Exhibit 1.1
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SELECT MEDICAL CORPORATION
(a Delaware corporation)
[8,700,000] Shares of Common Stock
PURCHASE AGREEMENT
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Dated: , 2001
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Table of Contents
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Page
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SECTION 1. Representations and Warranties......................................................... 3
(a) Representations and Warranties by the Company.......................................... 3
(i) Compliance with Registration Requirements..................................... 3
(ii) Independent Accountants....................................................... 4
(iii) Financial Statements.......................................................... 4
(iv) No Material Adverse Change in Business........................................ 4
(v) Good Standing of the Company.................................................. 5
(vi) Good Standing of Subsidiaries................................................. 5
(vii) Capitalization................................................................ 6
(viii) Authorization of Agreement.................................................... 7
(ix) Authorization and Description of Securities................................... 7
(x) Absence of Defaults and Conflicts............................................. 7
(xi) Absence of Labor Dispute...................................................... 7
(xii) Absence of Proceedings........................................................ 8
(xiii) Accuracy of Exhibits.......................................................... 8
(xiv) Possession of Intellectual Property........................................... 8
(xv) Absence of Further Requirements............................................... 8
(xvi) Possession of Licenses and Permits............................................ 9
(xvii) Accounts Receivable........................................................... 9
(xviii) Compliance with Social Security Act and Other Federal Enforcement
Initiatives................................................................... 10
(xix) Regulatory Filings............................................................ 11
(xx) Title to Property............................................................. 11
(xxi) Investment Company Act........................................................ 12
(xxii) Environmental Laws............................................................ 12
(xxiii) Registration Rights........................................................... 12
(xxiv) Insurance..................................................................... 13
(xxv) Tax Returns and Payment of Taxes.............................................. 13
(xxvi) No Stabilization or Manipulation.............................................. 14
(xxvii) Certain Transactions.......................................................... 14
(xxviii) Statistical and Market Data................................................... 14
(xxix) Accounting and other Controls................................................. 14
(b) Representations and Warranties by the Selling Shareholders............................. 14
(i) Accurate Disclosure........................................................... 15
(ii) Authorization of Agreements................................................... 15
(iii) Good and Valid Title.......................................................... 15
(iv) Due Execution of Power of Attorney and Custody Agreement...................... 16
(v) Absence of Manipulation....................................................... 16
(vi) Absence of Further Requirements............................................... 16
(vii) Restriction on Sale of Securities............................................. 17
(viii) Certificates Suitable for Transfer............................................ 17
(ix) No Association with NASD...................................................... 18
(c) Officer's Certificates................................................................. 18
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Table of Contents
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(continued)
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SECTION 2. Sale and Delivery to Underwriters; Closing............................................. 18
(a) Initial Securities..................................................................... 18
(b) Option Securities...................................................................... 18
(c) Payment................................................................................ 19
(d) Denominations; Registration............................................................ 20
SECTION 3. Covenants of the Company............................................................... 20
(a) Compliance with Securities Regulations and Commission Requests......................... 20
(b) Filing of Amendments................................................................... 20
(c) Delivery of Registration Statements.................................................... 21
(d) Delivery of Prospectus................................................................. 21
(e) Continued Compliance with Securities Laws.............................................. 21
(f) Blue Sky Qualifications................................................................ 21
(g) Rule 158............................................................................... 22
(h) Listing................................................................................ 22
(i) Restriction on Sale of Securities...................................................... 22
(j) Reporting Requirements................................................................. 23
(k) Medicare Filings and Notices........................................................... 23
SECTION 4. Payment of Expenses.................................................................... 23
(a) Expenses............................................................................... 23
(b) Expenses of the Selling Shareholders................................................... 23
(c) Termination of Agreement............................................................... 24
(d) Allocation of Expenses................................................................. 24
SECTION 5. Conditions of Underwriters' Obligations................................................ 24
(a) Effectiveness of Registration Statement................................................ 24
(b) Opinion of Counsel for the Company..................................................... 24
(c) Opinion of Counsel for the Selling Shareholders........................................ 25
(d) Opinion of Counsel for the Underwriters................................................ 25
(e) Officers' Certificate.................................................................. 25
(f) Certificate of the Selling Shareholders................................................ 26
(g) Accountant's Comfort Letter............................................................ 26
(h) Bring-down Comfort Letter.............................................................. 26
(i) Approval of Listing.................................................................... 26
(j) No Objection........................................................................... 26
(k) Lock-up Agreements..................................................................... 26
(l) Registration Rights Waivers............................................................ 26
(m) Certificate Concerning Predecessor Company Financial Information....................... 27
(n) Certificate of General Counsel of the Company.......................................... 27
(o) Medicare Filings....................................................................... 27
(p) Form W-8 or W-9........................................................................ 27
(q) Conditions to Purchase of Option Securities............................................ 27
(i) Officers' Certificate......................................................... 27
(ii) Certificate of Selling Shareholders........................................... 27
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(continued)
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(iii) Opinion of Counsel for the Company............................................ 27
(iv) Opinion of Counsel for the Selling Shareholders............................... 28
(v) Opinion of Counsel for the Underwriters....................................... 28
(vi) Bring-down Comfort Letter..................................................... 28
(vii) Certificate of General Counsel of the Company................................. 28
(r) Additional Documents................................................................... 28
(s) Termination of Agreement............................................................... 28
SECTION 6. Indemnification........................................................................ 29
(a) Indemnification of Underwriters by the Company and the Selling Shareholders............ 29
(b) Indemnification of Company, Directors and Officers and Selling Shareholders............ 30
(c) Actions against Parties; Notification.................................................. 30
(d) Settlement without Consent if Failure to Reimburse..................................... 31
SECTION 7. Contribution........................................................................... 31
SECTION 8. Representations, Warranties and Agreements to Survive Delivery......................... 33
SECTION 9. Termination of Agreement............................................................... 33
(a) Termination; General................................................................... 33
(b) Liabilities............................................................................ 34
SECTION 10. Default by One or More of the Underwriters............................................. 34
SECTION 11. Default by One or More of the Selling Shareholders..................................... 35
SECTION 12. Notices................................................................................ 35
SECTION 13. Parties................................................................................ 36
SECTION 14. GOVERNING LAW AND TIME................................................................. 36
SECTION 15. Effect of Headings..................................................................... 36
SCHEDULES
Schedule A - List of Underwriters
Schedule B - Selling Shareholders
Schedule C - Pricing Information
Schedule D - List of Persons Subject to Lock-Up
Schedule E - Document Amendments
Schedule 1 - Significant Subsidiaries
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Table of Contents
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(continued)
EXHIBITS
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Exhibit A-1 - Form of Opinion of Dechert
Exhibit A-2 - Form of Opinion of Xxxxxxx X. Xxxxxx
Exhibit A-3 - Form of Opinion of Company's Special Regulatory Counsel
Exhibit A-4 - Form of Opinion of Company's Special Canadian Counsel
Exhibit A-5 - Form of Opinion of Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol
Exhibit A-6 - Form of Opinion of Xxxxxxxx & Xxxxx
Exhibit A-7 - Form of Selling Shareholder Opinion of Dechert
Exhibit B - Form of Lock-Up Letter
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SELECT MEDICAL CORPORATION
(a Delaware corporation)
[8,700,000] Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
, 2001
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
X.X. Xxxxxx Securities Inc.
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
XX Xxxxx Securities Corporation
First Union Securities, Inc.
as U.S. Representatives of the several Underwriters
x/x Xxxxxxx Xxxxx & Xx.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Xxxxx Xxxxx
Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Ladies and Gentlemen:
Select Medical Corporation, a Delaware corporation (the "Company"), and the
persons listed on Schedule B hereto (the "Selling Shareholders") confirm their
respective agreements with Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated ("Xxxxxxx Xxxxx"), X.X. Xxxxxx Securities Inc ("X.X. Xxxxxx")
and each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom Xxxxxxx Xxxxx, X.X. Xxxxxx,
Credit Suisse First Boston Corporation, CIBC World Markets Corp., XX Xxxxx
Securities Corporation and First Union Securities, Inc. are acting as
representatives (in such capacity, the "Representatives"), with respect to (i)
the sale by the Selling Shareholders, acting severally and not jointly, and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, par value $.01 per share, of the
Company ("Common Stock") set forth in said Schedules A and B hereto, and
(ii) the grant by some of the Selling Shareholders to the Underwriters, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of [1,305,000] additional shares of Common Stock to
cover over-allotments, if any. The aforesaid [8,700,000] shares of Common Stock
(the "Initial Securities") to be purchased by the Underwriters and all or any
part of the 1,305,000 shares of Common Stock subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter called,
collectively, the "Securities".
The Company and the Selling Shareholders understand that the Underwriters
propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-72728) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectus.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in any such prospectus that
was omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted the Rule 430A Information that was
used after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus in
the form first furnished to the Underwriters for use in connection with the
offering of the Securities are herein called the "Prospectus." For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval system ("XXXXX").
Prior to the consummation of the offering of the Securities, each of the
documents set forth on Schedule E hereto shall have been executed (the
"Registration Rights Waivers").
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SECTION 1. Representations and Warranties.
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(a) Representations and Warranties by the Company. The Company represents
and warrants to each Underwriter and each Selling Shareholder as of the date
hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of
each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees
with each Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
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Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any Option Securities are purchased,
at the Date of Delivery), the Registration Statement, the Rule 462(b)
Registration Statement and any amendments and supplements thereto complied and
will comply in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto (including any prospectus
wrapper), at the time the Prospectus or any amendments or supplements thereto
were issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through the Representatives expressly for use in the Registration
Statement or the Prospectus.
The preliminary prospectus dated November 8, 2001 filed as part of the
Registration Statement and the Prospectus filed pursuant to Rule 424 under the
1933 Act, complied when so filed in all material respects with the 1933 Act
Regulations and the preliminary prospectus and the Prospectus delivered to the
Underwriters for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
XXXXX, except to the extent permitted by Regulation S-T.
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(ii) Independent Accountants. The accountants who certified the
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financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The consolidated financial statements
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included in the Registration Statement and the Prospectus, together with
the related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiaries, and NovaCare Physical
Rehabilitation and Occupational Health Group, Intensiva Healthcare
Corporation and Subsidiaries, and American Transitional Hospitals, Inc.
(collectivel y, the "Acquired Entities"), at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company, its consolidated subsidiaries and the Acquired Entities and for
the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved. The supporting
schedules included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The
selected consolidated financial data and the summary consolidated financial
information of the Company included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Registration
Statement. The statement of operations data and balance sheet data of
Sports Orthopedic Rehabilitation Services, PA ("SORS") for December 31,
1996 and the year then ended and the period January 1, 1997 through
February 6, 1997 included in the Prospectus under the heading "Selected
Consolidated Financial and Other Data" (the "SORS Financial Information")
was derived from the compiled financial statements of SORS. The compiled
financial statements of SORS for the above referenced periods (i) fairly
present the financial position of SORS at the dates indicated and the
statement of operations data for the periods specified and (ii) were
prepared in conformity with GAAP, except for the absence of footnotes,
statements of cash flows and the exclusion of certain per share
information. There are no material adjustments that would be required to be
made to the SORS Financial Information if the above referenced financial
statements of SORS were reissued to be in conformity with GAAP. The pro
forma financial information and the related notes thereto included in the
Registration Statement and the Prospectus present fairly the information
shown therein and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(iv) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings,
4
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course
of business (a "Material Adverse Effect"), (B) there have been no
transactions entered into by the Company or any of its subsidiaries, other
than those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one enterprise,
and (C) there has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock.
(v) Good Standing of the Company. The Company has been duly
----------------------------
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. (A) Each subsidiary of the
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Company set forth on Schedule 1 hereto (which lists all subsidiaries of the
Company that are either operating entities or holding companies, each a
"Subsidiary" and, collectively, the "Subsidiaries") has been duly organized
and is validly existing as a corporation or other entity in good standing
under the laws of the jurisdiction of its incorporation, has corporate or
other power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and is duly qualified
as a foreign corporation or other entity to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as set forth on
Schedule 1 hereto, (a) all of the issued and outstanding capital stock of
each such Subsidiary that is a corporation has been duly authorized and
validly issued, is fully paid and non-assessable and is owned, by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, and (b) all
of the ownership interests of each such Subsidiary that is not a
corporation have been duly authorized and are owned, by the Company,
directly or through subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the
outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of such
Subsidiary. The only subsidiaries of the Company are (a) the subsidiaries
listed on Exhibit 21 to the Registration Statement and (b) certain other
subsidiaries which, considered in
5
the aggregate as a single Subsidiary, do not constitute a "significant
subsidiary" as defined in Rule 1-02 of Regulation S-X.
(B) Except to the extent disclosed in the Prospectus under the
caption "Selected Consolidated Financial and Other Data" and in the
Company's consolidated financial statements included in the Prospectus,
each of the specialty acute care hospitals, outpatient rehabilitation
clinics and occupational health centers (collectively, the "Facilities")
described in the Prospectus as owned by the Company is owned or leased and
operated by a Subsidiary of which the Company directly or indirectly owns
100% of the outstanding ownership interests. Except as disclosed in the
Prospectus, there are no material encumbrances or restrictions on the
ability of any Subsidiary (i) to pay any dividends or make any
distributions on such Subsidiary's capital stock, (ii) to make any loans or
advances to, or investments in, the Company or any Subsidiary, or (iii) to
transfer any of its property or assets to the Company or any Subsidiary.
(vii) Capitalization. The authorized, issued and outstanding capital
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stock of the Company is as set forth in the Prospectus under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus, pursuant to the exercise of convertible securities or options
referred to in the Prospectus [or pursuant to the exercise of any put right
held by any prior owner of a Facility that was subsequently acquired by the
Company] or repurchases of an immaterial number of shares of the Company's
capital stock held by former employees). The shares of issued and
outstanding capital stock of the Company have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company was issued in violation
of the preemptive or other similar rights of any securityholder of the
Company that were not subsequently waived. The shares of issued and
outstanding capital stock of the Company, including the shares of capital
stock of the Company sold by the Selling Shareholders and any shares of
capital stock of the Company issued in connection with the exercise of any
put right held by any prior owner of a Facility that was subsequently
acquired by the Company, have been issued in compliance, in all material
respects, with all federal and state securities laws. Except as disclosed
in the Prospectus, there are no outstanding options or warrants to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of the Company's capital stock or
any such options, warrants, rights, convertible securities or obligations.
The description of the Company's stock option and purchase plans and the
options or other rights granted and exercised thereunder set forth in the
Prospectus accurately and fairly describe, in all material respects, the
information required to be shown with respect to such plans, arrangements,
options and rights.
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(viii) Authorization of Agreement. This Agreement has been duly
--------------------------
authorized, executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Common Stock
-------------------------------------------
conforms to all statements relating thereto contained in the Prospectus and
such description conforms to the rights set forth in the instruments
defining the same and the rights conferred by the Delaware General
Corporation Law (the "DGCL"); no holder of the Securities is or will be
subject to personal liability by reason of being such a holder; and the
sale of the Securities is not subject to the preemptive or other similar
rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor
---------------------------------
any of its subsidiaries is in violation of its (1) charter or by-laws or
(2) in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is
a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults under
Agreements and Instruments that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated in this Agreement and in
the Registration Statement (including the consummation of the Registration
Rights Waivers) and compliance by the Company with its obligations under
this Agreement has been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any subsidiary pursuant to, the Agreements and
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or any subsidiary or any applicable
law, statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event" means
any event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. No labor dispute with the employees
------------------------
of the Company or any subsidiary exists or, to the knowledge of the
Company, is
7
imminent, and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its or any subsidiary's principal
suppliers, manufacturers, customers or contractors, which, in either case,
may reasonably be expected to result in a Material Adverse Effect.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
----------------------
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending (other than any sealed
"qui tam" actions of which the Company has no knowledge), or, to the
knowledge of the Company, threatened, against or affecting the Company or
any subsidiary, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably
be expected to materially and adversely affect the properties or assets of
the Company and its subsidiaries taken as a whole or the consummation of
the transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
--------------------
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
-----------------------------------
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them in all material respects, and neither the Company nor
any of its subsidiaries has received any notice or is otherwise aware of
any infringement of or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required
8
for the performance by the Company of its obligations hereunder, in
connection with the offering or sale of the Securities under this
Agreement, the consummation of the Related Transactions or the consummation
of the transactions contemplated by this Agreement except such as have been
obtained or as may be required under the 1933 Act or the 1933 Act
Regulations and foreign or state securities or blue sky laws.
(xvi) Possession of Licenses and Permits. The Company and its
----------------------------------
subsidiaries possess required permits, licenses, provider numbers,
certificates, approvals (including without limitation, certificate of need
approvals), consents, orders, certifications (including, without
limitation, certification under the Medicare and Medicaid programs),
accreditations (including, without limitation, accreditation by the Joint
Commission on Accreditation of Healthcare Organizations) and other
authorizations (collectively, "Governmental Licenses") issued by, and have
made all required declarations and filings with, the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by them (including, without limitation,
Government Licenses as are required (i) under such federal and state
healthcare laws as are applicable to the Company and its subsidiaries and
(ii) with respect to those facilities operated by the Company or any of its
subsidiaries that participate in the Medicare and/or Medicaid programs, to
receive reimbursement thereunder), except where the failure to possess such
Government Licenses or to make such declarations would not reasonably be
expected to result in a Material Adverse Effect; the Company and its
subsidiaries are in compliance with the terms and conditions of all such
Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and effect
would not reasonably be expected to result in a Material Adverse Effect;
and neither the Company nor any of its subsidiaries has received any notice
of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would reasonably be expected to
result in a Material Adverse Effect. All of the long-term acute care
hospitals operated by the Company and its subsidiaries and all of the
Company's and its subsidiaries' outpatient clinics that operate as
"rehabilitation agencies" are "providers of service" as defined in the
Social Security Act and the regulations promulgated thereunder and are
eligible to participate in the Medicare and (to the extent disclosed in the
Prospectus) Medicaid programs.
(xvii) Accounts Receivable. The accounts receivable of the Company
-------------------
and its subsidiaries have been adjusted to reflect material changes in the
reimbursement policies of third party payors such as Medicare, Medicaid,
private
9
insurance companies, health maintenance organizations, preferred provider
organizations, managed care systems and other third party payors
(including, without limitation, Blue Cross plans). The accounts receivable,
after giving effect to the allowance for doubtful accounts, relating to
such third party payors do not materially exceed amounts the Company and
its subsidiaries are entitled to receive.
(xviii) Compliance with Social Security Act and Other Federal
-----------------------------------------------------
Enforcement Initiatives. Neither the Company nor, to the knowledge of the
-----------------------
Company, any officers, directors or stockholders, employees or other agents
of the Company or any of its subsidiaries or the hospitals operated by
them, has engaged in any activities which are prohibited under Federal
Medicare and Medicaid statutes including, but not limited to, 42 U.S.C.
(S)(S) 1320a-7 (Program Exclusion), 1320a-7a (Civil Monetary Penalties),
1320a-7b (the Anti-kickback Statute), (S) 1395nn and 1396b (the "Xxxxx"
law, prohibiting certain self-referrals), or any other federal healthcare
law, including, but not limited to, the federal TRICARE statute, 10 U.S.C.
(S)1071 et seq., the Federal Civil False Claims Act, 31 U.S.C. (S)(S) 3729-
32, Federal Criminal False Claims Act, 18 U.S.C. (S) 287, False Statements
Relating to Health Care Matters, 18 U.S.C. (S) 1035, Health Care Fraud, 18
U.S.C. (S) 1347, or the federal Food, Drug & Cosmetics Act, 21 U.S.C. (S)
360aaa, or any regulations promulgated pursuant to such statutes, or
related state or local statutes or regulations or any rules of professional
conduct, including but not limited to the following: (i) knowingly and
willfully making or causing to be made a false statement or representation
of a material fact in any applications for any benefit or payment under the
Medicare or Medicaid program or from any third party (where applicable
federal or state law prohibits such payments to third parties); (ii)
knowingly and willfully making or causing to be made any false statement or
representation of a material fact for use in determining rights to any
benefit or payment under the Medicare or Medicaid program or from any third
party (where applicable federal or state law prohibits such payments to
third parties); (iii) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any
benefit or payment under the Medicare or Medicaid program or from any third
party (where applicable federal or state law prohibits such payments to
third parties) on its own behalf or on behalf of another, with intent to
secure such benefit or payment fraudulently; (iv) knowingly and willfully
offering, paying, soliciting or receiving any remuneration (including any
kickback, bribe or rebate), directly or indirectly, overtly or covertly, in
cash or in kind (a) in return for referring an individual to a person for
the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by Medicare or Medicaid or
any third party (where applicable federal or state law prohibits such
payments to third parties), or (b) in return for purchasing, leasing or
ordering or arranging for or recommending the purchasing, leasing or
ordering of any good, facility, service, or item for which payment may be
made in
10
whole or in part by Medicare or Medicaid or any third party (where
applicable federal or state law prohibits such payments to third parties);
(v) knowingly and willfully referring an individual to a person with which
they have ownership or certain other financial arrangements (where
applicable federal law prohibits such referrals); and (vi) knowingly and
willfully violating any enforcement initiative instituted by any
governmental agency (including, without limitation, the Office of the
Inspector General and the Department of Justice), except for any such
activities which are specifically described in the Prospectus or which
would not, singly or in the aggregate, reasonably be expected to result in
a Material Adverse Effect. The billing practices of the Company, its
subsidiaries and each Facility operated by the Company and each of its
subsidiaries, including without limitation the billing practices with
respect to individual and group physical therapy, to the knowledge of the
Company, (i) are consistent with applicable federal and state law and (ii)
based on management's experience, are consistent with industry
practice.
(xix) Regulatory Filings. Neither of the Company or any of its
------------------
subsidiaries or any of the Facilities operated by any of them has failed to
file with applicable regulatory authorities any statement, report,
information or form required by any applicable law, regulation or order,
except where the failure to be so in compliance could not, individually or
in the aggregate, have a Material Adverse Effect. Except as described in
the Prospectus, all such filings or submissions were in compliance with
applicable laws when filed and no deficiencies have been asserted by any
regulatory commission, agency or authority with respect to any such filings
or submissions, except for any such failures to be in compliance or
deficiencies which would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(xx) Title to Property. The Company and its subsidiaries have good
-----------------
and marketable title to all real property owned by them and good title to
all other properties owned by them, in each case, free and clear of all
mortgages, pledges, liens, security interests, claims, restrictions or
encumbrances of any kind except such as (a) are described in the Prospectus
or (b) do not, singly or in the aggregate, in a manner that would
reasonably be expected to result in a Material Adverse Effect, affect the
value of such property or interfere with the use made or proposed to be
made of such property by the Company or any of its subsidiaries; and all of
the leases and subleases of the Company and its subsidiaries, considered as
one enterprise, and under which the Company or any of its subsidiaries
holds properties described in the Prospectus, are in full force and effect,
and neither the Company or any of its subsidiaries has any notice of any
claim of any sort that has been asserted by anyone adverse to the rights of
the Company or any of its subsidiaries under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or
such subsidiary to the continued possession of the leased or subleased
premises under any such lease or sublease,
11
except where the failure to be in full force and effect or such claim would
not reasonably be expected to have a Material Adverse Effect.
(xxi) Investment Company Act. Neither the Company nor any of its
----------------------
subsidiaries is, and upon the issuance and sale of the Securities as herein
contemplated and the application of the net proceeds therefrom as described
in the Prospectus none of them will be, an "investment company" or an
entity "controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxii) Environmental Laws. Except as described in the Registration
------------------
Statement, (A) neither the Company nor any of its subsidiaries or any of
the Facilities owned, leased or operated by them is in violation of any
material federal, state, local or foreign statute, law, rule, regulation,
standard, guide, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, including any judicial
or administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances
(including, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde insulation, petroleum or petroleum products) (collectively,
"Hazardous Materials") or to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Materials (collectively, "Environmental Laws"), (B) the Company and its
subsidiaries and each of the Facilities owned, leased or operated by them
have all material permits, authorizations and approvals required under any
applicable Environmental Laws and are each in compliance with their
requirements, (C) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries or any of the Facilities owned, leased or operated by them
except as would not, singly or in the aggregate, result in a Material
Adverse Effect and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of its
subsidiaries or any of the Facilities owned, leased or operated by them
relating to Hazardous Materials or any Environmental Laws except for such
events or circumstances that would not, singly or in the aggregate, result
in a Material Adverse Effect.
(xxiii) Registration Rights. Except as disclosed in the Prospectus
-------------------
under the caption "Shares Eligible for Future Sale-Registration Rights",
there are no
12
persons with registration rights or other similar rights to have any
securities of the Company or any of its subsidiaries registered pursuant to
the Registration Statement or otherwise registered by the Company under the
1933 Act.
(xxiv) Insurance. The Company and each of its subsidiaries and each
---------
of the Facilities owned, leased or operated by them are insured by insurers
of recognized financial responsibility against such losses and risks and in
such amounts as are prudent and customary in the healthcare industry;
neither the Company nor any of its subsidiaries or any of the hospitals
owned, leased or operated by them has been refused any material insurance
coverage sought or applied for since January 1, 1999; and the Company has
no reason to believe that it or any of the Facilities owned, leased or
operated by it or any of its subsidiaries, will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
coverage consistent with such coverage in all material respects from
insurers with comparable financial strength and claims paying ability
ratings as may be necessary to continue its operations except where the
failure to renew or maintain such coverage would not reasonably be expected
to result in a Material Adverse Effect. The officers and directors of the
Company are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as the Company believes
are prudent and customary for officers' and directors' liability insurance
of a public company and as the Company believes would cover claims which
would reasonably be expected to be made in connection with the issuance of
the Securities; and the Company has no reason to believe that it will not
be able to renew its existing directors' and officers' liability insurance
coverage as and when such coverage expires or to obtain coverage consistent
with such coverage in all material respects from insurers with comparable
financial strength and claims paying ability ratings as may be necessary to
cover its officers and directors.
(xxv) Tax Returns and Payment of Taxes. The Company and its
--------------------------------
subsidiaries have timely filed all federal, state, local and foreign tax
returns that are required to be filed or has duly requested extensions
thereof and all such tax returns are true, correct and complete, except to
the extent that any failure to file or request an extension, or any
incorrectness would not reasonably be expected to result in a Material
Adverse Effect. The Company and its subsidiaries have timely paid all taxes
shown as due on such filed tax returns (including any related assessments,
fines or penalties), except to the extent that any such taxes are being
contested in good faith and by appropriate proceedings, or to the extent
that any failure to pay would not reasonably be expected to result in a
Material Adverse Effect; and adequate charges, accruals and reserves have
been provided for in the financial statements referred to in Section
1(a)(iii) above in accordance with GAAP in respect of all Federal, state,
local and foreign taxes for all periods as to which the tax liability of
the Company and its subsidiaries has not been finally determined or remains
open to examination by applicable taxing authorities
13
except (A) for taxes incurred after the date of the financial statements
referred to in Section 1(a)(iii) or (B) where the failure to provide for
such charges, accruals and reserves would not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Internal Revenue Code of 1986, as
amended (the "Code").
(xxvi) No Stabilization or Manipulation. Neither the Company nor its
--------------------------------
subsidiaries or, to the best of the Company's knowledge, any of their
respective directors, officers or affiliates has taken or will take,
directly or indirectly, any action designed to, or that could be reasonably
expected to, cause or result in stabilization or manipulation of the price
of the Securities in violation of Regulation M under the Securities
Exchange Act of 1934, as amended (the "1934 Act").
(xxvii) Certain Transactions. Except as disclosed in the
--------------------
Prospectus, there are no outstanding loans, advances, or guarantees of
indebtedness by the Company or any of its subsidiaries to or for the
benefit of any of the executive officers or directors of the Company or any
of the members of the families of any of them that would be required to be
so disclosed under the 1933 Act, the 1933 Act Regulations or Form S-1.
(xxviii) Statistical and Market Data. The statistical and market-
---------------------------
related data included in the Prospectus are derived from sources which the
Company reasonably and in good faith believes to be accurate, reasonable
and reliable in all material respects and the statistical and market-
related data included in the Prospectus agrees with the sources from which
it was derived in all material respects.
(xxix) Accounting and other Controls. The Company has established
-----------------------------
a system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions were, are and will be executed in
accordance with management's general or specific authorization; (ii)
transactions were, are and will be recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets was, is and will be
permitted only in accordance with a management's general or specific
authorizations; and (iv) the recorded accountability for assets was, is and
will be compared with existing assets at reasonable intervals and
appropriate action was, is and will be taken with respect to any
differences.
(b) Representations and Warranties by the Selling Shareholders. Each
Selling Shareholder severally represents and warrants to each Underwriter as of
the date hereof, as of the Closing Time, and, if the Selling Shareholder is
selling Option Securities on a Date of Delivery, as of each such Date of
Delivery, and agrees with each Underwriter, as follows:
14
(i) Accurate Disclosure. With respect to each Selling Shareholder,
-------------------
to the extent that any statements or omissions made in the Registration
Statement, any preliminary prospectus, the Prospectus or any amendment or
supplement thereto are made in reliance upon and in conformity with written
information furnished to the Company by such Selling Shareholder expressly
for use therein (which information with respect each Selling Stockholder
that is not an employee, officer or director of the Company is limited to,
for all purposes of this agreement, information specifically relating to
the Selling Shareholder contained under the caption "Principal and Selling
Stockholders"), such preliminary prospectus and the Registration Statement
did, and the Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus, when they become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the 1933 Act and the rules and
regulations of the Commission thereunder and will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(ii) Authorization of Agreements. Such Selling Shareholder has the
---------------------------
full right, power and authority to enter into this Agreement and a Power of
Attorney and Custody Agreement (the "Power of Attorney and Custody
Agreement") and to sell, transfer and deliver the Securities to be sold by
such Selling Shareholder hereunder. The execution and delivery of this
Agreement and the Power of Attorney and Custody Agreement and the sale and
delivery of the Securities to be sold by such Selling Shareholder and the
consummation of the transactions contemplated herein and compliance by such
Selling Shareholder with its obligations hereunder have been duly
authorized by such Selling Shareholder and do not and will not, whether
with or without the giving of notice or passage of time or both, conflict
with or constitute a breach of, or default under, or result in the creation
or imposition of any security interest, mortgage, pledge, lien, tax,
charge, claim, equity or encumbrance of any kind (collectively, "Liens")
upon the Securities to be sold by such Selling Shareholder or any property
or assets of such Selling Shareholder pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease or
other agreement or instrument to which such Selling Shareholder is a party
or by which such Selling Shareholder may be bound, or to which any of the
property or assets of such Selling Shareholder is subject, nor will such
action result in any violation of the provisions of the charter or by-laws
or other organizational instrument of such Selling Shareholder, if
applicable, or any applicable treaty, law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
such Selling Shareholder or any of its properties.
(iii) Good and Valid Title. Such Selling Shareholder (i) has at the
--------------------
date hereof good and valid title to the Securities to be sold by such
Selling Shareholder
15
under this Agreement or to the options that will be exercised for such
Securities prior to the Closing Time, in each case free and clear of any
Lien, other than pursuant to this Agreement, and (ii) will at the Closing
Time and, if any Option Securities are purchased from such Selling
Shareholder, on the Date of Delivery, have good and valid title to the
Securities to be sold by such Selling Shareholder under this Agreement,
including any Securities received as a result of exercises of options, in
each case free and clear of any Lien, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the purchase
price therefor as contemplated in this Agreement (assuming each such
Underwriter has no notice of any adverse claim, as defined in Uniform
Commercial Code as adopted in the State of New York (the "UCC")), each of
the Underwriters will receive good and valid title to the Securities
purchased by it from such Selling Shareholder, free and clear of any Lien.
(iv) Due Execution of Power of Attorney and Custody Agreement. Such
--------------------------------------------------------
Selling Shareholder has duly executed and delivered, in the form heretofore
furnished to the Representatives, the Power of Attorney and Custody
Agreement with ., or any of them, as attorney(s)-in-fact (the "Attorney(s)-
in-Fact") and ., as custodian (the "Custodian"); the Custodian is
authorized to deliver the Securities to be sold by such Selling Shareholder
hereunder and to accept payment therefor; and [each/the] Attorney-in-Fact
is authorized to execute and deliver this Agreement and the certificate
referred to in Section 5(f) or that may be required pursuant to Section
5(q) on behalf of such Selling Shareholder, to sell, assign and transfer to
the Underwriters the Securities to be sold by such Selling Shareholder
hereunder, to determine the purchase price to be paid by the Underwriters
to such Selling Shareholder, as provided in Section 2(a) hereof, to
authorize the delivery of the Securities to be sold by such Selling
Shareholder hereunder, to accept payment therefor, and otherwise to act on
behalf of such Selling Shareholder in connection with this Agreement.
(v) Absence of Manipulation. Such Selling Shareholder has not taken,
-----------------------
and will not take, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably be expected to cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities in violation of
Regulation M under the 1934 Act.
(vi) Absence of Further Requirements. No filing with, or consent,
-------------------------------
approval, authorization, license, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by such Selling
Shareholder of its obligations hereunder or in the Power of Attorney or the
Custody Agreement, or in connection with the sale and delivery of the
Securities hereunder or the consummation of the transactions contemplated
by this Agreement, except such
16
as may have previously been made or obtained
or as may be required under the 1933 Act or the 1933 Act Regulations or
state securities laws.
(vii) Restriction on Sale of Securities. During a period of 90 days
---------------------------------
from the date of the Prospectus, such Selling Shareholder will not, without
the prior written consent of both Xxxxxxx Xxxxx and X.X. Xxxxxx, directly
or indirectly, (i) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock whether
now owned or hereafter acquired by such Selling Stockholder or with respect
to which such Selling Stockholder has or hereafter acquires the power of
disposition, or file any registration statement under the 1933 Act with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to the Securities
to be sold hereunder. Notwithstanding the foregoing, Xxxxxxx Xxxxx'x and
X.X. Xxxxxx'x prior written consent is not required for transactions by
persons not subject to Section 16 of the Securities Exchange Act of 1934,
as amended, with respect to the Company, relating (A) to shares of Common
Stock or other securities of the Company acquired in open market
transactions after the completion of the public offering and (B) sales of
shares of Common Stock underlying employee stock options in connection with
cashless exercises of those stock options by former employees of the
Company that were not subject to Section 16 with respect to the Company
while they were employed by the Company.
(viii) Certificates Suitable for Transfer. Except as provided for in
----------------------------------
the immediately following sentence, certificates for all of the Securities
to be sold by such Selling Shareholder pursuant to this Agreement, in
suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank with signatures guaranteed,
have been placed in custody with the Custodian with irrevocable conditional
instructions to deliver such Securities to the Underwriters pursuant to
this Agreement. With respect to any Securities to be sold by any such
Selling Shareholder as a result of exercise of options, such Selling
Shareholder has placed in custody with the Custodian an irrevocable Notice
of Exercise with respect to the Securities to be sold, and certificates
representing such shares in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in blank
with signatures guaranteed, shall be placed in custody with the Custodian
with irrevocable conditional instructions to deliver such Securities to the
Underwriters pursuant to this Agreement immediately prior to Closing Time.
17
(ix) No Association with NASD. Neither such Selling Stockholder nor
------------------------
any of its affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, or has any other association with (within the meaning of Article I,
Section 1(ee) of the By-laws of the National Association of Securities
Dealers, Inc., the "NASD"), any member firm of the NASD.
(c) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Shareholders as such and
delivered to the Representatives or to counsel for the Underwriters pursuant to
the terms of this Agreement shall be deemed a representation and warranty by
such Selling Shareholder to the Underwriters as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, each
Selling Shareholder agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from each Selling Shareholder, severally and not jointly, at the price per share
set forth in Schedule C, the number of Initial Securities set forth in Schedule
B opposite the name of such Selling Shareholder, plus any additional number of
Initial Securities which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Selling Shareholders that will be selling Option Securities, as
indicated by a corresponding amount opposite such Selling Shareholders' names in
the column titled "Maximum Number of Option Securities" in Schedule B, acting
severally and not jointly, hereby grant an option to the Underwriters, severally
and not jointly, to purchase up to an additional 1,305,000 shares of Common
Stock, as set forth in Schedule A or Schedule B, as the case may be, at the
price per share set forth in Schedule C, less an amount per share equal to any
dividends or distributions declared by the Company and payable on the Initial
Securities but not payable on the Option Securities. The option hereby granted
will expire 30 days after the date hereof and may be exercised in whole or in
part from time to time only for the purpose of covering over-allotments which
may be made in connection with the offering and distribution of the Initial
Securities upon notice by Xxxxxxx Xxxxx to the Company and the applicable
Selling Shareholders setting forth the number of Option Securities as to which
the several Underwriters are then exercising the option and the time and date of
payment and delivery for such Option Securities. Any such time and date of
delivery for the Option Securities (a "Date of Delivery") shall be
18
determined by Xxxxxxx Xxxxx, but shall not be later than seven full business
days nor, if after the Closing Time, later than seven nor less than two full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the Option Securities, each of the Underwriters, acting severally
and not jointly, will purchase that proportion of the total number of Option
Securities then being purchased which the number of Initial Securities set forth
in Schedule A opposite the name of such U.S. Underwriter bears to the total
number of Initial Securities and, as to each Selling Shareholder, that
proportion which the total number of Securities in Schedule B in the column
titled "Maximum Number of Option Securities" opposite the name of such Selling
Shareholder bears to the total number of Option Securities to be sold by Selling
Shareholders, subject in each case to such adjustments as Xxxxxxx Xxxxx in its
discretion shall make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Debevoise & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such
other place as shall be agreed upon by Xxxxxxx Xxxxx and the Company, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by
Xxxxxxx Xxxxx and the Company (such time and date of payment and delivery being
herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by Xxxxxxx Xxxxx and the
Company, on each Date of Delivery as specified in the notice from Xxxxxxx Xxxxx
to the Company.
Payment shall be made to the Selling Shareholders by wire transfer of
immediately available funds to a bank account designated by the Custodian
pursuant to each Selling Shareholder's Power of Attorney and Custody Agreement,
as the case may be, against delivery to the Representatives for the respective
accounts of the Underwriters of certificates for the Securities to be purchased
by them. It is understood that each Underwriter has authorized the
Representatives, for its account, to accept delivery of, receipt for, and make
payment of the purchase price for, the Initial Securities and the Option
Securities, if any, which it has agreed to purchase. Xxxxxxx Xxxxx,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose funds
have not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder.
19
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
and will notify both Xxxxxxx Xxxxx and X.X. Xxxxxx as soon as practicably
possible, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission regarding the
Registration Statement or any of the information contained therein, the Common
Stock or the transactions contemplated by this Agreement or the Registration
Statement (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information regarding the Registration Statement or any of the
information contained therein, the Common Stock or the transactions contemplated
by this Agreement or the Registration Statement, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) Filing of Amendments. The Company will give both Xxxxxxx Xxxxx and
X.X. Xxxxxx notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus,
will xxxxxxx Xxxxxxx Xxxxx and X.X. Xxxxxx with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case may
be, and will not file or use any such document to which Xxxxxxx Xxxxx and X.X.
Xxxxxx or counsel for the Underwriters shall reasonably object.
20
(c) Delivery of Registration Statements. The Company has furnished or will
deliver to the Representatives and counsel for the Underwriters, without charge,
signed copies of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein) and copies of all signed consents and certificates of
experts, and will also deliver to the Representatives, without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to XXXXX, except to the extent permitted by
Regulation S-T.
(d) Delivery of Prospectus. The Company has delivered to each Underwriter,
without charge, as many copies of each preliminary prospectus as such
Underwriter reasonably requested, and the Company hereby consents to the use of
such copies for purposes permitted by the 1933 Act. The Company will furnish to
each Underwriter, without charge, during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to XXXXX, except
to the extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement, the
International Purchase Agreement and in the Prospectus. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the judgment of the Company after consultation with
counsel or in the opinion of counsel for the Underwriters or for the Company, to
amend the Registration Statement or amend or supplement any Prospectus in order
that the Prospectus will not include any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements therein
not misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement any Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under
21
the applicable securities laws of such states and other jurisdictions (domestic
or foreign) as both Xxxxxxx Xxxxx and X.X. Xxxxxx may designate and to maintain
such qualifications in effect for a period of not less than one year from the
later of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.
(h) Listing. The Company will use its best efforts to effect and, for a
reasonable period after Closing Time, which shall not be less than five years
unless the Company engages in a transaction such as a merger or other business
combination in which the Company is not the surviving entity, or going private
transaction which by its terms provides otherwise and receives all required
Company stockholder approval, maintain the quotation of the Securities on the
Nasdaq National Market or the New York Stock Exchange (the "NYSE") and will file
with the Nasdaq National Market or the NYSE, as applicable, all documents and
notices required by the Nasdaq National Market or the NYSE, of companies that
have securities that are traded in the over-the-counter market and quotations
for which are reported by the Nasdaq National Market or on the NYSE.
(i) Restriction on Sale of Securities. During a period of 90 days from the
date of the Prospectus, the Company will not, without the prior written consent
of both Xxxxxxx Xxxxx and X.X. Xxxxxx, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of any share of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the Securities to be sold hereunder, (B) any
shares of Common Stock issued by the Company upon the exercise of an option or
warrant outstanding on the date hereof and referred to in the Prospectus, (C)
any shares of Common Stock issued or options to purchase Common Stock granted
pursuant to existing employee benefit plans of the Company referred to in
22
the Prospectus, (D) any shares of Common Stock issued pursuant to any non-
employee director stock plan or dividend reinvestment plan, or (E) the issuance
by the Company of shares of Common Stock or rights to acquire Common Stock in
connection with the Shareholder Rights Plan of the Company, dated as of
September 17, 2001.
(j) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
(k) Medicare Filings and Notices. The Company and its Subsidiaries will
make all required filings and provide all required notices to update indirect
ownership information that has been supplied in connection with the Company's
facilities that participate in the Medicare Program and other U.S. Federal
programs ("Medicare Filings and Notices").
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors and the
Selling Shareholder's respective counsel, (v) the qualification of the
Securities under securities laws in accordance with the provisions of Section
3(f) hereof, including filing fees and the reasonable fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus and of
the Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities, (ix) the filing fees incident to, and the
reasonable fees and disbursements of counsel to the Underwriters in connection
with, the review by the NASD of the terms of the sale of the Securities and (x)
the fees and expenses incurred in connection with the inclusion of the
Securities in the Nasdaq National Market.
(b) Expenses of the Selling Shareholders. The Selling Shareholders,
severally and not jointly, will pay all expenses incident to the performance of
their respective
23
obligations under, and the consummation of the transactions contemplated by this
Agreement, including (i) any stamp duties, capital duties and stock transfer
taxes, if any, payable upon the sale of the Securities to the Underwriters, and
their transfer between the Underwriters pursuant to an agreement between such
Underwriters and (ii) the fees and disbursements of their respective accountants
and other advisors.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders shall have
made or may make for the sharing of such costs and expenses.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of any Selling Shareholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration Statement,
including any Rule 462(b) Registration Statement, has become effective and at
Closing Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
(b) Opinion of Counsel for the Company. At Closing Time, the
Representatives shall have received the favorable opinions, dated as of Closing
Time, of:
(i) Dechert, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters, to the
effect set forth in Exhibit A-1 hereto and to such further effect as
counsel to the Underwriters may reasonably request; (ii) Xxxxxxx X. Xxxxxx,
Vice President and General Counsel of the Company, in form and substance
reasonably satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A-2 hereto and to such
24
further effect as counsel to the Underwriters may reasonably request; (iii)
Xxxx Xxxxx LLP, special regulatory counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other
Underwriters, to the effect set forth in Exhibit A-3 hereto and to such
further effect as counsel to the Underwriters may reasonably request; and
(iv) Torys, special Canadian counsel to the Company, in form and substance
reasonably satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A-4 hereto and to such
further effect as counsel for the Underwriters may reasonably request.
(c) Opinion of Counsel for the Selling Shareholders. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of
(i) Reboul, MacMurray, Xxxxxx, Xxxxxxx & Kristol, counsel for Welsh,
Carson, Xxxxxxxx & Xxxxx VII, L.P. and WCAS Capital Partners III, L.P.,
together with signed or reproduced copies of such letters for each of the
other Underwriters, in the form of Exhibit A-5 hereto, (ii) Xxxxxxxx &
Xxxxx, counsel for Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., GTCR
Associates V, GTCR Fund VI, L.P., GTCR Associates VI, GTCR IV Executive
Fund, L.P., Xxxxx Xxxxxxx Fund VI, L.P and Xxxxx Xxxxxxx Friends Fund VI,
L.P., together with signed or reproduced copies of such letters for each of
the other Underwriters, in the form of Exhibit A-6 hereto and (iii)
Dechert, counsel for the Selling Shareholders other than those referred to
in (i) and (ii) above, together with signed or reproduced copies of such
letters for each of the other Underwriters, in the form of Exhibit A-7
hereto.
(d) Opinion of Counsel for the Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Debevoise & Xxxxxxxx, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters in
form and substance satisfactory to the Underwriters.
(e) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Representatives shall have
received a certificate of the Executive Chairman, the Chief Executive Officer
and President, and the Senior Vice President and Chief Financial Officer of the
Company, dated as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in Section 1(a)
hereof are true and correct with the same force and effect as though expressly
made at and as of Closing Time, (iii) the Company has complied with all
agreements and satisfied
25
all conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened or, to their knowledge, are contemplated
by the Commission.
(f) Certificate of the Selling Shareholders. At Closing Time, the
Representatives shall have received a certificate of each Selling Shareholder,
dated as of the Closing Time, to the effect that (i) the representations and
warranties of such Selling Shareholder contained in Section 1(b) hereof are true
and correct in all respects with the same force and effect as though expressly
made at and as of Closing Time and (ii) such Selling Shareholder has complied in
all material respects with all agreements and all conditions on its part to be
performed under this Agreement at or prior to Closing Time.
(g) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the U.S. Representatives shall have received from
PricewaterhouseCoopers LLP a letter dated such date, in form and substance
satisfactory to the U.S. Representatives and PricewaterhouseCoopers LLP,
together with signed or reproduced copies of such letter for each of the other
Underwriters containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(h) Bring-down Comfort Letter. At Closing Time, the Representatives shall
have received from PricewaterhouseCoopers LLP, a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
previously furnished to the Underwriters at the time of execution of this
Agreement pursuant to subsection (h) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(i) Approval of Listing. At Closing Time, the Securities shall have been
approved for listing on the Nasdaq National Market, subject only to official
notice of issuance.
(j) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(k) Lock-up Agreements. At the date of this Agreement, the Representatives
shall have received an agreement substantially in the form of Exhibit B hereto
signed by the persons listed on Schedule C hereto.
(l) Registration Rights Waivers. Prior to or upon the purchase of the
Securities by the Underwriters, the Registration Rights waivers shall have been
duly executed and delivered to the Company and the Representatives.
26
(m) Certificate Concerning Predecessor Company Financial Information.
Prior to the purchase of the Securities by the Underwriters, the Representatives
shall have received a certificate of the Chief Financial Officer and the
Controller of the Company concerning the financial information of SORS contained
in the Prospectus in form and substance reasonably satisfactory for counsel for
the Representatives.
(n) Certificate of General Counsel of the Company. At Closing Time, the
Representatives shall have received a certificate of Xxxxxxx X. Xxxxxx, Senior
Vice President and General Counsel of the Company, in form and substance
reasonably satisfactory to counsel the Representatives.
(o) Medicare Filings. All Medicare Filings and Notices required to be made
or provided prior to Closing Time shall have been made or provided.
(p) Form W-8 or W-9. At the date of this Agreement, the Representatives
shall have received form W-8 or W-9, as required, signed by each Selling
Shareholder.
(q) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company and the Selling Shareholders contained herein and the statements
in any certificates furnished by the Company or any subsidiary of the Company
and the Selling Shareholders hereunder shall be true and correct as of each Date
of Delivery and, at the relevant Date of Delivery, the Representatives shall
have received:
(i) Officers' Certificate. A certificate, dated such Date of
---------------------
Delivery, of the President or a Vice President of the Company and of the
chief financial or chief accounting officer of the Company confirming that
the certificate delivered at the Closing Time pursuant to Section 5(d)
hereof remains true and correct as of such Date of Delivery.
(ii) Certificate of Selling Shareholders. A certificate, dated such
-----------------------------------
Date of Delivery, of each Selling Shareholder selling Option Securities
confirming that the certificate delivered at Closing Time pursuant to
Section 5(f) remains true and correct as of such Date of Delivery.
(iii) Opinion of Counsel for the Company. The opinion of Dechert,
----------------------------------
counsel for the Company, Xxxxxxx X. Xxxxxx, Vice President and General
Counsel of the Company, Xxxx Xxxxx LLP, special regulatory counsel for the
Company, and Torys, special Canadian counsel for the Company, each in form
and substance reasonably satisfactory to counsel for the Underwriters,
dated such Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as the
opinions required by Section 5(b) hereof.
27
(iv) Opinion of Counsel for the Selling Shareholders. With respect
-----------------------------------------------
to Selling Shareholders selling Option Securities, the favorable opinion of
such Selling Shareholder's counsel referenced in Section 5(c), each dated
such Date of Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(c)(i), 5(c)(ii) or 5(c) (iii), as the case may be.
(v) Opinion of Counsel for the Underwriters. The favorable opinion
---------------------------------------
of Debevoise & Xxxxxxxx, counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion required by
Section 5(d) hereof.
(vi) Bring-down Comfort Letter. A letter from PricewaterhouseCoopers
-------------------------
Representatives and dated such Date of Delivery, substantially in the same
form and substance as the letter furnished to the U.S. Representatives
pursuant to Section 5(f) hereof, except that the "specified date" in the
letter furnished pursuant to this paragraph shall be a date not more than
five days prior to such Date of Delivery.
(vii) Certificate of General Counsel of the Company. A certificate
---------------------------------------------
of Xxxxxxx X. Xxxxxx, Senior Vice President and General Counsel of the
Company, dated such Date of Delivery, in form and substance reasonably
satisfactory to counsel for the Representatives.
(r) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may reasonably require for the purpose of enabling them to pass
upon the issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Shareholders in connection with the
issuance and sale of the Securities as herein contemplated shall be reasonably
satisfactory in form and substance to the Representatives and counsel for the
Underwriters.
(s) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Securities
on a Date of Delivery which is after the Closing Time, the obligations of the
several Underwriters to purchase the relevant Option Securities, may be
terminated by the Representatives by notice to the Company and the Selling
Shareholders at any time at or prior to Closing Time or such Date of Delivery,
as the case may be, and such termination shall be without liability of any
party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.
28
SECTION 6. Indemnification.
---------------
(a) Indemnification of Underwriters by the Company and the Selling
Shareholders. The Company, and each of the Selling Shareholders severally and
not jointly, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any U.S. Underwriter within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information, or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading
or arising out of any untrue statement or alleged untrue statement of a
material fact included in any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Xxxxxxx Xxxxx), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that (x) this indemnity agreement shall not apply to any
-------- -------
loss, liability, claim, damage or expense to the extent (a) arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) or (b) resulting from the fact that such loss, liability,
claim, damage or expense resulted from an untrue statement or omission of a
material fact in or omitted from the preliminary prospectus and a court of
competent jurisdiction having made a final, non-appealable determination that
(1) the
29
untrue statement or omission was corrected in the Prospectus, (2) that at a time
sufficiently prior to the Closing Time, the Company furnished copies of the
Prospectus in sufficient quantities to such Underwriter, (3) that the Company
shall have sustained the burden of proving that such Underwriter failed to send
or give a copy of the Prospectus to the person asserting such loss, liability,
claim, damage or expense prior to the written confirmation or the sale of
Securities to such person by such Underwriter as required by the 1933 Act or the
1933 Act Regulations, and (4) that the sending of the Prospectus to the person
asserting such loss, liability, claim, damage or expense would have constituted
a defense to the claim asserted by such person or persons, and (y) with respect
to each Selling Shareholder, the indemnification provision in this Section 6(a)
shall be only with respect to information furnished in writing by or on behalf
of such Selling Shareholder for use in the Registration Statement (or any
amendment thereto), including Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or Prospectus (or any
amendment or supplement thereto); and provided, further, that the aggregate
-------- -------
liability of any Selling Shareholder pursuant to this Section 6(a) shall be
limited to the net proceeds received by such Selling Shareholder from the
Securities purchased by the Underwriters from such Selling Shareholder pursuant
to this Agreement; and provided, further, that no Selling Shareholder shall be
-------- -------
liable for any untrue statement, omission or alleged omission of any other
Selling Shareholder.
(b) Indemnification of Company, Directors and Officers and Selling
Shareholders. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Selling
Shareholder and each person, if any, who controls each Selling Shareholder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Section, as incurred, but only
with respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto),
including the Rule 430A Information, or any preliminary Prospectus or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through the Representatives expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Xxxxxxx Xxxxx,
30
and, in the case of parties indemnified pursuant to Section 6(b) above, counsel
to the indemnified parties shall be selected by the Company. An indemnifying
party may participate at its own expense in the defense of any such action;
provided, however, that counsel to the indemnifying party shall not (except with
the consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement. Notwithstanding the immediately preceding sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 6(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party specifying the basis for its claim that the unpaid balance is
unreasonable, in each case prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in Section 6
------------
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the
31
Company and the Selling Shareholders on the one hand and the Underwriters on the
other hand from the offering of the Securities pursuant to this Agreement or
(ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company and the Selling Shareholders on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions, which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company and the Selling Shareholders
on the one hand and the Underwriters on the other hand in connection with the
offering of the Securities pursuant to this Agreement shall be deemed to be in
the same respective proportions as the total net proceeds (i.e., after deducting
the total underwriting discount) from the offering of the Securities pursuant to
this Agreement (before deducting expenses) received by the Selling Shareholders
and the total underwriting discount received by the Underwriters, in each case
as set forth on the cover of the Prospectus bear to the aggregate initial public
offering price of the Securities as set forth on such cover.
The relative fault of the Company and the Selling Shareholders on the one
hand and the Underwriters on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, the Selling Shareholders, or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, (i) no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission and (ii) no Selling
Shareholder shall be required to contribute any
32
amount in excess of the amount of the total net proceeds received by such
Selling Shareholder from the sale of the Securities pursuant to this Agreement
or on a basis other than as specified in Section 6(a).
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 0000 Xxx) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
such Selling Shareholder, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several, and in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto, and not joint.
Nothing in Section 6 or this Section 7 shall affect any agreement among the
Company and the Selling Shareholders with respect to indemnification or
contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery. All representations, warranties and agreements contained in this
--------
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Shareholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Selling Shareholders, and shall survive delivery of the
Securities to the Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Shareholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus (exclusive of any amendment thereto), any material adverse change
in the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or the international financial markets, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce
33
contracts for the sale of the Securities, or (iii) if trading in any securities
of the Company has been suspended or materially limited by the Commission on the
Nasdaq National Market, or if trading generally on the American Stock Exchange
or the New York Stock Exchange or in the Nasdaq National Market has been
suspended or materially limited, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc., or a material disruption has occurred
in commercial banking or securities settlement or clearance services in the
United States or any other governmental authority, or (iv) if a banking
moratorium has been declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the Underwriters. If one or more of
------------------------------------------
the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of
all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement or, with respect
to any Date of Delivery which occurs after the Closing Time, the obligation
of the Underwriters to purchase and of the Selling Shareholders to sell the
Option Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which
34
does not result in a termination of the obligation of the Underwriters to
purchase and the Selling Shareholders to sell the relevant Option Securities, as
the case may be, either the Representatives, the Selling Shareholders or the
Company shall have the right to postpone Closing Time or the relevant Date of
Delivery, as the case may be, for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for a Underwriter under this Section 10.
SECTION 11. Default by One or More of the Selling Shareholders. If a
--------------------------------------------------
Selling Shareholder shall fail at Closing Time or at a Date of Delivery to sell
and deliver the number of Securities which such Selling Shareholder or Selling
Shareholders are obligated to sell hereunder, and the remaining Selling
Shareholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number to be sold by all Selling Shareholders as set forth in Schedule B hereto,
then the Underwriters may, at option of the Representatives, by notice from the
Representatives to the Company and the non-defaulting Selling Shareholders,
either (a) terminate this Agreement without any liability on the fault of any
non-defaulting party except that the provisions of Sections 1, 4, 6, 7 and 8
shall remain in full force and effect or (b) elect to purchase the Securities
which the non-defaulting Selling Shareholders have agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve any Selling Shareholder
so defaulting from liability, if any, in respect of such default.
In the event of a default by any Selling Shareholder as referred to in this
Section 11, each of the Representatives, the Company and the non-defaulting
Selling Shareholders shall have the right to postpone Closing Time or Date of
Delivery for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.
SECTION 12. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication (with confirmation of
transmission if by telecommunication). Notices to the Underwriters shall be
directed to the Representatives at Xxxxx Xxxxx, Xxxxx Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000-0000, attention of Xxxxxxxx Xxxx and Syndicate Operations,
facsimile (000) 000-0000/ (000) 000-0000, with a copy to Debevoise & Xxxxxxxx,
000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, attention of Xxxxxx X. Xxxxxxx, facsimile
(000) 000-0000; notices to the Company shall be directed to it at 0000 Xxx
Xxxxxxxxxx Xxxx, X.X. Xxx 0000, Xxxxxxxxxxxxx, Xxxxxxxxxxxx 00000, attention of
Xxxxxxx X. Xxxxxx, Senior Vice President, Secretary and General Counsel,
facsimile (000) 000-0000, with a copy to Dechert, 4000 Xxxx Atlantic Tower, 0000
Xxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, attention of Xxxxxxxxxxx X.
Xxxxxx, facsimile (000) 000-0000; and notices to the Selling Shareholders shall
be directed to ., attention of ..
35
SECTION 13. Parties. This Agreement shall each inure to the benefit of and
--------
be binding upon the Underwriters, the Company and the Selling Shareholders and
their respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters, the Company and the Selling Shareholders and their
respective successors and the controlling persons and officers and directors
referred to in Sections 6 and 7 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY AND
----------------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein and
------------------
the Table of Contents are for convenience only and shall not affect the
construction hereof.
36
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Attorney-in-Fact for the Selling
Shareholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the Underwriters, the
Company and the Selling Shareholders in accordance with its terms.
Very truly yours,
SELECT MEDICAL CORPORATION
By:________________________________
Name:
Title:
Each of the SELLING SHAREHOLDERS named in
Schedule B hereto
By:________________________________
Name:
As Attorney-in-Fact acting on behalf of
the Selling Shareholders named in Schedule
B hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
X.X. Xxxxxx Securities Inc.
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
XX Xxxxx Securities Corporation
First Union Securities, Inc.
By: XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
By: ______________________________
Authorized Signatory
For themselves and as U.S.
Representatives of the other
Underwriters named in Schedule A
hereto.
37
SCHEDULE A
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ -------------------
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated................................................
X.X. Xxxxxx Securities Inc..............................................
Credit Suisse First Boston Corporation..................................
CIBC World Markets Corp.................................................
XX Xxxxx Securities Corporation.........................................
First Union Securities, Inc.............................................
-------------------
Total................................................................... [8,700,000]
===================
Sch A-1
SCHEDULE B
Number of Maximum Number
Initial of Option
Securities Securities
---------------- --------------
Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. 2,500,000
WCAS Capital Partners III, L.P. 500,000
Golder, Thoma, Xxxxxxx, Xxxxxx Fund V, L.P. 1,995,523
GTCR Associates, V 4,477
GTCR Fund VI, L.P. 990,655
GTCR VI Executive Fund, L.P. 7,102
GTCR Associates VI 2,243
Xxxxx Xxxxxxx Fund VI, L.P. 1,659,168
Xxxxx Xxxxxxx Friends Fund VI, L.P. 16,590
Xxxxx X. Xxxxxxxx 450,000
Xxxxxx X. Xxxxxxxx 267,000
[Xxxxx X. Xxxxxxx] 24,242
XxXxx X. Xxxxxxxxx 29,000
Xxxxxxxx X. Xxxx 40,000
Xxxxxx X. Xxxxxxx 47,000
Xxxxxx X. Xxxxxxx 51,000
Xxxxx X. Xxxxx 45,000
S. Xxxxx Xxxxxxx 22,000
Xxxxx X. Xxxxxxx 17,000
Xxxxx X. Xxxxxxxxx 5,000
Xxxxxxx X. Xxxxxx 22,000
Xxxxxxx X. Xxxxx 5,000
Total 8,700,000 1,305,000
Sch B-1
SCHEDULE C
SELECT MEDICAL CORPORATION
[8,700,000] Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $_________.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $______, being an amount equal to the initial
public offering price set forth above less $______ per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
Sch C-1
SCHEDULE D
List of persons and entities subject to lock-up
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
XxXxx X. Xxxxxxxxx
Xxxxx Xxxxxxxx
Xxxxx X. Xxxxxx, Xx.
Xxxxxxx Xxxxxxxx
Xxxxx X. Xxxxxxx
Xxxxxxxx X. Xxxx
Xxxxx X. Xxxxx
S. Xxxxx Xxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxx Xxxxxxx
Xxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxx
Welsh, Carson, Xxxxxxxx & Xxxxx
Golder, Thoma, Xxxxxxx & Xxxxxx
Xxxxx Xxxxxxx Equity Partners
All other Selling Shareholders, if any.
Sch D-1
SCHEDULE E
Document Amendments
1. [Waivers of Registration Rights]
Sch E-1
SCHEDULE 1
Significant Subsidiaries
------------------------
[to be updated as appropriate]
Xxxx Center for Rehabilitation Therapies, Inc. Select Specialty Hospital - Xxx Arbor, Inc.
Affiliated Physical Therapists, Ltd. Select Specialty Hospital - Battle Creek, Inc.
Allegany Hearing and Speech, Inc. Select Specialty Hospital - Beech Grove, Inc.
American Transitional Hospitals, Inc. Select Specialty Hospital - Biloxi, Inc.*
Athens Sports Medicine Clinic, Inc. Select Specialty Hospital - Central Detroit, Inc.
Atlantic Health Group, Inc. Select Specialty Hospital - Charleston, Inc.
Atlantic Rehabilitation Services, Inc. Select Specialty Hospital - Cincinnati, Inc.
Avalon Rehabilitation& Healthcare, LLC* Select Specialty Hospital - Columbus, Inc.
Canadian Back Institute Limited* Select Specialty Hospital - Columbus/University, Inc.
Center for Evaluation & Rehabilitation, Inc. Select Specialty Hospital - Dallas, Inc.
Center for Physical Therapy & Sports Rehabilitation, Inc. Select Specialty Hospital - Denver, Inc.
C.E.R. - West, Inc. Select Specialty Hospital - Durham, Inc.
Xxxxxx Physical Therapy Associates, Inc. Select Specialty Hospital - Erie, Inc.
Xxxxxxx Xxxxx & Associates, Ltd. Select Specialty Hospital - Evansville, Inc.
Fine, Xxxxxx & Wah, Inc. Select Specialty Hospital - Flint, Inc.
GP Therapy, L.L.C.* Select Specialty Hospital - Fort Xxxxx, Inc.
Gulf Breeze Physical Therapy, Inc. Select Specialty Hospital - Fort Xxxxx, Inc.
Indianapolis Physical Therapy and Sports Medicine, Inc. Select Specialty Hospital - Greensburg, Inc.
Intensiva Healthcare Corporation Select Specialty Hospital - Houston, Inc.*
Intensiva Hospital of Greater St. Louis, Inc. Select Specialty Hospital - Indianapolis, Inc.
Xxxxxx Sportsmedicine Institute, Inc. Select Specialty Hospital - Johnstown, Inc.
Kentucky Orthopedic Rehabilitation, LLC* Select Specialty Hospital - Kansas City, Inc.
Kentucky Rehabilitation Services, Inc. Select Specialty Hospital - Knoxville, Inc.
Xxxx X. Xxxxxxx, Inc. Select Specialty Hospital - Little Rock, Inc.
Metro Rehabilitation Services, Inc. Select Specialty Hospital - Louisville, Inc.
MidAtlantic Health Group, Inc. Select Specialty Hospital - Macomb County, Inc.
Millennium Rehab Services, L.L.C.* Select Specialty Hospital - Memphis, Inc.
New Mexico Physical Therapists, Inc. Select Specialty Hospital - Mesa, Inc.
NovaCare Occupational Health Services, Inc. Select Specialty Hospital - Miami, Inc.
NovaCare Outpatient Rehabilitation, Inc. Select Specialty Hospital - Milwaukee, Inc.
NovaCare Outpatient Rehabilitation of California, Inc. Select Specialty Hospital - Morgantown, Inc.
NovaCare Outpatient Rehabilitation East, Inc. Select Specialty Hospital - Nashville, Inc.
NovaCare Outpatient Rehabilitation West, Inc. Select Specialty Hospital - New Orleans, Inc.
NW Rehabilitation Associates, L.P.* Select Specialty Hospital - North Knoxville, Inc.
P.T. Services, Inc.* Select Specialty Hospital - Northwest Detroit, Inc.
Physical Rehabilitation Partners, Inc. Select Specialty Hospital - Northwest Indiana, Inc.
Physio - Associates, Inc. Select Specialty Hospital - Oklahoma City, Inc.
Pro Active Therapy, Inc. Select Specialty Hospital - Oklahoma City/ East Campus, Inc.
Pro Active Therapy of Greenville, Inc. Select Specialty Hospital - Omaha, Inc.
Pro Active Therapy of North Carolina, Inc. Select Specialty Hospital - Philadelphia/AEMC, Inc.
Pro Active Therapy of Rocky Mount, Inc. Select Specialty Hospital - Phoenix, Inc.
Pro Active Therapy of South Carolina, Inc. Select Specialty Hospital - Pittsburgh, Inc.
Select Specialty Hospital - Akron, Inc.
Sch 1-1
Pro Active Therapy of Virginia, Inc. Select Specialty Hospital - Pontiac, Inc.
Professional Therapeutic Services, Inc. Select Specialty Hospital - Reno, Inc.
RCI (Exertec), Inc. Select Specialty Hospital - San Antonio, Inc.
RCI (Michigan), Inc. Select Specialty Hospital - Sioux Falls, Inc.
RCI (WRS), Inc. Select Specialty Hospital - TriCities, Inc.
Rebound Oklahoma, Inc. Select Specialty Hospital - Tulsa, Inc.
Rehab Advantage, Inc. Select Specialty Hospital - West Columbus, Inc.
RehabClinics, Inc. Select Specialty Hospital - Western Michigan, Inc.
RehabClinics (GALAXY), Inc. Select Specialty Hospital - Wichita, Inc.
RehabClinics (PTA), Inc. Select Specialty Hospital - Wilmington, Inc.
RehabClinics (SPT), Inc. Select Specialty Hospital - Wyandotte, Inc.
RehabClinics Dallas, Inc. Select Specialty Hospital - Youngstown, Inc.
S.T.A.R.T., Inc. Select Specialty Hospitals, Inc.
Select Houston Investors, Inc. Southwest Therapists, Inc.
Select - Houston Partners, L.P. Sports & Orthopedic Rehabilitation Services, Inc.
Select Management Services, LLC* Sports Therapy and Arthritis Rehabilitation, Inc.
SelectMark, Inc. Sprint Physical Therapy, P.C.*
Select Medical of Maryland, Inc. Therex, P.C.*
Xxxxxxxx, Inc.
West Penn Rehabilitation Services, Inc.
Yuma Rehabilitation Center, Inc.
* Direct and indirect ownership interests of the Company are less than 100%.
Sch 1-2
Exhibit A-1
FORM OF OPINION OF DECHERT,
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(i)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and corporate authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Purchase
Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in the jurisdictions listed on Exhibit A
hereto.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus under the caption "Capitalization" (except for
subsequent issuances pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectus, pursuant to the exercise of options
referred to in the Prospectus [or pursuant to the exercise of any put right held
by any prior owner of a Facility that was subsequently acquired by the Company]
or repurchases of an immaterial number of shares of the Company's capital stock
held by former employees); the shares of issued and outstanding capital stock of
the Company, including the Securities to be purchased by the Underwriters from
the Selling Shareholders, have been duly authorized and validly issued and are
fully paid and non-assessable and no holder of the Common Stock, including
holders of the Securities to be purchased by the Underwriters from the Selling
Shareholders, is or will be subject to personal liability by reason of being
such a holder; none of the outstanding shares of capital stock of the Company
was issued in violation of the preemptive or other similar rights (that were not
subsequently waived) of any securityholder of the Company existing by virtue of
the DGCL, the restated certificate of incorporation of the Company, the restated
by-laws of the Company or any contract to which the Company is a party and which
is filed as an exhibit to the Registration Statement or identified in a
certificate of the General Counsel of the Company attached hereto as Exhibit B
(which purports to identify all material contracts or group of similar contracts
that are material in the aggregate to the Company and its subsidiaries taken as
a whole and to which the Company or any of its subsidiaries is a party); and the
shares of issued and outstanding capital stock of the Company, have been issued
or will be issued in compliance, in all material respects, with all federal
securities laws.
(v) Based solely on a certificate from the Secretary of State or similar
government official the respective jurisdiction of incorporation or organization
of each
A-1-1
Subsidiary set forth on Schedule 1 hereto (each a "Subsidiary" and collectively
the "Subsidiaries"), each Subsidiary (a) has been duly incorporated or organized
and is validly existing as a corporation or other entity in good standing under
the laws of the jurisdiction of its incorporation or organization, has corporate
or other power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus and (b) is duly qualified as
a foreign corporation to transact business and is in good standing in each
jurisdiction set forth on Schedule 1 hereto (which purports to identify all
jurisdictions in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or be in good standing would not result in a Material
Adverse Effect). Except as otherwise disclosed on Schedule 2 hereto, (x)(i) all
of the issued and outstanding capital stock of each such Subsidiary that is a
corporation has been duly authorized and validly issued, is fully paid and non-
assessable and (ii) to our knowledge, is owned by the Company, directly or
through subsidiaries and (y)(i) all of the ownership interests of each such
Subsidiary that is not a corporation have been duly authorized and (ii) to our
knowledge, are owned, by the Company, directly or through subsidiaries.
(vi) The sale of the Securities by the Selling Shareholders is not
subject to the preemptive or other similar rights of any securityholder of the
Company existing by virtue of the DGCL, the restated certificate of
incorporation and amended and restated by-laws of the Company in effect
immediately prior to and at Closing Time or any contract to which the Company is
a party and that is filed as an exhibit to the Registration Statement pursuant
to Item 601(b)(2) or 601(b)(10) of Regulation S-K of the 1933 Act or identified
in a certificate of the General Counsel of the Company attached hereto as
Exhibit D (which purports to identify any agreements with respect to such
preemptive or other similar rights).
(vii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(viii) The Registration Statement[, including any Rule 462(b) Registration
Statement,] has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to our knowledge, no stop order
suspending the effectiveness of the Registration Statement [or any Rule 462(b)
Registration Statement] has been issued under the 1933 Act and no proceedings
for that purpose have been instituted or are pending or threatened by the
Commission.
(ix) The Registration Statement, including [any Rule 462(b) Registration
Statement,] the Rule 430A Information each amendment or supplement to the
Registration Statement filed on or before the date hereof, as of its effective
date, and the Prospectus, as of their issue dates (other than the financial
statements, footnotes thereto, supporting schedules, other financial information
and statistical information derived from the financial statements included
therein or omitted therefrom, as to which we express no
A-1-2
opinion), complied as to form in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations.
(x) The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements and with any
applicable requirements of the restated certificate of incorporation and the
restated by-laws of the Company in effect at Closing Time.
(xi) Except as disclosed in the Prospectus, there are no encumbrances or
restrictions pursuant to any agreement filed as an exhibit to the Registration
Statement pursuant to Item 601(b)(2) or 601(b)(10) of Regulation S-K of the 1933
Act or identified on a schedule provided by the General Counsel of the Company
attached hereto as Exhibit E (referencing agreements that impose encumbrances or
restrictions), on the ability of any Subsidiary (a) to pay any dividends or make
any distributions on such Subsidiary's capital stock, (b) to make any loans or
advances to, or investments in, the Company or any such Subsidiary, or (c) to
transfer any of its property or assets to the Company or any such Subsidiary.
(xii) To our knowledge, (a) there are no legal or governmental
proceedings or investigations pending or threatened against the Company, or to
which the Company, or any of its properties is subject, that are required to be
described in the Registration Statement or Prospectus (or any amendment or
supplement thereto) that are not so described, (b) there are no agreements,
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments that are required to be described or referred to in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) or to be filed as an exhibit to the Registration Statement that are not
so described or filed, as the case may be, and such descriptions are accurate in
all material respects, and (c) there are no legal or governmental proceedings or
investigations pending, or threatened in writing, that would materially affect
the issuance, sale or delivery of the Securities to the Underwriters under the
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiii) The information in the Prospectus under "Description of Capital
Stock", "Management-Employment Agreements", "Management - Select Medical
Corporation 1997 Amended and Restated Stock Option Plan", "Related Party
Transactions" and "Shares Eligible for Future Sale" and in the Registration
Statement under Items 14 and 15, to the extent that it constitutes matters of
law, summaries of legal matters, summaries of the Company's restated certificate
of incorporation and bylaws or legal conclusions, has been reviewed by us and is
correct in all material respects.
(xiv) To our knowledge, other than with respect to Health Care Laws (as to
which we express no opinion), there are no Federal, Delaware or Pennsylvania
statutes or regulations that are required to be described in the Prospectus that
are not described as required.
A-1-3
(xv) To our knowledge, the Company is not in violation of its restated
certificate of incorporation or amended and restated by-laws, and to our
knowledge, none of the Subsidiaries is in violation of its certificate of
incorporation, by-laws or analogous organizational documents. To our knowledge,
no default by the Company or any of its subsidiaries exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus or filed or incorporated by reference
as an exhibit to the Registration Statement.
(xvi) No filing with, or authorization, approval, consent, license, order,
registration, qualification of or with any United States, New York, Pennsylvania
or with respect to the DGCL, Delaware court or governmental authority or agency
(other than under the 1933 Act and the 1933 Act Regulations, which have been
obtained, or as may be required under the securities or blue sky laws of the
various states, as to which we express no opinion) is necessary or required in
connection with the due authorization, execution and delivery of the Purchase
Agreement or for the offering, issuance, sale or delivery of the Securities.
(xvii) The execution, delivery and performance of the Purchase Agreement
and the consummation of the transactions contemplated in the Purchase Agreement
and in the Registration Statement (including the completion of the Related
Transactions and the sale of the Securities) and compliance by the Company with
its obligations under the Purchase Agreement do not and will not, whether with
or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(x) of the Purchase Agreements) under or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument filed as an exhibit to the Registration Statement
pursuant to Item 601(b)(2) or 601(b)(10) of Regulation S-K of the 1933 Act or
any other material agreement of the Company or any of its subsidiaries in the
Certificate of the General Counsel of the Company attached hereto as Exhibit B,
to which the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that could not reasonably be expected
to have a Material Adverse Effect), nor will such action result in any violation
of the provisions of the certificate of incorporation or by-laws or analogous
organizational documents of the Company or any Subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties, assets or operations.
A-1-4
(xix) Except as disclosed in the Prospectus, to our knowledge, there are
no persons with registration rights or other similar rights to have any
securities (i) registered pursuant to the Registration Statement or (ii)
otherwise registered by the Company or any of its subsidiaries under the 1933
Act, other than, in the case of clause (ii), the rights of any person under the
Registration Rights Agreement that have not been waived.
(xx) Neither the Company or any of its subsidiaries is, and upon the
issuance and sale of the Securities as contemplated in the Purchase Agreement
and the application of the net proceeds therefrom as described in the Prospectus
none of them will be, an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the 1940 Act.
[The following statement shall be set forth in a separate letter]
We have participated in conferences with officers and other representatives
of the Company and representatives of the Underwriters and their counsel during
which the contents of the Registration Statement and related matters were
discussed and reviewed and, although we do not pass upon and do not assume
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement (except to the extent described in
paragraphs (xiii) and (xiv) in our separate opinion to you dated today), on the
basis of the information that was developed in the course of the services
referred to above, considered in the light of our understanding of the
applicable law, that, nothing has come to our attention that would lead us to
believe that the Registration Statement or any amendment thereto, including the
Rule 430A Information, (except for financial statements, footnotes and
schedules, other financial data and statistical information derived from the
financial statements included therein or omitted therefrom, as to which we need
make no statement), at the time such Registration Statement or any such
amendment became effective on or prior to the Closing Time, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus or any amendment or supplement thereto (except for financial
statements, footnotes and schedules, other financial data and statistical
information derived from the financial statements included therein or omitted
therefrom, as to which we need make no statement), at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
on or prior to the Closing Time or at the Closing Time, included or includes an
untrue statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
X-0-0
Xxxxxxx X-0
FORM OF OPINION OF XXXXXXX X. XXXXXX
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(i)
I am of the opinion that to my knowledge, all of the issued and outstanding
capital stock or ownership interests of the entities listed on Schedule A hereto
are owned by the Company, directly or through subsidiaries.
X-0-0
Xxxxxxx X-0
FORM OF OPINION OF COMPANY'S SPECIAL REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(ii)
(i) The information in the Prospectus under "Risk Factors --If there are
changes in the rates or methods of government reimbursements for our services,
our services, our net operating revenues and income could decline", "Risk
Factors --If our hospitals fail to maintain their exemption from the Medicare
prospective payment system or fail to maintain their status as a "hospital
within a hospital," our profitability may decline", "Risk Factors --We conduct
business in a heavily regulated industry, and changes in regulations or
violations of regulations may result in increased costs or sanctions that reduce
our net operating revenues and profitability", "Our Business-- Government
Regulations", to the extent that it describes federal and state laws of the
United States, has been reviewed by me and fairly presents the information set
forth therein in all material respects.
(ii) Each of the 59 specialty acute care hospitals described in the
Prospectus as owned or operated by the Company or its subsidiaries is duly
licensed as a hospital by the state in which it is located and is certified to
participate in the federal Medicare program. This opinion is based solely upon
our examination of originals or copies of such licenses and certifications
presented to us by the Company, and a Certificate of the Company that such
licenses and certifications are currently in effect.
(iii) We have reviewed the Certificate of the General Counsel of the
Company attached hereto as Exhibit A concerning the outpatient therapy clinics
owned, leased or operated by the Company or its subsidiaries. In the course of
our representation of the Company as special regulatory counsel, nothing has
come to our attention that would lead us to believe that the Certificate is not
accurate.
(iv) Except as disclosed in the Prospectus, in the course of our
representation of the Company as special regulatory counsel, we have not become
aware of any pending or threatened action, suit, proceeding, inquiry or
investigation, relating to any Health Care Law, to which the Company or any of
its subsidiaries is a party, brought by any court or governmental agency or
body, which could reasonably be expected to result in a Material Adverse Effect.
(v) No filing with, or authorization, approval, consent, license, order,
registration, qualification (collectively, "Approvals") of or with any (A)
United States governmental authority or agency, is necessary or required under
any federal Health Care Law, other than Medicare Filings and Notices that have
been made or given or that are not yet required to be made or given or (B) any
Pennsylvania governmental authority or agency is necessary or required under any
Pennsylvania Health Care Law, other than
A-3-1
such Approvals as have been obtained or made, in connection with the due
authorization, execution and delivery of the Purchase Agreement or for the
offering, issuance, sale or delivery of the Securities. Without having
investigated the laws of states other than Pennsylvania for purposes of this
opinion, based on our experience as special regulatory counsel representing
other issuers owning and operating other health care businesses, and our ongoing
representation of the Company as special regulatory counsel, we are not aware of
any Approvals under any Health Care Laws required to be obtained or made in
connection with the execution delivery and performance of the Purchase
Agreement, that, if not obtained or made, would result in a Material Adverse
Effect.
In the course of our representation of the Company as special regulatory
counsel, nothing has come to our attention that would lead us to believe that
the information contained in the Registration Statement under "Risk Factors--If
there are changes in the rates or methods of government reimbursements for our
services, our services, our net operating revenues and income could decline",
"Risk Factors--If our hospitals fail to maintain their exemption from the
Medicare prospective payment system or fail to maintain their status as a
"hospital within a hospital," our profitability may decline", "Risk Factors--We
conduct business in a heavily regulated industry, and changes in regulations or
violations of regulations may result in increased costs or sanctions that reduce
our net operating revenues and profitability", "Our Business--Government
Regulations" (A) at the time such Registration Statement or any such amendment
thereto became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (B) at the time the Prospectus
was issued, at the time any such amended or supplemented prospectus was issued
or at the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
For purposes of this opinion, the term "Health Care Laws" shall mean those
statutes, rules and regulations, judgments, decrees or orders specifically
regulating health care providers, as such, of the type owned and operated by the
Company and its subsidiaries as described under the headings "Risk Factors--If
there are changes in the rates or methods of government reimbursements for our
services, our net operating revenues and income could decline", "Risk Factors--
If our hospitals fail to maintain their exemption from the Medicare prospective
payment system or fail to maintain their status as a "hospital within a
hospital," our profitability may decline", "Risk Factors--We conduct business in
heavily regulated industry, and changes in regulations or violations of
regulations may result in increased costs or sanctions that reduce our net
operating revenues and profitability", "Our Business--Government Regulations"
in the Prospectus, including, without limitation, (a) health care licensure,
permit and certificate of need requirements, (b) Title XVIII, XIX and XXI of the
Social Security Act; (c) the Anti-Kickback Amendments (as defined in the
Prospectus) and the regulations promulgated thereunder, (d) the Xxxxx Laws (as
defined in the Prospectus) and the
A-3-2
regulations promulgated thereunder, (e) the False Claims Act, (f) Title II of
the Health Insurance Portability and Accountability Act of 1996, (g) Title IV of
the Balanced Budget Act of 1997, (h) any initiatives under Operation Restore
Trust and (i) state statutes, rules and regulations concerning matters similar
to (b) through (h) above, but specifically excluding statutes, ordinances,
administrative decisions, rules and regulations of counties, towns,
municipalities or special political subdivisions.
Debevoise & Xxxxxxxx and the Representatives may rely on our opinion
regarding Coding and Reimbursement for Therapy Services, dated October 5, 2001,
to Xxxxxxx X. Xxxxxx, Vice President, General Counsel and Secretary of the
Company, as if addressed to them and dated the date hereof.
Such opinion shall not state that it is to be governed or qualified by, or
that it is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
X-0-0
Xxxxxxx X-0
OPINION OF COMPANY'S SPECIAL CANADIAN COUNSEL
TO BE DELIVERED PURSUANT TO SECTION 5(b)(iv)
(i) Each of Canadian Back Institute ("CBI") and Rehab Health Inc.
("Rehab Health") is incorporated and existing under the Business Corporations
Act (Ontario).
(ii) Each of CBI Calgary Limited Partnership, CBI Etobicoke Limited
Partnership, CBI Scarborough Limited Partnership, CBI South Calgary Limited
Partnership, CBI Toronto Limited Partnership, CBI Victoria Limited Partnership,
(collectively, the "Limited Partnerships") has been formed and exists as a
limited partnership under the Limited Partnership Act (Ontario).
(iii) CBI has the corporate power and capacity to carry on its business as
presently conducted (including, in the case of the Limited Partnerships, the
business of the Limited Partnerships) and to own its properties and assets.
(iv) Rehab Health has the corporate power and capacity to carry on its
business as presently conducted and to own its properties and assets.
X-0-0
Xxxxxxx X-0
FORM OF OPINION OF REBOUL, MACMURRAY, XXXXXX, XXXXXXX &
KRISTOL TO BE DELIVERED PURSUANT TO SECTION 5(c)(i)
We have acted as counsel to Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P. and
WCAS Capital Partners III, L.P., each a Delaware limited partnership
(collectively, the "WCAS Selling Stockholders"), solely in connection with the
sale by the WCAS Selling Stockholders of an aggregate of 3,000,000 shares of
Common Stock, $.01 par value (the "Securities"), of Select Medical Corporation,
a Delaware corporation (the "Company"), to the underwriters named in the
Purchase Agreement dated November __, 0000, (xxx "Xxxxxxxx Agreement") among the
Company, the selling stockholders named therein and the several underwriters
named therein for whom you are acting as Representatives (the "Underwriters").
This opinion letter is furnished pursuant to Section 5(c) of the Purchase
Agreement. Capitalized terms used but not defined herein have the meanings set
forth in the Purchase Agreement.
In arriving at the opinions expressed below, we have reviewed the following
documents:
1. fully executed counterparts of the Purchase Agreement;
2. an executed copy of the WCAS Selling Stockholders' Irrevocable Power
of Attorney, dated November __, 2001 (the "Power of Attorney");
3. an executed copy of the WCAS Selling Stockholders' Letter of
Transmittal and Custody Agreement, dated November __, 2001 (the
"Custody Agreement");
4 the Registration Statement on Form S-1 (No. 333-72728), as amended
when it became effective, including the information deemed to be a
part thereof as of such time pursuant to Rule 430A under the 1933 Act
(the "Registration Statement");
5. the form of prospectus as first filed with the Commission pursuant to
Rule 424(b) under the 1933 Act (the "Prospectus"); and
6. a specimen certificate of the Common Stock; and
7. the limited partnership agreement and other governing documents of the
WCAS Selling Stockholders.
In addition, we have reviewed the originals or copies certified or
otherwise identified to our satisfaction of all such records of the WCAS Selling
Stockholders and such other instruments and other certificates of public
officials, officers and
A-5-1
representatives of the WCAS Selling Stockholders and such other persons, and we
have made such investigations of law, as we have deemed appropriate as a basis
for the opinions expressed below.
In rendering the opinions expressed below, we have assumed the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies. In addition, we have
assumed and have not verified the accuracy as to factual matters of each
document we have reviewed (including, without limitation, the accuracy of the
representations and warranties in the Purchase Agreement of each of the parties
thereto, including the WCAS Selling Stockholders).
Based on the foregoing, and subject to the further assumptions and
qualifications set forth below, it is our opinion that:
1. The Power of Attorney and Custody Agreement to which each WCAS Selling
Stockholders is a party has been duly executed and delivered by the
respective WCAS Selling Stockholders named therein and constitutes the
legal, valid and binding agreement of such WCAS Selling Stockholder.
2. The Purchase Agreement has been duly authorized, executed and delivered by
or on behalf of each WCAS Selling Stockholder.
3. The execution, delivery and performance of the Purchase Agreement and the
Power of Attorney and Custody Agreement and the sale and delivery of the
Securities and the consummation of the transactions contemplated in the
Purchase Agreement and in the Registration Statement and compliance by
the WCAS Selling Stockholders with its obligations under the Purchase
Agreement have been duly authorized by all necessary partnership action
on the part of the WCAS Selling Stockholders and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default under or result in
the creation or imposition of any tax, lien, charge or encumbrance upon
the Securities or any property or assets of the WCAS Selling Stockholders
pursuant to, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, license, lease or other instrument or agreement
known to us to which either WCAS Selling Stockholder is a party or by
which it may be bound, or to which any of the property or assets of the
WCAS Selling Stockholders may be subject nor will such action result in
any violation of the provisions of the constituent documents of the WCAS
Selling Stockholders or any law, administrative regulation, judgment or
order of any governmental agency or body or any administrative or court
decree known to us having jurisdiction over such WCAS Selling Stockholder
or any of its properties.
4. No filing with, or consent, approval, authorization, license, order,
registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than such consents,
approvals, authorizations, licenses,
A-5-2
orders or decrees which have been duly obtained and are in full force and
effect and other than the issuance of the order of the Commission
declaring the Registration Statement effective and such authorizations,
approvals or consents as may be necessary under state securities or blue
sky laws or as may be required under the rules of the NASD, as to which
we need express no opinion), is necessary or required to be obtained by
the WCAS Selling Stockholders for the performance by each Selling
Stockholder of its obligations under the Purchase Agreement or in the
Power of Attorney and Custody Agreement, or in connection with the offer,
sale or delivery of the Securities.
5. Upon payment for the Securities to be sold by the WCAS Selling Stockholders
to the Underwriters as provided in the Purchase Agreement, the delivery
of such Securities to Cede & Co. ("Cede") or such other nominee as may be
designated by The Depository Trust Company ("DTC"), the registration of
such Securities in the name of Cede or such other nominee and the
crediting of such Securities on the records of DTC to security accounts
in the Underwriter's name (assuming that neither the Underwriter nor DTC
has notice of any adverse claim (as such phrase is defined in Section 8-
105 of the Uniform Commercial Code as in effect in the State of New York
(the "UCC")) to such Securities or any security entitlement in respect
thereof), (A) DTC shall be a "protected purchaser" of such Securities
-
within the meaning of Section 8-303 of the UCC, (B) under Section 8-501
-
of the UCC, the Underwriter will acquire a security entitlement in
respect of such Securities and (C) to the extent governed by the UCC, no
-
action based on any "adverse claim" (as defined in Section 8-102 of the
UCC) to such security entitlement may be asserted against the
Underwriter; it being understood that for purposes of this opinion, we
have assumed that when such payment, delivery and crediting occur, (x)
-
such Securities will have been registered in the name of Cede or such
other nominee as may be designated by DTC, in each case on the Company's
share registry in accordance with its certificate of incorporation,
bylaws and applicable law, (y) DTC will be registered as a "clearing
-
corporation" within the meaning of Section 8-102 of the UCC and (z)
-
appropriate entries to the securities account or accounts in the name of
the Underwriters on the records of DTC will have been made pursuant to
the UCC.
Insofar as the opinion in numbered paragraph 1 relates to the validity,
binding effect or enforceability of any agreement or obligation of the WCAS
Selling Stockholders, (a) we have assumed that each of the WCAS Selling
-
Stockholders and each other party to such agreement or obligation has satisfied
those legal requirements that are applicable to it to the extent necessary to
make such agreement or obligation enforceable against it (except that no such
assumption is made as to the WCAS Selling Stockholders regarding matters of the
federal law of the United States of America or the law of the States of New York
and Delaware),and (b) such opinions are subject to applicable bankruptcy,
-
insolvency and similar laws affecting creditors' rights generally and to general
principles of equity. The foregoing opinions are limited to the federal law of
the
X-0-0
Xxxxxx Xxxxxx xx Xxxxxxx, the law of the State of New York and the Delaware
Revised Uniform Limited Partnership Act.
We are furnishing this opinion letter to you, as representatives of the
Underwriters, solely for the benefit of the Underwriters in connection with the
offering of the Securities. This opinion letter is not to be used, circulated,
quoted or otherwise referred to for any other purpose.
Very truly yours,
X-0-0
Xxxxxxx X-0
FORM OF OPINION OF XXXXXXXX & XXXXX
TO BE DELIVERED PURSUANT TO SECTION 5(c)(ii)
We are issuing this letter in our capacity as special counsel for Golder,
Thoma, Xxxxxxx, Xxxxxx Fund V, L.P., GTCR Associates V, GTCR Fund VI, L.P; GTCR
Associates VI, GTCR IV Executive Fund, X.X Xxxxx Xxxxxxx Fund VI, L.P. and Xxxxx
Xxxxxxx Friends Fund VI, L.P. (each a "Selling Stockholder") in response to the
requirement in Section 5(c)(ii) of the Purchase Agreement dated November_, 2001
(the "Underwriting Agreement") between Select Medical Corporation (the
"Company"), the underwriters named in Schedule A thereto (the "Underwriters")
and the selling stockholders named in Schedule B thereto. Every term which is
defined or given a special meaning in the Underwriting Agreement and which is
not given a different meaning in this letter has the same meaning whenever it is
used in this letter as the meaning it is given in the Underwriting Agreement.
In connection with the preparation of this letter, we have among other
things read:
(a) a copy of the Custody Agreement and Power of Attorney executed by or
on behalf of each Selling Stockholder;
(b) a copy of the Underwriting Agreement executed by or on behalf of each
Selling Stockholder;
(c) a specimen certificate for the Common Stock; and
(d) Copies of all certificates and other documents delivered today by or
on behalf of each Selling Stockholder at the closing of the purchase
and sale of the Common Stock under the Underwriting Agreement.
Subject to the assumptions, qualifications and limitations which are
identified in this letter, we advise you that:
6. The Power of Attorney and Custody Agreement have been duly authorized,
executed and delivered by each Selling Stockholder and each is a valid
and binding obligation of such Selling Stockholder.
7. The Underwriting Agreement has been duly authorized, executed and delivered
by each Selling Stockholder.
8. Each Selling Stockholder's execution and delivery of the Custody Agreement,
Power of Attorney and Underwriting Agreement, the compliance by such
Selling Stockholder of its obligations thereunder and such Selling
Stockholder's sale of
A-6-1
the Firm Shares to you in accordance with the Underwriting Agreement do
not (i) violate such Selling Stockholder's Partnership Agreement, (ii)
violate any order, judgment or decree known to us of any court or
governmental agency or body having jurisdiction over such Selling
Stockholder which order, judgment or decree is specifically applicable to
such Selling Stockholder, (iii) constitute a violation by such Selling
Stockholder of any applicable provision of any law known to us of any
governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder (except that we
express no opinion in this paragraph as to compliance with any disclosure
requirement or any prohibition against fraud or misrepresentation or as
to whether performance of the indemnification or contribution provisions
in the Custody Agreement, Power of Attorney or Underwriting Agreement
would be permitted) or (iv) breach, or result in a default under, any
existing obligation of such Selling Stockholder under any agreement or
instrument known to us to which the Selling Stockholder is a party or by
which such Selling Stockholder is bound and to which any property or
assets of such Selling Stockholder is subject, except, in the case of
clauses (ii) and (vi), for such violations, breaches or defaults which,
individually or in the aggregate, would not materially adversely affect
such Selling Stockholder's ability to perform its obligations under the
Custody Agreement, Power of Attorney or Underwriting Agreement.
9. Neither Selling Stockholder is required to obtain any consent, approval,
authorization or order of any governmental agency or body, or to our
knowledge, any court for the execution and delivery of the Custody
Agreement, the Power of Attorney or the Underwriting Agreement or the
delivery and sale of the Firm Shares by such Selling Stockholder under
the Underwriting Agreement, except such as may be required under the Act,
the Exchange Act or the blue sky laws of any jurisdiction, as to which we
express no opinion.
10. Upon payment for the Firm Shares to be sold by each Selling Shareholder to
you as provided in the Underwriting Agreement, the delivery of such Firm
Shares to Cede & Co. ("Cede") or such other nominee as may be designated
by The Depository Trust Company ("DTC"), the registration of such Firm
Shares in the name of Cede or such other nominee and the crediting of
such Firm Shares on the records of DTC to security accounts in your name
(assuming that neither you nor DTC has notice of any adverse claim (as
such phrase is defined in Section 8-105 of the Uniform Commercial Code as
in effect in the State of New York (the "UCC")) to such Firm Shares or
any security entitlement in respect thereof), (A) DTC shall be a
"protected purchaser" of such Firm Shares within the meaning of Section
8-303 of the UCC, (B) under Section 8-501 of the UCC, you will acquire a
security entitlement in respect of such Firm Shares and (C) to the extent
governed by the UCC, no action based on any "adverse claim" (as defined
in Section 8-102 of the UCC) to such security entitlement may be asserted
against you; it being understood that for purposes of this opinion, we
have assumed that
A-6-2
when such payment, delivery and crediting occur, (x) such Firm Shares will
have been registered in the name of Cede or such other nominee as may be
designated by DTC, in each case on the Company's share registry in
accordance with its certificate of incorporation, bylaws and applicable
law, (y) DTC will be registered as a "clearing corporation", within the
meaning of Section 8-102 of the UCC and (z) appropriate entries to the
securities account or accounts in your name on the records of DTC will have
been made pursuant to the UCC.
ooooooooo
We have assumed for purposes of this letter: each document we have reviewed
for purposes of this letter is accurate and complete, each such document that is
an original is authentic, each such document that is a copy conforms to an
authentic original, and all signatures on each such document are genuine; that
the Custody Agreement, Power of Attorney and Underwriting Agreement and every
other agreement we have examined for purposes of this letter constitutes a valid
and binding obligation of each party to that document and that each such party
has satisfied all legal requirements that are applicable to such party to the
extent necessary to entitle such party to enforce such agreement (except that we
make no such assumption with respect to each Selling Stockholder); and that you
have acted in good faith and without notice of any fact which has caused you to
reach any conclusion contrary to any of the conclusions provided in this letter.
We have also made other assumptions which we believe to be appropriate for
purposes of this letter.
In preparing this letter we have relied, without independent verification
upon: (i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Custody
Agreement, Power of Attorney and Underwriting Agreement and other documents
specifically identified at the beginning of this letter as having been read by
us; (iii) factual information provided to us by each Selling Stockholder or its
representatives; and (iv) factual information we have obtained from such other
sources as we have deemed reasonable. We have assumed that there has been no
relevant change or development between the dates and of which the information
cited in the preceding sentence was given and the date of this letter and that
the information upon which we have relied is accurate and does not omit
disclosures necessary to prevent such information from being misleading. We have
not undertaken any investigation to determine the facts upon which the advice in
this letter is based and have not undertaken any investigation or search of any
records of any court or any governmental agency or body for purposes of this
letter.
We confirm that we do not have knowledge that has caused us to conclude
that our reliance and assumptions cited in the two immediately preceding
paragraphs are unwarranted. Whenever this letter provides advice about (or based
upon) our knowledge of any particular information or about any information which
has or has not come to our attention such advice is based entirely on the
conscious awareness at the time this letter is delivered on the date it bears by
the lawyers with Xxxxxxxx & Xxxxx at that time who spent
A-6-3
substantial time representing each Selling Stockholder in connection with the
offering effected pursuant to the Prospectus.
Each opinion (an "enforceability opinion") in this letter that any
particular contract is a valid and binding obligation or is enforceable in
accordance with its terms is subject to: (i) the effect of bankruptcy,
insolvency, fraudulent conveyance and other similar laws and judicially
developed doctrines in this area such as substantive consolidation and equitable
subordination; (ii) the effect of general principles of equity; and (iii) other
commonly recognized statutory and judicial constraints on enforceability
including statutes of limitations. "General principles of equity" include but
are not limited to: principles limiting the availability of specific performance
and injunctive relief; principles which limit the availability of a remedy under
certain circumstances where another remedy has been elected; principles
requiring reasonableness, good faith and fair dealing in the performance and
enforcement of an agreement by the party seeking enforcement; principles which
may permit a party to cure a material failure to perform its obligations; and
principles affording equitable defenses such as waiver, laches and estoppel. It
is possible that terms in a particular contract covered by our enforceability
opinion may not prove enforceable for reasons other than those explicitly cited
in this letter should an actual enforcement action be brought, but (subject to
all the exceptions, qualifications, exclusions and other limitations contained
in this letter) such unenforceability would not in our opinion prevent the party
entitled to enforce that contract from realizing the principal benefits
purported to be provided to that party by the terms in that contract which are
covered by our enforceability opinion.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal laws of the state of New York or the federal law of
the United States, and represents our opinion as to how that issue would be
resolved were it to be considered by the highest court in the jurisdiction which
enacted such law. We express no opinion with respect to any state securities (or
"blue sky") laws or regulations or any laws, statutes governmental rules or
regulations which in our experience are not applicable generally to transactions
of the kind covered by the Underwriting Agreement. None of the opinions or other
advice contained in this letter considers or covers any rules and regulations of
the National Association of Securities Dealers, Inc. relating to the
compensation of underwriters.
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which we did not have knowledge at that time,
by reason of any change subsequent to that time in any law or other governmental
requirement or interpretation thereof covered by any of our opinions or advice,
or for any other reason.
A-6-4
This letter may be relied upon by the Underwriters only for the purpose
served by the provision in the Underwriting Agreement cited in the initial
paragraph of this letter in response to which it has been delivered. Without our
written consent: (i) no person other than the Underwriters may rely on this
letter for any purpose; (ii) this letter may not be cited or quoted in any
financial statement, prospectus, private placement memorandum or other similar
document; (iii) this letter may not be cited or quoted in any other document or
communication which might encourage reliance upon this letter by any person or
for any purpose excluded by the restrictions in this paragraph; and (iv) copies
of this letter may not be furnished to anyone for purposes of encouraging such
reliance.
Very truly yours,
XXXXXXXX & XXXXX
X-0-0
Xxxxxxx X-0
FORM OF THE SELLING SHAREHOLDER OPINION OF DECHERT TO
TO BE DELIVERED PURSUANT TO
SECTION 5(c)(iii)
Pursuant to the laws of the state of New York and the United States of
America, no filing with, or consent, approval, authorization, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign, (other than as have been made or will be obtained
under the Act and such authorizations, approvals or consents as may be necessary
under state securities laws, as to which [I][we] need express no opinion) is
necessary or required to be obtained by the Selling Shareholder(s) for the
performance by [each/the] Selling Shareholder of its obligations under the
Purchase Agreement or in the Power of Attorney and Custody Agreement, or in
connection with the offer, sale or delivery of the Securities.
[Each/The] Power of Attorney and Custody Agreement has been duly executed
and delivered by the [respective] Selling Shareholder(s) [named therein] and
constitutes the legal, valid and binding agreement of [such/the] Selling
Shareholder subject to banckruptcy insolvency, fraudulent transfer,
reorganiztion , moratorium and similar laws of general applicability relating to
creditors rights and to general equity principles.
The Purchase Agreement has been duly, executed and delivered by or on
behalf of [each/the] Selling Shareholder.
[Each/The] Attorney-in-Fact has been duly authorized by the Selling
Shareholder(s) to deliver the Securities on behalf of the Selling Shareholder(s)
in accordance with the terms of the Purchase Agreement.
The execution, delivery and performance of the Purchase Agreement and the
Power of Attorney and Custody Agreement and the sale and delivery of the
Securities and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement and compliance by the Selling
Shareholder(s) with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default under or result in the
creation or imposition of any tax, lien, charge or encumbrance upon the
Securities or any property or assets of the Selling Shareholder(s) pursuant to,
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, license, lease or other instrument or agreement listed on Schedule A to
this opinion, or any New York or Federal statute, rule or regulation,
administrative regulation, judgment or order of any governmental agency or body
or any administrative or court decree, which regulation judgment, order or
decree is known to us, having jurisdiction over [such/the] Selling Shareholder
or any of its properties.
A-7-1
Upon payment for the Securities to be sold by [each/the] Selling
Shareholder to you as provided in the Purchase Agreement, the delivery of such
Securities to Cede & Co. ("Cede") or such other nominee as may be designated by
The Depository Trust Company ("DTC"), the registration of such Securities in the
name of Cede or such other nominee and the crediting of such Securities on the
records of DTC to security accounts in your name (assuming that neither you nor
DTC has notice of any adverse claim (as such phrase is defined in Section 8-105
of the Uniform Commercial Code as in effect in the State of New York (the
"UCC")) to such Securities or any security entitlement in respect thereof), (A)
DTC shall be a "protected purchaser" of such Securities within the meaning of
Section 8-303 of the UCC, (B) under Section 8-501 of the UCC, you will acquire a
security entitlement in respect of such Securities and (C) no action based on
any "adverse claim" (as defined in Section 8-102 of the UCC) to such security
entitlement may be asserted against you; it being understood that for purposes
of this opinion, we have assumed that when such payment, delivery and crediting
occur, (x) such Securities will have been registered in the name of Cede or such
other nominee as may be designated by DTC, in each case on the Company's share
registry in accordance with its certificate of incorporation bylaws and
applicable law, (y) DTC will be registered as a "clearing corporation" within
the meaning of Section 8-102 of the UCC and (z) appropriate entries to the
securities account or accounts in your name on the records of DTC will have been
made pursuant to the UCC.
Such opinion shall not state that it is to be governed or qualified by, or
that it is otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal Opinion
Accord of the ABA Section of Business Law (1991).
A-7-2
[Form of lock-up from directors, officers or other stockholders pursuant to
Section 5(i)]
.
XXXXXXX XXXXX & CO.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated,
X.X. Xxxxxx Securities Inc.
Credit Suisse First Boston Corporation.
CIBC World Markets Corp.
XX Xxxxx Securities Corporation
First Union Securities, Inc.
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
x/x Xxxxxxx Xxxxx & Xx.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
Xxxxx Xxxxx
Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Re: Proposed Public Offering by Select Medical Corporation
Dear Sirs:
The undersigned, a stockholder and/or an officer and/or director of Select
Medical Corporation, a Delaware corporation (the "Company"), understands that
Xxxxxxx Xxxxx & Co., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
("Xxxxxxx Xxxxx") and X.X. Xxxxxx Securities Inc. ("X.X. Xxxxxx"), Credit Suisse
First Boston Corporation, CIBC World Markets Corp., XX Xxxxx Securities
Corporation and First Union Securities, Inc. propose to enter into a Purchase
Agreement (the "Purchase Agreement") with the Company and the Selling
Shareholders providing for the public offering of shares (the "Securities") of
the Company's common stock, par value $.01 per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder and/or an officer and/or director of the Company,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned agrees with each underwriter to
be named in the Purchase Agreement that, during a period of 90 days from the
date of the Purchase Agreement, the undersigned will not, without the prior
written consent of both Xxxxxxx Xxxxx and X.X. Xxxxxx, directly or indirectly,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of the
Company's
B-1
Common Stock or any securities convertible into or exchangeable or exercisable
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition, or file any registration statement under the Securities Act of
1933, as amended, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise. Notwithstanding the
foregoing, Xxxxxxx Xxxxx'x and X.X. Xxxxxx'x prior written consent is not
required for transactions by persons not subject to Section 16 of the Securities
Exchange Act of 1934, as amended, with respect to the Company, relating (A) to
shares of Common Stock or other securities of the Company acquired in open
market transactions after the completion of the public offering and (B) sales of
shares of Common Stock underlying employee stock options in connection with
cashless exercises of those stock options by former employees of the Company
that were not subject to Section 16 with respect to the Company while they were
employed by the Company.
In addition, the undersigned agrees that the Company and/or Xxxxxxx Xxxxx and
X.X. Xxxxxx Securities Inc. may, and the undersigned will, (i) with respect to
any shares of Common Stock for which the undersigned is the record holder, cause
the transfer agent for the Company to note stop transfer instructions with
respect to such shares of Common Stock on the transfer books and records of the
Company and (ii) with respect to any shares of Common Stock for which the
undersigned is the beneficial holder but not the record holder, cause the record
holder of such shares of Common Stock to cause the transfer agent for the
Company to note stop transfer instructions with respect to such shares of Common
Stock on the transfer books and records of the Company.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to enter into this letter agreement, and that, upon request,
the undersigned will execute any additional documents necessary or desirable in
connection with the enforcement hereof. All authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned
and any obligations of the undersigned shall be binding upon the heirs, personal
representatives, successors, and assigns of the undersigned.
Very truly yours,
Signature:_________________________
Print Name:________________________
B-2
