Exhibit 2.1
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
by and among
REGENCY HOSPITAL COMPANY, L.L.C.,
THE SELLERS NAMED HEREIN,
THE REPRESENTATIVE NAMED HEREIN,
INTENSIVA HEALTHCARE CORPORATION
and
SELECT MEDICAL CORPORATION
June 18, 2010
TABLE OF CONTENTS
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ARTICLE 1 PURCHASE AND SALE |
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1 |
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1A. |
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Purchase and Sale of Acquired Securities |
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1 |
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1B. |
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Closing |
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1 |
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1C. |
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Closing Distributions |
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2 |
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1D. |
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Purchase Price Adjustment |
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3 |
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1E. |
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Purchase Price Allocation |
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5 |
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ARTICLE 2 CONDITIONS TO CLOSING |
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6 |
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2A. |
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Conditions to All Parties Obligations |
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6 |
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2B. |
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Conditions to Buyers Obligations |
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6 |
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2C. |
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Conditions to the Sellers and the Companys Obligations |
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8 |
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ARTICLE 3 CERTAIN COVENANTS PRIOR TO THE CLOSING |
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9 |
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3A. |
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Access |
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9 |
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3B. |
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Ordinary Conduct of Company |
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10 |
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3C. |
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Distribution of Cash |
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12 |
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3D. |
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Exclusive Transaction |
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12 |
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3E. |
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Cooperation Regarding Repayment of Funded Indebtedness |
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12 |
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3F. |
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Notification |
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13 |
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3G. |
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Other Information and Events |
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13 |
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3H. |
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Cooperation Regarding Licenses |
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13 |
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3I. |
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Cooperation Regarding Certain Leases |
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13 |
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3J. |
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Effectiveness of Certificate of Need |
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14 |
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS |
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14 |
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4A. |
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Organization and Power |
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14 |
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4B. |
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Authorization; No Breach |
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14 |
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4C. |
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Ownership of Acquired Securities |
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15 |
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY |
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15 |
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5A. |
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Organization and Power |
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15 |
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5B. |
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Capitalization |
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16 |
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5C. |
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Subsidiaries |
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16 |
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5D. |
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Authorization; No Breach |
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17 |
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5E. |
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Financial Statements |
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17 |
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5F. |
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Undisclosed Liabilities |
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18 |
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TABLE OF CONTENTS
(continued)
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5G. |
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Absence of Certain Developments |
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18 |
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5H. |
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Real and Personal Property |
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20 |
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5I. |
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Tax Matters |
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21 |
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5J. |
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Company Material Contracts |
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22 |
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5K. |
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Intellectual Property |
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24 |
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5L. |
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Legal Proceedings |
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25 |
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5M. |
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Brokerage |
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25 |
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5N. |
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Company Employee Benefit Plans |
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25 |
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5O. |
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Medicare Participation/Accreditation |
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27 |
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5P. |
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Cost Reports and Other Filings |
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27 |
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5Q. |
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Exclusion |
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28 |
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5R. |
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Billing |
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28 |
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5S. |
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Reimbursement Matters |
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29 |
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5T. |
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Licenses |
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29 |
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5U. |
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Long Term Hospital Certification and Payment |
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30 |
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5V. |
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Census and Payor Mix Reports |
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31 |
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5W. |
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Transactions With Affiliates |
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31 |
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5X. |
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Bank Accounts |
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31 |
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5Y. |
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Insurance |
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31 |
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5Z. |
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Compliance with Applicable Laws |
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32 |
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5AA. |
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Environmental |
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33 |
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5BB. |
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Employees and Labor Relations |
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34 |
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5CC. |
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Votes Required |
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35 |
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ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF BUYER |
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35 |
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6A. |
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Organization and Corporate Power |
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35 |
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6B. |
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Authorization; No Breach |
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35 |
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6C. |
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Legal Proceedings |
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36 |
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6D. |
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Financing |
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36 |
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6E. |
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Brokerage |
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36 |
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6F. |
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Solvency |
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36 |
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6G. |
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Acquisition for Investment |
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37 |
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TABLE OF CONTENTS
(continued)
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ARTICLE 7 TERMINATION |
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37 |
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7A. |
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Termination |
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7B. |
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Effect of Termination |
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38 |
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ARTICLE 8 DEFINITIONS |
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38 |
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8A. |
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Definitions |
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8B. |
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Usage |
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38 |
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ARTICLE 9 INDEMNIFICATION |
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39 |
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9A. |
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Indemnification by Sellers |
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39 |
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9B. |
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Indemnification by Buyer |
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40 |
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9C. |
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Claims against the General Escrow Amount |
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40 |
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9D. |
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Exclusive Remedy |
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41 |
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9E. |
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Termination of Indemnification |
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42 |
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9F. |
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Procedures Relating to Indemnification |
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42 |
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9G. |
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Certain Additional Matters |
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44 |
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ARTICLE 10 ADDITIONAL AGREEMENTS |
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46 |
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10A. |
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Survival |
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10B. |
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Press Release and Announcements |
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46 |
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10C. |
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Confidentiality |
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46 |
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10D. |
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Commercially Reasonable Efforts |
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47 |
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10E. |
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Regulatory Act Compliance |
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47 |
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10F. |
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Certain Tax Matters |
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48 |
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10G. |
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Director and Officer Liability and Indemnification |
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49 |
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10H. |
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Designation and Replacement of Representative |
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49 |
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10I. |
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Authority and Rights of Representative; Limitations on Liability |
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50 |
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10J. |
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Representation of the Seller Group |
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51 |
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10K. |
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Expenses; Transfer Taxes |
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51 |
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10L. |
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Certain Access Provisions |
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51 |
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10M. |
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No Solicitation; Confidentiality |
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52 |
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ARTICLE 11 MISCELLANEOUS |
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53 |
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11A. |
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Amendment and Waiver |
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53 |
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11B. |
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Notices |
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53 |
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11C. |
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Assignment |
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55 |
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TABLE OF CONTENTS
(continued)
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11D. |
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Severability |
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55 |
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11E. |
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No Strict Construction |
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55 |
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11F. |
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Captions |
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55 |
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11G. |
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Complete Agreement |
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55 |
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11H. |
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Disclosure Letters |
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56 |
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11I. |
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No Additional Representations; Disclaimer |
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57 |
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11J. |
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Counterparts |
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58 |
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11K. |
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Governing Law |
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58 |
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11L. |
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CONSENT TO JURISDICTION |
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58 |
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11M. |
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WAIVER OF JURY TRIAL |
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58 |
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11N. |
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Time of the Essence |
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58 |
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11O. |
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Payments under Agreement |
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59 |
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11P. |
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Third-Party Beneficiaries and Obligations |
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59 |
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11Q. |
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Equitable Remedies |
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59 |
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11R. |
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Prevailing Party |
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59 |
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11S. |
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Release |
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59 |
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11T. |
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Further Assurances |
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60 |
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11U. |
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Guaranty |
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60 |
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LIST OF EXHIBITS
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Exhibit A
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Definitions |
Exhibit B
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Escrow Agreement |
Exhibit C
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Company Closing Certificate |
Exhibit D
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Company Secretary Certificate |
Exhibit E
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Form of Audit Report from Ernst and Young LLP |
Exhibit F
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Financial Statements Certificate |
Exhibit G
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FIRPTA Affidavit |
Exhibit H
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Instrument of Assignment |
Exhibit I
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Buyer Closing Certificate |
Exhibit J
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Buyer Secretary Certificate |
Exhibit K
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Post-Signing Macon Capital Expenditure Monthly Budget |
LIST OF SCHEDULES
Seller Disclosure Letter
Buyer Disclosure Letter
Company Disclosure Letter
Schedule 1E: Purchase Price Allocation
Schedule 8A(iii): Applicable Accounting Principles
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this Agreement) is made as of June 18, 2010, by
and among (i) Regency Hospital Company, L.L.C., a Delaware limited liability company (the
Company), (ii) each of Waud Capital Partners, L.P., a Delaware limited partnership, Waud
Capital Partners, L.L.C., a Delaware limited liability company, Waud Capital Affiliates, LLC, a
Delaware limited liability company, Waud Realty Minneapolis LLC, a Delaware limited liability
company, George Bruton, The Mecklenburg Grantor Trust, Rod Laughlin, Anne Mullendore, and Ron
Spaeth (each, a Seller and, collectively, the Sellers), (iii) Waud Capital
Partners, L.L.C., solely in its capacity as representative of the Sellers as set forth in this
Agreement (the Representative), (iv) Intensiva Healthcare Corporation, a Delaware
corporation (Buyer), and (v) solely for purposes of Section 11U, Select Medical
Corporation, a Delaware corporation (Guarantor). Unless otherwise defined herein,
capitalized terms used herein are defined in Exhibit A.
WHEREAS, the Sellers own collectively 100% of the issued and outstanding equity securities of
the Company, consisting of WRLLC Units, Special Units, Preferred Units, Class A Units and Class B
Units of the Company (collectively, the Acquired Securities);
WHEREAS, on the terms and subject to the conditions set forth in this Agreement, Buyer desires
to purchase from the Sellers, and the Sellers desire to sell to Buyer, all of the Acquired
Securities for the consideration described herein; and
WHEREAS, the respective boards of managers or directors or other governing bodies, as
applicable, of each Seller, the Company and Buyer have approved this Agreement and the transactions
contemplated hereby, upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties
and covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
1A. Purchase and Sale of Acquired Securities. On the terms and subject to the
conditions set forth in this Agreement, at the Closing and upon payment of the Estimated Purchase
Price and the delivery of the other amounts by Buyer in accordance with Section 1C, Buyer
shall purchase and accept from the Sellers, and the Sellers shall sell to Buyer, free and clear of
all Liens (other than Permitted Encumbrances of the type described in clause (i) of the definition
thereof or Liens created by Buyer), all of the Acquired Securities.
1B. Closing. On the terms and subject to the conditions set forth in this Agreement,
the closing of the purchase and sale of the Acquired Securities (the Closing) shall take
place, and the parties hereto shall consummate such purchase and sale, at the Chicago, Illinois
offices of Kirkland & Ellis LLP on the fifth (5th) Business Day after satisfaction or waiver of the
latest to occur of the conditions set forth in Article 2, except for those conditions which
by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of
such conditions at the Closing, unless the parties shall mutually agree on another date. The date
on which the Closing shall occur is referred to herein as the Closing Date. At the
Closing, subject to the terms and conditions set forth in this Agreement, Buyer shall make the
payments and deliveries contemplated by Section 1C and deliver to the Representative all of
the certificates, instruments and documents required to be delivered by Buyer under Section
2C in
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order for the conditions of each of the Sellers and the Company to be satisfied, and the
Representative shall deliver to Buyer all of the certificates, instruments and documents required
to be delivered under Section 2B in order for the conditions of Buyer to be satisfied.
1C. Closing Distributions.
(i) No later than three (3) Business Days prior to the Closing, the Company shall
provide Buyer with a statement setting forth its good faith estimate (which estimate shall
be reasonably satisfactory to Buyer) of (i) the Estimated Closing Indebtedness, (ii) the
Estimated Closing Net Working Capital, and (iii) the Estimated Purchase Price resulting
therefrom (the Estimated Closing Statement), together with an estimated balance
sheet of the Company and its Subsidiaries, on a consolidated basis, as of the Adjustment
Calculation Time (the Estimated Closing Balance Sheet) (accompanied by any
supporting work papers and other similar material used by the Company to prepare the
Estimated Closing Statement and the Estimated Closing Balance Sheet).
(ii) At the Closing, on the terms and subject to the conditions set forth in this
Agreement, Buyer shall pay to the Representative (on behalf of the Sellers) an aggregate
amount in cash (the Closing Cash Payment) equal to (x) the Estimated Purchase
Price less (y) the Escrow Deposit Amount, by wire transfer of immediately available
funds from Buyer to the account designated by the Representative (which account shall be
designated by the Representative in writing at least three (3) Business Days prior to the
Closing Date). The Closing Cash Payment shall be allocated among the Sellers, and
distributed to the Sellers by the Representative, in accordance with written instructions
which shall be delivered to Buyer not less than one (1) Business Day prior to the Closing.
(iii) At the Closing, on the terms and subject to the conditions set forth in this
Agreement, Buyer shall deliver, by wire transfer of immediately available funds, the Escrow
Deposit Amount to the Escrow Agent for deposit into a separate escrow account (the
Escrow Account) established pursuant to the terms of an escrow agreement,
substantially in the form of Exhibit B (the Escrow Agreement), among
Buyer, the Representative and the Escrow Agent. The Escrow Funds shall be maintained
separately in the Escrow Account. The fees and expenses of the Escrow Agent shall be paid
50% by Buyer and 50% by the Representative (on behalf of the Sellers). The Escrow Account
will be divided into the following two sub-accounts:
(a) An aggregate amount in cash equal to the Purchase Price Adjustment Escrow
Amount shall be deposited into a separate subaccount (the Purchase Price
Adjustment Escrow Account). The Purchase Price Adjustment Escrow Amount shall
be distributed in accordance with the provisions of this Agreement and the Escrow
Agreement.
(b) An aggregate amount in cash equal to the General Escrow Amount shall be
deposited into a separate subaccount (the General Escrow Account). The
General Escrow Amount shall be distributed in accordance with the provisions of this
Agreement and the Escrow Agreement.
(iv) At the Closing, on the terms and subject to the conditions set forth in this
Agreement, Buyer shall pay to the intended beneficiaries thereof (as identified by the
Representative to Buyer at least three (3) Business Days prior to the Closing Date) (a)
amounts due and owing pursuant to the Funded Indebtedness, (b) the Company Transaction
Expenses, (c) the Representative Expenses, and (d) any other liabilities included in the
computation of
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Estimated Closing Indebtedness (other than the Ohio Matter Payoff Amount) which
Representative instructs Buyer to pay at the Closing.
1D. Purchase Price Adjustment.
(i) Within 120 days following the Closing Date, the Company shall, and Buyer shall
cause the Company to, prepare and deliver to the Representative (a) an unaudited
consolidated balance sheet of the Company as of the Adjustment Calculation Time (the
Closing Balance Sheet), and (b) a statement (the Closing Statement)
setting forth the Companys calculation of Closing Net Working Capital and Closing
Indebtedness and the Purchase Price resulting therefrom. The Closing Balance Sheet shall be
prepared in accordance with GAAP applied on a basis consistent with the Applicable
Accounting Principles. The Closing Statement shall, with respect to the Closing Net Working
Capital and the Closing Indebtedness, be derived from the Closing Balance Sheet, and shall,
with respect to the Closing Net Working Capital and the Closing Indebtedness, be prepared in
accordance with the applicable definitions set forth in this Agreement. During the 30 days
immediately following the Representatives receipt of the Closing Balance Sheet and the
Closing Statement and any period of dispute with respect thereto thereafter, Buyer shall,
and shall cause the Company to, (x) provide the Representative and its representatives with
reasonable access during normal business hours to the books, records (including work papers,
schedules, memoranda and other documents), supporting data and employees and accountants
(subject to signing a customary accountants release) of the Company related to the Closing
Balance Sheet and the Closing Statement for purposes of their review of the Closing Balance
Sheet and the Closing Statement, and (y) cooperate with the Representative and its
representatives in connection with such review, including providing on a timely basis all
other information necessary or useful in connection with the review of the Closing Balance
Sheet and the Closing Statement as is reasonably requested by the Representative or its
representatives. The Closing Balance Sheet, the Closing Statement and the resulting
calculation of Closing Net Working Capital and Closing Indebtedness and the Purchase Price
resulting therefrom shall become final and binding upon the parties at 5:00 p.m. Eastern
Prevailing Time on the 30th day following the Representatives receipt thereof unless the
Representative gives written notice of its disagreement (a Notice of Disagreement)
to Buyer prior to such date; provided that the Closing Balance Sheet and the Closing
Statement shall become final and binding after such 30 day period with respect to any items
not relating to the dispute identified in a Notice of Disagreement; provided
further that a Notice of Disagreement may only be based on a claim that the Closing
Balance Sheet (or the Closing Statement or the components thereof) was not prepared in
accordance, or is otherwise inconsistent, with the terms of this Agreement; provided
further that the Closing Balance Sheet, the Closing Statement and the resulting
calculation of Closing Net Working Capital and Closing Indebtedness and the Purchase Price
resulting therefrom shall become final and binding upon the parties upon the
Representatives delivery, prior to the expiration of the 30-day period, of written notice
to Buyer of its acceptance of the Closing Balance Sheet and the Closing Statement. Any
Notice of Disagreement shall specify in reasonable detail the nature and amount of any
disagreement so asserted, and shall specify the line item or items on the Closing Balance
Sheet (or the Closing Statement, as applicable) which the Representative disagrees with and
the amount of each such line item or items as calculated by the Representative.
(ii) If a timely Notice of Disagreement is delivered by the Representative pursuant to
Section 1D(i), then the Closing Balance Sheet and the Closing Statement (as revised
in accordance with this Section 1D(ii)), and the resulting calculation of Closing
Net Working Capital and Closing Indebtedness and the Purchase Price resulting therefrom,
shall become final and binding upon the parties on the earlier of (a) the date any and all
matters specified in the
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Notice of Disagreement are finally resolved in writing by the Representative and Buyer
and (b) the date any and all matters specified in the Notice of Disagreement not resolved by
the Representative and Buyer are finally resolved in writing by the Arbiter (as defined
below). The Closing Balance Sheet and the Closing Statement shall be revised to the extent
necessary to reflect any resolution by the Representative and Buyer and any final resolution
made by the Arbiter in accordance with this Section 1D(ii). During the 30 days
immediately following the delivery of a Notice of Disagreement or such longer period as the
Representative and Buyer may agree in writing, the Representative and Buyer shall seek in
good faith to resolve in writing any differences which they may have with respect to any
matter specified in the Notice of Disagreement, and all such discussions related thereto
shall (unless otherwise agreed by Buyer and the Representative) be governed by Rule 408 of
the Federal Rules of Evidence and any applicable similar state rule. At the end of such
30-day period, the Representative and Buyer shall submit to KPMG LLP (the Arbiter)
for review and resolution of any and all matters (but only such matters) which remain in
dispute and which were included in the Notice of Disagreement, and if KPMG LLP is unwilling
or unable to act in such capacity (or is conflicted), then the Representative and Buyer
shall attempt to mutually agree on who shall serve as the Arbiter, and if the Representative
and Buyer cannot agree upon the Arbiter within ten (10) Business Days after KPMG LLP has
given notice that it will not serve as Arbiter, then the Representative and Buyer shall each
select, within five days of the end of such 10-day period, a nationally recognized
consulting or accounting firm with expertise in financial analysis and the firm selected by
the Representative and the firm selected by Buyer shall mutually and promptly (and in any
event within five days) select a third nationally recognized consulting or accounting firm
with expertise in financial analysis to serve as the Arbiter. Buyer and the Representative
shall instruct the Arbiter to, and the Arbiter shall, make a final determination of the
items included in the Closing Balance Sheet and the Closing Statement (to the extent such
amounts are in dispute) in accordance with the requirements and procedures set forth in this
Agreement. Buyer and the Representative will cooperate (and Buyer shall cause the Company to
cooperate) with the Arbiter during the term of its engagement. Buyer and the Representative
shall instruct the Arbiter not to, and the Arbiter shall not, assign a value to any item in
dispute greater than the greatest value for such item assigned by Buyer, on the one hand, or
the Representative, on the other hand, or less than the smallest value for such item
assigned by Buyer, on the one hand, or the Representative, on the other hand. Buyer and the
Representative shall also instruct the Arbiter to, and the Arbiter shall, make its
determination based solely on presentations by Buyer and the Representative that are in
accordance with the guidelines and procedures set forth in this Agreement (i.e., not
on the basis of an independent review). The Closing Balance Sheet, the Closing Statement and
the resulting calculation of Closing Net Working Capital and Closing Indebtedness and the
Purchase Price resulting therefrom shall become final and binding on the parties hereto on
the date the Arbiter delivers its final resolution in writing to Buyer and the
Representative (which final resolution shall be requested by the terms of the engagement
with the Arbiter to be not more than 30 days from the date of such engagement and no more
than 10 Business Days from the final submission of information and testimony by Buyer and
Representative to the Arbiter), and such resolution by the Arbiter shall not be subject to
court review or otherwise appealable but shall be enforceable by a court of competent
jurisdiction. The fees and expenses of the Arbiter pursuant to this Section 1D(ii)
shall be borne by Buyer, on the one hand, and the Representative, on the other hand, based
upon the percentage which the aggregate portion of the contested amount not awarded to each
party bears to the aggregate amount actually contested by such party.
(iii) If the Estimated Purchase Price is less than the Purchase Price (such shortfall,
the Deficit Amount), then within five (5) Business Days after the Closing Balance
Sheet and the Closing Statement become final and binding on the parties pursuant to this
Section 1D, (a) Buyer shall make payment of the Deficit Amount by wire transfer of
immediately available funds to the
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Representative (on behalf of the Sellers) and (b) Buyer and the Representative shall
deliver joint written instructions to the Escrow Agent to cause the Escrow Agent to
immediately make payment to, or as directed by, the Representative of an amount equal to the
entire amount in the Purchase Price Adjustment Escrow Account. If the Estimated Purchase
Price is greater than the Purchase Price (such excess, the Excess Amount), then
within five (5) Business Days after the Closing Balance Sheet and the Closing Statement
become final and binding on the parties pursuant to this Section 1D, Buyer and the
Representative shall deliver joint written instructions to the Escrow Agent to cause the
Escrow Agent to immediately make payments in the following order: (x) first, to Buyer, by
wire transfer of immediately available funds to, or as directed by, Buyer, an amount equal
to the Excess Amount from the Purchase Price Adjustment Escrow Account (and to the extent
there are not sufficient funds in the Purchase Price Adjustment Escrow Account, from the
General Escrow Account), and (y) second, to the Representative, by wire transfer of
immediately available funds to, or as directed by, the Representative, an amount equal to
the entire amount then remaining in the Purchase Price Adjustment Escrow Account (if any)
after Buyer has first received payment in accordance with clause (x) above.
(iv) Any payment pursuant to Section 1D(iii) shall be made together with
interest thereon at a rate per annum equal to the rate of interest published by The Wall
Street Journal as the prime rate at large U.S. money center banks on the Closing Date,
calculated on the basis of the number of days elapsed from the Closing Date to the date of
payment. Any interest payable by Buyer shall be paid to the Representative.
(v) Subject to Section 10I, any amounts received by the Representative pursuant
to this Section 1D shall be received for the benefit of the Sellers.
(vi) Buyer and the Sellers agree that (a) the payment of the Excess Amount (if any)
from the Purchase Price Adjustment Escrow Account and, if applicable, the General Escrow
Account as provided in Section 1D(iii) shall be the sole and exclusive remedy for
Buyer for payment of the Excess Amount (if any) and (b) the working capital adjustment and
indebtedness adjustment provided for in this Section 1D, and the dispute resolution
provisions provided for in this Section 1D, shall be the exclusive remedies for the
matters addressed therein. For the avoidance of doubt, and without limiting the generality
of the foregoing, no claim by Buyer for the payment of the Excess Amount shall be asserted
against the Seller Parties.
1E. Purchase Price Allocation. The Purchase Price (as adjusted pursuant to this
Agreement and as increased by the amounts treated as assumed Company liabilities for federal income
tax purposes and other amounts treated as taxable sales consideration for federal income tax
purposes) shall be allocated to the assets of the Company and its Subsidiaries (other than the
assets of the Partnership Subsidiaries and Regency Management Company, Inc.) for all Tax purposes
in accordance with their respective fair market values pursuant to an allocation schedule to be
prepared after the Closing in accordance with Sections 1060, 741, and 751 of the Code and the
regulations adopted thereunder and using the methodologies set forth on Schedule 1E (the
Asset Allocation). Within 120 days after the Closing Date, Buyer shall deliver a copy of
its initial determination of the Asset Allocation to the Representative. The Representative shall,
within 30 days after receipt of the initial determination of the Asset Allocation by Buyer, notify
Buyer if it disagrees with such initial determination (provided that Representative shall not
disagree with any allocation to the stock of Regency Management Company, Inc. determined by Buyer
to be equal to the adjusted tax basis of the assets less any liabilities of such entity as of the
Closing Date), and if the Representative does not so notify Buyer within such 30 days, the initial
Asset Allocation shall be final and binding on the parties. If the Representative disagrees with
such initial Asset Allocation (subject to the proviso in the immediately preceding sentence), Buyer
and the Representative shall make a good faith effort to resolve the dispute. If Buyer and the
Representative have
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been unable to resolve their differences within 30 days after Buyer has been notified of the
Representatives disagreement with the initial Asset Allocation, then any remaining disputed issues
shall be submitted to the Arbiter, who shall resolve the disagreement in a final binding manner in
accordance with the dispute resolution procedures set forth in Section 1D(ii) of this
Agreement. Except as may be required by applicable Legal Requirements, Buyer and the Representative
on behalf of the Sellers will (i) prepare all Tax books, records, and filings (including Internal
Revenue Service Forms 8594 and 8308) in a manner consistent with the Asset Allocation (as
determined pursuant to this Section 1E) and (ii) not take any action inconsistent therewith
with respect to Tax matters.
ARTICLE 2
CONDITIONS TO CLOSING
2A. Conditions to All Parties Obligations. The obligation of each of the Sellers,
the Company and Buyer to consummate the transactions contemplated by this Agreement is subject to
the satisfaction, or waiver by Buyer and the Representative in writing, of each of the following
conditions as of immediately prior to or at the Closing:
(i) Any applicable waiting periods under the HSR Act shall have expired or been
terminated by the appropriate Governmental Entity;
(ii) No temporary restraining order, injunction or other order of any Governmental
Entity of competent jurisdiction shall be in effect as of the Closing which restrains or
prohibits the consummation of the transactions contemplated by this Agreement, and there
shall not be in force any Legal Requirement that makes consummation of the transactions
contemplated by this Agreement illegal; and
(iii) This Agreement shall not have been terminated in accordance with Section
7A.
2B. Conditions to Buyers Obligations. The obligation of Buyer to consummate the
transactions contemplated by this Agreement is subject to the satisfaction, or waiver by Buyer in
writing, of each of the following additional conditions as of immediately prior to or at the
Closing:
(i) Each of the representations and warranties (a) contained in Section 4C,
Section 5B and Section 5C(i) shall be true and correct as of the Closing
Date as if made anew as of such date (other than those representations and warranties that
address matters only as of a particular date or only with respect to a specific period of
time, which need only be true and correct as of such date or with respect to such period),
and (b) contained in Article 4 and Article 5 (other than the representations
and warranties contained in Section 4C, Section 5B or Section 5C(i),
for which the provisions of clause (a) of this Section 2B(i) shall govern) shall be
true and correct (without giving effect to any material, materiality, or Company
Material Adverse Effect qualifications contained therein, except for such qualifications
contained in the representations and warranties contained in Sections 5J(i) through
(xvi), Section 5E(i) and the first sentence of Section 5T) as of the
Closing Date as if made anew as of such date (other than those representations and
warranties that address matters only as of a particular date or only with respect to a
specific period of time, which need only be true and correct as of such date or with respect
to such period), except where the failure of such representations and warranties referred to
in this clause (b) to be true and correct does not, and would not reasonably be expected to,
individually or in the aggregate, have a Company Material Adverse Effect.
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(ii) Each of the obligations, covenants and agreements of the Sellers and the Company
to be performed as of or prior to the Closing shall have been performed in all material
respects;
(iii) There shall not have occurred since March 31, 2010 any event, change, condition,
circumstance or state of facts that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect;
(iv) The Company shall have delivered to Buyer at the Closing each of the following
documents:
(a) a certificate in the form of Exhibit C dated the Closing Date and
signed by an executive officer of the Company on behalf of the Company confirming
the foregoing matters in Section 2B(i), Section 2B(ii) and
Section 2B(iii) (the Company Closing Certificate);
(b) a certificate in the form of Exhibit D dated the Closing Date, duly
executed by the Secretary or an Assistant Secretary of the Company, on behalf of the
Company, certifying as to: (1) an attached copy of the resolutions of the Board of
Managers of the Company authorizing and approving the execution, delivery and
performance of, and the consummation of the transactions contemplated by, this
Agreement, and stating that such resolutions have not been amended, modified,
revoked or rescinded; (2) the incumbency, authority and specimen signature of each
officer of the Company executing this Agreement; and (3) true and complete attached
copies of the applicable Organizational Documents of the Company and each Subsidiary
thereof (the Company Secretary Certificate);
(c) certificates as to the Companys and each Subsidiarys good standing (or
substantial equivalent) in the state of its jurisdiction of organization as of a
date no more than five (5) Business Days prior to the Closing Date;
(d) (i) the audited consolidated balance sheet of the Company and its
consolidated Subsidiaries as of December 31, 2009, and the related consolidated
statements of income and cash flows for the fiscal year ended December 31, 2009 in
the same form as attached on Section 5E(i) of the Company Disclosure Letter
and accompanied by an audit report from Ernst & Young LLP substantially in the form
of Exhibit E; and (ii) a certificate in the form of Exhibit F dated
the Closing Date and signed by an executive officer of the Company on behalf of the
Company (the Financial Statements Certificate);
(e) a non-foreign person affidavit of each Seller in the form of Exhibit
G; and
(f) the Escrow Agreement duly executed by the Escrow Agent and the
Representative;
(v) Each Seller shall have delivered to Buyer at the Closing a duly executed instrument
of assignment in the form of Exhibit H executed by such Seller with respect to such
Sellers Acquired Securities;
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(vi) All directors and managers of the Company and each Subsidiary of the Company
(except those designated by Buyer) shall have executed and delivered to the Company and each
Subsidiary of the Company, as applicable, resignations effective prior to or as of the
Closing;
(vii) No Governmental Entity shall have commenced any Legal Proceeding wherein an
unfavorable injunction, judgment, order or decree would (a) prevent consummation of the
transactions contemplated by this Agreement, or (b) cause any of the transactions
contemplated by this Agreement to be rescinded following the Closing.
(viii) All notices, filings, approvals and consents to or from Governmental Entities
set forth on Section 2B(viii) of the Company Disclosure Letter shall have been made,
obtained or issued, as applicable, and all Licenses set forth on Section 2B(viii) of
the Company Disclosure Letter shall have been received, reissued or transferred or will
remain in effect, as applicable;
(ix) The leases set forth on Section 2B(ix) of the Company Disclosure Letter
shall have been either extended or new leases for such Facilities shall have been entered
into by the Company or the applicable Subsidiary of the Company, in each case upon terms
reasonably acceptable to Buyer.
(x) Any restrictions in the leases set forth on Section 2B(x) of the Company
Disclosure Letter which would prohibit or otherwise restrict the Company, any Subsidiary of
the Company, Buyer or any Affiliate of Buyer from competing in either the Business or the
business of Buyer shall have been eliminated or otherwise resolved to the reasonable
satisfaction of Buyer.
(xi) The Company or a Subsidiary of the Company shall have either (a) terminated each
of the leases set forth on Section 2B(xi) of the Company Disclosure Letter or (b)
sold or otherwise disposed of the equity interests of the Subsidiaries of the Company which
are parties to the leases set forth on Section 2B(xi) of the Company Disclosure
Letter, in either case pursuant to agreements that are reasonably satisfactory to Buyer.
(xii) Each Required Consent Lease set forth on Section 2B(xii) of the Company
Disclosure Letter shall be a Consented Lease; and
(xiii) The Company shall have delivered to Buyer at or prior to the Closing evidence
that the Company or one or more of its Subsidiaries has repurchased, effective as of not
later than the Closing, the equity interests of the Subsidiary of the Company set forth on
Section 2B(xiii) of the Company Disclosure Letter that are not owned by the Company
or its Subsidiaries pursuant to agreements entered into between the Company and the holders
of such equity interests that are reasonably satisfactory to Buyer.
2C. Conditions to the Sellers and the Companys Obligations. The obligation of each
of the Sellers and the Company to consummate the transactions contemplated by this Agreement is
subject to the satisfaction, or waiver by the Representative (on behalf of all Sellers) in writing,
of each of the following additional conditions as of immediately prior to or at the Closing:
(i) Each of the representations and warranties of Buyer contained in this Agreement
shall be true and correct (without giving effect to any material, materiality, or Buyer
Material Adverse Effect qualifications contained therein) as of the Closing Date as if made
anew as of such date (other than those representations and warranties that address matters
only as of a particular date or only with respect to a specific period of time, which need
only be true and correct as of such date or with respect to such period), except where the
failure of such
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representations and warranties to be true and correct does not, and would not
reasonably be expected to, have a Buyer Material Adverse Effect;
(ii) Each of the obligations, covenants and agreements of Buyer to be performed as of
or prior to the Closing shall have been performed in all material respects; and
(iii) Buyer shall have delivered to the Company and the Representative (for the benefit
of all Sellers) at the Closing each of the following documents:
(a) a certificate in the form of Exhibit I dated the Closing Date and
signed by an executive officer of Buyer on behalf of Buyer confirming the foregoing
matters in Section 2C(i) and Section 2C(ii) (the Buyer Closing
Certificate);
(b) a certificate in the form of Exhibit J dated the Closing Date, duly
executed by the Secretary or an Assistant Secretary of Buyer, on behalf of Buyer,
certifying as to: (1) an attached copy of the resolutions of the Board of Directors
of each of Buyer and Parent authorizing and approving the execution, delivery and
performance of, and the consummation of the transactions contemplated by, this
Agreement, and stating that such resolutions have not been amended, modified,
revoked or rescinded; (2) the incumbency, authority and specimen signature of each
officer of Buyer executing this Agreement or the Escrow Agreement; and (3) true and
complete attached copies of the applicable Organizational Documents of Buyer (the
Buyer Secretary Certificate);
(c) certificates as to Buyers good standing in the State of Delaware as of a
date no more than five (5) Business Days prior to the Closing Date; and
(d) the Escrow Agreement duly executed by the Escrow Agent and Buyer.
ARTICLE 3
CERTAIN COVENANTS PRIOR TO THE CLOSING
3A. Access. During the period from the date of this Agreement to the earlier of the
Closing and the date that this Agreement is terminated in accordance with its terms (the
Pre-Closing Period), the Company shall, and shall use commercially reasonable efforts to
cause its representatives to, (i) grant to Buyer and its authorized representatives, reasonable
access, during normal business hours and upon reasonable notice, to the personnel and properties
and to all existing books and records, Tax Returns, work papers, Licenses and other documents and
information (provided that no such access shall be granted for the purpose of conducting any
environmental audit or other investigation) relating to the Company and its Subsidiaries that are
in the possession or under the control of the Company and its Subsidiaries and (ii) provide Buyer
and Buyers representatives with copies of such existing books, records, Tax Returns, work papers,
Licenses and other documents and information relating to the Company as Buyer may reasonably
request; provided that (a) such access does not unreasonably interfere with the
normal operations of the Company or its Subsidiaries, (b) all requests for access shall be directed
to the Chief Financial Officer of the Company (with a copy to the General Counsel of the Company)
or such other Person as the Company may designate in writing from time to time (the Designated
Contact), and (c) nothing herein shall require the Company to provide access to, or to
disclose any information to, Buyer if such access or disclosure would be in violation of applicable
Legal Requirements of any Governmental Entity (including the HSR Act and other anti-competition
Legal Requirements) or the provisions of any currently existing agreement to which the Company or
any of its Subsidiaries is a party or, subject to compliance with Section 3B, any
agreement to which the Company or any Subsidiary
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becomes a party during the Pre-Closing Period. Other than the Designated Contact or as
expressly provided in the preceding sentence or as authorized by the Designated Contact, Buyer is
not authorized to and shall not (and shall cause its employees, agents, representatives and
Affiliates not to) contact any employee, customer, patient, supplier, distributor, lessee, lessor,
lender or other material business relation of the Company or any of its Subsidiaries prior to the
Closing regarding the transactions contemplated by this Agreement or the Companys and its
Subsidiaries businesses without the prior written consent of the Representative, which consent
shall not be unreasonably withheld, conditioned or delayed. Buyer shall, and shall cause its
representatives to, abide by the terms of the Confidentiality Agreement with respect to such access
and any information furnished to it or its representatives pursuant to this Section 3A.
Buyer and its Representatives will hold any such information in accordance with the terms of the
Confidentiality Agreement.
3B. Ordinary Conduct of Company.
(i) During the Pre-Closing Period, except as otherwise contemplated by this Agreement,
the Company shall conduct the Business, and will cause each Subsidiary of the Company to
conduct the Business, in the ordinary course of business in all material respects,
consistent with past practice to the extent relevant, and use commercially reasonably
efforts to maintain in all material respects its relationships with key employees,
suppliers, patients and others having business relationships with it.
(ii) Without limiting Section 3B(i), during the Pre-Closing Period, except as
(w) set forth on Section 3B of the Company Disclosure Letter, (x) otherwise
consented to by Buyer in writing, (y) otherwise permitted by this Agreement, or (z) would
constitute a violation of applicable Legal Requirements, the Company shall not, and shall
cause each of its Subsidiaries not to:
(a) make any material change in the conduct of the Business, except for changes
that are in the ordinary course or not inconsistent with past practice;
(b) declare, set aside or pay any dividends (other than cash dividends to the
extent permitted by Section 3C) or make any other distributions (other than
cash distributions to the extent permitted by Section 3C) in respect of any
of its capital stock or any other equity interests (other than from a Subsidiary of
the Company to another Subsidiary of the Company or to the Company);
(c) adopt, establish or amend any material Employee Benefit Plan or collective
bargaining agreement;
(d) incur any indebtedness for borrowed money or guarantee any liabilities,
obligations or indebtedness of any Person (other than the Company or any Subsidiary
of the Company) unless such incurred indebtedness or guarantee(s) will not
materially interfere with or delay the Closing;
(e) cancel any material indebtedness for borrowed money owed to the Company or
any Subsidiary of the Company or waive any other claims or rights of material value;
(f) pay, loan or advance any amount to, or sell, transfer or lease any of its
material assets to, or enter into any agreement or arrangement with, any member of
the Company or Affiliate of the Company (other than payments, loans, advances,
sales,
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transfers, leases, agreements or arrangements between the Company and any
Subsidiary of the Company or between two or more Subsidiaries of the Company);
(g) make any material change in any method of accounting or accounting practice
or policy other than those required by GAAP;
(h) initiate, pay, discharge, settle or compromise any legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigation, other than any such payment, discharge, settlement or compromise that
involves solely monetary damages in an amount not in excess of $100,000 in the
aggregate (excluding payments to the extent they are covered by insurance);
(i) enter into a new agreement that would be included in the definition of
Company Material Contracts if it had been entered into as of the date of this
Agreement, or amend, revise, renew, or terminate any of the Company Material
Contracts;
(j) amend its Organizational Documents;
(k) acquire, by merging or consolidating with, or agreeing to merge or
consolidate with, or purchase a substantial portion of the assets of, or otherwise
acquire any business or any corporation, partnership, association or other business
organization or division thereof;
(l) effect any restructuring, reorganization or complete or partial liquidation
(other than, for the avoidance of doubt, cash dividends or cash distributions to the
extent permitted by Section 3C);
(m) sell, lease, sublease, mortgage, pledge or otherwise encumber or dispose of
any of the fixed assets or equipment owned or leased by the Company or any of its
Subsidiaries (x) having an aggregate value in excess of $100,000 or (y) for less
than fair market value;
(n) redeem or otherwise acquire any shares of its capital stock, equity
securities or other equity interests or issue any capital stock or any option,
warrant or right relating thereto or any securities convertible into or exchangeable
for any shares of capital stock, equity securities or other equity interests, or
enter into any agreement regarding the foregoing;
(o) increase in any manner the compensation or employee benefits of, or enter
into or establish any new bonus, incentive, employee benefits, severance or
termination agreement or arrangement (including, without limitation, any transaction
bonus or retention bonus agreement or arrangement) with any directors, officers,
employees or other service providers of the Company or any Subsidiary of the
Company, other than annual increases in the ordinary course of business consistent
in all material respects with past practice, as required by Legal Requirement or as
required by the terms of any employment, bonus, severance or other agreement or plan
in effect on the date immediately prior to the date hereof;
(p) make any commitments for capital expenditures for additions to property,
plant or equipment (i) outside of the ordinary course of business or (ii) where
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the payments for such commitments to be made after the Closing will be in
excess of $250,000 in the aggregate;
(q) fail to maintain in full force and effect through the Closing, insurance of
the type and with such coverage amounts and with insurers rated comparable to those
maintained as of the date hereof (and the Company shall promptly advise Buyer in
writing of any change of insurer or type of coverage);
(r) make, change or revoke any Tax election, including, without limitation, an
entity classification election under Treasury Regulation Section 301.7701-3;
(s) open any new hospital or purchase any hospital or close or sell any
hospital;
(t) enter into or renew any real property lease; or
(u) agree to take any of the actions described in subsections (a) through (t)
of this Section 3B(ii).
3C. Distribution of Cash. Notwithstanding any other provision to the contrary
contained in this Agreement, prior to the Closing Date, the Sellers shall be entitled to receive
from the Company and its Subsidiaries by way of dividends, distributions, return of capital or
otherwise all cash and cash equivalents owned or held by or for the benefit of the Company and its
Subsidiaries prior to and as of the Adjustment Calculation Time; provided, that after
delivery of the Estimated Closing Statement, the Company may not distribute any further cash or
cash equivalents to the Sellers unless such distribution was specifically contemplated by the
Estimated Closing Statement. For the avoidance of doubt, any such cash and cash equivalents
distributed to Sellers prior to the Closing Date shall not be considered current assets of the
Company or its Subsidiaries for purposes of the calculation of Closing Net Working Capital or
Estimated Closing Net Working Capital.
3D. Exclusive Transaction. During the Pre-Closing Period, the Company and each Seller
shall not, directly or indirectly:
(i) solicit or encourage the initiation of any inquiry, proposal or offer from any
Person (other than Buyer) relating to a possible Acquisition Transaction;
(ii) participate in any discussions or negotiations or enter into any agreement with,
or provide any non-public information to, any Person (other than Buyer) relating to or in
connection with a possible Acquisition Transaction; or
(iii) accept any proposal or offer from any Person (other than Buyer) relating to a
possible Acquisition Transaction.
The Company and each Seller shall promptly notify Buyer in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is received by the Sellers or
the Company or its Subsidiaries during the Pre-Closing Period.
3E. Cooperation Regarding Repayment of Funded Indebtedness. At least one (1) Business
Day prior to the Closing, the Company shall provide to Buyer (i) pay-off letters, releases or any
other documents reasonably requested by Buyer evidencing (a) the payments required to satisfy in
full all Funded Indebtedness and the other Indebtedness to be paid at Closing pursuant to
Section 1C(iv) or (b)
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the satisfaction, upon the occurrence of the Closing, in full, or termination of all of the
Companys obligations (other than customary contingent indemnity obligations) in respect of all
Funded Indebtedness and the other Indebtedness to be paid at Closing pursuant to Section
1C(iv), and (ii) releases, UCC termination statements and other customary documents reasonably
requested by Buyer releasing all Liens related to such Funded Indebtedness and the other
Indebtedness to be paid at Closing pursuant to Section 1C(iv), in each case, in form and
substance reasonably satisfactory to Buyer.
3F. Notification.
(i) During the Pre-Closing Period, the Company shall promptly notify Buyer in writing
if the Company or Sellers (as applicable) obtains knowledge of (a) any event, condition,
fact or circumstance that occurred or existed on or prior to the date of this Agreement and
that caused or constitutes a material breach of any representation or warranty made by the
Company or Sellers in this Agreement; (b) any material breach of any covenant or obligation
herein of the Company or Sellers or (c) any event, condition, fact or circumstance that
would make the satisfaction of any of the conditions set forth in Article 2
impossible or impracticable.
(ii) During the Pre-Closing Period, Buyer shall promptly notify the Company in writing
if Buyer obtains knowledge of (a) any event, condition, fact or circumstance that occurred
or existed on or prior to the date of this Agreement and that caused or constitutes a
material breach of any representation or warranty made by Buyer in this Agreement; (b) any
material breach of any covenant or obligation herein of Buyer or (c) any event, condition,
fact or circumstance that would make the satisfaction of any of the conditions set forth in
Article 2 impossible or impracticable.
3G. Other Information and Events. During the Pre-Closing Period, the Company shall furnish to Buyer:
(i) promptly, and in any event within five (5) Business Days, after the Company or any
Subsidiary of the Company receives written notice from any party to any Company Material
Contract that the Company or a Subsidiary of the Company is in default thereunder, a copy of
such notice; and
(ii) promptly, and in any event within five (5) Business Days, after the commencement
thereof, notice in writing of all Legal Proceedings by or before any Governmental Entity
commenced against the Company or any Subsidiary of the Company during the Pre-Closing
Period.
3H. Cooperation Regarding Licenses. Each party shall use commercially reasonable
efforts to assist and cooperate with the other parties, including, without limitation, by providing
to the other parties all relevant information in their possession or control and coordinating with
the other parties in connection with all communications with all appropriate Governmental Entities,
in order (i) to furnish the notices to and filings with Governmental Entities, and to obtain any
approvals or consents from Governmental Entities, in each case that Buyer deems reasonably
necessary or appropriate for the consummation of the transactions contemplated by this Agreement
and (ii) to cause all Licenses that Buyer deems reasonably necessary or appropriate to conduct and
operate the Business following the Closing in substantially the same manner as the Company and its
Subsidiaries currently conduct and operate the Business to be received, reissued, transferred or to
remain in effect, as applicable.
3I. Cooperation Regarding Certain Leases. During the Pre-Closing Period, Buyer and
the Company shall, and shall cause each of their respective Subsidiaries to, use their commercially
reasonable
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efforts to (i) extend or enter into new leases for the Facilities set forth on
Section 2B(ix) of the Company Disclosure Letter, and (ii) eliminate, or otherwise resolve
to the reasonable satisfaction of Buyer, any restrictions in the leases set forth on Section
2B(x) of the Company Disclosure Letter that would prohibit or otherwise materially restrict the
Company, any Subsidiary of the Company, Buyer or any Affiliate of Buyer from competing in either
the Business or the business of Buyer as the Closing.
3J. Effectiveness of Certificate of Need. The Company shall use its commercially
reasonable efforts to maintain the effectiveness of the Certificate of Need issued by the Georgia
Department of Community Health for the Development Project located at 535 Coliseum Drive, Macon GA
31217.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Except as set forth in the Seller Disclosure Letter (with specific reference to the particular
Section or subsection of this Agreement to which the information set forth in such Seller
Disclosure Letter relates; provided, that any information set forth in one section of the
Seller Disclosure Letter shall be deemed to apply to each other section or subsection thereof or
hereof to which (a) a specific cross reference to such other section or subsection is made, or (b)
the applicability of such disclosure to such other section or subsection is reasonably apparent on
its face), each Seller (on an individual basis and not on a joint and several basis) hereby
represents and warrants to and for the benefit of Buyer as follows:
4A. Organization and Power. Such Seller, if an entity other than a trust, is a
limited liability company or limited partnership, as applicable, existing and in good standing
under the laws of the State of Delaware and has all requisite limited liability company or limited
partnership, as applicable, power and authority necessary to execute, deliver and perform this
Agreement and consummate the transactions contemplated hereby. If a trust, such Seller is a trust
existing and enforceable under the laws of the State of Illinois, and each of such Sellers
trustees has all requisite power and authority necessary to execute, deliver and perform this
Agreement and consummate the transactions contemplated hereby. If not an entity, such Seller has
the legal capacity necessary to execute, deliver and perform this Agreement and consummate the
transactions contemplated hereby.
4B. Authorization; No Breach.
(i) All limited liability company or limited partnership, as and if applicable, acts
and other limited liability company or limited partnership, as and if applicable,
proceedings required to be taken by such Seller to authorize the execution, delivery and
performance of this Agreement and the other agreements, documents and instruments
contemplated hereby to be executed and delivered by such Seller at Closing and the
consummation of the transactions contemplated hereby and thereby have been duly and properly
taken. This Agreement has been duly executed and delivered by such Seller, and each of the
other agreements, documents and instruments contemplated hereby to be executed and delivered
by such Seller at Closing, when so executed and delivered, shall have been duly executed and
delivered by such Seller, and this Agreement constitutes, and each of the other agreements,
documents and instruments contemplated hereby to be executed and delivered by such Seller at
Closing, when so executed and delivered shall constitute, a valid and binding obligation of
such Seller, enforceable against such Seller in accordance with its terms, except as such
enforcement may be limited by the application of bankruptcy, moratorium and other Legal
Requirements affecting creditors rights generally and as
such enforcement may be limited by the availability of specific performance and the
application of equitable principles.
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(ii) Except as set forth on Section 4B(ii) of the Seller Disclosure Letter, the
execution and delivery by such Seller of this Agreement does not, and the consummation by
such Seller of the transactions contemplated hereby will not, (A) result in a breach of any
of the provisions of, (B) constitute a default under (or an event which, with notice or
lapse of time or both, would constitute a default), (C) result in a violation of or conflict
with, (D) give any third party the right to terminate or to accelerate any obligation or
receive any payment under, (E) result in the loss of any material right under, or (F)
require any authorization, consent, approval, exemption or other action by or notice to any
Governmental Entity or third party under (X) any provision of the certificate of formation,
limited liability company agreement, limited partnership agreement or similar organizational
or operational document, as and if applicable, of such Seller, (Y) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment or loan to which such Seller
is a party, or (Z) any judgment, order or decree applicable to such Seller or any Legal
Requirement applicable to such Seller, other than any such breaches, defaults, violations,
rights or requirements that, individually or in the aggregate, would not in the case of
clause (Y) have a material adverse effect the ability of such Seller to perform any of its
obligations under this Agreement or to consummate the transactions contemplated by this
Agreement; and other than any such authorizations, consents, approvals, exemptions or other
actions required under the HSR Act.
4C. Ownership of Acquired Securities. Such Seller has good and valid title to his,
her or its Acquired Securities, free and clear of all Liens (other than Permitted Encumbrances of
the type described in clause (i) of the definition thereof). Upon delivery of the Acquired
Securities and payment therefor pursuant hereto, such Seller will transfer good and valid title to
the Acquired Securities to Buyer, free and clear of all Liens (other than Permitted Encumbrances of
the type described in clause (i) of the definition thereof).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Letter (with specific reference to the
particular section or subsection of this Agreement to which the information set forth in such
Company Disclosure Letter relates; provided, that any information set forth in one section
of the Company Disclosure Letter shall be deemed to apply to each other section or subsection
thereof or hereof to which (a) a specific cross reference to such other section or subsection is
made, or (b) the applicability of such disclosure to such other section or subsection is reasonably
apparent on its face), the Company hereby represents and warrants to and for the benefit of Buyer
as follows:
5A. Organization and Power. The Company is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of Delaware and is
qualified to do business as a foreign limited liability company and is in good standing in each
jurisdiction in which the failure to so exist, be in good standing or qualify would have a Company
Material Adverse Effect. The Company and each of its Subsidiaries has all requisite limited
liability company power and authority necessary to own and operate its properties and to carry on
its businesses as now conducted. The Company has all requisite limited liability company power and
authority necessary to enter into this Agreement and to consummate the transactions contemplated
hereby. True and complete copies of the Companys certificate of formation and limited liability
company agreement have been made available to Buyer prior to the date of this Agreement, which
copies include all amendments, modifications or
supplements thereto. The Organizational Documents of the Company are in full force and
effect, and the Company is in compliance in all material respects with all of the terms and
provisions of its Organizational Documents.
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5B. Capitalization. Section 5B(a) of the Company Disclosure Letter sets forth
the issued and outstanding equity interests of the Company as of the date hereof, including a list
of all members and the equity interests held by each such member. The Acquired Securities
constitute all of the outstanding equity interests of the Company. All of the outstanding equity
interests of the Company have been duly authorized and validly issued and are held of record
collectively by the Sellers and have not been issued in violation of any preemptive or similar
right of any Person. The designations, powers, preferences, rights, qualifications, limitations
and restrictions in respect of each class and series of authorized equity interests of the Company
are as set forth in the Organizational Documents of the Company. Except as set forth on
Section 5B(b) of the Company Disclosure Letter, there are no outstanding or authorized
rights, subscriptions, warrants, options, calls, or other contracts or commitments to purchase or
otherwise acquire any Units or other equity interests of the Company or its Subsidiaries or
securities or obligations of any kind convertible into or exchangeable for any Units or other
equity interests of the Company or its Subsidiaries. There are no outstanding or authorized equity
appreciation, phantom equity, profit participation or similar rights with respect to the Company or
its Subsidiaries. Except as set forth on Section 5B(c) of the Company Disclosure Letter,
there are no outstanding contractual obligations binding on the Company or any of its Subsidiaries
(i) restricting the transfer of, (ii) affecting the voting rights of, (iii) requiring the
repurchase, redemption or disposition of, or containing any right of first refusal with respect to,
(iv) requiring the registration for sale of, or (v) granting any preemptive or antidilutive right
with respect to, any of the Acquired Securities or any other equity interests in the Company or any
of its Subsidiaries.
5C. Subsidiaries.
(i) Section 5C(i)(a) of the Company Disclosure Letter sets forth the name of
each Subsidiary of the Company, the jurisdiction of its incorporation or organization and
the outstanding capital stock or other equity interests of such Subsidiary, including
capital stock or other equity interests owned of record by the Company, by any of the
Companys Subsidiaries and by any third party. All such capital stock or other equity
interests have been duly authorized and are validly issued, and in the case of Persons that
are corporations, fully paid and non-assessable, and to the extent owned by the Company or a
Subsidiary of the Company, are owned with good and valid title, beneficially and of record,
and free and clear of all Liens (except as set forth on Section 5C(i)(a) of the
Company Disclosure Letter). Each such Subsidiary listed on Section 5C(i)(a) of the
Company Disclosure Letter is an entity duly organized, validly existing and in good standing
(or an equivalent foreign concept to the extent applicable) under the laws of the
jurisdiction of its incorporation or organization and is qualified to do business in each
jurisdiction in which the failure to so qualify would have a Company Material Adverse
Effect. Except as set forth on Section 5C(i)(b) of the Company Disclosure Letter,
none of the Companys Subsidiaries is a party to any option, warrant, purchase, right, or
other contract or commitment that could require any Person to sell, transfer, or otherwise
dispose of any of its outstanding capital stock or other equity securities of any Subsidiary
of the Company. Except as set forth on Section 5C(i)(c) of the Company Disclosure
Letter, none of the Companys Subsidiaries is a party to any voting trust, proxy,
stockholders agreement or other agreement or understanding with respect to the voting of
any of its outstanding capital stock or other equity securities.
(ii) Except for the Subsidiaries of the Company listed on Section 5C(i)(a) of
the Company Disclosure Letter or except as otherwise set forth on Section 5C(ii)(a)
of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries owns or
holds the right to
acquire any shares of stock or any other equity security in any other Person. Except as
set forth on Section 5C(ii)(b) of the Company Disclosure Letter, neither the Company
nor any of its Subsidiaries is a party to any agreement regarding the ownership or control
of any Person (other than a Subsidiary of the Company).
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(iii) True and complete copies of the Organizational Documents, as applicable, as in
effect on the date hereof for each of the Companys Subsidiaries have been made available to
Buyer prior to the date of this Agreement, which copies include all amendments,
modifications or supplements thereto. The Organizational Documents of each of the Companys
Subsidiaries are in full force and effect and each of the Companys Subsidiaries is in
compliance in all material respects with all of the terms and provisions of such
Organizational Documents applicable to it.
5D. Authorization; No Breach.
(i) All limited liability company acts and other limited liability company proceedings
required to be taken by the Company to authorize the execution, delivery and performance of
this Agreement, the Escrow Agreement and the other agreements, documents and instruments
contemplated hereby to be executed and delivered by the Company at Closing and the
consummation of the transactions contemplated hereby and thereby have been duly and properly
taken. This Agreement has been duly executed and delivered by the Company, and each of the
Escrow Agreement and the other agreements, documents and instruments contemplated hereby to
be executed and delivered by the Company at Closing, when so executed and delivered, shall
have been duly executed and delivered by the Company, and this Agreement constitutes, and
each of the Escrow Agreement and the other agreements, documents and instruments
contemplated hereby to be executed and delivered by the Company at Closing, when so executed
and delivered shall constitute, a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforcement may be limited
by the application of bankruptcy, moratorium and other laws affecting creditors rights
generally and as such enforcement may be limited by the availability of specific performance
and the application of equitable principles.
(ii) Except as set forth on Section 5D(ii) of the Company Disclosure Letter,
the execution and delivery by the Company of this Agreement does not, and the consummation
by the Company of the transactions contemplated hereby will not, (A) result in a breach of
any of the provisions of, (B) constitute a default under (or an event which, with notice or
lapse of time or both, would constitute a default under), (C) result in a violation of or
conflict with, (D) give any third party the right to terminate or to accelerate any
obligation, or be entitled to a payment under, (E) result in the loss of any right under,
(F) result in the creation or imposition of any Lien upon any of the assets of the Company
or any Subsidiary of the Company or (G) require any authorization, consent, approval,
exemption or other action by or notice to any Governmental Entity or third party, under any
provision of the Organizational Documents of the Company, any of the Company Material
Contracts, any License, any Environmental Permits, or any judgment, order or decree
applicable to the Company or any of its Subsidiaries or any Legal Requirement applicable to
the Company or any of its Subsidiaries, other than any such authorizations, consents,
approvals, exemptions or other actions required under the HSR Act.
5E. Financial Statements.
(i) Section 5E(i) of the Company Disclosure Letter sets forth the following
financial statements: (a) the audited consolidated balance sheets of the Company and its
consolidated Subsidiaries as of December 31, 2008 and 2007, and the related consolidated
statements of income and cash flows for the fiscal years ended December 31, 2008 and 2007,
(b) the unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of December 31, 2009, and the related consolidated statements of income and
cash flows for the fiscal year ended December 31, 2009, and (c) the unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as of March 31, 2010 (the
Latest Balance Sheet), and the related
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consolidated statements of income and cash
flows for the quarter then ended (together with the footnotes thereto above, collectively,
the Financial Statements). The Financial Statements present fairly, in all
material respects, the consolidated financial position of the Company and its Subsidiaries
and the consolidated results of their operations as of the respective dates and for the
respective periods indicated therein and have been prepared in accordance with GAAP, except
that the unaudited statements referred to in clause (c) may not contain all footnotes
required by GAAP. The Financial Statements have been prepared from and are consistent with
the books and records of the Company and its Subsidiaries.
(ii) Except for indebtedness among the Company and its Subsidiaries and except as set
forth on Section 5E(ii) of the Company Disclosure Letter, neither the Company nor
any Subsidiary of the Company has any Indebtedness.
(iii) Set forth on Section 5E(iii) of the Company Disclosure Letter is a
correct and complete list of all so called earn-out obligations of the Company or any
Subsidiary of the Company arising pursuant to the acquisition of any hospitals, facilities
or businesses, including the name of the acquisition giving rise to such earn-out and the
acquisition date.
(iv) Set forth on Section 5E(iv) of the Company Disclosure Letter is a true and
complete list of all hospital development projects of the Company or any Subsidiary of the
Company (collectively, the Development Projects), setting forth as to each
Development Project (a) the location or proposed location of such Development Project, (b)
any certificates of need that have been applied for in connection with such Development
Project and the status of all such applications and (c) any letters of intent, partnership
agreements or joint venture agreements relating to such Development Project.
(v) The information contained in Section 5E(v) of the Company Disclosure Letter
and the materials and documents referenced therein is true, correct and complete in all
material respects. Notwithstanding anything to the contrary in this Agreement, the
representations and warranties set forth in this Section 5E(v) are the sole and
exclusive representations and warranties of the Company or any of its Subsidiaries with
respect to Outlier Adjustments for the periods and hospitals listed on Section 5E(v)
of the Company Disclosure Letter.
5F. Undisclosed Liabilities. Except as set forth on Section 5F of the Company
Disclosure Letter, neither the Company nor any Subsidiary of the Company has any material
liabilities or obligations, except (a) as and to the extent reflected or reserved against in the
Latest Balance Sheet, (b) for liabilities and obligations which have been incurred since the date
of the Latest Balance Sheet in the ordinary course of business, (c) for liabilities and obligations
under this Agreement, (d) for executory obligations under contracts to which the Company or any
Subsidiary of the Company is a party and (e) for liabilities and obligations for Company
Transaction Expenses incurred in connection with the transactions contemplated hereby.
5G. Absence of Certain Developments. Except as set forth on Section 5G(a) of
the Company Disclosure Letter, since the date of the Latest Balance Sheet, (x) the Company and its
Subsidiaries have conducted their business in the ordinary course, consistent with past practice to
the extent relevant, and (y) there has not been any event, change, condition, state of facts or
development that, individually or in the aggregate, has had or would reasonably be expected to have
a Company Material Adverse Effect. In addition, and without limiting the foregoing, except as set
forth on Section 5G(b) of the Company Disclosure Letter or as expressly permitted or
expressly required by the terms of this Agreement, since the date of the Latest Balance Sheet,
neither the Company nor any of its Subsidiaries has:
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(i) issued or sold any of its equity interests or other equity securities, securities
convertible into its equity interests or other equity securities, or warrants, options or
other rights to purchase its equity interests or other equity securities;
(ii) sold, assigned or transferred any material portion of its tangible properties or
assets, except in the ordinary course of business, consistent with past practice to the
extent relevant;
(iii) sold, assigned, leased, licensed, conveyed or otherwise transferred any rights
under any patents, trademarks, trade names, copyrights, trade secrets or other intangible
assets, in each case owned by the Company or any of its Subsidiaries, other than in the
ordinary course of business, consistent with past practice to the extent relevant;
(iv) made or granted any material bonus (including, without limitation, any transaction
bonus or retention bonus), compensation or salary increase to any former or current employee
or group of former or current employees (except for increases in base compensation not
exceeding 5% in the aggregate in the ordinary course of business, consistent with past
practice to the extent relevant), or made, granted any increase in or established any
employee benefit, severance, insurance, deferred compensation, pension, retirement or profit
sharing plan or materially amended or terminated any existing Employee Benefit Plan (other
than in the ordinary course of business, consistent with past practice to the extent
relevant and except as may be required by, or in order to facilitate compliance with,
applicable law), or adopted any new Employee Benefit Plan;
(v) paid (or committed to pay) any management fee or made (or committed to make) any
loan or distribution of property or assets of the Company or any of its Subsidiaries to any
member, or declared, paid or set aside for payment any dividend or distribution with respect
to the equity interests of the Company, or purchased or redeemed (or committed to purchase
or redeem) any equity interests of the Company;
(vi) written down or cancelled any material receivables or debt, or waived or released
any material right or claim, except for cancellations, waivers and releases in the ordinary
course of business, consistent with past practice to the extent relevant;
(vii) suffered any material judgment with respect to, or made any material settlement
of, any Legal Proceeding;
(viii) effected any material change in accounting practices and procedures, other than
changes as a result of changes in GAAP; or
(ix) made or authorized any capital expenditures in excess of $50,000 individually or
$250,000 in the aggregate;
(x) entered into or materially amended any employment, severance or similar agreement
with any equityholder, director, officer or employee, or changed the job title, position or
job responsibilities of any senior management employees of the Company or its Subsidiaries;
(xi) acquired or disposed of any hospitals, facilities or businesses, other than the
opening or establishment of new hospitals, facilities or businesses;
-19-
(xii) made any loans or advances to, or guarantees for the benefit of, any Persons
(except to employees in the ordinary course of business, consistent with past practice to
the extent relevant);
(xiii) suffered any material destruction, loss or other casualty with respect to any
material assets which are used in the operation of conduct of its business; or
(xiv) agreed to do any of the foregoing.
5H. Real and Personal Property.
(i) Section 5H(i)(a) of the Company Disclosure Letter sets forth the address of
each Owned Real Property. Except as set forth on Section 5H(i)(b) of the Company
Disclosure Letter, the Company or one of its Subsidiaries has good and marketable fee simple
title to each Owned Real Property, free and clear of all Liens, except Permitted
Encumbrances (other than Liens created by Buyer). With respect to each Owned Real Property,
except as set forth on Section 5H(i)(c) of the Company Disclosure Letter: (a)
neither the Company nor any of its Subsidiaries has leased or otherwise granted to any
Person the right to use or occupy such Owned Real Property or any portion thereof; and (b)
there are no outstanding options, rights of first offer or rights of first refusal to
purchase such Owned Real Property or any portion thereof.
(ii) Section 5H(ii)(a) of the Company Disclosure Letter sets forth the address
of each Leased Real Property, and a true and complete list of all Leases. The Company or one
of its Subsidiaries owns good and valid leasehold interests in and to all the Leases. Except
for Permitted Encumbrances, there exist no Liens adversely affecting the use of the Leased
Real Property by the Company or any of its Subsidiaries. The Company has not received
written notice of any material default under any of the Leases which has not been cured or
waived. Except as set forth on Section 5H(ii)(b) of the Company Disclosure Letter,
no event has occurred which would allow the other party thereto to terminate or accelerate
performance under or otherwise modify (including upon the giving of notice or the passage of
time) any of such Leases. The Company or one of its Subsidiaries have the right to quiet
enjoyment of the Leased Real Property for the full term of the applicable Lease to the
extent provided in such Lease. Each Lease is a legal, valid and binding obligation of the
Company and its Subsidiaries, as applicable, enforceable against the Company and its
Subsidiaries in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors rights in general, or by general principles of equity. There are
no outstanding options or rights of any Person to acquire the Companys or any of its
Subsidiarys leasehold interests in any such Leased Real Property. All Leases as set forth
in Section 5H(ii)(c) of the Company Disclosure Letter are in full force and effect,
and neither the Company nor any Subsidiary of the Company, as applicable, is in material
default under any provision of such Leases, and, to the knowledge of the Company, no
condition exists which (with notice or lapse of time or both) could constitute a material
default thereunder in each case. True and complete copies of all Leases have been made
available for inspection by Buyer prior to the date of this Agreement.
(iii) Except as set forth on Section 5H(iii) of the Company Disclosure Letter,
neither the Company nor any Subsidiary of the Company has received written notice of public
improvements, annexation, special assessments, zoning or subdivision changes, or other
claims or charges with respect to any material part of the Real Property. To the knowledge
of the Company, each use of the Real Property by the Company and its Subsidiaries is and has
been valid, permitted and conforming uses in accordance with the current zoning
classification of the
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Real Property, and there are no outstanding variances or special use
permits affecting the Real Property or its uses.
(iv) Except (a) as set forth on Section 5H(iv) of the Company Disclosure
Letter, (b) as set forth on the Latest Balance Sheet, and (c) for Permitted Encumbrances,
the Company or one of its Subsidiaries has good title to all of the assets reflected on the
Latest Balance Sheet, except those disposed of by it since the date of the Latest Balance
Sheet, free and clear of all Liens. The Company and each of its Subsidiaries leases,
licenses, owns or otherwise has the right to use all assets used in and material to the
operation of the Business as currently conducted.
5I. Tax Matters.
(i) Except as set forth on Section 5I of the Company Disclosure Letter: (a)
each of the Company and each of its Subsidiaries has timely filed all Tax Returns that it is
required to file (except those under valid extensions); (b) all Taxes of the Company and its
Subsidiaries, whether or not shown to be payable on such Tax Returns, that are due and
payable prior to the Closing Date have been paid or shall be paid by the Company or its
Subsidiaries prior to the Closing Date (except Taxes that are being contested in good faith
and for which adequate reserves have been established in accordance with GAAP); (c) no
deficiency or proposed adjustment which has not been paid or resolved for any amount of Tax
has been asserted or assessed by any Taxing authority in writing against the Company or any
of its Subsidiaries; (d) neither the Company nor any of its Subsidiaries has consented to
extend the time in which any Tax may be assessed or collected by any Taxing authority (other
than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of
business); and (e) as of the date hereof, there are no ongoing or pending Tax audits by any
Taxing authority against the Company or any of its Subsidiaries.
(ii) The Company and each of its Subsidiaries have withheld and paid all Taxes required
to have been withheld and paid in connection with any amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party, and all Internal Revenue
Service Forms W-2 and 1099 required with respect thereto have been properly completed and
timely filed.
(iii) The Company and each of its Subsidiaries have paid, or have withheld and paid,
all sales, use and property Taxes required to have been paid, or withheld and paid.
(iv) No written claim has been made by any Taxing authority in a jurisdiction where
either the Company or any of its Subsidiaries does not file Tax Returns such that it is or
may be subject to taxation, including withholding obligations, by or in that jurisdiction.
(v) No payment which is or may be made by, from or with respect to any Employee Benefit
Plan to any current or former employee, director or agent of the Company or any ERISA
Affiliate, either alone or in conjunction with any other payment, event or occurrence, will
or could properly be characterized as an excess parachute payment under Section 280G of
the Code.
(vi) There is no Tax sharing or allocation agreement, arrangement or contract with any
Person pursuant to which the Company or any of its Subsidiaries would have liability for
Taxes of another Person following the Closing, and neither the Company nor any of its
Subsidiaries has liability for Taxes of another Person for any Tax period ending on or
before the Closing Date, in each such case other than incidental liabilities for Taxes of
another Person resulting from usual and customary provisions of lease, license, or other
similar contracts entered
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into in the ordinary course of business (for example, an
obligation to pay property taxes with respect to leased property pursuant to the terms of a
net lease).
(vii) Neither the Company nor any of its Subsidiaries (a) has ever been a member of any
consolidated, combined or unitary group of corporations for which it could be liable for
Taxes of any other Person pursuant to Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) and (ii) has any liability for Taxes of any other
Person by reason of being a successor or transferee by merger, liquidation or otherwise.
(viii) Neither the Company nor any of its Subsidiaries will be required to include any
item of income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any: (a) change in
method of accounting for a taxable period ending on or prior to the Closing Date; (b) any
closing agreement described in Section 7121 of the Code (or any similar provision of state,
local or foreign Tax law) executed on or prior to the Closing Date; (c) Tax ruling received
on or prior to the Closing that would have continuing effect after the Closing; (d)
installment sale or open transaction disposition made on or prior to the Closing Date; (e)
prepaid amount received on or prior to the Closing Date; or (f) settlement of any
intercompany accounts or indebtedness arising prior to the Closing.
(ix) Since formation, the Company and each of the Partnership Subsidiaries have been
treated as partnerships for federal, state and local income Tax purposes; neither the
Company nor any of the Partnership Subsidiaries has (a) elected to be treated as an
association taxable as a corporation or (b) has been treated as a publicly traded
partnership within the meaning of Section 7704 of the Code. Since formation, each of the
Companys Subsidiaries (other than the Partnership Subsidiaries and Regency Management
Company, Inc.) has been disregarded as an entity separate from its owner for federal, state
and local income Tax purposes, and none of such Subsidiaries has elected to be treated as an
association taxable as a corporation.
(x) Neither the Company nor any of its Subsidiaries has any obligation to make a
distribution to any of the Sellers after the Closing Date on account of Taxes or otherwise.
(xi) The Company has the power, directly or indirectly through a Subsidiary of the
Company, under the Organizational Documents of each of the Partnership Subsidiaries to cause
such Partnership Subsidiaries to make the election under Section 754 of the Code with
respect to the deemed transfer of interests in such Partnership Subsidiaries resulting from
the consummation of the transactions contemplated by this Agreement.
5J. Company Material Contracts.
(i) Section 5J(a) of the Company Disclosure Letter sets forth a complete list
as of the date of this Agreement of each of the following types of written and oral
contracts, leases, commitments and agreements to which the Company or any of its
Subsidiaries is a party (collectively, the Company Material Contracts):
(a) any agreement, plan or arrangement by which the Company or any of its
Subsidiaries is bound with regard to employment, consulting services, compensation,
bonus, incentive, stock option, equity purchase or other equity-based compensation
or right (including, without limitation, profits interests or equity appreciation
rights), severance pay, retention bonuses, or success fees, other than (a) any
Employee Benefit Plan set forth on Section 5N(i) of the Company Disclosure
Letter, (b) any consulting
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agreements that either (I) require future payments by the
Company or any of its Subsidiaries of less than $100,000 or (II) have a remaining
term of less than one year and can be terminated by the Company or any of its
Subsidiaries upon notice of 60 days or less without material cost or penalty, or (c)
any oral at will employment arrangements;
(b) each management, operating, services or other similar agreement pertaining
to the operation and maintenance of any Facility with annual payments in excess of
$100,000 and that is not terminable by the Company or any Subsidiary of the Company
upon notice of 60 days or less without substantial cost or penalty;
(c) any employee collective bargaining agreement or other labor or union
contract or agreement;
(d) all material powers of attorney;
(e) all partnership or joint venture agreements;
(f) all agreements, arrangements or understandings with any Affiliate of the
Company (other than any Subsidiary of the Company);
(g) any agreement containing a covenant not to compete granted by the Company
or any of its Subsidiaries in favor of a third party that impairs the Business as
currently conducted, or which expressly restricts the ability of the Company or any
of its Subsidiaries to conduct business of any type or in any location;
(h) any lease or similar agreement under which (a) the Company or any of its
Subsidiaries is lessee of, holds or uses, any machinery, equipment, vehicle or other
tangible personal property owned by a third party or (b) the Company or one of its
Subsidiaries is a lessor or sublessor of, or makes available for use by any third
party, any tangible personal property owned or leased by the Company or any of its
Subsidiaries, in any case which has future required scheduled payments in excess of
$100,000 per annum and is not terminable by it upon notice of 60 days or less
without substantial cost or penalty;
(i) all instruments relating to Indebtedness, including any note, bond, deed of
trust, mortgage, indenture or agreement to borrow money, any agreement relating to
the extension of credit, or any agreement of guarantee in favor of any Person other
than the Company or a Subsidiary of the Company;
(j) any contract or agreement evidencing any Lien on any of the assets or
properties of the Company or any of its Subsidiaries (other than Permitted
Encumbrances);
(k) any agreement, contract, lease, license, or instrument under which the
Company or any of its Subsidiaries has agreed (a) to purchase any membership
interests,
partnership interests, equity interests, stock, indebtedness or assets from any
third party for an aggregate purchase price in excess of $100,000, (b) to acquire
any interest in any business enterprise (whether through the purchase or sale of
assets, equity interests or by merger, consolidation or other business enterprise),
or (c) to sell or dispose of any of its membership interests, partnership interests,
equity interests, stock, indebtedness or assets to any third party for an aggregate
sale price in excess of $100,000;
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(l) each agreement, commitment or outstanding purchase order relating to
capital expenditures that involves total remaining payments by the Company or any
Subsidiary of the Company of more than $50,000;
(m) any material contract or agreement relating to the licensing of Company
Intellectual Property (other than licenses for commercially-available, standard,
off-the-shelf, desktop or similar computer software), whether the Company or a
Subsidiary is the licensee/grantee or licensor/grantor thereunder;
(n) all material agreements, contracts or commitments for any charitable or
political contribution;
(o) any consent order, consent judgment or similar agreement with any
Governmental Entity whereby the Company is under an obligation to perform
activities, refrain from activities and/or pay money;
(p) any other agreement, contract, lease, license, instrument or commitment
binding upon the Company or any of its Subsidiaries, in each case not included in
clauses (i) through (xv) above, which has future required scheduled payments to or
by the Company or any of its Subsidiaries in excess of $100,000 per annum and is not
terminable by it upon notice of 60 days or less without substantial cost or penalty.
(ii) The Company has made available to Buyer a copy of each Company Material Contract,
unless such delivery or inspection would be in violation of the provisions of any such
Company Material Contract (in which case a redacted copy has been made available to Buyer to
the extent permitted by such Company Material Contract). Except as disclosed on Section
5J(b) of the Company Disclosure Letter, the Company or one of its Subsidiaries, as
applicable, has performed all material obligations required to be performed by it to date
under the Company Material Contracts and is not (with or without the lapse of time or the
giving of notice, or both) in breach or default thereunder in any material respect. Except
as disclosed on Section 5J(c) of the Company Disclosure Letter, neither the Company
nor any Subsidiary of the Company has received written notice of such a default, has
received written notice of an event or occurrence of which with the giving of notice or the
lapse of time would constitute a default in any material respect under any covenant or
condition under any Company Material Contract, and, to the knowledge of the Company, no
other party to any such Company Material Contract is in default in any material respect
thereunder.
5K. Intellectual Property. Except as set forth on Section 5K of the Company
Disclosure Letter, the Company or one of its Subsidiaries owns or possesses a valid right or
license to use all Company Intellectual Property. No claims are pending in writing or, to the
knowledge of the Company, threatened against the Company or any of its Subsidiaries as of the date
of this Agreement with respect to the ownership, use, license, enforceability, or validity of any
Company Intellectual Property owned by the Company, other than claims which if determined adversely
to the Company and its Subsidiaries would not result in a Company Material Adverse Effect. Except
as set forth on Section 5K of the Company
Disclosure Letter, as of the date of this Agreement, none of the Company or any of its
Subsidiaries has any unresolved written claim, suit, charge, demand or allegation (including cease
and desist letters or offers of license) that the conduct of the business of the Company or any of
its Subsidiaries as currently conducted infringes, dilutes, misappropriates or otherwise violates
the Intellectual Property of a third party. To the knowledge of the Company, the conduct of the
businesses of the Company and its Subsidiaries does not infringe, dilute, misappropriate or
otherwise violate, and has not infringed, diluted, misappropriated or otherwise violated, the
Intellectual Property of a third party. The information
-24-
technology systems used in the conduct of
the business of the Company and its Subsidiaries, including the computer software, hardware,
firmware and telecommunications equipment and systems, operate adequately for the needs of the
business of the Company and its Subsidiaries as of the Closing.
5L. Legal Proceedings. Except as set forth on Section 5L of the Company
Disclosure Letter, (i) there are no Legal Proceedings pending or, to the knowledge of the Company,
threatened by or against the Company or any of its Subsidiaries or any of the property or rights of
the Company or any Subsidiary of the Company, and (ii) there are no outstanding judgments, orders,
writs, injunctions, decrees or, to the knowledge of the Company, investigations of any Governmental
Entity against the Company or any of the Companys Subsidiaries. To the knowledge of the Company,
there are no pending Legal Proceedings against the Company or its Subsidiaries agents, officers or
employees with respect to their employment with the Company or any Subsidiary of the Company, which
involve allegations of criminal violations of any Legal Requirements by the Company or any
Subsidiary of the Company or their agents, officers or employees acting on behalf of the Company or
any Subsidiary of the Company, including without limitation, Medicare or Medicaid. Except as set
forth on Section 5L of the Company Disclosure Letter, neither the Company nor any
Subsidiary of the Company has received written notice from a Governmental Entity of any pending or
threatened Legal Proceedings or surveys (other than surveys conducted in the ordinary course of
business).
5M. Brokerage. Except for fees and expenses payable to Jefferies & Company, Inc. or
Affiliates of the Representative, which in each case shall constitute Company Transaction Expenses,
no broker, finder, investment banker or other Person is entitled to any brokerage commissions,
finders fees, or similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of the Sellers or the Company
or any of its Subsidiaries.
5N. Company Employee Benefit Plans.
(i) Section 5N(i)(a) of the Company Disclosure Letter sets forth a true and
complete list of each material Employee Benefit Plan. Except as set forth on Section
5N(i)(b) of the Company Disclosure Letter, each Employee Benefit Plan has been
maintained, operated, funded and administered in accordance with its terms and the terms of
any related documents or agreements and complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code and other applicable Legal
Requirements.
(ii) As applicable with respect to each Employee Benefit Plan, the Company has made
available to Buyer, true and complete copies of, (i) each written Employee Benefit Plan,
including all amendments thereto, and in the case of an unwritten material Employee Benefit
Plan, a written description thereof, (ii) all trust documents, investment management
contracts, custodial agreements and insurance contracts relating thereto, (iii) the current
summary plan description and each summary of material modifications thereto, (iv) the three
most recently filed annual reports (Form 5500 and all schedules thereto), (v) the most
recent Internal Revenue Service (IRS) determination letter and each currently
pending application to the IRS for a determination letter, (vi) the three most recent
summary annual reports, actuarial reports and
financial statements and (vii) all records, notices and filings concerning IRS or
Department of Labor audits or investigations, prohibited transactions within the meaning
of Section 406 of ERISA or Section 4975 of the Code and reportable events within the
meaning of Section 4043 of ERISA.
(iii) Each Employee Benefit Plan that is intended to meet the requirements of a
qualified plan under Section 401(a) of the Code is so qualified, its related trust is
exempt from
-25-
taxation under Section 501(a) of the Code and it has either received a favorable
determination letter from the IRS or is operated under a prototype plan document that has
received a favorable opinion letter from the IRS.
(iv) Except as set forth on Section 5N(iv) of the Company Disclosure Letter,
none of the Company, any of its Subsidiaries, or any ERISA Affiliates contributes to, or has
any liability (contingent or otherwise) with respect to any Title IV Plan, any Multiemployer
Plan or any Money Purchase Plan.
(v) Except as set forth in Section 5N(v) of the Company Disclosure Letter, all
contributions to, and payments from, any Employee Benefit Plan which may have been required
in accordance with the terms of such Employee Benefit Plan, any related document or
applicable Legal Requirement, have been timely made.
(vi) Except as set forth on Section 5N(vi) of the Company Disclosure Letter,
there are no pending audits or investigations by any Governmental Entity involving any
Employee Benefit Plan, nor, to the knowledge of the Company, threatened or pending claims
(except for individual claims for benefits payable in the normal operation of the Employee
Benefit Plans), suits or proceedings involving any Employee Benefit Plan, any fiduciary
thereof or service provider thereto.
(vii) None of the Company, any ERISA Affiliate, or to the knowledge of the Company, any
fiduciary, trustee or administrator of any Employee Benefit Plan, has engaged in or, in
connection with the transactions contemplated by this Agreement, will engage in any
transaction with respect to any Employee Benefit Plan which would subject any such Employee
Benefit Plan, the Company, any ERISA Affiliate or Buyer to a tax, penalty or liability for a
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code. None of
the assets of any Employee Benefit Plan is invested in any property constituting employer
real property or an employer security, within the meaning of Section 407 of ERISA.
(viii) The Company and each ERISA Affiliate have complied in all material respects with
the notice and continuation coverage requirements of Section 4980B of the Code and the
regulations thereunder and the American Recovery and Reinvestment Act of 2009 with respect
to each Employee Benefit Plan that is a group health plan within the meaning of Section
5000(b)(1) of the Code. Except as set forth on Section 5N(viii) of the Company
Disclosure Letter, the Company, its Subsidiaries and each Employee Benefit Plan is in
compliance in all material respects with the applicable provisions of the Health Insurance
Portability and Accountability Act of 1996 (HIPAA) and the regulations issued
thereunder.
(ix) No Employee Benefit Plan provides and neither the Company nor any ERISA Affiliate
has promised to provide death, medical or other welfare benefits beyond termination of
service or retirement other than (A) coverage mandated by law or (B) death benefits under an
Employee Benefit Plan qualified under Section 401(a) of the Code.
(x) Except as set forth on Section 5N(x) of the Company Disclosure Letter, the
execution of, and performance of the transactions contemplated by, this Agreement will not
constitute an event under any Employee Benefit Plan that will, either alone or in
conjunction with any other event or occurrence, result in any payment (whether as severance
pay or otherwise), acceleration, vesting or increase in benefits with respect to any current
or former employee, director or agent of the Company or its Subsidiaries.
-26-
(xi) Each Employee Benefit Plan that constitutes a non-qualified deferred compensation
plan within the meaning of Section 409A of the Code, complies in both form and operation
with the requirements of Section 409A of the Code so that no amount paid pursuant to any
such Employee Benefit Plan is subject to tax under Section 409A of the Code.
(xii) Except as set forth on Section 5N(xii) of the Company Disclosure Letter,
the Company and its Subsidiaries have, for purposes of each Employee Benefit Plan, correctly
classified all individuals performing services for the Company or any of its Subsidiaries as
employees, independent contractors or agents, as applicable.
5O. Medicare Participation/Accreditation.
(i) All acute care hospitals owned, operated or managed by the Company or any
Subsidiary of the Company (each a Facility), as applicable, are qualified for
participation in the Medicare, Medicaid, CHAMPUS and TRICARE programs (as indicated), have
current and valid provider contracts with each such program (as indicated), and are and have
been in compliance in all material respects with the conditions of participation in such
programs with respect to each participating location. Set forth on Section 5O(i) of
the Company Disclosure Letter are all of the Companys and its Subsidiaries provider
numbers and a list of the Facilities that are billing for services utilizing such provider
numbers. Neither the Company nor any Subsidiary of the Company has received any written
notice from any of the Medicare, Medicaid, CHAMPUS or TRICARE programs of any pending or
threatened investigation or survey under the Medicare, Medicaid, CHAMPUS or TRICARE programs
(other than routine surveys in the ordinary course of business).
(ii) Except as set forth on Section 5O(ii) of the Company Disclosure Letter,
since January 1, 2006, neither the Company nor any Subsidiary of the Company has received
written notice of any pending or threatened investigation or inquiry (other than routine
surveys and audits that have not resulted in an investigation or inquiry) from any
Governmental Entity, fiscal intermediary, carrier or similar entity that enforces or
administers the statutory or regulatory provisions in respect of any governmental health
care program. There are no outstanding judgments, orders, writs, injunctions or decrees of
any Governmental Entity in respect of any governmental health care program against the
Company or any Subsidiary of the Company (whether or not covered by insurance).
(iii) Set forth on Section 5O(iii) of the Company Disclosure Letter is
information concerning the number of cases at the Facilities that have been subject to the
medical necessity reviews contemplated by Section 114(f) of Medicare, Medicaid and State
Childrens Health Insurance Program Extension Act of 2007, the number of such cases that
have been resolved without adjustment and with adjustment of the related payment amounts and
the number of such cases that are still pending, and listing and description of the status
of all appeals by the Company or its Subsidiaries of any such adjustments. Also set forth on
Section 5O(iii) of the Company Disclosure Letter is the coding accuracy rate of each
Facility for 2009.
5P. Cost Reports and Other Filings.
(i) Each cost report (Filing) with respect to Medicare and each state
Medicaid program in which the Company or any Subsidiary of the Company participates required
to be filed by or on behalf of the Company or any Subsidiary of the Company on or prior to
the Closing Date has been timely filed in accordance in all material respects with
applicable Legal Requirements and (ii) all of such Filings were, when filed or as they have
been subsequently
-27-
amended, true and complete in all material respects. The Company has made
available for inspection by Buyer prior to the date of this Agreement each such Filing made
after January 1, 2006.
(ii) Section 5P(ii)(a) of the Company Disclosure Letter lists the Medicare and
Medicaid cost reports duly filed by the Company and each Subsidiary of the Company covering
all open cost reporting periods prior to the Closing Date and which of such cost reports has
been (i) audited but not fully settled and (ii) neither audited nor settled, and a brief
description of any and all notices of program reimbursement, proposed or pending audit
adjustments, disallowances, appeals of disallowances, and any and all other unresolved
claims or disputes in respect of such cost reports. Except as set forth on Section
5P(ii)(b) of the Company Disclosure Letter, neither the Company nor any Subsidiary of
the Company has received written notice of any pending dispute between the Company and/or
any Subsidiary of the Company and Governmental Entities or the Medicare fiscal intermediary
regarding such cost reports for the remaining unaudited cost reports, other than with
respect to adjustments thereto made in the ordinary course of business. Neither the Company
nor any Subsidiary of the Company has received written notice of, and the Company does not
have knowledge of, any claims against the Company or any Subsidiary of the Company by any
third-party payors other than routine Medicare and Medicaid audit adjustments. Neither the
Company nor any Subsidiary of the Company has received any written notice that Medicare or
Medicaid has any claims against it which could result in offsets against future
reimbursement in excess of that provided for in the Reference Balance Sheet.
(iii) All home office cost reports filed by the Company and each Subsidiary of the
Company are true and correct in all material respects and have been properly allocated among
the Company and each Subsidiary of the Company in accordance in all material respects with
Medicare and Medicaid rules and regulations.
5Q. Exclusion. Except as set forth on Section 5Q of the Company Disclosure
Letter, neither the Company nor any Subsidiary of the Company nor, to the knowledge of the Company,
any Person who has a direct or indirect ownership interest (as those terms are defined in 42 C.F.R.
§1001.1001(a)(2)) in the Company or any Subsidiary of the Company of 5% or more or who has an
ownership or control interest (as defined in Section 1124(a)(3) of the Social Security Act or any
regulations promulgated thereunder) in the Company or any Subsidiary of the Company or any officer,
director, employee, vendor or agent of the Company or any Subsidiary of the Company: (a) has had a
civil monetary penalty assessed against it under Section 1128A of the Social Security Act or any
regulations promulgated thereunder; (b) has been excluded from participation under any federal
health care program; or (c) has been convicted (as that term is defined in 42 C.F.R. §1001.2) of
any of the categories of offenses as described in the Social Security Act Section 1128(a) and
(b)(1), (2), (3) or any regulations promulgated thereunder. Neither the Company nor any Subsidiary
of the Company has received any notice from any third-party payor of its intentions to suspend,
limit, terminate, revoke or fail to renew any contractual arrangement with the Company or any
Subsidiary of the Company.
5R. Billing. The Company has designed its internal policies and procedures with a
view toward ensuring that all billing by, or on behalf of, the Company or any Subsidiary of the
Company to
third-party payors, including, but not limited to, Medicare, Medicaid and private insurance
companies is, in the aggregate, true, correct and complete in all material respects. Neither the
Company nor any Subsidiary of the Company has received written notice from any third-party payor,
including but not limited to, Medicare or Medicaid, that indicates that Buyer could not continue to
bill in substantially the same manner and structure as the Company or any Subsidiary of the Company
is billing on the date hereof.
-28-
5S. Reimbursement Matters. Except as disclosed on Section 5S of the Company
Disclosure Letter, for the previous three years, neither the Company nor any Subsidiary of the
Company has received any written notice of denial of payment or overpayment of a material nature
from a federal health care program or any other third party reimbursement source (inclusive of
managed care organizations) with respect to items or services provided by the Company and/or any
Subsidiary of the Company, other than those which are in the ordinary course of business or have
been finally resolved in any settlement for an amount less than $50,000. Except as disclosed on
Section 5S of the Company Disclosure Letter, neither the Company nor any Subsidiary of the
Company is subject to (i) a focused review of claims by Medicare or (ii) a Corporate Integrity
Agreement, Certification of Compliance Agreement or similar government-mandated compliance
program.
5T. Licenses. Section 5T of the Company Disclosure Letter contains a complete
and accurate list of each material License that is owned, held or possessed by the Company or any
Subsidiary of the Company. Each License listed or required to be listed on Section 5T of
the Company Disclosure Letter is valid and in full force and effect. Except as set forth on
Section 5T of the Company Disclosure Letter:
(i) the Company and each Subsidiary of the Company is, and at all times since January
1, 2006 has been, in compliance in all material respects with the terms and requirements of
each License identified or required to be identified on Section 5T of the Company
Disclosure Letter;
(ii) to the knowledge of the Company, no event has occurred or circumstance exists that
may (with or without notice or lapse of time) (X) constitute or result directly or
indirectly in a material violation of or a material failure to comply with any term or
requirement of any License listed or required to be listed on Section 5T of the
Company Disclosure Letter or (Y) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, termination or nonrenewal of, or any modification to,
any License listed or required to be listed on Section 5T of the Company Disclosure
Letter;
(iii) neither the Company nor any Subsidiary of the Company has received, at any time
since January 1, 2006, written notice from any Governmental Entity or any other Person
regarding (X) any material violation of or material failure by the Company or any Subsidiary
of the Company to comply with any term or requirement of any License or (Y) any revocation,
withdrawal, suspension, cancellation or termination of, or modification to, any License; and
(iv) all applications required to have been filed for the renewal of the Licenses
listed or required to be listed on Section 5T of the Company Disclosure Letter have
been duly filed on a timely basis with the appropriate Governmental Entities, and all other
filings required to have been made with respect to such Licenses have been duly made on a
timely basis with the appropriate Governmental Entities.
(v) To the knowledge of the Company, each administrator, medical director, nurse,
therapist or other medical professional employee or medical contracted agent (each a
Professional Employee) of the Company or any Subsidiary of the Company holds such
license
as is necessary for that Professional Employee to carry out his or her duties for the
Company or Subsidiary of the Company, and each such license is valid and in full force and
effect. Except as set forth on Section 5T of the Company Disclosure Letter:
(a) to the knowledge of the Company, each Professional Employee is, and at all
times since January 1, 2006 has been, in compliance in all material respects with
all of the terms and requirements of each such License;
-29-
(b) to the knowledge of the Company, no event has occurred or circumstance
exists that may (with or without notice or lapse of time) (X) constitute or result
directly or indirectly in a material violation of or a material failure to comply
with any term or requirement of any such License or (Y) result directly or
indirectly in the revocation, withdrawal, suspension, cancellation, termination or
non-renewal of, or any modification to, any such License;
(c) to the knowledge of the Company, no Professional Employee has received, at
any time since January 1, 2006, any notice or other communication (whether oral or
written) from any Governmental Entity or any other Person regarding (X) any actual,
alleged, possible or potential material violation of or material failure to comply
with any term or requirement of any License or (Y) any actual, proposed, possible or
potential revocation, withdrawal, suspension, cancellation or termination of, or
modification to, any License; and
(d) to the knowledge of the Company, all applications required to have been
filed for the renewal of such Licenses have been duly filed on a timely basis with
the appropriate Governmental Entity, and all other filings required to have been
made with respect to such Licenses in order for the Professional Employee to perform
his or her duties for the Company or any Subsidiary of the Company have been duly
made on a timely basis with the appropriate Governmental Entity.
The Licenses listed on Section 5T of the Company Disclosure Letter collectively constitute
all of the Licenses necessary to permit the Company and its Subsidiaries to lawfully conduct and
operate the Business (including, without limitation, the operation of each of the Facilities) in
substantially the manner they currently conduct and operate the Business and to permit the Company
and Subsidiary of the Company to own and use their assets in substantially the manner in which they
currently own and use such assets.
5U. Long Term Hospital Certification and Payment.
(i) Each Facility meets the requirements for exclusion from the Medicare short-stay
hospital inpatient prospective payment system specified in 42 CFR § 412.1(a)(1) by complying
in all material respects with the requirements set forth at 42 CFR §412.23(e), including
without limitation the requirements concerning the calculation of the average length of stay
of each Facility set forth at 42 CFR §412.23(e)(3).
(ii) Each Facility that occupies space in a building also used by another hospital or
in one or more buildings located on the same campus as buildings used by another hospital
meets the requirements applicable to such Facility under 42 CFR §412.22(e), (f) or (h) in
all material respects.
(iii) Set forth on Section 5U(iii) of the Company Disclosure Letter is a table
listing: (A) each Facility; (B) whether the Facility is a freestanding long-term care
hospital as defined at 42 CFR §412.23(e)(5), a hospital within hospital as defined at 42
CFR §412.22(e), or a satellite facility as defined at 42 CFR §412.22(h); (C) in the case
of any Facility identified as a hospital within hospital, whether the Facility is
grandfathered by meeting the criteria at 42 CFR §412.22(f); (D) in the case of any
Facility identified as a hospital within hospital but is not grandfathered, whether the
Facility is subject to the transition at 42 CFR §412.534(g); (E) in the case of any Facility
identified as a satellite facility, whether the Facility is grandfathered by meeting the
criteria at 42 CFR §412.22(h)(3)(i); (F) in the case of any Facility identified as a
-30-
satellite facility but is not grandfathered, whether the Facility is subject to the
transition at 42 CFR §412.534(g); (G) whether the Facility is a rural hospital as
contemplated by 42 CFR §412.534(d) or 42 CFR §412.536(c); (H) whether the Facility is a
MSA-dominant hospital as contemplated by 42 CFR §412.534(e) or 42 CFR §412.536(d); (I) for
the Facilitys most recent cost reporting period, the percentage of patients admitted to the
Facility from any hospital located in the same building or on the same campus as the
Facility; and (J) for the Facilitys most recent cost reporting period, the percentage of
patients admitted to the Facility from any hospital from which the Facility admitted 25% or
more of its patients and the name of each such hospital.
5V. Census and Payor Mix Reports. The Company has made available to Buyer true and
complete reports detailing the census and payor mix for each Facility for all periods from January
1, 2008 to September 30, 2009.
5W. Transactions With Affiliates. Except as set forth on Section 5W of the
Company Disclosure Letter, since January 1, 2008, no director, officer, employee or greater than
five percent (5%) equityholder of the Company or member of the family or Affiliate (other than a
Subsidiary of the Company or a portfolio company of such Person) of any such Person is a party to
any transaction with the Company or any Subsidiary of the Company, including any contract providing
for the employment of, furnishing of services by, rental of real or personal property from or
otherwise requiring payments to any such Person or firm, other than employment-at-will arrangements
in the ordinary course of business.
5X. Bank Accounts. Section 5X of the Company Disclosure Letter sets forth a
list of all bank and securities accounts and lockboxes maintained by the Company or any Subsidiary
of the Company, a list of persons authorized to sign on behalf of the Company and each Subsidiary
of the Company with respect to each such account and a list of persons with authorized access to
each such lockbox.
5Y. Insurance. Section 5Y of the Company Disclosure Letter contains a true,
correct and complete list of all insurance policies or programs of self-insurance maintained by or
on behalf of the Company or any Subsidiary of the Company in effect as of the date hereof (in the
case of claims made based policies) and for policy periods beginning on or after January 1, 2006
(in the case of occurrence based policies), indicating for each policy the carrier, the type of
insurance coverage, the amounts of coverage, deductible, premium rate, cash value if any, whether
such policy is on an occurrence or claims made basis, expiration date and whether the program
was retrospectively rated. All such policies listed on Section 5Y of the Company
Disclosure Letter are in full force and effect. True and complete copies of all such insurance
policies have been made available for inspection by Buyer prior to the date of this Agreement.
Neither the Company nor any Subsidiary of the Company, as the case may be, is in material default
under any of such policies. No written notice of cancellation or non-renewal has been received by
the Company or any Subsidiary of the Company under any of such policies. There has not been any
failure by the Company or any Subsidiary of the Company to give notice of any material pending
claim under any such policy in a timely fashion or in the manner or detail required by the policy.
Except as set forth on Section 5Y of the Company Disclosure Letter, there are no
outstanding unpaid premiums under such policies that are due and payable as of the date hereof,
other than accounts payable
in the ordinary course of business. No written disallowance of any material claim under any
such policy has been received by the Company or any Subsidiary of the Company. Neither the Company
nor any Subsidiary of the Company has been refused any insurance, nor has any of their coverage
been limited by any insurance carrier to which any of them has applied for insurance or with which
any of them has carried insurance during the last three years. Except as disclosed on Section
5Y of the Company Disclosure Letter, neither the Company nor any Subsidiary of the Company is
party to any agreement pursuant to which it will be obligated to pay any retrospectively rated
premiums, deductible amounts or self-insured retentions in connection with any insurance policies.
-31-
5Z. Compliance with Applicable Laws.
(i) Except as set forth on Section 5Z of the Company Disclosure Letter, the
Company and each Subsidiary of the Company is, and for the applicable statute of
limitations, has been, in compliance in all material respects with all Legal Requirements
that are or were applicable to it or to the conduct or operation of its business or the
ownership, lease or use of any of its assets.
(ii) Except as set forth on Section 5Z of the Company Disclosure Letter,
neither the Company nor any Subsidiary of the Company has received, at any time since
January 1, 2006, any written notice, or, the knowledge of the Company, other communication
from any Governmental Entity or any other Person regarding (i) any violation of, or failure
to comply in any material respect with, any Legal Requirement, or (ii) any obligation on the
part of the Company or any Subsidiary of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(iii) Without limitation of the other provisions of this Section 5Z, except as
set forth on Section 5Z of the Company Disclosure Letter:
(a) neither the Company nor any Subsidiary of the Company has submitted any
claim in connection with any referral to any Facility in violation in any material
respect of any applicable self-referral law, including, without limitation, the
Ethics in Patient Referrals Act, 42 U.S.C. §1395nn and regulations thereunder, or
any applicable state self-referral law;
(b) no physician and no immediate family member of a physician who makes
referrals or is in a position to make referrals to any Facility has a direct or
indirect ownership or investment interest in the Company or any Subsidiary;
(c) neither the Company nor any Subsidiary of the Company has submitted any
claim for payment to any payor source, either governmental or nongovernmental, in
violation in any material respect of any false claim or fraud law, including,
without limitation, the False Claims Act, 31 U.S.C. §3729;
(d) neither the Company nor any Subsidiary of the Company is presently, or has
engaged in any activities which are cause for material criminal or civil penalties
and/or mandatory or permissive exclusion from any Health Care Program, including,
without limitation, (A) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any benefit or
payment; (B) knowingly and willfully making or causing to be made a false statement
or representation of a material fact for use in determining rights to any benefit or
payment; (C) presenting or causing to be presented a claim for reimbursement under
any Health
Care Program that is: (1) for an item or service the claimant knows or should
know was not provided as claimed; (2) for an item or service the claimant knows or
should know is false or fraudulent; or (3) for an item or service the claimant knows
or should know is not medically necessary; (D) any failure by a claimant to disclose
knowledge of the occurrence of any event affecting the initial or continued right to
any benefit or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; (E) knowingly or willfully soliciting
or receiving any bribe, rebate, payoff, influence payment, kickback or other payment
of any nature in violation of any Legal Requirement with respect to any Health Care
Program; or (F) knowingly and
-32-
willfully making or causing to be made or inducing or
seeking to induce the making of any false statement or representation (or omitting
to state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading) or a material fact with respect to (1)
the conditions or operations of a Facility in order that such Facility may obtain
certification, accreditation or similar approval under any Federal Health Care
Program (as defined at 42 U.S.C. §1320a-7b(f)) or any health care program operated
by or financed in whole or in part by any state or other government jurisdiction in
which the Company or any Subsidiary of the Company is authorized to do business
(each a State Health Care Program and together with the Federal Health
Care Programs, the Health Care Programs), or (2) information required to
be provided under §1124A of the Social Security Act (42 U.S.C. §1320a-3); and
(e) neither the Company, nor any Subsidiary of the Company nor, to the
knowledge of the Company, any officer, director, employee or contracted agent (for
or on behalf of the Company or any Subsidiary of the Company) of the Company or any
Subsidiary of the Company, has, directly or indirectly, (A) offered, paid, solicited
or received any remuneration, in cash or in kind, to, or made any financial
arrangements with, any past or present customers, past or present suppliers,
contractors or third party payors of the Company or any Subsidiary of the Company,
in order to obtain business or payments from such Persons in violation of any Legal
Requirement in any material respect; (B) solicited, received, given or agreed to
give, or is aware that there has been made or that there is any agreement to make,
any gift or gratuitous Payment (as hereinafter defined) of any kind, nature or
description to any customer or potential customer, supplier or potential supplier,
contractor, third party payor or any other Person in violation of any Legal
Requirement in any material respect; (C) made or agreed to make, or is aware that
there has been made or that there is any agreement to make, any contribution,
payment, gift or other distribution, whether in money, property or services (a
Payment) to, or for the private use of, any governmental official,
employee or agent where the Payment was in violation of any Legal Requirement in any
material respect; (D) established or maintained any unrecorded fund or asset for any
purpose or intentionally made any false or artificial entries on any of the books or
records of the Company or any Subsidiary of the Company for any reason; (E) made, or
agreed to make, or is aware that there has been made or that there is any agreement
to make, any Payment to any Person with the intention or understanding that any part
of such Payment would be used for any purpose other than that described in the
documents supporting such Payment; or (F) solicited, received, paid or offered any
illegal remuneration for any referral to any Facility or other prohibited conduct in
violation of any Legal Requirement in any material respect, including without
limitation, the Federal Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b), or any
applicable state anti-kickback law.
5AA. Environmental. Except as set forth on Section 5AA of the Company
Disclosure Letter, (i) the Company and its Subsidiaries since January 1, 2006 have been and are in
compliance in all
material respects with all Environmental Laws; (ii) the Company and its Subsidiaries maintain
and are in compliance in all material respects with all permits, licenses and other authorizations
that are required pursuant to Environmental Laws for the occupation of its facilities and the
operation of its business as presently conducted (Environmental Permits); all such
material Environmental Permits are listed on Section 5AA of the Company Disclosure Letter,
and are in full force and effect, with all applications for renewal timely filed; (iii) neither the
Company nor any of its Subsidiaries has received any written notice, demand or request for
information regarding any actual or alleged material violation of Environmental Laws, or any
material liabilities or potential liabilities arising under Environmental Laws; (iv) neither the
Company nor any of its Subsidiaries, nor to the knowledge of the Company, any other Person has had
a
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release of Hazardous Substances (as defined below) on the Owned or Leased Real Property that
would reasonably be expected to require material investigation, remediation or other response
action by the Company or any Subsidiary; (v) there are no present (nor to the knowledge of the
Company, past) actions, activities, circumstances, conditions, events or incidents that would
reasonably be expected to form the basis of a claim, action or proceeding under Environmental Laws
against the Company or any Subsidiary that would have or reasonably be expected to have a Company
Material Adverse Effect; and (vi) the Company has provided to Buyer copies of all material
environmental assessments, audits, reports, correspondence and other documents relating to the
Company or any of its Subsidiaries to the extent the forgoing are in the possession of the Company
or any of its Subsidiaries. For purposes of this Agreement, Environmental Laws shall mean
all applicable federal, state, and local statutes, regulations, and ordinances having the force or
effect of Legal Requirements, and all judicial and administrative orders and determinations,
concerning pollution or protection of the environment, including all those relating to the
presence, use, production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened release, control, or
cleanup of any hazardous or toxic materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, radioactive materials, chemotherapeutic,
biohazardous or infectious wastes, petroleum products or byproducts, asbestos, or polychlorinated
biphenyls (Hazardous Substances). Notwithstanding anything to the contrary in this
Agreement, the representations and warranties set forth in this Section 5AA , Section
5D(ii) and Section 5L are the sole and exclusive representations and warranties of the
Company or any of its Subsidiaries with respect to environmental matters, including matters arising
under or relating to Environmental Laws.
5BB. Employees and Labor Relations.
(i) Set forth on Section 5BB(i) of the Company Disclosure Letter hereto is a
(a) list of all payments required to be made by the Company and/or its Subsidiaries to
directors, officers, employees, or consultants contingent on the consummation of the
transactions contemplated by this Agreement and (b) list as of the date hereof of all
employees of the Company and each Subsidiary of the Company entitled to receive a base
salary at an annual rate in excess of $100,000 and their respective positions and annual
base salaries.
(ii) Except as set forth on Section 5BB(ii) of the Company Disclosure Letter,
at the present time and during the past three years, (a) no unfair labor practice complaint
or charge against the Company or any Subsidiary of the Company has been brought before, or,
to the knowledge of the Company, threatened by, the National Labor Relations Board or any
other Governmental Entity in any jurisdiction; (b) there has not occurred or, to the
knowledge of the Company, been threatened any labor strike, picketing, dispute involving a
group of employees, slowdown, stoppage, or other similar labor activity against or involving
the Company or any Subsidiary of the Company; (c) neither the Company nor any Subsidiary of
the Company is or has been party to any collective bargaining agreement and there are no
labor unions or other organizations representing, purporting to represent, or attempting to
represent any group of employees; (d) neither the Company nor any Subsidiary of the Company
is or has been a party to,
or affected by or threatened with, any union organizing or election activity or any
dispute or controversy with a union involving its employees; and (e) neither the Company nor
any Subsidiary of the Company has experienced any material labor difficulty involving a
group of employees.
(iii) Except as set forth on Section 5BB(iii) of the Company Disclosure Letter,
neither the Company nor any Subsidiary of the Company has effectuated a plant closing or
mass layoff under the Worker Adjustment Retraining Notification Act (WARN Act)
nor in the past 90 days has the Company or Subsidiary of the Company effectuated any plant
closing or layoff,
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which resulted in an employment loss within the meaning of the WARN Act
or any state or local law similar to the WARN Act.
5CC. Votes Required. Any vote or approval of the holders of any class or series of
the Companys equity interests necessary for the Company to adopt this Agreement and for the
Company to approve the transactions contemplated by this Agreement has been obtained.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Buyer Disclosure Letter (with specific reference to the particular
section or subsection of this Agreement to which the information set forth in such Buyer Disclosure
Letter relates; provided, that any information set forth in one section of the Buyer
Disclosure Letter shall be deemed to apply to each other section or subsection thereof or hereof to
which (a) a specific cross reference to such other section or subsection is made, or (b) the
applicability of such disclosure to such other section or subsection is reasonably apparent on its
face), Buyer hereby represents and warrants to and for the benefit of the Company (prior to the
Closing) and Sellers (after the Closing) as follows:
6A. Organization and Corporate Power. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is qualified to do
business as a foreign corporation and is in good standing in each jurisdiction in which the failure
to so be in good standing or qualify would have a Buyer Material Adverse Effect. Buyer and its
Subsidiaries have all requisite corporate power and authority necessary to own and operate its
properties and to carry on its business as now conducted and to execute, deliver and perform this
Agreement and the Escrow Agreement and to consummate the transactions contemplated hereby and
thereby. True and complete copies of Buyers Organizational Documents have been made available to
the Representative prior to the date of this Agreement, which copies include all amendments,
modifications or supplements thereto. Buyers Organizational Documents are in full force and effect
and Buyer is in compliance in all material respects with all of the material terms and provisions
thereof applicable to it.
6B. Authorization; No Breach.
(i) All corporate acts and other corporate proceedings required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement, the Escrow Agreement
and the other agreements, documents and instruments contemplated hereby to be executed and
delivered by Buyer at Closing and the consummation of the transactions contemplated hereby
and thereby have been duly and properly taken. This Agreement has been duly executed and
delivered by Buyer, and each of the Escrow Agreement and the other agreements, documents and
instruments contemplated hereby to be executed and delivered by Buyer at Closing, when so
executed and delivered, shall have been duly executed and delivered by Buyer, and this
Agreement constitutes, and each of the Escrow Agreement and the other agreements,
documents and instruments contemplated hereby to be executed and delivered by Buyer at
Closing, when so executed and delivered shall constitute, a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such
enforcement may be limited by the application of bankruptcy, moratorium and other laws
affecting creditors rights generally and as such enforcement may be limited by the
availability of specific performance and the application of equitable principles.
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(ii) Except as set forth in Section 6B of the Buyer Disclosure Letter, the
execution and delivery by Buyer of this Agreement does not, and the consummation by Buyer of
the transactions contemplated hereby will not, (A) result in a breach of any of the
provisions of, (B) constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, (C) result in a violation of, (D) give any third
party the right to terminate or to accelerate any obligation under, or (E) require any
authorization, consent, approval, exemption or other action by or notice to any Governmental
Entity or third party, under any provision of the certificate of incorporation or bylaws or
other organizational or governing documents of Buyer, or any indenture, mortgage, loan
agreement or lease or any other material agreement or instrument to which Buyer is a party
or by which Buyer or its assets are bound, or any judgment, order or decree applicable to
Buyer or its assets or any Legal Requirement applicable to Buyer or its assets, other than
any such breaches, defaults, violations or rights that, individually or in the aggregate,
would not have a Buyer Material Adverse Effect and other than any such authorizations,
consents, approvals, exemptions or other actions required under the HSR Act or the failure
of which to obtain would not, individually or in the aggregate, have or reasonably be
expected to have a Buyer Material Adverse Effect.
6C. Legal Proceedings. There are no Legal Proceedings pending or, to Buyers
knowledge, threatened by or against Parent or any of its Subsidiaries (including, without
limitation, Buyer) that would be reasonably likely to result in a Buyer Material Adverse Effect,
and as of the date of this Agreement, there are no outstanding judgments, orders, writs,
injunctions, decrees or, to Buyers knowledge, investigations of any Governmental Entity against
Parent or any of its Subsidiaries (including, without limitation, Buyer) that would be reasonably
likely to result in a Buyer Material Adverse Effect.
6D. Financing. Buyer has access to, and will have access to at the Closing, all funds
required in order to complete the purchase of the Acquired Securities on the terms contained in
this Agreement and to consummate the other transactions contemplated hereby. Buyer affirms that it
is not a condition to the Closing or to any of its other obligations under this Agreement that
Buyer obtain financing for or related to any of the transactions contemplated hereby.
6E. Brokerage. No agent, broker, investment banker, financial advisor or other firm
or Person is or will be entitled to any brokers or finders fee or any other similar commission or
fee in connection with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or any of its Subsidiaries (including, without
limitation, Buyer), other than any agent, broker, investment banker, financial advisor or other
firm or Person the fees and expenses of which shall be paid by Buyer.
6F. Solvency. Immediately after giving effect to the transactions contemplated
hereby, assuming (i) the accuracy of the representations and warranties of the Company contained in
this Agreement as of the Closing Date (without giving effect to any materiality or Company Material
Adverse Effect or similar qualifiers), (ii) that all other conditions to Buyers obligations to
consummate the transactions contemplated hereby have been satisfied or waived by Buyer in writing,
(iii) no event, change, occurrence or development (or aggregation of events, changes, occurrences
or developments) has
occurred that has had or may reasonably be expected to have a material adverse effect on the
business, results of operation or financial condition of the Company and its Subsidiaries taken as
a whole and (iv) that as of the Closing Date, the financial projections previously provided by the
Company to Buyer remain, in light of then current conditions, a reasonable projection of the future
performance of the Company, based on reasonable assumptions, immediately after the consummation of
the transactions contemplated by this Agreement, Parent and its Subsidiaries (on a consolidated
basis) shall: (a) be able to pay their respective debts as they become due; (b) own property which
has a fair value greater than the amounts required to pay their respective debts (including a
reasonable estimate of the amount of all
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contingent liabilities); and (c) not have an unreasonably
small amount of capital for the operation of the business in which they are engaged.
6G. Acquisition for Investment. The Acquired Securities being purchased by Buyer
pursuant to this Agreement are being purchased for investment only and not with a view to any
public distribution thereof, and Buyer will not offer to sell or otherwise dispose of such
securities in violation of any of the registration requirements of the Securities Act, or any
comparable state law. Buyer is an accredited investor within the meaning of Regulation D
promulgated pursuant to the Securities Act.
ARTICLE 7
TERMINATION
7A. Termination. Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated only as provided in this Section 7A. In the case of any such
termination, the terminating party shall give notice to the other parties specifying the provision
pursuant to which this Agreement is being terminated. This Agreement may be terminated at any time
prior to the Closing:
(i) by the mutual written consent of Buyer and the Representative (on behalf of the
Sellers and the Company);
(ii) by Buyer, if there has been an inaccuracy or breach by the Sellers, the Company or
the Representative of any covenant, representation or warranty of the Sellers, the Company
or the Representative contained in this Agreement which would prevent the satisfaction of
any condition to the obligations of Buyer at the Closing and such inaccuracy or breach has
not been waived by Buyer or, in the case of a covenant breach capable of being cured, cured
by the Company, the Sellers or the Representative within the earlier of twenty days after
written notice thereof from Buyer to the Representative or the Outside Date; provided that
any failure to effectuate the Closing when required by Section 1B or make the
deliveries required by Section 1C when thereby contemplated is a material and
willful breach of this Agreement;
(iii) by the Representative (on behalf of the Sellers and the Company), if there has
been an inaccuracy or breach by Buyer of any covenant, representation or warranty of Buyer
contained in this Agreement which would prevent the satisfaction of any condition to the
obligations of the Sellers and the Company at the Closing and such inaccuracy or breach has
not been waived by the Representative or, in the case of a covenant breach capable of being
cured, cured by Buyer within the earlier of twenty days after written notice thereof by the
Representative to Buyer or the Outside Date; provided that any failure to effectuate
the Closing when required by Section 1B or make the payments and deliveries required
by Section 1C when thereby contemplated is a material and willful breach of this
Agreement;
(iv) by Buyer if any of the conditions set forth in Section 2A or Section
2B shall have become incapable of being satisfied, and shall not have been waived by
Buyer;
(v) by the Representative (on behalf of the Sellers and the Company) if any of the
conditions set forth in Section 2A or Section 2C shall have become incapable
of being satisfied, and shall not have been waived by the Representative;
(vi) by Buyer or the Representative (on behalf of the Sellers and the Company) if the
transactions contemplated hereby have not been consummated on or prior to December 31, 2010
(the Outside Date); provided that (a) Buyer shall not
be entitled to terminate this Agreement
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pursuant to this Section 7A(vi) if Buyers
breach of this Agreement has prevented the consummation of the transactions contemplated
hereby and (b) the Representative shall not be entitled to terminate this Agreement pursuant
to this Section 7A(vi) if the Sellers or the Companys breach of this Agreement has
prevented the consummation of the transactions contemplated hereby.
7B. Effect of Termination. If this Agreement is terminated by Buyer or the
Representative in accordance with Section 7A, then (x) this Agreement shall forthwith
become void and of no further force or effect (other than this Section 7B, Section
10C, Section 10K and Article 11, which shall survive the termination of this
Agreement and shall be enforceable by the parties hereto notwithstanding any such termination), and
(y) there shall be no liability or obligation on the part of Buyer, the Sellers, the Company or the
Representative to any other party hereto, except as set forth in this Section 7B and except
for willful breaches of this Agreement by such party prior to the time of such termination. Nothing
in this Article 7 shall be deemed to alter the provisions of Section 11Q or
otherwise impair the right of any party to compel specific performance by another party of its
obligations under this Agreement. If the transactions contemplated by this Agreement are terminated
as provided herein, (i) Buyer shall return all documents and copies and other materials received
from or on behalf of the Company relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the Company, and (ii) all such information shall
be treated in accordance with the Confidentiality Agreement, which shall remain in full force and
effect notwithstanding the termination of this Agreement.
ARTICLE 8
DEFINITIONS
8A. Definitions. The terms defined in Exhibit A, whenever used herein, shall
have the meanings set forth on Exhibit A for all purposes of this Agreement. The
definitions on Exhibit A are incorporated into this Agreement as if fully set forth at
length herein and all references to a section in such Exhibit A are references to such
section of this Agreement.
8B. Usage.
(i) Whenever the words include, includes or including are used in this Agreement,
they shall be deemed to be followed by the words without limitation.
(ii) Words denoting any gender shall include all genders. Where a word is defined
herein, references to the singular shall include references to the plural and vice versa.
(iii) All references to an Article, Section or Exhibit shall be deemed to refer to such
Article, Section or Exhibit of this Agreement, unless otherwise specified. The terms
hereof, herein, hereunder and derivative words refer to this entire Agreement, unless
the context otherwise requires.
(iv) A reference to any party to this Agreement or any other agreement or document
shall include such partys successors and permitted assigns.
(v) All references to $ and dollars shall be deemed to refer to United States
currency unless otherwise specifically provided.
(vi) All references to a day or days shall be deemed to refer to a calendar day or
calendar days, as applicable, unless otherwise specifically provided.
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(vii) Any reference to any agreement or contract referenced herein or in the Company
Disclosure Letter shall be a reference to such agreement or contract, as amended, modified,
supplemented or waived.
(viii) Any reference to a Legal Requirement will be deemed also to refer to all
amendments and successor provisions thereto and all rules and regulations promulgated
thereunder.
ARTICLE 9
INDEMNIFICATION
9A. Indemnification by Sellers. From and after the Closing (but subject to the
provisions of this Article 9 (including the exclusive remedy and sole source of recovery
provisions of Section 9C(i) and Section 9D)), the Sellers (on a pro rata basis
(based on consideration received and not jointly)) shall, subject to Section 9C, indemnify
the Buyer Parties against, and hold harmless the Buyer Parties from, any and all Losses (regardless
of whether or not such Losses relate to any Third Party Claim) resulting from or relating to (i)
the failure of any representation or warranty of the Sellers or the Company contained in this
Agreement or in any Certificate (other than the Buyer Closing Certificate and the Buyer Secretary
Certificate) to be true and correct as of the date of this Agreement or as of the Closing Date as
if made anew as of such date, (ii) any breach of any covenant of the Sellers contained in this
Agreement or the Escrow Agreement, or any breach of any covenant of the Company contained in this
Agreement requiring performance prior to or at the Closing, (iii) (A) any amount actually received
or recorded by the Company or any Subsidiary of the Company prior to the Closing Date (or that was
considered a current asset of the Company or its Subsidiaries for purposes of the calculation of
Closing Net Working Capital) to the extent such amount is deemed an overpayment due to adjustments
(other than Outlier Adjustments) made by a Governmental Entity after the Closing Date to the cost
reports of the Company or any Subsidiary of the Company with respect to periods prior to the
Closing Date and (B) any amount actually received or recorded by the Company or any Subsidiary of
the Company prior to the Closing Date (or that was considered a current asset of the Company or its
Subsidiaries for purposes of the calculation of Closing Net Working Capital) to the extent such
amount is deemed an overpayment by a third party payor other than due to adjustments made to the
cost reports filed by or on behalf of the Company or any Subsidiary of the Company on or prior to
the Closing Date and, in each case for purposes of this Section 9A(iii) to the extent an
amount for such specific liability was not reflected as a current liability or contra-asset of the
Company or its Subsidiaries for purposes of the calculation of Closing Net Working Capital; (iv)
(A) any failure by the Company or any Subsidiary of the Company prior to the Closing Date to comply
with Legal Requirements related to third party payor programs sponsored by Governmental Entities,
including compliance with all Medicare and/or Medicaid Legal Requirements (other than with respect
to Outlier Adjustments), (B) any failure by the Company or any Subsidiary of the Company prior to
the Closing Date to comply with payment policies related to non-governmental third party payor
programs, and (C) any failure by the Company or any Subsidiary of the Company prior to the Closing
Date to comply with state health care Legal Requirements, including state facility and professional
licensure and certificate of
need Legal Requirements, in each case for purposes of this Section 9A(iv) to the
extent the amount of any Losses resulting from or relating to any such specific failure was not
reflected as a current liability or contra-asset of the Company or its Subsidiaries for purposes of
the calculation of Closing Net Working Capital; (v) Pre-Closing Taxes; (vi) the leases set forth on
Section 2B(x) of the Company Disclosure Letter or the Subsidiaries of the Company which are
parties to the leases set forth on Section 2B(x) of the Company Disclosure Letter; (vii)
the minority partners of the Subsidiary of the Company set forth on Section 2B(xiii) of the
Company Disclosure Letter and any repurchase or redemption of their interests; and (viii) any fraud
committed by the Company or its officers or directors.
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9B. Indemnification by Buyer. From and after the Closing (but subject to the
provisions of this Article 9), Buyer shall indemnify the Seller Parties against, and hold
harmless the Seller Parties from, any and all Losses resulting from or relating to (i) the failure
of any representation or warranty of Buyer contained in this Agreement, or in the Buyer Closing
Certificate or the Buyer Secretary Certificate, to be true and correct as of the date of this
Agreement or as of the Closing Date as if made anew as of such date, or (ii) any breach of any
covenant or agreement of Buyer contained in this Agreement or the Escrow Agreement, and any breach
of any covenant or agreement of the Company contained in this Agreement or the Escrow Agreement
requiring performance after the Closing.
9C. Claims against the General Escrow Amount.
(i) Following the Closing, the Buyer Parties sole and exclusive remedy and source of
recovery for any Losses (other than Losses resulting from or relating to any breach of the
Fundamental Representations or of a covenant of any Seller requiring performance after the
Closing, or in respect of claims pursuant to Section 9A(vi), Section 9A(vii)
or Section 9A(viii) or claims for fraud (collectively, Direct Claims)) is
the portion of the General Escrow Amount remaining at any given time in the General Escrow
Account. Following the Closing, except for Direct Claims, which may be asserted directly
against any Seller Party, no claim by Buyer for Losses under this Agreement or otherwise
shall be asserted directly against the Seller Parties or any of them. Subject to the
provisions of this Article 9 (including the pro rata nature of the indemnity
obligations hereunder), following the Closing, Buyer shall only be entitled to assert claims
directly against any or all of the Sellers in respect of any Losses resulting from or
relating to any Direct Claims, and a Buyer Party may at its option and in its sole
discretion, in addition to any other remedies available to it, also assert such Direct
Claims against the portion of the General Escrow Amount then remaining in the General Escrow
Account.
(ii) Within two (2) Business Days after the date that is 12 months following the
Closing Date (such date that is twelve months following the Closing Date, the General
Survival Date), Buyer and the Representative shall cause the Escrow Agent (including by
delivering joint written instructions to the Escrow Agent) to release to, or as directed by,
the Representative an amount in cash equal to $5,000,000 minus the sum of (a) the
amount for which claims for indemnification were made against the General Escrow Account
prior to the General Survival Date in accordance with the terms of this Agreement and that
are not yet resolved as of the General Survival Date (the Claim Amount) and (b)
the amount paid out of the General Escrow Account to any Buyer Party prior to the General
Survival Date. At any time after the General Survival Date, within five (5) Business Days
after Buyer determines that all or any portion of the Claim Amount is not owed to Buyer
hereunder, or a court of competent jurisdiction finally determines, that a Buyer Party is
not entitled to all or a portion of the Claim Amount, Buyer and the Representative shall
cause the Escrow Agent (including by delivering joint written instructions to the Escrow
Agent) to release to, or as directed by, the Representative on behalf of the Sellers such
portion of the Claim Amount that the Sellers would otherwise have been entitled to receive
on the General Survival Date; provided, that no such amount shall be released from
the
General Escrow Account upon such determination in the event that there are not
sufficient funds remaining in the General Escrow Account to cover any Extended Claim Amount.
(iii) Within two (2) Business Days after the date that is 18 months following the
Closing Date (such date that is eighteen months following the Closing Date, the
Extended Survival Date), Buyer and the Representative shall cause the Escrow Agent
(including by delivering joint written instructions to the Escrow Agent) to release to, or
as directed by, the Representative an amount in cash equal to (a) all remaining Escrow Funds
in the General Escrow Account, minus (b) the amount for which claims for
indemnification were made against the
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General Escrow Account prior to the Extended Survival Date (including any Claim Amount)
(the Extended Claim Amount) in accordance with the terms of this Agreement and
that are not yet resolved as of the Extended Survival Date. At any time after the Extended
Survival Date, within five (5) Business Days after Buyer determines that all or any portion
of the Extended Claim Amount is not owed to Buyer hereunder, or a court of competent
jurisdiction finally determines, that a Buyer Party is not entitled to all or a portion of
the Extended Claim Amount, Buyer and the Representative shall cause the Escrow Agent
(including by delivering joint written instructions to the Escrow Agent) to release to the
Representative on behalf of the Sellers such portion of the Extended Claim Amount.
(iv) In the event that Buyer Parties make a claim for indemnification hereunder and (a)
the Representative agrees with such claim in whole or in part or (b) a court of competent
jurisdiction finally determines that the Buyer Parties are entitled to indemnification under
this Agreement, the Representative and Buyer shall, no later than five (5) Business Days
thereafter cause the Escrow Agent (including by delivering joint written instructions to the
Escrow Agent) to release to, or as directed by, Buyer from the General Escrow Account the
amount to which Buyer is entitled hereunder.
(v) Subject to Section 10I, any amounts received by the Representative pursuant
to this Section 9C shall be received for the benefit of all Sellers.
9D. Exclusive Remedy. Each party acknowledges and agrees that, from and after the
Closing (except for actions seeking specific performance or similar equitable relief pursuant to
Section 11Q, disputes under Section 1D, which disputes will be resolved in
accordance with the dispute mechanism set forth in Section 1D, and fraud claims), its sole
and exclusive remedy with respect to any and all rights, claims and causes of action it may have
against any Indemnifying Party or any Seller Parties relating to the operation of the Company or
its Subsidiaries or their respective businesses, or resulting from or relating to the subject
matter of this Agreement and the Company Disclosure Letter and the transactions contemplated hereby
and thereby, whether arising under or based upon any Legal Requirements or otherwise (including any
right, whether arising at law or in equity, to seek indemnification, contribution, cost recovery,
damages, or any other recourse or remedy, including as may arise under common law), shall be
pursuant to the indemnification provisions set forth in this Article 9. In furtherance of
the foregoing, each of Buyer (on its own behalf and on behalf of the other Buyer Parties), the
Sellers (each on his, her or its own behalf and on behalf of the other Seller Parties who are not
signatories hereto) and the Company hereby (x) covenants and agrees that (other than as provided in
the first sentence of this Section 9D), from and after the Closing, he, she or it will not,
directly or indirectly, assert or otherwise bring any claim, cause of action or demand, or commence
or institute or cause to be commenced or instituted, any proceeding of any kind or nature relating
to the operation of the Company or its Subsidiaries or their respective businesses, or resulting
from or relating to the subject matter of this Agreement and the Company Disclosure Letter and the
transactions contemplated hereby and thereby, whether arising under or based upon any Legal
Requirements or otherwise (including any right, whether arising at law or in equity, to seek
indemnification, contribution, cost recovery, damages, or any other recourse or remedy, including
as may arise under common law), other than pursuant to the indemnification provisions set forth in
this Article 9, and (y) waives, from and after the Closing, to the fullest extent permitted
under applicable Legal Requirements, any and all rights, claims and causes of action it may have
against any Indemnifying Party or any Seller Parties relating to the operation of the Company or
its Subsidiaries or their respective businesses or relating to the subject matter of this Agreement
and the Company Disclosure Letter and the transactions contemplated hereby and thereby, whether
arising under or based upon any Legal Requirements or otherwise (including any right, whether
arising at law or in equity, to seek indemnification, contribution, cost recovery, damages, or any
other
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recourse or remedy, including as may arise under common law) other than as provided in the
first sentence of this Section 9D.
9E. Termination of Indemnification. Subject to the final sentence of this Section
9E, the obligations under Sections 9A(i), 9A(ii), 9B(i) and
9B(ii) shall terminate when the applicable representation or warranty or covenant
terminates pursuant to Section 10A; provided, however, that such
obligations shall not terminate with respect to any item as to which the Person to be indemnified
shall have, prior to the applicable Limitation Date, previously made a claim by delivering a
written notice to the Indemnifying Party meeting the requirements set forth in Section 10A.
Subject to the final sentence of this Section 9E, the obligations under Sections
9A(iii), 9A(iv) and 9A(v) shall terminate on the Extended Survival Date;
provided, however, that such obligations shall not terminate with respect to any
item as to which the Person to be indemnified shall have, on or prior to the Extended Survival
Date, previously made a claim by delivering a written notice to the Indemnifying Party meeting the
requirements set forth in Section 10A. Notwithstanding anything to the contrary contained
in this Agreement, unless earlier terminated in accordance with this Agreement, all obligations
under Section 9A (other than obligations in respect of Direct Claims) shall terminate at
such time as the General Escrow Amount has been disbursed from the General Escrow Account (it being
understood that such time could be before the General Survival Date and the Extended Survival
Date).
9F. Procedures Relating to Indemnification.
(i) In order for a Person that has rights of indemnification under this Agreement
(each, an Indemnified Party) to be entitled to any indemnification provided for
under this Agreement in respect of a claim or demand made by any Person (other than an
Indemnified Party) against the Indemnified Party (a Third Party Claim), such
Indemnified Party must notify the indemnifying party (the Indemnifying Party) in
writing (and setting forth in reasonable detail the basis for such Indemnified Partys
belief that such right to indemnification may exist to the extent known) of the Third Party
Claim within ten (10) Business Days after receipt by such Indemnified Party of notice of the
Third Party Claim; provided, that failure to give such notification on a timely
basis shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been prejudiced as a result of such failure; provided,
further, that for purposes of making claims against the Escrow Amount (or the
Sellers in respect of Direct Claims), written notice to the Representative shall be deemed
written notice to the Indemnifying Party pursuant to this Section 9F(i). Thereafter,
the Indemnified Party shall deliver to the Indemnifying Party, within five (5) Business Days
after the Indemnified Partys receipt thereof, copies of all notices and documents
(including court papers) received by the Indemnified Party relating to the Third Party
Claim; provided, that failure to deliver such notices and documents on a timely
basis shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such failure.
(ii) If a Third Party Claim is made against an Indemnified Party, the Indemnifying
Party shall be entitled to participate in the defense thereof and, if it elects, to control
the defense thereof, in each case at its own expense, with counsel selected by the
Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided,
that notice of the intention to so control the defense shall be delivered by the
Indemnifying Party to the Indemnified Party within twenty (20) days after the date of
receipt by the Indemnifying Party of notice by the Indemnified Party of the assertion of the
Third Party Claim; provided, further, that the Indemnifying Party shall be
entitled to control the defense only if (a) the claim does not seek equitable relief or, if
the claim does seek equitable relief, such claim for equitable relief is merely incidental
to a claim for monetary relief, (b) the Indemnifying Party verifies in writing to the
Indemnified Party its obligation to indemnify the Indemnified Party hereunder against Losses
that may result from such
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Third Party Claim, subject in all respects to the provisions of
this Article 9, (c) (x) in the case of claims in respect of Section 9A(i)
(other than in respect of any Fundamental Representations), Section 9A(iii),
Section 9A(iv) or Section 9A(v), there are sufficient funds remaining in the
General Escrow Account to satisfy any obligation to provide such indemnification to the
Indemnified Party with respect to such Third Party Claim along with any and all other
pending indemnification claims in respect of such Sections of this Agreement, and (y) in the
case of claims in respect of the Fundamental Representations, Section 9A(ii),
Section 9A(vi), Section 9A(vii) or Section 9A(viii), the
Indemnifying Party can reasonably demonstrate that it has the funds necessary to satisfy any
obligation to provide such indemnification to the Indemnified Party with respect to such
Third Party Claim along with any and all other pending indemnification claims in respect of
such Sections of this Agreement, and (d) in the case of claims in respect of Section
9A(i), Section 9A(iii), Section 9A(iv) or for any breach of any covenant
or agreement contained in Section 3F, Section 3G or Section 3H, if
the amount of such Third Party Claim exceeds 150% of the amount of any remaining deductible
that is applicable under Section 9G(ii)(a), Section 9G(ii)(b) or Section
9G(ii)(c) (the foregoing collectively, the Litigation Conditions);
provided, further, that the Indemnifying Party shall forfeit the right to
control the defense of any such claim if, at any time after assuming the defense or
settlement thereof, the Indemnifying Party no longer satisfies the Litigation Conditions or
fails to diligently contest, defend or litigate such claims in good faith. Should an
Indemnifying Party elect to assume the defense of a Third Party Claim in accordance with the
terms of this Agreement, the Indemnifying Party shall not be liable to the Indemnified Party
for legal expenses subsequently incurred by the Indemnified Party in connection with the
defense thereof unless (i) the Indemnifying Party has not employed counsel to assume the
defense of such action within a reasonable time after receiving notice of the commencement
of the action, (ii) the employment of counsel and the amount reimbursable therefor by the
Indemnified Party has been authorized in writing by the Indemnifying Party or (iii)
representation of the Indemnifying Party and the Indemnified Party by the same counsel
would, in the reasonable opinion of the counsel employed by the Indemnifying Party,
constitute a conflict of interest under applicable standards of professional conduct. If the
Indemnifying Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense (subject to the
previous sentence), separate from the counsel employed by the Indemnifying Party, it being
understood, however, that the Indemnifying Party shall control such defense so long as the
Indemnifying Party continues to have the right to control such defense in accordance with
this Section 9F(ii). All the parties hereto shall cooperate in the defense or
prosecution of a Third Party Claim. Such cooperation shall include the retention and
provision to the party controlling the defense (upon the request of such controlling party)
to records and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. The Indemnifying Party shall be
obligated to reimburse Indemnified Party for the reasonable out-of-pocket expenses related
to such cooperation. The Indemnifying Party shall have full authority to determine all
action to be taken with respect to a Third Party Claim the defense of which it has elected
to assume in accordance with this Section 9F(ii); provided, however,
that that the Indemnifying Party shall obtain the prior written consent (which shall not be
unreasonably withheld, conditioned or delayed) of the Indemnified Party prior to admitting
any liability with respect to, consenting to the entry of any judgment, or settling,
compromising or discharging any Third Party Claim. If the Indemnifying Party does not elect
to assume the control of the defense of any such Third Party Claim, fails to notify the
Indemnified Party of its election as herein provided, fails to satisfy the Litigation
Conditions or fails to diligently contest, defend or litigate such Third Party Claim in good
faith, the Indemnified Party may pay, compromise or defend such Third Party Claim;
provided, however, that the Indemnified Party shall obtain the prior written
consent (which shall not be unreasonably withheld, conditioned or
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delayed) of the
Indemnifying Party prior to admitting any liability with respect to, consenting to the entry
of any judgment, or settling, compromising or discharging any Third Party Claim.
9G. Certain Additional Matters.
(i) The amount of any and all Losses under this Article 9 shall be determined
net of the amount of any proceeds actually received by an Indemnified Party or any of such
Indemnified Partys Affiliates under or pursuant to any insurance policy, title insurance
policy, indemnity, reimbursement arrangement or contract pursuant to which or under which
such Indemnified Party or such Indemnified Partys Affiliates is a party or has rights
(collectively, Alternative Arrangements) (net of (i) any increase in premiums,
(ii) retroactive premiums, (iii) premium adjustments, or (iv) any deductible incurred in
obtaining such proceeds). If the Indemnified Party receives any such proceeds subsequent to
an indemnification payment by the Indemnifying Party in respect of any Losses, then such
Indemnified Party shall promptly reimburse the Indemnifying Party in an amount equal to the
amount by which such indemnification payment would have been reduced had such proceeds been
received by the Indemnified Party prior to such payment by the Indemnifying Party.
(ii)
(a) No Buyer Party shall be entitled to indemnification or other recovery
pursuant to Section 9A(i) or for any breach of any covenant or agreement
contained in Section 3F, Section 3G or Section 3H unless and
until the aggregate amount of all Losses under Section 9A(i), Section
9A(iii), Section 9A(iv) and for any breach of any covenant or agreement
contained in Section 3F, Section 3G or Section 3H (other
than Losses (x) resulting from or relating to breaches of Fundamental
Representations or Section 5E(v), for which no such limitation shall apply,
or (y) that have been recovered by a Buyer Party pursuant to Section 9A(iii)
or Section 9A(iv)) exceeds on a cumulative basis an amount equal to
$1,400,000, and then, such Buyer Party shall only be entitled to recover to the
extent of such excess (subject to Section 9C(i)); provided,
however, that the limitations set forth in this Section 9G(ii)(a)
shall not apply to claims arising from breaches of Fundamental Representations or
Section 5E(v).
(b) No Buyer Party shall be entitled to indemnification or other recovery
pursuant to Section 9A(iii), unless and until the aggregate amount of all
Losses under Section 9A(iii) exceeds on a cumulative basis an amount equal
to $250,000, and then such Buyer Party shall only be entitled to recover to the
extent of such excess (subject to Section 9C(i)).
(c) No Buyer Party shall be entitled to indemnification or other recovery
pursuant to Section 9A(iv), unless and until the aggregate amount of all
Losses under Section 9A(iv) exceeds on a cumulative basis an amount equal to
$250,000, and then such Buyer Party shall only be entitled to recover to the extent
of such excess (subject to Section 9C(i)).
(d) No Buyer Party shall assert any claim or series of related claims
whatsoever pursuant to Section 9A (except for a breach of Section
5E(v)), and no Buyer Party shall be entitled to indemnification or other
recovery whatsoever pursuant to Section 9A (except for a breach of
Section 5E(v)), for any Losses resulting from, or arising out of any Outlier
Adjustment.
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(e) Notwithstanding anything to the contrary contained in this Agreement, (1)
the aggregate cumulative liability of a Seller under this Article 9 shall in
no event exceed the aggregate proceeds actually received by such Seller and (2) no
Indemnified
Party shall be entitled to recover any amount under this Article 9 more
than once in respect of the same Loss.
(iii) No Seller Party shall assert any claim or series of related claims pursuant to
Section 9B(i), and no Seller Party shall be entitled to indemnification or other
recovery pursuant to Section 9B(i), unless and until the aggregate amount of all
Losses under Section 9B(i) (other than Losses resulting from or relating to breaches
of Fundamental Representations) exceeds on a cumulative basis an amount equal to $1,400,000,
and then such Indemnified Party shall only be entitled to recover to the extent of such
excess (subject to Section 9C(i)); provided, however, that the
foregoing limitation shall not apply to claims arising from breaches of Fundamental
Representations.
(iv) In no event shall any Indemnified Party be entitled to recover or make a claim for
any amounts in respect of, and in no event shall Losses be deemed to include punitive or
exemplary damages (except to the extent imposed on an Indemnified Party in connection with a
Third Party Claim) or any Losses to the extent included as a liability in the calculation of
Closing Net Working Capital or Closing Indebtedness.
(v) For purposes of determining whether there has been a breach of any representation
or warranty of the Company, the Sellers or Buyer in this Agreement or in any Certificate and
for purposes of calculating the amount of Losses to which an Indemnified Party is entitled
as a result of any such breach, such representation or warranty shall not be deemed
qualified by any material, materiality, Buyer Material Adverse Effect or Company
Material Adverse Effect qualifications; provided, however, that this
Section 9G(v) shall not apply to the representations and warranties set forth in the
first sentence of Section 5A, the third sentence of Section 5C(i),
Section 5E(i), Section 5G, Section 5J and the first sentence of
Section 5T(i).
(vi) The representations and warranties of the parties shall not be affected or
diminished by, and no right of indemnification hereunder shall be limited by reason of any
investigation or audit conducted before or after the Closing or the knowledge of any party
of any breach of a representation, warranty, covenant or agreement by the other party at any
time, or the decision of any party to complete the Closing.
(vii) Notwithstanding anything to the contrary set forth herein, no limitation or
condition of liability or indemnity shall apply to any fraud claims.
(viii) Any indemnity payment under this Agreement shall be treated as an adjustment to
the Purchase Price for Tax purposes unless not permitted by applicable Legal Requirements.
(ix) Each Seller waives, and acknowledges and agrees that such Seller shall not have
and shall not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against the Company or any
Subsidiary of the Company in connection with any indemnification obligation or any other
liability to which he or it may become subject under or in connection with this Agreement.
(x) Notwithstanding anything herein to the contrary, in no event shall any Seller be
responsible to Buyer (whether pursuant to indemnification hereunder or otherwise) for any
breach
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or violation by another Seller of any particular representation or warranty or
covenant or agreement of such breaching Seller in this Agreement, and each of the parties
hereto shall take all actions necessary (including actions under or in connection with the
Escrow Agreement) to effect
the foregoing; provided, however, that the foregoing shall not in any
way effect Buyers ability to make claims for indemnification against, and recover from, the
entire amount contained in the General Escrow Account.
ARTICLE 10
ADDITIONAL AGREEMENTS
10A. Survival. The representations and warranties of the parties, and covenants of
the parties which require performance on or prior to the Closing Date, set forth in this Agreement
or in any Certificate, shall (except as provided below) survive the Closing solely for purposes of
Article 9 and shall terminate as of 11:59 p.m. Eastern Prevailing Time on the date that is
twelve (12) months following the Closing Date; provided, that the representations and
warranties contained in Sections 5I, 5N and 5AA and any Certificate
(insofar as such Certificate relates to the representations and warranties in Sections 5I,
5N and 5AA) shall terminate as of 11:59 p.m. Eastern Prevailing Time on the date
that is eighteen (18) months following the Closing Date; provided, further, that
the Fundamental Representations, any Certificate (insofar as such Certificate relates to the
Fundamental Representations) and any covenants of the parties which require performance after the
Closing Date shall survive until the latest date permitted by applicable Legal Requirements;
provided, further, that if any Indemnified Party makes a claim for indemnification
under Article 9 at any time prior to the applicable Limitation Date, then such claim (and
only such claim) shall survive the applicable Limitation Date, solely for purposes of resolving
such claim, until such time as such claim is fully and finally resolved; provided,
further that (subject to Section 7B) Buyers obligations to pay the Purchase Price
and otherwise deliver the consideration and other items contemplated by this Agreement and Sellers
obligation to deliver the items contemplated by this Agreement shall survive indefinitely.
Limitation Date shall mean, with respect to any representation, warranty or covenant, the
date on which such representation, warranty or covenant expires pursuant to this Section
10A.
10B. Press Release and Announcements. During the Pre-Closing Period, neither the
Company, Sellers nor Buyer shall (and neither shall permit any of its representatives to) issue any
press release or make any public statement regarding this Agreement, or regarding any of the other
transactions contemplated by this Agreement, without the other parties prior written consent,
except as may be required by applicable Legal Requirements; provided, that the
Representative (on behalf of the Sellers) and the Company shall provide to Buyer, and Buyer shall
provide to the Representative and the Company, a copy of (and a reasonable opportunity to provide
comments to) any such press release or public announcement required by applicable Legal
Requirements to be issued by the Sellers or the Company or Buyer, as applicable, as far in advance
of issuance as is reasonably practicable. Notwithstanding the foregoing, promptly following the
execution of this Agreement, Buyer may issue a press release regarding this Agreement or the
transactions contemplated hereby so long as the form and substance of such press release is
reasonably acceptable to the Company.
10C. Confidentiality. Buyer acknowledges that all information provided to it and any
of its and its Affiliates agents and representatives by the Company and its Affiliates, agents and
representatives (including pursuant to Section 3A) is subject to the terms of a
confidentiality agreement, dated as of November 16, 2009, between the Company and Select Medical
Corporation (the Confidentiality Agreement).
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10D. Commercially Reasonable Efforts. Subject to the terms of this Agreement
(including the limitations set forth in this Section 10D), each of Buyer, the Sellers and
the Company shall each use its commercially reasonable efforts to cause the other parties
conditions to Closing to be satisfied on a timely basis and for the Closing to occur prior to the
Outside Date (including without limitation to cure
any material inaccuracy in any representation or warranty that would exist as of the Closing
Date). Notwithstanding anything to the contrary herein, for purposes of this Section 10D
and Section 3H and Section 10E, neither Buyer, nor any of its Affiliates, nor the
Company or any of its Subsidiaries, shall be required as a result of this Agreement, (i) to
initiate any legal action against, or defend any litigation brought by any Governmental Entity in
order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining
order or other order in any suit or proceeding which would otherwise have the effect of preventing
or materially delaying the Closing, or which may require any undertaking or condition set forth in
clause (ii) below, or (ii) to propose or agree to accept any undertaking or condition, to enter
into any consent decree, to make any divestiture or accept any operational restriction or to take
or commit to take any action that could reasonably be expected to limit (x) the freedom of action
of Buyer, the Company, or their respective Subsidiaries or Affiliates with respect to the operation
of, or Buyers or its Subsidiaries or Affiliates ability to retain, the Company, the Subsidiaries
of the Company or any of their respective businesses or assets or (y) the ability to retain, own or
operate any portion of the business of Buyer, the Company or their respective Subsidiaries and
Affiliates or alter or restrict in any way the business or commercial practices of Buyer or the
Company or either of their respective Subsidiaries or Affiliates. For purposes of this Section
10D and Section 3H and Section 10E, the commercially reasonable efforts of
each party shall include such partys agreement to respond to a Second Request but shall not
otherwise require such party or any of its Affiliates to expend any money to remedy any breach of
any representation or warranty hereunder, to commence any litigation or arbitration proceeding, to
offer or grant any accommodation (financial or otherwise) to any third party, to obtain any consent
required for the consummation of the transactions contemplated hereby or, in the case of the
Company and its Affiliates, to provide financing to Buyer for the consummation of the transactions
contemplated hereby.
10E. Regulatory Act Compliance. Buyer and the Company shall use commercially
reasonable efforts to file or cause to be filed, promptly (but in any event within five (5)
Business Days) after the date of this Agreement, any notifications or the like required to be filed
under the HSR Act and other antitrust or competition laws of any applicable jurisdiction with
respect to the transactions contemplated hereby. Buyer and the Company shall bear the costs and
expenses of their respective filings, but Buyer shall pay all filing fees under the HSR Act in
connection therewith. Buyer and the Company shall respond as promptly as practicable to any
requests for information, including a Second Request, made by any agencies and use their
commercially reasonable efforts to cause the waiting periods or other requirements under the HSR
Act and all other applicable antitrust or competition laws to terminate or expire at the earliest
possible date (including with respect to filings under the HSR Act, seeking early termination of
the waiting period under the HSR Act). Each of Buyer and the Company shall (A) unless otherwise
prohibited by applicable Legal Requirement, promptly notify each other of any communication to that
party from the Federal Trade Commission (FTC), the United States Department of Justice
(DOJ) or any other regulatory agency with respect to the transactions contemplated
hereby, and permit the other party to review in advance any proposed written communication to the
FTC, the DOJ or any other regulatory agency; (B) unless otherwise prohibited by applicable Legal
Requirement, furnish the other party with copies of all correspondence, filings and other
communications (and memoranda setting forth the substance thereof) between it, its Affiliates and
their respective representatives, on the one hand, and the FTC, the DOJ or any other regulatory
agency, or members of their respective staffs, on the other hand, with respect to the transactions
contemplated hereby (excluding documents and communications which are subject to pre-existing
confidentiality agreements or to attorney-client or other applicable privilege); (C) give the other
party prompt notice of the threat or commencement of any Legal Proceeding by or before any
Governmental Entity with respect to the Agreement or any of the other transactions
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contemplated
hereby, (D) keep the other party informed as to the status of any such Legal Proceeding and (E) not
agree to participate in any meeting with any Governmental Entity in respect of any filings,
investigation or other inquiry with respect to this Agreement and the transactions contemplated
hereby unless it consults with the other party in advance and, to the extent permitted by such
Governmental
Entity, gives the other party the opportunity to attend and participate thereat, in each case
to the extent practicable. The Company and Buyer will consult and cooperate with one another, and
will consider in good faith the views of one another, in connection with any analysis, appearance,
presentation, memorandum, brief, argument, opinion or proposal made or submitted in connection with
any Legal Proceeding under or relating to any federal or state antitrust or fair trade law. The
Company and Buyer will also furnish the other party with such necessary information and reasonable
assistance as such other party and its affiliates may reasonably request in connection with their
preparation of necessary filings, registrations, or submissions of information to any Governmental
Entities in connection with this Agreement and the transactions contemplated hereby, including
without limitation any filings necessary or appropriate under the provisions of the HSR Act (in
each case, if requested by the disclosing party).
10F. Certain Tax Matters.
(i) Responsibility for Filing Tax Returns. The Representative shall prepare or
cause to be prepared, and timely file or cause to be timely filed, all federal, state and
local income Tax Returns for the Company for periods ending on or before the Closing Date.
All such income Tax Returns shall be prepared consistent with the past practice of the
Company, except as otherwise required by applicable Legal Requirement. The Representative
shall allow Buyer the opportunity to review and comment on such income Tax Returns to be
filed after the date hereof for a reasonable period prior to the intended filing date.
(ii) Amendment of Tax Returns. Without the prior written consent of the other
party, which consent shall not be unreasonably withheld, conditioned or delayed, neither
Buyer nor the Representative will amend or permit the Company to amend any income Tax Return
filed by or with respect to the Company relating to the taxable period ending on or before
the Closing Date and the portion of any Straddle Period up to and including the Closing
Date, unless required by Legal Requirement.
(iii) Tax Audits. Notwithstanding any other provision of this Agreement but
after Buyer has received written confirmation from the Representative of the Sellers
indemnification obligations under Article 9, the Representative shall have the right
in its discretion to elect to represent the interests of the Company and the Sellers in any
claim, audit, examination, or administrative or court proceeding solely relating to any
audits or assessments or other disputes regarding any income Tax Return filed by the Company
with respect to tax periods that end on or before the Closing Date (Tax
Proceeding) but only to the extent such claim, audit, examination, or administrative or
court proceeding may impact Sellers indemnification obligations under Article 9.
Buyer shall promptly notify the Representative in writing upon receiving notice from any
taxing authority of the commencement of any Tax Proceeding regarding any income Tax Return
filed by or with respect to the Company with respect to tax periods that end on or before
the Closing Date, and Buyer shall take all action reasonably necessary to enable the
Representative to exercise its control rights as set forth in this Section 10F(iii).
(iv) Cooperation. Buyer, the Company and the Representative shall cooperate
fully, as and to the extent reasonably requested by the other party, in connection with the
filing of income Tax Returns pursuant to this Section 10F(iv) and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other partys request) the provision of records and information
which are reasonably relevant to any such audit,
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litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Company shall retain all books and
records with respect to Tax matters pertinent to the Company relating to any tax periods and
shall abide by all record retention agreements entered into with
any taxing authority, and shall give the Representative reasonable written notice prior
to transferring, destroying or discarding any such books and records prior to the expiration
of the applicable statute of limitations for that Tax period, and if the Representative so
requests, the Company shall allow the Representative to take possession of such books and
records rather than destroying or discarding such books and records.
(v) Tax Treatment. The parties hereto acknowledge that, consistent with Revenue
Ruling 99-6, I.R.B. 1999-6, the purchase and sale of the Acquired Securities by Buyer shall
be treated for United States federal income Tax purposes as an acquisition of the assets of
the Company and each of its Subsidiaries (other than the Partnership Subsidiaries and
Regency Management Company, Inc.) by Buyer as to Buyer and the sale of partnership interests
as to the Sellers, within the purview of Section 741 of the Code.
10G. Director and Officer Liability and Indemnification.
(i) For a six-year period after the Closing Date, Buyer shall not, and shall not permit
the Company or any of its Subsidiaries to, amend, repeal or modify any provision in the
Companys or any of its Subsidiaries Organizational Documents relating to the exculpation
or indemnification of officers and director or managers of the Company or its Subsidiaries
as in effect immediately prior to the Closing; provided, that any such provision may
be amended, repealed or modified as it applies to officers, directors or managers of the
Company and its Subsidiaries who were not officers, directors or managers of the Company or
its Subsidiaries prior to the Closing.
(ii) Prior to Closing, the Company shall obtain effective as of the Closing an extended
reporting period endorsement under the Companys existing directors and officers liability
insurance policy, with aggregate coverage equal to the greater of (a) the amount of
aggregate coverage in effect on the date of this Agreement and (b) the amount of aggregate
coverage in effect immediately prior to the Closing, insuring the directors and officers of
the Company and its Subsidiaries for anything done or not done by such directors or officers
in any such capacity whether pertaining to any act or omission occurring or existing prior
to or at the Closing Date and whether asserted or claimed prior to, at or after the Closing
Date, with a minimum six year term (the Tail Policy). The premiums related to the
Tail Policy shall either be paid prior to the Closing or be included as a current liability
in the calculation of Estimated Closing Net Working Capital and Closing Net Working Capital.
(iii) The obligations of Buyer and its Subsidiaries and Affiliates under this
Section 10G shall not be terminated or modified in such a manner as to adversely
affect any Person to whom this Section 10G applies without the prior consent of such
affected Person.
10H. Designation and Replacement of Representative. The Sellers have agreed that it
is desirable to designate the Representative to act on behalf of the Sellers for certain limited
purposes, as specified herein. The Sellers have designated Waud Capital Partners, L.L.C. as the
initial Representative, and execution of this Agreement by the Sellers shall, to the maximum extent
permitted under applicable Legal Requirement, constitute irrevocable ratification and approval of
such designation by the Sellers and authorization of the Representative by Sellers to serve in such
capacity (including to settle any and all disputes with Buyer under this Agreement and the Escrow
Agreement), and shall also constitute a
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reaffirmation, approval, acceptance and adoption of, and an
agreement to comply with and perform, all of the acknowledgments and agreements made by the
Representative on behalf of the Sellers in this Agreement and the other documents delivered in
connection herewith (including the Escrow Agreement). The Representative may resign of its choosing
at any time upon written notice to the Sellers and Buyer,
such resignation not to be effective until a replacement is appointed in accordance with this
Section 10H. The designation of the Representative is coupled with an interest, and, except
as set forth in the immediately preceding sentence, such designation is irrevocable and shall not
be affected by the death, incapacity, illness, bankruptcy, dissolution or other inability to act of
any of the Sellers. In the event that the Representative has resigned, a new Representative shall
be appointed by a vote of Persons which collectively owned more than 50% of the Class A Units of
the Company as of immediately prior to the Closing (the Majority Holders), such
appointment to become effective upon the written acceptance thereof by the new Representative.
Written notice of any such resignation, removal or appointment of a Representative shall be
delivered by the Representative to Buyer promptly after such action is taken.
10I. Authority and Rights of Representative; Limitations on Liability. The
Representative shall have all such powers and authority as are necessary or appropriate to carry
out the functions assigned to it under this Agreement and in any other document delivered in
connection herewith (including the Escrow Agreement), including all (and the exclusive) power and
authority to settle any and all disputes with Buyer under this Agreement and the Escrow Agreement
and to amend this Agreement and the other agreements contemplated hereby in any and all respects on
behalf of all Sellers, in each case, as the Representative determines in its sole discretion, which
settlements and amendments shall bind all Sellers hereto as if such Sellers made such settlement or
executed such amendment; provided, however, that the Representative will have no
obligation to act on behalf of the Sellers. The Company, Buyer and the Escrow Agent shall be
entitled to rely on the actions taken by the Representative without independent inquiry into the
capacity of the Representative to so act. Neither Buyer nor Company (a) need be concerned with the
authority of the Representative to act on behalf of the Sellers hereunder to the extent provided
herein or (b) shall be held liable or accountable in any manner for any act or omission of the
Representative in such capacity. All actions, notices, communications and determinations by the
Representative to carry out such functions shall conclusively be deemed to have been authorized by,
and shall be binding upon, the Sellers. Neither the Representative nor any of its members,
officers, directors, managers, employees, agents or representatives shall have any liability to the
Sellers with respect to actions taken or omitted to be taken by the Representative in such capacity
(or any of its members, officers, directors, managers, employees, agents or representatives in
connection therewith), except with respect to the Representatives willful misconduct. The
Representative will at all times be entitled to rely on any directions received from the Majority
Holders; provided, however, that the Representative shall not be required to follow
any such direction, and shall be under no obligation to take any action in its capacity as
Representative based upon any such direction. The Representative shall be entitled to engage such
counsel, experts and other agents and consultants as it shall deem necessary in connection with
exercising its powers and performing its function hereunder and (in the absence of bad faith on the
part of the Representative) shall be entitled to conclusively rely on the opinions and advice of
such Persons. The Representative (for itself and its members, officers, directors, managers,
employees, agents and representatives) shall be entitled to full reimbursement from the Sellers for
all expenses, disbursements and advances (including fees and disbursements of its counsel, experts
and other agents and consultants) incurred by the Representative in such capacity (or any of its
members, officers, directors, managers, employees, agents or representatives in connection
therewith), and to full indemnification against any Loss, liability or expenses arising out of
actions taken or omitted to be taken in its capacity as Representative (except for those arising
out of the Representatives willful misconduct), including the costs and expenses of investigation
and defense of claims, from the Sellers (including from funds paid to the Representative under this
Agreement and/or otherwise received by it in its capacity as the Representative, or funds to be
distributed to the Sellers under this Agreement at its direction, pursuant to or in connection with
this Agreement (including under the Escrow Agreement)). In furtherance of the
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foregoing,
notwithstanding anything in this Agreement to the contrary, the Representative shall have the power
and authority to set aside and retain funds paid to or received by it, or direct payment of funds
to be paid to the Sellers, as Purchase Price pursuant to this Agreement at Closing or thereafter,
to satisfy such obligations (including to establish such reserves as the Representative determines
in good faith to be
appropriate for such costs and expenses that are not then known or determinable or to
otherwise satisfy any reasonable purpose determined by the Representative in its sole discretion).
To the extent that any amount included as Representative Expenses exceeds such expenses,
disbursements or advances, the Representative may retain such excess as a fee for the services it
provides hereunder. The relationship created herein is not to be construed as a joint venture or
any form of partnership between or among the Representative or any Seller for any purpose of U.S.
federal or state law, including federal or state income tax purposes. Neither the Representative
nor any of its Affiliates owes any fiduciary or other duty to any Seller.
10J. Representation of the Seller Group. Each of the Company and the Sellers hereby
agrees, on its own behalf and on behalf of its directors, managers, members, partners, officers,
employees and Affiliates, that Kirkland & Ellis LLP may serve as counsel to each and any of the
Representative, the Sellers and their respective Affiliates (other than the Company and its
Subsidiaries) (individually and collectively, the Seller Group), on the one hand, and, if
requested by the Company, the Company and its Subsidiaries, on the other hand, in connection with
the negotiation, preparation, execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and that, following the Closing, Kirkland & Ellis LLP (or any
successor) may serve as counsel to each and any of the Seller Group or any director, manager,
member, partner, officer, employee or Affiliate of the Seller Group (but after the Closing,
excluding the Company and any of its Subsidiaries), in connection with any litigation, claim or
obligation arising out of or relating to this Agreement or the transactions contemplated by this
Agreement, notwithstanding any current or previous representation of the Company and/or any of its
Subsidiaries, and each of the parties hereto hereby consents thereto and waives any conflict of
interest arising therefrom, and each of such parties shall cause any Affiliate thereof to consent
to waive any conflict of interest arising from such representation. The foregoing waiver shall not
apply in the event applicable ethical rules prohibit such a waiver.
10K. Expenses; Transfer Taxes. If this Agreement is terminated prior to consummation
of the Closing, each party shall pay all fees and expenses incurred by such party in connection
with the negotiation, preparation and performance of and compliance with the terms of this
Agreement (including, without limitation, the fees and expenses of legal counsel, accountants,
investment bankers or other representatives and consultants) and the transactions contemplated
hereby or otherwise required by applicable Legal Requirement. If the Closing occurs, Buyer shall
pay, or cause to be paid, all fees and expenses incurred by Buyer and its Affiliates in connection
with this Agreement and the transactions contemplated hereby or otherwise required by applicable
Legal Requirement, and any and all Company Transaction Expenses and Representative Expenses to the
extent such fees and expenses are included as current liabilities in the calculation of Closing Net
Working Capital or as Closing Indebtedness; provided, that the Sellers shall pay one-half
(1/2) and Buyer shall pay one-half (1/2) of all property, transfer or similar taxes imposed on the
Company or its Subsidiaries and any transfer or similar tax imposed on any Seller resulting from
the transactions contemplated hereby.
10L. Certain Access Provisions. For a period of seven (7) years after the Closing
Date, Buyer shall preserve and retain, or cause the Company and its Subsidiaries to preserve and
retain, all material corporate, accounting, Tax, legal, auditing or other books and records of the
Company and its Subsidiaries relating to the conduct of the business and operations of the Company
and its Subsidiaries prior to the Closing Date.
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10M. No Solicitation; Confidentiality.
(i) For a period of one (1) year from and after the Closing Date, no Seller shall, and
each Seller shall cause its Affiliates not to, directly or indirectly, without the prior
written consent of Buyer: (i) solicit or direct any other Person to solicit any CEO
Employee to: (A) terminate
such CEO Employees employment with Buyer, the Company or any Subsidiary of the
Company; or (B) seek or accept employment or other affiliation with any Seller or any of its
Affiliates (other than, in each case, any solicitation directed at the public in general in
publications available to the public in general or any contact which such Seller can
demonstrate was initiated by such CEO Employee or any contact one (1) year after such CEO
Employees employment with Buyer, the Company or any Subsidiary of the Company is
terminated) or (ii) hire, employ or retain as a consultant or direct any other person to
hire, employ or retain as a consultant, any CEO Employee (other than any hiring, employing
or retaining resulting from (X) such CEO Employee responding to a solicitation directed at
the public in general in publications available to the public in general, (Y) contact which
such Seller can demonstrate was initiated by such CEO Employee or (Z) contact one (1) year
after such CEO Employees employment with Buyer, the Company or any Subsidiary of the Company
is terminated).
(ii) For a period of ninety (90) days from and after the Closing Date, no Seller shall,
and each Seller shall cause its Affiliates not to, directly or indirectly, without the prior
written consent of Buyer: (i) solicit or direct any other Person to solicit any Person who
was an employee of the Company or any Subsidiary of the Company at the office located at
11175 Cicero Drive, Alpharetta, Georgia on the Closing Date (or any Person who is an
employee at such location within six months prior to the Closing Date) to: (A) terminate
such employees employment with Buyer, the Company or any Subsidiary of the Company; or (B)
seek or accept employment or other affiliation with any Seller or any of its Affiliates or
(ii) hire, employ or retain as a consultant or direct any other person to hire, employ or
retain as a consultant, any such employee; provided that the restrictions set forth in
this Section 10M(ii) shall not apply to any employee set forth on Section
10M(ii) of the Company Disclosure Letter.
(iii) The Sellers hereby acknowledge and agree that if any Seller or any one or more of
its Affiliates breaches any provision of this Section 10M, any remedy at law would
be inadequate and that Buyer, in addition to seeking monetary damages in connection with any
such breach, shall be entitled to specific performance, and injunctive and other equitable
relief to prevent or restrain a breach of this Section 10M or to enforce the
provisions hereof.
(iv) The Sellers and Buyer intend that the provisions of this Section 10M be
enforced to the fullest extent permissible under the laws applied in each jurisdiction in
which enforcement is sought. If any provision of this Section 10M, or any part
hereof, shall be held by a court of competent jurisdiction to be invalid or unenforceable,
this Section 10M shall be amended to revise the scope of such provision, to make it
enforceable to the fullest extent permitted by applicable Legal Requirements, if possible,
or to delete such provision or such part, such revision or deletion to apply only with
respect to the operation of this Section 10M in the jurisdiction of such court.
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ARTICLE 11
MISCELLANEOUS
11A. Amendment and Waiver.
(i) This Agreement may be amended; provided that any amendment shall be
binding only if such amendment is set forth in a writing executed by the Representative (on
behalf of all Sellers), the Company and Buyer. No course of dealing between or among any
Persons having any interest in this Agreement shall be deemed effective to modify, amend or
discharge any part
of this Agreement or any rights or obligations of any Person under or by reason of this
Agreement.
(ii) No failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in exercising any power,
right, privilege or remedy under this Agreement, shall operate as a waiver of such power,
right, privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of this Agreement or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in
a written instrument duly executed and delivered by or on behalf of such Person; and any
such waiver shall not be applicable or have any effect except in the specific instance in
which it is given.
11B. Notices. All notices, demands and other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to
have been given (i) if personally delivered, on the date of delivery, (ii) if delivered by express
courier service of national standing (with charges prepaid) for next day or earlier delivery, on
the Business Day following the date of delivery to such courier service, (iii) if deposited in the
United States mail, first-class postage prepaid, on the fifth Business Day following the date of
such deposit, (iv) if transmitted by facsimile or electronic mail, on the date of transmission (but
only if followed by transmittal by express courier service of national standing (with charges
prepaid) for next day or earlier delivery or hand delivery on the next Business Day). Notices,
demands and communications to the Company, the Sellers, the Representative or Buyer shall, unless
another address is specified in writing pursuant to the provisions hereof, be sent to the address
indicated below:
Notices to the Company (prior to Closing):
|
|
|
Regency Hospital Company, L.L.C. |
11175 Cicero Drive, Suite 300 |
Alpharetta, Georgia 30022 |
Attention: |
|
Chief Executive Officer |
Facsimile: |
|
(770) 776-5464 |
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|
|
|
with a copy to: |
|
|
|
Waud Capital Partners, L.L.C. |
300 North LaSalle Street, Suite 4900 |
Chicago, Illinois 60654 |
Attention: |
|
Reeve B. Waud |
|
|
David O. Neighbours |
Facsimile: |
|
(312) 876-8444 |
Email: |
|
rwaud@waudcapital.com |
|
|
dneighbours@waudcapital.com |
|
|
|
Kirkland & Ellis LLP |
300 North LaSalle Street |
Chicago, Illinois 60654 |
Attention: |
|
Richard W. Porter, P.C. |
|
|
Martin A. DiLoreto, Jr., P.C. |
Facsimile: |
|
(312) 862-2200 |
Email: |
|
richard.porter@kirkland.com |
|
|
martin.diloreto@kirkland.com |
|
|
|
Notices to the Sellers or the Representative: |
|
|
|
c/o Waud Capital Partners, L.L.C. |
300 North LaSalle Street, Suite 4900 |
Chicago, Illinois 60654 |
Attention: |
|
Reeve B. Waud |
|
|
David O. Neighbours |
Facsimile: |
|
(312) 876-8444 |
Email: |
|
rwaud@waudcapital.com |
|
|
dneighbours@waudcapital.com |
|
|
|
with a copy to: |
|
|
|
Kirkland & Ellis LLP |
300 North LaSalle Street |
Chicago, Illinois 60654 |
Attention: |
|
Richard W. Porter, P.C. |
|
|
Martin A. DiLoreto, Jr., P.C. |
Facsimile: |
|
(312) 862-2200 |
Email: |
|
richard.porter@kirkland.com |
|
|
martin.diloreto@kirkland.com |
|
|
|
Notices to Buyer, Guarantor and the Company (following Closing): |
|
|
|
Select Medical Corporation |
4714 Gettysburg Road |
Mechanicsburg, Pennsylvania 17055 |
Attention: |
|
Michael E. Tarvin, Esq. |
Facsimile: |
|
(717) 412-9142 |
Email: |
|
mtarvin@selectmedicalcorp.com |
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|
|
|
with a copy to: |
|
|
|
Dechert LLP |
Cira Centre |
2929 Arch Street |
Philadelphia, PA 19104-2808 |
Attention: |
|
Carmen J. Romano |
|
|
Stephen M. Leitzell |
Facsimile: |
|
(215) 994-2222 |
Email: |
|
carmen.romano@dechert.com |
|
|
stephen.leitzell@dechert.com |
11C. Assignment. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned (including by operation of law) without the prior written consent of (i) prior to
the Closing, the Representative, the Company and Buyer and (ii) from and after the Closing, Buyer
and the
Representative; provided, however, that Buyer may assign, without the prior
written consent of any other party hereto (whereupon Buyer shall provide written notice thereof to
the Sellers, the Company and the Representative), any of its rights, benefits or obligations under
this Agreement to an Affiliate of Buyer, and after the Closing, Buyer may assign its rights and
obligations under this Agreement in whole or in part to any other Person; provided,
however, that no such assignment shall relieve Buyer of its obligations under this
Agreement.
11D. Severability. Without limiting Section 10M(iv), whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be enforceable and valid
under applicable Legal Requirement, but if any provision of this Agreement is held to be
unenforceable by or invalid under applicable Legal Requirement, such provision shall be ineffective
only to the extent of such unenforceability or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
11E. No Strict Construction. Each of Buyer, the Sellers, the Company and the
Representative confirm that it and its respective counsel have reviewed, negotiated and adopted
this Agreement as the joint agreement and understanding of the parties hereto and the language used
in this Agreement shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any Person.
11F. Captions. The captions used in this Agreement and in the Disclosure Letters are
for convenience of reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this Agreement, and all
provisions of this Agreement shall be enforced and construed as if no caption or description had
been used.
11G. Complete Agreement. This Agreement, the Disclosure Letters and any other
agreements referred to herein or therein executed and delivered on or after the date hereof,
contain the complete agreement among the parties hereto and supersede any prior understandings,
agreements or representations by or between such parties, written or oral, which may have related
to the subject matter hereof in any way; provided, however, that the
Confidentiality Agreement shall not be superseded by this Agreement and shall remain in effect in
accordance with its terms until the earlier of (a) the Closing, or (b) the date on which the
Confidentiality Agreement terminates in accordance with its terms.
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11H. Disclosure Letters.
(i) The inclusion of information in the Seller Disclosure Letter or the Company
Disclosure Letter shall not be construed as or constitute an admission or agreement that a
violation, right of termination, default, liability or other obligation of any kind exists
with respect to any item, nor shall it be construed as or constitute an admission or
agreement that such information is material to the Company, its Subsidiaries or any of the
Sellers. In addition, matters reflected in the Seller Disclosure Letter and/or the Company
Disclosure Letter are not necessarily limited to matters required by this Agreement to be
reflected in the Seller Disclosure Letter or the Company Disclosure Letter, as applicable.
Any such additional matters are set forth for informational purposes only and do not
necessarily include other matters of a similar nature. Neither the specifications of any
dollar amount in any representation, warranty or covenant contained in this Agreement nor
the inclusion of any specific item in the Seller Disclosure Letter and/or the Company
Disclosure Letter is intended to imply that such amount, or higher or lower amounts, or the
item so included or other items, are or are not material, and no Person shall use the fact
of the setting forth of any such amount or the inclusion of any such item in any dispute or
controversy between the parties as to whether any obligation, item or matter not described
herein or included in the Seller Disclosure Letter or the Company Disclosure Letter is or is
not material
for purposes of this Agreement. Further, neither the specification of any item or
matter in any representation, warranty or covenant contained in this Agreement nor the
inclusion of any specific item in the Seller Disclosure Letter or the Company Disclosure
Letter is intended to imply that such item or matter, or other items or matters, are or are
not in the ordinary course of business, and no Person shall use the fact of setting forth or
the inclusion of any such items or matter in any dispute or controversy between the parties
as to whether any obligation, item or matter not described herein or included in the Seller
Disclosure Letter or the Company Disclosure Letter is or is not in the ordinary course of
business for purposes of this Agreement. Prior to the Closing, the Sellers and the Company
shall have the right from time to time to supplement, modify or update the Seller Disclosure
Letter and the Company Disclosure Letter but only to the extent relating to facts, events or
circumstances arising out of developments after the date of this Agreement. No such
supplement, modification or update shall prohibit, limit or otherwise affect Buyers right
to indemnification hereunder, be taken into account in determining whether the condition set
forth in Section 2B(i) is satisfied or deemed to prevent or cure a breach of any
representation, warranty, covenant or agreement hereunder with respect to the information
disclosed in such supplement, modification or update.
(ii) The inclusion of information in the Buyer Disclosure Letter shall not be construed
as or constitute an admission or agreement that a violation, right of termination, default,
liability or other obligation of any kind exists with respect to any item, nor shall it be
construed as or constitute an admission or agreement that such information is material to
Buyer or any of its Subsidiaries. In addition, matters reflected in the Buyer Disclosure
Letter are not necessarily limited to matters required by this Agreement to be reflected in
the Buyer Disclosure Letter. Any such additional matters are set forth for informational
purposes only and do not necessarily include other matters of a similar nature. Neither the
specifications of any dollar amount in any representation, warranty or covenant contained in
this Agreement nor the inclusion of any specific item in the Buyer Disclosure Letter is
intended to imply that such amount, or higher or lower amounts, or the item so included or
other items, are or are not material, and no Person shall use the fact of the setting forth
of any such amount or the inclusion of any such item in any dispute or controversy between
the parties as to whether any obligation, item or matter not described herein or included in
the Buyer Disclosure Letter is or is not material for purposes of this Agreement. Further,
neither the specification of any item or matter in any representation, warranty or covenant
contained in this Agreement nor the inclusion of any specific item in the
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Buyer Disclosure
Letter is intended to imply that such item or matter, or other items or matters, are or are
not in the ordinary course of business, and no Person shall use the fact of setting forth or
the inclusion of any such items or matter in any dispute or controversy between the parties
as to whether any obligation, item or matter not described herein or included in the Buyer
Disclosure Letter is or is not in the ordinary course of business for purposes of this
Agreement. Prior to the Closing, Buyer shall have the right from time to time to supplement,
modify or update the Buyer Disclosure Letter but only to the extent relating to facts,
events or circumstances arising out of developments after the date of this Agreement by
providing written notice to the Representative that it is exercising such right pursuant to
this Section 11H(ii). No such supplement, modification or update shall prohibit,
limit or otherwise affect Sellers right to indemnification hereunder, be taken into account
in determining whether the condition set forth in Section 2C(i) is satisfied or
deemed to prevent or cure a breach of any representation, warranty, covenant or agreement
hereunder with respect to the information disclosed in such supplement, modification or
update
11I. No Additional Representations; Disclaimer.
(i) Buyer agrees that, except for the representations and warranties made by the
Company and Sellers that are expressly set forth in this Agreement or in any Certificate,
neither
the Sellers, the Company nor any of their Affiliates or representatives has made and
shall not be deemed to have made to Buyer or any of its Affiliates or representatives, any
representation or warranty of any kind. Without limiting the foregoing and for the avoidance
of doubt, Buyer further agrees that no Seller Party nor any of their respective direct or
indirect Affiliates or representatives will have or be subject to any liability to Buyer or
any other Person resulting from the distribution to Buyer, or Buyers use of the
Confidential Information Memorandum prepared by Jefferies & Company, Inc. dated September
2008 and any information, document or material made available to Buyer or its Affiliates or
representatives in certain data rooms and online data sites, management presentations or
any other form in expectation of the transactions contemplated by this Agreement, except for
the representations and warranties made by the Company and Sellers that are expressly set
forth in this Agreement and except for claims for fraud.
(ii) The Sellers and the Company acknowledge and agree that, except for the
representations and warranties made by Buyer that are expressly set forth in this Agreement
or in any Certificate, Buyer has not made and shall not be deemed to have made to the
Sellers, the Company, any Subsidiary of the Company, or any of their respective Affiliates
or representatives, any representation or warranty of any kind.
(iii) In connection with Buyers investigation of the Company and its Subsidiaries,
Buyer has received from or on behalf of the Company certain projections, including projected
statements of operating revenues and income from operations of the Company and its
Subsidiaries and certain business plan information of the Company and its Subsidiaries.
Buyer acknowledges that there are uncertainties inherent in attempting to make such
estimates, projections and other forecasts and plans, that Buyer is familiar with such
uncertainties, that Buyer is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all estimates, projections and other forecasts and plans so
furnished to it (including the reasonableness of the assumptions underlying such estimates,
projections and forecasts), and that Buyer shall have no claim against any Seller Party or
any other Person with respect thereto. Accordingly, neither the Company nor any Seller Party
makes any representations or warranties whatsoever with respect to such estimates,
projections and other forecasts and plans (including the reasonableness of the assumptions
underlying such estimates, projections and forecasts), and Buyer has not relied thereon.
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11J. Counterparts. This Agreement may be executed in multiple counterparts (including
by means of telecopied or electronically transmitted signature pages), all of which taken together
shall constitute one and the same Agreement.
11K. Governing Law. The internal law (and not the law of conflicts) of the State of
Delaware shall govern all questions concerning the construction, validity and interpretation of
this Agreement and the performance of the obligations imposed by this Agreement.
11L. CONSENT TO JURISDICTION. SUBJECT TO THE PROVISIONS OF SECTION 1D (WHICH
SHALL GOVERN ANY DISPUTE ARISING THEREUNDER), THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY
SUIT, ACTION OR PROCEEDING BROUGHT BY ANY PARTY (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO SHALL PROPERLY AND EXCLUSIVELY LIE IN ANY
FEDERAL OR STATE COURT LOCATED IN WILMINGTON, DELAWARE. EACH PARTY ALSO AGREES NOT TO BRING ANY
SUIT, ACTION OR PROCEEDING SEEKING EQUITABLE RELIEF (I) ARISING UNDER THIS
AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO IN ANY OTHER
COURT (OTHER THAN UPON THE APPEAL OF ANY JUDGMENT, DECISION OR ACTION OF ANY SUCH COURT LOCATED IN
WILMINGTON, DELAWARE). BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH
SUIT, ACTION OR PROCEEDING. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT,
AND HEREBY WAIVE ANY OBJECTION THAT ANY SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE
RESOLUTION OF SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES FURTHER AGREE THAT THE MAILING BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT
SHALL CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY
ANY OTHER MEANS PROVIDED BY LAW OR RULE OF COURT.
11M. WAIVER OF JURY TRIAL. THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF
ACTION (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
11N. Time of the Essence. For the purposes of this Agreement and the transactions
contemplated by this Agreement, time is of the essence.
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11O. Payments under Agreement. Each party agrees that all amounts required to be paid
hereunder shall be paid in United States currency and, except as otherwise expressly set forth in
this Agreement, without discount, rebate or reduction and subject to no counterclaim or offset, on
the dates specified herein (with time being of the essence).
11P. Third-Party Beneficiaries and Obligations. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any
Person (including any employee of the Company and/or any of its Subsidiaries) other than the
parties hereto or their respective successors and permitted assigns, any rights, remedies or
liabilities under or by reason of this Agreement, other than sections which are specifically for
the benefit of Persons specified therein (including Section 1C, Article 9,
Section 9C, Section 10H, Section 10I, Section 10J, and this
Section 11P), each of which is intended to be for the benefit of the Persons covered
thereby or to be paid thereunder and may be enforced by such Persons.
11Q. Equitable Remedies. The parties hereto agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed by Buyer, the Sellers
or the Company, as applicable, in accordance with their specific terms or were otherwise breached
by Buyer, the
Sellers or the Company, as applicable. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement by any of Buyer, the
Sellers or the Company, as applicable, and to enforce specifically the terms and provisions hereof
against Buyer, the Sellers or the Company, as applicable, in any court having jurisdiction, these
being in addition to any other remedy to which the parties hereto are otherwise entitled at law or
in equity.
11R. Prevailing Party. In the event of a default or alleged default or breach or
inaccuracy or alleged breach or inaccuracy by any party of its obligations under this Agreement,
the prevailing party in any action or proceeding in any court or arbitration in connection
therewith shall be entitled to recover from such other party its costs and expenses, including,
without limitation, reasonable legal fees and associated court costs.
11S. Release.
(i) Each Seller, on his own behalf and on behalf of his heirs, beneficiaries,
successors, assigns and representatives (collectively, the Releasors), hereby
releases effective as of the Closing, without the need for any further action, any and all
claims, liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and expenses (including
attorneys fees and costs incurred) of whatsoever kind or nature, whether at law or in
equity, matured or unmatured, known or unknown, contingent or liquidated or otherwise, that
any of them can, shall or may have against the Company, the Companys past and present
parent and subsidiary corporations and all of their past and present respective officers,
directors, managers, managing members, employees, shareholders, agents, and assigns
(collectively, Releasees), arising from or relating any matter, cause or thing
whatsoever occurring at any time on or prior to the Closing Date and relating to the Company
or any Subsidiary of the Company; provided, that the foregoing shall not affect or otherwise
release any Releasors Retained Rights.
(ii) Each Seller hereby irrevocably covenants to refrain from, directly or indirectly,
asserting any claim or demand or commencing, instituting or causing to be commenced, any
proceeding of any kind against any Releasee, based on or arising from any matter released
pursuant to Section 11S(i).
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(iii) Each Seller represents and agrees that (a) he fully understands his rights to
discuss all aspects of this Agreement with his attorneys, (b) he has availed himself of this
right, (c) he has carefully read and fully understands all of the terms of this Agreement,
(d) he has not transferred or assigned any rights or claims that he is hereby purporting to
release herein, and (e) he is voluntarily, and with proper and full authority, entering into
this Agreement. Each Seller represents that he has had a reasonable period of time to
consider the provisions of this Agreement, and that he has considered them carefully before
executing this Agreement.
(iv) If any provision of this Section 11S is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions in this Section 11S will
remain in full force and effect. Any provision of this Section 11S held invalid or
unenforceable only in part will remain in full force and effect to the extent not held
invalid or unenforceable.
11T. Further Assurances. Subject to the terms and conditions of this Agreement, from
and after the Closing, each party hereto shall execute and cause to be delivered to each other
party hereto such instruments and other documents, and shall take such other actions, as such other
party may reasonably request for the purpose of carrying out or evidencing any of the transactions
contemplated by this Agreement. After the Closing, the Sellers shall promptly transfer or deliver
to Buyer (or at Buyers
request, the Company or Subsidiary of the Company) cash, checks (which shall be properly
endorsed) or other property that Sellers may receive that is property of the Company or its
Subsidiaries.
11U. Guaranty. Guarantor hereby (i) unconditionally and irrevocably guarantees the
due and punctual payment and performance of all obligations of Buyer under Sections 1 and
2 of this Agreement, and (ii) agrees to be bound by the terms of Article 11.
Without limiting the generality of the foregoing and for the avoidance of doubt, Guarantor
acknowledges, accepts and agrees to the provisions of this Section 11U.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed on their
behalf, this Purchase and Sale Agreement as of the date first written above.
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REGENCY HOSPITAL COMPANY, L.L.C.
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By: |
/s/ William L. Anderson
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Name: |
William L. Anderson |
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Title: |
President and CEO |
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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed on their
behalf, this Purchase and Sale Agreement as of the date first written above.
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WAUD CAPITAL PARTNERS, L.P.
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By: |
Waud Capital Partners, L.L.C.
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Its: |
General Partner |
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By: |
/s/ Reeve B. Waud
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Name: |
Reeve B. Waud |
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Title: |
Authorized Signatory |
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WAUD CAPITAL PARTNERS, L.L.C.
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By: |
/s/ Reeve B. Waud
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Name: |
Reeve B. Waud |
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Title: |
Authorized Signatory |
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WAUD CAPITAL AFFILIATES, LLC
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By: |
/s/ Reeve B. Waud
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Name: |
Reeve B. Waud |
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Title: |
Authorized Signatory |
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WAUD REALTY MINNEAPOLIS LLC
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By: |
/s/ Reeve B. Waud
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Name: |
Reeve B. Waud |
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Title: |
Authorized Signatory |
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WAUD CAPITAL PARTNERS, L.L.C.,
solely in its capacity as the Representative
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By: |
/s/ Reeve B. Waud
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Name: |
Reeve B. Waud |
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Title: |
Authorized Signatory |
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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed on their
behalf, this Purchase and Sale Agreement as of the date first written above.
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/s/ Anne Mullendore
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Anne Mullendore |
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/s/ George Bruton
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George Bruton |
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THE MECKLENBURG GRANTOR TRUST
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By: |
/s/ Gary A. Mecklenburg
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Name: |
Gary A. Mecklenburg |
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Title: |
Trustee |
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/s/ Ron Spaeth
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Ron Spaeth |
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/s/ Rod Laughlin
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Rod Laughlin |
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IN WITNESS WHEREOF, the parties hereto have executed, or caused to be executed on their
behalf, this Purchase and Sale Agreement as of the date first written above.
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INTENSIVA HEALTHCARE CORPORATION
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By: |
/s/ Martin F. Jackson
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Name: |
Martin F. Jackson |
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Title: |
Vice President |
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SOLELY FOR PURPOSES OF SECTION 11U
SELECT MEDICAL CORPORATION
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By: |
/s/ Martin F. Jackson
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Name: |
Martin F. Jackson |
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Title: |
Executive Vice President and CFO |
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EXHIBIT A
DEFINITIONS
Acquired Securities shall have the meaning set forth in the recitals.
Acquisition Transaction shall mean any transaction involving: (i) the sale, license
or disposition by the Company or its Subsidiaries or the acquisition by any Person (other than
Buyer) of all or a material portion of any of the Companys business or assets; (ii) the issuance
or disposition by the Company or its Subsidiaries or acquisition by any Person (other than Buyer)
of (X) any limited liability company interests, capital stock or other equity security of the
Company or any Subsidiary of the Company, (Y) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any limited liability company interests, capital stock or other
equity security of the Company or Subsidiary of the Company or (Z) any security, instrument or
obligation that is or may become convertible into or exchangeable for any limited liability company
interests, capital stock or other equity security of the Company or any Subsidiary of the Company;
or (iii) any merger, consolidation, business combination, reorganization or similar transaction
involving the Company or any Subsidiary of the Company, other than the transaction contemplated
hereby.
Adjustment Calculation Time means 11:59 p.m. (Atlanta, Georgia time) on the day
immediately prior to the Closing Date.
Affiliate means any Person that directly, or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with the party specified.
Agreed Outlier Deduction Amount means $20,000,000.
Agreement shall have the meaning set forth in the preamble.
Alternative Arrangements shall have the meaning set forth in Section 9G(i).
Applicable Accounting Principles means the methodologies, policies, procedures,
practices, estimation techniques and principles as set forth on Schedule 8A(iii).
Arbiter shall have the meaning set forth in Section 1D(ii).
Asset Allocation shall have the meaning set forth in Section 1E.
Base Purchase Price means $210,000,000.
Business shall mean the business of the Company and its Subsidiaries as currently
conducted or presently proposed to be conducted.
Business Day means any day, other than a Saturday, Sunday, or any other date in
which banks located in Atlanta, Georgia are closed for business as a result of federal, state or
local holiday.
Buyer shall have the meaning set forth in the preamble.
Buyer Closing Certificate shall have the meaning set forth in Section
2C(iii)(a).
Buyer Disclosure Letter means the Buyer Disclosure Letter delivered by Buyer to
Sellers on the date hereof, as amended, supplemented or restated in accordance with Section
11H of this Agreement.
A-1
Buyer Material Adverse Effect means a material and adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
Buyer Parties means Buyer, any Affiliate of Buyer (including if the Closing shall
occur, the Company and its Subsidiaries) and their respective officers, directors, employees,
partners, members, managers, agents, attorneys, representatives, successors or permitted assigns.
Buyer Secretary Certificate shall have the meaning set forth in Section
2C(iii)(b).
Certificate means the Company Compliance Certificate, the Buyer Compliance
Certificate, the Company Secretary Certificate, the Buyer Secretary Certificate, the Financial
Statements Certificate and each FIRPTA Affidavit.
CEO Employee means any Person that was a Chief Executive Officer of a Facility (or
similar position) on the Closing Date or at any time within one year prior to the Closing Date.
Claim Amount shall have the meaning set forth in Section 9C(ii).
Closing shall have the meaning set forth in Section 1B.
Closing Balance Sheet shall have the meaning set forth in Section 1D(i).
Closing Cash Payment shall have the meaning set forth in Section 1C(ii).
Closing Date shall have the meaning set forth in Section 1B.
Closing Indebtedness means Indebtedness as of the Closing.
Closing Net Working Capital means Net Working Capital as of the Adjustment
Calculation Time.
Closing Statement shall have the meaning set forth in Section 1D(i).
CMS means the Centers for Medicare and Medicaid Services.
Code means the Internal Revenue Code of 1986, as amended.
Company shall have the meaning set forth in the preamble.
Company Closing Certificate shall have the meaning set forth in Section
2B(iv)(a).
Company Disclosure Letter means the Company Disclosure Letter delivered by the
Company to Buyer on the date hereof, as amended, supplemented or restated in accordance with
Section 11H of this Agreement.
Company Intellectual Property means material Intellectual Property used in the
conduct of the business of the Company and the Companys Subsidiaries as currently conducted.
Company Material Adverse Effect means any material and adverse effect (a) for
purposes of Section 2B(i) which individually or in the aggregate reduces the value to Buyer
of the business or operations of the Company and its subsidiaries, taken as a whole, by $10,000,000
or more, whether measured by a loss of, reduction in or adverse effect on, earnings, profits or
cash flows, or the
A-2
incurrence or increase of any liability or otherwise (it being understood that the foregoing
shall not prevent any adverse effect or series of adverse effects, which individually or in the
aggregate, equal less than $10,000,000 from also being deemed to be material), (b) for all purposes
other than Section 2B(i) on the financial condition, assets, liabilities, business or
results of operations of the Company and the Subsidiaries of the Company, taken as a whole, or (c)
on the ability of the Sellers or the Company to perform their respective obligations under this
Agreement or to consummate the transactions contemplated by this Agreement. Notwithstanding
anything contained herein to the contrary, none of the following (individually or in combination)
shall be deemed to constitute, or shall be taken into account in determining whether there has been
or would be, a Company Material Adverse Effect: (i) any adverse change or effect resulting from or
relating to general business, economic or financial market conditions so long as such change or
effect does not adversely affect the Company or its Subsidiaries, taken as a whole, in a materially
disproportionate manner relative to other similarly situated participants in the long-term acute
care hospital industry; (ii) any adverse change or effect resulting from or relating to conditions
generally affecting the industry or sector in which the Company or its Subsidiaries operate or
compete (so long as such change or effect does not adversely affect the Company or its
Subsidiaries, taken as a whole, in a materially disproportionate manner relative to other similarly
situated participants in the markets or industries in which they operate); (iii) any adverse change
or effect resulting from or relating to national or international political or social conditions,
including the engagement by the United States in hostilities or the escalation thereof, whether or
not pursuant to the declaration of a national emergency or war, or the occurrence or the escalation
of any military or terrorist attack upon the United States, or any of its territories, possessions,
or diplomatic or consular offices or upon any military installation, equipment or personnel of the
United States so long as such change or effect does not adversely affect the Company or its
Subsidiaries, taken as a whole, in a materially disproportionate manner relative to other similarly
situated participants in the long-term acute care hospital industry; (iv) any adverse change or
effect resulting from or relating to financial, banking, or securities markets (including any
disruption thereof and any decline in the price of any security or any market index) so long as
such change or effect does not adversely affect the Company or its Subsidiaries, taken as a whole,
in a materially disproportionate manner relative to other similarly situated participants in the
long-term acute care hospital industry; (v) changes in GAAP; (vi) the enactment in Minnesota of
Special Session 2010, H.F. No. 1, on May 21, 2010, amending Minn. Stat. § 256.969, subdivision
2b; (vii) any adverse change in or effect on the business of the Company and its Subsidiaries that
is cured by or on behalf of the Company before the earlier of the Closing Date and the date on
which this Agreement is terminated pursuant to Article 7, or (viii) any adverse change or
effect resulting from or relating to the taking of any action contemplated by this Agreement or the
other agreements contemplated hereby or the announcement of this Agreement, the other agreements
contemplated hereby or the transactions contemplated hereby or thereby.
Company Material Contracts shall have the meaning set forth in Section 5J.
Company Secretary Certificate shall have the meaning set forth in Section
2B(iv)(b).
Company Transaction Expenses means the aggregate fees and expenses incurred by the
Company and its Subsidiaries to the extent included in the calculations of Estimated Closing
Indebtedness or Closing Indebtedness (including any incurred on behalf of the Sellers) relating to
the transactions contemplated hereby (whether or not consummated), including, without limitation,
the aggregate fees and expenses of the Company and its Subsidiaries to (i) Jefferies & Company,
Inc. for investment banking services for the Company, (ii) Kirkland & Ellis LLP and Nelson Mullins
Riley & Scarborough, LLP for legal services to the Company and its Subsidiaries, and (iii) any
accountants of the Company and its Subsidiaries, in each case for clauses (i) (ii) above to the
extent unpaid at the time of determination (which, unless otherwise expressly indicated herein,
shall be the Closing); provided that, for the avoidance of doubt, in no event shall
Company Transaction Expenses be deemed to include any fees and expenses to the extent incurred by
the Company at the direction of Buyer or otherwise specifically
A-3
relating to Buyers or its Affiliates SEC reporting obligations, financing (including
obtaining any consent or waiver relating thereto) for the transactions contemplated hereby or any
other liabilities or obligations incurred by the Company on behalf of Buyer or its Affiliates in
connection with the transactions contemplated hereby (including any fees payable to any financing
institution on behalf of Buyer or its Affiliates).
Confidentiality Agreement shall have the meaning set forth in Section 10C.
Consented Lease means a Required Consent Lease for which the lessor or landlord
under such Required Consent Lease has consented in writing to the transactions contemplated by this
Agreement in a manner that is reasonably acceptable to Buyer.
Cost Report Year means each of the periods and hospitals identified on Section
5E(v) of the Company Disclosure Letter under the headings Cost Report Years.
Deficit Amount shall have the meaning set forth in Section 1D(iii).
Designated Contact shall have the meaning set forth in Section 3A.
Development Projects shall have the meaning set forth in Section 5E(iv).
Direct Claims shall have the meaning set forth in Section 9C.
Disclosure Letters means the Buyer Disclosure Letter, the Company Disclosure Letter
and the Seller Disclosure Letter.
DOJ shall have the meaning set forth in Section 10E.
Eastern Prevailing Time means either Eastern Standard Time or Eastern Daylight
Savings Time, as in effect from time to time, as established by the United States Congress.
Employee Benefit Plan means each employee benefit plan (as such term is defined in
Section 3(3) of ERISA), and each other pension, retirement, supplemental retirement, deferred
compensation, excess benefit, profit sharing, bonus, incentive, equity purchase, equity ownership,
equity option, equity appreciation, profits interest, employment, consulting, severance, salary
continuation, termination, change-of-control, health, life, disability, group insurance, vacation,
holiday and fringe benefit plan, program, contract or arrangement (whether written or unwritten,
qualified or nonqualified, funded or unfunded and including any that have been frozen or
terminated), in each case sponsored, maintained, contributed to or required to be contributed to by
the Company or any ERISA Affiliate for the benefit of any current or former employee, director,
officer, agent or independent contractor of the Company or any of its Subsidiaries, or with respect
to which the Company or any of its Subsidiaries has any liability (contingent or otherwise),
including by reason of being or having been considered a single employer with any other entity
pursuant to Section 414 of the Code.
Environmental Laws shall have the meaning set forth in Section 5AA.
Environmental Permits shall have the meaning set forth in Section 5AA.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
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ERISA Affiliate means any trade or business, whether or not incorporated, which is
or was, at any relevant time, treated with the Company or any of its Subsidiaries as a single
employer within the meaning of Section 414 of the Code.
Escrow Account shall have the meaning set forth in Section 1C(iii).
Escrow Agent shall have the meaning set forth in the Escrow Agreement.
Escrow Agreement shall have the meaning set forth in Section 1C(iii).
Escrow Amount shall mean the Escrow Deposit Amount, less any distributions thereof
in accordance with the terms of this Agreement and the Escrow Agreement.
Escrow Deposit Amount means an aggregate amount equal to the sum of the Purchase
Price Adjustment Escrow Amount and the General Escrow Amount.
Escrow Funds means the amounts held in the Escrow Account, including any dividends,
interest, distributions and other income received in respect thereof, less any losses on investment
thereof, less distributions in accordance with the terms of this Agreement and the Escrow
Agreement.
Estimated Closing Balance Sheet shall have the meaning set forth in Section
1C(i).
Estimated Closing Indebtedness means Closing Indebtedness, as estimated by the
Company in good faith, such estimate to be reasonably satisfactory to Buyer.
Estimated Closing Net Working Capital means Closing Net Working Capital, as
estimated by the Company in good faith, such estimate to be reasonably satisfactory to Buyer.
Estimated Closing Statement shall have the meaning set forth in Section
1C(i).
Estimated Purchase Price means the result equal to (i) the Base Purchase Price,
minus (ii) the Estimated Closing Indebtedness, plus (iii) the amount (if any) by
which the Estimated Closing Net Working Capital exceeds the Targeted Net Working Capital,
minus (iv) the amount (if any) by which the Targeted Net Working Capital exceeds the
Estimated Closing Net Working Capital, and minus (v) the Agreed Outlier Deduction Amount.
Excess Amount shall have the meaning set forth in Section 1D(iii).
Extended Claim Amount shall have the meaning set forth in Section 9C(iii).
Extended Survival Date shall have the meaning set forth in Section 9C(iii).
Facility shall have the meaning set forth in Section 5O(i).
Federal Health Care Programs shall have the meaning set forth in Section
5Z(iii)(d).
Filings shall have the meaning set forth in Section 5P(i).
Financial Statements shall have the meaning set forth in Section 5E(i).
Financial Statements Certificate shall have the meaning set forth in Section
2B(iv)(d).
A-5
FTC shall have the meaning set forth in Section 10E.
Fundamental Representations means the representations and warranties set forth in
Sections 4A, 4B(i), 4C, 5A, 5B, 5C, 5D(i),
5W, 6A, 6B(i) and 6D.
Funded Indebtedness means the Senior Credit Facilities, the Georgian Bank Loans, the
WRM Note and the Secured Promissory Note, dated as of May 1, 2004, made by Regency Hospital Company
of Macon, LLC in favor of The Medical Center of Central Georgia, Inc.
GAAP means United States generally accepted accounting principles.
General Escrow Account shall have the meaning set forth in Section
1C(iii)(b).
General Escrow Amount means $10,000,000.
General Survival Date shall have the meaning set forth in Section 9C(ii).
Georgian Bank Loans means (a) that certain Promissory Note, dated as of September
22, 2004, made by Regency Hospital of Minneapolis, LLC, in favor of Georgian Bank; (b) that certain
Loan Agreement, dated as of December 1, 2005, by and between Regency Hospital of North Dallas, LLC,
and Georgian Bank; (c) that certain Construction Loan Agreement, dated as of December 1, 2005, by
and between Regency Hospital of North Dallas, LLC and Georgian Bank; (d) that certain Loan
Agreement, dated as of April 21, 2006, by and between Regency Hospital of Fort Worth, LLC and
Georgian Bank; (e) that certain Construction Loan Agreement, dated as of April 21, 2006, by and
between Regency Hospital of Fort Worth, LLC and Georgian Bank; and (f) each other document or
agreement executed in connection with (a) through (e) above, as the same have been and may be
amended, modified, supplemented or waived from time to time.
Governmental Entity shall mean any (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature, (b) federal, state,
local, municipal, foreign or other government, (c) governmental or quasi-governmental authority of
any nature (including any governmental division, department, agency, commission, instrumentality,
official organization, unit, body or entity and any court or other tribunal), (d) any
self-regulatory authority (including the NYSE) and (e) and entity that acts for or on behalf of any
governmental or quasi-governmental authority under a contract or otherwise, including without
limitation any Medicare Administrative Contractor, Fiscal Intermediary, Carrier, Affiliated
Contractor, Recovery Audit Contractor, Zone Program Integrity Contractor, Program Safeguard
Contractor, or Medicaid Integrity Contractor.
Guarantor shall have the meaning set forth in the preamble.
Hazardous Substances shall have the meaning set forth in Section 5AA.
Health Care Programs shall have the meaning set forth in Section 5Z(iii)(d).
HIPAA shall have the meaning set forth in Section 5N(viii).
HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Indebtedness means, without duplication, (a) all obligations of the Company and its
Subsidiaries for borrowed money owed to any third party, including pursuant to the Senior Credit
A-6
Facilities, (b) all obligations of the Company and its Subsidiaries evidenced by bonds,
debentures, notes, mortgages or similar instruments, (c) all obligations of the Company and its
Subsidiaries issued or assumed as the deferred purchase price of property or services (including
the earned portion and any amounts reasonably expected to be earned of any so-called earn-out
obligations) but excluding such obligation to pay the deferred purchase price of such property or
services that are trade accounts payable incurred in the ordinary course of business, (d) all
obligations of the Company and its Subsidiaries under interest rate or currency swap transactions
(valued at the termination value thereof and including swap breakage or assessed fees), (e) all
reimbursement obligations, contingent or otherwise, under a drawn acceptance, drawn letter of
credit or a similar drawn facility, (f) all guarantees and arrangements having the economic effect
of a guarantee of the Company or its Subsidiaries of any indebtedness of the type mentioned in
other sections of this definition of any other Person, (g) obligations under leases required in
accordance with GAAP to be recorded as capital leases, (h) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to acquired property,
(i) all interest, any premiums payable or any other costs or charges (including any prepayment
penalties or breakage costs) on any instruments or obligations described in clauses (a) through (h)
hereof, (j) all Company Transaction Expenses, (k) all Representative Expenses, (l) the Ohio Matter
Payoff Amount, and (m) all obligations of the Company and its Subsidiaries for any change of
control, sale bonus or similar payment obligations to employees of the Company or its Subsidiaries
payable as a result of the consummation of the transactions contemplated by this Agreement;
provided that in no event shall Indebtedness include (1) any liabilities or
obligations related to inter-company debt between the Company and any of its wholly owned
Subsidiaries and any wholly owned Subsidiary of the Company and another wholly owned Subsidiary of
the Company, or (2) any fees and expenses to the extent incurred by the Company at the direction of
Buyer or otherwise specifically relating to Buyers or its Affiliates financing (including
obtaining any consent, agreement or waiver requested by Buyer relating thereto) for the
transactions contemplated hereby.
Indemnified Party shall have the meaning set forth in Section 9F(i).
Indemnifying Party shall have the meaning set forth in Section 9F(i).
Intellectual Property means any and all worldwide industrial and intellectual
property rights, irrespective of whether such rights are registered, including, without limitation,
all rights in and to the following: (i) patents and patent applications, (ii) trademarks, service
marks, trade dress, logos and registrations and applications for registration thereof together with
all of the goodwill associated therewith, (iii) copyrights (registered or unregistered) and
registrations and applications for registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) Technology, trade secrets, inventions (whether
patentable or unpatentable and whether or not reduced to practice) and know-how, and (vi) Internet
domain names.
IRS shall have the meaning set forth in Section 5N(ii).
knowledge when used in the phrase to the knowledge of the Company or
similar phrases means, and shall be limited to, the actual knowledge of each of William L.
Anderson, Kenneth M. Miles, Damian Canterini, Pat Jones, David Barnes, Everet Taylor and Alex Dali.
Latest Balance Sheet shall have the meaning set forth in Section 5E(i).
Leased Real Property means all leasehold or subleasehold estates and other rights to
use or occupy any land, buildings, structures, improvements, fixtures, or other interest in real or
immovable property that is used in the Companys or any of its Subsidiaries business.
A-7
Leases means all leases, subleases, licenses, concessions and other agreements
(written or oral), including all amendments, extensions, renewals and other agreements with respect
thereto, pursuant to which the Company or any of its Subsidiaries holds any Leased Real Property.
Legal Proceeding shall mean any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate proceeding), hearing,
inquiry, audit, survey, examination or investigation commenced, brought, conducted or heard by or
before any Governmental Entity or any arbitrator or arbitration panel.
Legal Requirement shall mean any federal, state, local, municipal, foreign or other
law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree,
order, rule, regulation, ruling or requirement, in each case having the force or effect of law,
issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the
authority of any Governmental Entity.
Licenses shall mean all licenses, permits, certifications, registrations,
certificates of need, certificates of occupancy, Drug Enforcement Administration registrations,
franchises, approvals, consents, waivers and authorizations from state and federal healthcare
programs and Governmental Entities, but Licenses shall not include Environmental Permits.
Lien means any mortgage, deed of trust, lien, pledge, hypothecation, claim, charge,
security interest, option, right of first refusal, preemptive right, community property interest,
restriction (including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any income derived from
any asset, any restriction on the use of any asset and any restriction on the possession, exercise
or transfer of any other attribute of ownership of any asset), infringement, easement, title defect
or other adverse claim of ownership or use, or other encumbrance of any kind, character or
description, whether or not of record (including any deposit, conditional or installment sale,
other title retention contract or capital lease), any lease in the nature thereof, or any filing
of, or agreement to give, any financing statement.
Limitation Date shall have the meaning set forth in Section 10A.
Litigation Conditions shall have the meaning set forth in Section 9F(ii).
Losses means any loss, damage, injury, liability, claim, demand, settlement,
judgment, award, fine, penalty, cost or expense (including reasonable attorneys fees), including
in respect of enforcement of indemnity rights hereunder.
Majority Holders shall have the meaning set forth in Section 10H.
Money Purchase Plan means a money purchase pension plan as described in Treasury
Regulation Sections 1.401-1(b)(1)(i).
Multiemployer Plan shall have the meaning set forth in Section 3(37) of ERISA.
Net Working Capital means the excess of (i) the sum of the Companys and its
Subsidiaries current assets (including, for the avoidance of doubt, the cash and cash equivalents
of the Company and its Subsidiaries) on a consolidated basis determined in accordance with GAAP
applied on a basis consistent with the Applicable Accounting Principles, over (ii) the sum of the
Companys and its Subsidiaries current liabilities on a consolidated basis determined in
accordance with GAAP applied on a basis consistent with the Applicable Accounting Principles;
provided, that notwithstanding clause
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(i) above, the current assets of the Company and its Subsidiaries shall include and be deemed to
include all Post-Signing Macon Capital Expenditures, but only so long as any obligation to pay for
such Post-Signing Macon Capital Expenditure that is not paid for in cash prior to the Adjustment
Calculation Time is included in the calculation of current liabilities; provided,
further, that notwithstanding clause (ii) above, the current liabilities of the Company and
its Subsidiaries shall not include (1) Company Transaction Expenses, Representative Expenses, any
liabilities or obligations in respect of Outlier Adjustments and any other liabilities that are
included in the definition of Indebtedness or that otherwise reduce the Purchase Price, and (2)
fees and expenses to the extent incurred by the Company at the direction of Buyer or otherwise
specifically relating to Buyers or its Affiliates SEC reporting obligations or financing
(including obtaining any consent, agreement or waiver relating thereto) for the transactions
contemplated hereby. If not fully satisfied prior to the Closing, the consideration to be paid to
acquire the equity interests of the Subsidiary of the Company set forth on Section 2B(xiii)
of the Company Disclosure Letter as contemplated by Section 2B(xiii) shall be included as a
current liability in the calculation of Net Working Capital, Estimated Closing Net Working Capital
and Closing Net Working Capital. By way of example, if the Closing were to have occurred on March
31, 2010, Net Working Capital would have been calculated in accordance with and as set forth on
Schedule 8A(iii).
Notice of Disagreement shall have the meaning set forth in Section 1D(i).
NYSE means, collectively, the New York Stock Exchange, or any successor entity or
entities thereto.
Ohio Matter Payoff Amount means the aggregate amounts owing as of the Closing by
Regency (as defined in the Ohio Matter Settlement Agreement) pursuant to Section III.1.C. of the
Ohio Matter Settlement Agreement. In no event shall the Ohio Matter Payoff Amount include any
obligations (whether payment or otherwise) in respect of or pursuant to the Regency Integrity
Agreement (notwithstanding anything therein or herein to the contrary).
Ohio Matter Settlement Agreement means that certain Settlement Agreement, dated as
of April 7, 2009, by and among the United States of America, acting through the United States
Department of Justice and on behalf of the Office of Inspector General of the Department of Health
and Human Services, the Company, the Subsidiaries of the Company party thereto and Melissa A.
Bailosky.
Organizational Documents means (i) the certificate or articles of incorporation,
organization or formation and the by-laws, the partnership agreement or operating or limited
liability company agreement (as applicable), and (ii) any documents comparable to those described
in clause (i) as may be applicable pursuant to any applicable Legal Requirement.
Outlier Adjustment means a reconciliation, audit or similar adjustment with respect
to any Cost Report Year (including, without limitation, any time value of money adjustment imposed
in the reconciliation process described below, and whether made or otherwise effected through a
demand for payment, an offset against, or deduction from, future payments, claim for reimbursement
or otherwise and whether any such adjustment is made or otherwise effected before, at or after the
Closing) to a Medicare outlier payment received by the Company or any Subsidiary of the Company
prior to the Closing (or any Medicare outlier payment which the Company or any Subsidiary of the
Company is entitled to receive prior to the Closing) imposed by CMS pursuant to the adjustment,
audit, reconciliation and similar process contemplated by 42 C.F.R. § 412.525(a)(4)(ii); 42 C.F.R.
§§ 412.84(i)(4), (m); and 42 C.F.R. §412.529(f) (or similar or successor regulations or
provisions).
Outside Date shall have the meaning set forth in Section 7A(vi).
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Owned Real Property means all land, together with all buildings, structures,
improvements and fixtures located thereon, and all easements, servitudes and other interests and
rights appurtenant thereto, owned by the Company or any of its Subsidiaries.
Parent means Select Medical Holdings Corporation, a Delaware corporation.
Partnership Subsidiaries means Regency Hospital of Fort Worth, LLLP, a Delaware
limited partnership, Regency Hospital of North Dallas LLLP, a Delaware limited liability limited
partnership, Regency Hospital of Odessa, LLLP, a Delaware limited liability limited partnership,
and Regency Hospital of Tucson, LLC, an Arizona limited liability company.
Payment shall have the meaning set forth in Section 5Z(iii)(e).
Permitted Encumbrances means (i) any restriction on transfer arising under
applicable securities Legal Requirements, (ii) Liens for Taxes not yet due or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings if a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made therefor, (iii)
any statutory or common law landlords liens created pursuant to or arising with respect to a
lease, sublease or license by the Company or Subsidiary of the Company of Leased Real Property
arising or incurred in the ordinary course of business which are not overdue, (iv) the terms,
provisions, restrictions and limitations of any personal property lease to the extent that such
terms, provisions, restrictions and limitations do not materially impair the operation of the
business at the facility at which such leased personal property is located, (v) Liens under the
Senior Credit Facilities which will be discharged at or prior to the Closing, (vi) mechanics Liens
and similar Liens for labor, materials, or supplies incurred in the ordinary course of business and
not yet due, (vii) zoning, building codes, and other land use Legal Requirement regulating the use
or occupancy of Leased Real Property or the activities conducted thereon that are imposed by any
Governmental Entity having jurisdiction over such Leased Real Property and that do not materially
interfere with the present use of the property affected thereby; (viii) easements, servitudes,
covenants, conditions, restrictions, and other similar matters affecting title to any assets of the
Company or any of its Subsidiaries and other title defects that in each case do not or would not
materially detract from the value and do not impair the use or occupancy of such assets, and (ix)
Liens set forth on Section 8A(i) of the Company Disclosure Letter.
Person means an individual, a partnership, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a Governmental Entity.
Post-Signing Macon Capital Expenditures means the aggregate amount of all capital
expenditures the obligations for which are incurred (whether paid in cash or accrued as a current
liability) by the Company or any of its Subsidiaries during the Pre-Closing Period in connection
with the Development Project located at 535 Coliseum Drive, Macon GA 31217, but only to the extent
such capital expenditures the obligations for which are incurred are either (i) contemplated by the
budget contained in Exhibit K for such Development Project or (ii) approved in advance by
Buyer. Any capital expenditures incurred prior to the date hereof in connection with the
Development Project located at 535 Coliseum Drive, Macon GA 31217 that are not paid in full prior
to the Adjustment Calculation Time will be considered current liabilities for purposes of the
calculation of Net Working Capital, Estimated Closing Net Working Capital and Closing Net Working
Capital.
Pre-Closing Period shall have the meaning set forth in Section 3A.
Pre-Closing Tax Period means any taxable period ending on or before the Closing Date
and the portion of any Straddle Period up to and including the Closing Date.
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Pre-Closing Taxes means the excess, if any, of (i) the sum of (A) all liability for
Taxes of each of the Company and its Subsidiaries for any Pre-Closing Tax Period (other than real
estate, personal property or similar ad valorem taxes) (excluding (x) any Taxes arising on the
Closing Date after the Closing as a result of actions outside the ordinary course of business taken
by or on behalf of Buyer or its Affiliates (including the Company and its Subsidiaries) following
the Closing and (y) any Taxes attributable to an election under Section 338 of the Code made by
Buyer or any of its Affiliates with respect to the acquisition or deemed acquisition of any of the
Subsidiaries) plus (B) any obligation to indemnify or otherwise assume or succeed to any
liability for Taxes of any other Person for any Pre-Closing Tax Period whether by contract, under
common law doctrines of de facto merger and successor liability or otherwise, over (ii) the
amount reflected as a liability for Taxes (plus the amount, if any, reflected as a liability for
Taxes of other Persons described in clause (i)(B) hereof) in the determination of Closing Net
Working Capital (other than real estate, personal property or similar ad valorem taxes). The
determination of the Taxes of the Company or any of its Subsidiaries or any other Person for the
portion of the Straddle Period ending on and including, and the portion of the Straddle Period
beginning after, the Closing Date shall be determined by assuming that the Straddle Period
consisted of two (2) taxable years or periods, one of which ended at the close of the Closing Date
and the other of which began at the beginning of the day following the Closing Date, and items of
income, gain, deduction, loss or credit of the Company or any of its Subsidiaries for the Straddle
Period shall be allocated between such two taxable years or periods on a closing of the books
basis by assuming that the books of the Company or any of its Subsidiaries were closed at the
close of the Closing Date, provided, however, that exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for depreciation, shall be
apportioned between such two taxable years or periods on a daily basis.
Professional Employee shall have the meaning set forth in Section 5T(v).
Purchase Price means the amount equal to the result of (i) the Base Purchase Price,
minus (ii) the Closing Indebtedness, plus (iii) the amount (if any) by which the
Closing Net Working Capital exceeds the Targeted Net Working Capital, minus (iv) the amount
(if any) by which the Targeted Net Working Capital exceeds the Closing Net Working Capital,
minus (v) the Agreed Outlier Deduction Amount.
Purchase Price Adjustment Escrow Account shall have the meaning set forth in
Section 1C(iii)(a).
Purchase Price Adjustment Escrow Amount means $2,000,000.
Real Property means the Owned Real Property and the Leased Real Property.
Regency Integrity Agreement means that certain Corporate Integrity Agreement,
effective on or about April 14, 2009, by and between the Office of Inspector General of the
Department of Health and Human Services and the Company, a copy of which is attached hereto as
Section 8A(ii) of the Company Disclosure Letter.
Releasees shall have the meaning set forth in Section 11S(i).
Releasors shall have the meaning set forth in Section 11S(i).
Representation shall have the meaning set forth in Section 11D.
Representative shall have the meaning set forth in the preamble.
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Representative Expenses means an amount estimated by the Representative for fees and
expenses incurred or estimated to be incurred by the Representative in its capacity as such either
before or after the Closing; provided, that Representative Expenses shall be no more than
the amount set forth in the calculation of Closing Indebtedness.
Required Consent Lease means those Leases that would be required to be listed in
Section 2B(xii) of the Company Disclosure Letter.
Retained Rights means (i) the rights of any Releasor under this Agreement or any
agreement entered into prior to Closing with Parent or any of its Subsidiaries (including, without
limitation, Buyer) in connection herewith, (ii) the rights of any Releasor (that is a natural
person) that is an employee of or other service provider to the Company or any Subsidiary for
wages, salary, bonus or other compensation or vested employee benefits arising prior to the Closing
to which such Releasor is specifically entitled under the Employee Benefit Plans as a result of
such Releasors employment by the Company or any of its Subsidiaries and which do not represent
liabilities (as determined in accordance with GAAP) of the Company or any Subsidiary as of the
Closing, and (iii) the rights of any such Releasor to exculpation, indemnification, reimbursement
or advancement of expenses as a director, manager, managing member or officer pursuant to the
Organizational Documents of the Company or any Subsidiary of the Company, but solely with respect
to third party claims (for the avoidance of doubt, excluding any claims by Seller or any Affiliate
of any Seller) made after the Closing (as long as such Releasor did not have actual knowledge of
such claim prior to the Closing).
SEC means the United States Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
Seller shall have the meaning set forth in the preamble.
Seller Disclosure Letter means the Seller Disclosure Letter delivered by the Seller
to Buyer on the date hereof, as amended, supplemented or restated in accordance with Section
11H of this Agreement.
Seller Group shall have the meaning set forth in Section 10J.
Seller Parties means the Sellers, any Affiliate of any Seller and their respective
officers, directors, employees, partners, members, managers, agents, attorneys, representatives,
successors or permitted assigns.
Senior Credit Facilities means that certain Amended and Restated Credit Agreement,
dated as of July 31, 2009 by and among Regency Hospitals, LLC, the other credit parties signatory
thereto, the lenders listed on the signature pages thereto, CIT Healthcare LLC, as administrative
agent, and CIT Capital Securities LLC, as sole lead arranger and book runner, and each other
document or agreement executed in connection therewith, as the same have been and may be amended,
modified, supplemented or waived from time to time.
State Health Care Programs shall have the meaning set forth in Section
5Z(iii)(d).
Straddle Period means any taxable period beginning on or prior to and ending after
the Closing Date.
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Subsidiary means, with respect to any Person, any corporation, partnership, limited
liability company, association or other business entity of which (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership, membership or other
similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership,
limited liability company, association or other business entity if such Person or Persons shall be
allocated a majority of partnership, membership, association or other business entity gains or
losses or shall be or control the managing director, general partner or manager of such
partnership, limited liability company, association or other business entity.
Tail Policy shall have the meaning set forth in Section 10G(ii).
Targeted Net Working Capital means $33,587,000.
Tax or Taxes means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, ad valorem,
profits, environmental taxes, customs duties, capital stock, franchise, employees income
withholding, foreign or domestic withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, value added, goods and services, alternative or
add-on minimum, estimated or other tax, fee, assessment, levy or charge of any kind whatsoever
including any interest, penalties or additions to Tax or additional amounts in respect of the
foregoing.
Tax Proceeding shall have the meaning set forth in Section 10F(iii).
Tax Return means any Tax return, declaration, report, claim for refund, or
information return or statement filed or required to be filed by the Company or any of its
Subsidiaries.
Technology means, collectively, specifications, quality control procedures,
manufacturing processes, designs, formulae, methods, techniques, ideas, data, improvements,
software and other similar materials, and all recordings, graphs, drawings, reports, analyses, and
other writings, and any other embodiments of the above, in any form whether or not specifically
listed herein, and all related technology, that are used, incorporated or embodied in or displayed
by any of the foregoing or used in the design, development, reproduction, sale, marketing,
maintenance or modification of any of the foregoing.
Third Party Claim shall have the meaning set forth in Section 9F(i).
Title IV Plan means any employee pension benefit plan (as such term is defined in
Section 3(2) of ERISA) that is subject to Title IV of ERISA, other than a Multiemployer Plan.
UCC means the Uniform Commercial Code.
Units shall have the meaning set forth in that certain Fifth Amended and Restated
Limited Liability Company Agreement of the Company, dated as of December 30, 2009, as the same may
be amended, modified or waived from time to time.
WARN Act shall have the meaning set forth in Section 5BB(iii).
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WRM Note means that certain Secured Promissory Note, dated as of December 21, 2004,
issued by Regency Hospital of Minneapolis, L.L.C., a Delaware limited liability company, to Waud
Realty Minneapolis LLC, a Delaware limited liability company.
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