EXHIBIT 10.1
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REORGANIZATION AND PURCHASE AGREEMENT
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By and Among
U.S. PHYSICAL THERAPY, LTD.
(THE PURCHASER)
STAR PHYSICAL THERAPY, LP
(THE COMPANY)
and
ITS RESPECTIVE PARTNERS
(THE SELLERS),
and
REGG SWANSON,
(AS THE SELLER REPRESENTATIVE),
Dated as of September 6, 2007
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1
Definitions............................................2
Section 1.2
Certain Interpretive Matters..........................10
ARTICLE II
PRE-CLOSING REORGANIZATION, SALE AND PURCHASE
Section 2.1
Pre-Closing Reorganization............................11
Section 2.2
Purchase and Sale of Purchased Interests..............12
ARTICLE III
PURCHASE PRICE, CLOSING PAYMENTS, WORKING CAPITAL ADJUSTMENT
Section 3.1
Closing Purchase Price................................12
Section 3.2
Estimated Closing Working Capital.....................13
Section 3.3
Working Capital True-Up...............................13
ARTICLE IV
CLOSING AND CLOSING DELIVERIES
Section 4.1
The Closing...........................................16
Section 4.2
Deliveries of STAR LP and the Sellers.................16
Section 4.3
Deliveries by Purchaser...............................17
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF STAR LP AND THE SELLERS
Section 5.1
Existence and Power...................................18
Section 5.2
Authorization; Enforceability.........................18
Section 5.3
Governmental Authorization............................18
Section 5.4
Non-Contravention; Consents...........................19
Section 5.5
Capitalization........................................19
Section 5.6
Subsidiaries..........................................20
Section 5.7
Financial Statements..................................20
Section 5.8
No Undisclosed Liabilities............................20
Section 5.9
Tax Matters...........................................21
Section 5.10
Absence of Certain Changes............................22
Section 5.11
Contracts.............................................24
Section 5.12
Insurance Coverage....................................25
Section 5.13
Litigation............................................26
Section 5.14
Compliance with Laws; Permits.........................26
Section 5.15
Assets; Properties; Sufficiency of Assets.............27
Section 5.16
Intellectual Property.................................27
Section 5.17
Environmental Matters.................................28
Section 5.18
Benefit Plans and Material Documents..................29
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Section 5.19
Affiliate Transactions................................32
Section 5.20
Referrals, Supplier and Employee Relations............32
Section 5.21
Other Employment Matters..............................32
Section 5.22
Medicare Participation/Accreditation..................33
Section 5.23
Medicare and Medicaid Filings.........................34
Section 5.24
Exclusion.............................................34
Section 5.25
Federal Health Care Programs..........................35
Section 5.26
Billing; Gratuitous Payments..........................35
Section 5.27
Reimbursement Matters.................................35
Section 5.28
Bank Accounts.........................................36
Section 5.29
General Partner and STAR LP Matters...................36
Section 5.30
Accounts Receivable...................................36
Section 5.31
Finders' Fees.........................................37
Section 5.32
Books and Records.....................................37
Section 5.33
Disclosure............................................37
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 6.1
Existence and Power...................................37
Section 6.2
Authorization; Enforceability.........................37
Section 6.3
Governmental Authorization............................38
Section 6.4
Non-Contravention.....................................38
Section 6.5
Parent Stock..........................................38
Section 6.6
Section 6.7 Disclosure................................38
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1
Employees and Benefits................................38
Section 7.2
Physical Therapy Alliance.............................39
Section 7.3
Further Assurances....................................39
Section 7.4
No Change of Ownership................................39
Section 7.5
Cooperation with Post-Closing Consents................39
Section 7.6
Clinic Director Expense...............................40
ARTICLE VIII
CERTAIN TAX MATTERS
Section 8.1
Transfer Taxes........................................40
Section 8.2
Partnership Status....................................40
Section 8.3
Section 754 Election..................................40
Section 8.4
Other Tax Matters.....................................40
ARTICLE IX
CONDITIONS TO CLOSING
Section 9.1
Conditions to Obligations of Purchaser................42
Section 9.2
Conditions to Obligations of STAR LP and the Sellers..44
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ARTICLE X
SURVIVAL; INDEMNIFICATION
Section 10.1
Survival..............................................44
Section 10.2
Indemnification.......................................45
Section 10.3
Procedures............................................45
Section 10.4
Offset................................................47
Section 10.5
Payment of Indemnification Payments...................47
ARTICLE XI
MISCELLANEOUS
Section 11.1
Notices...............................................48
Section 11.2
Amendments and Waivers................................48
Section 11.3
Expenses..............................................49
Section 11.4
Successors and Assigns................................49
Section 11.5
No Third-Party Beneficiaries..........................49
Section 11.6
Governing Law.........................................49
Section 11.7
Jurisdiction..........................................49
Section 11.8
Counterparts..........................................50
Section 11.9
Table of Contents; Headings...........................50
Section 11.10
Entire Agreement......................................50
Section 11.11
Severability; Injunctive Relief.......................50
Section 11.12
Arbitration...........................................50
Section 11.13
Swanson Guarantee.....................................51
EXHIBITS
Exhibit A - Certificate of Formation of
General Partner
Exhibit B - Limited Liability Agreement
of General Partner
Exhibit C - Plan of Conversion
Exhibit D - Certificate of Formation of
STAR LP
Exhibit E - Agreement of Limited
Partnership of STAR LP
Exhibit F - Clinic Locations
Exhibit G - Employment Agreement
Exhibit H - Non-Competition
Agreement
Exhibit I - Note
Exhibit J - Guarantee Agreement
Exhibit K - Assignment of Purchase
Interests
Exhibit L - Form of Seller Counsel Legal
Opinion
Exhibit M - Form of Purchaser Counsel
Legal Opinion
Exhibit N - General Release
Exhibit O - Management Agreement
Exhibit P - Sharing Percentages
Exhibit Q
Illustrative Computation of Net Working Capital
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REORGANIZATION AND PURCHASE AGREEMENT
REORGANIZATION AND PURCHASE AGREEMENT, dated as of September 6, 2007,
by and among U.S.
Physical Therapy,
Ltd., a Texas
limited partnership (the
"Purchaser"), STAR
Physical Therapy,
LP, a Texas limited
partnership
("STAR
LP"), the members of the Company set forth on the signature pages to this
Agreement and who
collectively are the
legal and beneficial
owners of 100% of
the limited
partnership interests
of STAR LP (each a "Seller" and collectively
the "Sellers"),
and Regg Swanson as Seller Representative for the purposes
described herein (the "Seller Representative") and in his individual capacity
for purposes of Section 11.13 of this Agreement relating to the unconditional
guarantee all
of the obligations and liabilities of the Regg E. Swanson
Revocable Trust, one of the Sellers, under this Agreement.
RECITALS
A.
The STAR PT Management
GP, LLC, a Texas limited liability company and
sole general
partner of STAR LP
(the "General
Partner") and Sellers are the
owners of all of the issued and outstanding partnership interests in STAR LP,
which has been, and
will continue
after the Closing, to be engaged in the
Business (as defined below), and the Regg E. Swanson Revocable
Trust, one of the
Sellers, is the sole
owner of all of the
issued and outstanding membership
interests of the General Partner.
B.
STAR LP is the successor entity to STAR Physical Therapy,
LLC, a former
Tennessee limited
liability company (the "Company"), as a result of the
Pre-Closing Reorganization described below.
C.
The Company with the Sellers on or about August 30, 2007,
(i) formed or
caused to form General Partner, including in connection with such
formation the
transfer by the Regg
E. Swanson
Revocable Trust to General Partner of a 1%
member interest in the
Company and (ii) as of the Effective Time, caused the
Company to be converted into STAR LP, a Texas limited partnership, under the
name "STAR Physical
Therapy, LP" to
succeed to the Business of the Company and
whereby, among other things, the Sellers converted their membership
interests in
the Company
into 99% limited partnership interests of STAR LP (the "LP
Interests") and the
General Partner
converted its 1% member interest in the
Company into a 1% general partner interest of STAR LP (the "GP
Interest") as the
sole general partner,
all in accordance with
the Texas Business
Organizations
Code ("TBOC")
and the Tennessee Revised Limited Liability Company Act, as
amended ("TRLLCA")
(the transactions
described in clauses
(i) and (ii) above,
collectively the
"Pre-Closing
Reorganization"),
all as provided in this
Agreement.
D.
On the terms and subject to the conditions of this Agreement, at the
Closing, the Purchaser shall, in consideration of the Purchase
Price (as defined
below), purchase (or cause one or more of its Affiliates to
purchase), (i)
from
the Regg E. Swanson Revocable Trust one hundred percent (100%) of
the membership
interests in the General Partner; and (ii) from the Sellers,
sixty-nine (69%) of
the LP Interests in STAR LP.
E.
As a result of the
consummation of the Pre-Closing Reorganization and
the Closing, at the
Effective Time: (i) the Sellers shall collectively own
thirty percent
(30%) of the STAR LP Interests, all of which shall be LP
Interests; (ii) the
Purchaser shall own or, as the sole owner of
the General
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Partner, control, (A) seventy percent (70%) of the STAR LP
Interests,
including
all of the GP Interest; and (B) 100% of the membership
interests of the General
Partner; and (iii) STAR LP shall continue to engage in the
Business.
NOW, THEREFORE,
in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the
Purchaser, STAR LP and
the
Sellers hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. In addition to the terms defined elsewhere
herein, the terms below are defined as follows:
"Accountants" has the meaning set forth in Section 3.3(b).
"Accounts Receivable"
means all accounts and notes receivable relating
to the Business.
"Accredited Sellers"
means the Sellers who constitute, and have
represented to Purchaser, their status as "accredited
investors" at Closing
as
such term is defined in Rule 501 promulgated under the Securities
Act.
"Affected Employees" has the meaning set forth in Section
7.1(a).
"Affiliate" means,
with respect to any Person, any other Person
directly or indirectly
controlling,
controlled by or under common control with
the first Person and, if such first Person is an individual, any member of the
immediate family (including parents, spouse and children) of such
individual and
any trust whose principal beneficiary is such individual or
one or more members
of such individual's
immediate family, and
any Person who is controlled by any
such member or trust.
For the purposes of this Agreement, "control," when used
with respect to any Person, means the possession, directly or
indirectly, of the
power to (a) vote 10% or more of the securities having ordinary
voting power for
the election of directors (or comparable positions) of such Person
or (b) direct
or cause the direction of the management and policies of such Person,
whether
through the ownership of voting securities, by contract or otherwise,
and the
terms "controlling" and "controlled" have meanings correlative to
the foregoing.
"Agreement" means this
Reorganization and Purchase Agreement, as the
same may be amended from time to time in accordance with the terms
hereof.
"Ancillary Agreements"
means the Employment
Agreements,
the General
Release, the Investment Agreement, the Management Agreement, the
Non-Competition
Agreements, the
Pre-Closing Reorganization Documents and all other instruments,
certificates and
other agreements entered into by STAR LP or any
Seller in
connection with
the consummation of the transactions contemplated by this
Agreement.
"Balance Sheet Date" means July 31, 2007.
"Benefit Plan" means
any employee
benefit plan within
the meaning of
Section 3(3) of ERISA,
and any other plan,
program, agreement, arrangement,
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policy,
contract,
commitment or
scheme, written or oral, statutory or
contractual, that
provides for compensation or benefits, including any deferred
compensation,
executive
compensation, bonus or
incentive plan, any
cafeteria
plan or any holiday or vacation plan or practice.
"Business" means the
business of STAR LP as now conducted (and the
business of the Company as conducted before the consummation of the
Pre-Closing
Reorganization),
including the business
of providing
outpatient physical
and
occupational
therapy services,
including
but not limited to, pre- and
post-operative care
and treatment for orthopedic-related disorders, sport
related injuries,
preventative
care, rehabilitation of injured workers and
neurological related injuries for patients and ancillary services
and activities
in connection
therewith from the
locations and in the areas identified on the
attached Exhibit F.
"Business Day" means a
day that is not a Saturday, Sunday or a day on
which commercial
banking institutions located in the State of Texas are
authorized or required to close.
"Capital Stock"
means (a) with respect to any Person that is a
corporation, any and
all shares, interests,
participation or other equivalents
(however designated and whether or not voting) of corporate stock,
including the
common stock of such
Person, and (b) with respect to any Person
that is not a
corporation, any and all partnership, limited liability or membership
interests
or other equity interests of such Person.
"Capitalized Lease
Obligations"
means the obligations
of such Person
that are required to be classified and accounted for as capital lease
obligations under
GAAP, together with all obligations to make termination
payments under such capitalized lease obligations.
"CERCLA" means the Comprehensive Environmental Response,
Compensation,
and Liability Act of 1980, 42 U.S.C. ss.ss. 9601, et seq., as
amended.
"Chapman" has the meaning set forth in Section 7.2.
"Charter Documents"
means (a) in the case of any
Person which is a
corporation, its
articles, certificate or memorandum of incorporation or
association and bylaws
or regulations, and
each certificate or
other document
setting forth the
designation,
amount and relative
rights, limitations and
preferences of any class or series of the corporation's capital stock, (b) in
the case of a Person
that is a limited
liability company, its articles or
certificate of formation or organization, limited liability company
agreement,
operating agreement or other similar governing documents and, (c)
in the case of
Person that is a general or limited partnership, its certificate of
formation or
limited partnership,
partnership agreement
or limited partnership agreement or
similar governing documents..
"Closing" has the meaning set forth in Section 4.1.
"Closing Cash
Consideration"
has the meaning set forth in Section
3.1(b).
"Closing Date" has the meaning set forth in Section 4.1.
"Closing Date
Balance Sheet" has the meaning set forth in Section
3.3(a).
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"Closing Date Funded Indebtedness" means the aggregate amount
necessary
to full pay and retire the Funded Debt of STAR LP as of the Closing
Date.
"Closing Statement" has the meaning set forth in Section
3.3(a).
"Closing Working
Capital Balance" has the meaning set forth in Section
3.3(a).
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning set forth in Recital B to this
Agreement.
"Constituent of
Concern" means any
substance defined as a hazardous
substance, hazardous
waste, hazardous material, pollutant or contaminant by any
Environmental Law, any
petroleum hydrocarbon
and any degradation
product of a
petroleum hydrocarbon,
asbestos, PCB or similar substance, the generation,
recycling, use,
treatment,
storage, transportation, Release, disposal or
exposure of or to which is subject to regulation under any
Environmental Law.
"Contracts" has the meaning set forth in Section 5.11.
"Conversion" has the meaning specified in Section 2.1(ii).
"Damages" has the meaning set forth in Section 10.2(a).
"Direct Claim" has the meaning set forth in Section 10.3(c).
"Effective Time" has the meaning set forth in Section 4.1.
"Employment Agreements" means the employment agreements between
STAR LP
and each of the Key Employees in the form of Exhibit G hereto.
"Environmental Claims"
means administrative, regulatory or judicial
actions, suits,
demands, demand letters, claims, liens, citations,
summonses,
notices of non-compliance or violation, requests for information,
investigations
or proceedings
relating in any way to the Release of Constituents of Concern
or
any Environmental
Law, including (a) Environmental Claims by Governmental
Authorities for
enforcement,
cleanup, removal, response, remedial or other
actions or
damages pursuant to any applicable Environmental Law and (b)
Environmental
Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from
Constituents of Concern or arising from an alleged injury or threat
of injury to
human health and safety or the environment.
"Environmental
Condition" means
a condition with respect to the
environment, which has
resulted or could
reasonably be expected to result in a
material loss, liability, cost or expense to the Business or STAR
LP.
"Environmental Law"
means any Law, administrative interpretation,
administrative order,
consent decree or judgment, or common law relating to the
environment, human
health and safety, including CERCLA, and any state and local
counterparts or equivalents.
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"Environmental
Permits" mean all
Permits, licenses,
authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as
amended, and any successor thereto.
"ERISA Affiliate"
means any Person that,
together with STAR LP, would
be considered a single
employer within the
meaning of Section 4001 of ERISA or
Section 414 of the Code.
"Estimated Closing
Working Capital
Balance" has the meaning set forth
in Section 3.2(a).
"Estimated Dispute Amount" has the meaning set forth in Section
10.4.
"Estimated Working
Capital Adjustment" has the meaning set forth in
Section 3.2(b).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended,
and the rules and regulations promulgated thereunder.
"Filings" has the meaning set forth in Section 5.23.
"Final Parent Stock
Price" means the average of the per share closing
sales prices of Parent Common Stock on NASDAQ Global Select Market,
as reported
in The Wall Street Journal, for the ten consecutive
trading days ending on
the
second calendar day immediately prior to the Effective Time (or if
such calendar
day is not a trading
day, then ending on the first trading day immediately
preceding such calendar day).
"Foreign Qualifications" has the meaning set forth in Section
2.1(iii).
"Funded Debt" means any (a) Indebtedness for borrowed money
(including
current maturities of
such Indebtedness,
accrued interest and penalties), (b)
any deferred compensation or similar obligations to current or
former employees,
shareholders, members
or their representatives, (c) any Capitalized Lease
Obligations, and (d)
any guarantees of
obligations of others similar to any of
those set forth above.
"GAAP" means
U.S.
generally accepted accounting principles,
consistently applied.
"General Partner"
has the meaning set forth in Recital A to this
Agreement.
"General Partner
Formation"
has the meaning set forth in Section
2.1(i).
"General Release"
means the general release among STAR LP, the Sellers
and Swanson, in the form of Exhibit N hereto.
"Governmental
Authority" means any domestic or foreign governmental or
regulatory agency,
authority,
bureau, commission, department, official or
similar body or instrumentality thereof, or any governmental court, arbitral
tribunal or other body administering alternative dispute
resolution.
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"GP Formation Documents" has the meaning set forth in Section
4.2(i).
"GP Interest" has the meaning set forth in Recital C to this
Agreement.
"Guarantee Agreement" has the meaning set forth in Section
3.1(d).
"Indebtedness" means
with respect to any Person, at any date, without
duplication, (a) all
obligations of such Person for borrowed money, including
all principal, interest, premiums, fees, expenses, overdrafts and
penalties with
respect thereto,
(b) all obligations of such Person evidenced by bonds,
debentures, notes or
other similar
instruments, (c) all
obligations
of such
Person to pay the deferred purchase price of the property or services,
except
trade payables incurred in the Ordinary Course of Business,
(d) all
obligations
of such Person to reimburse any bank or other Person in
respect of amounts paid
under a letter of
credit or similar instrument, (e) all Capitalized Lease
Obligations, (f) all other obligations of a Person which would be
required to be
shown as indebtedness
on a balance sheet of
such Person prepared in accordance
with GAAP, and (g) all
indebtedness of any other Person of the type referred to
in clauses (a) to (f) above directly or indirectly guaranteed by such Person or
secured by any assets of such Person, whether or not such Indebtedness
has been
assumed by such Person.
"Indemnified Party" has the meaning set forth in Section
10.3(a).
"Indemnifying Party" has the meaning set forth in Section
10.3(a).
"Intellectual Property Right" means any trademark, service mark, trade
name, product
designation,
logo, slogan, invention, patent, trade secret,
copyright, know-how,
proprietary
design or process, computer software and
database, Internet
address or domain
name (including any registrations or
applications for
registration or renewal of any of the foregoing), research in
progress, or any other similar type of proprietary intellectual property right,
in each case which is used or held for use or otherwise
necessary in
connection
with the conduct of the Business.
"Inventory"
means raw materials, work in progress and finished
goods
inventory.
"IRS" means the Internal Revenue Service.
"Key Employees"
means each of Regg Swanson, David Landers, Hal
Henninger, Kelly Ziegler, Leslie Burton, Marty Blair and Kent
Chapman.
"Law" means
any federal, foreign, state or local statute, law,
including common law, rule, regulation, ordinance, code, permit or
license.
"Lien" means,
with respect to any property or asset,
any mortgage,
lien, pledge, charge,
security interest,
encumbrance or other adverse claim of
any kind in
respect of such property or asset. For the purposes of this
Agreement, a Person
will be deemed to own,
subject to a Lien, any
property or
asset which it has
acquired or holds subject to the interest of a vendor or
lessor under any
conditional
sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"LP Interests"
has the meaning set forth in Recital C to this
Agreement.
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"Management Agreement"
means that certain
Management Agreement
dated
the date hereof
between U.S. PT
Management, Ltd., an
Affiliate of the General
Partner, and STAR LP, in the form of Exhibit O hereto.
"Material Adverse Effect" means (i) with respect to STAR LP, a
material
adverse effect on the business, assets, liabilities, condition (financial or
otherwise), or results
of operations and (ii) with respect to the Purchaser, a
material adverse
effect on the business, assets, liabilities, condition
(financial or
otherwise)
or results of
operations
of the Purchaser and its
Subsidiaries, taken as a whole.
"Net Working
Capital" means at any given time an amount
equal to the
current assets of STAR
LP less the sum of (i) current liabilities of STAR LP,
including any STAR LP
Transaction Expenses
(to the extent not paid at or prior
to Closing) and (ii)
Funded Debt of STAR LP. For illustration purposes only,
Exhibit Q set forth an example of the calculation of Net Working
Capital based
upon the Reference
Balance Sheet, as adjusted to remove certain current
liabilities not anticipated to continue after the Closing.
"Non-Competition
Agreement" means the non-competition agreement among
the Sellers, Swanson
and the Purchaser in
substantially the form
of Exhibit H
hereto.
"Notes" has the meaning set forth in Section 3.1(d).
"Order" means any
judgment, injunction, judicial or administrative
order or decree.
"Ordinary Course of
Business" means, with
respect to any Person,
the
ordinary course of
business of such Person, consistent with such Person's
past
practice and custom, including, with respect to any category,
quantity or dollar
amount, term and frequency of payment, delivery, accrual, expense or any other
accounting entry.
"Parent" has the meaning set forth in Section 3.1(d).
"Parent Stock" means
the common stock, par
value $0.01 per share,
of
Parent.
"Permit" has the meaning set forth in Section 5.14(b).
"Permitted Lien" means (a) mechanics' Liens, workmen's Liens,
carriers'
Liens, repairmen's
Liens, landlord's Liens or (b) statutory Liens for
Taxes,
assessments and other similar governmental charges that are not
overdue.
"Person" means
an individual, corporation, partnership, limited
liability company,
joint venture, association, trust or other entity or
organization or Governmental Authority.
"Pre-Closing
Reorganization" has the meaning set forth in Recital C to
this Agreement and in Section 2.1(ii) of this Agreement.
"Pre-Closing
Reorganization
Documents" has the
meaning set forth
in
Section 4.2(i).
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"Pre-Closing Tax Period" means any Tax period (or portion thereof)
that
ends on or before August 31, 2007.
"Prime Rate" means the U.S. prime rate of interest as
published by The
Wall Street Journal on
the last Business
Day prior to the
Closing Date as the
base rate on corporate
loans posted by at least 75% of the 30 largest U.S.
banks.
"Property" means any
real property and improvements at any time owned,
leased, used, operated or occupied (whether for storage,
disposal or
otherwise)
by STAR LP.
"PTA" has the meaning set forth in Section 7.2.
"PTA Clinics" has the meaning set forth in Section 7.2.
"PTA Indebtedness" has the meaning set forth in Section 7.2.
"Purchase Price" has the meaning set forth in Section 3.1.
"Purchased Interests"
means (i) 100% of all of the issued and
outstanding Capital
Stock of the General Partner and (ii) 69% of the LP
Interests of STAR LP
to be purchased
by the Purchaser on the Closing Date
immediately after consummation of the Pre-Closing Reorganization,
subject to the
terms and conditions of this Agreement.
"Purchaser" has the meaning set forth in the introductory
paragraph of
this Agreement.
"Real Property" has the meaning set forth in Section 5.15(b).
"Reference Balance Sheet" means the balance sheet of STAR LP as of
July
31, 2007, attached hereto as Schedule 5.7.
"Reference Financial Statements" means the balance sheets of STAR
LP as
of December 31, 2005 and 2006, together with the related statements of income
for the years then ended, and the Reference Balance Sheet, together with the
related statement of
income for the six-month period then ended, all of which
are attached hereto as Schedule 5.7.
"Release" means any
release, spill, emission, discharge, leaking,
pumping, injection,
deposit, disposal, discharge, dispersal, leaching or
migration into
the environment (including ambient air, surface water,
groundwater and
surface or subsurface
strata) or into or out
of any Property,
including the movement of Constituents of Concern through or in the air,
soil,
surface water, groundwater or property.
"Returns" means
returns, declarations, reports, claims for refund,
information returns or
other documents
(including
any related or
supporting
schedules, statements
or information) and including any amendment thereof filed
or required to be filed in connection with the determination, assessment or
collection of Taxes of any party or the administration of any Laws relating to
any Taxes.
"Securities Act"
means the Securities Act of 1933, as amended.
8
<PAGE>
"Selected Representations and Warranties" means the representations
and
warranties contained
in Sections
5.1 (Corporate Existence and Power), 5.2
(Authorization;
Enforceability),
5.3
(Governmental
Authorization),
5.4
(Non-Contravention;
Consents), 5.5 (Capitalization), 5.9 (Tax Matters), 5.15(a)
(Assets; Properties;
Sufficiency of Assets), 5.17 (Environmental Matters), 5.22
(Medicare
Participation/Accreditation), 5.23 (Cost Reports and Other
Filings),
5.24 (Exclusion), 5.25 (Federal Health Care Programs), 5.26
(Billing; Gratuitous
Payments), 5.27
(Reimbursement
Matters), 5.29 (General Partner and STAR LP
Matters) and 5.30 (Finders' Fees).
"Seller" and "Sellers"
has the meaning set
forth in the
introductory
paragraph of this Agreement.
"Seller Representative" has the meaning set forth in Section
3.3(e).
"Sharing Percentages" means the percentage applicable to each
Seller as
set forth on Exhibit P.
"STAR LP" has the meaning set forth in the introductory paragraph of
this Agreement, and
includes, for purposes
of this Agreement, the
Company for
all periods prior to the effective time of the Conversion
consummated
pursuant
to the Pre-Closing Reorganization.
"STAR LP Benefit Plans" has the meaning set forth in Section
5.18(a).
"STAR LP Formation" has the meaning set forth in Section
2.1(ii).
"STAR LP Formation
Documents"
has the meaning set forth in Section
4.2(i).
"STAR LP Interests" has the meaning set forth in Section
2.1(ii).
"STAR LP Transaction
Expenses" means the aggregate amount of all
out-of-pocket fees and expenses, incurred by or on behalf of, or to
be paid by,
STAR LP relating to the negotiation, preparation or execution of this
Agreement
or any documents
or agreements contemplated hereby or the performance or
consummation of the transactions contemplated hereby, which shall include,
but
not be limited to (A) any fees and expenses associated with obtaining
necessary
or appropriate waivers, consents or approvals of any
Governmental Authority
or
third parties
on behalf of STAR LP or any Seller, (B) any fees or expenses
associated with
obtaining the release and termination of any liens or
Encumbrances, (C) all
brokers' or finders' fees; (D) fees and expenses of
counsel, advisors,
consultants,
investment bankers, accountants, auditors and
experts, (F) all
awarded discretionary
pro rated 2007
bonuses for the
period
from January 1, 2007 through the Closing Date (or portion of such
period) to the
extent not accrued on the Closing Balance Sheet (including all payroll taxes
of
STAR LP), and (G) all sale, change of control, "stay-around,"
retention, success
or similar bonuses, severance or other payments to any Person in
connection with
or upon the consummation of the transactions contemplated hereby, in all
cases,
which have not been paid on or prior to the Closing Date
(including all
payroll
taxes of STAR LP with respect thereto).
"Straddle Period"
means any taxable period beginning before but ending
after the Closing Date.
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<PAGE>
"Subsidiary" means, with respect to any Person, (a) any corporation
50%
or more of whose stock
of any class or
classes having
by the terms thereof
ordinary voting power
to elect a majority of the directors of such corporation
(irrespective of
whether or not at the time stock of any class or classes
of
such corporation
have or might have
voting power by reason of the happening of
any contingency)
is at the time owned
by such Person,
directly or
indirectly
through Subsidiaries,
and (b) any partnership, limited liability company,
association, joint venture, trust or other entity in which such
Person, directly
or indirectly through
Subsidiaries, is
either a general partner, has a 50% or
greater equity interest at the time or otherwise owns a controlling
interest.
"Swanson" means Regg
E. Swanson,
the founder of STAR LP
and indirect
owner, through the
Regg E. Swanson
Revocable Trust,
of (i) a majority of
the
outstanding
partnership interests
of STAR LP and (ii)
all of the
outstanding
membership interest of the General Partner.
"Target Working Capital Balance" means $1,250,000.
"Tax" means (a) any
net income,
alternative or add-on
minimum tax,
gross income, gross
receipts, sales, use,
ad valorem, value
added, transfer,
franchise, profits,
license, withholding on amounts paid to or by STAR LP,
payroll, employment,
excise, severance,
stamp, occupation,
premium, property,
environmental or
windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever,
together with any
interest, penalty,
addition to tax or
additional amount
imposed by any Taxing
Authority, (b) any liability of STAR LP for the payment of any
amounts of any of
the foregoing
types
as a result of being a member of an affiliated,
consolidated, combined
or unitary group,
or being a party to
any agreement or
arrangement whereby
liability of STAR LP for payment of such amounts was
determined or taken
into account with
reference to the
liability of any other
Person, and (c) any
liability of STAR LP for the payment of any amounts as a
result of being a party to any Tax-Sharing Agreement or with respect to the
payment of any amounts of any of the foregoing types as a result of any
express
or implied obligation to indemnify any other Person.
"Tax-Sharing
Agreements" means all existing Tax-sharing agreements or
arrangements (whether or not written) that are binding on STAR
LP.
"Taxing Authority" means any Governmental Authority having
jurisdiction
over the assessment, determination, collection or other imposition
of any Tax.
"Third-Party Claim" means any claim, demand, action, suit or
proceeding
made or brought by any Person who or which is not a party to this
Agreement or
who or which is not an Affiliate of any party to this
Agreement.
Section 1.2
Certain Interpretive Matters.
(a) When a reference
is made in this
Agreement to an Article,
Section, Exhibit or
Schedule, such reference will be to an Article or
Section of, or an
Exhibit or
Schedule to, this Agreement unless
otherwise indicated.
Whenever the words,
"include,"
"includes"
or
"including" are used
in this Agreement,
they will be deemed to be
followed by the
words "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in
this
Agreement refer to this Agreement as a whole and not to any
particular
10
<PAGE>
provision of this Agreement. All terms defined in this
Agreement have
the defined meanings
when used in any
certificate or other
document
made or delivered
pursuant hereto unless
otherwise defined
therein.
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 term.
All references to "$" or dollar amounts will be to lawful
currency of
the United States of
America. Any
agreement,
instrument or
statute
defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as
from time to time amended, modified or supplemented, including (in
the
case of agreements or
instruments)
by waiver or consent
and (in the
case of statutes) by succession of comparable successor statutes and
references to all
attachments thereto
and instruments
incorporated
therein. References to
a Person are also to its permitted successors
and assigns.
Each
of the Schedules will apply only to its
corresponding Section or subsection of this Agreement. Each
accounting
term not otherwise
defined in this Agreement has the meaning assigned
to it in accordance
with GAAP. To the extent the term "day" or "days"
is used, it will mean calendar days unless referred to as a "Business
Day."
(b) No provision of this Agreement will be interpreted in favor
of, or against, any of
the parties hereto by
reason of the extent to
which any such
party or its
counsel participated in the drafting
thereof or by reason
of the extent
to which any such
provision is
inconsistent with any prior draft hereof or thereof.
(c) All references to
the "knowledge of STAR
LP" or to words of
similar import will be deemed to be references to the actual
knowledge
of any Seller or
Swanson, and will
include such knowledge as the
Sellers or Swanson would have had after due inquiry of the
responsible
employees of
STAR LP and its counsel and accountants, and all
references to the
"knowledge of the Purchaser" or to words of similar
import will be deemed to be references to the actual knowledge of one
or more of the individuals whose names are listed on Schedule
1.2(c)(i) and
will include such knowledge as such officers or
directors would
have had after due inquiry of the responsible
employees of the Purchaser and its counsel and accountants.
ARTICLE II
PRE-CLOSING REORGANIZATION, SALE AND PURCHASE
Section 2.1 Pre-Closing Reorganization. Prior to the Closing, the
Company and the Sellers consummated, or caused to consummate, the following
transactions to
effect a reorganization of the Business conducted by the
Company:
(i) Swanson
has formed or caused to be formed the General
Partner, and caused
the Regg E. Swanson
Revocable Trust to
transfer
and convey to the
General Partner a one percent (1%) membership
interest in the Company in exchange for one hundred percent (100%) of
the membership
interests in the General Partner (the "General Partner
Formation"),
such membership
transfer
evidenced by a form of
assignment of membership interest reasonably acceptable to
Purchaser;
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<PAGE>
(ii) Immediately
following the General Partner Formation and
before the Closing and in accordance with the Charter Documents of
the
Company and the applicable provisions of the TBOC and the
TRLLCA, the
Company, the Sellers
and the General
Partner entered into a
plan of
conversion in the form
attached hereto as Exhibit C (the "Plan of
Conversion"), whereby
the Company was converted into a Texas limited
partnership under
the name of "STAR Physical Therapy, LP" (the
"Conversion") and
pursuant to which,
among other things,
(A) all of
the outstanding
membership
interests of the Company owned by the
Sellers immediately
before the effective time of the Conversion
automatically
converted into 99% limited partnership interests in STAR
LP, (B) the 1%
membership
interests owned by the General Partner
immediately prior
to the effective time of the Conversion were
automatically converted into a 1% general partnership interest in
STAR
LP, and (C) a certificate of conversion was filed by the
Company with
Secretary of State of each of the States of Texas and Tennessee;
and
(iii) each
of STAR LP and the General Partner will be duly
qualified to do business in Tennessee and Indiana in accordance with
the applicable
Laws of Tennessee and Indiana (collectively, the
"Foreign
Qualifications") (the transactions described in clauses (i),
(ii) and (iii) of this
Section 2.1,
collectively
the "Pre-Closing
Reorganization").
Section 2.2 Purchase and Sale of Purchased Interests. As of the
date
hereof (but effective
as of the Effective
Time) and upon the terms and subject
to the conditions of this Agreement, at the Closing, the Sellers agree to sell
to the Purchaser,
and the Purchaser shall purchase from the Sellers the
Purchased Interests,
free and clear of all
Liens. The
Sellers shall pay any
Taxes payable with respect to the transfer of Purchased Interests
by the Sellers
to the Purchaser.
ARTICLE III
PURCHASE PRICE, CLOSING PAYMENTS, WORKING CAPITAL ADJUSTMENT
Section 3.1 Closing
Purchase Price. In consideration for the
conveyance by the Sellers to the Purchaser of the Purchased Interests, at the
Closing (but effective
as of the Effective
Time), the Purchaser
will pay, or
cause to be paid,
$23,100,000 aggregate
purchase price (the "Purchase Price"),
as adjusted pursuant to Sections 3.2 and 3.3, payable as
follows:
(a) An amount
sufficient to
satisfy in full the
Closing Date
Funded Indebtedness, to the applicable lenders;
(b) $19,099,995
in cash, as adjusted
for the Estimated
Working
Capital Adjustment
pursuant
to Section 3.2 (the "Closing Cash
Consideration") and
any reduction in the Purchase Price pursuant to
Section 7.6,
to Sellers by wire
transfer of
immediately
available
funds to a bank account designated in writing by the Sellers, such
designation to occur
no later than the second Business Day prior to
the scheduled
payment date to be
allocated among the
Sellers as set
forth on Schedule 3.1(b);
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<PAGE>
(c) $3,000,005 payable
in Parent Stock to the Accredited Sellers
based on the Final Parent Stock Price; and
(d) $1,000,000
by the issuance by the
Purchaser to
Accredited
Sellers of three-year
promissory
notes payable to the Accredited
Sellers in the aggregate original principal amount of $1,000,000,
in
the form attached
hereto as Exhibit I (the "Notes"), as adjusted
pursuant to
Section 3.3. The original principal amount to each
Accredited Seller shall be as set forth on Schedule 3.1(d).
The Notes
shall (i) bear
interest at the
annual rate equal to the Prime Rate
with interest and principal payable annually beginning on the first
anniversary date of
the Closing Date, (ii)
provide for
prepayments,
without
penalty, at any time by the Purchaser and (iii) shall be
unsecured but
guaranteed
by the ultimate parent corporation of
Purchaser, U.S.
Physical Therapy,
Inc., a Delaware
corporation (the
"Parent") in the form
attached hereto as Exhibit J (the
"Guarantee
Agreement").
Section 3.2 Estimated
Closing Working Capital.
(a) Prior to the Closing Date, STAR LP and Purchaser will
prepare
and agree on an estimate of the Closing Working Capital Balance (the
"Estimated
Closing Working Capital Balance") determined in accordance with
Section 3.3(a),
as if it were the actual Closing Working Capital Balance, but based upon STAR
LP's and Purchaser's
review of monthly and
other financial
information
then
available and
inquiries of personnel
responsible for the
preparation
of the
financial information
relating to STAR LP in
the ordinary course, and prepared
in accordance with GAAP applying the same accounting principles, policies, and
practices that were used in preparing the Reference Financial
Statements.
(b) The Closing Cash Consideration will be decreased
dollar-for-dollar by
the an amount equal to
the excess, if any, of
the Target
Working Capital
Balance over the Estimated Closing Working Capital Balance,
determined in accordance with Section 3.3(a) (the
"Estimated
Working Capital
Adjustment").
Section 3.3 Working
Capital True-Up.
(a) Within 60 days after the Closing Date, Purchaser will
prepare
and deliver or cause to be prepared and delivered to the Seller
Representative a
balance sheet of STAR
LP as of the close of
business on August 31,
2007 (the
"Closing Date
Balance Sheet") and a proposed statement of the Net Working
Capital of STAR LP prepared therefrom (the "Closing Statement"), in each case,
without giving
effect to the
transactions
described in this
Agreement to be
consummated at the
Closing, other than the payment at Closing of the
Closing
Date Funded
Indebtedness,
if any, which shall be treated as paid as of the
Effective Time.
The Closing Date
Balance Sheet and the
Closing Statement
(i)
will reflect, respectively, the financial position of STAR LP and
the components
and calculation of the
Net Working Capital of STAR LP and (ii) will be prepared
and determined
as of the close of
business on August 31, 2007, in accordance
with GAAP applying the same accounting principles, policies, and practices that
were used in preparing
the Reference Financial Statements. The Net Working
Capital of STAR LP as of the close of business on August 31, 2007,
determined in
accordance with this
Section 3.3 is referred to herein as the "Closing Working
Capital Balance."
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<PAGE>
(b) If, within 30 days after the date of Purchaser's delivery of
the Closing Date Balance Sheet and the Closing Statement,
Seller
Representative
determines in good
faith that the Closing
Date Balance
Sheet and the
Closing
Statement have
not been prepared or determined in accordance with this
Agreement, Seller
Representative
will give written
notice to Purchaser within
such 30 day period (i) setting forth Seller Representative's
proposed changes to
the Closing Date Balance Sheet as prepared by Purchaser and the
determination by
Seller Representative of the Closing Working Capital Balance and
(ii) specifying
in reasonable
detail Seller Representative's basis for disagreement with
Purchaser's
preparation and determination of the Closing Date Balance Sheet
and
the Closing Working Capital Balance. The failure by Seller
Representative to
so
express disagreement
and provide
such notice within such 30 day period will
constitute the acceptance of Purchaser's preparation of the Closing
Date Balance
Sheet and the computation of the Closing Working Capital
Balance. If Purchaser
and Seller
Representative are
unable to resolve any disagreement between them
with respect to the
preparation
of the Closing Date Balance Sheet and the
determination of the
Closing Working
Capital Balance within
15 days after the
giving of notice by Seller Representative to Purchaser of such
disagreement, the
items in dispute will be referred for determination to the Nashville office of
Crowe Chizek and
Company LLC (or,
if they are unable or
unwilling to serve,
another nationally or regionally recognized accounting firm not
affiliated with
STAR LP, the Sellers or Purchaser) (the "Accountants") as promptly as
practicable, but not
later than five days after the expiration of such 15 day
period. Each of the
Purchaser and Seller Representative shall provide the
Accountants with a
statement of its position within fifteen (15) days from
the
date of the referral.
Each party shall submit, in writing, detailed briefs to
the Accountants
setting forth their position as to the amount of each item
remaining in dispute with respect to the calculation of Closing Working
Capital
Balance, and the
Accountants shall make a written determination as promptly as
practicable but in any event within thirty (30) days after the date
on which the
dispute is referred to the Accountants by selecting from the
position of either
Purchaser or
Seller Representative. Neither Purchaser nor the Seller
Representative shall
be entitled to respond to the brief provided by the other
party to the Accountants. The Accountants shall be authorized to
select only the
calculation of Closing Working Capital Balance as presented by
Purchaser and the
Seller Representative
and shall not select
any other amount as the calculation
of Closing Working
Capital Balance.
The costs and expenses
of the Accountants
shall be borne by the party against whom the arbitration is decided. No party
will disclose to the Accountants, and the Accountants will not
consider for any
purpose, any
settlement discussions
or settlement offer made by any Party. The
calculation of
Closing Working Capital Balance as finally determined in
accordance with the
terms of this Section
3.3 shall be the
"Closing Working
Capital Balance" and such decision of the Accountants shall be
final and binding
on the Purchaser and the Seller Representative (on behalf of all
Sellers).
(c) Upon the final
determination of the
Closing Working Capital
Balance, the Parties shall make the following adjustments:
(i) If the Closing
Working Capital Balance exceeds the
Estimated Closing
Working Capital Balance and the Estimated
Working Capital
Balance was less than the Target Working Capital
Balance, then Purchaser will pay to the Seller Representative
(on
behalf of all Sellers) the amount of such difference, but in no
event in an amount
greater than the
Estimated Working
Capital
Adjustment computed pursuant to Section 3.2(b).
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<PAGE>
(ii) If the Closing Working Capital Balance is less than the
Estimated Closing Working Capital Balance, then the Sellers will
pay to Purchaser the amount of such difference.
(d) Any payment in respect of an adjustment required to be made
under this
Section 3.3(c) will be made by the Sellers or Purchaser, as
applicable, in cash by
wire transfer
of immediately available funds to one
account specified by
Purchaser or Seller
Representative,
as applicable, in
writing, prior to the
date such payment is required to be made hereunder. Such
payment will
be made within five (5) Business Days following the final
determination of the
Closing Working
Capital Balance. The Sellers shall be
jointly and severally liable for any payment due Purchaser under
Section 3.3(c),
and to the extent not
otherwise promptly satisfied by the Sellers in cash,
Purchaser may
(but is not
required) to set-off amounts due and owing by
Purchaser under the
Notes to satisfy any
amounts due Purchaser pursuant to
Section 3.3(c).
Any payment
due to the Seller
Representative
under Section
3.3(c) shall be paid to the Sellers based on their relative Sharing
Percentages
(less any fees and expenses incurred by the Seller Representative
in performance
on behalf of the Sellers).
(e) By execution of this Agreement, each of the Sellers hereby
appoints,
without further
act of any Seller, Swanson as the Seller
representative ("Seller Representative"), as agent and attorney-in-fact of
each
of the Sellers, with full power and authority, including power of
substitution,
acting in the name of
and for and on behalf
of such Seller
and to, in Seller
Representative's sole
discretion:
(i) resolve any
dispute with Buyer over any
aspect of this Section
3.3; (ii) give and
receive notices and
communications
with respect to this
Section 3.3 and Section 8.4; (iii) agree to, negotiate,
enter into settlements
and compromises of, and arbitration and comply with
orders and awards of
arbitrators in respect
of any claim or dispute under this
Section 3.3; (iv) enter into any agreement to effectuate any of the foregoing
items (i)-(iii)
which shall have the
effect of binding each
Seller as if such
Seller had personally
entered into such agreement(s), taken such actions or
refrained from taking such actions described in items (i)-(iv)
above; (v) do all
other things and take
all other action under
or related to this Section 3.3 or
the other agreements contemplated under this Section 3.3 that Seller
Representative may
consider necessary or proper to effectuate any of the
foregoing. Notwithstanding the foregoing, all actions taken or
decisions made by
the Seller
Representative on
behalf of the Sellers
shall be evidenced by a
writing signed
by the Seller Representative and shall be taken or made in
a
manner that is ratable and equitable among such Sellers. This appointment and
power of attorney
shall be deemed as coupled with an interest and all authority
conferred hereby shall be irrevocable and shall not be subject to
termination by
operation of
law, whether by the death or incapacity or liquidation or
dissolution of any Seller or the occurrence of any other event or
events and the
Seller Representative
may not terminate this
power of attorney with respect to
any Seller or such
Seller's successors or assigns without the consent of
Purchaser. Each Seller
agrees to hold the
Seller Representative
harmless and
indemnify the Seller Representative, with respect to any and all
loss, damage or
liability and expenses
(including reasonable
legal fees) which such Seller may
sustain as
a result of any action taken in good faith by the Seller
Representative.
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<PAGE>
ARTICLE IV
CLOSING AND CLOSING DELIVERIES
Section 4.1 The
Closing. The closing of the sale and purchase
of the Purchased Interests (the "Closing") will take place on or
about September
6, 2007, at the offices of Porter & Hedges, L.L.P., located at
1000 Main Street,
36th Floor, Houston,
Texas, unless the parties agree in
writing to change the
Closing to another time, date or place. The date upon which the Closing
occurs
is herein called the "Closing Date," but each of the parties hereto
hereby agree
that the purchase and sale of the Purchased Interests shall be
effective for all
purposes, including
financial accounting and Tax purposes, at 8:01 a.m. on
September 1, 2007 ("Effective Time").
Section 4.2 Deliveries
of STAR LP and the Sellers. At the Closing,
STAR LP and Sellers will deliver, or cause to be delivered, to the
Purchaser:
(i) all documents
necessary to evidence consummation of the
Pre-Closing
Reorganization duly
executed by STAR LP,
Sellers, the
General Partner
or STAR LP, as applicable, including: (A) the
Certificate of Formation of the General Partner in the form of
Exhibit
A hereto, the
Limited Liability Company Agreement of the General
Partner in
the form of Exhibit B hereto, an assignment of 1%
membership interest
from Swanson to the General Partner in a form
reasonably acceptable
to Purchaser, and to effect the GP Formation
(such Exhibit
A and Exhibit B, collectively, the "GP Formation
Documents"); (B) Plan
of Conversion
in the form of
Exhibit C, the
Certificate of
Formation of STAR LP
in the form of Exhibit D hereto,
and the Certificate
of Conversions to effect the STAR LP
Formation
(such Exhibit C and
Exhibit D,
collectively, the
"STAR LP Formation
Documents"); (C) the
foreign qualification
applications
to qualify
each of the General
Partner and STAR LP to
do business in
Tennessee
and Indiana, to effect
the Foreign
Qualifications; and
(D) and such
other documents necessary to consummate the Pre-Closing
Reorganization
(the items in clauses (A) through (D) collectively, the "Pre-Closing
Reorganization Documents");
(ii) an Assignment of Purchased Interests in the form of
Exhibit
K hereto;
(iii) the Agreement of Limited Partnership of STAR LP in the
form
of Exhibit E hereto, executed by the Sellers;
(iv) a certificate of
a duly authorized
officer of the
General
Partner and of the Sellers confirming compliance with the condition
set forth in Section 9.1(a);
(v) a certificate of
the secretary of STAR LP and of the Sellers
certifying as to each of the Pre-Closing Reorganization
Documents;
(vi) evidence
or copies of the consents, approvals, orders,
qualifications or
waivers required by any third party or Governmental
Authority to
consummate
the transactions contemplated by this
Agreement that are listed in Schedule 4.2(vi);
(vii) an Investment
Agreement executed by each of the Accredited
Sellers with respect to the Parent Stock, Notes and Guarantee
received
as a part of the Purchase Price, in substantially the form attached
hereto;
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<PAGE>
(viii) each Ancillary
Agreement (other than those provided under
clause (i) above)
required to be executed and delivered by parties
other than the Purchaser or its Affiliates;
(ix) an opinion of Stites & Harbison, P.L.L.C., counsel for the
Seller, in the form of Exhibit L hereto;
(x) resignations
of the managers and officers of the General
Partner (other than with respect to the persons executing Employment
Agreements relating
to the positions set forth in such Employment
Agreements);
(xi) payoff letters
executed and delivered
from all holders
of
Closing Date Funded Debt, which payoff letters set forth the terms
and
conditions of payment
and satisfaction
in full of all such
Closing
Date Funded Debt and release of all Liens granted by STAR LP relating
thereto on and as of the Closing Date; and
(xii) such other
documents and
instruments as may be reasonably
required to consummate the transactions contemplated by this
Agreement
and the Ancillary
Agreements and to
comply with the terms hereof and
thereof.
Section 4.3 Deliveries
by Purchaser.
At the Closing,
the Purchaser
will deliver, or cause to be delivered, to the applicable
Sellers:
(i) the Closing Cash Consideration to Sellers by wire
transfer of immediately available funds to the accounts
specified
pursuant to Section 3.1(b);
(ii) the Notes
executed by the Purchaser issued to the
Accredited Sellers pursuant to Section 3.1(d);
(iii) the Parent
Stock issued to the Accredited Sellers
pursuant to Section 3.1(c);
(iv) the Guarantee Agreement executed by Parent;
(v) the Agreement
of Limited Partnership in the form of
Exhibit E hereto,
executed by the Purchaser and the General
Partner;
(vi) a certificate of an authorized officer of the Purchaser
confirming the
Purchaser's
compliance
with the condition set
forth in Section 9.2(a);
(vii) each
Ancillary
Agreement
required
to be duly
authorized and delivered by the Purchaser or its Affiliates;
(viii) an opinion of Porter & Hedges, L.L.P., counsel for
the Purchaser, in the form of Exhibit M hereto; and
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(ix) such other documents and instruments as may be
reasonably required to
consummate the transactions contemplated
by this Agreement and the Ancillary Agreements and to comply
with
the terms hereof and thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF STAR LP AND THE SELLERS
STAR LP and Sellers
represent and warrant
to the Purchaser as of
the
time immediately prior
to the consummation of
the Pre-Closing
Reorganization,
except if expressly provided as of another time, as follows:
Section 5.1 Existence
and Power. STAR LP (i)
is a limited
liability
partnership duly organized, validly existing and in good standing
under the laws
of the State of Texas, (ii) has all limited partnership power required to
carry
on the Business as now conducted and (iii) is duly qualified to
conduct business
as a foreign limited
liability company and is in good
standing in each
other
jurisdiction where
such qualification is
necessary. Schedule
5.1 sets forth a
list of each foreign
jurisdiction in which STAR LP is qualified to do business.
STAR LP has previously
delivered to the
Purchaser true,
correct and
complete
copies of the articles of organization (and all amendments
thereto) and
limited
liability company agreement of STAR LP (and all amendments thereto)
as in effect
immediately prior to consummation of Pre-Closing Reorganization
pursuant to this
Agreement.
Section 5.2
Authorization;
Enforceability.
As of Closing, the
execution, delivery and performance of this Agreement by STAR LP
and each of the
Sellers, and of each
of the Ancillary Agreements by STAR LP, the Sellers or the
General Partner to the extent it will be a party thereto are within
each party's
powers and have been duly authorized by all necessary actions, and no other
action on the part of any such party is necessary to authorize this
Agreement or
any of the Ancillary
Agreements
to which any such party is a party at the
Closing. As of
Closing, this
Agreement has been, and each of the Ancillary
Agreements to which STAR LP, any Sellers or the General
Partner is a party
have
been duly executed and delivered by such party, as applicable.
Assuming the due
execution and
delivery by the Purchaser of this Agreement and each of the
Ancillary Agreements to which STAR LP, any of the Sellers or the
General Partner
is a party at the
Closing, this
Agreement constitutes, and each Ancillary
Agreement to which
STAR LP or any of the Sellers or the General Partner are a
party at the Closing
constitutes
at the Effective Time, valid and binding
agreements of such party, as applicable, enforceable against each in
accordance
with their terms,
except as such
enforcement
may be limited by bankruptcy,
insolvency,
reorganization,
moratorium or
other similar laws affecting
enforcement of creditors' rights generally and by general
principles of
equity
(whether applied in a proceeding at law or in equity).
Section 5.3
Governmental
Authorization.
Except
as disclosed in
Schedule 5.3, as of Closing, the execution, delivery and
performance by STAR LP,
the Sellers
and the General Partner of this Agreement and each Ancillary
Agreement to which
STAR LP, the Sellers or the General Partner is a party
require no consent,
approval, order,
authorization or
action by or in respect
of, or filing with, any Governmental Authority.
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Section 5.4
Non-Contravention;
Consents. Except as disclosed in
Schedule 5.4, as of Closing, the execution, delivery and performance by STAR
LP
and each of the Sellers of this Agreement and each Ancillary
Agreement to which
STAR LP, any of the Sellers or the General Partner is a party, and the
consummation of the
transactions
contemplated
hereby and
thereby do not (a)
violate the Charter
Documents of STAR LP, the General Partner or any applicable
Seller as in effect either before or after the Pre-Closing
Reorganization,
(b)
violate any
applicable
Law or Order,
(c) require any filing with or
Permit,
consent or approval
of, or the giving of
any notice to, any Person (including
filings, consents or approvals required under any Permits of STAR
LP, any Seller
or any licenses
to which STAR LP or any Seller is a party), (d) result in a
violation or breach of, conflict with, constitute (with or without
due notice or
lapse of time or both) a default under, or give rise to any right of
termination,
cancellation or acceleration of any right or obligation of STAR
LP
or any Seller,
or to a loss of any
benefit to which STAR LP or any Seller
is
entitled under, any Contract, agreement or other instrument binding
upon STAR LP
or any Seller, or any license, franchise, Permit or other similar
authorization
held by STAR LP or any Seller, or (e) result in the creation or
imposition
of
any Lien (other than Permitted Liens) on any asset of STAR LP.
Notwithstanding
the foregoing, no representation or warranty is made with respect
to whether the
transactions contemplated hereby violate any general non-assignment
clause under
any Contract,
agreement or other
instrument
binding upon STAR LP
solely as a
result of the Conversion contemplated by the Pre-Closing
Reorganization.
Section 5.5 Capitalization.
(a) Immediately
prior to the
consummation
of the Pre-Closing
Reorganization, (i) all units of the outstanding Capital Stock of
STAR
LP are owned of record and beneficially by the Sellers in the
amounts
as set forth on Schedule 5.5, and (ii) all such units of Capital
Stock
of STAR LP were duly authorized, validly issued and outstanding,
fully
paid and nonassessable, and free of preemptive rights and
other Liens
and were issued
in compliance with applicable limited liability
company and securities laws.
(b) Immediately
after
the consummation of the Pre-Closing
Reorganization and
immediately
prior to the closing
of the purchase
and sale of the Purchased Interests, (i) the total outstanding
Capital
Stock of STAR LP are owned of record and beneficially (A) 1% by the
General Partner
and (B) 99% by the Sellers, and (ii) the total
outstanding Capital
Stock of the General
Partner is owned of
record
and beneficially
by Regg E. Swanson
Revocable Trust, in each case,
free of preemptive rights and other Liens and were issued in
compliance with applicable limited partnership or limited
liability
company laws, as applicable, and securities laws. Immediately after
the consummation of
the Pre-Closing
Reorganization and
prior to the
closing of the purchase and sale of the Purchased Interests pursuant
to this Agreement, the
General Partner is the sole general partner of
STAR LP and the General Partner and Sellers together own of record
and
beneficially 100% of
the Capital Stock of
STAR LP, free and clear of
all Liens. Upon consummation of the transactions contemplated by this
Agreement, at the
Effective Time (i) the Purchaser will acquire good,
valid and indefeasible title to all of the Purchased Interests, free
and clear of all Liens, and which interests will represent as of
the
Effec
