EXHIBIT 10.1

 

Execution Copy

 

4,436,454 Shares

 

ALLION HEALTHCARE, INC.

 

COMMON STOCK

 

UNDERWRITING AGREEMENT

 

Dated January 25, 2006

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January 25, 2006

 

Thomas Weisel Partners LLC

William Blair & Company, L.L.C.

First Albany Capital Inc.

Susquehanna Financial Group, LLLP

    As Representatives of the several Underwriters

c/o Thomas Weisel Partners LLC

390 Park Avenue, 16th Floor

New York, New York 10022

 

Ladies and Gentlemen:

 

Introduction. Allion Healthcare, Inc., a Delaware corporation (the “Company”),
proposes to issue and sell to the several underwriters named in Schedule A
hereto (the “Underwriters”), and certain stockholders of the Company (the
“Selling Stockholders”) named in Schedule B hereto severally propose to sell to
the several Underwriters, an aggregate of 4,436,454 shares of the common stock,
par value $0.001 per share, of the Company (the “Firm Shares”), of which
1,800,000 shares are to be issued and sold by the Company and 2,636,454 shares
are to be sold by the Selling Stockholders, with each Selling Stockholder
selling the number of shares set forth opposite such Selling Stockholder’s name
in Schedule B hereto.

 

The Company also proposes to issue and sell to the several Underwriters not more
than an additional 665,468 shares of the Company’s common stock, par value
$0.001 per share (the “Additional Shares”), if and to the extent that you shall
have determined to exercise, on behalf of the Underwriters, the right to
purchase such shares of common stock granted to the Underwriters in Section 3
hereof. The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the “Shares.” The shares of common stock, par value $0.001 per
share, of the Company to be outstanding after giving effect to the sales
contemplated hereby are hereinafter referred to as the “Common Stock.” The
Company and the Selling Stockholders are hereinafter sometimes collectively
referred to as the “Sellers.” Thomas Weisel Partners LLC, William Blair &
Company L.L.C., First Albany Capital Inc., and Susquehanna Financial Group, LLLP
have agreed to act as representatives of the several Underwriters (in such
capacity, the “Representatives”) in connection with the offering and sale of the
Shares.

 

The Company has prepared and filed with the Securities and Exchange Commission
(the “Commission”), in accordance with the provisions of the Securities Act of
1933, as amended (the “Securities Act”), and the applicable rules and
regulations thereunder, a registration statement on Form S-1 (Commission File
No. 333-130165), including a prospectus, relating to the Shares. The term
“Registration Statement” as used herein means the registration statement
including all financial schedules and exhibits incorporated or deemed to be
incorporated by reference therein (but excluding any information or statements
therein that were incorporated, or deemed to be incorporated by reference to the
extent such information or statements have been modified or superceded by any
statement in the prospectus, or in any other document that was

 

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subsequently filed with the Commission and incorporated by reference in the
prospectus or Registration Statement) as amended at the time it becomes
effective or, if the registration statement became effective prior to execution
of this Agreement, as supplemented or amended prior to the execution of this
Agreement and includes information (if any) contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) of the rules under
the Securities Act and deemed to be part thereof at the time of effectiveness
pursuant to Rule 430A under the Securities Act. If it is contemplated, at the
time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed and must be declared effective before the
offering of the Shares may commence, the term “Registration Statement” as used
herein means the registration statement as amended by said post-effective
amendment. If the Company has filed, or files on or after the date of this
Agreement, a registration statement to register additional shares of Common
Stock pursuant to Rule 462(b) under the Securities Act (the “Rule 462(b)
Registration Statement”), then any reference herein to the term “Registration
Statement” shall be deemed to include such Rule 462(b) Registration Statement.
Any preliminary prospectus included in the Registration Statement or filed with
the Commission pursuant to Rule 424(a) of the rules under the Securities Act is
hereinafter referred to as a “Preliminary Prospectus.” The term “Statutory
Prospectus” as used herein means any Preliminary Prospectus, as amended or
supplemented, relating to the Shares that is included in the Registration
Statement immediately prior to the Applicable Time (as defined below). The final
prospectus filed with the Commission pursuant to Rule 424 of the rules under the
Securities Act that satisfies the requirements of Section 10(a) of the
Securities Act is hereinafter referred to as the “Prospectus.” The term
“Applicable Time” means 8:00 p.m. (Eastern time) on the date of this Agreement.
The term “General Disclosure Package” means the Statutory Prospectus, each
Issuer Represented Free Writing Prospectus (as defined below) and the
pricing-related information set forth on Schedule C. All references in this
Agreement to the Registration Statement, the Rule 462(b) Registration Statement,
a Preliminary Prospectus, the Statutory Prospectus, the Prospectus, any Issuer
Represented Free Writing Prospectus or any amendments or supplements to any of
the foregoing, shall include any copy thereof filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

 

1. Representations and Warranties and Agreements of the Company.

 

The Company represents and warrants to and agrees with each of the Underwriters
that:

 

1.1 Effective Registration Statement.

 

The Registration Statement has become effective under the Securities Act; no
stop order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or to the
Company’s knowledge threatened by the Commission.

 

1.2 Contents of Registration Statement.

 

(i) The Registration Statement, when it became effective, did not contain and,
as amended or supplemented, if applicable, 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

 

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therein not misleading, (ii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder, (iii) the Prospectus does not contain
and, as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph do not apply to statements or omissions in the Registration
Statement or the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein, and (iv) the statistical and market-related data included in
the Registration Statement and the Prospectus are based on or derived from
sources that the Company believes to be reliable and accurate. With respect to
the exception set forth at clause (iii), the Company acknowledges that the only
information furnished in writing by the Underwriters for use in the Registration
Statement or the Prospectus are the statements specifically relating to (a) the
aggregate number of Firm Shares that the Representatives have severally agreed
to purchase contained in the first paragraph under the Section captioned
“Underwriting” in the Prospectus, (b) the concession and reallowance figures
contained in the paragraph captioned “Commissions and Discounts” under the
Section captioned “Underwriting” in the Prospectus, (c) information under the
paragraph captioned “Passive Market Making” under the Section captioned
“Underwriting” in the Prospectus, and (d) stabilizing and passive market making
activities under the paragraph captioned “Short Sales, Stabilizing Transactions
and Penalty Bids” under the Section captioned “Underwriting” in the Prospectus.

 

1.3 Non-Ineligible Issuer.

 

At the time of filing the Registration Statement and at the date hereof, the
Company was not and is not an “ineligible issuer” as defined in Rule 405 under
the Securities Act (“Rule 405”).

 

1.4 Contents of Free Writing Prospectuses.

 

Other than the Preliminary Prospectus and the Prospectus, the Company (including
its agents and representatives, other than the Underwriters in their capacity as
such) has not used or referred to or authorized any other person to use or refer
to, and will not use or refer to or authorize any other person to use or refer
to, any “written communication” (as defined in Rule 405 under the Securities
Act) that constitutes an offer to sell or solicitation of an offer to buy the
Shares (each such communication by the Company or its agents and representatives
(other than a communication referred to in clause (i) below, but including a
communication referred to in clause (ii) below) an “Issuer Represented Free
Writing Prospectus”) other than (i) any document not constituting a prospectus
pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the
Securities Act or (ii) the documents listed on Schedule D hereto and any other
“written communications” (as defined in Rule 405 under the Securities Act)
approved in writing in advance by the Representatives. Each such Issuer
Represented Free Writing Prospectus, as of its issue date and at all subsequent
times through the Closing Date or until any earlier date of which the Company
notified or notifies the Representatives as described in the second paragraph of
Section 5.11, (i) complied and will comply in all material respects with the
Securities Act, (ii) did not and does not include any information that conflicts
with the

 

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information contained in the Registration Statement, the Statutory Prospectus or
the Prospectus, (iii) has been filed in accordance with the Securities Act (to
the extent required thereby) and, (iv) when taken together with the Preliminary
Prospectus, the Statutory Prospectus and the Prospectus accompanying, or
delivered prior to delivery of, such Issuer Represented Free Writing 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 the light of
the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions made in each such Issuer Represented Free Writing
Prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use in any Issuer Represented Free Writing Prospectus, it being acknowledged
that the only such information provided by the Underwriters expressly for use
therein consists of the information set forth in the final sentence of
Section 1.2.

 

As of the Applicable Time, the General Disclosure Package, does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this sentence do not apply to statements or omissions in the
General Disclosure Package based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through the
Representatives expressly for use therein, it being acknowledged that the only
such information provided by the Underwriters expressly for use therein consists
of the information set forth in the final sentence of Section 1.2.

 

1.5 Compliance with Securities Act.

 

Each Preliminary Prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Securities Act, complied when so filed in all material
respects with the Securities Act and the applicable rules and regulations of the
Commission thereunder.

 

1.6 Financial Statements of the Company and Acquired Companies.

 

The financial statements of (i) the Company and its consolidated subsidiaries,
(ii) Medicine Made Easy (“MME”), (iii) North American Home Health Supply, Inc.
(“North American”), (iv) Specialty Pharmacies Inc. (“Specialty”), and
(v) Frontier Pharmacy & Nutrition, Inc. d/b/a PMW Pharmacy (“Frontier” and,
collectively with MME, North American and Specialty, the “Acquired Companies”)
included in the Registration Statement, the Statutory Prospectus and the
Prospectus (including, in each case, all notes and schedules thereto) present
fairly in all material respects the financial condition, results of operations
and cash flows of the Company and its consolidated subsidiaries, and of the
Acquired Companies at the dates and for the periods indicated; and such
financial statements and related schedules and notes thereto, including the
unaudited financial information filed with the Commission as part of the
Registration Statement , the Statutory Prospectus and Prospectus have been
prepared in conformity with generally accepted accounting principles (“GAAP”),
consistently applied throughout the periods indicated and conform with the rules
and regulations adopted by the Commission under the Securities Act, provided
however, that unaudited interim financial

 

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statements are subject to year end adjustments not material in amount, and do
not contain footnotes required under GAAP. The information in the Registration
Statement, the Statutory Prospectus and the Prospectus under the captions
“Summary Historical and Pro Forma Consolidated Financial Data,” “Selected
Historical Consolidated Financial Data” and “Unaudited Pro Forma Consolidated
Financial Statements” presents fairly the information shown therein as at the
respective dates and for the respective periods specified and has been presented
on a basis consistent with the audited consolidated financial statements of the
Company and its consolidated subsidiaries, and of the Acquired Companies set
forth in the Registration Statement, the Statutory Prospectus and Prospectus,
subject to such adjustments as shall be described in the footnotes to such
financial data in the Registration Statement, the Statutory Prospectus and
Prospectus.

 

1.7 Pro Forma Financial Statements.

 

The unaudited condensed consolidated pro forma financial data and the related
notes thereto set forth under the captions “Summary Historical and Pro Forma
Consolidated Financial Data” and “Unaudited Pro Forma Consolidated Financial
Statements” in the Registration Statement, the Statutory Prospectus and the
Prospectus presents fairly the information shown therein, have been prepared in
accordance with the applicable requirements of Article 11 of Regulation S-X
promulgated under Securities Exchange Act of 1934, as amended (the “Exchange
Act”), have been properly compiled on a pro forma basis as described therein,
and the assumptions used in the preparation thereof were reasonable at the time
made and the adjustments used therein are based upon good faith estimates and
assumptions believed by the Company to be reasonable at the time made.

 

1.8 Auditor Independence.

 

BDO Seidman, LLP, which has expressed its opinion with respect to the financial
statements and schedules of the Company and its consolidated subsidiaries and of
MME filed as a part of the Registration Statement and included in the
Registration Statement, the Statutory Prospectus and the Prospectus, is an
independent certified public accountant with respect to the Company and its
subsidiaries and MME within the meaning of the Securities Act and the rules and
regulations of the Commission adopted thereunder.

 

1.9 Due Incorporation.

 

The Company has been duly incorporated, is validly existing as a corporation in
good standing under the laws of the State of Delaware, has the corporate power
and authority to own its property and to conduct its business as described in
the Registration Statement, the Statutory Prospectus and the Prospectus and to
enter into and perform its obligations under this Agreement, and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have, individually or in the
aggregate, a material adverse effect on the assets, properties, condition,
financial or otherwise, or in the results of operations, business, affairs or
business prospects of the Company and its subsidiaries, taken as a whole (a
“Material Adverse Effect”).

 

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1.10 Subsidiaries.

 

Schedule E hereto accurately sets forth each such subsidiary of the Company and
its jurisdiction of organization. Each subsidiary of the Company has been duly
organized, is validly existing as a corporation or limited liability company, as
the case may be, in good standing under the laws of the jurisdiction of its
organization, has the power and authority to own its property and to conduct its
business as described in the Registration Statement, the Statutory Prospectus
and the Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
result in, individually or in the aggregate, a Material Adverse Effect. All of
the issued shares of capital stock of each subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and non-assessable and
are either owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities, claims, preemptive rights, rights of first
refusal or similar rights, or restrictions upon voting or transfer.

 

1.11 Authorization of Underwriting Agreement.

 

This Agreement has been duly and validly authorized by all necessary corporate
action in respect thereof, duly executed and delivered by the Company, and is a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.

 

1.12 Description of Capital Stock.

 

The authorized, issued and outstanding capital stock of the Company conforms in
all material respects to the description thereof contained in the Registration
Statement, the Statutory Prospectus and the Prospectus, and, as of the date
hereof, the Company has authorized and outstanding capital stock as set forth in
the column entitled “Actual” and in the corresponding line items under the
caption “Capitalization” in the Registration Statement, the Statutory Prospectus
and the Prospectus.

 

1.13 Outstanding Securities.

 

All of the issued and outstanding shares of capital stock of the Company,
including the Firm Shares to be sold by the Selling Stockholders, (i) have been
duly authorized and are validly issued, fully paid and non-assessable, (ii) were
not issued in violation of any preemptive rights, rights of first refusal or
other similar rights of any security holder of the Company or any other person,
and (iii) are not subject to preemptive rights, rights of first refusal or
similar rights to subscribe for or to purchase or acquire any shares of capital
stock of the Company or any of its subsidiaries, or any such rights pursuant to
its certificate of incorporation or bylaws or any agreement or instrument to or
by which the Company or any of its subsidiaries is a party or bound. All sales
of shares of capital stock of the Company prior to the date hereof were at all
relevant times duly registered under the Securities Act or were exempt from the

 

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registration requirements of the Securities Act, and all such sales of shares
complied in all material respects with applicable state securities or Blue Sky
laws or were exempt from such applicable state securities or Blue Sky laws.
Except as disclosed in the Registration Statement, the Statutory Prospectus and
the Prospectus, the Company has not sold or issued any securities during the
six-month period preceding the date of the Prospectus, including any sales
pursuant to Rule 144A, or Regulations D or S of, the Securities Act, other than
shares issued pursuant to employee benefit plans, qualified stock option plans
or other employee compensation plans or pursuant to outstanding options, rights
or warrants described in the Registration Statement, the General Disclosure
Package and the Prospectus.

 

1.14 Validly Issued Shares.

 

The Shares to be sold by the Company have been duly authorized and, when issued
and delivered by the Company in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive rights, rights of first refusal or
other similar rights to subscribe for or to purchase or acquire any shares of
Common Stock of the Company or any of its subsidiaries, or any such rights
pursuant to its certificate of incorporation or bylaws or any agreement or
instrument to or by which the Company or any of its subsidiaries is a party or
bound.

 

1.15 Registration Rights.

 

There are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any securities
(debt or equity) of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration Statement
(collectively, “Registration Rights”), other than as set forth on Schedule F
hereto. Schedule F hereto accurately sets forth the names of all holders of
shares of capital stock of the Company that have Registration Rights and the
number of such shares of capital stock subject to Registration Rights. Prior to
the date hereof, all holders listed on Schedule F (i) have waived in writing the
Registration Rights to which their shares relate in connection with the offering
contemplated by this Agreement or (ii) have received written notice from the
Company, in compliance with the terms of each holder’s Registration Rights
agreement, that such holders may exercise his, her or its Registration Rights
with respect to all or any portion of the shares subject thereto and such
holders have elected either to exercise the right to have all or a portion of
their shares included in the offering contemplated by this Agreement or to waive
their rights to have their shares included in such offering.

 

1.16 Nasdaq; Exchange Act Registration.

 

The Shares have been listed for quotation on the National Association of
Securities Dealers Automated Quotation (“Nasdaq”) National Market System. A
registration statement has been filed on Form 8-A pursuant to Section 12 of the
Exchange Act, which complies in all material respects with the Exchange Act. The
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or the
quotation of the Common Stock on Nasdaq, nor has the Company received any
notification that the Commission or the Nasdaq is contemplating terminating such
registration or quotation.

 

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1.17 No Conflicts.

 

The execution and delivery by the Company of, and the performance by the Company
of its obligations under, this Agreement will not contravene, result in a breach
or violation of, or constitute a default under, or will not result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant to,
(i) any provision of applicable law, (ii) any provision of the certificate of
incorporation or bylaws or other organizational or governing documents of the
Company or any of its subsidiaries, (iii) any agreement or other instrument
binding upon the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries is a party or to which any of its or their respective
properties are subject, or (iv) any regulation, rule, judgment, order or decree
of any governmental body, agency or court having jurisdiction over the Company
or any subsidiary, except, in the case of clauses (i), (iii) and (iv) above,
where such violations, breaches, contraventions, liens, charges, claims or
encumbrances would not, individually or in the aggregate, result in a Material
Adverse Effect.

 

1.18 No Consents.

 

(i) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign, (ii) no authorization, approval, vote or other
consent of any stockholder or creditor of the Company, and (iii) no
authorization, approval, vote or other consent of any other person or entity, is
necessary or required for the performance by the Company of its obligations
under this Agreement, for the offering, issuance, sale or delivery of the Shares
hereunder, or for the consummation by the Company of any of the other
transactions contemplated by this Agreement, in each case on the terms
contemplated by the Prospectus, except such as have been already obtained under
the Securities Act or the rules and regulations thereunder, or such as may be
required under state securities or Blue Sky laws or the National Association of
Securities Dealers, Inc. (the “NASD”).

 

1.19 No Material Adverse Change.

 

Subsequent to the respective dates as to which information is given in the
Registration Statement, the Statutory Prospectus and the Prospectus, (i) there
has not occurred any Material Adverse Effect, (ii) except in the ordinary course
of business, the Company and its subsidiaries have not incurred any material
liability or obligation, direct or contingent, nor entered into any material
transaction, (iii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock, and (iv) there has not been any material change in
the capital stock, short-term debt or long-term debt of the Company and its
subsidiaries.

 

1.20 Legal Proceedings; Statutes and Regulations.

 

There are no legal or governmental proceedings pending or, to the knowledge of
the Company, threatened to which the Company or any of its subsidiaries is a
party or to which

 

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any of the properties of the Company or any of its subsidiaries is subject
(i) that are required to be described in the Registration Statement, the
Statutory Prospectus or the Prospectus and are not so described, or (ii) which
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect. There are no material statutes or regulations
applicable to the Company or any of its subsidiaries, or its or their business
operations or properties, that are required to be described in the Registration
Statement, the Statutory Prospectus or the Prospectus that are not described as
required. The statements relating to legal matters and proceedings and statutes
and regulations in the Registration Statement, the Statutory Prospectus and the
Prospectus under the subcaptions “– Reimbursement Management,” “– Disease
Management,” “– Third Party Reimbursement, Cost Containment and Legislation,” “–
Government Regulation,” and “– Legal Proceedings,” under the caption “Business,”
in each case fairly and accurately summarize such matters and proceedings in all
material respects.

 

1.21 Contracts.

 

There are no contracts or other documents which are required to be described in
the Registration Statement, the Statutory Prospectus and the Prospectus or filed
as exhibits to the Registration Statement by the Securities Act or the
applicable rules and regulations thereunder which have not been described in the
Registration Statement, the Statutory Prospectus and the Prospectus or filed as
exhibits to the Registration Statement.

 

1.22 Related Party Transactions.

 

No relationship, direct or indirect, exists between or among the Company, on the
one hand, and the directors, officers, stockholders, customers or suppliers of
the Company, on the other hand, which is required to be described in the
Registration Statement, the Statutory Prospectus and the Prospectus and which is
not so described. There are no outstanding loans, advances or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any of their respective family members.

 

1.23 Not an Investment Company.

 

The Company is not and, after giving effect to the offering and sale of the
Shares and the application of the proceeds thereof as described in the
Registration Statement, the Statutory Prospectus and the Prospectus, will not be
an “investment company” as such term is defined in the Investment Company Act of
1940, as amended.

 

1.24 No Violation.

 

The Company and its subsidiaries have conducted its and their businesses in
compliance with applicable laws, except where the failure to comply would not
result in a Material Adverse Effect and neither the Company nor any of its
subsidiaries is in violation of, and no event has occurred which with notice or
lapse of time or both would constitute a default under or in, (i) its
certificate of incorporation or bylaws, (ii) the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties may be
bound, or (iii) any federal, state, local or foreign law, statute, rule,
regulation, decree, order, license or permit, to which the Company or any of its

 

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subsidiaries or any of its or their properties or its or their businesses may be
subject, including but not limited to the Medicare Prescription Drug,
Improvement and Modernization Act, the Prescription Drug Marketing Act, the
Federal Food, Drug, and Cosmetic Act, the Federal Controlled Substances Act, the
Federal Anti-Kickback Statute, the Federal Stark Law, the Federal False Claims
Act, the Federal Civil Monetary Penalties Law, the health information privacy
and security regulations enacted under the Health Insurance Portability and
Accountability Act of 1996, the applicable State pharmacy licensing laws, and
the applicable State unfair and deceptive trade practices and consumer
protection laws except, for violations or defaults which would not, individually
or in the aggregate, result in a Material Adverse Effect.

 

1.25 Governmental Permits.

 

The Company, its subsidiaries and each of the pharmacists employed by the
Company (i) have all licenses, certificates, authorizations, permits, approvals
and other rights from, and have filed all reports, documents and other
information required to be filed with, the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses
as now conducted (each, an “Authorization”) except for such Authorizations where
the failure to possess such Authorization, or the invalidity of which,
individually or in the aggregate, would not have a Material Adverse Effect,
(ii) have fulfilled and performed all obligations necessary to maintain each
Authorization, and (iii) to the Company’s knowledge, there are no pending or
threatened actions, suits, proceedings or investigations that would reasonably
be expected to result in the revocation, termination, suspension, modification
or impairment of any Authorization, which revocation, termination, suspension,
modification or impairment would, individually or in the aggregate, result in a
Material Adverse Effect. All such Authorizations are valid and in full force and
effect and the Company, its subsidiaries and each of the pharmacists employed by
the Company and its subsidiaries are in compliance in all respects with the
terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities having jurisdiction with respect
thereto except where the failure to comply would not result in a Material
Adverse Effect

 

1.26 Properties.

 

All real property, buildings and other improvements held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings or
other improvements by the Company and its subsidiaries, and all such leases are
in full force and effect. Neither the Company nor any of its subsidiaries has
any notice of any claim of any sort that has been asserted by anyone adverse to
the rights of the Company or any of its subsidiaries under any of the leases
mentioned above or affecting or questioning the rights of the Company or its
subsidiaries in the continued possession of the leased premises under any such
lease. The Company and its subsidiaries have good and marketable title to all
personal property owned by them which is material to the businesses of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Registration
Statement, the Statutory Prospectus and the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries.

 

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1.27 Environmental.

 

The Company and its subsidiaries (i) are in compliance with any and all
applicable foreign, federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses, and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, individually or in the aggregate, result in a Material Adverse
Effect.

 

1.28 Intellectual Property Rights.

 

Except as disclosed in the Registration Statement, the Statutory Prospectus and
the Prospectus, the Company and its subsidiaries own, license or otherwise
possess all rights to use, all software, hardware, systems, processes and other
technology and all material patents, patent rights, inventions, know-how
(including trade secrets and other unpatented or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks,
trade names, copyrights and other intellectual property rights (collectively,
the “Rights”) necessary for the conduct of its or their businesses as currently
operated. To the Company’s knowledge, no claims have been asserted against the
Company or any of the Company’s subsidiaries by any person with respect to the
use of any such Rights or challenging or questioning the validity or
effectiveness of any such Rights. Except as disclosed in the Registration
Statement, the Statutory Prospectus and the Prospectus, the continued use of the
Rights in connection with the business and operations of the Company and its
subsidiaries does not, to the knowledge of the Company, infringe on the rights
of any person, which, if the subject of an unfavorable decision, ruling or
filing, would, individually or in the aggregate, result in a Material Adverse
Effect.

 

1.29 No Labor Disputes.

 

No material labor dispute with the employees of the Company or any of its
subsidiaries exists or is imminent; and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that would, individually
or in the aggregate, result in a Material Adverse Effect.

 

1.30 Insurance.

 

The Company and its subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which they are engaged. There are no claims
by the Company or its subsidiaries under any insurance policy as to which any
insurance company is denying liability or defending under a reservation of
rights clause. Neither the Company nor any of its subsidiaries has 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 from similar insurers
as may be necessary to continue its or their businesses at a cost that would
not, individually or in the aggregate, result in a Material Adverse Effect.

 

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1.31 Taxes.

 

(i) Each of the Company and its subsidiaries has filed all federal, state, local
and foreign tax returns and tax forms required to be filed except where the
failure to file would not have a Material Adverse Effect, (ii) such returns and
forms were complete and correct in all material respects, and any taxes,
including any penalties and interest, shown by such returns or otherwise
assessed that are due or payable have been paid, (iii) all payroll withholdings
required to be made by the Company and its subsidiaries with respect to
employees have been made, and (iv) there have been no tax deficiencies asserted
or, to the knowledge of the Company, threatened against the Company or its
subsidiaries.

 

1.32 No Price Stabilization or Manipulation.

 

The Company has not taken, directly or indirectly, any action designed to or
that would reasonably be expected to cause or result in any stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.

 

1.33 Accounting Controls.

 

The Company and each of its subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance regarding the
(i) reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP, (ii) maintenance of
records that in reasonable detail accurately and fairly reflect transactions and
dispositions of the assets of the Company and its subsidiaries, (iii) recording
of transactions as necessary to permit preparation of financial statements in
accordance with GAAP and that receipts and expenditures of the Company and its
subsidiaries are being made only in accordance with authorizations of management
and directors of the Company or the applicable subsidiary, and (iv) prevention
or timely detection of unauthorized acquisition, use or disposition of the
Company’s or its subsidiaries’ assets that would have a Material Adverse Effect
on the Company’s consolidated financial statements. Except as described in the
Registration Statement, the Statutory Prospectus and the Prospectus, the Company
has not identified any material weakness in the Company’s “internal control over
financial reporting” as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)
(whether or not remediated).

 

1.34 Exchange Act; Sarbanes-Oxley Act.

 

The Company has filed all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Act in the manner and within
the time periods required by the Exchange Act and such documents, at the time
filed with Commission, conformed in all material respects to the requirements of
the Exchange Act, and none of such documents when they were filed with the
Commission contained an untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein not
misleading. The Company is in compliance in all material respects with all of
the provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder (the “Sarbanes-Oxley Act”) that are effective and
applicable to the Company.

 

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1.35 Disclosure Controls and Procedures.

 

Management has established and maintains disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and its
subsidiaries and designed such disclosure controls and procedures to ensure 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 Commission’s rules and forms
and that material information relating to the Company and its subsidiaries is
made known to the Company’s principal executive officer and principal financial
officer, or persons performing similar functions, by others within those
entities. Since the date of the Form 10-Q for the third quarter of 2005, there
has been no change in the Company’s internal controls that has materially
affected, or is reasonably likely to materially affect, the Company’s disclosure
controls.

 

1.36 Brokers Fees.

 

Except as disclosed in the Registration Statement, the Statutory Prospectus and
the Prospectus, there are no contracts, agreements or understandings between the
Company and any person that would give rise to a valid claim against the Company
or any of the Underwriters for a brokerage commission, finder’s fee or other
like payment in connection with the transactions contemplated herein, the
Registration Statement, the Statutory Prospectus and the Prospectus or, to the
Company’s knowledge, any contracts, agreements, understandings, payments,
arrangements or issuances with respect to the Company or any of its officers,
directors, stockholders, employees or affiliates that may affect the
Underwriters’ compensation as determined by the NASD.

 

1.37 Audit Committee.

 

The Company’s board of directors has validly appointed an audit committee whose
composition satisfies the requirements of the Exchange Act, the rules and
regulations of the Commission adopted thereunder and Rules 4200 and 4350 of the
rules of the NASD. The audit committee has adopted a charter that satisfies the
Exchange Act, the rules and regulations of the Commission adopted thereunder and
Rules 4200 and 4350 of the NASD.

 

1.38 Mail Order Meds, Inc.

 

Mail Order Meds, Inc. does not own, lease or otherwise have any material assets
and the Company has discontinued all material business operations related to
Mail Order Meds, Inc.

 

2. Representations and Warranties and Agreements of the Selling Stockholders.
Each of the Selling Stockholders severally, not jointly, represents and warrants
to and agrees with each of the Underwriters that:

 

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2.1 Power and Authority.

 

If such Selling Stockholder is a corporation, partnership, limited partnership,
limited liability company or trust, such Selling Stockholder has been duly
organized or incorporated and is validly existing as a corporation, partnership,
limited partnership, limited liability company or trust in good standing under
the laws of its jurisdiction of incorporation or organization, as applicable.

 

2.2 Due Authorization.

 

This Agreement has been duly authorized, executed and delivered by or on behalf
of such Selling Stockholder and, assuming due authorization, execution and
delivery by each of the Company and the Representatives, is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except as rights to indemnification hereunder may be limited by applicable law
and except as the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.

 

2.3 Selling Stockholder Documents.

 

The Custody Agreement signed by such Selling Stockholder relating to the deposit
of the Firm Shares to be sold by such Selling Stockholder (the “Custody
Agreement”) and the Power of Attorney appointing certain individuals as such
Selling Stockholder’s attorneys-in-fact to the extent set forth therein,
relating to the transactions contemplated hereby and by the Registration
Statement (the “Power of Attorney”) have been duly authorized, executed and
delivered by such Selling Stockholder and, assuming due authorization, execution
and delivery by Continental Stock Transfer & Trust Company, as Custodian, are
valid and binding agreements of such Selling Stockholder enforceable in
accordance with their respective terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights and remedies of creditors
or by general equitable principles (regardless of whether enforcement is sought
in a proceeding in equity or law).

 

2.4 No Conflicts or Consents.

 

The execution and delivery by such Selling Stockholder of, and the performance
by such Selling Stockholder of its obligations under, this Agreement, the
Custody Agreement and the Power of Attorney will not contravene, result in a
breach or violation of, or constitute a default under or will not result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or assets of such Selling Stockholder pursuant to, (i) any provision of
applicable law, (ii) any provision of the certificate of incorporation or
by-laws or other organizational or governing documents of such Selling
Stockholder (if such Selling Stockholder is not an individual), (iii) any
agreement or other instrument binding upon such Selling Stockholder or (iv) any
regulation, rule, judgment, order or decree of any governmental body, agency or
court having jurisdiction over such Selling Stockholder. No filings with, or
consent, approval, authorization or order of, or qualification with, any court
or governmental authority or agency, domestic or foreign, is required for the
performance by such Selling Stockholder of its obligations under this Agreement,
or the Custody Agreement or Power of

 

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Attorney of such Selling Stockholder, except such as have been already obtained
under the Securities Act or the rules and regulations thereunder, or such as may
be required by the state securities or Blue Sky laws or the NASD in connection
with the offer and sale of the Shares.

 

2.5 Good Title to Shares.

 

(a) Such Selling Stockholder is, or in the case of the Selling Stockholders
identified on Schedule G hereto, upon the exercise of options or warrants, as
the case may be, with respect to underlying shares of Common Stock, such Selling
Stockholder will be on the Closing Date, the lawful owner of the Firm Shares to
be sold by such Selling Stockholder pursuant to this Agreement and (b) such
Selling Stockholder, other than those Selling Stockholders identified on
Schedule G prior to the exercise of options or warrants, as the case may be,
with respect to underlying shares of Common Stock, has and each such Selling
Stockholder on the Closing Date will have, valid title to the Firm Shares to be
sold by such Selling Stockholder free and clear of any security interests,
claims, liens, equities and other encumbrances and the legal right and power,
and all authorization and approval required by law, to enter into this
Agreement, the Custody Agreement and the Power of Attorney and to sell, transfer
and deliver the Firm Shares to be sold by such Selling Stockholder. The Firm
Shares to be sold by such Selling Stockholder are not subject to any preemptive
rights, rights of first refusal or similar rights to subscribe for or to
purchase or acquire any of such Firm Shares.

 

2.6 Delivery of Common Shares.

 

The Firm Shares to be sold by such Selling Stockholder pursuant to this
Agreement are certificated securities in registered form and are not held in any
securities account or by or through any securities intermediary within the
meaning of the Uniform Commercial Code as in effect in the State of New York.
The Selling Stockholder has caused certificates for the number of Firm Shares to
be sold by such Selling Stockholder hereunder to be delivered to the Custodian,
endorsed in blank or with blank stock powers duly executed, with a signature
appropriately guaranteed, such certificates to be held in custody by the
Custodian for delivery pursuant to the provisions of this Agreement and the
Custody Agreement. Delivery of the Firm Shares to be sold by such Selling
Stockholder pursuant to this Agreement will pass valid title to such Firm Shares
free and clear of any security interests, claims, liens, equities and other
encumbrances.

 

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2.7 No Association with the NASD.

 

Except as described in the completed NASD Questionnaire provided by such Selling
Stockholder to the Company prior to the date of this Agreement, neither such
Selling Stockholder nor any of its affiliates, directly, or indirectly through
one or more intermediaries, is or controls, is controlled by, or is under common
control with, or is a person associated with (as defined in such NASD
Questionnaire), any member firm of the National Association of Securities
Dealers, Inc.

 

2.8 No Price Stabilization or Manipulation.

 

Such Selling Stockholder has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in any stabilization or manipulation of the price of the Common Stock
to facilitate the sale or resale of the Shares.

 

2.9 Disclosure by Selling Stockholder in Registration Statement.

 

The information in the Registration Statement, the Statutory Prospectus and the
Prospectus under the caption “Principal and Selling Stockholders” and any other
information furnished by or on behalf of such Selling Stockholder in writing
expressly for use in the General Disclosure Package or any Selling Stockholder
Free Writing Prospectus which specifically relates to such Selling Stockholder
does not, and will not on the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Such Selling Stockholder is not prompted
by any information concerning the Company or its subsidiaries which is not set
forth in the Registration Statement, the Statutory Prospectus and the Prospectus
to sell its Shares pursuant to this Agreement.

 

2.10 Confirmation of Company Representations and Warranties.

 

If such Selling Stockholder is an executive officer or director of the Company,
such Selling Stockholder has no reason to believe that the representations and
warranties of the Company contained in Section 1 hereof are not true and
correct. If such Selling Stockholder is an executive officer or director of the
Company, such Selling Stockholder has reviewed and is familiar with the
Registration Statement, the General Disclosure Package and the Prospectus and
the information in the Registration Statement, the General Disclosure Package
and the Prospectus does not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, that the representations and warranties provided
in this Section 2.10 do not apply to statements or omissions based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use therein, which
such Selling Stockholder and the Underwriters acknowledge consists only of that
information identified in the final sentence of Section 1.2.

 

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2.11 Lock-Up Agreement.

 

Such Selling Stockholder agrees to be bound by the terms of the “lock-up”
agreement set forth in Exhibit A hereto (the “Lock-Up Agreement”), between the
Representatives and such Selling Stockholder; provided, however, that if such
Selling Stockholder is the Chief Executive Officer of the Company as of the date
hereof, the restricted period set forth in the Lock-Up Agreement shall be for a
period of 180 days, rather than 90 days.

 

2.12 Selling Stockholder Free Writing Prospectuses.

 

Such Selling Stockholder represents and agrees that, without the prior consent
of Thomas Weisel Partners LLC, it has not made and will not make any offer
relating to the Shares that would constitute a “free writing prospectus,” as
defined in Rule 405 under the Securities Act (any such “free writing prospectus”
of any Selling Stockholder, a “Selling Stockholder Free Writing Prospectus”),
and it has not used, referred to, or distributed, and will not use, refer to or
distribute, any such Selling Stockholder Free Writing Prospectus. Any Selling
Stockholder Free Writing Prospectus consented to by Thomas Weisel Partners LLC
is hereinafter referred to as a “Selling Stockholder Permitted Free Writing
Prospectus.” Each Selling Stockholder represents that it has treated or agrees
that it has complied and will comply with the requirements of Rule 433 under the
Securities Act applicable to any Selling Stockholder Permitted Free Writing
Prospectus of such Selling Stockholder, including timely filing with the
Commission where required, legending and record keeping

 

3. Purchase and Sale Agreements.

 

3.1 Firm Shares.

 

Each Seller, severally and not jointly, hereby agrees to sell to the several
Underwriters, and each Underwriter, upon the basis of the representations and
warranties herein contained, but subject to the conditions hereinafter stated,
agrees, severally and not jointly, to purchase from such Seller at $12.12435 per
share (the “Purchase Price”) the number of Firm Shares (subject to such
adjustments to eliminate fractional shares as the Representatives may determine)
that bears the same proportion to the number of Firm Shares to be sold by such
Seller, as set forth in Schedule B opposite the name of the Company and each
other Seller, as the number of Firm Shares set forth in Schedule A hereto
opposite the name of such Underwriter bears to the total number of Firm Shares.

 

3.2 Additional Shares.

 

On the basis of the representations and warranties contained in this Agreement,
and subject to its terms and conditions, the Company agrees to sell to the
Underwriters the Additional Shares, and the Underwriters shall have the right to
purchase, severally and not jointly, up to 665,468 Additional Shares at the
Purchase Price. The Representatives may exercise this right on behalf of the
Underwriters in whole or from time to time in part by giving notice to the
Company in writing not later than 30 days after the date of this Agreement. Any
exercise notice shall specify the number of Additional Shares to be purchased by
the Underwriters and the date on which such shares are to be purchased. A
purchase date may be the same as the Closing Date (as defined below) but may not
be earlier than the Closing Date and no

 

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purchase date may be later than 10 business days after the date of notice.
Additional Shares may be purchased as provided in Section 4 hereof solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. If any Additional Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Additional Shares to be purchased as the number of Firm Shares set
forth in Schedule A hereto opposite the name of such Underwriter bears to the
total number of Firm Shares.

 

3.3 Market Standoff Provision.

 

The Company hereby agrees that, without the prior written consent of Thomas
Weisel Partners LLC (which consent may be withheld in its sole discretion) it
will not, during the period commencing on the date hereof and ending 90 days
after the date of the Prospectus, (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. Additionally, the Company hereby agrees that without the prior
written consent of Thomas Weisel Partners LLC (which consent may be withheld in
its sole discretion), it will not, during the period commencing on the date
hereof and ending 90 days after the date of the Prospectus, file any
registration statement with the Commission relating to the offering of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock. The restrictions set forth in this Section 3.3
shall not apply to (i) the Shares to be sold hereunder, (ii) the issuance by the
Company of options to purchase shares of the Company’s Common Stock under the
Company’s existing plans as described in the Prospectus, provided that such
options do not become vested and exercisable during the 90-day restricted
period, or (iii) the issuance by the Company of shares of Common Stock upon the
exercise of options or warrants.

 

If, (i) during the last 17 days of the 90-day restricted period described in
this Section 3.3, the Company issues an earnings release or material news or a
material event relating to the Company occurs, or (ii) prior to the expiration
of the 90-day restricted period, the Company announces that it will release
earnings results or becomes aware that material news or a material event will
occur during the 16-day period beginning on the last day of the 90-day
restricted period, the 90-day restricted period described in this Section 3.3
automatically shall extend 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, unless in either clauses (i) or (ii) the Representatives
waive the extension in writing.

 

The Company acknowledges that the Selling Stockholders are subject to similar
restrictions as contained in this Section 3.3 pursuant to the “lock-up”
agreement terms included in Exhibit A hereto on the transfer or other
disposition of shares of capital stock of the Company held by them, and the
Company agrees to take all reasonable measures to enforce each such Selling
Stockholders’ compliance with such restrictions.

 

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3.4 Terms of Public Offering.

 

The Sellers are advised by the Representatives that the Underwriters propose to
make a public offering of their respective portions of the Shares as soon after
the Registration Statement and this Agreement have become effective as in the
Representatives’ judgment is advisable. The Sellers are further advised by the
Representatives that the Underwriters will offer the Shares to the public
initially at a price of $12.83 per share (the “Public Offering Price”) and to
certain dealers selected by the Representatives at a price that represents a
concession of not more than $0.42339 per share below the Public Offering Price,
and that any Underwriter may allow, and such dealers may reallow, a concession
not in excess of $0.1000 per share to any other Underwriter or to certain other
dealers.

 

3.5 No Fiduciaries.

 

The Sellers acknowledge and agree that (i) the purchase and sale of the Shares
pursuant to this Agreement is an arm’s-length commercial transaction between the
Sellers, on the one hand, and the several Underwriters, on the other, (ii) in
connection therewith each Underwriter is acting as a principal and not the agent
or fiduciary of the Sellers, and (iii) no Underwriter has assumed an advisory
responsibility in favor of the Sellers with respect to the offering contemplated
hereby or the process leading thereto (irrespective of whether such Underwriter
has advised or is currently advising the Sellers on other matters) or any other
obligation to the Company except the obligations expressly set forth in this
Agreement.

 

4. Payment and Delivery.

 

4.1 Firm Shares.

 

Payment for the Firm Shares to be sold by each Seller shall be made to such
Seller in immediately available funds to bank accounts designated by the Company
and the Custodian against delivery of such Firm Shares for the respective
accounts of the several Underwriters at 10:00 a.m., New York City time, on
January 31, 2006, or at such other time on the same or such other date, not
later than February 10, 2006, as shall be designated in writing by the
Representatives. The time and date of such payment are hereinafter referred to
as the “Closing Date.”

 

4.2 Additional Shares.

 

Payment for any Additional Shares shall be made to the Company in immediately
available funds against delivery of such Additional Shares for the respective
accounts of the several Underwriters at 10:00 a.m., New York City time, on the
date specified in the notice described in paragraph 3.2 or at such other time on
the same or on such other date, in any event not later than February 24, 2006,
as shall be designated in writing by the Representatives. The time and date of
each payment for any Additional Shares are hereinafter referred to as the
“Option Closing Date.”

 

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4.3 Delivery of Certificates.

 

Certificates for the Firm Shares and Additional Shares, if any, shall be in
definitive form and registered in such names and in such denominations as the
Representatives shall request in writing not later than two full business day
prior to the Closing Date or the Option Closing Date, as the case may be. The
certificates evidencing the Firm Shares and Additional Shares shall be delivered
to the Representatives on the Closing Date or the Option Closing Date, as the
case may be, for the respective accounts of the several Underwriters, with any
transfer taxes payable in connection with the transfer of the Shares to the
Underwriters duly paid, against payment of the Purchase Price therefor.

 

5. Covenants.

 

In further consideration of the agreements of the Underwriters herein contained,
the Company covenants with each Underwriter (and, in certain provisions herein
contained, each Underwriter covenants to the Company) as follows:

 

5.1 Furnish Copies of Registration Statement and Prospectus.

 

To furnish to the Representatives, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and, for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and, to furnish to the Underwriters in New York City, without
charge, prior to 10:00 a.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
paragraph 5.3 below, as many copies of the preliminary prospectus and the
Prospectus and any supplements and amendments thereto or to the Registration
Statement as the Representatives may reasonably request.

 

5.2 Notification of Amendments or Supplements and Other Information.

 

Before amending or supplementing the Registration Statement or the Prospectus,
to furnish to the Representatives a copy of each such proposed amendment or
supplement, and not to file any such proposed amendment or supplement to which
the Representatives or counsel for the Underwriters reasonably object, and to
file with the Commission within the applicable period specified in Rule 424(b)
under the Securities Act any prospectus required to be filed pursuant to such
rule.

 

The Company will notify the Representatives immediately, and confirm the notice
in writing, (i) when any post-effective amendment to the Registration Statement
shall become effective, or any amendment or supplement to the Prospectus shall
have been filed, (ii) of the receipt of any comments from the Commission,
(iii) of any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for additional
information, (iv) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement, any Rule 462(b) Registration
Statement or any post-effective amendment to the Registration Statement, or of
any order preventing or suspending the use of any Preliminary Prospectus, or of
the suspension of the qualification of the Shares for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes or of any examination pursuant to Section 8(e) of the

 

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Securities Act concerning the Registration Statement and (v) if the Company
becomes the subject of a proceeding under Section 8A of the Securities Act in
connection with the offering of the Shares. In addition, each Underwriter agrees
to notify the Company immediately, and confirm notice in writing, if such
Underwriter becomes subject of a proceeding under Section 8A of the Securities
Act in connection with the offering of Shares.

 

5.3 Filings of Amendments or Supplements.

 

If, during such period after the first date of the public offering of the Shares
as in the opinion of counsel for the Underwriters the Prospectus is required by
law to be delivered in connection with sales by an Underwriter or dealer (the
“Prospectus Delivery Period”), any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in order
to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if, in the reasonable
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare, file with
the Commission and furnish, at its own expense, to the Underwriters and to the
dealers (whose names and addresses the Representatives will furnish to the
Company) to which Shares may have been sold by the Representatives on behalf of
the Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the Prospectus,
as amended or supplemented, will comply with applicable law.

 

5.4 Blue Sky Laws.

 

To use its reasonable efforts to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives shall
reasonably request. In each jurisdiction in which the Shares have been so
qualified, the Company will file such statements and reports as may be required
by the laws of such jurisdiction and shall maintain such qualifications in
effect so long as required for the distribution of the Shares; provided however,
that the Company shall not be required in connection therewith, as condition
thereof, to qualify as a foreign corporation or to execute a general consent to
service of process in any jurisdiction or subject itself to taxation as doing
business in any jurisdiction.

 

5.5 Earnings Statement.

 

To make generally available to its securityholders and to the Representatives as
soon as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Securities Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Securities Act
and the rules and regulations thereunder (including, at the option of the
Company, Rule 158).

 

5.6 Use of Proceeds.

 

The Company shall apply the net proceeds from the sale of the Shares sold by it
in the manner described under the caption “Use of Proceeds” in the Prospectus.

 

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5.7 Transfer Agent.

 

The Company shall engage and maintain, at its expense, a registrar and transfer
agent for the Common Stock.

 

5.8 Periodic Reporting Obligations.

 

During the Prospectus Delivery Period, the Company shall (i) file all documents
required to be filed with the Commission pursuant to Section 13, 14 or 15 of the
Exchange Act in the manner and within the time periods required by the Exchange
Act and (ii) file all reports and documents required to be filed with the Nasdaq
National Market under applicable securities laws and by the Nasdaq National
Market.

 

5.9 Preparation of Prospectus.

 

Immediately following the execution of this Agreement, the Company will, subject
to Section 5.3 hereof, prepare the Prospectus containing the information
required by Rule 430A of the Securities Act and other selling terms of the
Shares, the plan of distribution thereof and such other information as may be
required by the Securities Act or rules and regulations thereunder or as the
Representatives and the Company may deem appropriate, and will file or transmit
for filing with the Commission, in accordance with Rule 424(b) of the Securities
Act (without reliance on Rule 424(b)(8) of the Securities Act), copies of the
Prospectus.

 

5.10 Notification of Earnings Releases or Material News.

 

Prior to the expiration of the 90-day period described in Section 3.3, the
Company shall promptly notify the Representatives if it intends to release
earnings results or becomes aware that material news or a material event
concerning the Company will occur at any time prior to the expiration of such
90-day restricted period through the 16-day period beginning on the last day of
such 90-day restricted period.

 

5.11 Issuer Free Writing Prospectuses.

 

The Company represents and agrees that, unless it obtains the prior consent of
Thomas Weisel Partners LLC, and each Underwriter represents and agrees that,
unless it obtains the prior consent of the Company and Thomas Weisel Partners
LLC, it will not make any offer relating to the Shares that would constitute an
“issuer free writing prospectus,” as defined in Rule 433, or that would
otherwise constitute a “free writing prospectus,” as defined in Rule 405,
required to be filed with the Commission. Any such free writing prospectus
consented to by Thomas Weisel Partners LLC is hereinafter referred to as an
“Issuer Permitted Free Writing Prospectus” and, collectively with any Selling
Stockholder Permitted Free Writing Prospectuses, the “Permitted Free Writing
Prospectuses.” The Company represents and agrees that it will treat each Issuer
Permitted Free Writing Prospectus as an “issuer free writing prospectus,” as
defined in Rule 433 under the Securities Act, and will comply with the
requirements of Rules 164 and 433 under the Securities Act applicable to any
Issuer Permitted Free Writing Prospectus, including timely filing with the
Commission where required, legending and record keeping.

 

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The Company further represents and agrees that if at any time following issuance
of an Issuer Represented Free Writing Prospectus there occurred or occurs an
event or development as a result of which any Issuer Represented Free Writing
Prospectus conflicted or would conflict with the information contained in the
Registration Statement or contained or would contain an untrue statement of a
material fact or omitted or would omit to state a material fact necessary to
make the statements therein, in the light of the circumstances prevailing at
that subsequent time, not misleading, the Company has promptly notified or will
promptly notify the Representatives and has promptly amended or will promptly
amend or supplement, at its own expense, such Issuer Represented Free Writing
Prospectus to eliminate or correct such conflict, untrue statement or omission;
provided, however, that the foregoing does not apply to statements or omissions
made in any Issuer Represented Free Writing Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use in any Issuer
Represented Free Writing Prospectus, it being acknowledged that the only such
information provided by the Underwriters expressly for use therein consists of
the information set forth in the final sentence of Section 1.2.

 

6. Conditions to the Underwriters’ Obligations.

 

The obligations of the Sellers to sell the Shares to the several Underwriters
and the several obligations of the Underwriters to purchase and pay for the
Shares on the Closing Date and on each Option Closing Date, as the case may be,
are subject to the following conditions:

 

6.1 Effective Registration Statement.

 

The Registration Statement shall have become effective not later than 4:00 p.m.
(New York City time) on the date hereof.

 

6.2 Rule 462(b) Registration Statement.

 

If the Company elects to rely upon Rule 462(b), the Company shall file a Rule
462(b) Registration Statement with the Commission in compliance with Rule 462(b)
by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the
Company shall at the time of filing either pay to the Commission the filing fee
for the Rule 462(b) Registration Statement or give irrevocable instructions for
the payment of such fee pursuant to Rule 111(b) under the Securities Act.

 

6.3 Prospectus Filed with Commission.

 

The Company shall have filed the Prospectus with the Commission (including the
information required by Rule 430A under the Securities Act) in the manner and
within the time period required by Rule 424(b) under the Securities Act (without
reliance on Rule 424(b)(8) of the Act); or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective amendment shall
have become effective.

 

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6.4 No Stop Order.

 

No stop order suspending the effectiveness of the Registration Statement, any
Rule 462(b) Registration Statement, or any post-effective amendment to the
Registration Statement, shall be in effect on the Closing Date and each Option
Closing Date, as the case may be, and no proceedings for such purpose shall have
been instituted or threatened by the Commission on the Closing Date and each
Option Closing Date, as the case may be.

 

6.5 Nasdaq.

 

The Shares shall have been listed for quotation on the Nasdaq National Market
System.

 

6.6 No NASD Objection.

 

The NASD shall have raised no objection to the fairness and reasonableness of
the underwriting terms and arrangements.

 

6.7 Representations and Warranties; Covenants.

 

The representations and warranties of the Company and the Selling Stockholders
contained in this Agreement and in the certificates delivered pursuant to
Sections 6.9 and 6.10 shall be true and correct when made, on and as of the
Applicable Time and on and as of the Closing Date and, with respect to the
representations and warranties of the Company, on and as of each Option Closing
Date, as the case may be, as if made on such date (except that those
representations and warranties that address matters only as of a particular date
shall remain true and correct as of such date). The Company and the Selling
Stockholders shall have performed in all material respects all covenants and
agreements and satisfied all the conditions contained in this Agreement required
to be performed or satisfied by the Company and the Selling Stockholders at or
before the Closing Date and, with respect to the covenants, agreements and
conditions of the Company, each Option Closing Date, as the case may be.

 

6.8 No Material Adverse Change.

 

There shall not have occurred any change, or any development involving a
prospective change, in the condition, financial or otherwise, or in the
earnings, businesses, operations or prospects of the Company and its
subsidiaries, individually or as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement) that, in the Representative’s reasonable judgment, is material
and adverse and that makes it, in the Representative’s judgment, impracticable
to market the Shares on the terms and in the manner contemplated in the
Prospectus.

 

6.9 Officer’s Certificate.

 

The Representatives shall have received on the Closing Date and on each Option
Closing Date a certificate, dated the Closing Date or the Option Closing Date,
as applicable, and signed by the Chief Executive Officer and by the Chief
Financial Officer of the Company, representing (i) that the representations and
warranties contained in this Agreement are true and

 

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correct as of the Closing Date or the Option Closing Date, as applicable,
(ii) that the Company has complied with all of the agreements and has satisfied
all of the conditions on its part to be performed or satisfied hereunder on or
before such Closing Date or Option Closing Date, as applicable.

 

6.10 Selling Stockholders Certificate.

 

The Underwriters shall have received on the Closing Date a certificate, dated
the Closing Date, and signed by the Attorney-in-Fact of each Selling
Stockholder, to the effect that the representations and warranties of the
Selling Stockholders contained in this Agreement are true and correct as of the
Closing Date and that the Selling Stockholders have complied with all of the
agreements and satisfied all of the conditions on their part to be performed or
satisfied hereunder on or before the Closing Date.

 

6.11 Opinion of Company Counsel.

 

The Representatives shall have received on the Closing Date an opinion of
Kirkland & Ellis LLP, counsel for the Company, dated the Closing Date, to the
effect set forth in Exhibit B-1 attached hereto. The opinion shall be rendered
to the Representatives as representatives of the Underwriters at the request of
the Company and shall so state therein.

 

6.12 Opinion of Special Regulatory Counsel.

 

The Representatives shall have received on the Closing Date an opinion of Nixon
Peabody LLP, special regulatory counsel to the Company, dated the Closing Date,
to the effect set forth in Exhibit B-2 attached hereto. The opinion shall be
rendered to the Representatives as representatives of the Underwriters at the
request of the Company and shall so state therein.

 

6.13 Opinion of Selling Stockholders’ Counsel.

 

The Underwriters shall have received on the Closing Date an opinion of Gusrae,
Kaplan, Bruno & Nusbaum PLLC, counsel for the Selling Stockholders, dated the
Closing Date, the form of which is attached hereto as Exhibit B-3. The opinion
shall be rendered to the Underwriters at the request of the Selling Stockholders
and shall so state therein.

 

6.14 Opinion of Underwriters’ Counsel.

 

The Representatives shall have received on the Closing Date an opinion of
Alston & Bird LLP, counsel for the Underwriters, dated the Closing Date, with
respect to the Registration Statement, the Prospectus and other related matters
as the Representatives may request, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them to pass
upon such matters.

 

6.15 Opinion of Special Local Counsel.

 

The Representatives shall have received on the Closing Date (i) an opinion of
Johnson, Pope, Bokor, Ruppell & Burns, LLP, special Florida counsel to the
Company, dated the Closing Date, to the effect set forth in Exhibit B-4 attached
hereto, (ii) an opinion of Perkins

 

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Coie LLP, special Washington counsel to the Company, dated the Closing Date, to
the effect set forth in Exhibit B-5 attached hereto, and an opinion of Winstead
Sechrest & Minick P.C., special Texas counsel to the Company, dated the Closing
Date, to the effect set forth in Exhibit B-6 attached hereto. The opinions shall
be rendered to the Representatives as representatives of the Underwriters at the
request of the Company and shall so state therein.

 

6.16 Comfort Letter from BDO Seidman, LLP.

 

The Representatives shall have received, on each of the date hereof, the Closing
Date and each Option Closing Date, a letter dated the date hereof, the Closing
Date or the Option Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, from BDO Seidman, LLP, independent public
accountants, containing statements and information of the type ordinarily
included in accountants’ “comfort letters” to underwriters with respect to the
financial statements and certain financial information of the Company and its
consolidated subsidiaries and of the Acquired Companies contained in the
Registration Statement and the Prospectus; provided that the letter delivered on
the Closing Date shall use a “cut-off date” not earlier than the date hereof.

 

6.17 Selling Stockholder Documents.

 

On the date hereof, the Company and the Selling Stockholders shall have
furnished for review by the Representatives copies of the Powers of Attorney and
Custody Agreements executed by each of the Selling Stockholders and such further
information, certificates and documents as the Representatives may reasonably
request.

 

6.18 Additional Documents.

 

On the Closing Date and on each Option Closing Date, the Representatives and
counsel for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein or in order
to evidence the accuracy of any of the representations and warranties or the
satisfaction of any of the conditions or agreements herein contained.

 

The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the satisfaction of each of the above conditions on or
prior to the Option Closing Date and to the delivery to the Representatives on
the Option Closing Date of such documents as the Representatives may reasonably
request with respect to the good standing of the Company, the due authorization
and issuance of the Additional Shares and other matters related to the issuance
of the Additional Shares.

 

7. Expenses.

 

Whether or not the transactions contemplated in this Agreement are consummated
or this Agreement is terminated, (a) the Company agrees to pay or cause to be
paid all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of each of the
Company’s counsel, the Company’s accountants and one counsel for the Selling
Stockholders (which shall be Gusrae, Kaplan, Bruno & Nusbaum

 

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PLLC) in connection with the preparation and negotiation of this Agreement and
the registration and delivery of the Shares under the Securities Act, and all
other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, any Permitted Free Writing
Prospectus the Prospectus (including any costs associated with the electronic
delivery of these materials), and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities as may be specified by the Underwriters, (ii) the fees and expenses
of the Custodian, any attorney-in-fact under the Power of Attorney and expenses
associated with communications with and collection of documents from the Selling
Stockholders, (iii) except as provided in clause (b) below, all costs and
expenses related to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iv) the cost of printing
or producing any Blue Sky or legal investment memorandum in connection with the
offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under state
securities laws as contemplated by Section 5.4 hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or legal
investment memorandum (such fees and disbursements not to exceed $5,000),
(v) all filing fees and the reasonable fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of the
offering of the Shares by the NASD (such fees and disbursements not to exceed
$20,000), (vi) all costs and expenses incident to listing the Shares on the
Nasdaq National Market, (vii) the cost of printing certificates, if any,
representing the Shares, (viii) the costs and charges of any transfer agent,
registrar or depositary, (ix) the costs and expenses of the Company relating to
investor presentations on any “road show” undertaken in connection with the
marketing of the offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, (x) all expenses in connection with any offer and sale of the
Shares outside of the United States, if any, including filing fees and
reasonable fees and disbursements of counsel for the Underwriters in connection
with offers and sales outside of the United States, and (xi) all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section, and (b) each Selling
Stockholder will bear its own costs and expenses, including any fees and expense
of counsel or other advisors for such Selling Stockholders, other than the fees
and expenses of the one counsel for the Selling Stockholders paid by the Company
as provided in Section 7(a)(i) above, and any transfer or other taxes payable on
the transfer and delivery of the Shares by such Selling Stockholder to the
Underwriters. It is understood, however, that except as provided in this
Section, Section 8 entitled “Indemnity and Contribution,” and the last paragraph
of Section 11 below, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel and any advertising expenses
connected with any offers they may make.

 

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8. Indemnity and Contribution.

 

8.1 Indemnification by the Company and the Selling Stockholders Who Are
Directors or Executive Officers.

 

The Company and each Selling Stockholder who is a director or executive officer
of the Company on the date of this Agreement, jointly and severally, agree to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, and each affiliate of any
Underwriter within the meaning of Rule 405 under the Securities Act, from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, any
Preliminary Prospectus, any Issuer Represented Free Writing Prospectus or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), in any Blue Sky application or other
information or other documents executed by the Company and filed in any state or
other jurisdiction to qualify any or all of the Shares under the securities laws
thereof, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in light of the circumstances under which
they were made in the case of a Prospectus); provided, however, that the Company
shall not be liable in any such case to the extent that 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 in the
Registration Statement, any Issuer-Represented Free Writing Prospectus or the
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through the Representatives expressly for use therein, it being acknowledged by
the Company that the only such information provided by the Underwriters
expressly for use therein consists of the information set forth in the final
sentence of Section 1.2.

 

8.2 Indemnification by Each Selling Stockholder.

 

Each Selling Stockholder of the Company on the date of this Agreement agrees,
severally and not jointly, to indemnify and hold harmless each Underwriter and
each person, if any, who controls such Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and each
affiliate of any Underwriter within the meaning of Rule 405 under the Securities
Act from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any Preliminary Prospectus, any Issuer Represented Free Writing Prospectus, any
Selling Stockholder Free Writing Prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in light of the circumstances under which
they were made in the case of a

 

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Prospectus), but only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, any Issuer Represented Free Writing
Prospectus, any Selling Stockholder Free Writing Prospectus or the Prospectus or
any amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by the Selling Stockholders for use
therein.

 

8.3 Indemnification by the Underwriters.

 

Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, each Selling Stockholder, the directors of the Company,
the officers of the Company who sign the Registration Statement, each person, if
any, who controls the Company or any Selling Stockholder within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, and
each affiliate of the Company and each Selling Stockholder within the meaning of
Rule 405 under the Securities Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any Preliminary Prospectus, any Issuer
Represented Free Writing Prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in light of the circumstances under which
they were made in the case of a Prospectus), but only with reference to
information relating to such Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in the
Registration Statement, any preliminary prospectus, any Issuer Represented Free
Writing Prospectus, Selling Stockholder Free Writing Prospectus, the Prospectus
or any amendments or supplements thereto, it being acknowledged by the Company
and each Selling Stockholder that the only such information provided by the
Underwriters expressly for use therein consists of the information set forth in
the final sentence of Section 1.2.

 

8.4 Indemnification Procedures.

 

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 (the “Indemnified Party”), the Indemnified Party
shall promptly notify the person against whom such indemnity may be sought (the
“Indemnifying Party”) in writing and the Indemnifying Party shall retain counsel
reasonably satisfactory to the Indemnified Party to represent the Indemnified
Party and any others the Indemnifying Party may designate in such proceeding and
shall pay 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, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel, or (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 ethically impermissible due to actual or
potential

 

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differing interests between them. It is understood that the Indemnifying Party
shall not, in respect of the legal expenses of any Indemnified Party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act or who are affiliates of any
Underwriter within the meaning of Rule 405 under the Securities Act, (ii) the
fees and expenses of more than one separate firm (in addition to any local
counsel) for the Company, its directors, its officers who sign 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
(iii) the fees and expenses of more than one separate firm (in addition to local
counsel) for all Selling Stockholders and all persons, if any, who control any
Selling Stockholder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such firm for the
Underwriters and such control persons and affiliates of any Underwriters, such
firm shall be designated in writing by Thomas Weisel Partners LLC. In the case
of any such firm for the Company, and such directors, officers and control
persons of the Company, such firm shall be designated in writing by the Company.
In the case of any such firm for the Selling Stockholders and such control
persons of any Selling Stockholders, such firm shall be designated in writing by
the persons named as attorneys-in-fact for the Selling Stockholders under the
Powers of Attorney. 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. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
the settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnified Party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment includes an unconditional release
of the Indemnified Party from all liability arising out of such action or claim,
and does not include a statement as to or an admission of fault, culpability or
a failure to act, by or on behalf of any Indemnified Party.

 

8.5 Limitation of Selling Stockholder Liability.

 

The liability of each Selling Stockholder under the indemnity and contribution
provisions of this Section 8 shall be limited to an amount equal to the
aggregate offering price of the aggregate number of Shares sold by such Selling
Stockholder, less the underwriting discount, as set forth on the front cover
page of the Prospectus (“Maximum Stockholder Liability Amount”). If the
Underwriters or any affiliated party of any Underwriter shall have a claim for
indemnification or contribution against the Company and the Selling Stockholders
who are directors or executive officers of the Company pursuant to Section 8.1,
the Underwriters or the affiliated party of an Underwriter, as the case may be,
(i) first shall seek to obtain reimbursement, indemnification or contribution
for any losses, expenses, liabilities or claims arising under Section 8.1 from
the Company and (ii) if the Company shall have failed, after reasonable efforts
on the part of such Underwriter or affiliated party of such Underwriter, to
agree to satisfy such request for reimbursement, indemnification or contribution
in full within 30

 

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days, then the Underwriters or affiliated party of an Underwriter may seek to
obtain reimbursement, indemnification or contribution, on a joint and several
basis, from the Selling Stockholders who are directors or executive officers of
the Company; provided, however, in accordance with the 1st sentence of this
Section 8.5, no Selling Stockholder who is an officer or director of the Company
shall incur liability in excess of such Selling Stockholder’s Maximum
Stockholder Liability Amount; provided, further however, that the Underwriters
and any affiliated party of such Underwriter shall not be required to effect
such initial demand upon the Company and wait such 30 day period, in accordance
with clause (i) above, if it would prejudice their right to indemnification from
any Selling Stockholder. The indemnity agreement set forth herein is not
exclusive of any agreement the Company may have with the Selling Stockholders
relating to indemnification, and nothing contained in this Agreement shall
affect any obligation or liability the Company may have to one or more of the
Selling Stockholders, or one or more of the Selling Stockholders may have to the
Company, pursuant to other agreements.

 

8.6 Contribution Agreement.

 

To the extent the indemnification provided for in this Section 8 is unavailable
to an Indemnified Party or insufficient in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Party under
such Section 8, in lieu of indemnifying such Indemnified Party thereunder, shall
contribute to the amount paid or payable by such Indemnified Party 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 Indemnifying Party
or Parties, on the one hand, and the Indemnified Party or Parties, on the other
hand, from the offering of the Shares or (ii) if the allocation provided by
clause 8.6(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause 8.6(i) above but also the relative fault of the Indemnifying Party or
Parties, on the one hand, and of the Indemnified Party or Parties, on the other
hand, 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 Sellers, on the one hand,
and the Underwriters, on the other hand, in connection with the offering of the
Shares shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Shares (before deducting expenses) received by
each Seller and the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the total public offering price of the Shares. The relative
fault of the Sellers, on the one hand, and the Underwriters, on the other hand,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Sellers or by
the Underwriters and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Underwriters’ respective obligations to contribute pursuant to this
Section 8.6 are several in proportion to the respective number of Shares they
have purchased hereunder, and not joint. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this Section 8.6, notify such
party or parties from whom contribution may be sought, but the omission so to
notify such party or parties from whom contribution may be sought shall not
relieve the party or parties from whom contribution may be sought from any
obligation it or they may have under this Section 8.6, except to the extent the

 

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party or parties from whom contribution may be sought are actually and adversely
prejudiced as a result of the failure to receive notice. No party shall be
liable for contribution with respect to any action, suit, proceeding or claim
settled without its written consent.

 

8.7 Contribution Amounts.

 

The Sellers and the Underwriters agree that it would not be just or equitable if
contribution provided by this Section 8 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 that does not take account of the equitable
considerations referred to in Section 8.7. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public 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. 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 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 party at law or
in equity.

 

8.8 Survival of Provisions.

 

The indemnity and contribution provisions contained in this Section 8 and the
representations, warranties and other statements of the Company and the Selling
Stockholders contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, any Selling Stockholder or any person controlling any Selling
Stockholder, or the Company, its officers or directors or any person controlling
the Company and (iii) acceptance of and payment for any of the Shares.

 

9. Effectiveness.

 

This Agreement shall become effective upon the execution and delivery hereof by
the parties hereto.

 

10. Termination.

 

This Agreement shall be subject to termination by notice given by the
Representatives to the Company and the Selling Stockholders, if (a) after the
execution and delivery of this Agreement and prior to the Closing Date
(i) trading generally shall have been suspended or materially limited on or by,
as the case may be, any of the New York Stock Exchange, the American Stock
Exchange, or the Nasdaq National Market, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have

 

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been declared by either Federal or New York state authorities, (iv) in the
reasonable judgment of the Representatives, there shall have occurred any
material adverse change in the financial markets, beyond normal market
fluctuations, as the result of any outbreak or escalation of hostilities,
directly or indirectly, involving the United States or the declaration by the
United States of a national emergency or war or any change in financial markets
or any calamity or crisis after the date of this Agreement that has an impact on
the financial markets, or (v) in the reasonable judgment of the Representatives,
there shall have occurred any material adverse change, or any development that
could reasonably be expected to result in a material adverse change, in the
condition, financial or otherwise, or in the earnings, business, operations or
prospects, whether or not arising from transactions in the ordinary course of
business, of the Company and its subsidiaries, taken as a whole, and (b) in the
case of any of the events specified in clauses 10(a)(i) through 10(a)(v), such
event, individually or together with any other such event, makes it, in the
reasonable judgment of the Representatives, impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus.

 

If this Agreement shall be terminated by the Underwriters, or any of them,
pursuant to Sections 10(a)(ii) or 10(a)(v) hereof, the Company will reimburse
the Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves for all out-of-pocket expenses (including the documented
fees and disbursements of their counsel) reasonably incurred by such terminating
Underwriters in connection with this Agreement and the offering contemplated
hereunder.

 

If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of any Seller to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason any Seller shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the documented fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.

 

11. Defaulting Underwriters.

 

If, on the Closing Date or the Option Closing Date, as the case may be, any one
or more of the Underwriters shall fail or refuse to purchase Shares that it has
or they have agreed to purchase hereunder on such date, and the aggregate number
of Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase is not more than one-tenth of the aggregate number of the
Shares to be purchased on such date, the other Underwriters shall be obligated
severally in the proportions that the number of Firm Shares set forth opposite
their respective names in Schedule A bears to the aggregate number of Firm
Shares set forth opposite the names of all such non-defaulting Underwriters, or
in such other proportions as the Representatives may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 11 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If, on
the Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate

 

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number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to the Representatives, the Company and the Selling
Stockholders for the purchase of such Firm Shares are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of any non-defaulting Underwriter, the Company or the Selling Stockholders. In
any such case either the Representatives or the relevant Sellers shall have the
right to postpone the Closing Date, but in no event for longer than 7 days, in
order that the required changes, if any, in the Registration Statement and in
the Prospectus or in any other documents or arrangements may be effected. If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability to the Company and the
non-defaulting Underwriters arising out of or related to any default of such
Underwriter under this Agreement.

 

12. Failure of the Selling Stockholders to Sell and Deliver Shares.

 

If one or more of the Selling Stockholders shall fail to sell and deliver to the
Underwriters the Firm Shares to be sold and delivered by such Selling
Stockholders at the Closing Date pursuant to this Agreement, then the
Underwriters may at their option, by written notice from the Representatives to
the Company and the Selling Stockholders, either (i) terminate this Agreement
without any liability on the part of any Underwriter or, except as provided in
Sections 7 and 8 hereof, the Company or the non-defaulting Selling Stockholders,
or (ii) purchase the shares which the Company and other Selling Stockholders
have agreed to sell and deliver in accordance with the terms hereof. If one or
more of the Selling Stockholders shall fail to sell and deliver to the
Underwriters the Firm Shares to be sold and delivered by such Selling
Stockholders pursuant to this Agreement at the Closing Date, then the
Underwriters shall have the right, by written notice from the Representatives to
the Company and the Selling Stockholders, to postpone the Closing Date but in no
event for longer than 7 days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. No action taken pursuant to this Section 12 shall relieve any
Selling Stockholder so defaulting from liability, if any, in respect of such
default.

 

13. Counterparts.

 

This Agreement may be signed in counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.

 

14. Headings; Table of Contents.

 

The headings of the sections of this Agreement and the table of contents have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.

 

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15. Notices.

 

All communications hereunder shall be in writing and shall be mailed, hand
delivered or telecopied and confirmed to the parties hereto as follows:

 

If to the Representatives:

 

Thomas Weisel Partners LLC

390 Park Avenue, 16th Floor

New York, NY 10022

Facsimile: (212) 271-3747

Attention: Brent Milner

 

with a copy to:

 

Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, California 94104

Facsimile: (415) 364-2694

Attention: Jack Helfand, Esq.

 

If to the Company:

 

Allion Healthcare, Inc.

1660 Walt Whitman Road, Suite 105

Melville, New York 11747

Facsimile: (631) 547-6532

Attention: Michael P. Moran

 

with a copy to:

 

Kirkland & Ellis LLP

655 15th Street, N.W., Suite 1200

Washington, DC 20005

Facsimile: 202-879-5200

Attention: Mark D. Director, Esq.

 

If to the Selling Stockholders:

 

Continental Stock Transfer & Trust Company, as Custodian

17 Battery Place – 8th Floor

New York, New York 10004

Facsimile: 212-509-5150

Attention: Felix Orihuela

 

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With copy to:

 

Gusrae, Kaplan, Bruno & Nusbaum PLLC

120 Wall Street – 11th Floor

New York, New York 10005

Facsimile: 212-809-5449

Attention: Lawrence G. Nusbaum, Esq.

 

Any party hereto may change the address for receipt of communications by giving
written notice to the others.

 

16. Successors.

 

This Agreement will inure to the benefit of and be binding upon the parties
hereto, including any substitute Underwriters pursuant to Section 11 hereof, and
to the benefit of the officers and directors and controlling persons referred to
in Section 8, and in each case their respective successors, and no other person
will have any right or obligation hereunder. The term “successors” shall not
include any purchaser of the Shares as such from any of the Underwriters merely
by reason of such purchase.

 

17. Partial Unenforceability.

 

The invalidity or unenforceability of any Section, paragraph or provision of
this Agreement shall not affect the validity or enforceability of any other
Section, paragraph or provision hereof. If any Section, paragraph or provision
of this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to be made such minor changes (and only such minor
changes) as are necessary to make it valid and enforceable.

 

18. Governing Law.

 

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED IN SUCH STATE.

 

19. Consent to Jurisdiction.

 

Any legal suit, action or proceeding arising out of or based upon this Agreement
or the transactions contemplated hereby (“Related Proceedings”) may be
instituted in the federal courts of the United States of America located in the
City of New York or the courts of the State of New York in each case located in
the City of New York (collectively, the “Specified Courts”), and each party
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
“Related Judgment”), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. Service of any process, summons,
notice or document by mail to such party’s address set forth above shall be
effective service of process for any suit, action or other proceeding brought in
any such court. The parties irrevocably and unconditionally waive any objection
to the laying of venue of any suit, action or other proceeding in the Specified
Courts and irrevocably and unconditionally waive and agree not to plead or claim
in any such court that any such suit, action or other proceeding brought in any
such court has been brought in an inconvenient forum.

 

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20. Entire Agreement.

 

This Agreement constitutes the entire agreement of the parties to this Agreement
and supersedes all prior written or oral and all contemporaneous oral
agreements, understandings and negotiations with respect to the subject matter
hereof.

 

21. Amendments.

 

This Agreement may only be amended or modified in writing, signed by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.

 

22. Sophisticated Parties.

 

Each of the parties hereto acknowledges that it is a sophisticated business
person who was adequately represented by counsel during negotiations regarding
the provisions hereof, including, without limitation, the indemnification and
contribution provisions of Section 8, and is fully informed regarding said
provisions. Each of the parties hereto further acknowledges that the provisions
of Section 8 hereto fairly allocate the risks in light of the ability of the
parties to investigate the Company, its affairs and its business in order to
assure that adequate disclosure has been made in the Registration Statement, any
preliminary prospectus and the Prospectus (and any amendments and supplements
thereto), as required by the Securities Act and the Exchange Act.

 

23. Certain Agreements, Waivers and Acknowledgements.

 

Each Selling Stockholder acknowledges and agrees that any rights that such
Selling Stockholder may have pursuant to any agreement with the Company with
respect to the registration of securities of the Company in connection with this
offering of the Shares as contemplated by this Agreement, are hereby satisfied
and waived.

 

[Remainder of page intentionally left blank]

 

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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.

 

Very truly yours, ALLION HEALTHCARE, INC. By:  

/s/ Michael P. Moran

--------------------------------------------------------------------------------

Name:   Michael P. Moran Title:   Chairman of the Board, Chief Executive Officer
and President

The Selling Stockholders

named in Schedule B hereto acting severally

By:  

/s/ James G. Spencer

--------------------------------------------------------------------------------

    Attorney-in-Fact

 

Accepted as of the date hereof

 

Thomas Weisel Partners LLC

William Blair & Company, L.L.C.

First Albany Capital Inc.

Susquehanna Financial Corp.

 

Acting severally on behalf

    of themselves and the

    several Underwriters named

    in Schedule A hereto.

 

By: Thomas Weisel Partners LLC

By:

     

/s/ Brent Milner

--------------------------------------------------------------------------------

Name:

      Brent Milner

Title:

      Partner, Head of Healthcare Investment Banking

 

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