EXHIBIT B
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AGREEMENT
AGREEMENT, dated as of October 17, 2004 (this "Agreement"), by and
among EGL HOLDING COMPANY, a Delaware corporation ("Parent"), and the several
other individuals and entities named on Schedule I hereto (each a "Rollover
Investor" and collectively, the "Rollover Investors").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on the date hereof , Parent, EGL Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent ("Acquisition"),
and Select Medical Corporation, a Delaware corporation ("SEM"), are entering
into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which,
upon the terms and subject to the conditions set forth therein, Acquisition will
merge with and into SEM (the "Merger") with SEM continuing as the surviving
corporation;
WHEREAS, on or prior to the closing of the Merger (the "Closing"), the
Certificate of Incorporation of Parent will be amended and restated in
substantially the form of Exhibit A hereto (the "Restated Parent Charter"), and
pursuant to the Restated Parent Charter, the authorized capital stock of Parent
will consist of (i) Participating Preferred Stock, par value $0.001 per share
("Parent Preferred Stock"), and (ii) Common Stock, par value $0.001 per share
("Parent Common Stock");
WHEREAS, each Rollover Investor is the beneficial owner of at least
the number of shares of Common Stock, par value $.01 per share, of SEM ("SEM
Common Stock"), set forth opposite such Rollover Investor's name on Schedule I
hereto under the heading "Rollover Shares" (the "Rollover Shares"); and
WHEREAS, each of the Rollover Investors, acting severally and not
jointly, is willing to contribute such Rollover Investor's Rollover Shares to
Parent in exchange for newly issued shares of Parent Preferred Stock and Parent
Common Stock (the "New Parent Shares"), upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
AGREEMENTS
SECTION 1.01. Rollover. Prior to the Closing, each Rollover Investor
will enter into a stock subscription and exchange agreement with Parent, Welsh,
Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ IX, L.P. and other equity investors selected by Parent,
in substantially the form set forth in Exhibit B hereto (the "Stock Subscription
Agreement"), and will contribute such Rollover Investor's Rollover Shares to
Parent in exchange for New Parent Shares on the terms and conditions set forth
in the Stock Subscription Agreement (each such Rollover Investor to be a
Schedule III Purchaser (as defined in the Stock Subscription Agreement)
thereunder). For
purposes of each such exchange of shares of SEM Common Stock for New Parent
Shares, the value of the shares of SEM Common Stock contributed by each Rollover
Investor to Parent shall be $18.00 per share (i.e., an amount equal to the
consideration per share of SEM Common Stock payable in the Merger).
SECTION 1.02. Stockholders Agreement and Registration Rights
Agreement. As contemplated by the Stock Subscription Agreement, prior to the
Closing Date, each Rollover Investor will enter into a stockholders agreement,
in substantially the form set forth in Exhibit C hereto, and a registration
rights agreement, in substantially the form set forth in Exhibit D hereto, in
each case with Parent, Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ IX, L.P. and other equity
investors selected by Parent.
SECTION 1.03. Management Agreements and Acknowledgements.
(a) At or prior to the Closing, each Rollover Investor who is an
employee of SEM (each, a "Management Rollover Investor") also agrees to enter
into the following agreements: (i) a restricted stock award agreement, which
provides such Management Rollover Investor with the percentage of available
shares of Parent Common Stock under Parent's Equity Incentive Plan, set forth
opposite such Management Rollover Investor's name on Schedule I hereto under the
heading "Restricted Shares" and is otherwise in a form (together with the
accompanying Equity Incentive Plan) substantially as set forth in Exhibits E-1
and E-2 hereto; it being understood that Parent's Equity Incentive Plan shall
make 20% of the fully-diluted Parent Common Stock as of the Closing available
for grants of restricted stock; (ii) a long-term cash incentive award agreement,
which provides such Management Rollover Investor with the participation interest
in a long-term cash incentive plan of Parent; (iii) an amended employment
agreement, which amends the terms of such Management Rollover Investor's
existing employment agreement and any other change of control, severance or
similar agreement with SEM (each, an "Existing Employment Agreement") to reflect
the acknowledgments and agreements set forth in clauses (i) and (ii) of Section
1.03(b) below and such other changes as are reasonably acceptable to such
Management Rollover Investor and Parent; and (iv) in the case of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇, a Warrant substantially as set forth in Exhibit F hereto to purchase
2% of the fully-diluted Parent Common Stock as of the Closing. It is also
understood that the Management Rollover Investors will be given the opportunity
to purchase for cash the subordinated debt securities of Parent that may be
purchased by WCAS Capital Partners IV, L.P. as described in its commitment
letter to Parent dated as of the date hereof, up to an aggregate principal
amount of $10,000,000.
(b) Each Management Rollover Investor acknowledges and agrees (i) that
the Merger and other transactions contemplated by the Merger Agreement will not
be treated as a "Change of Control" under the relevant provisions of any
Existing Employment Agreement with such Management Rollover Investor, and (ii)
to forgo any change of control or similar payments such Management Rollover
Investor would be entitled to receive under such provisions, if the Merger or
other transactions contemplated by the Merger Agreement or this Agreement would
have been treated as such a "Change of Control" (including any gross-up or
payments for, or to reimburse such Management Rollover Investor for, excise
taxes resulting from such payments or other benefits provided under such an
Existing Employment Agreement or otherwise in connection with the Merger and
other transactions contemplated by the Merger Agreement or
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this Agreement). For the avoidance of doubt, it is understood that such
provisions shall remain in effect with respect to any future Change of Control
as defined therein.
SECTION 1.04. Restrictions on Transfers. Each Rollover Investor agrees
that, without the prior written consent of Parent, it will not make any
transfer, sale, assignment, pledge, hypothecation or other disposition
(including by operation of law), whether directly or indirectly pursuant to the
creation of a derivative security, the grant of an option or other right or the
imposition of a restriction on disposition or voting (in each case, a
"Transfer"), of any of its Rollover Shares.
ARTICLE II.
REPRESENTATION AND WARRANTIES
SECTION 2.01. Parent Representations. Parent represents and warrants
to each Rollover Investor that:
(a) Existence. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware.
(b) Authorization; Power; Validity. The execution and delivery by
Parent of this Agreement and the consummation of the transactions contemplated
hereby are within Parent's powers and have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by Parent.
This Agreement constitutes a valid and binding agreement of Parent, enforceable
against Parent in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
SECTION 2.02. Rollover Investor Representations. Each Rollover
Investor, severally and not jointly, and solely with respect to such Rollover
Investor, represents and warrants to Parent that:
(a) Existence. Such Rollover Investor (if not a natural person) is a
corporation, limited partnership, limited liability company, government pension
plan or other entity, as the case may be, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization.
(b) Authorization; Power; Validity. The execution and delivery by such
Rollover Investor (if not a natural person) of this Agreement and the
consummation of the transactions contemplated hereby are within such Rollover
Investor's powers and have been duly authorized by all necessary action on the
part of such Rollover Investor. This Agreement has been duly executed and
delivered by such Rollover Investor. This Agreement constitutes a valid and
binding agreement of such Rollover Investor, enforceable against such Rollover
Investor in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of
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creditors' rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
(c) Title to Rollover Shares. Such Rollover Investor has good and
valid title to the Rollover Shares to be contributed to Parent pursuant to
Section 1.01, free and clear of all claims, liens and encumbrances.
ARTICLE III.
MISCELLANEOUS
SECTION 3.01. Condition Precedent. For purposes of Section 203 of the
Delaware General Corporation Law, this Agreement, including the Exhibits hereto,
and the respective obligations of each of the parties hereto is subject to the
approval of the Board of Directors of the Company, upon the recommendation of
the Special Committee (as defined in the Merger Agreement), and upon such
approval this Agreement shall thereafter be binding on the parties.
SECTION 3.02. Termination. This Agreement shall be terminated, and the
transactions contemplated hereby abandoned at any time prior to the consummation
of the Merger, upon the Merger Agreement being terminated in accordance with its
terms. If this Agreement is terminated as permitted by this Section 3.02, such
termination shall be without liability of any party (or any stockholder,
subsidiary, general partner, limited partner, member, director, officer,
trustee, employee, agent, consultant or representative of such party) to any of
the other parties to this Agreement and this Agreement shall become void and of
no further force or effect.
SECTION 3.03. Notices. Any notice or communication required or
permitted hereunder shall be in writing and shall be delivered personally,
delivered by nationally recognized overnight courier service for next day
delivery, sent by certified or registered mail, postage prepaid, or sent by
facsimile (subject to electronic confirmation of such facsimile transmission).
Any such notice or communication shall be deemed to have been given (i) when
delivered, if personally delivered, (ii) one business day after it is deposited
with a nationally recognized overnight courier service, if sent by nationally
recognized overnight courier service, (iii) the day of sending, if sent by
facsimile prior to 5:00 p.m. (EST) on any business day or the next succeeding
business day if sent by facsimile after 5:00 p.m. (EST) on any business day or
on any day other than a business day or (iv) five business days after the date
of mailing, if mailed by certified or registered mail, postage prepaid, in each
case, to the following address or facsimile number, or to such other addressee,
address or facsimile number as such party may subsequently designate to the
other parties by notice given hereunder:
if to Parent, to it at:
EGL Holding Company
c/o Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ IX, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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and with an additional copy to:
Ropes & ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to any Rollover Investor, to such Rollover Investor at the address
set forth for such Rollover Investor on Schedule I hereto.
SECTION 3.04. Amendments and Waivers. Any provision of this Agreement
(or any Schedule or Exhibit to this Agreement) may be amended or waived if, but
only if, such amendment or waiver is in writing and, in the case of an
amendment, signed by (i) Parent and (ii) a majority-in-interest of the Rollover
Investors (determined by reference to the number of Rollover Shares to be
contributed to Parent hereunder) or, in the case of a waiver, signed by the
party against whom the waiver is to be effective. Notwithstanding the foregoing,
Schedule I hereto can be amended by a written instrument signed only by Parent
and each Rollover Investor affected thereby and the Exhibits to this Agreement
can be amended by a written instrument signed only by Parent so long as such
amendment treats all Schedule I Purchasers, Schedule II Purchasers, Schedule III
Purchasers and Schedule IV Purchasers (each, as defined in the Subscription
Agreement) equally or does not adversely affect any of Schedule III Purchasers
(as defined in the Stock Subscription Agreement). No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
SECTION 3.05. Expenses. Except as may otherwise be agreed in writing
by Parent, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
cost or expense.
SECTION 3.06. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. No party hereto shall assign this
Agreement or any of its rights, interests or obligations hereunder without the
prior written consent of Parent and any purported assignment without such
consent shall be invalid and of no effect.
SECTION 3.07. Governing Law. This Agreement, and all claims arising
hereunder or relating hereto, shall be governed and construed and enforced in
accordance with the laws of the State of New York without giving effect to its
conflicts of laws principles.
SECTION 3.08. Jurisdiction. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in
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connection with, this Agreement or the transactions contemplated hereby or
thereby may only be brought in the United States District Court for the Southern
District of New York or any New York State court sitting in New York County, New
York, and each of the parties hereby consents to the exclusive jurisdiction of
such courts in any such suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding which is brought in any
such court has been brought in an inconvenient forum. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, and each
party agrees that, in addition to any method of service of process otherwise
permitted by law, service of process on each party may be made by any method for
giving such party notice as provided in Section 3.03, and shall be deemed
effective service of process on such party.
SECTION 3.09. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
SECTION 3.10. Specific Performance. The parties hereto acknowledge and
agree that any breach or threatened breach of the terms of this Agreement would
give rise to irreparable harm for which money damages would not be an adequate
remedy and accordingly the parties agree that, in addition to any other
remedies, each party shall be entitled to enforce the terms of this Agreement by
a decree of specific performance without the necessity of proving the inadequacy
of money damages as a remedy.
SECTION 3.11. Entire Agreement. This Agreement, including the
Schedules and Exhibits hereto, constitutes the entire agreement, arrangement and
understanding of the parties hereto with respect to the subject matter hereof,
including without limitation all arrangements among the parties relating to the
shares of SEM Common Stock held by each Rollover Investor, and there are no
other agreements, arrangements or understandings among the parties hereto with
respect to the subject matter hereof.
SECTION 3.12. Counterparts; Third Party Beneficiaries. This Agreement
may be executed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. No provision of this Agreement shall confer upon any person
other than the parties hereto any rights or remedies hereunder.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the day and year first above written.
PARENT: EGL HOLDING COMPANY
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
ROLLOVER INVESTORS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ FUND VI, L.P.
By: TC Partners VI, L.P.
Its General Partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Equity Partners, Inc.
Its General Partner
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇ ▇▇▇▇▇▇▇ FRIENDS
FUND VI, L.P.
By: TC Partners VI, L.P.
Its General Partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Equity Partners, Inc.
Its General Partner
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ FUND VII, L.P.
By: TC Partners VII, L.P.
Its General Partner
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Equity Partners, Inc.
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President