company or the Selling Shareholders within the meaning of
the Act, against any losses, claims, damages or liabilities to which the
Company or any such director, officer, Selling Shareholder or controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based (i) upon any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made; and will reimburse
any legal or other expenses reasonably incurred by the Company or any such
director, officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or
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22
otherwise than on account of the provisions of Section 8(a) or (b). In case
any such proceeding shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred the fees and expenses
of the counsel retained by the indemnified party in the event (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them,
or (iii) the indemnifying party shall have failed to assume the defense and
employ counsel acceptable to the indemnified party within a reasonable period
of time after notice of commencement of the action. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company and the Selling Shareholders in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
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 party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. In addition, the indemnifying party will not, without
the prior written consent of the indemnified party, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action
or proceeding of which indemnification may be sought hereunder (whether or not
any indemnified party is an actual or potential party to such claim, action or
proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under Section 8(a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Shareholders on
the one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Selling Shareholders on
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23
the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Shareholders on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Shareholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault 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 Shareholders on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 8(d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts
and commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation and (iii) no Selling Shareholder
shall be required to contribute any amount in excess of the proceeds received
by such Selling Shareholder from the Underwriters in the offering. The
Underwriters' obligations in this Section 8(d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or
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expenses are incurred. The indemnity and contribution agreements contained in
this Section 8 and the representations and warranties of the Company and the
Selling Shareholders set forth in this Agreement shall remain operative and in
full force and effect, regardless of (i) any investigation made by or on behalf
of any Underwriter or any person controlling any Underwriter, the Company, its
directors or officers, the Selling Shareholders or any persons controlling the
Company or any Selling Shareholder, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor
to any Underwriter, or to the Company, its directors or officers, the Selling
Shareholders or any person controlling the Company or any of the Selling
Shareholders shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section 8.
9. Default by Underwriters. If on the Closing Date or the Option Closing
Date, as the case may be, any Underwriter shall fail to purchase and pay for
the portion of the Shares which such Underwriter has agreed to purchase and pay
for on such date (otherwise than by reason of any default on the part of the
Company or a Selling Shareholder), you, as Representatives of the Underwriters,
shall use your best efforts to procure within 36 hours thereafter one or more
of the other Underwriters, or any others, to purchase from the Company and the
Selling Shareholders such amounts as may be agreed upon and upon the terms set
forth herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or Underwriters failed to purchase. If during such 36
hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not exceed 10% of the Firm Shares or Option
Shares, as the case may be, covered hereby, the other Underwriters shall be
obligated, severally, in proportion to the respective numbers of Firm Shares or
Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and
the Selling Shareholders or you as the Representatives of the Underwriters will
have the right, by written notice given within the next 36-hour period to the
parties to this Agreement, to terminate this Agreement without liability on the
part of the non-defaulting Underwriters or of the Company except to the extent
provided in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option
Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you, as Representatives, may determine in order that
the required changes in the Registration Statement or in the Prospectus or in
any other documents or arrangements may be effected. The term "Underwriter"
includes any person substituted for a defaulting Underwriter. Any action taken
under this Section 9 shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.
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25
10. Notices. All communications hereunder shall be in writing and, except
as otherwise provided herein, will be mailed, delivered or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland 21202, Attention:
Richard L. Franyo, Managing Director; if to the Company, to Envoy Corporation,
15 Century Boulevard, Suite 600, Nashville, Tennessee 37214, Attention: Fred C.
Goad, Jr., Chairman of the Board; if to the Selling Shareholders, to Fred C.
Goad, Jr. and Jim D. Kever at the address of the Company listed above.
11. Termination. This Agreement may be terminated by you by notice to the
Company as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change or
any development involving a prospective material adverse change in or affecting
the condition, financial or otherwise, of the Company or the earnings, business
affairs, management or business prospects of the Company, whether or not
arising in the ordinary course of business, (ii) any outbreak or escalation of
hostilities or declaration of war or national emergency after the date hereof
or other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the United
States would, in your reasonable judgment, make the offering or delivery of the
Shares impracticable or inadvisable, (iii) suspension of trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or
limitation on prices (other than limitations on hours or numbers of days of
trading) for securities on either such Exchange, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your reasonable opinion materially and adversely affects or will materially or
adversely affect the business or operations of the Company (v) declaration of a
banking moratorium by either federal or New York State authorities, (vi) the
suspension of trading of the Company's Common Stock by the Commission or the
NASDAQ National Market; (vii) the taking of any action by any federal or state
governmental body or agency in respect of its monetary or fiscal affairs which
in your reasonable opinion has a material adverse effect on the securities
markets in the United States or elsewhere, or (viii) any litigation or
proceeding is pending or threatened against the Underwriters which seeks to
enjoin or otherwise restrain, or seeks damages in connection with, or questions
the legality or validity of this Agreement or the transactions contemplated
hereby; or
(c) as provided in Sections 6 and 9 of this Agreement.
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26
13. Information Provided by Underwriters. The Company, the Selling
Shareholders and the Underwriters acknowledge and agree that the only
information furnished or to be furnished by any Underwriter to the Company for
inclusion in any Prospectus or the Registration Statement consists of the
information set forth in the last paragraph on the front cover page (insofar as
such information relates to the Underwriters), legends required by Item 502(d)
of Regulation S-K under the Act and the information under the caption
"Underwriting" in the Prospectus.
14. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and the Selling Shareholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Shares merely because of such purchase.
13. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for
the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
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27
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Shareholders and the several Underwriters in accordance with its terms.
Very truly yours,
ENVOY CORPORATION
By
--------------------------------------------
Fred C. Goad, Jr.
Chairman of the Board and Co-Chief Executive
Officer
Selling Shareholders listed on Schedule II
By
--------------------------------------------
, as attorney-in-fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
HAMBRECHT & QUIST LLC
J.C. BRADFORD & CO.
SOUTHCOAST CAPITAL CORPORATION
As Representatives of the
several Underwriters listed
on Schedule I
By ALEX. BROWN & SONS INCORPORATED
By
-------------------------------
Authorized Officer
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SCHEDULE I
Schedule of Underwriters
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
Alex. Brown & Sons Incorporated
Hambrecht & Quist LLC
J.C. Bradford & Co.
Southcoast Capital Corporation
Total
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SCHEDULE II
Schedule of Selling Shareholders
Number of Firm Shares
Selling Shareholder to be Sold
- ------------------- ---------------------
Fred C. Goad, Jr.
Jim D. Kever
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