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EXHIBIT 1.1
SELECT MEDICAL CORPORATION
(a Delaware corporation)
o Shares of Common Stock
U.S. PURCHASE AGREEMENT
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Dated:
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SECTION 1. Representations and Warranties........................................................ 4
(a) Representations and Warranties by the Company......................................... 4
(i) Compliance with Registration Requirements.................................... 4
(ii) Independent Accountants...................................................... 5
(iii) Financial Statements......................................................... 5
(iv) No Material Adverse Change in Business....................................... 6
(v) Good Standing of the Company................................................. 6
(vi) Good Standing of Subsidiaries................................................ 7
(vii) Capitalization............................................................... 8
(viii) Authorization of Agreement................................................... 8
(ix) Authorization and Description of Securities.................................. 8
(x) Authorization of Related Transactions........................................ 9
(xi) Absence of Defaults and Conflicts............................................ 9
(xii) Absence of Labor Dispute..................................................... 10
(xiii) Absence of Proceedings....................................................... 10
(xiv) Accuracy of Exhibits......................................................... 10
(xv) Possession of Intellectual Property.......................................... 10
(xvi) Absence of Further Requirements.............................................. 11
(xvii) Possession of Licenses and Permits........................................... 11
(xviii) Accounts Receivable.......................................................... 12
(xix) Compliance with Social Security Act and Other Federal Enforcement Initiatives 12
(xx) Regulatory Filings........................................................... 13
(xxi) Title to Property............................................................ 13
(xxii) Investment Company Act....................................................... 14
(xxiii) Environmental Laws........................................................... 14
(xxiv) Registration Rights.......................................................... 15
(xxv) Insurance.................................................................... 15
(xxvi) Tax Returns and Payment of Taxes............................................. 15
(xxvii) No Stabilization or Manipulation............................................. 16
(xxviii) Certain Transactions......................................................... 16
(xxix) Statistical and Market Data.................................................. 16
(xxx) Accounting and other Controls................................................ 16
(b) Officer's Certificates................................................................ 17
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing....................................... 17
(a) Initial Securities.................................................................... 17
(b) Option Securities..................................................................... 17
(c) Payment............................................................................... 17
(d) Denominations; Registration........................................................... 18
(e) Appointment of Qualified Independent Underwriter...................................... 18
SECTION 3. Covenants of the Company.............................................................. 19
(a) Compliance with Securities Regulations and Commission Requests........................ 19
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(b) Filing of Amendments.................................................................. 19
(c) Delivery of Registration Statements................................................... 19
(d) Delivery of Prospectuses.............................................................. 20
(e) Continued Compliance with Securities Laws............................................. 20
(f) Blue Sky Qualifications............................................................... 20
(g) Rule 158.............................................................................. 21
(h) Use of Proceeds....................................................................... 21
(i) Listing............................................................................... 21
(j) Restriction on Sale of Securities..................................................... 21
(k) Reporting Requirements................................................................ 22
(l) Compliance with NASD Rules............................................................ 22
(m) Compliance with Rule 463.............................................................. 22
SECTION 4. Payment of Expenses................................................................... 22
(a) Expenses.............................................................................. 22
(b) Termination of Agreement.............................................................. 23
SECTION 5. Conditions of U.S. Underwriters' Obligations.......................................... 23
(a) Effectiveness of Registration Statement............................................... 23
(b) Opinion of Counsel for Company........................................................ 24
(c) Opinion of Counsel for U.S. Underwriters.............................................. 24
(d) Officers' Certificate................................................................. 24
(e) Accountant's Comfort Letter........................................................... 25
(f) Bring-down Comfort Letter............................................................. 25
(g) Approval of Listing................................................................... 25
(h) No Objection.......................................................................... 25
(i) Lock-up Agreements.................................................................... 25
(j) Purchase of Initial International Securities ......................................... 25
(k) Related Transactions.................................................................. 25
(l) Certificate Concerning Predecessor Company Financial Information...................... 25
(m) Certificate of General Counsel of the Company......................................... 25
(n) Conditions to Purchase of U.S. Option Securities...................................... 26
(i) Officers' Certificate........................................................... 26
(ii) Opinion of Counsel for Company.................................................. 26
(iii) Opinion of Counsel for U.S. Underwriters........................................ 26
(iv) Bring-down Comfort Letter....................................................... 26
(v) Certificate of General Counsel of the Company................................... 26
(o) Additional Documents.................................................................. 27
(p) Termination of Agreement.............................................................. 27
SECTION 6. Indemnification....................................................................... 27
(a) Indemnification of U.S. Underwriters.................................................. 27
(b) Indemnification of Company, Directors and Officers.................................... 29
(c) Actions against Parties; Notification................................................. 29
(d) Settlement without Consent if Failure to Reimburse.................................... 30
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(e) Indemnification for Reserved Securities............................................... 30
SECTION 7. Contribution.......................................................................... 31
SECTION 8. Representations, Warranties and Agreements to Survive Delivery........................ 32
SECTION 9. Termination of Agreement.............................................................. 32
(a) Termination; General.................................................................. 32
(b) Liabilities........................................................................... 33
SECTION 10 Default by One or More of the U.S. Underwriters....................................... 33
SECTION 11 Notices............................................................................... 34
SECTION 12 Parties............................................................................... 34
SECTION 13 GOVERNING LAW AND TIME................................................................ 35
SECTION 14 Effect of Headings.................................................................... 35
SCHEDULES
Schedule A - List of Underwriters
Schedule B - Pricing Information
Schedule C - List of Persons Subject to Lock-Up
Schedule D - Document Amendments
Schedule 1 - Significant Subsidiaries
EXHIBITS
Exhibit A-1 - Form of Opinion of Dechert
Exhibit A-2 - Form of Opinion of Company's Special Regulatory Counsel
Exhibit A-3 - Form of Opinion of Company's Canadian Counsel
Exhibit B - Form of Lock-Up Letter
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SELECT MEDICAL CORPORATION
(a Delaware corporation)
Shares of Common Stock
(Par Value $.01 Per Share)
U.S. PURCHASE AGREEMENT
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇.▇. ▇▇▇▇▇▇ Securities Inc.
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
▇▇ ▇▇▇▇▇ Securities Corporation
First Union Securities, Inc.
as U.S. Representatives of the several U.S. Underwriters
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
Select Medical Corporation, a Delaware corporation (the "Company"),
confirms its agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ &
▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other U.S. Underwriters
named in Schedule A hereto (collectively, the "U.S. Underwriters", which term
shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇ Securities Inc., Credit
Suisse First Boston Corporation, CIBC World Markets Corp., ▇▇ ▇▇▇▇▇ Securities
Corporation and First Union Capital Securities, Inc. are acting as
representatives (in such capacity, the "U.S. Representatives"), with respect to
the issue and sale by the Company and the purchase by the U.S. 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 Schedule A, and with respect to the grant by the Company to the U.S.
Underwriters, acting severally and not jointly, of the option described in
Section 2(b)
hereof to purchase all or any part of additional shares of Common Stock to cover
over-allotments, if any. The aforesaid shares of Common Stock (the "Initial U.S.
Securities") to be purchased by the U.S. Underwriters and all or any part of the
shares of Common Stock subject to the option described in Section 2(b) hereof
(the "U.S. Option Securities") are hereinafter called, collectively, the "U.S.
Securities".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of shares of Common
Stock (the "Initial International Securities") through arrangements with certain
underwriters outside the United States and Canada (the "International Managers")
for which ▇▇▇▇▇▇▇ ▇▇▇▇▇ International and ▇.▇. ▇▇▇▇▇▇ Securities Ltd., Credit
Suisse First Boston (Europe) Limited, CIBC World Markets plc, ▇▇ ▇▇▇▇▇
Securities Corporation and First Union Securities, Inc. are acting as lead
managers (the "Lead Managers") and the grant by the Company to the International
Managers, acting severally and not jointly, of an option to purchase all or any
part of the International Managers' pro rata portion of up to additional shares
of Common Stock solely to cover overallotments, if any (the "International
Option Securities" and, together with the U.S. Option Securities, the "Option
Securities"). The Initial International Securities and the International Option
Securities are hereinafter called the "International Securities". It is
understood that the Company is not obligated to sell and the U.S. Underwriters
are not obligated to purchase, any Initial U.S. Securities unless all of the
Initial International Securities are contemporaneously purchased by the
International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the U.S. Underwriters propose to make a public
offering of the U.S. Securities as soon as the U.S. Representatives deem
advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters agree that up to shares of the
Initial U.S. Securities to be purchased by the U.S. Underwriters and that up to
shares of the Initial International Securities to be purchased by the
International Managers (collectively, the "Reserved Securities") shall be
reserved for sale by the Underwriters to certain eligible employees and persons
having business relationships with the Company,
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as part of the distribution of the Securities by the Underwriters, subject to
the terms of this Agreement, the applicable rules, regulations and
interpretations of the National Association of Securities Dealers, Inc. and all
other applicable laws, rules and regulations. To the extent that such Reserved
Securities are not orally confirmed for purchase by such eligible employees and
persons having business relationships with the Company by the end of the first
business day after the date of this Agreement, such Reserved Securities may be
offered to the public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-48856) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
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. Two forms of prospectus are to be used in connection
with the offering and sale of the Securities: one relating to the U.S.
Securities (the "Form of U.S. Prospectus") and one relating to the International
Securities (the "Form of International Prospectus"). The Form of International
Prospectus is identical to the Form of U.S. Prospectus, except for the front
cover and back cover pages and the information under the caption "Underwriting."
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 Form
of U.S. Prospectus and Form of International 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 Form of U.S. Prospectus and the final Form of
International Prospectus in the forms first furnished to the Underwriters for
use in connection with the offering of the Securities are herein called the
"U.S. Prospectus" and the "International Prospectus," respectively, and
collectively, the "Prospectuses." For purposes of this Agreement, all
references to the Registration Statement, any preliminary prospectus, the U.S.
Prospectus, the International 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
("▇▇▇▇▇").
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Immediately prior to or upon the consummation of the offering of the
Securities or, in the case of (iv) below, within 30 days following the Closing
Time or such other period as permitted under the applicable agreement (i) the
Company's certificate of incorporation and bylaws will be amended and restated
and the Company will file the amended and restated certificate of incorporation
with the Secretary of State of the State of Delaware (the "Charter Amendments");
(ii) a .576 for 1 reverse split of the Common Stock will be effected (the "Stock
Split"); (iii) conversion of 16,000,000 shares of Class B Preferred Stock of the
Company into 9,216,000 shares of Common Stock will be effected (the
"Conversion"); (iv) certain minority owners of the Company's outpatient
rehabilitation clinics who have exercised their put options to purchase Common
Stock as set forth in certain agreements between such minority owners and the
Company will have these exercises completed (the "Put Exercises"); (v) the
stockholders agreement among the Company and certain of its stockholders will be
terminated (the "Stockholder Agreement Termination"); and (vi) each of the
documents set forth on Schedule D hereto shall have been executed and delivered
(the "Document Amendments"); the Charter Amendments, the Stock Split, the
Conversion, the Put Exercises, the Stockholder Agreement Termination and the
Document Amendments are collectively referred to herein as the "Related
Transactions."
SECTION 1. Representations and Warranties.
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(a) Representations and Warranties by the Company. The Company
represents and warrants to each U.S. Underwriter 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 U.S.
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 U.S. 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, and the
Prospectuses, the preliminary prospectuses dated March 7, 2001 and any
supplement thereto or prospectus wrapper prepared in connection therewith, at
their respective times
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of issuance and at the Closing Time, complied and will comply in all material
respects with any applicable laws or regulations of foreign jurisdictions in
which the Prospectuses and such preliminary prospectuses, as amended or
supplemented, if applicable, are distributed in connection with the offer and
sale of Reserved Securities. Neither of the Prospectuses nor any amendments or
supplements thereto (including any prospectus wrapper), at the time the
Prospectuses or any amendments or supplements thereto were issued and at the
Closing Time (and, if any U.S. 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 Prospectuses made in reliance upon and in conformity with information
furnished to the Company in writing by any U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement or the
Prospectuses.
The preliminary prospectuses dated March 7, 2001 filed as part of the
Registration Statement and the Prospectuses 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 prospectuses and the Prospectuses 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
▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(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
included in the Registration Statement and the Prospectuses, 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.
(collectively, 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 Prospectuses present fairly the
information shown
5
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 combined 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 Prospectuses 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; the as adjusted financial
information included in the Registration Statement and the Prospectuses has
been properly compiled on the basis described 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
Prospectuses, except as otherwise stated therein, (A) there has been no
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 (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
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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
Prospectuses 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,
6
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 Company
------------------------------
set forth on Schedule 1 hereto (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 Prospectuses 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 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 Prospectuses under the
caption "Selected Consolidated Financial and Other Data" and in the
Company's consolidated financial statements included in the Prospectuses,
each of the specialty acute care hospitals, outpatient rehabilitation
clinics and occupational health centers (collectively, the "Facilities")
described in the Prospectuses 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 Prospectuses, 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.
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(vii) Capitalization. The authorized, issued and outstanding capital
---------------
stock of the Company is as set forth in the Prospectuses in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of convertible securities or options referred to
in the Prospectuses 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 any shares of capital
stock of the Company issued or to be 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 Prospectuses, 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 Prospectuses accurately and fairly describe, in all material
respects, the information required to be shown with respect to such plans,
arrangements, options and rights.
(viii) Authorization of Agreement. This Agreement and the International
---------------------------
Purchase Agreement have been duly authorized, executed and delivered by the
Company.
(ix) Authorization and Description of Securities. The Securities to be
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purchased by the U.S. Underwriters and the International Managers from the
Company have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and, when
issued and delivered by the Company pursuant to this Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth herein and the International Purchase Agreement,
respectively, will be validly issued, fully paid and non-assessable; the
Common Stock conforms to all statements relating thereto contained in the
Prospectuses 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 will be
subject to personal liability by reason of being such a
8
holder; and the issuance of the Securities is not subject to the preemptive
or other similar rights of any securityholder of the Company.
(x) Authorization of Related Transactions. To the extent required by
--------------------------------------
law, the Company's certificate of incorporation, by-laws or other
constituent documents, or any agreement between the Company and any of its
stockholders or holders of its indebtedness, the consummation of the
Related Transactions has been duly authorized by the Company's board of
directors and securityholders and no other corporate proceedings on the
part of the Company are needed to authorize the Related Transactions.
(xi) 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 International
Purchase Agreement and the consummation of the transactions contemplated in
this Agreement, the International Purchase Agreement and in the
Registration Statement (including the issuance and sale of the Securities
and the use of the proceeds from the sale of the Securities as described in
the Prospectuses under the caption "Use of Proceeds" and the consummation
of the Related Transactions) and compliance by the Company with its
obligations under this Agreement and the International Purchase Agreement
have 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.
9
(xii) 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 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.
(xiii) 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 and the International
Purchase Agreement or the Related Transactions or the performance by the
Company of its obligations hereunder or thereunder; 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.
(xiv) Accuracy of Exhibits. There are no contracts or documents which
---------------------
are required to be described in the Registration Statement or the
Prospectuses or to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) 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.
10
(xvi) 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 for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement and the International Purchase
Agreement, the consummation of the Related Transactions or the consummation
of the transactions contemplated by this Agreement and the International
Purchase Agreement, except (i)(A) 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 or (B) the filing of a Form 8-A under the
Securities Exchange Act of 1934 as amended (the "1934 Act") and the
regulations promulgated thereunder (the "1934 Act Regulations") and (ii)
with regard to offers and sales of Reserved Securities, such as have been
obtained under the laws and regulations of jurisdictions outside the United
States in which the Reserved Securities are offered.
(xvii) 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
11
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.
(xviii) 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 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.
(xix) 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 "▇▇▇▇▇" 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
12
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 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.
(xx) 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.
(xxi) 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
Prospectuses 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 Prospectuses, 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
13
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, 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.
(xxii) 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 Prospectuses 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").
(xxiii) 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
14
except for such events or circumstances that would not, singly or in the
aggregate, result in a Material Adverse Effect.
(xxiv) Registration Rights. Except as disclosed in the Prospectuses
--------------------
under the caption "Shares Eligible for Future Sale-Registration Rights",
there are no 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.
(xxv) 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.
(xxvi) 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
15
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 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").
(xxvii) 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").
(xxviii) Certain Transactions. Except as disclosed in the Prospectuses,
---------------------
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.
(xxix) Statistical and Market Data. The statistical and market-related
----------------------------
data included in the Prospectuses 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 Prospectuses agrees with the sources from
which it was derived in all material respects.
(xxx) 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.
16
(b) Officer's Certificates. Any certificate signed by any officer of the
Company or any its subsidiaries delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to U.S. 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, the
Company agrees to sell to each U.S. Underwriter, severally and not jointly, and
each U.S. Underwriter, severally and not jointly, agrees to purchase from the
Company, at the price per share set forth in Schedule B, the number of Initial
U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter, plus any additional number of Initial U.S. 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 Company hereby grants an option to the U.S. Underwriters, severally
and not jointly, to purchase up to an additional shares of Common Stock at the
price per share set forth in Schedule B, less an amount per share equal to any
dividends or distributions declared by the Company and payable on the Initial
U.S. Securities but not payable on the U.S. 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 U.S. Securities upon notice by the Global Coordinator to the Company
setting forth the number of U.S. Option Securities as to which the several U.S.
Underwriters are then exercising the option and the time and date of payment and
delivery for such U.S. Option Securities. Any such time and date of delivery for
the U.S. Option Securities (a "Date of Delivery") shall be determined by the
Global Coordinator, 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 U.S. Option Securities, each of the U.S. Underwriters, acting severally and
not jointly, will purchase that proportion of the total number of U.S. Option
Securities then being purchased which the number of Initial U.S. Securities set
forth in Schedule A opposite the name of such U.S. Underwriter bears to the
total number of Initial U.S. Securities, subject in each case to such
adjustments as the Global Coordinator 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 & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such
other place as shall be agreed upon by
17
the Global Coordinator 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 the Global Coordinator 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 U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by
the Global Coordinator and the Company, on each Date of Delivery as specified in
the notice from the Global Coordinator to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the U.S. Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. ▇▇▇▇▇▇▇ ▇▇▇▇▇, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. 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 U.S. Underwriter from
its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. 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
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. 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.
(e) Appointment of Qualified Independent Underwriter. The Company hereby
confirms its engagement of Credit Suisse First Boston Corporation as, and Credit
Suisse First Boston Corporation hereby confirms its agreement with the Company
to render services as, a "qualified independent underwriter" within the meaning
of Rule 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc. with respect to the offering and sale of the U.S. Securities.
Credit Suisse First Boston Corporation, solely in its capacity as qualified
independent underwriter and not otherwise, is referred to herein as the
"Independent Underwriter."
18
SECTION 3. Covenants of the Company. The Company covenants with each U.S.
------------------------
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 the Global Coordinator 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
Prospectuses or any amended Prospectuses 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, the International Purchase
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 Prospectuses 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, the International Purchase
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 the Global Coordinator
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 Prospectuses, will furnish the Global
Coordinator 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 the Global Coordinator or counsel for the U.S.
Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company has furnished or will
deliver to the U.S. Representatives and counsel for the U.S. 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 U.S. Representatives,
without charge, a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for each
19
of the U.S. Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. 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 U.S. Underwriter, without charge, during the period when the
U.S. Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
such number of copies of the U.S. Prospectus (as amended or supplemented) as
such U.S. Underwriter may reasonably request. The U.S. Prospectus and any
amendments or supplements thereto furnished to the U.S. Underwriters will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, 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 Prospectuses. 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 U.S. Underwriters or for the
Company, to amend the Registration Statement or amend or supplement any
Prospectus in order that the Prospectuses 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 Prospectuses comply with such requirements, and
the Company will furnish to the U.S. Underwriters such number of copies of such
amendment or supplement as the U.S. Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the U.S. Underwriters, to qualify the Securities for offering
and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Global Coordinator 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,
20
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) Use of Proceeds. The Company will use the net proceeds received by it
from the sale of the Securities in the manner specified in the Prospectuses
under "Use of Proceeds".
(i) 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.
(j) Restriction on Sale of Securities. During a period of 180 days from the
date of the Prospectuses, the Company will not, without the prior written
consent of the Global Coordinator, (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 or under the International Purchase
Agreement, (B) any shares of Common Stock issued by the Company upon the
exercise of an option or
21
warrant or the conversion of a security outstanding on the date hereof and
referred to in the Prospectuses, (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 the Prospectuses, (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
in connection with any Put Exercises immediately prior to or after the
consummation of the offering of the Securities or any other Related Transaction.
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are 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.
(l) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD rules
from sale, transfer, assignment, pledge or hypothecation for a period of three
months following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request of the
Underwriters, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Securities, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in
connection with such release.
(m) Compliance with Rule 463. The Company will comply with the requirements
of Rule 463 of the 1933 Act Regulations.
(n) 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 particpate 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,
22
sale, issuance or delivery of the Securities, (iii) the preparation, issuance
and delivery of the certificates for the Securities to the Underwriters,
including any stock or other transfer taxes and any stamp or other duties
payable upon the sale, issuance or delivery of the Securities to the
Underwriters and the transfer of the Securities between the U.S. Underwriters
and the International Managers, (iv) the fees and disbursements of the Company's
counsel, accountants and other advisors, (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
Prospectuses 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 National Association of Securities Dealers, Inc. (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 and (xi) all costs and expenses of the Underwriters, including
the fees and disbursements of counsel for the Underwriters, in connection with
matters related to the Reserved Securities which are designated by the Company
for sale to directors, officers, employees, business associates and related
persons of the Company, provided that such costs and expenses shall not exceed
$25,000 in the aggregate (exclusive of any costs and expenses of foreign
counsel).
(b) Termination of Agreement. If this Agreement is terminated by the U.S.
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the U.S. Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the U.S. Underwriters.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations of
---------------------------------------------
the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
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 U.S. Underwriters. A prospectus
containing the Rule 430A Information shall have been filed
23
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 Company. At Closing Time, the U.S.
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 U.S. Underwriters, together with signed or
reproduced copies of such letter for each of the other U.S. Underwriters,
to the effect set forth in Exhibit A-1 hereto and to such further effect as
counsel to the U.S. Underwriters may reasonably request; (ii) ▇▇▇▇ ▇▇▇▇▇
LLP, special regulatory counsel for the Company, in form and substance
satisfactory to counsel for the U.S. Underwriters, together with signed or
reproduced copies of such letter for each of the other U.S. Underwriters,
to the effect set forth in Exhibit A-2 hereto and to such further effect as
counsel to the U.S. Underwriters may reasonably request; and (iii) Torys,
special Canadian counsel to the Company, in form and substance reasonably
satisfactory to counsel for the U.S. Underwriters, together with signed or
reproduced copies of such letter for each of the other U.S. Underwriters to
the effect set forth in Exhibit A-3 hereto and to such further effect as
counsel for the U.S. Underwriters may reasonably request.
(c) Opinion of Counsel for U.S. Underwriters. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Debevoise & ▇▇▇▇▇▇▇▇, counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters in form and substance satisfactory to the U.S. Underwriters.
(d) 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 Prospectuses, 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 U.S.
Representatives shall have received a certificate of the Chief Executive
Officer, the President and Chief Operating Officer, 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 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.
24
(e) 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
U.S. 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 Prospectuses.
(f) 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 U.S. Underwriters at the time of execution of this
Agreement pursuant to subsection (e) of this Section, except that the specified
date referred to shall be a date not more than three business days prior to
Closing Time.
(g) 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.
(h) 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.
(i) Lock-up Agreements. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons listed on Schedule C hereto.
(j) Purchase of Initial International Securities. Contemporaneously with
the purchase by the U.S. Underwriters of the Initial U.S. Securities under this
Agreement, the International Managers shall have purchased the Initial
International Securities under the International Purchase Agreement.
(k) Related Transactions. Prior to or upon the purchase of the Securities
by the Underwriters, the Related Transactions, other than the Put Exercises,
shall have been consummated.
(l) Certificate Concerning Predecessor Company Financial Information. Prior
to the purchase of the Securities by the Underwriters, the U.S. 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 Prospectuses in form and substance reasonably satisfactory for counsel
for the U.S. Representatives.
(m) Certificate of General Counsel of the Company. At Closing Time, the
U.S. Representatives shall have received a certificate of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Senior Vice
25
President and General Counsel of the Company, in form and substance reasonably
satisfactory to counsel the U.S. Representatives.
(n) Medicare Filings. All Medicare Filings and Notices required to be made
prior to Closing Time shall have been made or provided.
(o) Conditions to Purchase of U.S. Option Securities. In the event that the
U.S. Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the U.S. Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the relevant Date
of Delivery, the U.S. 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) Opinion of Counsel for Company. The opinion of Dechert counsel for
-------------------------------
the Company, ▇▇▇▇ ▇▇▇▇▇ 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 U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. 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.
(iii) Opinion of Counsel for U.S. Underwriters. The favorable opinion
-----------------------------------------
of Debevoise & ▇▇▇▇▇▇▇▇, counsel for the U.S. Underwriters, dated such Date
of Delivery, relating to the U.S. Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion required
by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from PricewaterhouseCoopers
--------------------------
LLP, in form and substance reasonably satisfactory to counsel for the U.S.
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.
(v) Certificate of General Counsel of the Company. A certificate of
----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President and General Counsel of the
Company,
26
dated such Date of Delivery, in form and substance reasonably satisfactory
to counsel for the U.S. Representatives.
(p) Additional Documents. At Closing Time and at each Date of Delivery,
counsel for the U.S. 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 in connection with the issuance and sale of the Securities
as herein contemplated shall be reasonably satisfactory in form and substance to
the U.S. Representatives and counsel for the U.S. Underwriters.
(q) 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 U.S. Option
Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant Option
Securities, may be terminated by the U.S. Representatives by notice to the
Company 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.
SECTION 6. Indemnification.
---------------
(a) Indemnification of U.S. Underwriters. (1) The Company agrees to
indemnify and hold harmless each U.S. 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 Prospectuses
(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, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered
27
and (B) any untrue statement or alleged untrue statement of a material fact
included in the supplement or prospectus wrapper material distributed in
any jurisdiction in connection with the reservation and sale of the
Reserved Securities to directors, officers, employees, business associates
and related persons of the Company or the omission or alleged omission
therefrom of a material fact necessary to make the statements therein, when
considered in conjunction with the Prospectuses or preliminary
prospectuses, not misleading;
(iii) 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, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(1)(ii)(A) hereof; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇ ▇▇▇▇▇), 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 or
in connection with any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof, to the extent that any such expense is not paid
under (i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any
-------- -------
loss, liability, claim, damage or expense to the extent (x) 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 U.S. Underwriter through the U.S. Representatives expressly for
use in the Registration Statement (or any amendment thereto), including the Rule
430A Information, or any preliminary prospectus or the U.S. Prospectus (or any
amendment or supplement thereto) or (y) 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 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 U.S. Prospectus in sufficient quantities to such
U.S. Underwriter, (3) that the Company shall have sustained the burden of
proving that such U.S. Underwriter failed to send or give a copy of the U.S.
Prospectus to the person asserting such loss, liability, claim,
28
damage or expense prior to the written confirmation or the sale of Securities to
such person by such U.S. Underwriter as required by the 1933 Act or the 1933 Act
Regulations, and (4) that the sending of the U.S. 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.
(2) In addition to and without limitation of the Company's obligation to
indemnify Credit Suisse First Boston Corporation as an Underwriter, the Company
also agrees to indemnify and hold harmless the Independent Underwriter and each
person, if any, who controls the Independent Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act, from and against any
and all loss, liability, claim, damage and expense whatsoever, as incurred,
incurred as a result of the Independent Underwriter's participation as a
"qualified independent underwriter" within the meaning of Rule 2720 of the
Conduct Rules of the National Association of Securities Dealers, Inc. in
connection with the offering of the U.S. Securities.
(b) Indemnification of Company, Directors and Officers. Each U.S.
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 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 U.S. prospectus or the U.S. Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by such U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or such preliminary prospectus or the U.S. 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)(1) above,
counsel to the indemnified parties shall be selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇, 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
29
out of the same general allegations or circumstances; provided, that, if
indemnity is sought pursuant to Section 6(a)(2), then, in addition to the fees
and expenses of such counsel for the indemnified parties, the indemnifying party
shall be liable for the reasonable fees and expenses of not more than one
counsel (in addition to any local counsel) separate from its own counsel and
that of the other indemnified parties for the Independent Underwriter in its
capacity as a "qualified independent underwriter" and all persons, if any, who
control the Independent Underwriter within the meaning of Section 15 of the 1933
Act or Section 20 of 1934 Act 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 if, in the reasonable judgment of the
Independent Underwriter, there may exist a conflict of interest between the
Independent Underwriter and the other indemnified parties. Any such separate
counsel for the Independent Underwriter and such control persons of the
Independent Underwriter shall be designated in writing by the Independent
Underwriter. 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)(1)(iii) 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)(1)(iii) 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.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a written
request, to
30
indemnify and hold harmless the Underwriters from and against any and all
losses, liabilities, claims, damages and expenses incurred by them as a result
of the failure of directors, officers, employees, business associates and
related persons of the Company to pay for and accept delivery of Reserved
Securities which, by the end of the first business day following the date of
this Agreement, were subject to a properly confirmed agreement to purchase.
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 Company on the one
hand and the U.S. 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 on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof, 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 on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
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 U.S. Securities pursuant
to this Agreement (before deducting expenses) received by the Company and the
total underwriting discount received by the U.S. Underwriters, in each case as
set forth on the cover of the U.S. Prospectus bear to the aggregate initial
public offering price of the U.S. Securities as set forth on such cover.
The relative fault of the Company on the one hand and the U.S. 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 or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or any violation of the nature referred to in Section
6(a)(1)(ii)(A) hereof.
The Company and the U.S. Underwriters agree that Credit Suisse First Boston
Corporation will not receive any additional benefits hereunder for serving as
the Independent Underwriter in connection with the offering and sale of the U.S.
Securities.
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation
31
(even if the U.S. 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, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S. Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the ▇▇▇▇ ▇▇▇) 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 a U.S.
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 U.S.
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 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. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several, and in proportion to the number of Initial U.S. Securities set
forth opposite their respective names in Schedule A hereto, and not joint.
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 submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The U.S. Representatives may terminate this
Agreement, by notice to the Company, 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 U.S. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects
32
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 U.S. Representatives, impracticable to market the Securities or
to enforce 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 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 U.S. Underwriters. If one or more
------------------------------------------------
of the U.S. 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 U.S. Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. 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 U.S.
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 U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. 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 U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
U.S. 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 U.S. Underwriters to purchase and of the Company to sell
the Option Securities to
33
be purchased and sold on such Date of Delivery shall terminate without
liability on the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
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 does not result in a termination of the obligation of the U.S.
Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either the U.S. Representatives 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 "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.
SECTION 11. 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 U.S. Underwriters shall be
directed to the U.S. Representatives at North Tower, World Financial Center, New
York, New York 10281-1201, attention of ▇▇▇▇▇ ▇▇▇▇▇▇ and Syndicate Operations,
facsimile (▇▇▇) ▇▇▇-▇▇▇▇/ (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Debevoise & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, attention of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, facsimile
(▇▇▇) ▇▇▇-▇▇▇▇; and notices to the Company shall be directed to it at ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President, Secretary and General Counsel,
facsimile (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Dechert, 4000 ▇▇▇▇ Atlantic Tower, ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
be binding upon the U.S. Underwriters and the Company 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 U.S.
Underwriters and the Company 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 U.S. Underwriters and the Company 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 U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.
34
SECTION 13. 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 14. 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.
35
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
SELECT MEDICAL CORPORATION
By:______________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
▇.▇. ▇▇▇▇▇▇ Securities Inc.
Credit Suisse First Boston Corporation
CIBC World Markets Corp.
▇▇ ▇▇▇▇▇ Securities Corporation
First Union Securities, Inc.
By: ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By: -----------------------------
Authorized Signatory
For themselves and as U.S.
Representatives of the other U.S.
Underwriters named in Schedule A
hereto.
36
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
Prospectuses and to enter into and perform its obligations under the U.S.
Purchase Agreement and the International 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 Prospectuses in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the U.S. Purchase Agreement and the International Purchase Agreement or pursuant
to reservations, agreements or employee benefit plans referred to in the
Prospectuses or pursuant to the exercise of convertible securities or options
referred to in the Prospectuses 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 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 (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 (that purports to identify all material contracts
or group of similar contracts that are material in the aggregate to which the
Company or any of its subsidiaries is a party); and the shares of issued and
outstanding capital stock of the Company (including any shares of capital stock
of the Company issued or to be issued in connection with the exercise of the put
rights pursuant to the agreements set forth on Exhibit C hereto (that purports
to identify the only agreements with respect to put rights), assuming such
shares are issued and sold in accordance with the agreements set forth on
Exhibit C hereto), have been issued or will be issued in compliance, in all
material respects, with all federal securities laws.
A-1-1
(v) Based solely on a certificate from the Secretary of State or similar
government official of each Subsidiary's respective jurisdiction of
incorporation or organization, each Subsidiary 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
Prospectuses and is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction set forth on Schedule 1 hereto
(that 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, (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, to our knowledge, is owned
by the Company, directly or through subsidiaries and (b) all of the ownership
interests of each such Subsidiary that is not a corporation have been duly
authorized and, to our knowledge, are owned, by the Company, directly or through
subsidiaries.
(vi) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for issuance
and sale to the Underwriters pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, respectively, and, when issued and delivered
by the Company pursuant to the U.S. Purchase Agreement and the International
Purchase Agreement, respectively, against payment of the consideration set forth
in the U.S. Purchase Agreement and the International Purchase Agreement, will be
validly issued and fully paid and non-assessable and no holder of the Securities
is or will be subject to personal liability by reason of being such a holder.
(vii) The issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company existing by virtue of
the DGCL, the certificate of incorporation and 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 which 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 (that purports to identify any agreements with respect to such
preemptive or other similar rights).
(viii) The U.S. Purchase Agreement and the International Purchase
Agreement have 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 Prospectuses 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
A-1-2
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.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information, the Prospectuses and each amendment or
supplement to the Registration Statement and the Prospectuses filed on or before
the date hereof as of their respective effective or 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 opinion)
complied as to form in all material respects with the requirements of the 1933
Act and the 1933 Act Regulations.
(xi) 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.
(xii) Except as disclosed in the Prospectuses, 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 containing agreements that impose 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 such Subsidiary, or (iii) to
transfer any of its property or assets to the Company or any such Subsidiary.
(xiii) 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 Prospectuses (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 Prospectuses (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 Shares to the Underwriters under the U.S.
Purchase Agreement or the International Purchase Agreement or the performance by
the Company of its obligation thereunder.
(xiv) The information in the Prospectuses under "Description of Capital
Stock", "Management-Employment Agreements", "Management - Select Medical
Corporation 1997 Amended and Restated Stock Option Plan", "Related Party
Transactions", "Shares
A-1-3
Eligible for Future Sale" and "United States Federal Income Tax Considerations
for Non-United States Holders" 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.
(xv) 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 Prospectuses
that are not described as required.
(xvi) To our knowledge, neither the Company nor any of the Subsidiaries
is in violation of its restated certificate of incorporation or restated by-laws
and 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 Prospectuses or filed or incorporated by reference
as an exhibit to the Registration Statement.
(xviii) 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
or Form 8-A under 1934 Act or 1934 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 U.S.
Purchase Agreement and the International Purchase Agreement or for the offering,
issuance, sale or delivery of the Securities.
(xix) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation of the
transactions contemplated in the U.S. Purchase Agreement, the International
Purchase Agreement and in the Registration Statement (including the completion
of the Related Transactions and the issuance and sale of the Securities, and the
use of the proceeds from the sale of the Securities as described in the
Prospectuses under the caption "Use Of Proceeds") and compliance by the Company
with its obligations under the U.S. Purchase Agreement and the International
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
A-1-4
Company or any of its subsidiaries identified on a schedule provided by 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 have 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, 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.
(xx) Except as disclosed in the Prospectuses, to our knowledge, there are
no persons with registration rights or other similar rights to have any
securities registered pursuant to the Registration Statement or otherwise
registered by the Company or any of its subsidiaries under the 1933 Act.
(xxi) Neither the Company or any of its subsidiaries is, and upon the
issuance and sale of the Securities as contemplated in the Purchase Agreements
and the application of the net proceeds therefrom as described in the
Prospectuses 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.
(xxii) The Stock Split and the Charter Amendments were duly authorized by
the Company's Board of Directors and stockholders, the Stock Split has been
consummated in accordance with its terms and the Charter Amendments have become
effective.
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).
[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 U.S. 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
A-1-5
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 Prospectuses 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
Prospectuses were issued, at the time any such amended or supplemented
prospectus was issued on or prior to 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.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF OPINION OF COMPANY'S SPECIAL REGULATORY COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)(ii)
(i) The information in the Prospectuses 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 54 specialty acute care hospitals described in the
Prospectuses 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 Prospectuses, 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)
Pennsylvania governmental authority or agency is necessary or required under any
Pennsylvania Health Care Law, other than such Approvals as have been obtained or
made, in connection with the due authorization, execution and delivery of the
U.S. Purchase Agreement and the International Purchase
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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 other state Health Care Laws required
to be obtained or made in connection with the execution delivery and performance
of the U.S. Purchase Agreement and the International 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 Prospectuses
were 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 ▇▇▇▇▇ Laws (as
defined in the Prospectus) and the regulations promulgated thereunder, (e) the
False Claims Act, (f) Title II of the Health Insurance
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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 countries, towns, municipalities or special
political subsidiaries.
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).
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
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.
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[Form of lock-up from directors, officers or other
stockholders pursuant to Section 5(i)]
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated,
▇.▇. ▇▇▇▇▇▇ Securities Inc.
Credit Suisse First Boston Corporation.
CIBC World Markets Corp.
▇▇ ▇▇▇▇▇ Securities Corporation
First Union Securities, Inc.
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
▇▇▇▇▇▇▇ ▇▇▇▇▇ International
▇.▇. ▇▇▇▇▇▇ Securities Ltd.
Credit Suisse First Boston (Europe) Limited
CIBC World Markets Corp.
▇▇ ▇▇▇▇▇ Securities Corporation
First Union Securities, Inc.
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Proposed Public Offering by Select Medical Corporation
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of Select
Medical Corporation, a Delaware corporation (the "Company"), understands that
(i) ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
("▇▇▇▇▇▇▇ ▇▇▇▇▇") and ▇.▇. ▇▇▇▇▇▇ Securities Inc., Credit Suisse First Boston
Corporation, CIBC World Markets Corp., ▇▇ ▇▇▇▇▇ Securities Corporation and First
Union Securities, Inc. propose to enter into a U.S. Purchase Agreement (the
"U.S. Purchase Agreement") with the Company providing for the public offering of
shares (the "Securities") of the Company's common stock, par value $.01 per
share (the "Common Stock") and (ii) ▇▇▇▇▇▇▇ ▇▇▇▇▇ International, ▇.▇. ▇▇▇▇▇▇
Securities Ltd., Credit Suisse First Boston (Europe) Limited, CIBC World Markets
Corp., ▇▇ ▇▇▇▇▇ Securities Corporation and First Union Securities, Inc. propose
to enter into an International Purchase Agreement
B-1
with the Company providing for the public offering of the Common Stock of the
Company (together with the U.S. Purchase Agreement, the "Purchase Agreements".
In recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder [and 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 Agreements that, during a period of 180 days from the
date of the Purchase Agreements, the undersigned will not, without the prior
written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, 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 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, ▇▇▇▇▇▇▇
▇▇▇▇▇'▇ 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 to (A) Reserved Securities, as defined in the
U.S. Purchase Agreement, (B) shares of Common Stock or other securities of the
Company acquired in open market transactions after the completion of the public
offering and (C) 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 ▇▇▇▇▇▇▇ ▇▇▇▇▇ 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
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shall be binding upon the heirs, personal representatives, successors, and
assigns of the undersigned.
Very truly yours,
Signature: ________________
Print Name:________________
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