-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R4pDIOyEsYirHoT/0wNOAdji/+ZwBmaUNQ33m1keCCfwoENwLTED0Px7L9znJ5y0 mRmRdAJp8MDzTRHAYt25Fw== 0001306472-04-000002.txt : 20041020 0001306472-04-000002.hdr.sgml : 20041020 20041020172812 ACCESSION NUMBER: 0001306472-04-000002 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20041020 DATE AS OF CHANGE: 20041020 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SELECT MEDICAL CORP CENTRAL INDEX KEY: 0001035688 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 232872718 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-61617 FILM NUMBER: 041088086 BUSINESS ADDRESS: STREET 1: 4716 OLD GETTYSBURG RD CITY: MECHANICSBURG STATE: PA ZIP: 17055 BUSINESS PHONE: 7179721100 MAIL ADDRESS: STREET 1: 4716 OLD GETTYSBURG RD CITY: MECHANICSBURG STATE: PA ZIP: 17055 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EGL Holding CO CENTRAL INDEX KEY: 0001306472 IRS NUMBER: 201764048 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 320 PARK AVENUE, SUITE 2500 CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: (212) 893-9500 MAIL ADDRESS: STREET 1: 320 PARK AVENUE, SUITE 2500 CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 s13d_10182004select.txt (Page 1 of 27 Pages) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D (Rule 13d-101) UNDER THE SECURITIES EXCHANGE ACT OF 1934 1 SELECT MEDICAL CORPORATION - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $.01 par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 816196 10 9 - -------------------------------------------------------------------------------- (CUSIP Number) Welsh, Carson, Anderson Select Medical Corporation Ropes & Gray LLP & Stowe IX, L.P. 4716 Old Gettysburg Road 45 Rockefeller Plaza 320 Park Avenue, Suite 2500 Mechanicsburg, PA 17055 New York, NY 10111 New York, NY 10022 Attn: Michael E. Tarvin Attn: Othon A. Prounis Attn: Jonathan M. Rather Tel: (717) 972-1100 Tel: (212) 841-5700 Tel: (212) 893-9500 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) October 17, 2004 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box |X| 2 Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) - ------------------ 1 The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. 2 The filing person who has previously filed a statement on Schedule 13G is Rocco A. Ortenzio. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 816196 10 9 (Page 2 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS EGL Holding Company EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO/Not Applicable - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 5,712,870* shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,712,870* shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.6% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- * Reflects 5,712,870 shares of Common Stock of Select Medical Corporation to be contributed to EGL Holding Company pursuant to the Agreement, dated October 17, 2004, among EGL Holding Company and the various rollover investors referred to therein. CUSIP No. 816196 10 9 (Page 3 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Welsh, Carson, Anderson & Stowe IX, L.P. EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO/Not Applicable - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 5,712,870* shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,712,870* shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.6% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- * Reflects 5,712,870 shares of Common Stock of Select Medical Corporation to be contributed to EGL Holding Company pursuant to the Agreement, dated October 17, 2004, among EGL Holding Company and the various rollover investors referred to therein. CUSIP No. 816196 10 9 (Page 4 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS WCAS IX Associates, L.L.C. EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO/Not Applicable - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 5,712,870* shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,712,870* shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.6% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------------- * Reflects 5,712,870 shares of Common Stock of Select Medical Corporation to be contributed to EGL Holding Company pursuant to the Agreement, dated October 17, 2004, among EGL Holding Company and the various rollover investors referred to therein. CUSIP No. 816196 10 9 (Page 5 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Patrick J. Welsh EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 125,000 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 125,000 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 125,000 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less than 1.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 6 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Russell L. Carson EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 722,960 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 722,960 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 722,960 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less Than 1.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 7 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Bruce K. Anderson EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 618,910 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 618,910 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 618,910 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less Than 1.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 8 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Thomas E. McInerney EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 450,984 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 450,984 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 450,984 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less Than 1.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 9 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Robert A. Minicucci EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 88,626 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 88,626 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 88,626 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less Than 1.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 10 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Anthony J. de Nicola EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 19,483 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 0 EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 19,483 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 19,483 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less Than 1.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 11 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Thoma Cressey Fund VI, L.P. EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,098,596 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,098,596 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,098,596 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.1% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 12 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Thoma Cressey Friends Fund VI, L.P. EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,098,596 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,098,596 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,098,596 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.1% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 13 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS TC Partners VI, L.P. EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO/Not Applicable - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,098,596 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,098,596 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,098,596 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.1% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 14 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Thoma Cressey Equity Partners, Inc. EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS OO/Not Applicable - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 0 SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,098,596 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 0 WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,098,596 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,098,596 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.1% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 15 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Bryan C. Cressey EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 213,274 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 2,098,596 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 213,274 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 2,098,596 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,311,870 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.3% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 16 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Rocco A. Ortenzio EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 12,373,140 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 235,444 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 12,373,140 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 235,444 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 12,608,584 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.5% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 17 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Robert A. Ortenzio EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 4,200,002 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 359,284 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 4,200,002 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 359,284 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,559,286 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.4% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- CUSIP No. 816196 10 9 (Page 18 of 27 Pages) - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS Martin F. Jackson EIN No.: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)|X| (b)|_| - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS PF - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS |_| IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7. SOLE VOTING POWER NUMBER OF 356,424 shares SHARES ------------------------------------------- BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 4,000 shares EACH ------------------------------------------- REPORTING 9. SOLE DISPOSITIVE POWER PERSON 356,424 shares WITH ------------------------------------------- 10. SHARED DISPOSITIVE POWER 4,000 shares - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 360,424 shares - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) Less than 1.0% - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- (Page 19 of 27 Pages) SCHEDULE 13D Item 1. Security and Issuer. The class of equity securities to which this statement of Schedule 13D (the "Schedule 13D") relates is the Common Stock, par value $.01 per share ("Common Stock"), of Select Medical Corporation, a Delaware corporation (the "Issuer"). The address of the principal executive offices of the Issuer is 4716 Old Gettysburg Road, Mechanicsburg, Pennsylvania 17055. Item 2. Identity and Background. (a) Name ---- This Schedule 13D is being filed on behalf of each of the following persons pursuant to Rule 13d-1(k) promulgated by the Securities and Exchange Commission (the "Commission") pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"): EGL Holding Company, a Delaware corporation ("Holdings"), Welsh, Carson, Anderson & Stowe IX, L.P., a Delaware limited partnership ("WCAS IX"), WCAS IX Associates, L.L.C., a Delaware limited liability company ("WCAS IX Associates"), Patrick J. Welsh, Russell L. Carson, Bruce K. Anderson, Thomas E. McInerney, Robert A. Minicucci, Anthony J. de Nicola, Thoma Cressey Fund VI, L.P., a Delaware limited partnership ("TCEP VI"), Thoma Cressey Friends Fund VI, L.P., a Delaware limited partnership ("TCEP Friends"), TC Partners VI, L.P., a Delaware limited partnership ("TC GP"), Thoma Cressey Equity Partners, Inc., a Delaware corporation ("TCEP"), Bryan C. Cressey, Rocco A. Ortenzio, Robert A. Ortenzio and Martin F. Jackson. WCAS IX is the sole stockholder of Holdings. Sean M. Traynor and Eric J. Lee are the officers and directors of Holdings. WCAS IX Associates is the sole general partner of WCAS IX. Each of the following individuals are managing members of WCAS IX Associates: Patrick J. Welsh, Russell L. Carson, Bruce K. Anderson, Thomas E. McInerney, Robert A. Minicucci, Anthony J. de Nicola, Paul B. Queally, D. Scott Mackesy, Sanjay Swani, John D. Clark, James R. Matthews, Sean D. Traynor, John Almeida, and Jonathan M. Rather (collectively, the "WCAS Persons" and together with Eric J. Lee, the "WCAS Individuals"). The WCAS Individuals are each employees of an affiliate of WCAS IX Associates. Russell L. Carson is a director of the Issuer. TCEP is the general partner of TC GP and TC GP is the general partner of each of TCEP VI and TCEP Friends. Bryan C. Cressey (collectively with TCEP VI, TCEP Friends, TC GP and TCEP, the "TCEP Investors") is a principal at TCEP and a director of the Issuer. Each of Rocco A. Ortenzio, Robert A. Ortenzio and Martin F. Jackson (collectively, the "SEM Persons") are directors and/or executive officers of the Issuer. The reporting persons are making this single, joint filing because they may be deemed to constitute a "group" within the meaning of Section 13(d)(3) of the Exchange Act. Each of the aforementioned reporting persons has entered into a Joint Filing Agreement, a copy of which is filed with this Schedule 13D as Exhibit A, pursuant to which such persons have agreed to file this Schedule 13D jointly in accordance with the provisions of Rule 13d-1(k)(1) under the Exchange Act. Information in this Schedule 13D with respect to each of the reporting persons is given solely by such reporting person, and no reporting person assumes responsibility for the accuracy or completeness of information provided by another reporting person. (Page 20 of 27 Pages) (b) Principal Address ----------------- The principal address of each of Holdings, WCAS IX, WCAS IX Associates and each WCAS Individual is c/o Welsh, Carson, Anderson & Stowe, 320 Park Avenue, Suite 2500, New York, New York 10022. The principal address of each TCEP Investor is 233 Wacker Drive, 92nd Floor, Chicago, Illinois 60606. The principal address of each SEM Person is c/o Select Medical Corporation, 4716 Old Gettysburg Road, Mechanicsburg, Pennsylvania 17055. (c) Principal Business ------------------ The principal business of Holdings will be the acquisition of the outstanding shares of the Issuer (as described in Item 4 below). The principal business of WCAS IX is that of an investment limited partnership. The principal business of WCAS IX Associates is that of general partner of WCAS IX. The principal business of each WCAS Individual is that of an employee of an affiliate of WCAS IX Associates and, other than Eric J. Lee, a managing member of WCAS IX Associates. The principal business of TCEP VI and TCEP Friends is that of an investment limited partnership. The principal business of TC GP is that of general partner of TCEP VI and TCEP Friends. The principal business of TCEP is that of general partner of TC GP and other similar partnerships. The principal business of Bryan C. Cressey is that of a principal of TCEP. The principal business of each SEM Person is that of a director and/or executive officer of the Issuer. (d and e) No Convictions or Proceedings. ----------------------------- During the last five years, none of the reporting persons or other individuals for which information has been provided in this Item 2, as applicable: (i) has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction resulting in his being subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Citizenship ----------- Each WCAS Individual (other than D. Scott Mackesy), Bryan C. Cressey and each SEM Person is a citizen of the United States. D. Scott Mackesy is a citizen of Canada. Item 3. Source and Amount of Funds or Other Consideration. Holdings, WCAS IX and WCAS IX Associates may be deemed to have acquired beneficial ownership of 5,712,870 shares of Common Stock pursuant to the Agreement, dated October 17, 2004 (the "Rollover Agreement"), between Holdings, the TCEP Investors and the SEM Persons. However, such reporting persons expressly disclaim beneficial ownership of the shares of Common Stock covered by the Rollover Agreement. Subject to the terms of the Rollover Agreement, each TCEP Investor and each SEM Investor has agreed to (i) contribute certain of their shares of Common Stock to Holdings prior to the consummation of the Merger (as defined in Item 4 below) and in return receive equity interests in Holdings, (ii) enter into certain agreements with Holdings, WCAS IX and other equity investors selected by Holdings with respect to such contribution and (iii) not to transfer any such shares of Common Stock prior to consummation of the Merger without (Page 21 of 27 Pages) the consent of Holdings. Any contributed shares will be cancelled in the Merger. In addition, pursuant to such agreement, each SEM Person will execute various restricted stock award and employment agreements as well as receive other cash incentives in connection with their continuing employment by the surviving corporation following consummation of the Merger. The foregoing description of the Rollover Agreement is qualified in its entirety by reference to such agreement, a copy of which is attached hereto as Exhibit B, and is incorporated herein by reference. To the extent any WCAS Person who is a reporting person directly beneficially owns any shares of Common Stock (as set forth in Item 5 below), such shares were purchased by such reporting person using such reporting person's personal funds or received pursuant to distributions made to such reporting person by investment partnerships affiliated with WCAS IX. To the extent any TCEP Investor directly beneficially owns any shares of Common Stock (as set forth in Item 5 below), such shares were purchased by each such reporting person using such reporting person's personal funds. To the extent any SEM Person directly beneficially owns any shares of Common Stock (as set forth in Item 5 below), such shares were purchased, directly or indirectly, by such reporting person using such reporting person's personal funds or pursuant to the cashless exercise of options. Item 4. Purpose of Transaction. (a through j) On October 17, 2004, Holdings, EGL Acquisition Corp., a Delaware corporation ("Acquisition"), and the Issuer entered into an Agreement and Plan of Merger, a copy of which is attached hereto as Exhibit C (the "Merger Agreement"), pursuant to which Acquisition, a wholly owned subsidiary of Holdings, will be merged with and into the Issuer, with the Issuer continuing as the surviving corporation (the "Merger"). Following the consummation of the Merger, the Issuer will be a wholly owned subsidiary of Holdings. Under the terms of the Merger Agreement, each existing share of Common Stock, other than shares held by WCAS IX or its affiliates, treasury shares and dissenting shares, will be converted into the right to receive $18.00 in cash (the "Merger Consideration"). In addition, all outstanding options for Common Stock will be converted into the right to receive the Merger Consideration less the exercise price of such options. The Merger remains subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, including obtaining approval of the existing shareholders of the Issuer. Pursuant to the Merger Agreement, the board of directors of Acquisition at the effective time of the Merger will become the board of directors of the Issuer. In addition, at the effective time of the Merger, the certificate of incorporation of the Issuer will be amended and restated at the effective time of the Merger to conform to an exhibit attached to the Merger Agreement (the bylaws of the Issuer will not change). If the Merger is consummated, the Common Stock will be delisted from the New York Stock Exchange and will be deregistered under Section 12(g)(4) of the Exchange Act. The foregoing description of the Merger Agreement is qualified in its entirety by reference to such agreement, a copy of which is attached hereto as Exhibit C, and is incorporated herein by reference. In addition to the transactions contemplated by the Rollover Agreement, the Merger is expected to be financed by equity investments in Holdings to be made by certain of the reporting persons and related investors, certain loan arrangements to be entered into by Holdings and the Issuer with JP Morgan Chase Bank, Wachovia Bank, National Association and Merrill Lynch Capital Corporation (collectively, the "Lenders"), and a loan to be made to Holdings by WCAS Capital Partners IV, L.P., a Delaware limited partnership ("WCAS CP IV") and an affiliate of WCAS IX. The specific investments and loans are discussed below. Pursuant to an Equity Commitment Letter, dated as of October 17, 2004 (the "WCAS Equity Commitment Letter"), by and between Holdings and WCAS IX, a copy of which is attached hereto as Exhibit D, WCAS IX and certain related investors, including the WCAS Persons, will provide up to $567.2 million in cash to Holdings in return for equity interests in Holdings. The cash proceeds of such investment will be contributed by Holdings to Acquisition to finance a portion of the consideration for the Merger. Also, WCAS IX has an understanding with the WCAS Persons who are reporting persons that such WCAS Persons will contribute certain of their shares of Common Stock to Holdings prior to the consummation of the Merger and in return receive equity interests in Holdings. Any contributed shares will be cancelled in the Merger. In addition, pursuant to the WCAS Equity Commitment Letter, a designee of WCAS IX, as agent for various entities, will receive a financing fee equal to $24.6 million and WCAS IX and its affiliates will be reimbursed for all of their out-of-pocket fees and expenses. (Page 22 of 27 Pages) Pursuant to an Equity Commitment Letter, dated as of October 17, 2004 (the "TCEP Equity Commitment Letter"), by and between Holdings and Thoma Cressey Fund VII, L.P., a Delaware limited partnership ("TCEP VII"), a copy of which is attached hereto as Exhibit E, TCEP VII and certain related investors, each of which are affiliates of one or more of the TCEP Investors, will provide up to $50.0 million in cash to Holdings in return for equity interests in Holdings. The cash proceeds of such investment will be contributed by Holdings to Acquisition to finance a portion of the consideration for the Merger. In addition, WCAS IX and TCEP VII have an understanding that TCEP VII, or its designee will be entitled to receive a portion of the financing fee payable pursuant to the WCAS Equity Commitment Letter and TCEP VII and its affiliates will be reimbursed for all of their out-of-pocket fees and expenses. Pursuant to a Senior Secured Credit Facilities and Senior Subordinated Bridge Facility Commitment Letter, dated October 17, 2004 (the "Debt Commitment Letter"), by and among Holdings and the Lenders, a copy of which is attached hereto as Exhibit F, the Lenders have agreed to provide (i) a $480.0 million senior secured term loan facility and (ii) a $300.0 million revolving credit facility (collectively, the "Bank Facility"). The Debt Commitment Letter contemplates that the Issuer and/or Holdings will issue an aggregate $660.0 million unsecured senior subordinated notes (the "Notes") pursuant to a Rule 144A offering. In the event that the Notes are not issued at the time the Merger is consummated, the Lenders have agreed to provide a bridge loan facility in the amount of up $660.0 million under a senior unsecured credit facility (the "Bridge Facility"). The Bank Facility and the Bridge Facility are expected to contain customary terms and conditions, including, without limitation, with respect to fees, indemnification and events of default. A portion of the proceeds of these loan arrangements will be used to finance a portion of the consideration for the Merger. Pursuant to a Commitment Letter, dated as of October 17, 2004 (the "CP IV Commitment Letter"), by and between Holdings and WCAS CP IV, a copy of which is attached hereto as Exhibit G, WCAS CP IV will provide up to $150.0 million in cash to Holdings in return for a senior subordinated note. The cash proceeds of such loan will be contributed by Holdings to Acquisition to finance a portion of the consideration for the Merger. Pursuant to the CP IV Commitment Letter, WCAS CP IV and its affiliates will be reimbursed for all of their out-of-pocket fees and expenses. In addition, in connection with the Merger, WCAS IX, Holdings and the Issuer entered into a Contingency Letter Agreement, dated October 17, 2004 (the "Contingency Letter"), a copy of which is attached hereto as Exhibit H, pursuant to which WCAS IX agreed that, in the event the Issuer terminates the Merger Agreement and such termination arises from a knowing and willful breach of the Merger Agreement by Acquisition and/or Holdings, it will make an equity contribution to Holdings of up to $10.0 million to satisfy any liabilities of Holdings or Acquisition resulting from such knowing or willful breach. The foregoing descriptions of the WCAS Equity Commitment Letter, the TCEP Equity Commitment Letter, the Debt Commitment Letter, the CP IV Commitment Letter and the Contingency Letter are qualified in their entirety by reference to such agreements, copies of which are attached as Exhibits D, E, F, G and H, respectively, and are incorporated herein by reference. (Page 23 of 27 Pages) Item 5. Interest in Securities of the Issuer. The following information is based on a total of 101,867,236 shares of Common Stock outstanding as of October 15, 2004. (a through b) As of the date of filing, no reporting person may be deemed to beneficially own any other shares of Common Stock except as may be due to being part of a "group" within the meaning of Section 13(d) of the Exchange Act or as may be set forth below. Each reporting person has sole voting power with respect to and sole power to dispose of the shares set forth below that are directly beneficially owned by such reporting person. Each reporting person expressly disclaims beneficial ownership of any shares which are held by related investors, except to the extent of such reporting person's pecuniary interest in such related investor. Holdings, WCAS IX, WCAS IX Associates and the WCAS Individuals -------------------------------------------------------------- Holdings, WCAS IX and WCAS IX Associates may be deemed to have acquired beneficial ownership of 5,712,870 shares of Common Stock pursuant to the Rollover Agreement. However, such reporting persons expressly disclaim beneficial ownership of the shares of Common Stock covered by the Rollover Agreement. Holdings, Acquisition, WCAS IX, WCAS IX Associates and the WCAS Individuals do not directly own any shares of Common Stock other than as set forth below. (i) Patrick J. Welsh directly owns 125,000 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. (ii) Russell L. Carson directly owns 722,960 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. (iii) Bruce K. Anderson directly owns 618,910 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. (iv) Thomas E. McInerney directly owns 450,984 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. (v) Robert A. Minicucci directly owns 88,626 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. (vi) Anthony J. de Nicola directly owns 19,483 shares of Common Stock (including 12,239 shares held by a foundation he controls), or less than 1.0% of the Common Stock outstanding. (Page 24 of 27 Pages) TCEP Investors -------------- As general partner of TCEP VI and TCEP Friends, TC GP may be deemed to beneficially own the shares of the Common Stock beneficially owned by such entities, and as general partner of TC GP, TCEP may also be deemed to beneficially own such shares. In addition, Bryan C. Cressey is a principal of TCEP and may be deemed to beneficially own the shares of Common Stock beneficially owned by TCEP VI, TCEP Friends and TCEP. The TCEP Investors do not directly own any shares of Common Stock other than as set forth below. (i) TCEP VI directly owns 2,077,818 shares of Common Stock, or approximately 2.1% of the Common Stock outstanding. (ii) TCEP Friends directly owns 20,778 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. (iii) Bryan C. Cressey directly owns 213,274 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. SEM Persons ----------- (i) Rocco A. Ortenzio directly owns 12,373,140 shares of Common Stock (including 7,780,000 shares issuable upon exercise of presently-exercisable stock options or options exercisable within the next 60 days), and indirectly beneficially owns, through relationships he has with various other investors, an additional 235,444 shares of Common Stock of which he shares voting power and the power to dispose with such other investors, for an aggregate 12,608,584 shares of Common Stock, or approximately 11.5% of the Common Stock outstanding. (ii) Robert A. Ortenzio directly owns 4,200,002 shares of Common Stock (including 2,400,002 shares issuable upon exercise of presently-exercisable stock options or options exercisable within the next 60 days), and indirectly beneficially owns, through relationships he has with various other investors, an additional 359,284 shares of Common Stock of which he shares voting power and the power to dispose with such other investors, for an aggregate 4,559,286 shares of Common Stock, or approximately 4.4% of the Common Stock outstanding. (Page 25 of 27 Pages) (iii) Martin F. Jackson directly owns 356,424 shares of Common Stock (including 259,424 shares issuable upon exercise of presently-exercisable stock options or options exercisable within the next 60 days), and indirectly beneficially owns an additional 4,000 shares of Common Stock held by his children, for an aggregate 360,424 shares of Common Stock, or less than 1.0% of the Common Stock outstanding. (c) Except as described in Item 3 above, none of the reporting persons has effected any transactions in the Common Stock in the 60 days prior to the date of this statement. (d) Except as described in this Schedule 13D, no person has the power to direct the receipt of dividends on or the proceeds of sales of, the shares of Common Stock owned by the reporting persons. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Except as described in this Schedule 13D or the Exhibits hereto or with respect to the SEM Persons, in their filings pursuant to Section 16 filed prior to the date hereof, none of the reporting persons or other individuals for which information has been provided in Item 2 presently have any contracts, arrangements, understandings or relationships with respect to the securities of the Issuer. Item 7. Material to be Filed as Exhibits. A. Joint Filing Agreement dated October 18, 2004 B. Rollover Agreement C. Merger Agreement D. WCAS Equity Commitment Letter E. TCEP Equity Commitment Letter F. Debt Commitment Letter G. CP IV Commitment Letter H. Contingency Letter (Page 26 of 27 Pages) SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this Statement is true, complete and correct. Dated: October 20, 2004 EGL HOLDING COMPANY By:/s/ Sean M. Traynor -------------------------------------------- Chief Executive Officer WELSH, CARSON, ANDERSON & STOWE IX, L.P. By: WCAS IX Associates, LLC, General Partner By:/s/ Jonathan M. Rather -------------------------------------------- Managing Member WCAS IX ASSOCIATES, LLC By:/s/ Jonathan M. Rather -------------------------------------------- Managing Member By:/s/ Jonathan M. Rather -------------------------------------------- Attorney-in-Fact/Patrick J. Welsh By:/s/ Jonathan M. Rather -------------------------------------------- Attorney-in-Fact/Russell L. Carson By:/s/ Jonathan M. Rather -------------------------------------------- Attorney-in-Fact/Bruce K. Anderson By:/s/ Jonathan M. Rather -------------------------------------------- Attorney-in-Fact/Thomas E. McInerney (Page 27 of 27 Pages) By:/s/ Jonathan M. Rather -------------------------------------------- Attorney-in-Fact/Robert A. Minicucci By:/s/ Jonathan M. Rather -------------------------------------------- Attorney-in-Fact/Anthony J. deNicola THOMA CRESSEY FUND VI, L.P. By: TC Partners VI, L.P., General Partner By: Thoma Cressey Equity Partners, Inc., General Partner By:/s/ Bryan C. Cressey -------------------------------------------- Vice President THOMA CRESSEY FRIENDS FUND VI, L.P. By: TC Partners VI, L.P., General Partner By: Thoma Cressey Equity Partners, Inc., General Partner By:/s/ Bryan C. Cressey -------------------------------------------- Vice President TC PARTNERS, L.P. By: Thoma Cressey Equity Partners, Inc., General Partner By:/s/ Bryan C. Cressey -------------------------------------------- Vice President THOMA CRESSEY EQUITY PARTNERS, INC. By:/s/ Bryan C. Cressey -------------------------------------------- Vice President By:/s/ Bryan C. Cressey -------------------------------------------- Bryan C. Cressey /s/Rocco A. Ortenzio -------------------------------------------- Rocco A. Ortenzio /s/Rocco A. Ortenzio -------------------------------------------- Robert A. Ortenzio /s/Martin F. Jackson -------------------------------------------- Martin F. Jackson EX-99 2 exa10182004select.txt EXHIBIT A -- AGMT. RE. JOINT FILING OF SCH. 13D Exhibit A --------- AGREEMENT REGARDING THE JOINT FILING OF SCHEDULE 13D ------------------------------ The undersigned hereby agree as follows: (i) Each of them is individually eligible to use the Schedule 13D to which this Exhibit is attached, and such Schedule 13D is filed on behalf of each of them; and (ii) Each of them is responsible for the timely filing of such Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning such person contained therein; but none of them is responsible for the completeness or accuracy of the information concerning the other persons making the filing, unless such person knows or has reason to believe that such information is inaccurate. Dated: October 20, 2004 EGL HOLDING COMPANY By:/s/ Sean M. Traynor ----------------------------------------------- Chief Executive Officer WELSH, CARSON, ANDERSON & STOWE IX, L.P. By: WCAS IX Associates, LLC, General Partner By:/s/ Jonathan M. Rather ----------------------------------------------- Managing Member WCAS IX ASSOCIATES, LLC By:/s/ Jonathan M. Rather ----------------------------------------------- Managing Member /s/ Jonathan M. Rather ----------------------------------------------- Attorney-in-Fact/Patrick J. Welsh /s/ Jonathan M. Rather ----------------------------------------------- Attorney-in-Fact/Russell L. Carson /s/ Jonathan M. Rather ----------------------------------------------- Attorney-in-Fact/Bruce K. Anderson /s/ Jonathan M. Rather ----------------------------------------------- Attorney-in-Fact/Thomas E. McInerney /s/ Jonathan M. Rather ----------------------------------------------- Attorney-in-Fact/Robert A. Minicucci /s/ Jonathan M. Rather ----------------------------------------------- Attorney-in-Fact/Anthony J. deNicola THOMA CRESSEY FUND VI, L.P. By: TC Partners VI, L.P., General Partner By: Thoma Cressey Equity Partners, Inc., General Partner By:/s/ Bryan C. Cressey ----------------------------------------------- Vice President THOMA CRESSEY FRIENDS FUND VI, L.P. By: TC Partners VI, L.P., General Partner By: Thoma Cressey Equity Partners, Inc., General Partner By:/s/ Bryan C. Cressey ----------------------------------------------- Vice President TC PARTNERS VI, L.P. By: Thoma Cressey Equity Partners, Inc., General Partner By:/s/ Bryan C. Cressey ----------------------------------------------- Vice President THOMA CRESSEY EQUITY PARTNERS, INC. By:/s/ Bryan C. Cressey ----------------------------------------------- Vice President /s/ Bryan C. Cressey ----------------------------------------------- Bryan C. Cressey /s/ Rocco A. Ortenzio ----------------------------------------------- Rocco A. Ortenzio /s/ Rocco A. Ortenzio ----------------------------------------------- Robert A. Ortenzio /s/ Martin F. Jackson ----------------------------------------------- Martin F. Jackson EX-99.77Q1 3 exb10182004select.txt EXHIBIT B EXHIBIT B --------- AGREEMENT AGREEMENT, dated as of October 17, 2004 (this "Agreement"), by and among EGL HOLDING COMPANY, a Delaware corporation ("Parent"), and the several other individuals and entities named on Schedule I hereto (each a "Rollover Investor" and collectively, the "Rollover Investors"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, on the date hereof , Parent, EGL Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("Acquisition"), and Select Medical Corporation, a Delaware corporation ("SEM"), are entering into an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which, upon the terms and subject to the conditions set forth therein, Acquisition will merge with and into SEM (the "Merger") with SEM continuing as the surviving corporation; WHEREAS, on or prior to the closing of the Merger (the "Closing"), the Certificate of Incorporation of Parent will be amended and restated in substantially the form of Exhibit A hereto (the "Restated Parent Charter"), and pursuant to the Restated Parent Charter, the authorized capital stock of Parent will consist of (i) Participating Preferred Stock, par value $0.001 per share ("Parent Preferred Stock"), and (ii) Common Stock, par value $0.001 per share ("Parent Common Stock"); WHEREAS, each Rollover Investor is the beneficial owner of at least the number of shares of Common Stock, par value $.01 per share, of SEM ("SEM Common Stock"), set forth opposite such Rollover Investor's name on Schedule I hereto under the heading "Rollover Shares" (the "Rollover Shares"); and WHEREAS, each of the Rollover Investors, acting severally and not jointly, is willing to contribute such Rollover Investor's Rollover Shares to Parent in exchange for newly issued shares of Parent Preferred Stock and Parent Common Stock (the "New Parent Shares"), upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I. AGREEMENTS SECTION 1.01. Rollover. Prior to the Closing, each Rollover Investor will enter into a stock subscription and exchange agreement with Parent, Welsh, Carson, Anderson & Stowe IX, L.P. and other equity investors selected by Parent, in substantially the form set forth in Exhibit B hereto (the "Stock Subscription Agreement"), and will contribute such Rollover Investor's Rollover Shares to Parent in exchange for New Parent Shares on the terms and conditions set forth in the Stock Subscription Agreement (each such Rollover Investor to be a Schedule III Purchaser (as defined in the Stock Subscription Agreement) thereunder). For purposes of each such exchange of shares of SEM Common Stock for New Parent Shares, the value of the shares of SEM Common Stock contributed by each Rollover Investor to Parent shall be $18.00 per share (i.e., an amount equal to the consideration per share of SEM Common Stock payable in the Merger). SECTION 1.02. Stockholders Agreement and Registration Rights Agreement. As contemplated by the Stock Subscription Agreement, prior to the Closing Date, each Rollover Investor will enter into a stockholders agreement, in substantially the form set forth in Exhibit C hereto, and a registration rights agreement, in substantially the form set forth in Exhibit D hereto, in each case with Parent, Welsh, Carson, Anderson & Stowe IX, L.P. and other equity investors selected by Parent. SECTION 1.03. Management Agreements and Acknowledgements. (a) At or prior to the Closing, each Rollover Investor who is an employee of SEM (each, a "Management Rollover Investor") also agrees to enter into the following agreements: (i) a restricted stock award agreement, which provides such Management Rollover Investor with the percentage of available shares of Parent Common Stock under Parent's Equity Incentive Plan, set forth opposite such Management Rollover Investor's name on Schedule I hereto under the heading "Restricted Shares" and is otherwise in a form (together with the accompanying Equity Incentive Plan) substantially as set forth in Exhibits E-1 and E-2 hereto; it being understood that Parent's Equity Incentive Plan shall make 20% of the fully-diluted Parent Common Stock as of the Closing available for grants of restricted stock; (ii) a long-term cash incentive award agreement, which provides such Management Rollover Investor with the participation interest in a long-term cash incentive plan of Parent; (iii) an amended employment agreement, which amends the terms of such Management Rollover Investor's existing employment agreement and any other change of control, severance or similar agreement with SEM (each, an "Existing Employment Agreement") to reflect the acknowledgments and agreements set forth in clauses (i) and (ii) of Section 1.03(b) below and such other changes as are reasonably acceptable to such Management Rollover Investor and Parent; and (iv) in the case of Rocco A. Ortenzio, a Warrant substantially as set forth in Exhibit F hereto to purchase 2% of the fully-diluted Parent Common Stock as of the Closing. It is also understood that the Management Rollover Investors will be given the opportunity to purchase for cash the subordinated debt securities of Parent that may be purchased by WCAS Capital Partners IV, L.P. as described in its commitment letter to Parent dated as of the date hereof, up to an aggregate principal amount of $10,000,000. (b) Each Management Rollover Investor acknowledges and agrees (i) that the Merger and other transactions contemplated by the Merger Agreement will not be treated as a "Change of Control" under the relevant provisions of any Existing Employment Agreement with such Management Rollover Investor, and (ii) to forgo any change of control or similar payments such Management Rollover Investor would be entitled to receive under such provisions, if the Merger or other transactions contemplated by the Merger Agreement or this Agreement would have been treated as such a "Change of Control" (including any gross-up or payments for, or to reimburse such Management Rollover Investor for, excise taxes resulting from such payments or other benefits provided under such an Existing Employment Agreement or otherwise in connection with the Merger and other transactions contemplated by the Merger Agreement or 2 this Agreement). For the avoidance of doubt, it is understood that such provisions shall remain in effect with respect to any future Change of Control as defined therein. SECTION 1.04. Restrictions on Transfers. Each Rollover Investor agrees that, without the prior written consent of Parent, it will not make any transfer, sale, assignment, pledge, hypothecation or other disposition (including by operation of law), whether directly or indirectly pursuant to the creation of a derivative security, the grant of an option or other right or the imposition of a restriction on disposition or voting (in each case, a "Transfer"), of any of its Rollover Shares. ARTICLE II. REPRESENTATION AND WARRANTIES SECTION 2.01. Parent Representations. Parent represents and warrants to each Rollover Investor that: (a) Existence. Parent is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. (b) Authorization; Power; Validity. The execution and delivery by Parent of this Agreement and the consummation of the transactions contemplated hereby are within Parent's powers and have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by Parent. This Agreement constitutes a valid and binding agreement of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. SECTION 2.02. Rollover Investor Representations. Each Rollover Investor, severally and not jointly, and solely with respect to such Rollover Investor, represents and warrants to Parent that: (a) Existence. Such Rollover Investor (if not a natural person) is a corporation, limited partnership, limited liability company, government pension plan or other entity, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. (b) Authorization; Power; Validity. The execution and delivery by such Rollover Investor (if not a natural person) of this Agreement and the consummation of the transactions contemplated hereby are within such Rollover Investor's powers and have been duly authorized by all necessary action on the part of such Rollover Investor. This Agreement has been duly executed and delivered by such Rollover Investor. This Agreement constitutes a valid and binding agreement of such Rollover Investor, enforceable against such Rollover Investor in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of 3 creditors' rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. (c) Title to Rollover Shares. Such Rollover Investor has good and valid title to the Rollover Shares to be contributed to Parent pursuant to Section 1.01, free and clear of all claims, liens and encumbrances. ARTICLE III. MISCELLANEOUS SECTION 3.01. Condition Precedent. For purposes of Section 203 of the Delaware General Corporation Law, this Agreement, including the Exhibits hereto, and the respective obligations of each of the parties hereto is subject to the approval of the Board of Directors of the Company, upon the recommendation of the Special Committee (as defined in the Merger Agreement), and upon such approval this Agreement shall thereafter be binding on the parties. SECTION 3.02. Termination. This Agreement shall be terminated, and the transactions contemplated hereby abandoned at any time prior to the consummation of the Merger, upon the Merger Agreement being terminated in accordance with its terms. If this Agreement is terminated as permitted by this Section 3.02, such termination shall be without liability of any party (or any stockholder, subsidiary, general partner, limited partner, member, director, officer, trustee, employee, agent, consultant or representative of such party) to any of the other parties to this Agreement and this Agreement shall become void and of no further force or effect. SECTION 3.03. Notices. Any notice or communication required or permitted hereunder shall be in writing and shall be delivered personally, delivered by nationally recognized overnight courier service for next day delivery, sent by certified or registered mail, postage prepaid, or sent by facsimile (subject to electronic confirmation of such facsimile transmission). Any such notice or communication shall be deemed to have been given (i) when delivered, if personally delivered, (ii) one business day after it is deposited with a nationally recognized overnight courier service, if sent by nationally recognized overnight courier service, (iii) the day of sending, if sent by facsimile prior to 5:00 p.m. (EST) on any business day or the next succeeding business day if sent by facsimile after 5:00 p.m. (EST) on any business day or on any day other than a business day or (iv) five business days after the date of mailing, if mailed by certified or registered mail, postage prepaid, in each case, to the following address or facsimile number, or to such other addressee, address or facsimile number as such party may subsequently designate to the other parties by notice given hereunder: if to Parent, to it at: EGL Holding Company c/o Welsh, Carson, Anderson & Stowe IX, L.P. 320 Park Avenue, Suite 2500 New York, New York 10022 Attention: Sean M. Traynor Facsimile: (212) 893-9583 4 and with an additional copy to: Ropes & Gray LLP 45 Rockefeller Plaza New York, New York 10111 Attention: Othon A. Prounis, Esq. Facsimile: (212) 841-5725 if to any Rollover Investor, to such Rollover Investor at the address set forth for such Rollover Investor on Schedule I hereto. SECTION 3.04. Amendments and Waivers. Any provision of this Agreement (or any Schedule or Exhibit to this Agreement) may be amended or waived if, but only if, such amendment or waiver is in writing and, in the case of an amendment, signed by (i) Parent and (ii) a majority-in-interest of the Rollover Investors (determined by reference to the number of Rollover Shares to be contributed to Parent hereunder) or, in the case of a waiver, signed by the party against whom the waiver is to be effective. Notwithstanding the foregoing, Schedule I hereto can be amended by a written instrument signed only by Parent and each Rollover Investor affected thereby and the Exhibits to this Agreement can be amended by a written instrument signed only by Parent so long as such amendment treats all Schedule I Purchasers, Schedule II Purchasers, Schedule III Purchasers and Schedule IV Purchasers (each, as defined in the Subscription Agreement) equally or does not adversely affect any of Schedule III Purchasers (as defined in the Stock Subscription Agreement). No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. SECTION 3.05. Expenses. Except as may otherwise be agreed in writing by Parent, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such cost or expense. SECTION 3.06. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party hereto shall assign this Agreement or any of its rights, interests or obligations hereunder without the prior written consent of Parent and any purported assignment without such consent shall be invalid and of no effect. SECTION 3.07. Governing Law. This Agreement, and all claims arising hereunder or relating hereto, shall be governed and construed and enforced in accordance with the laws of the State of New York without giving effect to its conflicts of laws principles. SECTION 3.08. Jurisdiction. The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in 5 connection with, this Agreement or the transactions contemplated hereby or thereby may only be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York County, New York, and each of the parties hereby consents to the exclusive jurisdiction of such courts in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, and each party agrees that, in addition to any method of service of process otherwise permitted by law, service of process on each party may be made by any method for giving such party notice as provided in Section 3.03, and shall be deemed effective service of process on such party. SECTION 3.09. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 3.10. Specific Performance. The parties hereto acknowledge and agree that any breach or threatened breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties agree that, in addition to any other remedies, each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. SECTION 3.11. Entire Agreement. This Agreement, including the Schedules and Exhibits hereto, constitutes the entire agreement, arrangement and understanding of the parties hereto with respect to the subject matter hereof, including without limitation all arrangements among the parties relating to the shares of SEM Common Stock held by each Rollover Investor, and there are no other agreements, arrangements or understandings among the parties hereto with respect to the subject matter hereof. SECTION 3.12. Counterparts; Third Party Beneficiaries. This Agreement may be executed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. No provision of this Agreement shall confer upon any person other than the parties hereto any rights or remedies hereunder. [SIGNATURE PAGES FOLLOW] 6 IN WITNESS WHEREOF, each of the parties hereto has duly executed and delivered this Agreement as of the day and year first above written. PARENT: EGL HOLDING COMPANY By:/s/ Sean M. Traynor -------------------------------- Name: Sean M. Traynor Title: Chief Executive Officer ROLLOVER INVESTORS: /s/ Rocco A. Ortenzio ---------------------------------- Rocco A. Ortenzio /s/ Robert A. Ortenzio ---------------------------------- Robert A. Ortenzio /s/ Martin F. Jackson ---------------------------------- Martin F. Jackson THOMA CRESSEY FUND VI, L.P. By: TC Partners VI, L.P. Its General Partner By: Thoma Cressey Equity Partners, Inc. Its General Partner By:/s/ Bryan C. Cressey -------------------------------- Name: Bryan C. Cressey Title: Vice President THOMA CRESSEY FRIENDS FUND VI, L.P. By: TC Partners VI, L.P. Its General Partner By: Thoma Cressey Equity Partners, Inc. Its General Partner By:/s/ Bryan C. Cressey -------------------------------- Name: Bryan C. Cressey Title: Vice President /s/ Bryan C. Cressey ---------------------------------- Bryan C. Cressey THOMA CRESSEY FUND VII, L.P. By: TC Partners VII, L.P. Its General Partner By: Thoma Cressey Equity Partners, Inc. Its General Partner By: /s/ Bryan C. Cressey -------------------------------- Name: Bryan C. Cressey Title: Vice President EX-99 4 ex-c.txt EXHIBIT C -- AGREEMENT AND PLAN OF MERGER EXHIBIT C --------- EXECUTION COPY -------------- =============================================================================== AGREEMENT AND PLAN OF MERGER AMONG EGL HOLDING COMPANY, EGL ACQUISITION CORP. AND SELECT MEDICAL CORPORATION Dated as of October 17, 2004 =============================================================================== Table of Contents ARTICLE I THE MERGER.........................................................1 1.1. The Merger.....................................................1 1.2. Closing........................................................2 1.3. Effective Time of the Merger...................................2 1.4. Effects of the Merger..........................................2 ARTICLE II EFFECT OF THE MERGER ON THE OUTSTANDING SECURITIES OF THE COMPANY AND ACQUISITION; EXCHANGE PROCEDURES..............................3 2.1. Effect on Capital Stock........................................3 2.2. Exchange of Certificates.......................................4 2.3. Effect of the Merger on Company Stock Options..................6 ARTICLE III REPRESENTATIONS AND WARRANTIES...................................7 3.1. Representations and Warranties of the Company..................7 3.2. Representations and Warranties of Parent and Acquisition......20 ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS........................24 4.1. Affirmative Covenants of the Company..........................24 4.2. Negative Covenants of the Company.............................24 ARTICLE V ADDITIONAL AGREEMENTS.............................................27 5.1. Access to Information; Confidentiality........................27 5.2. No Solicitation...............................................27 5.3. Fees and Expenses.............................................30 5.4. Brokers or Finders............................................31 5.5. Indemnification; Directors' and Officers' Insurance...........32 5.6. Reasonable Best Efforts.......................................34 5.7. Publicity.....................................................35 5.8. Consents and Approvals; State Takeover Laws...................35 5.9. Notification of Certain Matters...............................36 5.10. Continuation of Employee Benefits.............................37 5.11. Preparation of the Proxy Statement; Special Meeting...........37 5.12. Consequences If Rights Are Triggered..........................39 5.13. Stockholder Litigation........................................39 5.14. Debt Tender Offers...........................................39 5.15. Stock Purchases..............................................40 i TABLE OF CONTENTS (continued) ARTICLE VI CONDITIONS PRECEDENT.............................................40 6.1. Conditions to Each Party's Obligation to Effect the Merger....40 6.2. Conditions to the Obligation of Parent and Acquisition to Effect the Merger.............................................41 6.3. Conditions to Obligation of the Company to Effect the Merger..42 ARTICLE VII TERMINATION AND ABANDONMENT.....................................43 7.1. Termination and Abandonment...................................43 7.2. Effect of Termination.........................................45 ARTICLE VIII MISCELLANEOUS..................................................45 8.1. Survival of Representations, Warranties, Covenants and Agreements....................................................45 8.2. Specific Performance..........................................46 8.3. Notices.......................................................46 8.4. Interpretation................................................47 8.5. Counterparts..................................................47 8.6. Entire Agreement; No Third Party Beneficiaries................47 8.7. Amendment.....................................................48 8.8. Waiver........................................................48 8.9. Governing Law.................................................48 8.10. Submission to Jurisdiction....................................48 8.11. Assignment....................................................49 8.12. Severability..................................................49 8.13. Obligation of Parent..........................................49 EXHIBITS -------- Exhibit 1...... Rollover Stockholders Exhibit 1.4(c). Certificate of Incorporation of the Surviving Company Exhibit 2.3(a). Company Stock Options Exhibit 3.1(u). Material Contracts Exhibit 4.1.... Affirmative Covenants of the Company Exhibit 4.2.... Negative Covenants of the Company Exhibit 5.5(a). Indemnification Agreements Exhibit 5.7.... Press Release Exhibit 5.14... Debt Tender Offers Exhibit 8.4.... Knowledge of Parties ii AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER, dated as of October 17, 2004 (this "Agreement"), is made and entered into by and among EGL HOLDING COMPANY, a Delaware corporation ("Parent"), EGL ACQUISITION CORP., a Delaware corporation ("Acquisition"), and SELECT MEDICAL CORPORATION, a Delaware corporation (the "Company"). RECITALS WHEREAS, the Board of Directors of each of Parent, Acquisition and the Company (in the case of the Company acting on the recommendation of a special committee (the "Special Committee") formed for the purpose of representing the Company in connection with the possible transactions contemplated hereby) has deemed it advisable and in the best interests of their respective stockholders for Acquisition to merge with and into the Company (the "Merger") pursuant to Section 251 of the Delaware General Corporation Law (the "DGCL") upon the terms and subject to the conditions set forth herein; WHEREAS, the Board of Directors of each of Parent, Acquisition and the Company has adopted resolutions approving and declaring advisable this Agreement, the Merger and the transactions contemplated by this Agreement; WHEREAS, each of the stockholders of the Company listed on Exhibit 1 hereto (the "Rollover Stockholders") have, concurrently with the execution of this Agreement, executed an agreement, dated as of the date hereof, pursuant to which such Rollover Stockholders have agreed on the terms set forth therein to contribute the number of shares of Company Common Stock (as hereinafter defined) set forth opposite each such stockholder's name on Exhibit 1 under the heading "Rollover Shares" to Parent in exchange for shares of Parent capital stock immediately prior to the Merger; and WHEREAS, Parent, Acquisition and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I THE MERGER 1.1. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, Acquisition shall be merged with and into the Company at the Effective Time (as hereinafter defined). At the Effective Time, the separate corporate existence of Acquisition shall cease, and the Company shall continue as the surviving corporation under the name "Select Medical Corporation" and shall succeed to and assume all of the rights and obligations of the Company and Acquisition in accordance with the DGCL. As the context requires, the Company is sometimes hereinafter referred to as the "Surviving Corporation." 1.2. Closing. Unless this Agreement shall have been terminated and the Merger shall have been abandoned pursuant to Section 7.1, the consummation of the Merger (the "Closing") shall take place as promptly as practical following the satisfaction or waiver (subject to applicable Law (as hereinafter defined)) of all of the conditions (other than those conditions which by their nature are to be satisfied at Closing, but subject to the fulfillment or waiver of those conditions) set forth in Article VI (and, in any event, not more than two business days following the satisfaction or waiver of all such conditions) (the "Closing Date"), at the offices of Ropes & Gray LLP, 45 Rockefeller Plaza, New York, New York 10111, unless another date, time or place is agreed to in writing by the parties hereto. 1.3. Effective Time of the Merger. At Closing, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware as provided in the DGCL. The Merger shall become effective upon such filing or at such time thereafter as Parent, Acquisition and the Company shall agree and specify in the Certificate of Merger (the "Effective Time"). 1.4. Effects of the Merger. (a) The Merger shall have the effects set forth in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL, including Section 259 of the DGCL. (b) The directors of Acquisition and the officers of the Company immediately prior to the Effective Time shall, from and after the Effective Time, be the initial directors and officers of the Surviving Corporation until their successors have been duly elected or appointed and qualified, or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. (c) Effective upon and as part of the Merger, the Restated Certificate of Incorporation of the Company shall be amended in its entirety to be the same as set forth in Exhibit 1.4(c) and, as so amended, shall be the Certificate of Incorporation of the Surviving Corporation following the Merger until thereafter amended in accordance with its terms and the DGCL. (d) The Company shall take all required corporate action so that the Bylaws of the Company as in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation following the Merger until thereafter amended in accordance with the DGCL, the Certificate of Incorporation of the Surviving Corporation and the Bylaws of the Surviving Corporation. 2 ARTICLE II EFFECT OF THE MERGER ON THE OUTSTANDING SECURITIES OF THE COMPANY AND ACQUISITION; EXCHANGE PROCEDURES 2.1. Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of common stock, par value $.01 per share, of the Company (the "Company Common Stock"), the holder of any shares of capital stock of Parent or the holder of any shares of common stock, par value $.01 per share, of Acquisition (the "Acquisition Common Stock"): (a) Common Stock of Acquisition. Each share of Acquisition Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into and become one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. (b) Cancellation of Treasury Stock and Company Common Stock Owned by Parent or Acquisition. Each share of Company Common Stock that is owned by Parent or Acquisition or held in the treasury of the Company (collectively, the "Excluded Shares") shall be canceled and retired and shall cease to exist, and no cash or other consideration shall be delivered or deliverable in exchange therefor. (c) Conversion of Company Common Stock. Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time other than Rollover Shares, Excluded Shares and Dissenting Shares (as hereinafter defined) shall be converted into the right to receive from the Surviving Corporation an amount of cash equal to $18.00 (the "Merger Consideration"). (d) Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately prior to the Effective Time and that are held by a holder who was entitled to and has validly demanded appraisal rights in accordance with Section 262 of the DGCL ("Dissenting Shares") shall not be converted into the right to receive the Merger Consideration unless and until such holder shall have failed to perfect or shall have effectively withdrawn or lost such holder's appraisal rights under the DGCL, but instead shall be converted into the right to receive such consideration determined to be due to such holder from the Surviving Corporation with respect to such Dissenting Shares in accordance with the DGCL. If any such holder shall have failed to perfect or shall have effectively withdrawn or lost such appraisal rights pursuant to the DGCL, each Dissenting Share of such holder shall be treated as a share of Company Common Stock that had been converted as of the Effective Time into the right to receive the Merger Consideration in accordance with Section 2.1(c). The Company shall give prompt notice to Parent of any demands, attempted withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company for appraisal of shares of Company Common Stock, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. Other than pursuant to an Order (as hereinafter defined), the Company shall not, except with the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed), make any payment with respect to, settle, offer to settle or approve any withdrawal of, any such demands. 3 (e) Cancellation and Retirement of Company Common Stock. As of the Effective Time, all shares of Company Common Stock (other than Excluded Shares and Dissenting Shares) that are issued and outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any shares of Company Common Stock being converted into the right to receive the Merger Consideration pursuant to Section 2.1(c) (the "Certificates") shall cease to have any rights with respect to such shares of Company Common Stock, except the right to receive a cash amount equal to the product of the Merger Consideration per share multiplied by the number of shares so represented, to be paid in consideration therefor upon surrender of such Certificate in accordance with Section 2.2(b). (f) Certain Adjustments. In the event that prior to the Effective Time, solely as a result of a reclassification, stock split (including a reverse stock split), combination or exchange of shares, stock dividend or stock distribution which in any such event is made on a pro rata basis to all holders of Company Common Stock, there is a change in the number of shares of Company Common Stock outstanding or issuable upon the conversion, exchange or exercise of securities or rights convertible or exchangeable or exercisable for shares of Company Common Stock, then the Merger Consideration shall be equitably adjusted to reflect such event. 2.2. Exchange of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall appoint a U.S. commercial bank or trust company, reasonably acceptable to the Company, to act as paying agent (the "Paying Agent") for the payment of the Merger Consideration upon surrender of the Certificates in accordance with Section 2.1(c). At the Effective Time, Parent and the Surviving Corporation shall enter into a paying agent agreement with the Paying Agent, in form and substance reasonably acceptable to the Company, and shall deposit (or cause to be deposited) with the Paying Agent, in trust for the benefit of the holders of such Certificates, for use in the payment of the Merger Consideration in accordance with this Article II, the aggregate Merger Consideration (such cash consideration being hereinafter referred to as the "Merger Fund"). The Paying Agent shall, pursuant to irrevocable instructions of Parent and the Company given on the Closing Date, make payments of the Merger Consideration out of the Merger Fund. The Merger Fund shall not be used for any other purpose. (b) Exchange Procedures. Promptly after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail or deliver to each Person (as hereinafter defined) who was, at the Effective Time, a holder of record of Company Common Stock and whose shares are being converted into the Merger Consideration pursuant to Section 2.1(c) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall otherwise be in a form and have such other provisions as the Surviving Corporation may reasonably specify) containing instructions for use by holders of Company Common Stock to effect the exchange of their shares of Company Common Stock for the Merger Consideration as provided herein. As soon as reasonably practicable after the Effective Time, each holder of an outstanding Certificate or Certificates shall, upon surrender to the Paying Agent of such Certificate or Certificates and such letter of transmittal duly executed and completed in accordance with the instructions thereto (together with such other documents as the Paying Agent may reasonably request) and acceptance thereof by the Paying Agent (or, if such shares are held in book-entry or other uncertificated form, upon the entry through a book-entry transfer 4 agent of the surrender of such shares of Company Common Stock on a book-entry account statement (it being understood that any references herein to "Certificates" shall be deemed to include references to book-entry account statements relating to the ownership of shares of Company Common Stock)), be entitled to an amount of cash (payable by check) equal to the product of the Merger Consideration per share multiplied by the number of shares of Company Common Stock represented by such Certificate or Certificates. The Paying Agent shall accept such Certificates upon compliance with such reasonable terms and conditions as the Paying Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. If cash is to be remitted to a Person other than the Person in whose name the Certificate surrendered for exchange is registered, it shall be a condition of such exchange that the Certificate so surrendered shall be properly endorsed, with signature guaranteed, or otherwise in proper form for transfer and that the Person requesting such exchange shall pay to the Paying Agent any transfer or other taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Certificate so surrendered, or shall establish to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2(b), at any time after the Effective Time, each Certificate shall be deemed to represent only the right to receive the product of the Merger Consideration per share multiplied by the number of shares of Company Common Stock represented by such Certificate upon such surrender as contemplated by Section 2.1. No interest will be paid or will accrue on any cash payable as Merger Consideration. (c) No Further Ownership Rights in Company Common Stock Exchanged for Cash. All cash paid upon the surrender for exchange of Certificates in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock exchanged for cash theretofore represented by such Certificates, and after the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented to the Surviving Corporation for transfer, they shall be converted and exchanged for cash as provided in this Article II. (d) Termination of Merger Fund. Any portion of the Merger Fund which remains undistributed to the holders of Certificates for twelve months after the Effective Time shall be delivered to the Surviving Corporation, and any holders of Certificates who have not theretofore complied with this Article II shall thereafter look only to Parent and the Surviving Corporation for payment of the Merger Consideration per share of Company Common Stock, subject to escheat and abandoned property and similar Laws (as hereinafter defined). (e) No Liability. None of Parent, the Surviving Corporation or the Paying Agent shall be liable to any Person in respect of any cash from the Merger Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. (f) Investment of Merger Fund. The Paying Agent shall invest any cash in the Merger Fund solely in Cash Equivalents (as defined below) as directed by the Surviving Corporation. Any interest and other income resulting from such investments shall be paid to the Surviving Corporation. Any net loss resulting from such investments shall be borne by the Surviving Corporation and Parent, and the Surviving Corporation and/or Parent shall deposit additional funds with the Paying Agent equal to such net loss in order to make payments of the Merger Consideration from the Merger Fund. As used herein, "Cash Equivalents" means (i) 5 obligations issued or guaranteed by the United States or its agencies or instrumentalities; (ii) obligations issued or guaranteed by any state of the United States or any political subdivision thereof, rated at least AA or the equivalent on the date of purchase by Moody's Investors' Service or Standard & Poor's; (iii) certificates of deposit and bankers' acceptances of commercial banks in the United States with combined capital and surplus of at least Three Hundred Million Dollars; and (iv) investment grade commercial paper rated in the highest commercial paper rating category of Moody's Investors' Service or Standard & Poor's maturing within one year. (g) Withholding Rights. The Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the "Code"), or any provision of state, local or foreign tax Law, and the Surviving Corporation or the Paying Agent, as the case may be, shall make any required filings with and payments to tax authorities relating to any such deduction or withholding. To the extent that amounts are so deducted and withheld by the Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by the Surviving Corporation or the Paying Agent. (h) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may require as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable pursuant to this Agreement. 2.3. Effect of the Merger on Company Stock Options. (a) A list showing each of the Company's stock option plans, programs and arrangements (collectively, the "Stock Plans") and options to acquire shares of Company Common Stock that are outstanding as of the date hereof under the Stock Plans (the "Company Stock Options") is set forth on Exhibit 2.3(a) (such list to include the name of the Stock Plan under which such options were issued, the holders thereof, the number of shares subject thereto and the exercise prices thereof. (b) At, or immediately prior to, the Effective Time, the Board of Directors of the Company or any committee administering the Stock Plans shall take all actions necessary so that all outstanding Company Stock Options heretofore granted under any Stock Plan shall be cancelled at the Effective Time. Immediately prior to the Effective Time, each Company Stock Option, whether or not then vested or exercisable, shall no longer be exercisable but shall entitle each holder thereof, in cancellation and settlement therefor, to a payment in cash equal to the product of (i) the excess, if any, of (x) the per share Merger Consideration over (y) the exercise price per share of Company Common Stock subject to such Company Stock Option, multiplied by (ii) the number of shares of Company Common Stock for which such Company Stock Option 6 shall not theretofore have been exercised, whether or not then vested or exercisable. The Surviving Corporation shall pay the holders of Company Stock Options the cash payments described in this Section 2.3(b) on or as soon as reasonably practicable after the Closing Date. (c) Prior to the Effective Time, the Company shall use its reasonable best efforts to obtain all necessary consents to ensure that, after the Effective Time, the only rights of the holders of Company Stock Options (with respect to such Company Stock Options) will be to receive the cash payment described in Section 2.3(b) in cancellation and settlement therefor. (d) The Stock Plans shall terminate as of the Effective Time, and the provisions in any other agreement, arrangement or benefit plan providing for the issuance, transfer or grant of any capital stock of the Company or any interest in respect of any capital stock of the Company shall be deleted as of the Effective Time, and the Company shall use its reasonable best efforts to take such actions to ensure that, after the Effective Time, no holder of a Company Stock Option or any participant in or a party to any Stock Plan or other agreement, arrangement or benefit plan shall have any right thereunder to acquire any capital stock or any interest in respect of any capital stock of the Surviving Corporation. (e) The Surviving Corporation shall be entitled to deduct and withhold from the amounts otherwise payable pursuant to this Section 2.3 to any holder of Company Stock Options such amounts as the Surviving Corporation is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax Law, and the Surviving Corporation shall make any required filings with and payments to tax authorities relating to any such deduction or withholding. To the extent that amounts are so deducted and withheld by the Surviving Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Stock Options in respect of which such deduction and withholding was made by the Surviving Corporation. ARTICLE III REPRESENTATIONS AND WARRANTIES 3.1. Representations and Warranties of the Company. Except (i) as set forth in the item of the disclosure schedule of the Company (the "Company Disclosure Schedule") that corresponds with the applicable subsection below (it being understood that matters disclosed in an item of the Company Disclosure Schedule shall be deemed disclosed with respect to any other subsection if it is reasonably apparent that the matters so disclosed in such item are applicable to such other subsection) or (ii) in the Company's Annual Report on Form 10K for the fiscal year ended December 31, 2003 filed with the SEC on March 15, 2004 or any SEC Documents (as hereinafter defined) filed after October 15, 2003 and prior to the date hereof, the Company hereby represents and warrants to Parent and Acquisition as follows: (a) Organization, Standing and Power. Each of the Company and its Subsidiaries (as defined below) is a corporation, partnership or a limited liability company duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate, partnership or limited liability company power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except for any failure by any of the Company's Subsidiaries to be in good standing that does not have and would not reasonably be expected to have, individually or in the 7 aggregate, a Company Material Adverse Effect (as defined below). Each of the Company and its Subsidiaries is duly qualified or licensed to do business as a foreign corporation, partnership or limited liability company and in good standing to conduct business in each jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification or licensing necessary, other than in such jurisdictions where the failure to so be qualified, licensed or in good standing does not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. The Company has heretofore made available to Parent and Acquisition complete and correct copies of the certificates of incorporation and bylaws (or other organizational documents) of the Company and its Subsidiaries. Neither the Company nor any of the Company's Subsidiaries is in violation of or default under the provisions of any such organizational documents, except for any such violations or defaults under organizational documents of the Company's Subsidiaries that do not have and would not be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect. As used in this Agreement, (i) "Company Material Adverse Effect" shall mean (A) a material adverse effect on the business, operations, assets, liabilities, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole, or (B) a material adverse effect on the ability of the Company to perform its obligations under this Agreement; provided, that Company Material Adverse Effect shall not be deemed to include any such material adverse effect arising as a result of (1) conditions, events or circumstances (other than any changes or proposed changes in Laws, including changes or proposed changes in payment or reimbursement by government payors, but excluding the final regulatory changes announced by the Center for Medicare and Medicaid Services on August 2, 2004 applicable to long term acute care hospitals operated as "hospitals within hospitals" or "satellites") affecting either (x) the United States economy generally or (y) the industry of the Company and its Subsidiaries generally, which in each case does not have a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole, (2) changes in generally accepted accounting principles or in Securities and Exchange Commission ("SEC") accounting rules, policies, practices or interpretations, (3) acts or omissions of Parent or Acquisition prior to the Effective Time, (4) acts or omissions of the Company or any of its Subsidiaries taken at the request of Parent or with the prior written consent of Parent after the date of this Agreement, (5) the effects of compliance with this Agreement by the Company or any of its Subsidiaries, including the incurrence of expenses by the Company or any of its Subsidiaries in connection with the consummation of the transactions contemplated hereby, (6) acts or omissions of Parent, Acquisition, the Company or its Subsidiaries contemplated hereby that have an effect on the Company or its Subsidiaries, including any disruptions to the business of the Company or any of its Subsidiaries as a result of the execution, delivery and performance of this Agreement or the announcement of the transactions contemplated hereby, (7) any outbreak or escalation of hostilities, any occurrence or threat of acts commonly referred to as terrorist attacks or any armed hostilities associated therewith and any national or international calamity or emergence or any escalation thereof, or (8) changes in the market price or trading volume of the shares of Company Common Stock (but not any change or effect underlying such decrease to the extent such change or effect would otherwise constitute a Company Material Adverse Effect); (ii) "Subsidiary" shall mean, with respect to any party, any Person (A) of which such party or any other Subsidiary of such party is a general partner, (B) of which voting power to elect a majority of the board of directors or others performing similar functions with respect to such Person is held by such party or by one or more of its Subsidiaries or (C) of which at least 50% of the equity interests (or economic equivalent) of such Person are, directly or indirectly, owned or controlled by such party or by one or more of its Subsidiaries, and (iii) "Person" shall mean any 8 natural person, firm, partnership, limited liability company, joint venture, business trust, trust, association, corporation, company, unincorporated entity or other entity. (b) Capital Structure. (i) The Company. The authorized capital stock of the Company consists of 210,000,000 shares of stock of which (A) 200,000,000 shares are Company Common Stock and (B) 10,000,000 shares are Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which 545,000 shares are designated as Series A Junior Participating Preferred Stock ("Series A Preferred Stock"). As of the close of business on October 15, 2004 (the "Capitalization Date"), 101,867,236 shares of Company Common Stock were issued and outstanding; no shares of Preferred Stock were issued and outstanding; no shares of Company Common Stock were held in the Company's treasury; 21,704,817 shares of Company Common Stock were reserved for issuance pursuant to the outstanding Company Stock Options; and there were outstanding one-half rights ("Rights") with respect to 101,867,236 one one-hundredths of a share of Series A Preferred Stock of the Company under the Rights Agreement dated as of September 17, 2001 between the Company and Mellon Investor Services LLC (the "Rights Agreement"). No bonds, debentures, notes or other indebtedness of the Company or any Subsidiary thereof having any right to vote with the stockholders (or other equityholders) of the Company or such Subsidiary on matters submitted to the stockholders (or other equityholders) of the Company or such Subsidiary (or any securities that are convertible into or exercisable or exchangeable for any bonds, debentures, notes or other indebtedness having such voting rights) are issued or outstanding. Since the Capitalization Date, no shares of capital stock of the Company and no other securities directly or indirectly convertible into, or exchangeable or exercisable for, capital stock of the Company have been issued, other than shares of Company Common Stock issued upon the exercise of Company Stock Options outstanding on the Capitalization Date. There are no outstanding shares of capital stock of the Company or securities, directly or indirectly, convertible into, or exchangeable or exercisable for, shares of capital stock of the Company or any outstanding "phantom" stock, "phantom" stock rights, stock appreciation rights, restricted stock awards, dividend equivalent awards or other stock-based awards or rights pursuant to which any Person is or may be entitled to receive any payment or other consideration or value based upon or valued by reference to the capital stock of the Company or the dividends paid on the capital stock of the Company or the revenues, earnings or financial performance, stock performance or other attribute of the Company (other than ordinary course payments to Company employees (including bonus payments)). There are no puts, calls, rights (including preemptive rights), commitments or agreements (including employment, termination and similar agreements) to which the Company or any of its Subsidiaries is a party or by which it is bound, in any case, obligating the Company or any of its Subsidiaries to issue, deliver, sell, purchase, redeem or acquire any equity securities of the Company or securities convertible into, or exercisable or exchangeable for equity securities of the Company, or obligating the Company or any of its Subsidiaries to grant, extend or enter into any such put, call, right, commitment or agreement. All outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, and are not subject to, and have not been issued in violation of, preemptive or other similar rights. The information contained on Exhibit 2.3(a) with respect to the Stock Plans and the Company Stock Options is true, correct and complete in all material respects. 9 (ii) Agreements Relating to Capital Stock. Except as set forth in this Agreement, there are not, as of the date hereof, any stockholder agreements, voting trusts or other agreements or understandings to which the Company is a party or by which it is bound relating to the voting of any shares of the capital stock of the Company. All registration rights agreements to which the Company or any of its Subsidiaries is a party are identified in the Company Disclosure Schedule. (iii) Subsidiaries. All Subsidiaries of the Company, their respective jurisdictions of organization, their respective forms of organization and the holders of their respective outstanding capital stock or other equity interests are identified in the Company Disclosure Schedule. All outstanding shares of capital stock of, or other equity interests in, the Subsidiaries of the Company are owned by the Company or a direct or indirect wholly-owned Subsidiary of the Company, free and clear of all pledges, liens, hypothecations, claims, charges, security interests or other encumbrances of any kind (collectively, "Liens"). All such issued and outstanding shares of capital stock or other ownership interests are validly issued, fully paid and nonassessable and no such shares or other equity interests have been issued in violation of any preemptive or similar rights. No shares of capital stock of, or other equity interests in, any Subsidiary of the Company are reserved for issuance. There are no outstanding shares of capital stock of, or other equity interests in, any Subsidiary of the Company or securities directly or indirectly convertible into, or exchangeable or exercisable for, shares of capital stock of, or other equity interests in, any Subsidiary of the Company or any outstanding awards or rights pursuant to which any Person is or may be entitled to receive any payment or other consideration or value based upon or valued by reference to the value, revenues, earnings or financial performance or any other attribute of any Subsidiary of the Company. There are no calls, rights (including preemptive rights), commitments or agreements (including employment, termination and similar agreements) to which the Company or any of its Subsidiaries is a party or by which it is bound, in any case obligating the Company or any of its Subsidiaries to issue, deliver, sell, purchase, redeem or acquire, any equity securities of any Subsidiary of the Company or securities convertible into, or exercisable or exchangeable for equity securities of any Subsidiary of the Company. (iv) Investments. Except for the capital stock or other equity interests of its Subsidiaries, the Company does not own, directly or indirectly, (i) any shares of outstanding capital stock of any other corporation or securities convertible into or exchangeable for capital stock of any other corporation or (ii) any equity or other participating interest in the revenues or profits of any Person, and neither the Company nor any of its Subsidiaries is subject to any obligation to make any investment (in the form of a loan, capital contribution or otherwise) in any Person. (c) Authority; No Violations; Consents and Approvals. (i) The Company has all requisite corporate power and authority to enter into this Agreement and, subject to the adoption of this Agreement by the Required Vote and the Disinterested Vote (as each term is hereinafter defined) (the "Company Stockholder Approval"), to perform its obligations under this Agreement. The Company's execution and delivery of this Agreement and, subject to the Company Stockholder Approval, the consummation of the transactions contemplated hereby by the Company have been duly authorized by all necessary corporate action on the part of the 10 Company. This Agreement has been duly executed and delivered by the Company and, assuming the due execution and delivery of this Agreement by Parent and Acquisition, constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except as the enforcement hereof may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws now or hereafter in effect relating to creditors' rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at Law or in equity). (ii) The Company's execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Company will not conflict with, or result in any breach or violation of, or default (with or without notice or the lapse of time, or both) under, or give rise to a right of termination, cancellation, modification or acceleration of any material obligation under, or the loss of any material assets (including any material intellectual property assets) or the creation of any Lien under (any of the foregoing, a "Violation"), (A) any provision of the certificate or articles of incorporation or bylaws (or other organizational documents) of the Company or any of its Subsidiaries, (B) any loan or credit agreement, note, bond, mortgage, deed of trust, indenture, lease, Plan (as hereinafter defined), Company Permit (as hereinafter defined), or other agreement, obligation, instrument, concession, franchise or license to which the Company or any Subsidiary of the Company is a party or by which any of their respective properties or assets are bound, (C) assuming that all consents, approvals, authorizations and other actions described in Section 3.1(c)(iii) have been obtained and all filings and other obligations described in Section 3.1(c)(iii) have been made or fulfilled, any statute, law, ordinance, rule, regulation, New York Stock Exchange or other stock exchange rule or listing requirement, permit or authorization (collectively, "Laws") applicable to the Company or any of its Subsidiaries or their respective properties or assets, or (D) any writ, judgment, decree, award, consent decree, waiver, stipulation, consent, settlement agreement, subpoena, complaint, citation, notice, summons, temporary restraining order, temporary or permanent injunction, stay, ruling or order of any Governmental Entity (collectively, "Orders") applicable to the Company or any of its Subsidiaries or their respective properties or assets except, in the case of clause (A) as it relates to the Company's Subsidiaries and in the case of clauses (B), (C) and (D) as they relate to the Company and its Subsidiaries, for any Violations that do not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (iii) No consent, approval, franchise, license, certificate of need, order or authorization of, or registration, declaration or filing with, notice, application or certification to, or permit, inspection, waiver or exemption from any court, tribunal, judicial body, governmental arbitrator, stock exchange, administrative or regulatory agency, self-regulatory organization, body or commission or other governmental or quasi-governmental authority or instrumentality, whether local, state or federal, domestic or foreign (each a "Governmental Entity"), is required with respect to the Company or any of its Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except for (A) the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and all other applicable federal, state, foreign and other Laws and Orders that are designed or intended to prohibit, restrict or regulate actions having the purpose or 11 effect of monopolization or restraint of trade or lessening of competition (collectively, "Competition Laws"), (B) the filing with the SEC of (1) a proxy statement in preliminary form and in definitive form for distribution to the stockholders of the Company in advance of the Special Meeting (as hereinafter defined) in accordance with Regulation 14A promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") (such proxy statement as amended or supplemented from time to time being hereinafter referred to as the "Proxy Statement") and (2) such reports under and such other compliance with the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (C) the filing of the Certificate of Merger and any related documents with the Secretary of State of the State of Delaware and appropriate documents, if any, with the relevant authorities of other jurisdictions in which the Company or any of its Subsidiaries does business, (D) compliance with any applicable requirements of state blue sky, securities or takeover Laws or New York Stock Exchange listing requirements and (E) such other consents, approvals, franchises, licenses, orders, authorizations, registrations, declarations, filings, notices, applications, certifications, permits, waivers and exemptions the failure of which to be obtained or made does not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (d) Disclosure Documents. Since October 15, 2003, the Company has filed all required forms, reports and documents with the SEC required to be filed by it pursuant to federal securities Laws and the SEC rules and regulations thereunder (collectively, the "Company SEC Documents"). As of their respective dates, the Company SEC Documents complied in all material respects with the applicable requirements of the Securities Act of 1933 (the "Securities Act") or the Exchange Act, as the case may be, in effect as of the time of filing. None of the Company SEC Documents filed pursuant to the Exchange Act as of the time filed, nor any of the Company SEC Documents filed pursuant to the Securities Act as of the time of their effectiveness, contained any 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, in light of the circumstances under which they were made, not misleading, except to the extent that information contained in any Company SEC Document has been revised or superseded by a later-filed Company SEC Document filed and publicly available prior to the date hereof. The financial statements of the Company included in the Company SEC Documents complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q or Rule 10-01 of Regulation S-X of the SEC) and present fairly in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of their respective dates and the consolidated results of operations and the consolidated cash flows of the Company and its consolidated Subsidiaries for the periods presented therein (subject, in the case of the unaudited statements, to year-end audit adjustments, as permitted by Rule 10-01, and any other adjustments described therein). (e) Information Supplied. None of the information to be supplied by the Company specifically for inclusion or incorporation by reference in the Proxy Statement, the Schedule 13E-3 to be filed with the SEC concurrently with the filing of the Proxy Statement (the "Schedule 13E-3") or the Offer Documents (as hereinafter defined) will, in the case of the Proxy Statement, on the date it is first mailed to the holders of the Company Common Stock or on the 12 date (the "Meeting Date") of the related Special Meeting, in the case of the Schedule 13E-3, on the date that it is filed with the SEC, or in the case of the Offer Documents, on the date first mailed to the holders of the Senior Subordinated Notes (as hereinafter defined) or on the date that Senior Subordinated Notes are accepted for payment, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. All documents that the Company is responsible for filing with the SEC in connection with the transactions contemplated hereby will comply as to form, in all material respects, with the applicable provisions of the Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to the information supplied or to be supplied by or on behalf of Parent or Acquisition specifically for inclusion or incorporation by reference in the Proxy Statement, the Schedule 13E-3 or the Offer Documents. (f) Compliance. The conduct by the Company and its Subsidiaries of their respective businesses is in compliance with all applicable Laws, except for such instances of noncompliance as do not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (g) Company Permits. The Company and its Subsidiaries hold all of the permits, licenses, variances, exemptions, orders, franchises, authorizations, rights, registrations, certifications, accreditations and approvals of Governmental Entities that are necessary for the lawful conduct of the businesses of the Company and its Subsidiaries as currently conducted (each a "Company Permit"), and are in compliance with the terms thereof, except where the failure to hold any such Company Permit or to be in compliance with the terms thereof does not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. None of the Company or any of its Subsidiaries has received any written notice of any action pending or threatened by any Governmental Entities to revoke, withdraw or suspend any Company Permit, except where such revocation, withdrawal or suspension would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (h) Litigation. There is no claim, suit, action, audit, arbitration, investigation, inquiry or other proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any Person that the Company or any such Subsidiary has agreed to indemnify in respect thereof ("Company Litigation"), the resolution of which has or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect (other than Company Litigation arising after the date of this Agreement relating to the approval of this Agreement and the transactions contemplated hereby). There is no Order outstanding against the Company or any of its Subsidiaries or affecting any of their respective properties, assets or business operations the operation or effect of which does have or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (i) Taxes. Each of the Company and its Subsidiaries has duly filed with the appropriate taxing authority all material tax returns, reports, declarations, estimates, information returns and statements, including any related schedules, attachments or other supporting information and including any amendment thereto ("Tax Returns") required to be filed by it, or requests for extensions to file such Tax Returns have been timely filed and granted and have not expired, and such Tax Returns, when filed, were true, correct and complete in all material 13 respects. Except as does not and would not reasonably be expected to have a Company Material Adverse Effect, all material taxes due and owing (whether or not reflected on any Tax Return) by the Company or any of its Subsidiaries have been timely paid or adequately reserved or properly accounted for in accordance with GAAP by the Company and its Subsidiaries. Except as does not and would not reasonably be expected to have a Company Material Adverse Effect, the Company and each of its Subsidiaries has complied with all applicable Laws relating to the payment and withholding of taxes (including employee related taxes). As of the date hereof, except as does not and would not reasonably be expected to have a Company Material Adverse Effect, (i) there is no audit examination, deficiency refund litigation, proposed adjustment, proposed adjustment proceeding (whether judicial or administrative) or matter in controversy pending or, to the knowledge of the Company, threatened with respect to any taxes due and owing by the Company or any of its Subsidiaries, (ii) there are no outstanding agreements or waivers extending the statutory period of limitations for a tax assessment applicable to any Tax Return with respect to a taxable period for which such statute of limitations is still open and (iii) there are no liens for taxes on any asset of the Company or any of its Subsidiaries. As used in this Agreement the term "taxes" includes all domestic or foreign federal, state or local income, franchise, property, sales, use, ad valorem, payroll, social security, unemployment, assets, value added, withholding, excise, severance, transfer, employment, alternative or add-on minimum and other taxes, charges, fees, levies, imposts, duties, licenses and governmental fees or other like assessments including obligations for withholding taxes from payments due or made to any other person, together with any interest, penalties, fines or additional amounts imposed by any taxing authority or additions to tax. (j) Pension and Benefit Plans; ERISA. (i) For purposes of this Agreement, the term "Plan" shall refer to any of the following currently maintained by the Company, any of its Subsidiaries or any other Person that, together with the Company or any of its Subsidiaries, is treated as a single employer under Section 414 of the Code, or with respect to which the Company, any of its Subsidiaries or any other Person that, together with the Company or any of its Subsidiaries, is treated as a single employer under Section 414 of the Code currently contributes or has any current obligation to contribute, for the benefit of any current or former employees, officers or directors of the Company or its Subsidiaries or with respect to which the Company or any of its Subsidiaries has any liability: any written "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), deferred compensation or change-in-control agreement, executive compensation, incentive bonus or other bonus arrangement, employee pension, profit sharing, savings, retirement, stock option, stock purchase, severance pay, life, health, disability or accident insurance plan, or other material employee benefit plan, program, arrangement, agreement or commitment (whether or not in writing). (ii) The Company Disclosure Schedule identifies each Plan. During the period for which the relevant statute of limitations remains open, none of the Plans are: (A) a defined benefit plan subject to Title IV of ERISA; 14 (B) a "Multiemployer plan" as defined in Section 4001 of ERISA; or (C) a "Multiple Employer Plan" as that term is defined in Section 413(a) of the Code. (iii) No Person has incurred any material liability under Title IV of ERISA or Section 412 of the Code during the time such Person was required to be treated as a single employer with the Company or any of its Subsidiaries under Section 414 of the Code that does have or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (iv) Each Plan that is an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and intended to qualify under Section 401 of the Code has either received a favorable determination letter from the Internal Revenue Service with respect to such qualification or has filed for such a determination letter with the Internal Revenue Service within the time permitted under Section 401(b) of the Code, and nothing has occurred since the date of such determination letter (or the filing for such a determination letter) that has resulted in or would reasonably be expected to result in a tax qualification defect that would reasonably be expected to have a Company Material Adverse Effect. (v) Each Plan has been operated and administered in accordance with its terms and in compliance with applicable ERISA provisions and the Code, except for such instances of noncompliance that have not and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (vi) Except as provided by Law (including without limitation so-called "COBRA") no Plan provides benefits in the nature of health or medical insurance to employees or their dependents after their termination of employment with the Company or Subsidiary. (k) Absence of Certain Changes or Events. Except as contemplated by this Agreement, since June 30, 2004, (i) each of the Company and its Subsidiaries has conducted its business, in all material respects, only in the ordinary course and in a manner consistent with past practice (except in connection with the negotiation and execution and delivery of this Agreement), (ii) no event has occurred and no action has been taken that would have been prohibited by the terms of Section 4.2 if such Section had been in effect as of and at all times since June 30, 2004, except for such events and actions that do not and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect and (iii) there has not been any change, event, condition, circumstance or state of facts (whether or not covered by insurance) that has had or that would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (l) No Undisclosed Material Liabilities. There are no liabilities of the Company or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, that do have or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, other than (i) liabilities reflected in the Company's financial statements (together with the related notes thereto) filed with the Company's Quarterly Report on Form 10Q for the fiscal quarter ended 15 June 30, 2004, (ii) liabilities incurred in connection with the transactions contemplated by this Agreement and (iii) liabilities that were incurred in the ordinary course of business since June 30, 2004. (m) Opinion of Financial Advisor. The Special Committee and the Board of Directors of the Company have received the opinion of Banc of America Securities LLC (the "Financial Advisor"), dated October 17, 2004, to the effect that, as of such date and subject to the qualifications stated therein, the Merger Consideration to be received by the holders of Company Common Stock in the Merger (other than Parent, Acquisition and their respective subsidiaries and affiliates and the Rollover Stockholders) is fair from a financial point of view to such holders. (n) Environmental Matters. Neither the Company nor any of its Subsidiaries (i) is, to the knowledge of the Company, the subject of any federal, state, local or foreign investigation, (ii) has received any written notice or claim within the past twelve months or (iii) has entered into any negotiations or agreements with any Governmental Entity, in each of the cases described in subclauses (i), (ii) and (iii) above, relating to any material liability or material remedial action or potential material liability or material remedial action under any Environmental Laws (as defined below). Except as does not have and would not reasonably be expected to have a Company Material Adverse Effect, there has been no Release (as defined below) by the Company or any of its Subsidiaries or, to the knowledge of the Company, there has been no Release by any other party or any threat of a Release, of any Hazardous Substance on, at, from or, to the knowledge of the Company, to any Company Real Property and (ii) none of the Company Owned Real Property (as defined below) or Company Leased Real Property (as defined below) has been used by the Company and its Subsidiaries, or, to the knowledge of the Company, any other party, for the storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Substance or as a landfill or other waste disposal site. As used in this Agreement, (i) the term "Environmental Law" means any Law relating to the protection of the environment, health, safety and natural resources, including for the prevention of pollution or contamination, or the cleanup, regulation and protection of the air, water or soil in the indoor or outdoor environment, (ii) the term "Release" means the spill, emission, leaking, pumping, injecting, deposit, disposal, discharge, dispersal, leaching or migrating of any Hazardous Substance into the indoor or outdoor environment and (iii) the term "Hazardous Substances" means any pollutant, contaminant, effluent, emission, radioactive substance, toxic substance, hazardous waste, hazardous material, medical waste, radioactive waste, special waste, petroleum or petroleum derived substance or waste, asbestos (and any substance containing asbestos), polychlorinated biphenyls, flammable explosives, methane, chemicals known to cause cancer or reproductive toxicity, any material that, because of its quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential threat to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported, or otherwise handled, all other substances or related materials defined as hazardous or toxic in, or otherwise included within the scope of, any Environmental Law, and any hazardous or toxic constituent thereof. (o) Vote Required. Assuming that the representations and warranties made by Parent and Acquisition in Section 3.2(h) are true and correct, the affirmative vote of the holders of (i) a majority of the shares of Company Common Stock outstanding as of the record date for the Special Meeting (such vote is sometimes referred to as the "Required Vote") and (ii) a majority of the shares of Company Common Stock outstanding as of the record date for the 16 Special Meeting, excluding the shares of Company Common Stock held by Parent, Acquisition or any of their respective affiliates and by the Rollover Stockholders (such vote is sometimes referred to as the "Disinterested Vote") are the only votes of the holders of any class or series of the Company's capital stock or other securities necessary (under applicable Law or otherwise) to adopt this Agreement and to consummate the Merger and perform the other transactions contemplated hereby. (p) Board Recommendation. The Board of Directors of the Company, at a meeting duly called and held on October 17, 2004, has, upon recommendation of the Special Committee, by the vote of those directors present (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are advisable and fair to and in the best interests of the Company and the stockholders of the Company and has approved the same and (ii) resolved to recommend, subject to their fiduciary duties under applicable Law and subject to Section 5.2(d), that the holders of the shares of Company Common Stock approve and adopt this Agreement. (q) Intellectual Property. Except as does not have or would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) the Company and its Subsidiaries own or have a license or other right to use all patents, trademarks, service marks, trade names, copyrights, trade secrets and other intellectual property rights used in their respective businesses as currently conducted (collectively, "Company Intellectual Property"), and (ii) neither the Company nor any of its Subsidiaries has received written notice indicating that any of the Company Intellectual Property infringes upon the intellectual property rights of any third party. (r) Properties. The Company Disclosure Schedule contains a complete and accurate listing of all real property owned by the Company and its Subsidiaries (the "Company Owned Real Property"). The Company or a Subsidiary thereof has good, valid and marketable title to all of the Company Owned Real Property and all of their other material properties and assets, in each case free and clear of all Liens, except (A) imperfections of title and encumbrances that are not material in character, amount or extent and that do not, in any material respect, detract from the value of, or, in any material respect, interfere with the present use of, such properties or assets, (B) Liens for Taxes not yet due and payable or being contested in good faith by appropriate proceedings, (C) statutory or common law Liens under leases or rental agreements which are confined to the premises or property leased or rented, (D) deposits or pledges made in connection with, or to secure payment of, worker's compensation, unemployment insurance or old age pension programs mandated under applicable Law, (E) statutory or common law Liens in favor of carriers, warehousemen, mechanics and materialmen and other statutory or common law Liens to secure claims for labor, materials or supplies, (F) purchase money security interests incurred in connection with the purchase of property or assets that are reflected in the financial statements included in the SEC Documents filed prior to the date of this Agreement that are limited to the property or assets so acquired, and (G) with respect to Company Owned Real Property only, Liens reflected in title records. Except as does not have and would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, the Company or one of its Subsidiaries has a good and valid leasehold interest in each parcel of real property leased by the Company or any of its Subsidiaries (the "Company Leased Property"). Except as does not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (A) the Company or one of its Subsidiaries has the right to use and occupancy of the Company Leased Property for the full 17 term of the lease or sublease relating thereto, (B) each such lease or sublease is a legal, valid and binding agreement, enforceable in accordance with its terms, of the Company or a Subsidiary thereof and of the other parties thereto, and there is no, nor has the Company or any of its Subsidiaries received notice of, any material default thereunder, and (C) neither the Company nor any of its Subsidiaries has assigned its interest under any such lease or sublease or sublet any part of the premises covered thereby. (s) Insurance. The Company and its Subsidiaries are covered by valid and currently effective insurance policies issued in favor of the Company and its Subsidiaries that are customary in all material respects for companies of similar size and financial condition in the Company's industry. All such policies are in full force and effect, all premiums due and payable thereon have been paid and the Company and its Subsidiaries have complied with the provisions of such policies, except where such failure to be in full force and effect, such nonpayment or such noncompliance does not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. Except as does not have and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, none of the Company or any of its Subsidiaries has been advised of any defense to coverage or reservation of rights in connection with any claim to coverage asserted or noticed by the Company or any of its Subsidiaries under or in connection with any of their existing insurance policies. None of the Company or its Subsidiaries has received any written notice from or on behalf of any insurance carrier issuing policies or binders relating to or covering the Company or its Subsidiaries that there will be a cancellation or non-renewal of existing policies or binders or a material decrease in coverage or a material increase in deductible or self insurance retention. (t) Labor Matters. None of the Company or any of its Subsidiaries is a party to, or is bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization. There is (i) no strike or material labor dispute, slowdown or stoppage pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, and (ii) to the knowledge of the Company, no union certification petition has been filed with respect to the employees of the Company or its Subsidiaries. (u) Contracts. (A) Subsections (i) through (iii) of Exhibit 3.1(u) to this Agreement each contain, as of the date of this Agreement, a complete and accurate listing of the following contracts, agreements, commitments, leases, licenses, arrangements, instruments and obligations, whether written or oral (and, if oral, a complete and accurate summary thereof), to which the Company or any Subsidiary of the Company is a party, together with all amendments, waivers or other changes thereto: (i) each contract, agreement, commitment, lease, license, arrangement, instrument and/or obligation which is reasonably likely to involve aggregate annual payments by the Company or any Subsidiary of the Company of more than $5,000,000; (ii) all contracts and agreements relating to (A) any indebtedness (which does not include accounts payable incurred in the ordinary course of business), notes payable (including notes payable in connection with acquisitions), accrued interest payable or other obligations for borrowed money, whether current, short-term, or long- 18 term, secured or unsecured, of the Company or any of its Subsidiaries, (B) any purchase money indebtedness or earn-out or similar obligation in respect of purchases of property or assets by the Company or any of its Subsidiaries, (C) any lease obligations of the Company or any of its Subsidiaries under leases which are capital leases in accordance with GAAP, (D) any financing of the Company or any of its Subsidiaries effected through "special purpose entities" or synthetic leases or project financing, (E) any obligations of the Company or any of its Subsidiaries in respect of banker's acceptances or letters of credit (other than stand-by letters of credit in support of ordinary course trade payables), (F) any obligation or liability of the Company or any of its Subsidiaries with respect to interest rate swaps, collars, caps, currency derivatives and similar hedging obligations or (G) any guaranty of any of the foregoing (the liabilities and obligations referred to in (A) through (G) above, "Indebtedness") in excess of $1,000,000, or any Liens upon any properties or assets of the Company or any Subsidiary of the Company as security for such Indebtedness; and (iii) all contracts, agreements and arrangements entered into since August 1, 2002 by the Company or any of its Subsidiaries and any other Person providing for the acquisition by the Company or such Subsidiary (including by merger, consolidation, acquisition of stock or assets or any other business combination) of any corporation, partnership, other business organization or division or unit thereof or any material amount of assets of such other Person that involved or involves the payment of consideration in excess of $10,000,000. (B) Except for matters that do not and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) none of the Company or any of its Subsidiaries is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect under any contract, lease, license or other agreement or instrument, (ii) to the knowledge of the Company, none of the other parties to any such contract, lease, license or other agreement or instrument is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and (iii) neither the Company nor any of its Subsidiaries has received any written notice of the intention of any party to terminate or cancel any such contract, lease, license or other agreement or instrument whether as a termination or cancellation for convenience or for default of the Company or any of its Subsidiaries. (v) Affiliate Contracts and Affiliated Transactions. Except as described in the Company SEC Documents filed prior to the date hereof, no executive officer or director of the Company or of any Subsidiary of the Company (or, to the Company's knowledge, any family member of any such Person who is an individual or any entity in which any such Person or any such family member owns a material beneficial interest) or any Person owning 5% or more of the Company Common Stock is a party to any material contract, agreement, commitment, lease, license, arrangement, instrument, obligation, transaction or understanding with or binding upon the Company or any of its Subsidiaries or any of their respective properties or assets or has any material interest in any material property owned by the Company or any of its Subsidiaries or has engaged in any material transaction with any of the foregoing within the last twelve months. (w) Rights Agreement Amendment. The Company has entered into an amendment to the Rights Agreement pursuant to which (i) the Rights Agreement and the Rights will not be applicable to the Merger, (ii) the execution of this Agreement and the consummation 19 of the Merger shall not result in a "Distribution Date" (as defined in the Rights Agreement), (iii) consummation of the Merger shall not result in Welsh, Carson, Anderson & Stowe IX, L.P. ("WCAS"), Parent, Acquisition, the Rollover Stockholders or their respective spouses, associates, affiliates, general partners and limited partners or Subsidiaries being an "Acquiring Person" (as defined in the Rights Agreement), result in the occurrence of a "Triggering Event" (as defined in the Rights Agreement) or otherwise result in the ability of any Person to exercise any rights under the Rights Agreement or enable or require the Rights to separate from the shares of Company Common Stock to which they are attached and (iv) the Rights Agreement and the Rights will expire immediately prior to the Effective Time. (x) State Takeover Statutes. No "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation enacted under any state Law (with the exception of Section 203 of the DGCL) applicable to the Company is applicable to the Merger or the other transactions contemplated hereby. The Board of Directors of the Company has taken all action necessary to approve WCAS, Parent, Acquisition, the Rollover Stockholders and their respective spouses, associates, affiliates, general partners and limited partners and Subsidiaries, or any combination thereof, becoming "interested stockholders" (within the meaning of Section 203 of the DGCL), in connection with negotiating and entering into agreements or otherwise having arrangements or understandings, in each case among themselves solely in connection with the participation of all or any of them in the transactions contemplated by this Agreement and/or the ownership of Parent. 3.2. Representations and Warranties of Parent and Acquisition. Except as set forth in the disclosure schedule of Parent and Acquisition (the "Parent Disclosure Schedule"), Parent and Acquisition hereby jointly and severally represent and warrant to the Company as follows: (a) Organization, Standing and Power. Each of Parent and Acquisition is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Parent and Acquisition is duly qualified or licensed to do business as a foreign corporation and in good standing to conduct business in each jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification or licensing necessary, other than in such jurisdictions where the failure to so be qualified, licensed or in good standing would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect (as hereinafter defined). Each of Parent and Acquisition has heretofore made available to the Company complete and correct copies of its certificate of incorporation and bylaws (or other organizational documents). Neither Parent nor Acquisition is in violation of or default under the provisions of any such organizational documents, except for any such violations or defaults that would not be reasonably expected to have, individually or in the aggregate, a Parent Material Adverse Effect. (b) Capital Structure. As of the date of this Agreement, the authorized capital stock of Parent consists of 100 shares of common stock of Parent, all of which shares have been validly issued and are fully-paid, nonassessable and owned by WCAS. The authorized capital stock of Acquisition consists of 100 shares of Acquisition Common Stock, all of which shares are fully-paid, nonassessable and owned by Parent. Parent has never had and does not have any Subsidiaries other than Acquisition, and Acquisition has never had and does not have any Subsidiaries. 20 (c) Authority; No Violations; Consents and Approvals. (i) Each of Parent and Acquisition has all requisite corporate power and authority to enter into this Agreement and to perform its obligations under this Agreement. Each of Parent's and Acquisition's execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent and Acquisition have been duly authorized by all necessary corporate action on the part of Parent and Acquisition. This Agreement has been duly executed and delivered by Parent and Acquisition and, assuming the due execution and delivery by the Company, constitutes the valid and binding obligation of Parent and Acquisition enforceable against them in accordance with its terms except as the enforcement hereof may be limited by (A) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws now or hereafter in effect relating to creditors' rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding at Law or in equity). (ii) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by Parent and Acquisition will not result in any Violation of (A) any provision of the Certificate of Incorporation or Bylaws of Parent or Acquisition, (B) any loan or credit agreement, note, bond, mortgage, deed of trust, indenture, lease, plan, permit or other agreement, obligation, instrument, concession, franchise or license to which Parent or Acquisition is a party or by which any of their properties or assets are bound, (C) assuming that all consents, approvals, authorizations and other actions described in Section 3.2(c)(iii) have been obtained and all filings and obligations described in Section 3.2(c)(iii) have been made or fulfilled, any Law applicable to Parent or Acquisition or to their properties or assets or (D) any Order applicable to Parent or Acquisition or to their properties or assets, except, in the case of clauses (B), (C) and (D) only, for any Violations that do not and could not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, assets, liabilities, financial condition or results of operations of Parent and Acquisition, taken as a whole, or on the ability of Parent or Acquisition to perform its obligations under this Agreement (a "Parent Material Adverse Effect"). (iii) No consent, approval, franchise, license, order or authorization of, or registration, declaration or filing with, notice, application or certification to, or permit, waiver or exemption from any Governmental Entity is required by or with respect to Parent or Acquisition in connection with its execution and delivery of this Agreement or the consummation by Parent or Acquisition of the transactions contemplated hereby, except for (A) the requirements of Competition Laws applicable to the transactions contemplated hereby, (B) the filing with the SEC of the Schedule 13E-3 and such other schedules or reports under and such other compliance with the Exchange Act as may be required in connection with this Agreement and the transactions contemplated hereby, (C) the filing of the Certificate of Merger and any related documents with the Secretary of State of the State of Delaware, (D) such filings and approvals as may be required by any applicable state securities, "blue sky" or takeover Laws and (E) such other consents, approvals, franchises, licenses, orders, authorizations, registrations, declarations, filings, notices, applications, certifications, permits, waivers and exemptions the failure of which to be obtained or made have not and could not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect. 21 (d) Information Supplied. None of the information to be supplied by Parent and Acquisition specifically for inclusion or incorporation by reference in the Proxy Statement will, on the date it is first mailed to the holders of Company Common Stock or on the Meeting Date, and none of the information supplied or to be supplied by Parent specifically for inclusion or incorporation by reference in the Schedule 13E-3 will, at the time of its filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If, at any time prior to the Meeting Date, any event with respect to Parent or Acquisition, or with respect to information supplied by Parent or Acquisition specifically for inclusion in the Proxy Statement or the Schedule 13E-3, shall occur which is required to be described in an amendment of, or supplement to, the Proxy Statement or the Schedule 13E-3, such event shall be so described by Parent or Acquisition and included by the parties hereto in the Schedule 13E-3 or provided to the Company for inclusion in the Proxy Statement. All documents that Parent and Acquisition are responsible for filing with the SEC in connection with the transactions contemplated herein will comply as to form, in all material respects, with the applicable provisions of the Exchange Act, and each such document required to be filed with any Governmental Entity other than the SEC will comply in all material respects with the provisions of applicable Law as to the information required to be contained therein. Notwithstanding the foregoing, neither Parent nor Acquisition makes any representation or warranty with respect to the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Proxy Statement or the Schedule 13E-3. (e) Limited Operations of Parent and Acquisition. Parent and Acquisition were each formed on October 14, 2004 solely for the purpose of engaging in the transactions contemplated hereby. Neither Parent nor Acquisition has engaged in any other business activities. Except for (i) obligations or liabilities incurred in connection with its organization and the transactions contemplated hereby and (ii) this Agreement and any other agreements and arrangements contemplated hereby or entered into in furtherance hereof, neither Parent nor Acquisition has incurred any material obligations or liabilities or engaged in any business activities. As of the date of this Agreement, Parent, Acquisition and their respective affiliates own less than 5% of the outstanding Company Common Stock. (f) Financing. Parent has received, executed and delivered a commitment letter, dated as of October 17, 2004 (the "Senior Bank and Bridge Loan Commitment Letter") from JPMorgan Chase Bank, Wachovia Bank, National Association and Merrill Lynch Capital Corporation (the "Lenders") and certain of their affiliates, pursuant to which the Lenders have committed, subject to the terms and conditions set forth therein, to provide to Acquisition (i) up to $780,000,000 in senior secured debt financing ($480,000,000 of which would be in the form of term loans and $300,000,000 of which would be in the form of a revolving credit facility) and (ii) in the event that Acquisition is unable to complete at the Closing a public offering or a Rule 144A or other private placement offering of not less than $660,000,000 of senior subordinated notes, up to $660,000,000 of bridge financing in the form of senior subordinated increasing rate bridge loans, in each case, to complete the transactions contemplated hereby (such financing described in the Senior Bank and Bridge Loan Commitment Letter, the "Bank Financing"). In addition, Parent has received, executed and delivered (i) commitment letters, dated as of October 17, 2004 (the "Equity Commitment Letters") from WCAS and Thoma Cressy Fund VII, L.P. ("TCEP") pursuant to which WCAS and TCEP have committed, subject to the terms and conditions set forth therein, to provide to Parent an aggregate $617,200,000 in cash in exchange for shares of capital stock of Parent and (ii) a commitment letter, dated as of 22 October 17, 2004 (the "WCAS CP IV Commitment Letter", and together with the Senior Bank and Bridge Loan Commitment Letter and the Equity Commitment Letters, the "Financing Letters") from WCAS Capital Partners IV, L.P. ("WCAS CP IV") pursuant to which WCAS CP IV has committed, subject to the terms and conditions set forth therein, to provide to Parent $150,000,000 in cash in exchange for senior subordinated notes and shares of capital stock of Parent, in each case, to complete the transactions contemplated hereby. True and complete copies of the Financing Letters as in effect on the date of this Agreement have been furnished to the Company. As of the date of this Agreement, the Financing Letters are valid and in full force and effect. The financing sources' obligations to fund the commitments under the Financing Letters are not subject to any conditions other than as set forth in the Financing Letters. No event has occurred that (with or without notice, lapse of time, or both) would constitute a default under the Financing Letters on the part of Parent or Acquisition. Neither Parent nor Acquisition is aware of any reason, fact or circumstance existing on the date of this Agreement that (A) makes or is reasonably likely to make any of the statements set forth in any Financing Letter inaccurate, (B) has caused or is reasonably likely to cause any Financing Letter to not be in full force and effect or (C) precludes or is reasonably likely to preclude the satisfaction of the conditions set forth in any Financing Letter. Parent has paid all commitment and other fees required to be paid under the Financing Letters on or prior to the date hereof (and will pay all such fees that are required to be paid after the date hereof). (g) Solvency. Neither Parent nor Acquisition is entering into the transactions contemplated by this Agreement with actual intent to hinder, delay or defraud either present or future creditors. Neither Parent nor Acquisition is in breach of default of any obligation owed to any creditor for Indebtedness or any other creditor who may have a Lien on any of its rights and assets. Neither Parent nor Acquisition has, either voluntarily or involuntarily, (i) filed or consented to the filing against it of a petition in bankruptcy or a petition to take advantage of an insolvency Law, (ii) made an assignment for the benefit of creditors, (iii) consented to the appointment of a receiver for itself or for the whole or any substantial part of its property, (iv) had a petition in bankruptcy filed against it, or (v) been adjudged bankrupt or filed a petition or answer seeking reorganization or arrangement under the federal bankruptcy Laws or any other Laws. After giving effect to the consummation of the transactions contemplated hereby and the debt incurred to finance such transactions, (A) the sum of the present fair saleable value of the assets of the Surviving Corporation will exceed the sum of its total liabilities, (B) the Surviving Corporation will not have incurred, nor believed that it will have incurred, debts beyond its ability to pay such debts as such debts mature, and (C) the Surviving Corporation will have sufficient capital with which to conduct its current businesses and proposed businesses, and the property of the Surviving Corporation will not constitute unreasonably small capital with which to conduct its present businesses and proposed businesses. Notwithstanding anything to the contrary contained above, (A) each representation and warranty contained in this Section 3.2(g) that is being made on the date hereof with respect to the Surviving Corporation after giving effect to the consummation of the transactions contemplated hereby is made on the date hereof assuming that (i) the Company's representations and warranties in Sections 3.1(d), 3.1(h) and 3.1(l) are true and correct, in each case, in all respects (without giving effect to any knowledge, materiality or Material Adverse Effect or similar qualifier), (ii) no circumstance, event or condition (or aggregation of circumstances, events or conditions) occurring after the date of this Agreement will have had at the Effective Time a material adverse effect on the financial condition of the Company and its Subsidiaries, taken as a whole, and (iii) the Company will comply in all respects with its obligations under Sections 4.1 and 4.2 hereof at all times between the date of this Agreement and the Effective Time and (B) all certifications in the bring-down 23 certificate required under Section 6.3(a) that relate to this Section 3.2(g) shall be made assuming that all certificates delivered by the Company at Closing pursuant to Sections 6.2(a) and (b) are true and correct, in each case, in all respects (without giving effect to any knowledge, materiality or Material Adverse Effect or similar qualifier). (h) Delaware Law. None of Parent, Acquisition or any of their respective affiliates was an "interested stockholder" as such term is defined in Section 203 of the DGCL (other than as a result of a transaction approved by the Board of Directors of the Company as described in Section 203(a)(1) of the DGCL) at any time during the three-year period immediately preceding the execution and delivery of this Agreement. ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS 4.1. Affirmative Covenants of the Company. During the period from the date of this Agreement to the Effective Time, except (i) as set forth on Exhibit 4.1 or as otherwise expressly contemplated by this Agreement or (ii) to the extent that Parent shall otherwise consent in writing, the Company shall, and shall cause each of its Subsidiaries to carry on in all material respects their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted. 4.2. Negative Covenants of the Company. During the period from the date of this Agreement to the Effective Time, except (i) as set forth on Exhibit 4.2 or as otherwise expressly contemplated by this Agreement or (ii) to the extent that Parent shall otherwise consent in writing, the Company shall not, and shall not permit any of its Subsidiaries to: (a) (i) declare, set aside or pay dividends on, or make other distributions (whether in cash, stock or property) in respect of, any capital stock (other than cash dividends and distributions by Subsidiaries of the Company to the Company or a wholly-owned Subsidiary of the Company or the Company's regular quarterly dividend), or set aside funds therefor, (ii) adjust, split, combine or reclassify any capital stock, or issue, authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, any capital stock or (iii) purchase, redeem or otherwise acquire any capital stock or securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock, or set aside funds therefor (except upon the exercise of Company Stock Options outstanding on the date of this Agreement as set forth on Exhibit 2.3(a) to the extent cashless exercises are provided for in the Stock Plan governing such Company Stock Option); (b) (i) except for shares of Company Common Stock issuable pursuant to Company Stock Options outstanding on the date of this Agreement that are issued in accordance with the current terms thereof and the Stock Plans, issue, deliver, hypothecate, pledge, sell or otherwise encumber any shares of capital stock, any other voting securities or any securities directly or indirectly convertible into, or exercisable or exchangeable for, capital stock or other voting securities, or any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock based performance units or (ii) amend the terms of any outstanding debt or equity security (including any Company Stock Option) or any Stock Plan; 24 (c) amend or propose to amend its certificate or articles of incorporation or bylaws (or other organizational documents); (d) (i) merge or consolidate with, or acquire any interest in, any Person or division or unit thereof, (ii) acquire or agree to acquire any assets, except for acquisitions of inventory, equipment, raw materials, tools and other assets in the ordinary course of business and consistent with past practice or (iii) make any loan, advance or capital contribution to, or otherwise make any investment in, any Person other than loans or advances to, or investments in, wholly-owned Subsidiaries of the Company existing on the date of this Agreement in the ordinary course of business consistent with past practice; provided, that the foregoing clauses (i) and (ii) shall not prohibit any acquisition (or series of related acquisitions) which does not involve, and is not reasonably expected at the time of consummation thereof to involve, payments by the Company and its Subsidiaries in excess of (A) $10,000,000 in respect of any single acquisition or series of related acquisitions or (B) $100,000,000, when taken together with all other such acquisitions made after the date hereof pursuant to this proviso and the amount of all capital expenditures made after the date hereof pursuant to the CapEx Basket (as hereinafter defined) (the foregoing proviso, the "Acquisition Basket"); (e) sell, lease, license, encumber or otherwise dispose of, or subject to any Lien, any of its assets, other than (i) sales of inventory in the ordinary course of business consistent with past practice and (ii) other dispositions so long as the aggregate value of all assets so disposed does not exceed $10,000,000; (f) authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution; (g) except for increases in the compensation of employees (other than employees who are directors or executive officers) made in the ordinary course of business and consistent with past practice, and except as may be required by applicable Law or pursuant to any Plan or any employment agreement existing on the date of this Agreement, (i) grant to any current or former director, officer or employee any material increase in compensation, severance, termination pay or fringe or other benefits, (ii) enter into any new, or amend (including by accelerating rights or benefits under) any existing, employment, indemnification, change of control, severance or termination agreement with any current or former director or executive officer or (iii) establish, adopt or become obligated under any new Plan or collective bargaining agreement or amend (including by accelerating rights or benefits under) any such Plan or arrangement in existence on the date hereof (except, in each case, to the extent required by applicable Law); (h) (i) assume, incur or guarantee any Indebtedness after the date hereof in excess of $5,000,000 in the aggregate at any one time outstanding, (ii) issue or sell any debt securities or warrants or rights to acquire any debt securities, (iii) guarantee any other obligations of any other Person or (iv) enter into any "keep well" or other agreement to maintain the financial condition of any other Person or any other agreement having the same economic effect; (i) other than as required by SEC guidelines, GAAP or applicable Law, revalue any material assets or make any changes with respect to accounting policies, procedures and practices or change its fiscal year; 25 (j) settle or compromise any pending or threatened claims, litigation, arbitrations or other proceedings (A) involving potential payments by or to the Company or any of its Subsidiaries of more than $1,000,000 in the aggregate, (B) that admit liability or consent to material non-monetary relief, or (C) that otherwise would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; (k) (i) other than with respect to the Debt Offers (as hereinafter defined), pay, discharge or satisfy any other claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than in the ordinary course of business and consistent with past practice, (ii) cancel any Indebtedness, (iii) waive or assign any claims or rights that would reasonably be expected to have a value exceeding $1,000,000 or (iv) waive any material benefits of, or agree to modify in any material respect, or materially fail to enforce, or consent to any material matter with respect to which consent is required under, any material confidentiality, standstill or similar agreement to which the Company or any of its Subsidiaries is a party (except for the Confidentiality Agreement); (l) (i) make or rescind any material tax election, (ii) take any tax position or settle or compromise any claim, action, suit, arbitration, investigation, audit, examination, litigation, proceeding (whether judicial or administrative) or matter in controversy relating to taxes (A) involving potential payments by the Company or any of its Subsidiaries of more than $1,000,000 in the aggregate, (B) that admit liability or consent to any material non-monetary relief, or (C) that otherwise would reasonably be expected, individually or in the aggregate to have a Company Material Adverse Effect, or (iii) make any material change to its method of reporting income, deductions or other tax items for tax purposes; (m) enter into any new line of business; (n) make any capital expenditure; provided that the Company and its Subsidiaries shall be permitted to make any capital expenditure (or series of related capital expenditures) of less than $10,000,000, individually, or $100,000,000, when taken together with all other capital expenditures made after the date hereof pursuant to this proviso and the aggregate amount of all acquisitions made after the date hereof pursuant to the Acquisition Basket (the foregoing proviso, the "CapEx Basket"); (o) enter into any material contract, agreement or arrangement to the extent consummation of the transactions contemplated by this Agreement or compliance by the Company with the provisions of this Agreement could reasonably be expected to result in a Violation of such contract, agreement or arrangement; (p) enter into, modify, amend, cancel or terminate any contract, agreement or arrangement which if so entered into, modified, amended or terminated would reasonably be expected to have a Company Material Adverse Effect or in a manner that would cause a breach of this Agreement; (q) subject to Section 5.2, alter (through merger, liquidation, reorganization, restructuring or any other fashion) the corporate structure or ownership of the Company or any of its Subsidiaries; (r) subject to Section 5.2, except to the extent that the Board of Directors of the Company (acting through the Special Committee) deems necessary or advisable in 26 connection with the entering into of a Permitted Alternative Agreement (as hereinafter defined) in compliance with the provisions of this Agreement, (i) redeem the Rights, or amend or modify or terminate the Rights Agreement other than to delay the Distribution Date (as defined in the Rights Agreement) with respect to, or to render the Rights inapplicable to, the execution, delivery and performance of this Agreement and the transactions contemplated hereby, (ii) permit the Rights to become nonredeemable at the redemption price currently in effect, or (iii) take any action which would allow any Person other than Parent or Acquisition or any of their affiliates to become the Beneficial Owner (as defined in the Rights Agreement) of 15% or more of the Company Common Stock without causing a Distribution Date (as defined in the Rights Agreement) or a Shares Acquisition Date (as defined in the Rights Agreement) to occur or otherwise take any action which would render the Rights Agreement inapplicable to any transaction contemplated by such Person; (s) knowingly or intentionally take any action that results or is reasonably likely to result in any of the representations or warranties of the Company hereunder being untrue in any material respect; or (t) agree to or make any commitment to take any actions prohibited by this Section 4.2. ARTICLE V ADDITIONAL AGREEMENTS 5.1. Access to Information; Confidentiality. Except for information relating to Company Acquisition Proposals and information that, if provided, would adversely affect the ability of the Company or any of its Subsidiaries to assert attorney-client or attorney work product privilege or a similar privilege or as limited by applicable Law, during the period from the date of this Agreement to the Effective Time, the Company shall, and shall cause each of its Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of Parent and Acquisition (including financing sources and their officers, employees, accountants, counsel and other representatives), during normal business hours and upon reasonable request, reasonable access to (i) all of the Company's and its Subsidiaries' books, records, leases, licenses, and contracts (ii) subject to the Company's prior written consent in each instance (which consent shall not be unreasonably withheld, delayed or conditioned), to the Company's and its Subsidiaries' properties, customers, officers, employees, accountants, counsel and other representatives who have material knowledge relating to the Company or any of its Subsidiaries and (iii) to financial and operating data and other information relating the Company and its Subsidiaries. Parent and Acquisition shall conduct any investigation under this Section 5.1 is a manner that does not unreasonably interfere with the conduct of the business of the Company and its Subsidiaries. The Confidentiality Agreement, dated August 27, 2004, between WCAS and the Company (the "Confidentiality Agreement"), shall apply with respect to information furnished thereunder or hereunder and any other activities contemplated thereby or hereby, and Parent and Acquisition shall comply with the provisions of the Confidentiality Agreement. 5.2. No Solicitation. 27 (a) During the period beginning on the date of this Agreement and continuing until 12:01 a.m. (EST) on November 6, 2004 (the "Exclusivity Period Start Date"), the Company and its Subsidiaries and their respective officers, directors, employees, agents, advisors, affiliates and other representatives (such Persons, together with the Subsidiaries of the Company, collectively, the "Company Representatives") shall have the right (acting under the direction of the Special Committee) to (i) initiate, solicit and encourage Company Acquisition Proposals (as hereinafter defined), including by way of providing access to non-public information pursuant to (but only pursuant to) one or more Acceptable Confidentiality Agreements (as hereinafter defined); provided that the Company shall promptly provide to Parent any material non-public information concerning the Company or its Subsidiaries that is provided to any Person given such access which was not previously provided to Parent and (ii) enter into and maintain or continue discussions or negotiations with respect to Company Acquisition Proposals or otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, discussions or negotiations. (b) Subject to Section 5.2(c) and except as may relate to any Person or group of related Persons from whom the Company has received, after the date hereof and prior to the Exclusivity Period Start Date, a written indication of interest that the Board of Directors of the Company (acting through the Special Committee if such committee still exists) reasonably believes is bona fide and could reasonably be expected to result in a Superior Proposal (as hereinafter defined) (each such Person or group, an "Excluded Party"), from the Exclusivity Period Start Date until the Effective Time or, if earlier, the termination of this Agreement in accordance with Article VII, the Company shall not, and shall not direct, authorize or permit any of the Company Representatives, and shall be responsible for noncompliance with the following provisions by any of the foregoing, to, directly or indirectly, (A) initiate, solicit or encourage (including by way of providing information) any prospective purchaser in a manner that, or the invitation or submission of any inquiries, proposals or offers or any other efforts or attempts that constitute or, may reasonably be expected to lead to any Company Acquisition Proposal or engage in any discussions or negotiations with respect thereto or otherwise cooperate with or assist or participate in, or facilitate any such inquiries, proposals, discussions or negotiations or (B) accept a Company Acquisition Proposal or enter into any agreement or agreement in principle (other than an Acceptable Confidentiality Agreement) providing for or relating to a Company Acquisition Proposal or enter into any agreement or agreement in principle requiring the Company to abandon, terminate or fail to consummate the transactions contemplated hereby or breach its obligations hereunder. Subject to Section 5.2(c) and except as may relate to an Excluded Party, on the Exclusivity Period Start Date the Company shall immediately cease and cause to be terminated any existing solicitation, encouragement, discussion or negotiation with any Persons conducted heretofore by the Company or any Company Representatives with respect to any Company Acquisition Proposal. Notwithstanding anything to the contrary contained herein, the Company (A) shall not, and shall not permit any of the Company Representatives to, provide any non-public information to any Excluded Party without first entering into an Acceptable Confidentiality Agreement and (B) will promptly provide to Parent any material non-public information concerning the Company or its Subsidiaries provided to any Excluded Party which was not previously provided to Parent. (c) Notwithstanding anything to the contrary contained in Section 5.2(b), if at any time prior to obtaining Company Stockholder Approval, (i) the Company has otherwise complied with its obligations under this Section 5.2 and the Company has received a written Company Acquisition Proposal from a third party that the Board of Directors of the Company 28 (acting through the Special Committee if such committee still exists) believes in good faith to be bona fide, (ii) the Board of Directors of the Company (acting through the Special Committee if such committee still exists) determines in good faith, after consultation with its independent financial advisors and outside counsel, that such Company Acquisition Proposal constitutes or could reasonably be expected to constitute a Superior Proposal and (iii) after consultation with its outside counsel, the Board of Directors of the Company (acting through the Special Committee if such committee still exists) determines in good faith that the failure to take such action would be inconsistent with its fiduciary duties under applicable Law, then the Company may (x) furnish information with respect to the Company and its Subsidiaries to the Person making such Company Acquisition Proposal and (y) participate in discussions or negotiations with the Person making such Company Acquisition Proposal regarding such Company Acquisition Proposal; provided, that the Company (A) will not, and will not allow Company Representatives to, disclose any non-public information to such Person without entering into an Acceptable Confidentiality Agreement and (B) will promptly provide to Parent any material non-public information concerning the Company or its Subsidiaries provided to such other Person which was not previously provided to Parent. Nothing contained in this Section 5.2 shall prohibit the Company or the Board of Directors of the Company (in each case, acting through the Special Committee if such committee still exists) from taking and disclosing to the Company's stockholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any other disclosure required by applicable Law. (d) Neither the Board of Directors of the Company nor any committee thereof shall directly or indirectly (i) (A) withdraw (or modify in a manner adverse to Parent and Acquisition), or publicly propose to withdraw (or modify in a manner adverse to Parent and Acquisition), the approval, recommendation or declaration of advisability by such Board of Directors or any such committee thereof of this Agreement, or the Merger or the other transactions contemplated by this Agreement or (B) recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any alternative Company Acquisition Proposal, including any Permitted Alternative Agreement (any action described in this clause (i) being referred to as an "Adverse Recommendation Change") or (ii) approve or recommend, or publicly propose to approve or recommend, or allow the Company or any of its Subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement constituting or related to, or that is intended to or could reasonably be expected to lead to, any Company Acquisition Proposal (other than an Acceptable Confidentiality Agreement and, to the extent a Company Acquisition Proposal involves the issuance of securities to stockholders of the Company, other than an appropriate confidentiality agreement that allows the Company to receive and review confidential information with respect to proposed issuer of any such securities); provided, that the Company shall not be prohibited from entering into a Permitted Alternative Agreement (as hereinafter defined) in accordance with Section 7.1(g). Notwithstanding the foregoing, at any time prior to obtaining Company Stockholder Approval, the Board of Directors of the Company (acting through the Special Committee if such committee still exists) may make an Adverse Recommendation Change if such Board of Directors determines in good faith (after consultation with its independent financial advisors and outside counsel) that failure to take such action would be inconsistent with its fiduciary duties to the stockholders of the Company under applicable Law. 29 (e) From and after the date hereof, the Company shall provide notice to Parent of any intent to take any of the actions described in Section 7.1(f) or to terminate this Agreement pursuant to Section 7.1(g) or to enter into a Permitted Alternative Agreement. (f) As used in this Agreement, "Company Acquisition Proposal" means any inquiry, proposal or offer from any Person or group of Persons other than Parent or its affiliates relating to any direct or indirect acquisition or purchase of a business that constitutes 20% or more of the net revenues, net income or assets of the Company and its Subsidiaries, taken as a whole, or 20% or more of the outstanding Company Common Stock, any tender offer or exchange offer that if consummated would result in any Person or group of Persons beneficially owning 20% or more of the outstanding Company Common Stock, or any merger, reorganization, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company (or any Subsidiary or Subsidiaries of the Company whose business constitutes 20% or more of the net revenues, net income or assets of the Company and its Subsidiaries, taken as a whole). (g) As used in this Agreement, "Superior Proposal" means a Company Acquisition Proposal (but changing the references to "20% or more" in the definition of "Company Acquisition Proposal" to "50% or more") which the Board of Directors of the Company (acting through the Special Committee) in good faith determines (based on such matters as it deems relevant, including the advice of its independent financial advisor and outside counsel), would, if consummated, result in a transaction that is more favorable to the stockholders of the Company, (in their capacities as stockholders) than the transactions contemplated hereby (including any changes to the terms of this Agreement proposed by Parent in response to such offer or otherwise). (h) As used in this Agreement, an "Acceptable Confidentiality Agreement" shall mean a confidentiality and standstill agreement that contains provisions which are no less favorable to the Company than those contained in the Confidentiality Agreement. 5.3. Fees and Expenses. (a) Except as otherwise provided in this Section 5.3 and except with respect to claims for damages incurred as a result of a material and willful breach of this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. The Company shall pay all costs and expenses in connection with the printing and mailing of the Proxy Statement as well as all SEC filing fees related thereto. (b) In the event of any termination of this Agreement (i) by Parent under Section 7.1(f), (ii) by the Company under Section 7.1(g) or (iii) by Parent or the Company under Section 7.1(c) or 7.1(h) if, but only if (in the case of termination under Section 7.1(c) or Section 7.1(h) only) (A) a proposed Company Acquisition Proposal shall have been communicated to the Board of Directors of the Company or the Special Committee or publicly announced prior to the (x) Termination Date (as hereinafter defined), in the case of a termination under Section 7.1(c), or (y) Special Meeting, in the case of a termination under Section 7.1(h), and (B) within twelve months after such termination pursuant to 7.1(c) or 7.1(h), the Company (and/or its Subsidiaries) enter(s) into a definitive agreement with the Person or group (or any affiliate of any such Person or any member of such group) that made the Company Acquisition Proposal referred to in clause 30 (A) above) with respect to, or consummate(s), a transaction that would have constituted a Company Acquisition Proposal (the "Subsequent Transaction"), then the Company shall (A) pay to WCAS Management Corporation ("WCAS Management"), a fee in the amount of $40,000,000 (the "Company Termination Fee") and (B) reimburse WCAS Management for the documented out-of-pocket fees and expenses reasonably incurred by it, Parent and Acquisition in connection with this Agreement and the transactions contemplated hereby (including fees and other amounts (including fees and other payments based on a percentage of the Company Termination Fee or the proposed aggregate Merger Consideration) payable to all banks, investment banking firms and other financial institutions, and their respective agents and counsel, and all fees of counsel, accountants, financial printers, experts and consultants to WCAS Management, Parent and its affiliates) (the "Expenses") in an amount not to exceed $750,000, in each case, in cash, by wire transfer of immediately available funds to an account designated by WCAS Management. To the extent required by Section 5.3(b), the Company shall pay the Company Termination Fee to WCAS Management (x) in the case of a termination pursuant to Section 7.1(f) or 7.1(g), on the day of termination of this Agreement or (y) in the case of a termination pursuant to Section 7.1(c) or 7.1(h), on the date, if any, of the entering into of a definitive agreement with respect to, or the consummation of, as the case may be, a Subsequent Transaction. The Company shall reimburse such Expenses, to the extent required by this Section 5.3(b) above, promptly after receiving an invoice therefor from Parent. Parent shall deliver such invoice on or after the date on which the Company is obligated to pay the Company Termination Fee to Parent under this Section 5.3(b). In the event of any termination of this Agreement by Parent under Section 7.1(d) where the breach or failure to perform giving rise to such right of termination was a willful and knowing breach or failure to perform, on the day of termination of this Agreement the Company shall pay to WCAS Management a fee in the amount of $10,000,000 in cash, by wire transfer of immediately available funds to an account designated by WCAS Management. In the event of any termination of this Agreement by the Company under Section 7.1(e) where the breach or failure to perform giving rise to such right of termination was a willful and knowing breach or failure to perform, on the day of termination of this Agreement Parent shall pay to the Company a fee in the amount of $10,000,000 in cash, by wire transfer of immediately available funds to an account designated by the Company. 5.4. Brokers or Finders. (a) The Company represents, as to itself, its Subsidiaries and its affiliates, that no agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company, except for the Financial Advisor, whose fees and expenses will be paid by the Company in accordance with the Company's agreements with such firm (copies of which have been delivered by the Company to Parent prior to the date of this Agreement). (b) Parent and Acquisition represent, as to themselves and their respective affiliates, that no agent, broker, investment banker, financial advisor or other firm or Person is or will be entitled to receive from the Company any broker's or finder's fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Acquisition, except as set forth in the Financing Letters and as set forth in the Parent Disclosure Schedule. 31 5.5. Indemnification; Directors' and Officers' Insurance. (a) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including any such claim, action, suit, proceeding or investigation in which any Person who is now, or has been at any time prior to the date hereof, or who becomes prior to the Effective Time, a director, officer, employee or other agent of the Company or any of its Subsidiaries (each, together with such Person's heirs, executors, administrators and other representatives, the "Indemnitees") is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, (i) the fact that he or she is or was a director, officer, employee or agent of the Company, any of its Subsidiaries or any of their respective predecessors or (ii) this Agreement or any of the transactions contemplated hereby, whether in any case asserted or arising before or after the Effective Time (collectively, "Actions"), subject to this Section 5.5(a), after the Effective Time, Parent and the Surviving Corporation, acting jointly and severally, shall indemnify and hold harmless, to the fullest extent permitted by Law, each Indemnitee against any losses, claims, damages, liabilities, costs, expenses (including, as described below, reasonable attorney's fees and expenses), judgments, and amounts paid in settlement, all in connection with any Action. Within 7 days after an Indemnitee receives notice of any Action, such Indemnitee shall give Parent written notice thereof together with a copy of any written claim, process or other legal pleading; provided, that failure so to notify Parent shall not relieve Parent from any liability that it may have under this Section 5.5(a), except to the extent Parent shall have been actually and materially prejudiced by such failure. Parent may, within 20 days after receiving notice of such Action (or sooner, if the nature of such Action so requires, but in no event within less than five business days after receiving such notice) notify the Indemnitee in writing that, at its own expense, it is assuming the defense of such Action, including the employment of counsel reasonably satisfactory to the Indemnitee. Upon written request by an Indemnitee, and assuming that Parent has not timely assumed such Indemnitee's defense pursuant to the preceding sentence, Parent and the Surviving Corporation, acting jointly and severally, shall advance all reasonable attorney's fees and expenses incurred by such Indemnitee in connection with any Action, provided, that the Indemnitee shall first provide a written undertaking to Parent and the Surviving Corporation to repay all such fees and expenses when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and nonappealable, that indemnification of such Indemnitee in the manner contemplated hereby is prohibited by applicable Law; such judicial determination also shall mean that Parent shall have no indemnification obligation hereunder to that Indemnitee. Any Indemnitee shall have the right to employ separate counsel in defense of any Action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnitee and such counsel shall not appear in the Action, unless (x) Parent shall have failed to assume the defense as provided above or (y) Parent and the Indemnitee are both party to such Action and the Indemnitee determines in good faith upon advice of counsel that joint representation would be inappropriate. If Parent elects not to defend against any Action, or fails to notify an Indemnitee of its election within the required period of time, such Indemnitee may defend, compromise, settle or consent to the entry of a judgment in such Action without the consent of Parent. Parent will not, without prior written consent of the Indemnitee (which consent shall not be unreasonably withheld), settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate an Action, except consent shall not be required if such settlement, compromise, consent or termination includes an unconditional release of such Indemnitee from all liabilities arising out of such Action. If Parent elects to defend against an Action, no Indemnitee shall take any action to settle or compromise such Action or consent to the entry of a 32 judgment therein. Each Indemnitee shall cooperate with all reasonable requests of Parent relating to the defense, resolution, compromise or settlement of any Action. The obligations of Parent and the Surviving Corporation under this Section 5.5(a) shall continue in full force and effect for a period of six (6) years from the Effective Time; provided, however, that all rights to indemnification in respect of any Action asserted or made within such period shall continue until the final disposition of such Action. (b) Without limiting the foregoing, Parent, Acquisition and the Company agree that (i) all rights to indemnification and exculpation from liability for acts and omissions occurring at or prior to the Effective Time and rights to advancements of expenses relating thereto now existing in favor of the current or former directors, officers, employees and agents of the Company and its Subsidiaries (the "Indemnitees") as provided in the charters and/or bylaws (or similar organizational documents) of the Company and its Subsidiaries or in any indemnification agreement listed on Exhibit 5.5(a) shall survive the Merger, and (ii) for a period of six years from the Effective Time, such provisions shall not be amended, repealed or otherwise modified in any manner that would adversely affect the rights thereunder of any such Indemnitees, unless an alteration or modification of such documents is required by applicable Law or each Indemnitee affected thereby otherwise consents in writing thereto. (c) For a period of six years after the Effective Time, the Surviving Corporation shall maintain officers' and directors' liability insurance and fiduciary liability insurance in respect of acts or omissions occurring at or prior to the Effective Time, including the transactions contemplated hereby ("D&O Insurance"), covering Indemnitees who are currently covered by the Company's existing officers' and directors' or fiduciary liability insurance policies on terms no less advantageous to Indemnitees than such existing insurance; provided, that the Surviving Corporation shall not be required to pay an annual premium therefor in excess of 300% of the last annual premium paid prior to the date hereof (the "Current Premium"); provided, further, that if the existing D&O Insurance expires, is terminated or canceled, or if 300% of the Current Premium is insufficient to maintain or procure the coverage contemplated by this Section 5.5(c), during such six-year period, the Surviving Corporation will use its commercially reasonable efforts to obtain as much comparable insurance as can be obtained for 300% of the Current Premium. The provisions of the immediately preceding sentence shall be deemed to have been satisfied if prepaid policies have been obtained prior to the Effective Time from an insurer or insurers that have an insurer financial strength rating by A.M. Best Co. of at least "A," which policies provide the Indemnitees with coverage, from the Effective Time to the sixth anniversary of the Effective Time, including in respect of the transactions contemplated hereby, on terms that are no less advantageous to Indemnitees than the Company's existing D&O Insurance. If such prepaid policies have been obtained prior to the Effective Time, then the Surviving Corporation shall maintain such policies in full force and effect and continue the obligations thereunder. (d) If any of Parent, the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then Parent and the Surviving Corporation shall cause proper provisions to be made so that such Person assumes the obligations set forth in this Section 5.5. 33 (e) This Section 5.5, which shall survive the consummation of the Merger at the Effective Time and shall continue for the periods specified herein, is intended to bind Parent and the Surviving Corporation and inure to the benefit of the Indemnitees, each of whom may enforce the provisions of this Section 5.5 (whether or not parties to this Agreement). The provisions of this Section 5.5 are in addition to, and not in lieu of, any other rights to indemnification, contribution or exculpation of liability that any Indemnitee may be entitled to or hereafter acquire under any Law, agreement or provision of the Company's, the Surviving Corporation's or any Subsidiary's certificate of incorporation or bylaws or otherwise. (f) To the extent permitted by Law, Parent and the Surviving Corporation shall be jointly and severally liable to pay all reasonable expenses, including reasonable attorney's fees and expenses, that may be incurred by any Indemnitee in enforcing the indemnity and other obligations set forth in this Section 5.5. The obligations of Parent and the Surviving Corporation under this Section 5.5 shall not be terminated or modified in such a manner as to adversely affect any Indemnitee without the prior written consent of such Indemnitee and shall survive the consummation of the Merger, it being expressly agreed that the Indemnified Parties to whom this Section 5.5 applies shall be third party beneficiaries of this Section 5.5. 5.6. Reasonable Best Efforts. (a) Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable, under applicable Law or otherwise, to consummate and make effective the transactions contemplated by this Agreement; provided, however, that no party hereto shall be required hereunder to pay any funds to obtain any third party consent. (b) If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities and franchises of the Company, the parties to this Agreement shall direct their respective officers and directors to take all such necessary action. (c) The Company agrees to provide, and will cause its Subsidiaries and its and their respective officers and employees to provide all necessary cooperation reasonably requested by Parent or Acquisition in connection with the arrangement of, and the negotiation of agreements with respect to, the financing contemplated by the Financing Letters (the "Financing") or any Alternative Financing (as hereinafter defined), including (i) by making available to Parent and Acquisition and such financing sources and their representatives and personnel (including for participation at organizational meetings, drafting sessions for offering memoranda and in road shows) personnel, representatives, documents and information of the Company and its Subsidiaries as may reasonably be requested by Parent or Acquisition or such financing sources (ii) if applicable, by cooperating with financing sources in achieving a timely offering and/or syndication of the Financing or any Alternative Financing reasonably satisfactory to Parent and Acquisition and such financing sources and (iii) by using reasonable best efforts to cause the Company's independent accountants to provide any reports, consents and comfort letters reasonably requested in connection with the Financing or any Alternative Financing. 34 (d) Parent and Acquisition shall use their respective commercially reasonable efforts to arrange financing for the transactions contemplated hereby on the terms and conditions described in the Financing Letters, including their respective commercially reasonable efforts to (i) negotiate definitive agreements with respect thereto on the terms and conditions contained therein and (ii) satisfy all conditions applicable to Parent and Acquisition in such definitive agreements that are within their respective control. If any portion of the Financing becomes unavailable on the terms and conditions described in the Financing Letters, then Parent and Acquisition shall use their respective commercially reasonable efforts to obtain any such portion from alternative sources (the "Alternative Financing"); provided, that Parent and Acquisition shall be under no obligation to obtain such Alternative Financing unless it can be obtained on terms which are in the aggregate no less favorable to Parent, the Surviving Corporation and the stockholders of Parent than the terms of the Financing Letters. Parent shall give the Company prompt written notice of any material breach by any party of any of the Financing Letters of which it has knowledge or any termination of any of the Financing Letters. Parent and Acquisition shall keep the Company informed of all material developments with respect to their respective efforts to arrange the financing for the transactions contemplated hereby and shall not permit any amendment or modification to be made to, or any waiver of any provision or remedy under, any of the Financing Letters without (i) the prior written consent of the Company (acting through the Special Committee) if such amendment, modification or waiver would materially and adversely affect the likelihood that the Financing contemplated thereby will be obtained and (ii) in the case of an amendment not covered by clause (i), notice to the Company. 5.7. Publicity. The parties hereto will consult with each other and will mutually agree upon any press release or other public announcement pertaining to the Merger, the Debt Offers, the Financing, any Alternative Financing or this Agreement and shall not issue any such press release or make any such public announcement prior to such consultation and agreement, except pursuant to Section 5.2 or as may be required by applicable Law or any rule or regulation of any United States securities exchange on which securities of the releasing party are listed, in which case the party proposing to issue such press release or make such public announcement shall use its commercially reasonable efforts, taking into account the circumstances of the required disclosure, to consult in good faith with the other party before issuing any such press release or making any such public announcement. The parties hereto have agreed that the Company may issue the press release attached hereto as Exhibit 5.7 promptly following the execution and delivery of this Agreement. 5.8. Consents and Approvals; State Takeover Laws. (a) Parent, Acquisition and the Company shall cooperate with one another in (i) determining whether any action by or in respect of, or filing with, any Governmental Entity is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any contracts, agreements, commitments, leases, licenses, arrangements, instruments or obligations, in connection with the consummation of the transactions contemplated hereby and (ii) seeking timely to obtain any such actions, consents, approvals or waivers. Without limiting the generality of the foregoing, each of the parties hereto shall file or cause to be filed with the Federal Trade Commission (the "FTC"), the Antitrust Division of the Department of Justice (the "Antitrust Division") and any other applicable Governmental Entity any notification required to be filed by it or its "ultimate parent" company under any applicable Competition Laws and the rules and regulations promulgated thereunder with respect to the transactions contemplated by this Agreement. Such parties will use their reasonable best efforts to make such filings promptly 35 and to respond on a timely basis to any requests for additional information made by any such Governmental Entity. Each of the parties hereto agrees to furnish the other with copies of all material correspondence, filings and communications between it and its affiliates and their respective representatives, on the one hand, and the FTC, the Antitrust Division or any other Governmental Entity or members or their respective staffs, on the other hand, with respect to the Merger, other than personal financial information filed therewith. (b) Each party hereto shall cooperate and use its reasonable best efforts to promptly prepare and file all necessary documentation to effect all necessary applications, notices, petitions, filings and other documents, and use its reasonable best efforts to obtain (and will cooperate with each other in obtaining) any consent, acquiescence, authorization, order or approval of, or any exemption or nonopposition by, any Governmental Entity required to be obtained or made by Parent, Acquisition or the Company or any of their respective affiliates in connection with the Merger or the taking of any other action contemplated by this Agreement. Each party hereto will use its reasonable best efforts to obtain prior to the Effective Time any consent, approval or waiver from third parties necessary to allow the Company and its Subsidiaries to continue operating their businesses as presently conducted as a result of the consummation of the transactions contemplated hereby. (c) Each party hereto agrees to furnish the other with such necessary information and reasonable assistance as such other party and its affiliates may reasonably request in connection with their preparation of necessary filings, registrations or submissions of information to any Governmental Entities, including any filings necessary under the provisions of any applicable Competition Law. (d) Without limiting the foregoing, the Company and its Board of Directors (acting through the Special Committee) shall (i) use their commercially reasonable efforts to take all action necessary or otherwise reasonably requested by Parent or Acquisition to exempt the Merger from the provisions of any applicable takeover, business combination, control share acquisition or similar Law and (ii) if any takeover, business combination, control share acquisition or similar Law becomes applicable to this Agreement or the Merger, use their commercially reasonable efforts to take all action necessary to ensure that the Merger may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such statute or regulation on the Merger. 5.9. Notification of Certain Matters. Each party shall use its best efforts to give prompt written notice to each other party of (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated hereby, (b) notice or communication from any Governmental Entity in connection with the transactions contemplated hereby, (c) the occurrence, or failure to occur, of any event of which it becomes aware that has caused or could reasonably be expected to cause any representation or warranty of such party contained in this Agreement that is qualified as to materiality being or becoming as of any time between the date of this Agreement and the Effective Time untrue or inaccurate at such time in any respect or any such representation or warranty that is not so qualified being or becoming as of any time between the date of this Agreement and the Effective Date untrue or inaccurate in any material respect, (d) the failure of it to comply with or satisfy in any material respect any obligation to be complied with or satisfied by it under this Agreement or (e) the commencement or threat of, or any material development with respect to, any Company Litigation or any other action, suit, investigation, 36 inquiry or proceeding which relates to the consummation of the transactions contemplated hereby or the issuance of any Order affecting the Company or any of its Subsidiaries or any of their respective properties or assets, in either case which, if pending, threatened or issued, as the case may be, on or prior to the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.1. The delivery of any notice pursuant to this Section 5.9 is for informational purposes and shall not limit or otherwise affect the remedies available hereunder to any party or parties receiving such notice. 5.10. Continuation of Employee Benefits. (a) From and after the Effective Time, the Surviving Corporation and its Subsidiaries shall honor in accordance with their terms all of the existing employment, severance, consulting, salary continuation and similar agreements between the Company or any of its Subsidiaries and any current or former officer, director, employee or consultant of the Company or any of its Subsidiaries or group of such officers, directors, employees or consultants. (b) Until the first anniversary of the Effective Time, the Surviving Corporation shall not materially and adversely alter the benefits (including health benefits, severance policies and general employment policies and procedures) that are available to employees of the Company and its Subsidiaries on the date hereof (other than modifications to any employee benefit plans in the ordinary course of business consistent with past practice and other than with respect to any equity-based compensation). Nothing in this Section 5.10(b) shall be deemed to prevent the Surviving Corporation or any of its Subsidiaries from making any change required by applicable Law. (c) To the extent permitted under applicable Law, each employee of the Company or its Subsidiaries shall be given credit for all service with the Company or its Subsidiaries (or service credited by the Company or its Subsidiaries) under all employee benefit plans, programs, policies and arrangements maintained by the Surviving Corporation and its Subsidiaries in which they participate or in which they become participants for purposes of eligibility, vesting and benefit accrual including, for purposes of determining (i) short-term and long-term disability benefits, (ii) severance benefits, (iii) vacation benefits and (iv) benefits under any retirement plan. (d) This Section 5.10, which shall survive the consummation of the Merger at the Effective Time and shall continue without limit except as expressly set forth herein, is intended to benefit and bind the Surviving Corporation and any Person (including such Person's heirs, executives, administrators and other representatives) referenced in this Section 5.10, each of whom may enforce the provisions of this Section 5.10 whether or not parties to this Agreement. Except as provided in paragraph (a) above, nothing contained in this Section 5.10 shall create any third party beneficiary rights in any employee or former employee (including any dependent thereof) of the Company, any of its Subsidiaries or the Surviving Corporation with respect to continued employment for any specified period. 5.11. Preparation of the Proxy Statement; Special Meeting. (a) As soon as reasonably practicable following the date of this Agreement, the Company shall prepare in accordance with the provisions of the Exchange Act and file with 37 the SEC the Proxy Statement, and the parties hereto shall prepare in accordance with the provisions of the Exchange Act and file with the SEC the Schedule 13E-3. The parties will cooperate with each other in connection with the preparation of the Proxy Statement and the Schedule 13E-3. The Company will use its commercially reasonable efforts to have the Proxy Statement cleared by the SEC and mailed to its stockholders as promptly as practicable after such filing, and the parties hereto will use their commercially reasonable efforts to have the Schedule 13E-3 cleared by the SEC as promptly as practicable after such filing. Each party agrees to correct any information provided by it for use in the Proxy Statement or the Schedule 13E-3 which shall have become false or misleading in any material respect. The Company will as promptly as practicable notify Parent of (i) the receipt of any oral or written comments from the SEC relating to the Proxy Statement or the Schedule 13E-3 and (ii) any request by the SEC for any amendment to the Proxy Statement or the Schedule 13E-3 or for additional information. The parties hereto shall provide each other with reasonable opportunity to review and comment on drafts of the Proxy Statement (including each amendment or supplement thereto) and the Schedule 13E-3 (including each amendment or supplement thereto) and all responses to requests for additional information by and replies to comments of the SEC (provided that the Company shall consult with Parent in connection with the preparation of all such documents or responses and give due consideration to all comments reasonably proposed by Parent in respect of such documents and responses), prior to filing such documents with or sending such documents to the SEC, and the parties hereto will provide each other with copies of all such filings made and correspondence with the SEC. If, at any time prior to the Effective Time, any information should be discovered by any party hereto which should be set forth in an amendment or supplement to the Proxy Statement or the Schedule 13E-3 so that the Proxy Statement or the Schedule 13E-3 would not include any misstatement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto, and to the extent required by applicable Law, an appropriate amendment or supplement describing such information shall be promptly filed by the Company with the SEC and disseminated by the Company to the stockholders of the Company. (b) The Company shall, acting through its Board of Directors and in accordance with applicable Law and the Certificate of Incorporation and the Bylaws of the Company, duly call, give notice of, convene and hold a special meeting of its stockholders (the "Special Meeting") as promptly as reasonably practicable after the date hereof (and, in no event later than 45 days after the mailing of the Proxy Statement to the stockholders of the Company) for the purpose of considering and taking action upon this Agreement and the Merger and, subject to Section 5.2(d), shall solicit proxies in favor of approval of this Agreement and the Merger. Subject to Section 5.2(d), the Board of Directors of the Company shall recommend approval of this Agreement and the Merger by the Company's stockholders and shall include such recommendation, together with a copy of the opinion referred to in Section 3.1(m), in the Proxy Statement. Without limiting the generality of the foregoing, the Company's obligations pursuant to the first sentence of this Section 5.11(b) shall not be affected by (i) the commencement, public proposal, public disclosure or communication to the Company of any Company Acquisition Proposal or (ii) an Adverse Recommendation Change. Notwithstanding the foregoing, if the Company properly exercises its right to terminate this Agreement pursuant to Section 7.1(g), the Company's obligations pursuant to the first sentence of this Section 5.11(b) shall terminate. The Company may, if it has complied with the provisions of Section 5.2 and this Section 5.11, and if it receives a written bona fide Company Acquisition Proposal that it 38 reasonably expects could result in a Superior Proposal, delay the mailing of the Proxy Statement or the holding of the Special Meeting, in each case, for such time (not to exceed ten business days) as is necessary for the Board of Directors of the Company (acting through the Special Committee) to consider such Company Acquisition Proposal and to determine the effect, if any, on its recommendation in favor of the Merger. 5.12. Consequences If Rights Are Triggered. If any Distribution Date (as defined in the Rights Agreement) or Shares Acquisition Date (as defined in the Rights Agreement) occurs under the Rights Agreement at any time during the period from the date of this Agreement to the Effective Time other than as a result of the actions of Parent, Acquisition or their respective affiliates, the Company, Parent and Acquisition shall make such adjustment to the per share Merger Consideration (without any increase in the aggregate Merger Consideration) as the Company, Parent and Acquisition shall mutually agree so as to preserve the economic benefits that the parties each reasonably expected on the date of this Agreement to receive as a result of the consummation of the Merger. 5.13. Stockholder Litigation. The Company shall give Parent the opportunity to participate in the defense and settlement of any stockholder litigation against the Company and/or its directors relating to this Agreement and the transactions contemplated by this Agreement, and no such settlement shall be agreed to without Parent's prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned. 5.14. Debt Tender Offers. (a) At such time as requested by Parent and Acquisition (provided that Parent and Acquisition shall coordinate with the Company regarding such timing), the Company shall (i) commence cash tender offers to purchase all of the Company's outstanding 9-1/2% Senior Subordinated Notes due 2009 (the "9-1/2% Notes") and all of the Company's 7-1/2% Senior Subordinated Notes due 2013 (the "7-1/2% Notes" and, together with the 9-1/2% Notes, collectively, the "Senior Subordinated Notes") and (ii) solicit the consent of the holders of the 9-1/2% Notes regarding the amendments (the "9-1/2% Notes Indenture Amendments") described on Part A of Exhibit 5.14 hereto to the covenants contained in the Indenture, dated as of June 11, 2001, among the Company, certain Subsidiaries of the Company, as guarantors, and U.S. Bank Trust National Association, as trustee, and the consent of the holders of the 7-1/2% Notes regarding the amendments (the "7-1/2% Notes Indenture Amendments" and, together with the 9-1/2% Notes Indenture Amendments, collectively, "Indenture Amendments") described on Part B of Exhibit 5.14 hereto to the covenants contained in the Indenture, dated as of August 12, 2003, among the Company, certain Subsidiaries of the Company, as guarantors, and U.S. Bank Trust National Association, as trustee. Such offers to purchase and consent solicitations (the "Debt Offers") shall be made on such terms and conditions as are described on Exhibit 5.14 and such other terms and conditions agreed to by Parent and Acquisition; provided, that, in any event, the parties agree that the terms and conditions of the Debt Offers shall provide that the closing thereof shall be contingent upon the closing of the Merger. The Company shall waive any of the conditions to the Debt Offers (other than the conditions that the closing thereof shall be contingent on the closing of the Merger and that there shall be no Order or injunction prohibiting consummation of the Debt Offers) and make any other changes in the terms and conditions of the Debt Offers as may be reasonably requested by Parent and Acquisition (other than a change that decreases the applicable price payable for each Senior Subordinated Note), and the Company shall not, without Parent's and Acquisition's prior consent, waive any condition to the Debt 39 Offers described on Exhibit 5.14, or make any changes to the terms and conditions of the Debt Offers. The Company covenants and agrees that, subject to the terms and conditions of this Agreement, including but not limited to the terms and conditions to the Debt Offers, it will accept for payment, and pay for, the Senior Subordinated Notes and effect the Indenture Amendments, in each case contemporaneously with, and contingent upon, the Effective Time. The Company shall enter into customary dealer manager agreements and customary information agent agreements with a dealer manager and information agent, respectively, recommended by Parent (and reasonably acceptable to the Company). (b) Promptly following the date of this Agreement, the Company shall prepare, subject to advice and comments of Parent and Acquisition, an offer to purchase the 9-1/2% Notes and an offer to purchase the 7-1/2% Notes and forms of the related letters of transmittal and summary advertisement, as well as all other information and exhibits that may be necessary or advisable in connection with the Debt Offers (collectively, the "Offer Documents"). In the event that this Agreement is terminated in accordance with Article VII, the Company will have the right to amend the Offer Documents and/or to terminate the Debt Offers without Parent's consent. All mailings to the holders of Senior Subordinated Notes in connection with the Debt Offers shall be subject to the prior review, comment and approval of Parent and Acquisition (such approval not to be unreasonably withheld, delayed or conditioned). The Company will use its reasonable best efforts to cause the Offer Documents to be mailed to the holders of the Senior Subordinated Notes as promptly as practicable following receipt of the request from Parent and Acquisition under paragraph (a) above to do so. If at any time prior to the Effective Time any information should be discovered by any party hereto, which should be set forth in an amendment or supplement to the Offer Documents mailed to holders of Senior Subordinated Notes so that such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and, to the extent required by applicable Law, an appropriate amendment or supplement describing such information shall promptly be prepared by the Company and, if required, filed by the Company with the SEC or disseminated by the Company to the holders of the Senior Subordinated Notes. 5.15. Stock Purchases. Between the date hereof and the Meeting Date, Parent and Acquisition shall not, and they shall cause their affiliates not to, purchase, sell, assign, encumber or otherwise participate in any transfer of shares of Company Common Stock. ARTICLE VI CONDITIONS PRECEDENT 6.1. Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction or waiver, where permitted by applicable Law, by each party hereto prior to the Effective Time of the following conditions: (a) This Agreement shall have been adopted at the Special Meeting (or an adjournment thereof) by the Required Vote and the Disinterested Vote. 40 (b) (i) All applicable waiting periods (including any extensions thereof) under any Competition Law applicable to the transactions contemplated hereby shall have expired or been terminated, (ii) all actions required by, or filings required to be made with, any Governmental Entity under any such Competition Law that are necessary to permit the consummation of the transactions contemplated hereby shall have been taken or made, and (iii) all consents, approvals and actions of, filings with, and notices to, all other Governmental Entities required of Parent, Acquisition or the Company or any of their respective Subsidiaries or other affiliates in connection with the transactions contemplated hereby shall have been made, obtained or effected, as the case may be, except, in the case of clauses (ii) and (iii) above, for those, the failure of which to be made, obtained or effected does not have and could not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect; provided, however, that the condition set forth in this Section 6.1(b) may not be asserted by any party hereto whose breach of its obligations hereunder has resulted in a failure to obtain such required approval. (c) No Order or Law shall be in effect that enjoins or prohibits the consummation of the Merger or the other transactions contemplated hereby; provided, that prior to invoking this condition, each party hereto shall use its commercially reasonable efforts to have any such legal prohibition or restraint removed. 6.2. Conditions to the Obligation of Parent and Acquisition to Effect the Merger. The obligation of Parent and Acquisition to effect the Merger is further subject to the following conditions, any or all of which may be waived, in whole or in part by Parent and Acquisition, on or prior to the Effective Time, to the extent permitted by applicable Law: (a) Each of the representations and warranties of the Company (i) set forth in Sections 3.1(a) (first sentence only), 3.1(b), 3.1(c)(i), 3.1(c)(ii)(A), 3.1(k) (with respect to Section 4.2), 3.1(o), 3.1(p), 3.1(w), 3.1(x) and 5.4(a) of this Agreement (the "Specified Sections") shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date (provided that, to the extent any such representation or warranty speaks as of a specified date, it need only be true and correct as of such specified date) and (ii) set forth in this Agreement (other than the Specified Sections) shall be true and correct (provided that any representation or warranty of the Company contained herein that is subject to a materiality, Material Adverse Effect or similar qualification shall not be so qualified for purposes of this paragraph) as of the Closing Date as though made on and as of the Closing Date (provided that, to the extent any such representation or warranty speaks as of a specified date, it need only be true and correct as of such specified date), except, in the case of this clause (ii) only, where the failure of such representations and warranties to be true and correct do not and would not reasonably be expected to have a Company Material Adverse Effect; and Parent and Acquisition shall have received a certificate signed on behalf of the Company by the chief executive officer and the chief financial officer of the Company to the effect set forth in this paragraph. (b) The Company shall have performed in all material respects the obligations required to be performed by it under this Agreement on or prior to the Closing Date; and Parent and Acquisition shall have received a certificate signed on behalf of the Company by the chief executive officer and the chief financial officer of the Company to the effect set forth in this paragraph. 41 (c) The Company shall have received all written consents, waivers and authorizations necessary to provide for the continuation in full force and effect after the Effective Time of all contracts, agreements, commitments, leases, licenses, arrangements, instruments and obligations of the Company and its Subsidiaries which, if not so continued as a result of the consummation of the Merger, could reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (d) There shall not have occurred after the date of this Agreement (i) a change or proposed change in Laws (including all changes or proposed changes in payment or reimbursement by government payors) other than the final regulatory changes announced by the Center for Medicare and Medicaid Services on August 2, 2004 applicable to long term acute care hospitals operated as "hospitals within hospitals" or "satellites" that does have or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, financial condition, results of operations or prospects of the Company and its Subsidiaries, taken as a whole, or (ii) any event, change, condition, circumstance or state of facts that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. (e) Parent and Acquisition shall have obtained the proceeds of the Bank Financing substantially on the terms contemplated by the Senior Bank and Bridge Loan Commitment Letter or proceeds of Alternative Financing in an aggregate amount that is sufficient to allow the Surviving Corporation to fulfill its obligations under Article II hereof. (f) Not less than a majority of the aggregate principal amount of the 9-1/2% Notes and not less than a majority of the aggregate principal amount of the 7-1/2% Notes shall have been tendered and accepted for payment by the Company in accordance with the terms and conditions of the Debt Offers, and the Indenture Amendments shall have been approved and shall have become effective, in each case concurrently with the effectiveness of the Merger. (g) The total number of Dissenting Shares shall not exceed 8% of the issued and outstanding shares of Company Common Stock as of the Effective Time. (h) The Company shall have delivered to Parent on the Closing Date a complete, accurate and valid statement conforming with Treasury Regulation Section 1.1445-2(c)(3) certifying that shares of capital stock of the Company do not constitute "United States real property interests" under Section 897(c) of the Code. 6.3. Conditions to Obligation of the Company to Effect the Merger. The obligation of the Company to effect the Merger is further subject to the following conditions, any or all of which may be waived, in whole or in part by the Company, on or prior to the Effective Time, to the extent permitted by applicable Law: (a) The representations and warranties of Parent and Acquisition set forth in this Agreement that are qualified as to materiality shall be true and correct, and the representations and warranties of Parent and Acquisition set forth in this Agreement that are not so qualified shall be true and correct in all material respects, in each case, as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (provided that, to the extent any such representation or warranty speaks as of a specified date, it need only be true and correct as of such specified date); and the Company shall have received a certificate 42 signed on behalf of Parent and Acquisition by their respective presidents to the effect set forth in this paragraph. (b) Parent and Acquisition shall have performed in all material respects the obligations required to be performed by them under this Agreement on or prior to the Closing Date; and the Company shall have received a certificate signed on behalf of Parent and Acquisition by their respective presidents to the effect set forth in this paragraph. (c) Parent and Acquisition shall have obtained the proceeds of the Financing or Alternative Financing in an aggregate amount that is sufficient to allow the Surviving Corporation to fulfill its obligations under Article II hereof. (d) The Board of Directors of the Company (including the Special Committee if such committee continues to exist) shall have received a certificate substantially in the form of the closing "solvency" certificate to be delivered in connection with the Bank Financing or Alternative Financing, as the case may be. ARTICLE VII TERMINATION AND ABANDONMENT 7.1. Termination and Abandonment. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after Company Stockholder Approval: (a) by mutual written consent of the Company, Parent and Acquisition; (b) by Parent or the Company, if any court of competent jurisdiction or other Governmental Entity shall have enacted, issued, promulgated, enforced or entered any Law or Order, or refused to grant any required consent or approval, that has the effect of making the consummation of the transactions contemplated by this Agreement illegal or that otherwise prohibits consummation of such transactions; (c) by Parent or the Company, if the Effective Time shall not have occurred on or before 5:00 p.m., Eastern Standard Time, on April 30, 2005 (the "Termination Date"); provided, that the right to terminate this Agreement under this Section 7.1(c) shall not be available to any party whose failure to fulfill or breach of any obligation under this Agreement has been the cause of, or resulted in, the failure of the Effective Time to occur on or before such date; (d) by Parent, if (i) any of the representations and warranties of the Company contained in this Agreement shall fail to be true and correct such that the condition set forth in Section 6.2(a) would not be satisfied, or (ii) the Company shall have breached or failed to comply with any of its obligations under this Agreement such that the condition set forth in Section 6.2(b) would not be satisfied (in either case, other than as a result of a material breach by Parent or Acquisition of any of their respective obligations under this Agreement) and such failure or breach with respect to any such representation, warranty or obligation cannot be cured or, if curable, shall continue unremedied for a period of twenty days after the Company has received written notice from Parent of the occurrence of such failure or breach (provided that in 43 no event shall such twenty-day period extend beyond the second day preceding the Termination Date); (e) by the Company, if (i) any of the representations and warranties of Parent and Acquisition contained in this Agreement shall fail to be true and correct such that the condition set forth in Section 6.3(a) would not be satisfied, or (ii) Parent or Acquisition shall have breached or failed to comply with any of their respective obligations under this Agreement such that the condition set forth in Section 6.3(b) would not be satisfied (in either case, other than as a result of a material breach by the Company of any of its obligations under this Agreement) and such failure or breach with respect to any such representation, warranty or obligation cannot be cured or, if curable, shall continue unremedied for a period of twenty days after Parent has received written notice from the Company of the occurrence of such failure or breach (provided that in no event shall such twenty-day period extend beyond the second day preceding the Termination Date); (f) by Parent, if (i) an Adverse Recommendation Change shall have occurred, (ii) the Board of Directors of the Company shall have failed to recommend to the Company's stockholders that they approve this Agreement, the Merger and the other transactions contemplated hereby at the Special Meeting, (iii) a tender or exchange offer that would constitute a Company Acquisition Proposal is commenced on or after the date of this Agreement and the Board of Directors of the Company or any committee thereof fails to recommend against or in favor of acceptance of such tender or exchange offer by the stockholders of the Company (including by means of taking no position with respect to the acceptance of such tender or exchange offer by the stockholders of the Company) within ten business days from the commencement thereof or (iv) if the Board of Directors of the Company or any committee thereof resolves to take any of the foregoing actions; (g) by the Company, at any time prior to obtaining the Company Stockholder Approval, upon the Board of Directors of the Company (acting through the Special Committee but only if such committee still exists) resolving to enter into, subject to the terms of this Agreement, including Section 5.3, a definitive agreement containing a Company Acquisition Proposal by a third party; provided, that (i) the Board of Directors of the Company (acting through the Special Committee but only if such committee still exists) shall not so resolve unless (A) the Company shall have complied with its obligations under Section 5.2, (B) the Board of Directors of the Company shall have determined in good faith (after consultation with its independent financial advisors and outside counsel) that such Company Acquisition Proposal constitutes a Superior Proposal and the failure to take such action is inconsistent with the fiduciary duties of the Board of Directors of the Company to the stockholders of the Company under applicable Law, and (C) the Company shall have fully negotiated the final terms of such Company Acquisition Proposal; (ii) immediately following the Board of Directors of the Company (acting through the Special Committee) so resolving, the Company shall have so notified Parent and provided to Parent in writing the identity of the Person making, and the final terms and conditions of, such Company Acquisition Proposal; and (iii) the Company shall have the right to enter into such a definitive agreement (a "Permitted Alternative Agreement") so long as (A) the effectiveness of such agreement is conditioned upon the Company complying with its obligations under Section 5.3, (B) the effectiveness of such agreement is conditioned upon the termination of this Agreement pursuant to this Section 7.1(g) and (C) immediately following the execution of such agreement, such agreement and all related agreements, exhibits, schedules and other documents are delivered to Parent; or 44 (h) by Parent or the Company, if the Special Meeting is held and the Company fails to obtain the Company Stockholder Approval at the Special Meeting (or any reconvened meeting after any adjournment thereof). Any party desiring to terminate this Agreement shall give written notice of such termination to the other parties. 7.2. Effect of Termination. (a) In the event of any termination of this Agreement by any party hereto as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no further liability or obligation hereunder on the part of any party hereto or their respective affiliates, officers, directors or stockholders, except that the last sentence of Section 5.1(a), Section 5.3, Section 5.4, this Section 7.2 and Article VIII shall survive such termination. (b) Except for the termination rights provided in Section 7.1 and except as otherwise provided in Section 8.2, the Company acknowledges and agrees that its sole and exclusive remedy for any claim asserted by the Company against Parent or Acquisition, including, without limitation, any claim that arises out of or relates in any way to the negotiation, entry into, performance, or the terms of this Agreement or the transactions contemplated hereby or the breach or claimed breach thereof shall be limited to the remedy as agreed to in the Contingency Letter Agreement among WCAS, the Company and Parent dated of even date herewith (the "Contingency Letter Agreement") and such remedy shall only be available if this Agreement shall have been terminated by the Company pursuant to Section 7.1(e) and such breaches or claimed breaches by Parent and/or Acquisition giving rise to such termination were knowing and willful. (c) Except for the termination rights provided in Section 7.1 and except as otherwise provided in Section 8.2, Parent and Acquisition acknowledge and agree that: (i) for any claim asserted by Parent or Acquisition against the Company, including, without limitation, any claim that arises out of or relates in any way to the negotiation, entry into, performance, or terms of this Agreement or the transactions contemplated hereby or the breach or claimed breach thereof, Parent and Acquisition shall be entitled to only a single recovery, and such recovery shall be as specified in Section 5.3 hereof; (ii) such recovery shall be Parent and Acquisition's sole and exclusive remedy with respect to any such claim, and all other damages or remedies, at law or in equity (including provisional remedies) are waived; (iii) it is the intent of Parent and Acquisition that the limitations imposed hereby on remedies and the measure of damages shall apply regardless of the theory upon which recovery hereunder is sought. ARTICLE VIII MISCELLANEOUS 8.1. Survival of Representations, Warranties, Covenants and Agreements. None of the representations, warranties, covenants and agreements contained in this Agreement or in any certificate or other instrument delivered pursuant to this Agreement shall survive the Effective Time except for covenants and agreements that contemplate performance after the Effective Time (which covenants and agreements shall survive in accordance with their terms). 45 8.2. Specific Performance. The parties hereto acknowledge and agree that any breach or threatened breach of the terms of this Agreement would give rise to irreparable harm for which money damages would not be an adequate remedy and accordingly the parties agree that, in addition to any other remedies (provided that if a party seeks a remedy pursuant to Section 5.3(b) in connection with a breach, such remedy shall be such party's sole and exclusive remedy with respect to such breach), each party shall be entitled to enforce the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a remedy. 8.3. Notices. Any notice or communication required or permitted hereunder shall be in writing and shall be delivered personally, delivered by nationally recognized overnight courier service, sent by certified or registered mail, postage prepaid, or sent by facsimile (subject to electronic confirmation of such facsimile transmission and the sending (on the date of such facsimile transmission) of a confirmation copy of such facsimile by nationally recognized overnight courier service or by certified or registered mail, postage prepaid). Any such notice or communication shall be deemed to have been given (i) when delivered, if personally delivered, (ii) one business day after it is deposited with a nationally recognized overnight courier service, if sent by nationally recognized overnight courier service, (iii) the day of sending, if sent by facsimile prior to 5:00 p.m. (EST) on any business day or the next succeeding business day if sent by facsimile after 5:00 p.m. (EST) on any business day or on any day other than a business day or (iv) five business days after the date of mailing, if mailed by certified or registered mail, postage prepaid, in each case, to the following address or facsimile number, or to such other address or addresses or facsimile number or numbers as such party may subsequently designate to the other parties by notice given hereunder: (a) if to Parent or Acquisition, to it: c/o Welsh, Carson, Anderson & Stowe IX, L. P. 320 Park Avenue, Suite 2500 New York, New York 10022-6815 Attn: Sean M. Traynor Facsimile: (212) 893-9566 with a copy to: Ropes & Gray LLP 45 Rockefeller Plaza New York, New York 10111 Attn: Othon A. Prounis, Esq. Facsimile: (212) 841-5725 (b) if to the Company, to: Select Medical Corporation 4716 Old Gettysburg Road Mechanicsburg, Pennsylvania 17055 Attn: David S. Chernow, James E. Dalton, Jr. and Michael E. Tarvin, Esq. Facsimile: (717) 975-9981 46 with a copy to: Foley & Lardner LLP 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attn: Jay O. Rothman, Stephen A. Crane and Steven Vazquez Facsimile: (414) 297-4900 8.4. Interpretation. As used herein, the words "hereof", "herein", "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and the words "Article" and "Section" are references to the articles and sections of this Agreement unless otherwise specified. Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation". Unless otherwise provided herein, each accounting term used in this Agreement has the meaning given to it in accordance with GAAP. As used in this Agreement, the term "affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under the Exchange Act. When used herein, the phrase "to the knowledge of" any Person or any similar phrase shall mean, and shall be limited to, the actual knowledge of the individuals listed in Exhibit 8.4 and shall include only their actual knowledge obtained in their respective capacities with Parent, Acquisition or the Company, as the case may be, without any imputation of the actual or imputed knowledge of any other Person or duty to conduct any inquiry or investigation. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Any agreement or statute referred to herein means such agreement or statute as from time to time amended, qualified or supplemented, including, in the case of statutes, by succession of comparable successor statutes. References to the Securities Act and to the Exchange Act are also references to the rules and regulations of the SEC promulgated thereunder. References to a Person are also to its successors and permitted assigns. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. Any standard of materiality included in this Agreement, including any dollar thresholds specified in Section 3.1 or Section 4.2, shall not by reason only of such inclusion be deemed to constitute evidence of a Company Material Adverse Effect or a Parent Material Adverse Effect. 8.5. Counterparts. This Agreement may be executed in two or more counterparts (and may be delivered by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.6. Entire Agreement; No Third Party Beneficiaries. This Agreement, including the schedules and exhibits hereto, together with the confidentiality, nondisclosure and standstill provisions of the Confidentiality Agreement and the Contingency Letter Agreement, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof (other than the confidentiality, nondisclosure and standstill provisions of the Confidentiality Agreement which shall survive the execution and delivery of 47 this Agreement). This Agreement shall be binding upon and inure to the benefit of each party hereto and to their respective successors and permitted assigns, and, except as provided in Sections 5.3(b), 5.5 and 5.10, nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any other right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 8.7. Amendment. This Agreement may be amended, modified or supplemented, only by written agreement of Parent, Acquisition and the Company at any time prior to the Effective Time with respect to any of the terms contained herein; provided, that (a) after Company Stockholder Approval is obtained, no term or condition contained in this Agreement shall be amended or modified in any manner that requires further approval by the stockholders of the Company without so obtaining such further stockholder approval and (b) the Board of Directors of the Company (acting through the Special Committee) shall approve any such amendment, modification or supplement. 8.8. Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Boards of Directors (in the case of the Company, acting through the Special Committee), may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts required hereby, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed by such party. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Subject to Section 7.2, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by Law. 8.9. Governing Law. This Agreement, and all claims arising hereunder or relating hereto, shall be governed and construed and enforced in accordance with the Laws of the State of Delaware, without giving effect to the principles of conflicts of Law thereof. 8.10. Submission to Jurisdiction. Each of the parties hereto irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Delaware Court of Chancery or, in the event (but only in the event) such court does not have complete subject matter jurisdiction, any other court of the State of Delaware or the United States District Court for the District of Delaware, in any action or proceeding arising out of or relating to this Agreement. Each of the parties hereto agrees that, subject to rights with respect to post-trial motions and rights of appeal or other avenues of review, a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in the Delaware Court of Chancery or any other state court of the State of Delaware or the United States District Court for the District of Delaware. Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. 48 8.11. Assignment. No party hereto shall assign this Agreement or any of its rights, interests or obligations hereunder (whether by operation of Law or otherwise) without the prior written consent of the other parties hereto. Any attempted assignment in violation of the foregoing shall be null and void. 8.12. Severability. If any term or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as neither the economic nor legal substance of the transactions contemplated herein is affected in any manner materially adverse to any party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner. 8.13. Obligation of Parent. Notwithstanding anything to the contrary in this Agreement, whenever this Agreement requires Acquisition or the Surviving Corporation to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause Acquisition or the Surviving Corporation to take such action and a guarantee of performance thereof. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan of Merger to be executed and delivered by their respective officers thereunto duly authorized as of the date first above written. THE COMPANY: SELECT MEDICAL CORPORATION By: /s/ Michael E. Tarvin -------------------------------------- Name: Michael E. Tarvin Title: Senior Vice President, General Counsel and Secretary PARENT: EGL HOLDING COMPANY By: /s/ Sean M. Traynor -------------------------------------- Name: Sean M. Traynor Title: Chief Executive Officer ACQUISITION: EGL ACQUISITION CORP. By: /s/ Sean M. Traynor --------------------------------------- Name: Sean M. Traynor Title: Chief Executive Officer 49 EX-99 5 exd10182004select.txt EXHIBIT D -- EQUITY COMMITMENT LETTER EXHIBIT D --------- WELSH, CARSON, ANDERSON & STOWE IX, L.P. 320 Park Avenue, Suite 2500 New York, New York 10022-6815 October 17, 2004 EGL Holding Company c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, New York 10022-6815 Re: Equity Commitment Letter Ladies and Gentlemen: Reference is hereby made to the Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), by and among EGL Holding Company, a Delaware corporation ("Parent"), EGL Acquisition Corp., a Delaware corporation ("Acquisition"), and Select Medical Corporation, a Delaware corporation (the "Company") . Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Merger Agreement. Welsh, Carson, Anderson & Stowe IX, L.P. ("WCAS") hereby commits to Parent that, at the Effective Time, subject to the satisfaction or waiver (with WCAS's consent) of each of the conditions precedent set forth in Sections 6.1 and 6.2 of the Merger Agreement, WCAS and certain investors (together with WCAS, the "Investors") shall purchase equity securities of Parent for an aggregate purchase price of $567,200,000 in cash. The proceeds of such purchase will be contributed by Parent to Acquisition in exchange for common equity of Acquisition and used by Acquisition to provide a portion of the funds needed to consummate the Merger, to finance the Company's tender offer for its existing senior subordinated notes, to repay certain of the existing senior indebtedness of the Company and its subsidiaries and to pay transaction expenses in connection with the Merger and the transactions related thereto. WCAS's commitment and other obligations under this letter agreement will terminate upon the termination of the Merger Agreement. It is contemplated that certain individuals affiliated with WCAS shall, prior to the Effective Time, contribute an aggregate 2,000,000 shares (the "GP Shares") of Company Common Stock to Parent in exchange for shares of Parent capital stock. As provided in Section 2.1(b) of the Merger Agreement, the GP Shares so contributed to Parent would be owned by Parent at the Effective Time and cancelled for no consideration in the Merger. In the event that the aggregate number of GP Shares so contributed to Parent is less than 2,000,000, the amount of WCAS's equity commitment set forth in the preceding paragraph shall be increased by an amount equal to the product of (x) 2,000,000 less the number of GP Shares actually contributed to Parent and held by Parent at the Effective Time and (y) $18.00. At the Closing, Parent shall cause the Surviving Corporation to pay WCAS Management Corporation, as agent for WCAS Management Corporation and certain other investors of the Company, a financing fee equal to $24,600,000, payable in immediately available funds. Parent further agrees to cause the Surviving Corporation to reimburse WCAS and its affiliates for (or pay on their behalf) all of the out-of-pocket fees and expenses incurred by them in connection with the transactions contemplated by the Merger Agreement and this letter agreement, including, without limitation, the fees and expenses of their legal, accounting, financial and other advisors. Notwithstanding anything that may be expressed or implied in this letter agreement, Parent covenants, agrees and acknowledges that no Person other than WCAS shall have any obligation to capitalize Parent or Acquisition hereunder and that, notwithstanding that WCAS and certain of the other Investors are partnerships, no recourse hereunder or under any documents or instruments delivered in connection herewith shall be had against any current or future officer, agent or employee of WCAS or of any other Investor, against any current or future general or limited partner of WCAS or of any other Investor or against any current or future director, officer, employee, general or limited partner, member, affiliate or assignee of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise. Without limiting the generality of the foregoing it is expressly agreed and acknowledged by Parent that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future officer, agent or employee of WCAS or of any other Investor or any current or future general or limited partner of WCAS or of any Investor or any current or future director, officer, employee, general or limited partner, member, affiliate or assignee of any of the foregoing, as such for any obligations of WCAS or of any Investor under this letter agreement or any documents or instruments delivered in connection herewith or for any claim relating to, based on, in respect of or by reason of such obligations or their creation. Each of WCAS and Parent covenants, agrees and acknowledges that: (i) this letter agreement may be executed in two or more counterparts (and may be delivered by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; (ii) this letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; (iii) except for the obligations hereunder to WCAS Management Corporation nothing express or implied is intended to or shall confer upon any other Person any other right, benefit or remedy of any nature whatsoever relating to, under or by reason of this letter agreement; (iv) this letter agreement and all claims arising hereunder shall be governed by and construed and enforced in accordance with the Laws of the State of New York, without giving effect to the principles of conflicts of Laws thereof; (v) any claim arising under this letter agreement shall be brought exclusively in the state or federal courts sitting in New York County, New York, and such courts are agreed to be a convenient forum for such claims and (vi) this letter agreement, together with the Merger Agreement and the other agreements executed in connection with the Merger Agreement on the date hereof, sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof and supercedes all prior written and oral agreements and understandings with respect thereto. 2 Very truly yours, WELSH, CARSON, ANDERSON & STOWE IX, L.P. By WCAS IX Associates LLC, General Partner By /s/ Sean M. Traynor ------------------------------- Managing Member Accepted and agreed to as of the first date above written: EGL HOLDING COMPANY By /s/ Sean M. Traynor ---------------------------------- Name: Sean M. Traynor Title: Chief Executive Officer 3 EX-99 6 exe10182004select.txt EXHIBIT E -- EQUITY COMMITMENT LETTER EXHIBIT E --------- THOMA CRESSEY FUND VII, L.P. Sears Tower, 92nd Floor 233 South Wacker Drive Chicago , IL 60606 October 17, 2004 EGL Holding Company c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, New York 10022-6815 Re: Equity Commitment Letter Ladies and Gentlemen: Reference is hereby made to (i) the Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), by and among EGL Holding Company, a Delaware corporation ("Parent"), EGL Acquisition Corp., a Delaware corporation ("Acquisition"), and Select Medical Corporation, a Delaware corporation (the "Company"), (ii) the Agreement, dated as of the date hereof (the "Rollover Agreement"), by and among Parent and the Rollover Investors named therein and (iii) the Equity Commitment Letter, dated the date hereof (the "WCAS Equity Commitment Letter"), by and between Parent and Welsh, Carson, Anderson & Stowe IX, L.P ("WCAS"). Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Merger Agreement. Thoma Cressey Fund VII, L.P. ("TCEP") hereby commits to Parent that, at the Effective Time, subject to the satisfaction or waiver of each of the conditions precedent set forth in Sections 6.1 and 6.2 of the Merger Agreement, TCEP and its related co-investors, if any, (together with TCEP, the "Investors") shall purchase equity securities of Parent for an aggregate purchase price of $50,000,000 in cash. Such purchase shall be (i) made by TCEP pursuant to investment documentation substantially in the forms attached as Exhibits A, B, C and D to the Rollover Agreement, (ii) conditioned upon and made concurrently with the equity investment contemplated by the WCAS Equity Commitment Letter (the "WCAS Investment") and (iii) made at the same price per share and in the same relative proportions (as between classes of equity securities) as are applicable to the WCAS Investment. The proceeds of such purchase will be contributed by Parent to Acquisition in exchange for common equity of Acquisition and used by Acquisition to provide a portion of the funds needed to consummate the Merger, to finance the Company's tender offer for its existing senior subordinated notes, to repay certain of the existing senior indebtedness of the Company and its subsidiaries and to pay transaction expenses in connection with the Merger and the transactions related thereto. TCEP's commitment and other obligations under this letter agreement will terminate upon the termination of the Merger Agreement. Notwithstanding anything that may be expressed or implied in this letter agreement, Parent covenants, agrees and acknowledges that no Person other than TCEP shall have any obligation to capitalize Parent or Acquisition hereunder and that, notwithstanding that TCEP and certain of the other Investors are partnerships, no recourse hereunder or under any documents or instruments delivered in connection herewith shall be had against any current or future officer, agent or employee of TCEP or of any other Investor, against any current or future general or limited partner of TCEP or of any other Investor or against any current or future director, officer, employee, general or limited partner, member, affiliate or assignee of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise. Without limiting the generality of the foregoing it is expressly agreed and acknowledged by Parent that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future officer, agent or employee of TCEP or of any other Investor or any current or future general or limited partner of TCEP or of any Investor or any current or future director, officer, employee, general or limited partner, member, affiliate or assignee of any of the foregoing, as such for any obligations of TCEP or of any Investor under this letter agreement or any documents or instruments delivered in connection herewith or for any claim relating to, based on, in respect of or by reason of such obligations or their creation. Each of TCEP and Parent covenants, agrees and acknowledges that: (i) this letter agreement may be executed in two or more counterparts (and may be delivered by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; (ii) this letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; (iii) nothing express or implied is intended to or shall confer upon any other Person any other right, benefit or remedy of any nature whatsoever relating to, under or by reason of this letter agreement; (iv) this letter agreement and all claims arising hereunder shall be governed by and construed and enforced in accordance with the Laws of the State of New York, without giving effect to the principles of conflicts of Laws thereof; (v) any claim arising under this letter agreement shall be brought exclusively in the state or federal courts sitting in New York County, New York, and such courts are agreed to be a convenient forum for such claims and (vi) this letter agreement, together with the Merger Agreement, the Rollover Agreement and the other agreements executed in connection with the Merger Agreement on the date hereof, sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof and supercedes all prior written and oral agreements and understandings with respect thereto. 2 Very truly yours, THOMA CRESSEY FUND VII, L.P. By: TC Partners VII, L.P. Its General Partner By: Thoma Cressey Equity Partners, Inc. Its General Partner By: /s/ Bryan C. Cressey ----------------------------------- Name: Bryan C. Cressey Title: Vice President 3 Accepted and agreed to as of the first date above written: EGL HOLDING COMPANY By /s/ Sean M. Traynor ---------------------------------- Name: Sean M. Traynor Title: Chief Executive Officer 4 EX-99 7 exf10182004select.txt EXHIBIT F -- PROJECT EAGLE COMMITMENT LETTER EXHIBIT F JPMorgan Chase Bank Wachovia Bank, Merrill Lynch, Pierce, J.P. Morgan Securities Inc. National Association Fenner & Smith Incorporated 270 Park Avenue Wachovia Capital Merrill Lynch New York, NY 10017 Markets, LLC Capital Corporation 1 Wachovia Center, DC 6 4 World Financial Center 301 South College Street New York, NY 10080 Charlotte, NC 28288 October 17, 2004 EGL Holding Company c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, NY 10022 Attention of Sean Traynor Project Eagle $780,000,000 Senior Secured Credit Facilities $660,000,000 Senior Subordinated Bridge Facility Commitment Letter Ladies and Gentlemen: You have advised JPMorgan Chase Bank ("JPMCB"), J.P. Morgan Securities Inc. ("JPMorgan"), Wachovia Bank, National Association ("Wachovia"), Wachovia Capital Markets, LLC ("WCM"), Merrill Lynch Capital Corporation ("MLCC" and, together with JPMorgan and Wachovia, the "Agents") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") that you intend to consummate the Transactions (such term and each other capitalized term used but not defined herein having the meanings assigned to them in the Term Sheets (as defined below)). In connection with the foregoing, (a) JPMCB is pleased to advise you of its commitment to provide (i) 33.34% of the aggregate principal amount of the Senior Facilities, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Summary of Principal Terms and Conditions attached hereto as Exhibit A (the "Senior Facilities Term Sheet"), and (ii) 33.33% of the aggregate principal amount of the Bridge Facility, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Summary of Principal Terms and Conditions attached hereto as Exhibit B (the "Bridge Facility Term Sheet" and, together with the Senior Facilities Term Sheet, the "Term Sheets"); (b) Wachovia is pleased to advise you of its commitment to provide (i) 33.33% of the aggregate principal amount of the Senior Facilities, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Senior Facilities Term Sheet, and (ii) 33.33% of the aggregate principal amount of the Bridge Facility, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Bridge Facility Term Sheet; and (c) MLCC is pleased to advise you of its commitment to provide (i) 33.33% of the aggregate principal amount of the Senior Facilities, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Senior Facilities Term Sheet, and (ii) 33.34% of the aggregate principal amount of the Bridge Facility, upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Bridge Facility Term Sheet. The commitments described in this paragraph are collectively referred to herein as the "Commitments". It is understood and agreed that (a) JPMCB will act as the sole and exclusive administrative agent and collateral agent for the Senior Facilities, (b) Wachovia will act as the sole and exclusive syndication agent for the Senior Facilities, (c) MLCC will act as the sole and exclusive documentation agent for the Senior Facilities and as sole and exclusive administrative agent for the Bridge Facility, and (d) each will, in such capacities, perform the duties customarily associated with such roles. It is also understood and agreed that (a) JPMorgan, WCM and MLPF&S will act as joint arrangers for the Senior Facilities (in such capacities, the "Senior Facilities Arrangers"), (b) JPMorgan and WCM will act as joint lead arrangers and joint bookrunners for the Senior Facilities (in such capacities, the "Lead Arrangers") and (c) MLPF&S, JPMorgan and WCM will act as joint arrangers and joint bookrunners for the Bridge Facility (in such capacities, the "Bridge Facility Arrangers" and, together with the Senior Facilities Arrangers and the Lead Arrangers, the "Arrangers"), in each case, upon the terms set forth or referred to in this Commitment Letter and in the Term Sheets. It is further understood and agreed that (a) no additional agents, co-agents, arrangers, co-arrangers or bookrunners will be appointed and no other titles awarded in connection with the Facilities without the approval of the Arrangers and (b) no compensation (other than as expressly contemplated by the Term Sheets or the Fee Letters referred to below) will be paid in connection with the Facilities unless you and we so agree. Each Arranger reserves the right, prior to or after the execution of definitive documentation for the Facilities, to syndicate all or a portion of its Commitments to one or more financial institutions that will become parties to such definitive documentation pursuant to (a) syndications of the Senior Facilities to be managed by JPMorgan and (b) a syndication of the Bridge Facility to be managed by MLPF&S (the financial institutions becoming parties to such definitive documentation being collectively referred to as the "Lenders"). You understand that each of the Facilities will be separately syndicated. The Arrangers may decide to commence syndication efforts promptly, and you agree actively to assist the Arrangers in completing a timely and orderly syndication satisfactory to the Arrangers. Such assistance shall include, but not be limited to (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit from your existing lending and investment banking relationships and the existing lending and investment banking relationships of the Fund, the Borrower and Eagle, (b) direct contact during the syndications between your senior management, representatives and advisors and those of the Fund, the Borrower and Eagle, on the one hand, and the proposed Lenders, on the other hand, (c) your assistance (including the use of commercially reasonable efforts to cause the Fund, the Borrower, Eagle and your and their respective affiliates and advisors to assist) in the preparation of Confidential Information Memoranda for the Facilities and other marketing materials to be used in connection with the syndications and (d) the hosting, with the Arrangers, of one or more meetings of prospective Lenders. It is understood and agreed that (a) JPMorgan will, after consultation with you and the other Arrangers, manage all aspects of the syndications of the Senior Facilities, and (b) MLPF&S will, after consultation with you and the other Arrangers, manage all aspects of the syndication of the Bridge Facility, in each case including selection of Lenders, determination of when such Arranger will approach potential Lenders -2- and the time of acceptance of the Lenders' commitments, any naming rights and the final allocations of the commitments among the Lenders. It is also understood and agreed that the amount and distribution of fees among the Lenders (a) under the Senior Facilities will be at JPMorgan's discretion, after consultation with you and the other Arrangers, and (b) under the Bridge Facility will be at MLPF&S's discretion, after consultation with you and the other Arrangers. To assist the Arrangers in their syndication efforts, you agree promptly to prepare and provide to each Agent and each Arranger (and to use commercially reasonable efforts to cause the Fund, the Borrower and Eagle to provide) all information with respect to you, the Borrower, Eagle and their respective subsidiaries, the Transactions and the other transactions contemplated hereby, including all financial information and projections (the "Projections"), as they may reasonably request in connection with the structuring, arrangement and syndication of the Facilities. At the request of the Arrangers, you agree to assist (and to use commercially reasonable efforts to cause the Borrower and Eagle to assist) in the preparation of a version of the information package and presentation consisting exclusively of information and documentation that is either publicly available or not material with respect to you, the Borrower, Eagle, your or their respective subsidiaries or affiliates and any of your or their respective securities for purposes of Federal and state securities laws. The Commitments and the Agents' and the Arrangers' agreements to perform the services described herein are subject to the condition that (a) all information other than the Projections (the "Information") that has been or will be prepared by or on behalf of you, the Fund, the Borrower, Eagle or any of your or their authorized representatives and made available to any Agent or any Arranger (taken as a whole and giving effect to all written updates thereto) is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be prepared by or on behalf of you, the Fund, the Borrower, Eagle or any of your or their authorized representatives and made available to any Arranger or any Agent have been or will be prepared in good faith based upon assumptions that are reasonable at the time of preparation and at the time the related Projections are made available to any Agent or any Arranger. You agree that if at any time from and including the date hereof until the Closing Date the condition in the preceding sentence would not be satisfied if the Information and the Projections were being furnished at such time, then you will promptly supplement the Information and the Projections so that such condition would be satisfied under those conditions. In arranging the Facilities, including the syndications of the Facilities, the Agents and the Arrangers will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent verification thereof. As consideration for the Commitments and the Agents' and the Arrangers' agreement to structure, arrange and syndicate the Facilities in connection therewith, you agree to pay (or to cause the Borrower to pay) to the Agents and the Arrangers the fees as set forth in the Term Sheets, in the Fee Letter dated the date hereof and delivered herewith with respect to the Facilities (the "Fee Letter") and in the Administrative Agent's Fee Letter dated the date hereto between you and JPMCB (the "Administrative Agent's Fee Letter" and, together with the Fee Letter, the "Fee Letters"). -3- Each Commitment and each Agent's agreement and each Arranger's agreement to perform the services described herein are subject to (a) each Agent's and Arranger's not having discovered or otherwise become aware of information not previously disclosed to it that it reasonably believes to be materially inconsistent with the information provided to it by you prior to the date hereof, of the business, operations, assets, liabilities, financial condition or results of operations of Eagle and its subsidiaries, taken as a whole, (b) there not having occurred since December 31, 2003, any Company Material Adverse Effect (as defined below), (c) there not having occurred any significant change or condition in the loan syndication, financial or capital markets (including, without limitation, high-yield market) that, in the judgment of such Arranger, could reasonably be expected to materially impair the syndication of any of the Facilities or the issuance and sale of the Senior Subordinated Notes, (d) the satisfaction of such Arranger that, prior to and during the syndication of the Facilities, there shall be no competing issues of debt securities or commercial bank or other credit facilities of you, the Borrower, Eagle or your or their respective subsidiaries being offered, placed or arranged (other than the Senior Subordinated Notes), (e) the negotiation, execution and delivery of definitive documentation with respect to the Facilities reasonably satisfactory to each Agent and counsel for the Agents, (f) the Arrangers having been afforded a reasonable period to syndicate the Facilities and (g) the other conditions set forth or referred to herein and in the Term Sheets (including the annexes thereto). "Company Material Adverse Effect" means any event, change, condition, circumstance or state of facts or aggregation of events, changes, conditions, circumstances or state of facts, that has had or could reasonably be expected to have, individually or in the aggregate (i) a material adverse effect on the business, operations, assets, liabilities, financial condition or results of operations of Eagle and its subsidiaries, taken as a whole, whether or not covered by insurance, or (ii) a material adverse effect on the ability of the Borrower to perform its obligations under the Facilities, provided that Company Material Adverse Effect shall not be deemed to include any such material adverse effect arising as a result of conditions, events or circumstances (other than any changes or proposed changes in Laws (as defined below), including changes or proposed changes in payment or reimbursement by government payors, but excluding the final regulatory changes announced by the Center for Medicare and Medicaid Services on August 2, 2004 applicable to long term acute care hospitals operated as "hospitals within hospitals") affecting either (x) the United States economy generally or (y) the industry of the Company and its Subsidiaries generally, which in each case does not have a materially disproportionate effect on the Company and its Subsidiaries, taken as a whole. "Laws" means any statute, law, ordinance, rule, regulation, New York Stock Exchange or other stock exchange rule or listing requirement, permit or authorization. Those matters that are not covered by or made clear under the provisions hereof and of the Term Sheets are subject to the reasonable approval and agreement of the Agents, the Arrangers and you. By executing this Commitment Letter, you agree (a) to indemnify and hold harmless the Agents, the Arrangers and their respective officers, directors, employees, affiliates, agents, advisors, representatives and controlling persons from and against any and all losses, claims, damages, liabilities and expenses, joint or several, that may be incurred by or asserted or awarded against any such person (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), in each case arising out of or in connection with this Commitment Letter, the Term Sheets, the Fee Letter, the Transactions and the Facilities, regardless of whether any of such indemnified parties is a -4- party thereto, and to reimburse each of such indemnified parties upon demand for any reasonable legal or other out-of-pocket expenses incurred in connection with investigating or defending any of the foregoing, provided that the foregoing indemnity will not, as to any indemnified party, apply to losses, claims, damages, liabilities or related expenses to the extent they are found in a final judgment of a court to have resulted from the willful misconduct or gross negligence of such indemnified party, and (b) in the circumstances set forth in the Fee Letter, to reimburse the Agents, the Arrangers and their respective affiliates, upon presentation of a summary statement in reasonable detail, for all reasonable out-of-pocket expenses (including, without limitation, reasonable out-of-pocket expenses of the Agents' and the Arrangers' due diligence investigations, consultants' fees, syndication expenses, travel expenses and reasonable fees, disbursements and other charges of counsel) incurred in connection with the Facilities and the preparation of any related documentation (including this Commitment Letter, the Term Sheets, the Fee Letters, the definitive documentation for the Facilities and any security arrangements in connection therewith). Notwithstanding any other provision of this Commitment Letter, no indemnified person shall be liable for any damages arising from the use by others of information or other materials obtained through electronic, telecommunications or other information transmission systems or for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings) in connection with its activities related to this Commitment Letter, the Term Sheets, the Fee Letter, the Transactions and the Facilities. You acknowledge the Agents, the Arrangers and their respective affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. None of the Agents, the Arrangers or any of their respective affiliates will use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or its other relationships with you in connection with the performance by the Agents, the Arrangers or any of their respective affiliates of services for other companies, and none of the Agents, the Arrangers or any of their respective affiliates will furnish any such information to other companies. You also acknowledge that none of the Agents, the Arrangers or any of their respective affiliates has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, the Fund, the Borrower, Eagle or your or their respective subsidiaries, confidential information obtained by you or it or any of your or its respective affiliates from other companies. This Commitment Letter, the Commitments and the agreements of the Agents and the Arrangers shall not be assignable by you without the prior written consent of the other parties hereto, and any attempted assignment without such consent shall be void; provided, however, that this Commitment Letter, the Commitments hereunder and the Fee Letter may be assigned by you to the Borrower pursuant to a writing reasonably satisfactory to each of the Agents and the Arrangers, so long as you remain liable for all your obligations hereunder and thereunder. This Commitment Letter may not be amended or any provision hereof waived or modified except by an instrument in writing signed by each of the Agents and the Arrangers and you. This Commitment Letter may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Commitment Letter. -5- This Commitment Letter is solely for the benefit of the parties hereto and the indemnitees referred to herein and no other person shall acquire or have any rights under or by virtue of this Commitment Letter (other than, following any assignment to the Borrower in accordance with the first sentence of this paragraph, the Borrower). This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. The Agents and the Arrangers may perform the duties and activities described hereunder through any of their respective affiliates and the provisions of the second preceding paragraph shall apply with equal force and effect to any of such affiliates so performing any such duties or activities. You, the Agents and the Arrangers irrevocably and unconditionally submit to the exclusive jurisdiction of any state or Federal court sitting in the City of New York over any suit, action or proceeding arising out of or relating to the Transactions, this Commitment Letter, the Term Sheets, the Fee Letters or the performance of services hereunder or thereunder. You, the Agents and the Arrangers hereby agree that service of any process, summons, notice or document by registered mail addressed to said party shall be effective service of process for any suit, action or proceeding brought in any such court. You, the Agents and the Arrangers irrevocably and unconditionally waive any objection to the laying of venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding has been brought in any inconvenient forum. You, the Agents and the Arrangers agree that a final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon you and may be enforced in any other courts to whose jurisdiction you are or may be subject by suit upon judgment. You, the Agents and the Arrangers irrevocably agree to waive trial by jury in any suit, action, proceeding, claim or counterclaim brought by or on behalf of any party related to or arising out of the Transactions, this Commitment Letter, the Term Sheets, the Fee Letters or the performance of services hereunder or thereunder. You agree that you will not disclose, directly or indirectly, this Commitment Letter, the Term Sheets, the Fee Letters, the contents of any of the foregoing or the activities of the Agents or the Arrangers pursuant hereto or thereto to any person without the prior approval of the Agents and the Arrangers, except that you may disclose (a) this Commitment Letter, the Term Sheets, the Fee Letters and the contents hereof and thereof (i) to (A) the Investors and their respective affiliates and (B) your and their respective shareholders, partners, members, officers, employees, attorneys, accountants and advisors, in the case of clauses (A) and (B), on a confidential and need-to-know basis and (ii) as required by applicable law or compulsory legal process or as requested by a governmental authority, in which case you agree to inform us promptly thereof, (b) this Commitment Letter, the Term Sheets and the contents hereof and thereof (but not the Fee Letters or the contents thereof) to Eagle and its officers, directors, employees, attorneys, accountants and advisors, in each case in connection with the Transactions and on a confidential and need-to-know basis, (c) this Commitment Letter, the Term Sheets and the contents hereof and thereof (but not the Fee Letters or the contents thereof) in any public filing, prospectus or offering memorandum in connection with the Transactions or the financing thereof and (d) the terms of the Facilities and drafts of the definitive documentation in respect of the Facilities to rating agencies on a confidential basis. Please indicate your acceptance of the terms hereof and of the Fee Letter by signing in the appropriate space below and in the Fee Letter and returning to JPMCB the enclosed duplicate originals (or facsimiles) of this Commitment Letter and the Fee Letter not later than 5:00 p.m., New York City time, on October 20, 2004. The Commitments -6- will expire at such time in the event that JPMCB has not then received such executed duplicate originals (or facsimiles) in accordance with the immediately preceding sentence. In the event that the initial borrowing under the Facilities does not occur on or before April 30, 2005, then this Commitment Letter and the Commitments shall automatically terminate unless the Agents and the Arrangers shall, in their sole discretion, agree to an extension. The compensation, reimbursement, indemnification, jurisdiction, syndication, securities demand and confidentiality provisions contained herein and in the Fee Letters shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or the Commitments, provided that your obligations under this Commitment Letter, other than those relating to compensation, reimbursement, jurisdiction, syndication, confidentiality and the securities demand shall automatically terminate and be superseded by the definitive documentation relating to the Facilities upon the execution thereof, and you shall be released from all liability in connection therewith at such time. -7- We are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions. Very truly yours, JPMORGAN CHASE BANK, By: /s/ Bruce Borden ------------------------------------------- Name: Bruce Borden Title: Vice President J.P. MORGAN SECURITIES INC., By: /s/ Adam Reinman ------------------------------------------- Name: Adam Reinman Title: Vice President S-1 WACHOVIA BANK, NATIONAL ASSOCIATION, /s/ Jim Jeffries ------------------------------------------- Name: Jim Jeffries Title: Managing Director WACHOVIA CAPITAL MARKETS, LLC, /s/ Jim Jeffries ------------------------------------------- Name: Jim Jeffries Title: Managing Director S-2 MERRILL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED, /s/ Sarang Gadkari ------------------------------------------- Name: Sarang Gadkari Title: Director MERRILL LYNCH CAPITAL CORPORATION, /s/ Sarang Gadkari ------------------------------------------- Name: Sarang Gadkari Title: Vice President S-3 Accepted and agreed to as of the date first above written: EGL HOLDING COMPANY, By: /s/ Sean M. Traynor ------------------------------------ Name: Sean M. Traynor Title: Chief Executive Officer S-4 EXHIBIT A CONFIDENTIAL October 17, 2004 Project Eagle ------------- $780,000,000 Senior Secured Credit Facilities --------------------------------------------- Summary of Principal Terms and Conditions ----------------------------------------- Borrower: EGL Acquisition Corp., a newly-formed Delaware - -------- corporation (the "Borrower") and a wholly owned subsidiary of EGL Holding Company, a Delaware corporation ("Holdings"), all the equity interests in which will be owned by one or more affiliates of Welsh, Carson, Anderson & Stowe IX, L.P. (the "Fund") and certain other investors designated by the Fund and reasonably satisfactory to the Agents (together with the Fund, the "Investors"). Following the Merger, the "Borrower" will be a Delaware corporation previously identified to the Agents as "Eagle". Transactions: Pursuant to an Agreement and Plan of Merger (the - ------------ "Merger Agreement") to be entered into among Holdings acceptable to the Agents (it being understood that the last draft provided on October 17, 2004 is acceptable to the Agents), the Borrower and Eagle, (a) the Borrower will be merged (the "Merger") with and into Eagle, with Eagle surviving the Merger, (b) each outstanding share of common stock of Eagle (other than shares held by holders who properly exercise appraisal rights and shares held by the Investors and Holdings) will be converted in the Merger into the right to receive $18.00 in cash, (c) options and warrants to acquire shares of common stock of Eagle that are "in-the money" will be canceled pursuant to the Merger Agreement in exchange for a lump-sum payment based on the per-share merger consideration of $18.00 (the aggregate amount payable under clauses (b) and (c) is referred to herein as the "Merger Consideration") and (d) shares of common stock of Eagle owned by the Investors in an aggregate amount of not less than $139,200,000 (based on the per share Merger Consideration value) will be contributed to Holdings in return for common and preferred equity of Holdings (the "Roll-over Equity Contribution"). Exh. A-1 In connection with the Merger, (a) (i) the Investors of Eagle will contribute not less than $617,200,000 in cash to Holdings (it being agreed that the aggregate amount contributed may be reduced by up to $40,000,000 to the extent that cash on the balance sheet of the Borrower at the Closing Date exceeds $220,000,000) in exchange for common and preferred stock of Holdings, the aggregate proceeds of which will be contributed by Holdings to the Borrower as common equity (such contributions being referred to herein as the "Common Equity Contributions"); and (ii) affiliates of the Fund will purchase for cash subordinated notes and equity of Holdings (the "Holdings Subordinated Notes") yielding gross proceeds of not less than $150,000,000, having terms and conditions reasonably satisfactory to the Agents, the aggregate proceeds of which will be contributed by Holdings to the Borrower as common equity (such contributions, together with the Common Equity Contributions being referred to as the "Equity Contributions"); (b) the Borrower will obtain the senior secured credit facilities (the "Senior Facilities") described below under the caption "Senior Facilities" on the date on which the Merger is consummated (the "Closing Date"); (c) the Borrower will either (i) issue up to $660,000,000 in aggregate principal amount of its senior subordinated notes (the "Senior Subordinated Notes") in a public offering or in a Rule 144A or other private placement or (ii) if and to the extent the Borrower is unable to issue the Senior Subordinated Notes on or prior to the Closing Date, borrow $660,000,000 less the amount of the Senior Subordinated Notes issued pursuant to the immediately preceding clause (i) in senior subordinated loans from one or more lenders under a new senior subordinated bridge facility (the "Bridge Facility" and, together with the Senior Facilities, the "Facilities") (it being agreed that the aggregate principal amount of Senior Subordinated Notes and loans under the Bridge Facility, as applicable, shall be reduced by the amount in excess of $10,000,000 over the sum of (x) the aggregate principal amount of Existing Subordinated Notes (as defined below) not tendered pursuant to the Debt Tender Offer (as defined below) plus (y) the amount of the tender premium offered in respect thereof pursuant to the Exh. A-2 Debt Tender Offer plus (z) accrued interest in respect thereof (such amount, the "Untendered Amount")); (d) Eagle will repay all amounts outstanding under the Credit Agreement dated as of September 22, 2000 (the "Existing Credit Agreement"), among Eagle, certain of its subsidiaries the lenders named therein, The Chase Manhattan Bank, The Chase Manhattan Bank of Canada, Banc of America Securities, LLC and CIBC, Inc., and will terminate all commitments thereunder and all liens in respect thereof shall be released; (e) Eagle will consummate a tender offer and consent solicitation (the "Debt Tender Offers") in respect of both its 9-1/2% Senior Subordinated Notes due 2009 and its 7-1/2% Senior Subordinated Notes due 2013 (together, the "Existing Subordinated Notes"), pursuant to which Eagle will repurchase at least a majority of each series of the Existing Subordinated Notes at prices and on terms no less favorable than those described in the Merger Agreement or otherwise reasonably satisfactory in all respects to the Agents, and as a result of which all significant negative covenants in each series of such Existing Subordinated Notes will be eliminated; (f) the Merger Consideration will be paid; and (g) fees and expenses incurred by Holdings, the Borrower, Eagle, the Arrangers and the Agents in connection with the Transactions (as defined below), in an aggregate amount not to exceed $133,000,000, will be paid (the "Transaction Costs"). The transactions described in clauses (a) through (g) of this paragraph, together with the transactions described in the preceeding paragraph, are collectively referred to herein as the "Transactions". Agents: (a) JPMorgan Chase Bank ("JPMCB") will act as sole - ------ and exclusive administrative agent and collateral agent for the Senior Facilities (in such capacities, the "Administrative Agent") for a syndicate of financial institutions (the "Lenders"), (b) Wachovia Bank, National Association ("Wachovia") will act as sole and exclusive syndication agent for the Senior Facilities and (c) Merrill Lynch Capital Corporation ("MLCC" and, together with JPMCB and Wachovia, the "Agents") will act as sole and exclusive documentation agent for the Senior Facilities. In such capacities, each Agent will perform the duties customarily associated with such roles. Exh. A-3 Arrangers: J.P. Morgan Securities Inc. ("JPMorgan"), Wachovia - --------- Capital Markets, LLC ("WCM") and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") will act as joint arrangers for the Senior Facilities (in such capacities, the "Arrangers"), and JPMorgan and WCM will act as joint lead arrangers and joint bookrunners for the Senior Facilities (in such capacities, the "Lead Arrangers"). Each Arranger will perform the duties customarily associated with such roles. JPMorgan will manage the syndication of the Senior Facilities in consultation with the Fund and the other Arrangers. Senior Facilities: (A) A Senior Secured Tranche B Term Loan Facility in an aggregate principal amount of up to $480,000,000 (the "Tranche B Facility"). (B) A Senior Secured Revolving Credit Facility in an aggregate principal amount of up to $300,000,000 (the "Revolving Facility"). Up to an amount to be agreed upon of the Revolving Facility will be available in the form of letters of credit. In connection with the Revolving Facility, the Administrative Agent will make available to the Borrower a swingline facility under which the Borrower may make short-term borrowings of up to an amount to be agreed upon. Any such swingline loan will reduce availability under the Revolving Facility on a dollar-for-dollar basis. Each Lender under the Revolving Facility will, promptly upon request by the Administrative Agent, fund to the Administrative Agent its pro rata share of any swingline borrowings. Incremental Facility: At any time during the term of the Revolving - -------------------- Facility,the Borrower may add an incremental revolving facility or an incremental term loan facility (such facility, the "Incremental Facility") in an aggregate amount of up to $100,000,000. The Incremental Facility will be secured and guaranteed with the Senior Facilities on a pari passu basis. Lenders under the Revolving Facility or Lenders under the Tranche B Facility will be entitled to participate, but will not be required to participate, Exh. A-4 in an Incremental Facility that consists of revolving loans or term loans, respectively, and any new Lenders that commit to provide a portion of an Incremental Facility shall be reasonably acceptable to the Administrative Agent and the Borrower and, in the case of the Revolving Facility, the Issuing Bank (as defined below). Incremental Facilities consisting of revolving commitments shall not have a scheduled maturity date that is earlier than the Revolving Maturity Date (as defined below) and Incremental Facilities consisting of term loans shall not have a scheduled maturity date that is earlier than the Tranche B Maturity Date (as defined below) and shall not have a weighted average life that is shorter than the Tranche B Facility. If the interest rate spread applicable to the Incremental Facility exceeds the interest rate spread applicable to the analogous Senior Facility by more than 0.50%, then the interest rate spread applicable to the analogous Senior Facility shall be increased so that it equals the interest rate spread equal to such Incremental Facility minus 0.50%. The Incremental Facility will have terms and conditions substantially similar to the analogous Senior Facility and will otherwise be on terms and subject to conditions satisfactory to the Agents. The Incremental Facility will be made available only if, after giving effect thereto, (i) no default or event of default exists under the Credit Agreement with respect to the Senior Facilities (the "Credit Agreement"), and (ii) the Borrower is in pro forma compliance with the financial covenants in the Credit Agreement. Purpose: (A) The proceeds of the loans under the Tranche B - ------- Facility (plus up to $200,000,000 of borrowings under the Revolving Facility less the Untendered Amount up to $10,000,000) will be used by the Borrower on the Closing Date, solely (i) first, to pay the Transaction Costs, (ii) second, to pay all principal, interest, fees and other amounts outstanding under the Existing Credit Agreement, (iii) third, to repurchase the Existing Subordinated Notes tendered (and not withdrawn) pursuant to the Debt Tender Offers, including any premium payments associated therewith and (iv) fourth, together with the Equity Contribution, the proceeds of the issuance of the Senior Subordinated Notes and/or the borrowings under Exh. A-5 the Bridge Facility, as applicable, and cash on hand at Eagle, to pay the Merger Consideration. The estimated sources and uses of the funds necessary to consummate the Transactions and the other transactions contemplated hereby are set forth on Annex II hereto. (B) Except as provided in (A) above, the proceeds of loans under the Revolving Facility will be used by the Borrower for working capital and general corporate purposes after the Closing Date. (C) Letters of credit will be used by the Borrower for general corporate purposes. Availability: (A) The full amount of the Tranche B Facility must be - ------------ drawn in a single drawing on the Closing Date. Amounts borrowed under the Tranche B Facility that are repaid or prepaid may not be reborrowed. (B) Loans under the Revolving Facility will be available on (to the extent permitted by clause (A) above under "Purpose") and after the Closing Date at any time prior to the final maturity of the Revolving Facility, in minimum principal amounts to be agreed upon. Amounts repaid under the Revolving Facility may be reborrowed. Interest Rates and Fees: As set forth on Annex I hereto. - ----------------------- Default Rate: With respect to overdue principal, the applicable - ------------ interest rate plus 2.00% per annum and, with respect to any other overdue amount, the interest rate applicable to ABR loans plus 2.00% per annum. Letters of Credit: Letters of credit under the Revolving Facility will - ----------------- be issued by any Agent or affiliate of any Agent (the "Issuing Bank"). Each letter of credit shall expire not later than the earlier of (a) 12 months after its date of issuance and (b) the fifth business day prior to the final maturity of the Revolving Facility. Drawings under any letter of credit shall be reimbursed by the Borrower on the same business day. To the extent that the Borrower does not reimburse the Issuing Bank on the same business day, the Exh. A-6 Lenders under the Revolving Facility shall be irrevocably obligated to reimburse the Issuing Bank pro rata based upon their respective Revolving Facility commitments. The issuance of all letters of credit shall be subject to the customary procedures of the Issuing Bank. Maturity and Amortization: (A) The Tranche B Facility will mature on the date - ------------------------- that is seven years after the Closing Date (the "Tranche B Maturity Date"), and will amortize in equal quarterly installments in an amount equal to 1.00% per annum during the first six years after the Closing Date, and in four equal quarterly installments during the seventh year after the Closing Date. (B) The Revolving Facility will mature on the date that is six years after the Closing Date (the "Revolving Facility Maturity Date"). Guarantees: All obligations of the Borrower under the Senior - ---------- Facilities and any interest rate protection or other hedging arrangements entered into with a Lender (or any affiliate of any Lender) will be unconditionally guaranteed (the "Guarantees") by Holdings and by each existing and subsequently acquired or organized domestic subsidiary of the Borrower (other than Permitted Joint Ventures (definition to be agreed upon)). Any guarantees to be issued in respect of the Senior Subordinated Notes or the Bridge Facility, as applicable, will be subordinated to the Guarantees to the same extent as the Senior Subordinated Notes or the Bridge Facility, as applicable, are subordinated to the Senior Facilities. Security: The Senior Facilities, the Guarantees and any - -------- interest rate protection and other hedging arrangements entered into with a Lender (or any affiliate of any Lender) will be secured by substantially all the assets of Holdings, the Borrower and each other existing and subsequently acquired or organized domestic subsidiary of Holdings (collectively, the "Collateral"), including but not limited to (a) a first-priority pledge of (i) all the capital stock of the Borrower and (ii) all the capital stock held by Holdings, the Borrower or any Exh. A-7 other domestic subsidiary of Holdings, of each existing and subsequently acquired or organized subsidiary of Holdings (which pledge, in the case of any foreign subsidiary, shall be limited to 65% of the capital stock of such foreign subsidiary) and (b) perfected first-priority security interests in, and mortgages on, substantially all tangible and intangible assets of Holdings, the Borrower and each existing or subsequently acquired or organized domestic subsidiary of Holdings (including but not limited to accounts, inventory, intellectual property, licensing agreements, real property, cash and proceeds of the foregoing). It is understood and agreed that security interests may not be taken pursuant to this paragraph to the extent that the Agents (or, after the Closing Date, the Administrative Agent) determine that the detriment to Eagle of providing such security interest would be excessive in relation to the benefits to the Lenders afforded thereby. All the above-described pledges, security interests and mortgages shall be created on terms, and pursuant to documentation, satisfactory to the Lenders and, subject to certain limited exceptions permitted under the definitive documentation for the Senior Facilities, none of the Collateral shall be subject to any other pledges, security interests or mortgages. Mandatory Prepayments: Loans under the Tranche B Facility shall be prepaid - --------------------- with (a) 50% of the Borrower's Excess Cash Flow (to be defined), with stepdowns to 25% and zero based upon the Borrower's ratio of total indebtedness to EBITDA (to be defined) to be agreed upon (with the first payment in respect of Excess Cash Flow required for the first full fiscal year after the Closing Date and due in the following year, and with any voluntary prepayments of the Tranche B Facility during any fiscal year to be credited on a dollar-for-dollar basis against any mandatory prepayment required by this clause (a) in the immediately succeeding fiscal year), (b) 100% of the net cash proceeds of all non-ordinary-course asset sales or other dispositions of property by Holdings and its subsidiaries (including insurance and condemnation proceeds), subject to reinvestment provisions and other limited exceptions to be agreed upon, (c) 100% of the net cash proceeds of issuances of debt obligations of Exh. A-8 Holdings and its subsidiaries (other than (i) the Senior Subordinated Notes, and (ii) other limited debt permitted under the Credit Agreement) and (d) 50% of the net cash proceeds of issuances of equity of Holdings and its subsidiaries (other than limited exceptions to be agreed upon), with stepdowns to 25% and zero based upon the Borrower's ratio of total indebtedness to EBITDA to be agreed upon, provided that, in the case of clauses (c) and (d), the net proceeds of any such issuances of debt or equity will be applied first to repay all outstanding Initial Loans (if any) under the Bridge Facility. The above-described mandatory prepayments shall be applied in order of maturity to the scheduled amortization payments occurring within the next 12 months under the Tranche B Facility and any excess shall be applied pro rata to the remaining amortization payments under the Tranche B Facility. Voluntary Prepayments/ Reductions in Commitments: Voluntary prepayments of borrowings under the Senior - ------------------------- Facilities and voluntary reductions of the unutilized portion of the Revolving Facility commitments will be permitted at any time, in minimum principal amounts to be agreed upon, without premium or penalty, subject to reimbursement of the Lenders' redeployment costs in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant Interest Period (to be defined). All voluntary prepayments under the Tranche B Facility shall be applied in order of maturity to the scheduled amortization payments occurring within the next 12 months under the Tranche B Facility and any excess shall be applied pro rata to the remaining amortization payments thereunder. Representations and Warranties: Usual for facilities and transactions of this type - ------------------- and others to be reasonably specified by the Administrative Agent, including, without limitation, organization and power; authorization and enforceability; accuracy of financial statements; no material adverse change; absence of litigation or conflicts; no violation of law, agreements or instruments; compliance with laws and regulations (including but not limited to ERISA, margin Exh. A-9 regulations and environmental laws); payment of taxes; ownership of properties; inapplicability of the Investment Company Act and the Public Utility Holding Company Act; solvency; effectiveness of regulatory, governmental and third-party approvals; labor matters; environmental matters; accuracy of information; validity, priority and perfection of security interests in the Collateral; and designation of the Senior Facilities as "senior indebtedness" under the indenture relating to the Senior Subordinated Notes and the indentures relating to the Existing Subordinated Notes. Conditions Precedent to Initial Borrowing: Usual for facilities and transactions of this type - -------------------- and others to be reasonably specified by the Administrative Agent, including, without limitation, those specified on Exhibit C to the Commitment Letter to which this Term Sheet is attached; delivery of satisfactory legal opinions, audited financial statements and other financial information to be agreed upon; first-priority perfected security interests in the Collateral (free and clear of all liens, subject to limited exceptions to be agreed upon); execution of the Guarantees, which shall be in full force and effect; accuracy of representations and warranties; absence of defaults, prepayment events or creation of liens under debt instruments or other agreements as a result of the transactions contemplated hereby; evidence of authority; material consents of all persons; compliance with applicable laws and regulations (including but not limited to ERISA, margin regulations, bank regulatory limitations and environmental laws); there not having occurred since December 31, 2003 any Company Material Adverse Effect; payment of fees and expenses; delivery of borrowing certificates; and delivery of evidence of satisfactory insurance. Conditions Precedent to Each Borrowing: Usual and customary for transactions of this type. - -------------- Affirmative Covenants: Usual for facilities and transactions of this type - --------------------- and others to be reasonably specified by the Administrative Agent (to be applicable to Holdings and its subsidiaries), including, without limitation, maintenance of corporate existence and rights; performance of obligations; delivery of audited Exh. A-10 annual consolidated financial statements for Holdings and unaudited quarterly consolidated financial statements for Holdings and other financial information; delivery of notices of default, litigation and material adverse change; maintenance of properties in good working order; maintenance of satisfactory insurance; compliance with laws; inspection of books and properties; further assurances; and payment of taxes. The Borrower will also be required to maintain appropriate interest protection and other hedging arrangements with one or more Lenders (or affiliates thereof) such that the interest cost of at least 50% of all funded debt (including without limitation the Holdings Subordinated Notes and the Senior Subordinated Notes) on the Closing Date shall be fixed for at least three years following the Closing Date. Negative Covenants: Usual for facilities and transactions of this type - ------------------ and others to be reasonably specified by the Administrative Agent (to be applicable to Holdings and its subsidiaries, other than Permitted Joint Ventures), including, without limitation, limitations on dividends or other distributions on capital stock (other than (x) payments to shareholders exercising appraisal rights) or (y) subject to compliance with a minimum ratio of EBITDA to cash interest expense, cash amounts sufficient to pay accrued and unpaid interest on the Holdings Subordinated Notes; limitations on redemptions and repurchases of capital stock; limitations on prepayments, redemptions and repurchases of debt; limitations on liens and sale-leaseback transactions; limitations on loans and investments; limitations on debt; limitations on mergers, recapitalizations, acquisitions and asset sales; limitations on transactions with affiliates; limitations on changes in business conducted; prohibition on change in status of Holdings as a passive holding company that holds no assets other than the capital stock of the Borrower; and limitations on amendments of subordinated debt agreements. Selected Financial (a) A maximum ratio of total indebtedness to EBITDA, Covenants: (b) a minimum ratio of EBITDA to cash interest - ------------------ expense and (c) maximum capital expenditures (with carry-forward provisions to be agreed upon), in each case with definitions of financial terms and levels Exh. A-11 (including any credit of unrestricted cash against total indebtedness) to be agreed upon. Solely for purposes of determining compliance with the financial covenants, if Holdings makes equity contributions to the Borrower (such equity contributions to be common equity or preferred equity with terms and conditions no less favorable than those to be specified in the Credit Agreement) after the end of a fiscal period and on or prior to the date that is five business days after the date financial statements are required to be delivered for such fiscal period, the proceeds of which are promptly applied to prepay loans under the Tranche B Facility, then such prepayment of indebtedness shall be deemed to have occurred prior to the end of such fiscal period. In addition, Holdings may make equity contributions to the Borrower (any such equity contribution to be common equity or preferred equity on terms and conditions no less favorable than those to be specified in the Credit Agreement) in an aggregate amount since the Closing Date not to exceed $30,000,000 and with limitations on frequency to be agreed (such contributions, the "Specified Equity Contributions") and each Specified Equity Contribution shall be included in the calculation of EBITDA for the purpose of determining compliance with the financial covenants at the end of the fiscal quarter immediately preceding the date of such Specified Equity Contribution and any applicable subsequent periods, provided that the Borrower shall prepay loans under the Revolving Facility, if any (without reducing the commitments thereunder), with the proceeds of such Specified Equity Contribution. The provisions of this paragraph shall only be applicable at such time as there are no amounts outstanding under the Bridge Facility. Events of Default: Usual for facilities and transactions of this type - ----------------- and others to be reasonably specified by the Administrative Agent (in certain cases, with grace periods and materiality thresholds to be agreed upon) including, without limitation, nonpayment of principal, interest or other amounts, violation of covenants, inaccuracy of representations and warranties, cross default and cross acceleration, bankruptcy, material judgments, ERISA, actual or asserted invalidity of security documents, Guarantees Exh. A-12 or the subordination provisions of the Bridge Facility or the Senior Subordinated Notes, as applicable, or the Existing Subordinated Notes and Change in Control (to be defined). Voting: Amendments and waivers of the Credit Agreement - ------ and the other definitive credit documentation will require the approval of Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Senior Facilities, except that (a) the consent of each Lender adversely affected thereby shall be required with respect to, among other things, (i) increases in commitments, (ii) reductions of principal, interest or fees, (iii) extensions of scheduled amortization or final maturity and (iv) releases of all or substantially all the Collateral or material Guarantees (other than in connection with any sale of Collateral or the relevant guarantor permitted by the Credit Agreement) and (b) the consent of Lenders holding more than 50% of any class of loans under the Senior Facilities shall be required with respect to any amendment that by its terms adversely affects the rights of such class in respect of payments or Collateral in a manner different than such amendment affects the other classes. Cost and Yield Protection: Usual for facilities and transactions of this type. - ------------------------- Assignments and The Lenders will be permitted to assign loans and Participations: commitments to other Lenders (or their affiliates) - --------------- or to any Federal Reserve Bank without restriction (except that proposed assignments of commitments under the Revolving Facility will require the consent of the Administrative Agent and the Issuing Bank) or to other financial institutions with the consent of the Borrower (unless certain defaults or events of default have occurred and are continuing) and the Administrative Agent (and, in the case of assignments of commitments under the Revolving Facility, the Issuing Bank), in each case not to be unreasonably withheld. Each assignment (except to other Lenders or their affiliates) will be in a minimum amount of (a) $5,000,000 in respect of loans and commitments under the Revolving Facility and (b) $1,000,000 in respect of loans and commitments under the Tranche B Facility. The Administrative Agent will receive a processing and recordation fee of $3,500, payable by Exh. A-13 the assignor and/or the assignee, with each assignment. Assignments will be by novation and will not be required to be pro rata among the Senior Facilities. The Lenders will be permitted to participate loans and commitments without restriction. Voting rights of participants shall be limited to matters in respect of (a) increases in commitments, (b) reductions of principal, interest or fees, (c) extensions of scheduled amortization or final maturity and (d) releases of all or substantially all the Collateral or material Guarantees (other than in connection with any sale of Collateral or the relevant guarantor permitted by the Credit Agreement). Expenses and Indemnification: All reasonable out-of-pocket expenses (including, - --------------- without limitation, expenses incurred in connection with due diligence) of the Arrangers and the Agents associated with the syndication of the Senior Facilities and with the preparation, execution and delivery, administration, waiver or modification and enforcement of the Credit Agreement and the other documentation contemplated hereby and thereby (including the reasonable fees, disbursements and other charges of counsel to the Agents and Arrangers) are to be paid by the Borrower. In addition, all reasonable out-of-pocket expenses of the Lenders for enforcement costs and documentary taxes associated with the Senior Facilities are to be paid by the Borrower. The Borrower will indemnify the Arrangers, the Agents, the other Lenders and their affiliates and their respective officers, directors, employees, affiliates, agents and controlling persons and hold them harmless from and against all costs, expenses (including reasonable fees, disbursements and other charges of counsel) and liabilities of any such indemnified person arising out of or relating to any claim or any litigation or other proceedings (regardless of whether any such indemnified person is a party thereto) that relate to the proposed Transactions, including the financing contemplated thereby, or any transactions connected therewith, provided that none of the Arrangers, the Agents or any other Lender (nor any of their respective officers, directors, employees, affiliates, agents and controlling persons) will be indemnified for its gross negligence or willful misconduct. Exh. A-14 Any costs or expenses advanced pursuant to the foregoing provisions shall be reimbursed to the extent that such costs or expenses are finally judicially determined to have resulted from the gross negligence or willful misconduct of the indemnified party by a court of competent jurisdiction. Governing Law and Forum: New York. - ----------------------- Counsel to the Agents and Arrangers: Cahill Gordon & Reindel LLP. - ------------- Exh. A-15 ANNEX I Interest Rates: The interest rates under the Senior Facilities will - -------------- be as follows: Revolving Facility ------------------ At the option of the Borrower, Adjusted LIBOR plus 2.50% or ABR plus 1.50%, subject to stepdowns to be agreed upon based upon the Borrower's ratio of total indebtedness to EBITDA. Tranche B Facility ------------------ At the option of the Borrower, Adjusted LIBOR plus 2.50% or ABR plus 1.50%. All Senior Facilities --------------------- The Borrower may elect interest periods of 1, 2, 3 or 6 months (or, to the extent made available by the applicable Lenders, 9 or 12 months) for Adjusted LIBOR borrowings. Calculation of interest shall be on the basis of actual days elapsed in a year of 360 days (or 365 or 366 days, as applicable, in the case of ABR loans based on the Prime Rate) and interest shall be payable at the end of each interest period and, in any event, at least every 3 months or 90 days, as applicable. ABR is the Alternate Base Rate, which is the higher of JPMCB's Prime Rate and the Federal Funds Effective Rate plus 1/2 of 1.00%. Adjusted LIBOR will at all times include statutory reserves. Letter of Credit Fee: A per annum fee equal to the spread over Adjusted - -------------------- LIBOR under the Revolving Facility will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Facility, payable in arrears at the end of each quarter and upon the termination of the Revolving Facility, in each case for the actual number of days elapsed over a 360-day A-I-1 year. Such fees shall be distributed to the Lenders participating in the Revolving Facility pro rata in accordance with the amount of each such Lender's Revolving Facility commitment. In addition, the Borrower shall pay to the Issuing Bank, for its own account, (a) a fronting fee of 0.125% per annum on the aggregate face amount of outstanding letters of credit, payable in arrears at the end of each quarter and upon the termination of the Revolving Facility, in each case for the actual number of days elapsed over a 360-day year, and (b) customary issuance and administration fees. Commitment Fees: 0.50% per annum, with a stepdown to 0.375% based upon - --------------- the Borrower's ratio of total indebtedness to EBITDA, on the undrawn portion of the commitments in respect of the Revolving Facility, commencing to accrue on the Closing Date and payable quarterly in arrears after the Closing Date. For the purpose of calculating the commitment fee, outstanding swingline loans will be deemed not to utilize the Revolving Facility commitments. A-I-2 ANNEX II Estimated Sources and Uses of Funds (in millions) Uses of Funds Sources of Funds - ------------- ---------------- Merger Consideration $ 1,834.2 Tranche B Facility $ 480.0 Roll-over Equity 139.2 Revolving Facility 200.01 Refinance Existing Debt2 350.0 Senior Subordinated Notes 660.03 Transaction Costs4 133.0 Holdings Subordinated Notes 150.0 Cash on Balance Sheet 10.0 Equity Contributions5 617.2 Roll-over Equity 139.2 Excess Cash on Balance Sheet 220.0 ----------- ----------- Total Uses $ 2,466.4 Total Sources $ 2,466.4 =========== ===========
_________________________________________ 1 Amount of Revolving Facility to be drawn on the Clsoing Date to be decreased by the Untendered Amount up to $10,000,000. 2 Includes the Existing Credit Agreement and the Existing Subordinated Notes and assumes all the Existing Subordinated Notes are repurchased pursuant to the Debt Tender Offers. 3 To be decreased by the Untendered Amount in excess of $10,000,000. 4 Includes tender premium to be paid in connection with the Debt Tender Offers. 5 To be decreased by up to $40,000,000 to the extent Excess Cash on Balance Sheet exceeds $220,000,000. A-II-1 EXHIBIT B CONFIDENTIAL October 17, 2004 Project Eagle ------------- $660,000,000 Senior Subordinated Bridge Facility ------------------------------------------------ Summary of Principal Terms and Conditions ----------------------------------------- Initial Loans: The Lenders (as defined below) will make loans (the - ------------- "Initial Loans") to the "Borrower" (as defined below) on the Closing Date (as defined in Exhibit A to the Commitment Letter to which this Exhibit B is attached) in an aggregate principal amount of up to $660,000,000 less the Untendered Amount in excess of $10,000,000. The Agents (as defined below) and each assignee of any portion of the Initial Loans or of the Agents' commitments to make the Initial Loans are collectively referred to as the "Lenders". Borrower: EGL Acquisition Corp., a newly-formed Delaware - -------- corporation (the "Borrower") and a wholly owned subsidiary of EGL Holding Company, a Delaware corporation ("Holdings"), all the equity interests in which will be owned by one or more affiliates of Welsh, Carson, Anderson & Stowe IX, L.P. (the "Fund") and certain other investors designated by the Fund and reasonably satisfactory to the Agents. Following the Merger described under the heading "Transactions" in Exhibit A to the Commitment Letter to which this Exhibit B is attached, the "Borrower" will be a Delaware corporation previously identified to the Agents as "Eagle". Guarantees: The obligations of the Borrower in respect of the - ---------- Initial Loans will be unconditionally and irrevocably guaranteed on a senior subordinated basis by each subsidiary of the Borrower that is a guarantor of the Senior Facilities (as defined below). Guarantors will be released in a manner consistent with the Senior Facilities. Agent: Merrill Lynch Capital Corporation ("MLCC") will act - ----- as sole and exclusive administrative agent (the "Administrative Agent"). In such capacity, MLCC will Exh. B-1 perform the duties customarily associated with such role and with customary compensation. Arrangers: Merrill Lynch, Pierce, Fenner & Smith Incorporated - --------- ("MLPF&S"), J.P. Morgan Securities Inc. ("JPMorgan") and Wachovia Capital Markets, LLC ("WCM") will act as joint arrangers and joint bookrunners (in such capacities, the "Arrangers"). Each Arranger will perform the duties customarily associated with such roles. MLPF&S will manage the syndication of the Bridge Facility in consultation with the Fund and the other Arrangers. Lenders: A syndicate of banking and financial institutions - ------- arranged by the Arrangers. Transactions: As set forth in Exhibit A to the Commitment Letter to - ------------ which this Exhibit B is attached. Capitalized terms used but not defined herein shall have the meanings assigned to such terms in Exhibit A to the Commitment Letter to which this Exhibit B is attached. Use of Proceeds: The proceeds of the Initial Loans will be used by the - --------------- Borrower on the Closing Date, together with the proceeds of the issuance of the Senior Subordinated Notes, as applicable, a portion of the proceeds of the loans under the Senior Facilities, the Equity Contribution and cash on hand at Eagle, to pay the Merger Consideration. The estimated sources and uses of the funds necessary to consummate the Transactions and the other transactions contemplated hereby are set forth on Annex II to Exhibit A to the Commitment Letter to which this Exhibit B is attached. The amount drawn under the Initial Loans will be reduced by an amount equal to the Untendered Amount in excess of $10,000,000. Funding: The Lenders will make the Initial Loans - ------- simultaneously with (a) the consummation of the Transactions (including, without limitation, the Equity Contributions) and (b) the initial funding under the Senior Facilities. Maturity/Exchange: All the Initial Loans will mature on the date that is - ----------------- one year following the Closing Date (the "Maturity Date"). If any Initial Loan has not been previously repaid in full on or prior to the Maturity Date, the Exh. B-2 Lender in respect of such Initial Loan thereafter will have the option at any time or from time to time to receive Exchange Notes (the "Exchange Notes") in exchange for such Initial Loan having the terms set forth in the term sheet attached hereto as Annex I; provided, however, that a Lender may not elect to exchange only a portion of its outstanding Initial Loans for Exchange Notes unless such Lender intends at the time of such partial exchange of Initial Loans promptly to sell the Exchange Notes received in such exchange. If any Lender does not exchange its Initial Loans for Exchange Notes on the Maturity Date, such Lender shall be required to extend the maturity of such Initial Loans to another date selected by such Lender. If, at such extended maturity, such Lender does not exchange its Initial Loans, such Lender shall be required again to extend the maturity of such Initial Loans to another date selected by such Lender (provided that such Lender shall not be required to extend the maturity of such Initial Loans beyond the tenth anniversary of the Closing Date (the "Final Maturity Date")), and this sentence shall apply to each extended maturity of such Initial Loans prior to the Final Maturity Date. The Initial Loans and the Exchange Notes shall be pari passu for all purposes. Interest: For the first three-month period commencing on the - -------- Closing Date, interest on the Initial Loans shall accrue at a rate per annum equal to the higher of (i) three-month adjusted LIBOR ("Adjusted LIBOR") as determined on the Closing Date plus a spread (the "Spread") and (ii) 8.50%. The Spread shall initially be determined on the Closing Date and shall initially equal 650 basis points. If the Initial Loans are not repaid in full within three months following the Closing Date, the Spread will increase by 50 basis points at the end of such three-month period and shall increase by an additional 50 basis points at the end of each three-month period thereafter until the Maturity Date. Notwithstanding the foregoing, (a) the interest rate in effect at any time prior to the Maturity Date shall not exceed 12% per annum, (b) the interest rate in effect at any time prior to the Maturity Date Exh. B-3 shall not be less than 8.50% per annum and (c) to the extent the interest payable prior to the Maturity Date on any Initial Loan exceeds a rate of 10% per annum, the Borrower may, at its option, cause such excess interest to be paid by adding such excess interest to the principal amount of such Initial Loan. In no event shall the interest rate on the Initial Loans exceed the highest lawful rate permitted under applicable law. Overdue amounts will bear interest at the rate applicable to the Initial Loans plus 2.00% per annum. Following the Maturity Date, all outstanding Initial Loans will accrue interest at the rate provided for the Exchange Notes in Annex I hereto, subject to the absolute and cash caps applicable to the Exchange Notes. Calculation of interest shall be on the basis of actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of Initial Loans based on JPMCB's Prime Rate). Adjusted LIBOR will at all times include statutory reserves. In the event that Adjusted LIBOR cannot be determined, or any Lender is unable to maintain a loan accruing interest at Adjusted LIBOR, the affected Initial Loans will accrue interest until the Maturity Date at the "Alternate Base Rate", which will be the higher of JPMCB's Prime Rate and the Federal Funds Effective Rate plus 1/2 of 1.00%, plus, in each case, a spread. Such spread shall initially be 550 basis points and shall increase by 50 basis points at the end of each three-month period subsequent to the Closing Date until the Maturity Date. Interest will be payable in arrears (a) for Initial Loans accruing interest at a rate based on Adjusted LIBOR, at the end of each Adjusted LIBOR period following the Closing Date and on the Maturity Date, (b) for Initial Loans accruing interest at a rate based on the Alternate Base Rate, at the end of each fiscal quarter of the Borrower following the Closing Date and on the Maturity Date and (c) for Initial Exh. B-4 Loans outstanding after the Maturity Date, at the end of each fiscal quarter of the Borrower following the Maturity Date. Subordination: The Initial Loans will be subordinated to the Senior - ------------- Facilities and other senior indebtedness of the Borrower on terms customary for senior subordinated facilities and transactions of this type. Senior Facilities: The Borrower will obtain the $780,000,000 senior - ----------------- secured credit facilities (the "Senior Facilities"), all as described in Exhibit A to the Commitment Letter to which this Exhibit B is attached. Mandatory Redemption: The Borrower will be required to prepay Initial Loans - -------------------- (and, if issued, Exchange Notes, to the extent required by the terms of such Exchange Notes) on a pro rata basis, at par plus accrued and unpaid interest, from the net proceeds (after deduction of, among other things, amounts required to repay the Senior Facilities) from the incurrence of any debt or the issuance of any equity or from all non-ordinary-course asset sales (subject to exceptions and baskets to be agreed upon). Optional Prepayment: The Initial Loans may be prepaid, in whole or in - ------------------- part, at the option of the Borrower, at any time upon three days' prior notice, at par plus accrued and unpaid interest, subject to reimbursement of the Lenders' actual redeployment costs in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period. If the Borrower elects to optionally prepay all or any portion of the Initial Loans, then the Borrower shall be required to optionally redeem on a pro rata basis outstanding Exchange Notes, if any, subject, in certain circumstances, to the non-call provisions of any Fixed Rate Exchange Notes, at par plus accrued and unpaid interest. Documentation: Usual for facilities and transactions of this type - ------------- and reasonably satisfactory to the Arrangers. Exh. B-5 Representations and Warranties: Usual for facilities and transactions of this type - -------------- and reasonably satisfactory to the Arrangers. Conditions Precedent: Usual for facilities and transactions of this type, - -------------------- those specified below and in the Commitment Letter to which this Exhibit B is attached (including Exhibit A (other than the clause therein that refers to security interests in collateral) and Exhibit C thereto) and others to be reasonably specified by the Agents, including, without limitation, delivery of satisfactory legal opinions, audited financial statements and other financial information to be agreed upon; execution of guarantees, which shall be in full force and effect; accuracy of representations and warranties; absence of conflicts with applicable law and of defaults, prepayment events or creation of liens under debt instruments or other agreements as a result of the transactions contemplated hereby; evidence of authority; material consents of all persons; compliance with applicable laws and regulations (including but not limited to ERISA, margin regulations, bank regulatory limitations and environmental laws); there not having occurred since December 31, 2003 any Company Material Adverse Effect; payment of fees and expenses; delivery of borrowing certificates; and delivery of evidence of satisfactory insurance. The Borrower shall have received not less than $680,000,000 (not including undrawn commitments), less the Untendered Amount up to $10,000,000, in gross cash proceeds from borrowings under the Senior Facilities. The terms and conditions of the Senior Facilities (including but not limited to terms and conditions relating to the interest rate, fees, maturity, subordination, covenants, events of defaults and remedies) shall be reasonably satisfactory in all respects to the Lenders. The Investment Banks (as defined in the Fee Letter) shall have received, as soon as practicable but in no event later than 45 days prior to the Closing Date, a substantially complete initial draft of a registration statement or a Rule 144A offering memorandum or other private placement memorandum relating to the Senior Subordinated Notes. Exh. B-6 The Investment Banks shall have been afforded a reasonable period, which shall not be less than 30 days, following the receipt of a complete printed preliminary prospectus or preliminary offering memorandum or preliminary private placement memorandum suitable for use in a customary high-yield road show relating to the issuance of the Senior Subordinated Notes to attempt to place such Notes with qualified purchasers thereof. Such preliminary prospectus, offering memorandum or private placement memorandum shall contain all financial statements and other data to be included therein (including all audited financial statements, all unaudited financial statements (which shall have been reviewed by the independent accountants for Eagle as provided in Statement on Auditing Standards No. 100) and all appropriate pro forma financial statements prepared in accordance with, or reconciled to, generally accepted accounting principles in the United States and prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended) and all other data (including selected financial data) that the Securities and Exchange Commission would require in a registered offering of the Senior Subordinated Notes or that would be necessary for the Investment Banks to receive customary "comfort" (including "negative assurance" comfort) from independent accountants in connection with the offering of the Senior Subordinated Notes; provided that narrative disclosure with respect to the financial performance of non-guarantor subsidiaries shall be included in a form to be agreed upon. The Agents shall have received management's consolidated financial projections for the Borrower and its subsidiaries for the period of seven years following the Closing Date, which projections shall reflect the Transactions and the other transactions contemplated hereby and include the written assumptions upon which such projections are based, and such projections shall be reasonably satisfactory to the Agents, including with respect to any cost savings projected for the Borrower and its subsidiaries therein. Such projections shall be substantially similar in form to the projections (the "Initial Projections") received by the Agents prior Exh. B-7 to the date of the Commitment Letter to which this Exhibit B is attached. Covenants: Usual for facilities and transactions of this type - --------- and reasonably satisfactory to the Arrangers, including certain financial covenants (including maintenance covenants) to be mutually agreed upon by the Borrower and the Lenders. The affirmative covenants shall in any event include delivery of financial projections of Borrower and its subsidiaries updated quarterly in a form substantially similar to that described above under the heading "Conditions Precedent". Following the Maturity Date, all outstanding Initial Loans will bear covenants substantially identical to the covenants of the Exchange Notes. Events of Default: Usual for facilities and transactions of this type - ----------------- and reasonably satisfactory to the Arrangers (in certain cases with grace periods and materiality thresholds to be agreed upon). Following the Maturity Date, the events of default relevant to the Initial Loans will be automatically modified to be consistent with the Exchange Notes. Cost and Yield Protection: Usual for facilities and transactions of this type. - ---------- Assignment and Participation: Subject to the consent of the Administrative Agent - ------------- (not to be unreasonably withheld or delayed), the Lenders will have the absolute and unconditional right to assign Initial Loans and commitments without the consent of the Borrower. The Administrative Agent will receive a processing and recordation fee of $3,500, payable by the assignor and/or the assignee, with each assignment. Assignments will be by novation which will release the obligation of the assigning Lender. Subject to the consent of the Administrative Agent (not to be unreasonably withheld or delayed), Lenders will be Exh. B-8 permitted to participate their Initial Loans to other financial institutions without restriction, other than customary voting limitations. Participants will have the same benefits as the selling Lenders would have (and will be limited to the amount of such benefits) with regard to yield protection and increased costs. Voting: Amendments and waivers of the documentation for the - ------ Initial Loans and the other definitive credit documentation related thereto will require the approval of Lenders holding more than 50% of the outstanding Initial Loans, except that the consent of each affected Lender will be required for (a) reductions of principal, interest rates or fees, (b) releases of all or substantially all the material guarantees, (c) modification in any manner adverse to the Lenders of any provisions relating to subordination, (d) except as provided under "Maturity/Exchange" above, extensions of the Maturity Date, (e) additional restrictions on the right to exchange Initial Loans for Exchange Notes or any amendment of the rate of such exchange, (f) any amendment to the Exchange Notes that requires (or would, if any Exchange Notes were outstanding, require) the approval of all holders of Exchange Notes or (g) modifications of any voting percentages. Expenses and Indemnification: All reasonable out-of-pocket expenses (including but - --------------- not limited to expenses incurred in connection with due diligence) of the Lenders, the Agents and the Arrangers associated with the preparation, execution and delivery, administration, waiver or modification and enforcement of the Senior Subordinated Facility and the other documentation contemplated hereby and thereby (including the reasonable fees, disbursements and other charges of counsel) are to be paid by the Borrower. In addition, all reasonable out-of-pocket expenses of the Lenders for enforcement costs and documentary taxes associated with the facility are to be paid by the Borrower. The Borrower will indemnify the Lenders, the Agents and the Arrangers, and their respective officers, directors, employees, affiliates, agents and controlling persons, and hold them harmless from and against all costs, Exh. B-9 expenses (including but not limited to reasonable fees and out-of-pocket charges and disbursements of counsel) and liabilities of any such Lender, the Agents or the Arrangers arising out of or relating to any claim or any litigation or other proceeding (regardless of whether any such Lender, the Agents or the Arrangers is a party thereto) that relate to the proposed transactions, including but not limited to the Transactions or any transactions connected therewith; provided, however, that no such person (nor any of their respective officers, directors, employees, affiliates, agents or controlling persons) will be indemnified for costs, expenses or liabilities arising from such person's gross negligence or wilful misconduct. Any costs or expenses advanced pursuant to the foregoing provisions shall be reimbursed to the extent that such costs or expenses are finally judicially determined to have resulted from the gross negligence or willful misconduct of the indemnified party. Governing Law and Forum: New York. - ----------------------- Counsel for the Agents and the Arrangers: Cahill Gordon & Reindel LLP. - ----------------- Exh. B-10 ANNEX I to Exhibit B Project Eagle Summary of Principal Terms and Conditions of Exchange Notes Capitalized terms used but not defined herein have the meanings given in the Summary of Principal Terms and Conditions of the $660,000,000 Senior Subordinated Bridge Facility to which this Annex I is attached. Issuer: The Borrower will issue Exchange Notes under an - ------ indenture that complies with the Trust Indenture Act (the "Indenture"). The Borrower in its capacity as issuer of the Exchange Notes is referred to as the "Issuer". Guarantees: Same as Initial Loans. - ---------- Principal Amount: The Exchange Notes will be available only in exchange - ---------------- for the Initial Loans. The principal amount of any Exchange Note will equal 100% of the aggregate principal amount (including any accrued interest not required to be paid in cash) of the Initial Loan for which it is exchanged. Maturity: The Exchange Notes will mature on the tenth - -------- anniversary of the Closing Date. Interest Rate: The Exchange Notes will bear interest at a rate equal - ------------- to the Initial Rate (as defined below) plus the Exchange Spread (as defined below). Notwithstanding the foregoing, the interest rate in effect at any time shall not exceed 12% per annum nor be less than 10.50% per annum, and to the extent the interest payable on any Exchange Note exceeds a rate of 10% per annum, the Issuer may, at its option, cause such excess interest to be paid by issuing additional Exchange Notes in a principal amount equal to such excess interest. In no event shall the interest rate on the Exchange Notes exceed the highest lawful rate permitted under applicable law. "Exchange Spread" shall mean 0 basis points during the three-month period commencing on the Maturity Date 1-B-1 and shall increase by 50 basis points at the beginning of each subsequent three month period. "Initial Rate" shall be determined on the Maturity Date and shall equal the interest rate borne by the Initial Loans on the day immediately preceding the Maturity Date plus 50 basis points. Interest will be payable in arrears at the end of each fiscal quarter of the Issuer. Subordination: Same as Initial Loans. - ------------- Mandatory Redemption: The Issuer will be required to redeem the Exchange - -------------------- Notes or, in the case of Fixed Rate Exchange Notes, to offer to purchase such notes (and, if outstanding, repay the Initial Loans) on a pro rata basis, at par plus accrued and unpaid interest, from the net proceeds (after deduction of, among other things, amounts required to repay the Senior Facilities) from all nonordinary-course asset sales (subject to exceptions and baskets to be agreed upon). Optional Redemption: Subject to the following sentence, the Exchange Notes - ------------------- will be redeemable at the option of the Issuer, in whole or in part, at any time at par plus accrued and unpaid interest to the redemption date. If any Exchange Note is sold by a Lender to a third-party purchaser, such Lender shall have the right to fix the interest rate on such Exchange Note (each such Note, a "Fixed Rate Exchange Note") at (a) a rate not higher than the then applicable rate of interest on such Exchange Note or (b) upon the representation of such transferring Lender that a higher rate (such higher rate, the "Transfer Rate") is necessary in order to permit such Lender to transfer such Exchange Note to a third party and receive consideration equal to the principal amount thereof plus all accrued and unpaid interest to the date of such transfer; provided, however, that such Transfer Rate shall not exceed 12% per annum. If such Lender exercises such right, such Fixed Rate Exchange Note will be non-callable for four years (except that up to 35% of the principal amount thereof may be called at a premium to be agreed upon with the proceeds of a Qualified IPO (to be defined)) from the 1-B-2 date of the initial issuance of Exchange Notes and will be callable thereafter at par plus accrued interest plus a premium equal to (a) the coupon in effect on the date of sale of the Exchange Notes or (b) if the Transfer Rate was used, the Transfer Rate, which premium in either case shall decline ratably on each yearly anniversary of the date of such sale to zero one year prior to the maturity of the Exchange Notes (except that if such period has not ended prior to the date that is one year prior to such maturity, such premium shall fall immediately to zero on the date that is one year prior to such maturity), provided that such call protection shall not apply to any call for redemption issued prior to the sale to such third-party purchaser. If the Issuer elects to optionally redeem all or any portion of the Exchange Notes, then the Issuer shall be required to optionally prepay on a pro rata basis outstanding Initial Loans, if any, at par plus accrued and unpaid interest. Registration Rights: The Issuer will file within 60 days after the - ------------------- Maturity Date, and will use its commercially reasonable efforts to cause to become effective as soon thereafter as practicable, a shelf registration statement with respect to the Exchange Notes (a "Shelf Registration Statement") and/or a registration statement relating to a Registered Exchange Offer (as described below). If a Shelf Registration Statement is filed, the Issuer will keep such registration statement effective and available (subject to customary exceptions) until it is no longer needed to permit unrestricted resales of Exchange Notes but in no event longer than two years from the Maturity Date. If within 150 days from the Maturity Date, a Shelf Registration Statement for the Exchange Notes has not been declared effective or the Issuer has not effected an exchange offer (a "Registered Exchange Offer") whereby the Issuer has offered registered notes having terms identical to the Exchange Notes (the "Substitute Notes") in exchange for all outstanding Exchange Notes and Initial Loans (it being understood that a Shelf Registration Statement is required to be made available in respect of Exchange Notes the holders of which could not receive Substitute 1-B-3 Notes through the Registered Exchange Offer that, in the opinion of counsel, would be freely saleable by such holders without registration or requirement for delivery of a current prospectus under the Securities Act (other than a prospectus-delivery requirement imposed on a broker-dealer who is exchanging Exchange Notes acquired for its own account as a result of a market making or other trading activities)), then the Issuer will pay liquidated damages of $0.096 per week per $1,000 of principal amount of Exchange Notes and Initial Loans outstanding (which rate of liquidated damages shall increase by 0.048 every 90 days up to a maximum of $0.192 per week) to holders of such Exchange Notes and Initial Loans who are unable freely to transfer Exchange Notes from and including the 151st day after the date of the first issuance of Exchange Notes to but excluding the earlier of the effective date of such Shelf Registration Statement or the date of consummation of such Registered Exchange Offer (such damages to be payable in the form of additional Initial Loans or Exchange Notes, as applicable, if the then interest rate thereon exceeds the applicable cash interest rate cap). The Issuer will also pay such liquidated damages for any period of time (subject to customary exceptions) following the effectiveness of a Shelf Registration Statement during which such Shelf Registration Statement is not available for resales thereunder. In addition, unless and until the Issuer has consummated the Registered Exchange Offer and, if required, caused the Shelf Registration Statement to become effective, the holders of the Exchange Notes will have the right to "piggy-back" the Exchange Notes in the registration of any debt securities (subject to customary scale-back provisions) that are registered by the Issuer (other than on a Form S-4) unless all the Exchange Notes and Initial Loans will be redeemed or repaid from the proceeds of such securities. Exchange Notes Escrowed: The Exchange Notes will be delivered on the Closing - -------- Date and held, undated, in escrow by a mutually agreeable fiduciary. 1-B-4 Right to Transfer Exchange Notes: The holders of the Exchange Notes shall have the - -------------- absolute and unconditional right to transfer such Exchange Notes in compliance with applicable law to any third parties. Covenants: Usual for those contained in an indenture governing - --------- senior subordinated notes issued in a Rule 144A offering. Events of Default: Usual for those contained in an indenture governing - ----------------- senior subordinated notes issued in a Rule 144A offering. Governing Law and Forum: New York. - ----------------------- 1-B-5 EXHIBIT C Project Eagle Senior Secured Credit Facilities Senior Subordinated Bridge Facility Summary of Additional Conditions Precedent The initial borrowings under the Facilities shall be subject to the following conditions precedent. All capitalized terms used but not defined herein shall have the meanings set forth in the Commitment Letter to which this Exhibit C is attached, the Senior Facilities Term Sheet and the Bridge Facility Term Sheet. 1. The Transactions shall have been consummated or shall be consummated simultaneously with the closing of the Facilities in accordance with applicable law, the Merger Agreement and all other related documentation (without giving effect to any amendments or waivers to or of such documents that are adverse in any material respect to the Lenders not approved by the Lenders), and no more than 8% of the outstanding common stock of Eagle shall constitute shares held by holders who properly exercise appraisal rights. The Transactions shall have been consummated in a manner consistent with the sources and uses shown on Annex II to the Senior Facilities Term Sheet. 2. The Equity Contributions shall have been made. 3. Eagle shall concurrently (a) repurchase at least a majority of each series of the Existing Subordinated Notes pursuant to the Debt Tender Offers at prices and on terms reasonably satisfactory in all respects to the Agents and, as a result of which, all significant negative covenants in the Existing Subordinated Notes shall be eliminated and (b) pay all principal, interest, fees and other amounts outstanding under the Existing Credit Agreement, and terminate all commitments under the Existing Credit Agreement and cause all liens in respect thereof to be terminated. 4. With respect to the Senior Facilities, the Borrower shall have received either (a) $660,000,000 in gross cash proceeds from the issuance of the Senior Subordinated Notes or (b) if and to the extent the Borrower is unable to issue the Senior Subordinated Notes prior to the Closing Date, $660,000,000 less the amount of Senior Subordinated Notes issued pursuant to clause (a) in gross cash proceeds from loans under the Bridge Facility (it being agreed that the aggregate principal amount of Senior Subordinated Notes and loans under the Bridge Facility, as applicable, shall be reduced by the Untendered Amount in excess of $10,000,000). With respect to the Bridge Facility, the Borrower shall have received $480,000,000 in gross cash proceeds from the borrowings under the Tranche B Facility and $200,000,000 (less the Untendered Amount up to $10,000,000) in gross cash proceeds from the borrowings under the Revolving Facility. Exh. D-1 5. After giving effect to the Transactions and the other transactions contemplated hereby, Holdings and its subsidiaries shall have outstanding no indebtedness or preferred stock other than (a) the loans and other extensions of credit under the Senior Facilities, (b) the Senior Subordinated Notes or loans under the Bridge Facility, as applicable, (c) the Holdings Subordinated Notes, (d) preferred stock issued to the Investors in connection with the Transactions and (e) other limited indebtedness to be agreed upon. The terms and conditions of (a) all indebtedness to remain outstanding after the Closing Date (including but not limited to terms and conditions relating to interest rates, fees, amortization, maturity, redemption, subordination, covenants, events of default and remedies) and (b) all preferred stock to be issued in connection with the Transactions or to remain outstanding after the Closing Date (including but not limited to terms and conditions relating to cash dividend payments, dividend rates, redemption, subordination, covenants, conversion, voting rights, events of default and remedies) shall be reasonably satisfactory in all material respects to the Lenders. 6. The Lenders shall have received (a) audited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Borrower for the three fiscal years ended December 31, 2003 (and, if available, the audited financial statements for the fiscal year ending December 31, 2004, which in any event shall be provided within 75 days after fiscal year end), (b) unaudited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Borrower for each subsequent fiscal quarter (and, if the audited financial statements for the year ending December 31, 2004 are not required to be provided pursuant to clause (a), unaudited financial statements or summary financial information for such fiscal year) ended at least 40 days before the Closing Date (and comparable periods for the prior fiscal year), and (c) if the Closing Date is on or prior to February 10, 2005, summary financial data for the twelve months ended November 30, 2004 or, if available, December 31, 2004, which financial statements described in clauses (a) through (c) shall not be materially inconsistent with the financial statements or forecasts previously provided to the Lenders. 7. The Lenders shall have received a pro forma consolidated balance sheet of the Borrower as of the Closing Date, after giving effect to the Transactions and the other transactions contemplated hereby, which balance sheet shall not be materially inconsistent with the forecasts previously provided to the Lenders. 8. There shall be no litigation, arbitration, administrative proceeding or consent decree that could reasonably be expected to have a material adverse effect on (a) the business, operations, performance, properties, condition (financial or otherwise), prospects or material agreements of or applicable to Holdings and its subsidiaries, taken as a whole, after giving effect to the Transactions and the other transactions contemplated hereby, or (b) the ability of the parties to consummate the Transactions or the other transactions contemplated hereby. Exh. D-2 9. The Lenders shall be reasonably satisfied in all respects with any tax sharing agreements among Holdings and its subsidiaries after giving effect to the Transactions and the other transactions contemplated hereby, and with the plans of Holdings with respect thereto. 10. The Lenders shall have received a solvency certificate from a financial officer of the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, together with such other evidence reasonably requested by the Lenders, confirming the solvency of the Borrower and its subsidiaries on a consolidated basis after giving effect to the Transactions and the other transactions contemplated hereby. 11. The consummation of the Transactions and the other transactions contemplated hereby shall not (a) violate any applicable law, statute, rule or regulation or (b) conflict with, or result in a default or event of default under, any material agreement of Holdings, the Borrower or any of their respective subsidiaries, after giving effect to the Transactions, in each case which could reasonably be expected to have (i) a material adverse effect on the business, operations, assets, liabilities, financial condition or results of operations of Eagle and its subsidiaries, taken as a whole, whether or not covered by insurance, or (ii) a material adverse effect on the ability of the Borrower to perform its obligations under the Facilities. 12. (a) After giving effect to the Transactions, Holdings's and Borrower's respective ratios of total indebtedness to Pro Forma Adjusted EBITDA (such pro formas to be done in accordance with Regulation S-X and, as adjusted, in a manner consistent with EBITDA, as adjusted, in Eagle's most recent public filings prior to the date of this letter) for the most recent period of four fiscal quarters ending at least 40 days prior to the Closing Date shall not exceed 5.80 to 1.00 and 5.20 to 1.00, respectively, and (b) Holdings's Pro Forma Adjusted EBITDA for the most recent twelve-month period ending at least 40 days prior to the Closing Date shall be greater than $259,000,000. 13. All requisite material governmental authorities and third parties shall have approved or consented to the Transactions and the other transactions contemplated hereby to the extent required, all applicable waiting or appeal periods (including any extensions thereof) shall have expired and there shall be no governmental or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose materially burdensome conditions on the Transactions or the other transactions contemplated hereby. 14. The Senior Facilities and the Senior Subordinated Notes shall have been rated by Standard & Poor's Ratings Services ("S&P") and by Moody's Investors Service, Inc. ("Moody's") no later than 45 days prior to the Closing Date. Exh. D-3 EX-99 8 exg10182004select.txt EXHIBIT G -- COMMITMENT LETTER EXHIBIT G --------- WCAS CAPITAL PARTNERS IV, L.P. 320 Park Avenue, Suite 2500 New York, New York 10022-6815 October 17, 2004 EGL Holding Company c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, New York 10022-6815 Re: Commitment Letter Ladies and Gentlemen: Reference is hereby made to the Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), by and among EGL Holding Company, a Delaware corporation ("Parent"), EGL Acquisition Corp., a Delaware corporation ("Acquisition"), and Select Medical Corporation, a Delaware corporation (the "Company"). Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Merger Agreement. WCAS Capital Partners IV, L.P. ("WCAS CP IV") hereby commits to Parent that, at the Effective Time, subject to the satisfaction or waiver (with WCAS CP IV's consent) of each of the conditions precedent set forth in Sections 6.1 and 6.2 of the Merger Agreement, WCAS CP IV shall purchase, for an aggregate purchase price of $150,000,000 in cash, (i) senior subordinated notes of Parent in an aggregate principal amount of $150,000,000 and having the terms described on Annex A hereto and (ii) equity securities of Parent (the amount and type of such equity securities to be determined in accordance with the methodology referred to in the Amended and Restated Agreement of Limited Partnership of WCAS CP IV). The proceeds of such purchase will be contributed by Parent to Acquisition in exchange for common equity of Acquisition and used by Acquisition to provide a portion of the funds needed to consummate the Merger, to finance the Company's tender offer for its existing senior subordinated notes, to repay certain of the existing senior indebtedness of the Company and its subsidiaries and to pay transaction expenses in connection with the Merger and the transactions related thereto. WCAS CP IV's commitment and other obligations under this letter agreement will terminate upon the termination of the Merger Agreement. At the Closing, Parent shall cause the Surviving Corporation to reimburse WCAS CP IV and its affiliates for (or pay on their behalf) all of the out-of-pocket fees and expenses incurred by them in connection with the transactions contemplated by the Merger Agreement and this letter agreement, including, without limitation, the fees and expenses of their legal, accounting, financial and other advisors. Notwithstanding anything that may be expressed or implied in this letter agreement, Parent covenants, agrees and acknowledges that no Person other than WCAS CP IV shall have any obligation to capitalize Parent or Acquisition hereunder and that, notwithstanding that WCAS CP IV is a partnership, no recourse hereunder or under any documents or instruments delivered in connection herewith shall be had against any current or future officer, agent or employee of WCAS CP IV, against any current or future general or limited partner of WCAS CP IV or against any current or future director, officer, employee, general or limited partner, member, affiliate or assignee of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, or otherwise. Without limiting the generality of the foregoing it is expressly agreed and acknowledged by Parent that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any current or future officer, agent or employee of WCAS CP IV or any current or future general or limited partner of WCAS CP IV or any current or future director, officer, employee, general or limited partner, member, affiliate or assignee of any of the foregoing, as such for any obligations of WCAS CP IV under this letter agreement or any documents or instruments delivered in connection herewith or for any claim relating to, based on, in respect of or by reason of such obligations or their creation. Each of WCAS and Parent covenants, agrees and acknowledges that: (i) this letter agreement may be executed in two or more counterparts (and may be delivered by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; (ii) this letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; (iii) nothing express or implied is intended to or shall confer upon any other Person any other right, benefit or remedy of any nature whatsoever relating to, under or by reason of this letter agreement; (iv) this letter agreement and all claims arising hereunder shall be governed by and construed and enforced in accordance with the Laws of the State of New York, without giving effect to the principles of conflicts of Laws thereof; (v) any claim arising under this letter agreement shall be brought exclusively in the state or federal courts sitting in New York County, New York, and such courts are agreed to be a convenient forum for such claims and (vi) this letter agreement, together with the Merger Agreement and the other agreements executed in connection with the Merger Agreement on the date hereof, sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof and supercedes all prior written and oral agreements and understandings with respect thereto. 2 Very truly yours, WCAS CAPITAL PARTNERS IV, L.P. By WCAS CP IV Associates LLC, General Partner By /s/ Sean M. Traynor ------------------------------------ Managing Member Accepted and agreed to as of the first date above written: EGL HOLDING COMPANY By /s/ Sean M. Traynor --------------------------------- Name: Sean M. Traynor Title: Chief Executive Officer ANNEX A ------- Summary of Principal Terms of Notes ----------------------------------- Issuer Parent Principal Amount: $150,000,000 Ranking: Subordinate in right of payment to any guaranty by Parent of the Surviving Corporation's senior credit facility ("Senior Indebtedness") on terms satisfactory to the providers of the senior credit facility and bridge loan facility Maturity: The tenth anniversary of the Closing Date Optional Prepayment: At any time at par Mandatory Prepayment: Upon a change of control or an IPO Interest Rate: 10.0% per annum for interest paid in cash and 12.0% per annum for interest paid-in-kind Interest Payments: Payable in cash on a semi-annual basis to the extent allowed under the agreements governing Senior Indebtedness. If not paid in cash, interest shall be paid-in-kind 4 EX-99 9 exh10182004select.txt EXHIBIT H -- CONTINGENCY LETTER AGREEMENT EXHIBIT H --------- Execution Copy -------------- WELSH, CARSON, ANDERSON & STOWE IX, L.P. 320 Park Avenue, Suite 2500 New York, New York 10022-6815 October 17, 2004 EGL Holding Company c/o Welsh, Carson, Anderson & Stowe 320 Park Avenue, Suite 2500 New York, NY 10022-6815 Select Medical Corporation 4716 Old Gettysburg Road Mechanicsburg, PA 17055 Re: Contingency Letter Agreement ---------------------------- Ladies and Gentlemen: Reference is hereby made to the Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), by and among EGL Holding Company, a Delaware corporation ("Parent"), EGL Acquisition Corp., a Delaware corporation ("Acquisition"), and Select Medical Corporation, a Delaware corporation (the "Company"). Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in the Merger Agreement. Welsh, Carson, Anderson & Stowe IX, L.P. ("WCAS IX") hereby agrees with Parent and the Company that, if, at any time on or after the date hereof and prior to the Effective Time, Parent and/or Acquisition shall have knowingly and willfully breached the Merger Agreement and the Company shall have terminated the Merger Agreement pursuant to Section 7.1(e) thereof, WCAS IX shall be obligated to make an equity contribution to Parent to satisfy such liability, which for administrative convenience shall be paid by WCAS IX directly to the Company, in the amount of $10,000,000 less any amounts paid by Parent pursuant to Section 5.3(b) of the Merger Agreement (the "Backstop Amount"). The Backstop Amount may be satisfied in whole or part by any other affiliate of Welsh, Carson, Anderson & Stowe ("WCAS") or any third party. Any payment contemplated by this paragraph shall be made on the day that the Company terminates the Merger Agreement pursuant to Section 7.1(e) thereof provided that (i) the breach or failure to perform giving rise to such termination was a willful and knowing breach or failure to perform, (ii) the Company shall have executed and delivered a settlement agreement with WCAS IX and Parent with respect to the liability of WCAS IX under this letter agreement and the liability of Parent under Section 5.3(b) of the Merger Agreement and (iii) if the Company shall have filed a lawsuit, the Company shall have executed and delivered a stipulation of dismissal with prejudice thereof in form prepared by WCAS IX. WCAS IX further acknowledges and agrees that, consistent with and subject to the terms and conditions of this letter agreement, the obligation of WCAS IX hereunder to pay the Backstop Amount is absolute and unconditional. The Company covenants, agrees and acknowledges that: (i) for any claim asserted by the Company against WCAS IX (and/or any other affiliate of WCAS), including, without limitation, any claim that arises out of or relates in any way to the negotiation, entry into or terms of the Merger Agreement or this letter agreement or the transactions contemplated by either of them or the breach or claimed breach thereof, the Company shall be entitled to only a single recovery, and such recovery shall be limited to the Backstop Amount; (ii) such recovery shall be the Company's sole and exclusive remedy with respect to any such claim, and all other damages or remedies, at law or in equity (including provisional remedies) are waived; and (iii) it is the intent of the Company that the limitations imposed hereby on remedies and the measure of damages shall apply regardless of the theory or theories upon which recovery is sought. Any amounts paid by WCAS IX hereunder shall reduce any liability of Parent or Acquisition pursuant to the last sentence of Section 5.3(b) of the Merger Agreement. Notwithstanding anything that may be expressed or implied in the foregoing provisions of this letter agreement, Parent, Acquisition and the Company covenant, agree and acknowledge that no person or entity other than WCAS IX shall have any obligation hereunder and that, notwithstanding that WCAS IX is a partnership, no recourse hereunder shall be had against any other affiliate of WCAS, against any past, current or future officer, director, agent or employee of WCAS IX, against any past, current or future general or limited partner of WCAS IX or against any past, current or future director, officer, employee, general or limited partner, member, affiliate, heir, executor, administrator, trustee, successor or assign of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding or by virtue of any statute, regulation or other applicable Law, or otherwise. Without limiting the generality of the foregoing, it is expressly covenanted, agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise incurred by any past, current or future officer, agent or employee of WCAS IX, any past, current or future general or limited partner of WCAS IX or any past, current or future director, officer, employee, general or limited partner, member, affiliate, heir, executor, administrator, trustee, successor or assign of any of the foregoing, for any obligations of WCAS IX under this letter agreement or for any claim relating to, based on, in respect of or by reason of such obligations or their creation. This letter agreement shall terminate immediately, and be of no further force and effect, as of the Effective Time. This letter agreement shall survive any termination of the Merger Agreement. Each of WCAS IX, Parent and the Company covenants, agrees and acknowledges that: (i) this letter agreement may be executed in two or more counterparts (and may be delivered by facsimile), each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; (ii) this letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; (iii) nothing express or implied is intended to or shall confer upon any other Person any other right, benefit or remedy of any nature whatsoever relating to, under or by reason of this letter agreement; (iv) this letter agreement and all claims arising hereunder or relating hereto shall be governed by 2 and construed and enforced in accordance with the Laws of the State of New York, without giving effect to the principles of conflicts of Laws thereof; (v) any claim arising under or relating to this letter agreement shall be brought exclusively in the state or federal courts sitting in New York, New York, the parties hereto irrevocably consent to the jurisdiction of those courts for such purpose, and such courts are agreed to be a convenient forum for such claims; (vi) this letter agreement, together with the Merger Agreement and the other agreements executed in connection with the Merger Agreement on the date hereof and the Confidentiality Agreement between WCAS IX and the Company dated as of August 27, 2004, sets forth the entire agreement and understanding of the parties with respect to the subject matter hereof and supercedes all prior written and oral agreements and understandings with respect thereto; (vii) this letter agreement may not be amended or modified in any way except by a writing signed by all of the parties hereto; and (viii) this letter agreement is validly entered into by the parties hereto, acting through their duly authorized signatories, and shall be binding upon the parties (and their respective successors and assigns) according to its terms. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 3 Very truly yours, WELSH, CARSON, ANDERSON & STOWE IX, L.P. By WCAS IX Associates LLC General Partner /s/ Sean M. Traynor By ------------------------------- Managing Member Accepted and Agreed to By: EGL HOLDING COMPANY /s/ Sean M. Traynor By ------------------------------- Name: Sean M. Traynor Title: Chief Executive Officer SELECT MEDICAL CORPORATION /s/ Michael E. Tarvin By ------------------------------- Name: Michael E. Tarvin Title: Senior Vice President, General Counsel & Secretary -----END PRIVACY-ENHANCED MESSAGE-----