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Search Agreement and Plan of Merger by:
EXHIBIT 10.1
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REORGANIZATION AND
PURCHASE AGREEMENT
-------------------------------------
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
--------------------------------------------------------------------------------
<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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
<PAGE>
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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<PAGE>
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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<PAGE>
"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.
4
<PAGE>
"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.
5
<PAGE>
"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.
6
<PAGE>
"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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<PAGE>
"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.
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"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