EXHIBIT H
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Execution Copy
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WELSH, CARSON, XXXXXXXX & XXXXX IX, L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
October 17, 2004
EGL Holding Company
c/o Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Select Medical Corporation
0000 Xxx Xxxxxxxxxx Xxxx
Xxxxxxxxxxxxx, XX 00000
Re: Contingency Letter Agreement
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Ladies and Gentlemen:
Reference is hereby made to the Agreement and Plan of Merger, dated as
of the date hereof (the "Merger Agreement"), by and among EGL Holding Company, a
Delaware corporation ("Parent"), EGL Acquisition Corp., a Delaware corporation
("Acquisition"), and Select Medical Corporation, a Delaware corporation (the
"Company"). Capitalized terms used and not otherwise defined herein have the
meanings ascribed to them in the Merger Agreement.
Welsh, Carson, Xxxxxxxx & Xxxxx IX, L.P. ("WCAS IX") hereby agrees
with Parent and the Company that, if, at any time on or after the date hereof
and prior to the Effective Time, Parent and/or Acquisition shall have knowingly
and willfully breached the Merger Agreement and the Company shall have
terminated the Merger Agreement pursuant to Section 7.1(e) thereof, WCAS IX
shall be obligated to make an equity contribution to Parent to satisfy such
liability, which for administrative convenience shall be paid by WCAS IX
directly to the Company, in the amount of $10,000,000 less any amounts paid by
Parent pursuant to Section 5.3(b) of the Merger Agreement (the "Backstop
Amount"). The Backstop Amount may be satisfied in whole or part by any other
affiliate of Welsh, Carson, Xxxxxxxx & Xxxxx ("WCAS") or any third party. Any
payment contemplated by this paragraph shall be made on the day that the Company
terminates the Merger Agreement pursuant to Section 7.1(e) thereof provided that
(i) the breach or failure to perform giving rise to such termination was a
willful and knowing breach or failure to perform, (ii) the Company shall have
executed and delivered a settlement agreement with WCAS IX and Parent with
respect to the liability of WCAS IX under this letter agreement and the
liability of Parent under Section 5.3(b) of the Merger Agreement and (iii) if
the Company shall have filed a lawsuit, the Company shall have executed and
delivered a stipulation of dismissal with prejudice thereof in form prepared by
WCAS IX. WCAS IX further
acknowledges and agrees that, consistent with and subject to the terms and
conditions of this letter agreement, the obligation of WCAS IX hereunder to
pay the Backstop Amount is absolute and unconditional.
The Company covenants, agrees and acknowledges that: (i) for any claim
asserted by the Company against WCAS IX (and/or any other affiliate of WCAS),
including, without limitation, any claim that arises out of or relates in any
way to the negotiation, entry into or terms of the Merger Agreement or this
letter agreement or the transactions contemplated by either of them or the
breach or claimed breach thereof, the Company shall be entitled to only a single
recovery, and such recovery shall be limited to the Backstop Amount; (ii) such
recovery shall be the Company's sole and exclusive remedy with respect to any
such claim, and all other damages or remedies, at law or in equity (including
provisional remedies) are waived; and (iii) it is the intent of the Company that
the limitations imposed hereby on remedies and the measure of damages shall
apply regardless of the theory or theories upon which recovery is sought. Any
amounts paid by WCAS IX hereunder shall reduce any liability of Parent or
Acquisition pursuant to the last sentence of Section 5.3(b) of the Merger
Agreement.
Notwithstanding anything that may be expressed or implied in the
foregoing provisions of this letter agreement, Parent, Acquisition and the
Company covenant, agree and acknowledge that no person or entity other than WCAS
IX shall have any obligation hereunder and that, notwithstanding that WCAS IX is
a partnership, no recourse hereunder shall be had against any other affiliate of
WCAS, against any past, current or future officer, director, agent or employee
of WCAS IX, against any past, current or future general or limited partner of
WCAS IX or against any past, current or future director, officer, employee,
general or limited partner, member, affiliate, heir, executor, administrator,
trustee, successor or assign of any of the foregoing, whether by the enforcement
of any assessment or by any legal or equitable proceeding or by virtue of any
statute, regulation or other applicable Law, or otherwise. Without limiting the
generality of the foregoing, it is expressly covenanted, agreed and acknowledged
that no personal liability whatsoever shall attach to, be imposed on or
otherwise incurred by any past, current or future officer, agent or employee of
WCAS IX, any past, current or future general or limited partner of WCAS IX or
any past, current or future director, officer, employee, general or limited
partner, member, affiliate, heir, executor, administrator, trustee, successor or
assign of any of the foregoing, for any obligations of WCAS IX under this letter
agreement or for any claim relating to, based on, in respect of or by reason of
such obligations or their creation.
This letter agreement shall terminate immediately, and be of no
further force and effect, as of the Effective Time. This letter agreement shall
survive any termination of the Merger Agreement.
Each of WCAS IX, Parent and the Company covenants, agrees and
acknowledges that: (i) this letter agreement may be executed in two or more
counterparts (and may be delivered by facsimile), each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument; (ii) this letter agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns; (iii)
nothing express or implied is intended to or shall confer upon any other Person
any other right, benefit or remedy of any nature whatsoever relating to, under
or by reason of this letter agreement; (iv) this letter agreement and all claims
arising hereunder or relating hereto shall be governed by
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and construed and enforced in accordance with the Laws of the State of New
York, without giving effect to the principles of conflicts of Laws thereof;
(v) any claim arising under or relating to this letter agreement shall be
brought exclusively in the state or federal courts sitting in New York, New
York, the parties hereto irrevocably consent to the jurisdiction of those courts
for such purpose, and such courts are agreed to be a convenient forum for such
claims; (vi) this letter agreement, together with the Merger Agreement and the
other agreements executed in connection with the Merger Agreement on the date
hereof and the Confidentiality Agreement between WCAS IX and the Company dated
as of August 27, 2004, sets forth the entire agreement and understanding of the
parties with respect to the subject matter hereof and supercedes all prior
written and oral agreements and understandings with respect thereto; (vii) this
letter agreement may not be amended or modified in any way except by a writing
signed by all of the parties hereto; and (viii) this letter agreement is validly
entered into by the parties hereto, acting through their duly authorized
signatories, and shall be binding upon the parties (and their respective
successors and assigns) according to its terms.
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Very truly yours,
WELSH, CARSON, XXXXXXXX &
XXXXX IX, L.P.
By WCAS IX Associates LLC
General Partner
/s/ Xxxx X. Xxxxxxx
By
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Managing Member
Accepted and Agreed to By:
EGL HOLDING COMPANY
/s/ Xxxx X. Xxxxxxx
By
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Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
SELECT MEDICAL CORPORATION
/s/ Xxxxxxx X. Xxxxxx
By
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Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President,
General Counsel & Secretary
