Document:

Exhibit 10.1

 

Exhibit 10.1

REGISTRATION RIGHTS AGREEMENT

March 25, 1998

To the several persons named

at the foot hereof

Dear Sirs:

          This will confirm that (a) in respect of the several purchasers named in Annex I
hereto (such purchasers being herein referred to individually as a
“Purchaser” and collectively as
the “Purchasers”), in consideration of the purchase by you of (i) up to an aggregate 7,500,000
shares (the “Convertible Preferred Shares”) of Series A Convertible Preferred Stock, $.01
par value, of Tandem Health Care, Inc., a Pennsylvania corporation
(the “Company”), and (ii) up to
an aggregate 22,500,000 shares (the “Redeemable Preferred Shares” and collectively with the
Convertible Preferred Shares, the “Preferred Shares”) of Series B Redeemable Preferred
Stock, $.01 par value, of the Company, all pursuant to the Securities Purchase Agreement dated as of
March 24, 1998 (the “Purchase Agreement”), among the Company and the Purchasers, and as an
inducement to you to consummate the transactions contemplated thereby, and (b) in respect of the
stockholders of the Company named in Annex II hereto (such stockholders being herein referred
to individually as a “Founder” and collectively as
the “Founders”), as owners of an aggregate
1,232,759 shares of Common Stock (as defined below), in consideration of your agreement to
accept the provisions of this Agreement and the Stockholders Agreement dated as of the date
hereof among the Company, the Purchasers and each of you, the Company hereby covenants and
agrees with each of you, and with each subsequent holder of Restricted Stock (as,such term is
defined herein) and Founders Stock (as such term is defined herein), as follows:

          1.
Certain Definitions. As used herein, the following terms shall have the
following respective meanings:

          “Commission” shall mean the Securities and Exchange Commission, or any other
federal agency at the time administering the Securities Act.

 

 

          “Common Stock” shall mean the Common Stock, $.01 par value, of the Company,
as constituted as of the date of this Agreement.

          “Conversion Shares” shall mean the shares of Common Stock issued upon
conversion of the Convertible Preferred Shares and shall also include any securities issued
upon exchange, adjustment or transfer of any such shares, the certificates for which are
required by the provisions of Section 2 hereof to bear the legend set forth in such Section.

          “Convertible Preferred Shares” shall have the meaning ascribed thereto in the
introductory paragraph to this Agreement and shall also include any securities issued upon
exchange, adjustment or transfer of any such shares, the certificates for which are required
by the provisions of Section 2 hereof to bear the legend set forth in such Section.

          “Exchange Act” shall mean the Securities Exchange Act of 1934 or any similar
federal statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.

          “Founders Stock” shall have the meaning ascribed thereto in the introductory
paragraph to this Agreement and shall also include any securities issued upon exchange,
adjustment or transfer of any such shares, the certificates for which are required by the
provisions of Section 2 hereof to bear the legend set forth in such Section.

          “Public
Sale” shall mean any sale of Common Stock to the public pursuant to an
offering registered under the Securities Act or to the public pursuant to the provisions of
Rule 144 (or any successor or similar rule) adopted under the Securities Act.

          “Preferred Shares” shall have the meaning ascribed thereto in the introductory
paragraph to this Agreement and shall also include any securities issued upon exchange,
adjustment or transfer of any such shares, the certificates for which are required by the
provisions of Section 2 hereof to bear the legend set forth in such Section.

          “Redeemable Preferred Shares” shall have the meaning ascribed thereto in the
introductory paragraph to this Agreement and shall also include any securities issued upon
exchange, adjustment or transfer of any such shares, the certificates for which are required
by the provisions of Section 2 hereof to bear the legend set forth in such Section.

          “Registration Expenses” shall mean the expenses so described in Section 8 hereof.

          “Restricted Stock” shall mean (i) the Conversion Shares, and (ii) any securities
issued upon exchange, adjustment or transfer of any such shares, the certificates for which
are required by the provisions of Section 2 hereof to bear the legend set forth in such Section.

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          “Securities
Act” shall mean the Securities Act of 1933 or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the same shall
be in effect at the time.

          “Selling
Expenses” shall mean the expenses so described in Section 8 hereof.

          “Warrant Agreement” shall mean the Warrant Agreement dated February 27,
1998, between the Company and Health Care REIT, Inc., as amended by the Agreement
dated March 25, 1998, among the Company, Health Care REIT, Inc., the Purchasers and
the Founders.

          “Warrant Shares” shall mean the shares of Common Stock issued upon exercise of
the Warrant Agreement and shall also include any securities issued upon exchange,
adjustment or transfer of any such shares other than in a Public Sale.

          2.
Restrictive Legend. Each certificate representing the Preferred Shares, each
certificate representing the Conversion Shares, each certificate representing the Founders Stock
and, other than in a Public Sale or as otherwise provided in Section 3 hereof, each certificate or
instrument issued upon exchange or transfer of any Preferred Shares, Conversion Shares or
Founders Stock, as the case may be, shall be stamped or otherwise imprinted with a legend
substantially in the following form:

“THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED
UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.”

          3. Notice of Proposed Transfer. Prior to any proposed transfer of any Preferred
Shares, Restricted Stock or Founders Stock (other than under the circumstances described in
Section 4, 5 or 6 hereof), the holder thereof shall give written notice to the Company of its
intention to effect such transfer. Each such notice shall describe the manner of the proposed
transfer and, if requested by the Company, shall be accompanied by an opinion of counsel
reasonably satisfactory to the Company (it being agreed that Reboul, MacMurray, Hewitt,
Maynard & Kristol and Buchanan Ingersoll Professional Corporation shall be satisfactory) to the
effect that the proposed transfer of such Preferred Shares, Restricted Stock or Founders Stock, as
the case may be, may be effected without registration under the Securities Act, whereupon the
holder of such Preferred Shares, Restricted Stock or Founders Stock, as the case may be, shall be
entitled, subject to that certain Stockholders Agreement dated as of the date hereof by and among
the Company, the Purchasers and the Founders, to transfer such Preferred Shares, Restricted
Stock or Founders Stock, as the case may be, in accordance with the terms of its notice;
provided, however, that in the case of any Purchaser that is a partnership, no such opinion or other
docu-

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mentation shall be required if such notice shall cover a transfer by such partnership to its
partners. Each certificate representing the Preferred Shares, Restricted Stock or Founders Stock, as the
case may be, transferred as above provided shall bear the legend set forth in Section 2, unless (i)
— such transfer is in accordance with the provisions of Rule 144 (or any other rule permitting public
sale without registration under the Securities Act) or (ii) the opinion of counsel referred to
above is to the further effect that the transferee and any subsequent transferee (other than an affiliate
of the Company) would be entitled to transfer such securities without registration under the Securities Act.

          The foregoing restrictions on transferability of the Preferred Shares, Restricted
Stock and Founders Stock shall terminate as to any particular Preferred Shares or shares of Restricted
Stock or Founders Stock, as the case may be, when such shares shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in accordance with the
intended method of disposition by the seller or sellers thereof set forth in the registration
statement concerning such shares. Whenever a holder of any Preferred Shares, Restricted Stock
or Founders Stock is able to demonstrate to the Company (and its counsel) that the provisions of
Rule I44(k) of the Securities Act are available to such holder without limitation, such holder of
Preferred Shares, Restricted Stock or Founders Stock, as the case may be, shall be entitled to
receive from the Company, without expense, a new certificate not bearing the restrictive legend
set forth in Section 2.

          4.
Required Registration.

          (a) At any time the holders of Restricted Stock constituting at least a majority of
the total Restricted Stock outstanding at such time (treating for the purpose of such computation
the holders of Convertible Preferred Shares as the holders of the Conversion Shares then issuable
upon conversion of such Convertible Preferred Shares) may request the Company to register
under the Securities Act all or any portion of the Restricted Stock held by such requesting holder
or holders for sale in the manner specified in such notice,
provided, however, that the
only securities which the Company shall be required to register pursuant hereto shall be shares of Common
Stock.

          (b) Upon receipt of any notice under Section 4(a), the Company shall immediately
notify any holders of Restricted Stock from whom notice has not been received and holders of
Founders Stock and shall use its best efforts to register under the Securities Act, for public sale
in accordance with the method of disposition specified in such notice from requesting holders, the
number of shares of Restricted Stock specified in such notice (and in any notices received from
other holders and holders of Founders Stock within 20 days after their receipt of such notice from
the Company). If such method of disposition shall be an underwritten public offering, (i) the
Company may designate the managing underwriter of such offering, subject to the approval of the
selling holders of a majority of the Restricted Stock (treating for the purpose of such computation
the holders of Convertible Preferred Shares as the holders of the Conversion Shares then issuable
upon conversion of such Convertible Preferred Shares), which approval shall not be unreasonably

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withheld, and (ii) as and to the extent that, in the opinion of the managing underwriter,
the Founders Stock so requested to be registered (together with any Warrant Shares which have
requested to be registered in such offering in accordance with the Warrant Agreement) would
adversely affect the marketing of the Restricted Stock so requested to be registered, the number
of shares of Founders Stock (and the number of Warrant Shares) so requested to be included shall
be reduced pro rata among the requesting holders of Founders Stock (and the requesting
holders of Warrant Shares) based upon the number of shares of Founders Stock (and the number of
Warrant Shares) so requested to be registered. The Company shall be obligated to register
Restricted Stock and Founders Stock pursuant to Section 4(a) on two occasions only. Notwithstanding
anything to the contrary contained herein, the obligation of the Company under this Section 4
shall be deemed satisfied only when a registration statement covering all shares of Restricted
Stock specified in notices received as aforesaid, for sale in accordance with the method
of disposition specified by the requesting holder, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares shall have been sold
pursuant thereto.

          (c) The Company shall be entitled to include in any registration statement referred
to in this Section 4, for sale in accordance with the method of disposition specified by the
requesting holders, shares of Common Stock to be sold by the Company for its own account,
except as and to the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would adversely affect the
marketing of the Restricted Stock and Founders Stock (if any) to be sold. Except as provided in
this paragraph (c), the Company will not effect any other registration of its Common Stock,
whether for its own account or that of other holders, from the date of receipt of a notice from
requesting holders pursuant to this Section 4 until the completion of the period of distribution of
the registration contemplated thereby.

          (d) Notwithstanding anything to the contrary contained in this Agreement, the
Company will be entitled, once in any one year period, to postpone the filing period (or suspend
the effectiveness) of any registration of the Restricted Stock (and Founders Stock and/or Warrant
Shares (if any), as the case may be) pursuant to this Section 4 for a reasonable period of time not
in excess of 90 calendar days, if the Board of Directors of the Company determines, in its reasonable
business judgment, that such registration and offering could materially interfere with
bonafide financing or other material business plans of the Company (other than a planned public
offering of securities by the Company for cash) or would require disclosure of information, the
premature disclosure of which would, in the Board of Directors’ reasonable business judgment,
materially and adversely affect the Company. If the Company postpones the filing of a registration
statement (or suspends its effectiveness) pursuant to this Section 4, it will promptly notify,
in writing, the holders of Restricted Stock (and Founders Stock and/or Warrant Shares (if any), as
the case may be), that requested such registration when the events or circumstances permitting
such postponement have ended.

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          5.
Form S-3 Registration.

          (a) If the Company shall receive from any holder or holders of Restricted Stock, a
written request or requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to Restricted Stock owned by such holder or holders, the
Company will:

     (i) promptly give written notice of the proposed registration, and any related
qualification or compliance, to all other holders of Restricted Stock from whom notice has
not been received and to holders of Founders Stock; and

     (ii) as soon as practicable, effect such registration (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate qualifications
under applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other government
requirements or regulations) as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such holder’s or holders’ Restricted Stock as
are specified in such request, together with all or such portion of the Restricted Stock or
Founders Stock of any holder or holders thereof joining in such request as are specified in
a written request given within 30 days after receipt of such written notice from the
Company, provided that the Company shall not be obligated to effect any such registration,
qualification or compliance pursuant to this Section 5(a) if the Company is not
entitled to use Form S-3, and provided, further, the only securities which the Company
shall be required to register pursuant hereto shall be shares of Common Stock. Subject to
the foregoing, the Company shall file a registration statement covering the Restricted
Stock or Founders Stock or both, as the case may be, so requested to be registered as
soon as practicable after receipt of the request or requests of the holders of the Restricted
Stock and Founders Stock.

          (b) Registrations effected pursuant to this Section 5 shall not be counted as
requests for registration effected pursuant to Section 4.

          6.
Incidental Registration. If the Company at any time (other than pursuant to
Section 4 or Section 5 hereof) proposes to register any of its Common Stock under the Securities
Act for sale to the public, whether for its own account or for the account of other security
holders or both (except with respect to registration statements on Form S-4 or S-8 or another form not
available for registering the Restricted Stock or Founders Stock for sale to the public), it will
give written notice at such time to all holders of outstanding Restricted Stock and Founders Stock of
its intention to do so. Upon the written request of any such holder, given within 20 days after
receipt of any such notice by the Company, to register any of its Restricted Stock or Founders
Stock, as the case may be (which request shall state the intended method of disposition thereof),
the Company will use its best efforts to cause the Restricted Stock or Founders Stock or both, as
the case may be, as to which registration shall have been so requested to be included in the

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securities to be covered by the registration statement proposed to be filed by the Company,
all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its
written request) of such Restricted Stock or Founders Stock, as the case may be, so registered.
In the event that any registration pursuant to this Section 6 shall be, in whole or in part, an
underwritten public offering of Common Stock, any request by a holder pursuant to this Section 6 to
register Restricted Stock or Founders Stock, as the case may be, shall specify that either (i) such
Restricted Stock or Founders Stock, as the case may be, is to be included in the underwriting on
the same terms and conditions as the shares of Common Stock otherwise being sold through
underwriters under such registration or (ii) such Restricted Stock or Founders Stock, as the case
may be, is to be sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings of common stock in reasonably similar
circumstances. The number of shares of Restricted Stock or Founders Stock or both, as the case
may be, to be included in such an underwriting (and the number of Warrant Shares which have
requested to be included in such offering in accordance with the Warrant Agreement) may be
reduced (pro rata among the requesting holders of Founders Stock, Restricted Stock and
Warrant Shares (if any) based upon the number of shares of Founders Stock and Restricted Stock and the
number of Warrant Shares so requested to be registered) if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein, provided,
however, that such number of shares
of Restricted Stock or Founders Stock or both, as the case may be, shall not be reduced (nor shall
such number of Warrant Shares be reduced) if any shares are to be included in such underwriting
for the account of any person other than the Company or other than a holder of Restricted Stock
or Founders Stock (or Warrant Shares), as the case may be.

          Notwithstanding anything to the contrary contained in this Section 6, in the event
that there is a firm commitment underwritten public offering of securities of the Company pursuant
to a registration covering Restricted Stock or Founders Stock or both, as the case may be, and
a holder of Restricted Stock or Founders Stock does not elect to sell his Restricted Stock or
Founders Stock, as the case may be, to the underwriters of the Company’s securities in connection
with such offering, such holder shall refrain from selling such Restricted Stock or Founders
Stock, as the case may be, so registered pursuant to this Section 6 during the period of distribution
of the Company’s securities by such underwriters and the period in which the underwriting
syndicate participates in the after market; provided, however, that such holder shall, in
any event, be entitled to sell its Restricted Stock or Founders Stock, as the case may be, commencing on the
90th day after the effective date of such registration statement.

          7.
Registration Procedures and Expenses. If and whenever the Company is
required by the provisions of Section 4, 5 or 6 hereof to use its best efforts to effect the
registration of any of the Restricted Stock or Founders Stock or both, as the case may be, under the
Securities Act, the Company will, as expeditiously as possible;

          (a) prepare (and afford counsel for the selling holders reasonable opportunity to
review and comment thereon) and file with the Commission a registration statement (which, in the

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case of an underwritten public offering pursuant to Section 4 hereof, shall be on Form S-l or
other form of general applicability satisfactory to the managing underwriter selected as therein
provided) with respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution contemplated thereby
(determined as hereinafter provided);

          (b) prepare (and afford counsel for the selling holders reasonable opportunity to
review and comment thereon) and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective for the period specified in paragraph (a) above and
as shall comply with the provisions of the Securities Act with respect to the disposition of all
Restricted Stock or Founders Stock or both, as the case may be, covered by such registration
statement in accordance with the sellers’ intended method of disposition set forth in such registration
statement for such period;

          (c) furnish to each seller and to each underwriter such number of copies of the
registration statement and the prospectus included therein (including each preliminary prospectus)
as such persons may reasonably request in order to facilitate the public sale or other disposition
of the Restricted Stock or Founders Stock or both, as the case may be, covered by such registration
statement;

          (d) use its best efforts to register or qualify the Restricted Stock or Founders
Stock or both, as the case may be, covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the sellers of Restricted Stock or Founders Stock or both,
as the case may be, or, in the case of an underwritten public offering, the managing underwriter,
shall reasonably request;

          (e) immediately notify each seller under such registration statement and each
underwriter, at any time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing;

          (f) notify each seller under such registration statement of (i) any request by the
Commission for amendments or supplements to the registration statement or the prospectus or for
additional information or (ii) the issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings by any person for
that purpose;

          (g) to furnish (if the offering is underwritten) at the request of any seller, on the
date that Restricted Stock or Founders Stock or both, as the case may be, is delivered to the
underwriters for sale pursuant to such registration: (i) an opinion dated such date of counsel

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representing the Company for the purposes of such registration, addressed to the underwriters
and to such seller, stating that such registration statement has become effective under the Securities
Act and that (A) to the best knowledge of such counsel, no stop order suspending the
effectiveness thereof has been issued and no proceedings for that purpose have been instituted or
are pending or contemplated under the Securities Act, (B) the registration statement, the related
prospectus, and each amendment or supplement thereof, comply as to form in all material respects
with the requirements of the Securities Act and the applicable rules and regulations of the
Commission thereunder (except that such counsel need express no opinion as to financial
statements, the notes thereto, and the financial schedules and other financial and statistical data
contained therein) and (C) to such other effects as may reasonably be requested by counsel for the
underwriters or by such seller or its counsel, and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the underwriters, stating that they are
independent public accountants within the meaning of the Securities Act and that, in the opinion
of such accountants, the financial statements of the Company included in the registration
statement or the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities Act, and such
letter shall additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as such underwriters or seller may
reasonably request; and

          (h) make available for inspection by each seller, any underwriter participating in
any distribution pursuant to such registration statement, and any attorney, accountant or other
agent retained by such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company’s officers, directors and
employees to supply all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement and permit such seller,
attorney, accountant or agent to participate in the preparation of such registration statement.

For purposes of paragraphs (a) and (b) above and of Section 4(c) hereof, the period of distribution
of Restricted Stock or Founders Stock or both, as the case may be, in a firm commitment
underwritten public offering shall be deemed to extend until each underwriter has completed the
distribution of all securities purchased by it, and the period of distribution of Restricted Stock
or Founders Stock or both, as the case may be, in any other registration shall be deemed to extend
until the earlier of the sale of all Restricted Stock or Founders Stock or both, as the case may
be, covered thereby or six months after the effective date thereof.

          In connection with each registration hereunder, the selling holders of Restricted
Stock or Founders Stock, as the case may be, will furnish to the Company in writing such
information with respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with federal and applicable state securities
laws.

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          In connection with each registration pursuant to Sections 4, 5 and 6 hereof
covering an underwritten public offering, the Company agrees to enter into a written agreement
with the managing underwriter selected in the manner herein provided in such form and containing
such provisions as are customary in the securities business for such an arrangement between major
underwriters and companies of the Company’s size and investment stature, provided that (1) the
selling holders and their counsel shall have the opportunity to review and comment on such
agreement, (2) such agreement shall not contain any such provision applicable to the Company
which is inconsistent with the provisions hereof and (3) the time and place of the closing under
said agreement shall be as mutually agreed upon among the Company, such managing underwriter
and the selling holders of Restricted Stock or Founders Stock, as the case may be.

          8.
Expenses. All expenses incurred by the Company in complying with Sections
4, 5 and 6 hereof, including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants for the Company, fees of
the National Association of Securities Dealers, Inc. or any successor thereto, transfer taxes, fees
of transfer agents and registrars, costs of insurance and fees and expenses of one counsel for all
sellers of Restricted Stock and one counsel for all sellers of Founders Stock, as the case may be,
but excluding any Selling Expenses, are herein called
“Registration Expenses.” All
underwriting discounts and selling commissions applicable to the sale of Restricted Stock or Founders Stock or
both, as the case may be, are herein called “Selling Expenses.”

          The Company will pay all Registration Expenses in connection with each registration
statement filed pursuant to Section 4, 5 or 6 hereof. All Selling Expenses in connection with
any registration statement filed pursuant to Section 4, 5 or 6 hereof shall be borne by the
participating sellers in proportion to the number of shares sold by each, or by such persons other than
the Company (except to the extent the Company shall be a seller) as they may agree.

          9. Indemnification. In the event of a registration of any of the Restricted Stock or
Founders Stock or both, as the case may be, under the Securities Act pursuant to Section 4, 5 or
6 hereof, to the extent permitted by law, the Company will indemnify and hold harmless each
seller of such Restricted Stock or Founders Stock, as the case may be, thereunder and each underwriter
of Restricted Stock or Founders Stock or both, as the case may be, thereunder and each
officer, director and each other person, if any, who controls such seller or underwriter within the
meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such Restricted Stock or
Founders Stock or both, as the case may be, was registered under the Securities Act pursuant to
Section 4, 5 or 6, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such seller, each such underwriter and

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each such controlling person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in reliance upon and in
conformity with information furnished by such seller, such underwriter or such controlling person
in writing specifically for use in such registration statement or prospectus.

          In the event of a registration of any of the Restricted Stock or Founders Stock or
both, as the case may be, under the Securities Act pursuant to Section 4, 5 or 6 hereof, to the
extent permitted by law, each seller of such Restricted Stock or Founders Stock, as the case may
be, thereunder, severally and not jointly, will indemnify and hold harmless the Company and each
officer, director and each other person, if any, who controls the Company within the meaning of
the Securities Act, each officer of the Company who signs the registration statement, each
director of the Company, each underwriter and each person who controls any underwriter within
the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer or director or underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration statement under which
such Restricted Stock or Founders Stock or both, as the case may be, was registered under the
Securities Act pursuant to Section 4, 5 or 6, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided,  however, that such seller will be liable hereunder
in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with information pertaining to such seller, as such, furnished in
writing to the Company by such seller specifically for use in such registration statement or
prospectus; provided,  further,  however, that the liability of each seller hereunder shall
be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the
proportion that the public offering price of shares sold by such seller under such registration
statement bears to the total public offering price of all securities sold thereunder, but not to
exceed the proceeds (net of underwriting discounts and commissions) received by such seller from
the sale of Restricted Stock or Founders Stock, as the case may be, covered by such registration
statement.

          Promptly after receipt by an indemnified party hereunder of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the

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omission so to notify the indemnifying party shall not relieve it from any liability which it
may have to any indemnified party other than under this Section 9. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party (provided that such indemnifying party shall not, without the consent of
the indemnified party, agree to a settlement involving a plea of nolo contendere or an admission of
liability on the part of such indemnified party), and, after notice from the indemnifying party to
such indemnified party of its election so to assume and undertake the defense thereof, the
indemnifying party shall not be liable to such indemnified party under this Section 9 for any legal
expenses subsequently incurred by such indemnified party in connection with the defense thereof
other than reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that, if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded that there may be
reasonable defenses available to it which are different from or additional to those available to
the indemnifying party, or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party shall have the right
to select a separate counsel with the consent of the indemnifying party (which consent shall not be
unreasonably withheld) and to assume such legal defenses and otherwise to participate in the
defense of such action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as incurred.

          Notwithstanding the foregoing, any indemnified party shall have the right to retain
its own counsel in any such action, but the fees and disbursements of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party shall have failed to retain
counsel for the indemnified person as aforesaid or (ii) the indemnifying party and such indemnified
party shall have mutually agreed to the retention of such counsel. It is understood that the
indemnifying party shall not, in connection with any action or related actions in the same
jurisdiction, be liable for the fees and disbursements of more than one separate firm qualified in
such jurisdiction to act as counsel for the indemnified parties hereunder. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its prior written
consent, but if settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of
such settlement or judgment.

          If the indemnification provided for in the first two paragraphs of this Section 9 is
unavailable or insufficient to hold harmless an indemnified party under such paragraphs
in respect of any losses, claims, damages or liabilities or actions in respect thereof referred to therein,
then each indemnifying party shall in lieu of indemnifying such indemnified party contribute to the
amount paid or payable by such indemnified party as a result of such losses, claims, damages,
liabilities or actions in such proportion as appropriate to reflect the relative fault of the
Company, on the one hand, and the sellers of such Restricted Stock or Founders Stock, as the case may be,
on the other, in connection with the statements or omissions which resulted in such losses, claims,

12

 

damages, liabilities or actions as well as any other relevant equitable considerations,
including without limitation the failure to give any notice under the third paragraph of this Section 9. The
relative fault shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact relates to information supplied by the Company, on the
one hand, or the sellers of such Restricted Stock or Founders Stock, as the case may be, on the
other, and to the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the sellers of Restricted Stock
and Founders Stock agree that it would not be just and equitable if contributions pursuant to this
paragraph were determined by pro  rata allocation (even if all of the sellers of such
Restricted Stock or Founders Stock, as the case may be, were treated as one entity for such purpose) or by
any other method of allocation which did not take account of the equitable considerations referred
to above in this paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or action in respect thereof, referred to above in this
paragraph, shall be deemed to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph, the sellers of Restricted Stock and Founders Stock shall not be
required to contribute any amount in excess of the amount, if any, by which the total price at
which the Common Stock sold by each of them was offered to the public exceeds the amount of
any damages which they would have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No person guilty of fraudulent misrepresentations (within
the meaning of Section 11(f) of the Securities Act), shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation.

          The indemnification of underwriters provided for in this Section 9 shall be on such
other terms and conditions as are at the time customary and reasonably required by such underwriters.
In the event that such indemnification of underwriters is on such other terms and
conditions, the indemnification of the sellers of Restricted Stock in such underwriting shall, at
the sellers’ request, be modified to conform to such terms and conditions.

          10. Changes in Common Stock. If, and as often as, there are any changes in the
Common Stock by way of stock split, stock dividend, combination or reclassification, or through
merger, consolidation, reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof, as may be required, so that the rights and
privileges granted hereby shall continue with respect to the Common Stock as so changed and
shall apply to any securities received in any such transaction.

          11. Representations and Warranties of the Company. The Company represents
and warrants to you as follows:

          (a) The execution, delivery and performance of this Agreement by the Company
have been duly authorized by all requisite corporate action and will not violate any provision of
law, any order of any court or other agency of government, the Articles of Incorporation or
By-laws of the Company, or any provision of any indenture, agreement or other instrument to which

13

 

it or any of its properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the Company.

          (b) This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws from time to time in effect affecting the enforcement of creditors rights generally
and to general equitable principles.

          12.
Rule 144 Reporting. The Company agrees with you as follows:

          (a) The Company shall make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times from and after the
date it is first required to do so.

          (b) The Company shall file with the Commission in a timely manner all reports and
other documents as the Commission may prescribe under Section 13(a) or 15(d) of the Exchange
Act at any time after the Company has become subject to such reporting requirements of the
Exchange Act.

          (c) The Company shall furnish to such holder of Restricted Stock or Founders
Stock, as the case may be, forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and after the date it
first becomes subject to such reporting requirements), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), (ii) a copy of the
most recent annual or quarterly report of the Company, and (iii) such other reports and documents
so filed as a holder may reasonably request to avail itself of any rule or regulation of the
Commission allowing a holder of Restricted Stock to sell any such securities without registration.

          13.
Miscellaneous.

          (a) all covenants and agreements contained in this Agreement by or on behalf of
any of the parties hereto, including without limitation the rights to indemnification under Section
9 hereof, shall bind and inure to the benefit of the respective successors, heirs and assigns of the
parties hereto whether so expressed or not. Without limiting the generality of the foregoing, the
registration rights conferred herein on the holders of Restricted Stock or Founders Stock, as the
case may be, shall inure to the benefit of any and all subsequent holders from time to time of the
Restricted Stock or of Founders Stock for so long as the certificates representing the Restricted
Stock or Founders Stock shall be required to bear the legend specified in Section 2 hereof.

14

 

          (b) all notices, requests, consents and other communications hereunder shall be in
writing and shall be delivered personally or by nationally recognized overnight courier, or mailed
by first-class registered mail, postage prepaid, addressed as follows:

     if
to the Company, to it at Tandem Health Care, Inc., Persimmon Road, Sewickley,
Pennsylvania 15143, Attention: Lawrence R. Deering;

     if to any Purchaser, at its address as set forth in Annex I hereto, with a copy to
Reboul, MacMurray, Hewitt, Maynard & Kristol, 45 Rockefeller Plaza, New York, New
York 10111, Attention: Joshua A. Leuchtenburg, Esq.; and

     if to the Founders, at their addresses as set forth in Annex II hereto;

     if to any subsequent holder of Restricted Stock or Founders Stock, as the case may
be, to it at such address as may have been furnished to the Company in writing by such
holder;

or, in any case, at such other address or addresses as shall have been furnished in writing to the
Company (in the case of a holder of Restricted Stock or Founders Stock) or to the holders of
Restricted Stock or Founders Stock (in the case of the Company). Any notice or other communication
pursuant to this Agreement shall be deemed to have been duly given or made and to have
become effective when delivered in hand to the party to which directed or if sent by first-class
registered mail, postage prepaid and properly addressed as set forth above, at the earlier of (i)
the time when received by the addressee or (ii) the fifth business day following the dispatch thereof.

          (c) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.

          (d) This Agreement constitutes the entire agreement of the parties with respect to
the subject matter hereof and may not be modified or amended except in a writing executed by the
holders of a majority of the Restricted Stock and, if such amendment adversely affects the rights
of holders of Founders Stock, by the holders of a majority in interest of the Founders Stock.

          (e) This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and the same instrument.

15

 

          Please
indicate your acceptance of the foregoing by signing and returning the enclosed
counterpart of this letter, whereupon this letter (herein sometimes called “this Agreement”) shall be a binding agreement between the Company and you.

	 	 	 	 	 
	 	Very truly yours,

TANDEM HEALTH CARE, INC.

 	 
	 	By:  	/s/
Lawrence R. Deering	 
	 	 	Chairman and Chief 	 
	 	 	Executive Officer 	 

	 	 	 	 	 
	AGREED TO AND ACCEPTED	 	 
	as of the date first above written:	 	 
	 
	 	 	 	 
	PURCHASERS:	 	 
	 
	 	 	 	 
	BEHRMAN CAPITAL II L.P,	 	 
	By:

	 	Behrman Brothers, L.L.C.	 	 
	 

	 	General Partner	 	 
	 
	 	 	 	 
	By:
	 	/s/ Darryl Behrman	 	 
	 

	 	 	 	 
	 

	 	          Managing Member	 	 
	 
	 	 	 	 
	STRATEGIC ENTREPRENEUR FUND II, L.P.	 	 
	 
	 	 	 	 
	By:
	 	/s/  Darryl Behrman	 	 
	 

	 	 	 	 
	 

	 	          General Partner	 	 
	 
	 	 	 	 
	FOUNDERS:	 	 
	 
	 	 	 	 
	/s/ Lawrence R. Deering	 	 
	 	 	 
	Lawrence R. Deering	 	 
	 
	 	 	 	 
	/s/ Joseph D. Conte	 	 
	 	 	 
	Joseph D. Conte	 	 

 

 

ANNEX I

Name and Address

  of Investor

Behrman Capital II L.P.

  126 East 56th Street

New York, New York 10022

Strategic Entrepreneur Fund II, L.P.

  126 East 56th Street

New York, New York 10022

17

 

ANNEX II

Name and Address

  of Founder

Lawrence R. Deering

Tandem Health Care, Inc.

Persimmon Road

Sewickley, Pennsylvania 15143

Joseph Conte

550 Via Lugano

Winter Park, Florida 32789

 

 

JOINDER

     The undersigned, as of this 1st day of June, 2004, hereby joins as a party
to that certain Registration Rights Agreement, dated as of March 25, 1998, by
and among Tandem Health Care, Inc. (the “Company”) and certain shareholders of
the Company which are signatories thereto, to which this joinder shall be
attached.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	LAWRENCE R. DEERING GRANTOR

RETAINED ANNUITY TRUST	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Lawrence R. Deering	 	 
	 

	 	 	 	 	 	 	 	Trustee	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Agreed and accepted:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	TANDEM HEALTH CARE, INC.	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Gene Curcio	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Gene Curcio	 	 	 	 	 	 	 	 
	Its:

	 	Chief Financial Officer	 	 	 	 	 	 	 	 

(Signature Page to Registration Rights Agreement)Exhibit 10.2

 

Exhibit 10.2

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement is made this 1st day of March, 2000, between TANDEM HEALTH
CARE, INC., a Pennsylvania corporation (the “Company”) and THE JAMES B. RENACCI — 1998, a trust
organized under the laws of the State of Ohio (“Holder”).

     1. Registrable Securities. The term “Registrable Securities” shall mean the shares
of the Company’s common stock (“Shares”) issuable to Holder upon conversion or exercise of the
Company’s Warrants (“Warrants”) as well as the common stock or other securities of Company issued
to the Holder in a stock split, subdivision or combination, or reclassification of, or a stock
dividend or other distribution on, or in substitution of, or exchange for, or otherwise in
connection with such common stock, or in a reorganization, merger or consolidation involving
Company, or in a sale of all, or substantially all of Company’s assets, all as identified more
fully in the Warrant Agreement between Company and Holder dated Feb. 29, 2000 (the “Warrant
Agreement”).

     2. Incidental Registration Rights.

     (a) Until the time set forth in Section 2(g) hereof, each time that Company proposes to file a
registration statement under the Securities Act of 1933, as amended (the “Securities Act”) or an
offering statement under Regulation A of the Securities Act (of either a primary or secondary
offering of securities), (other than on a Registration Statement filed in connection with an
exchange offer or other offer of Common Stock solely to the then-existing shareholders of Company),
Company shall promptly give written notice of such proposed Registration to Holder, which shall
offer Holder the right to request inclusion of any Registrable Securities in the proposed
Registration.

     (b) Holder shall have twenty (20) or such longer period as shall be set forth in the notice
from the receipt of such notice to deliver to Company a written request specifying the number of
shares of Registrable Securities Holder intends to sell and the Holder’s intended plan of
disposition.

     (c) Company shall have the exclusive right to select all underwriters for any underwritten
public offering of securities of Company. In the event that the proposed Registration by Company
is, in whole or in part, an underwritten public offering of securities of Company, any request
under Section 2(b) shall contain the Holder’s agreement that the Registrable Securities will be
included in the underwriting on the same terms and conditions as the shares of common stock, if
any, otherwise being sold through underwriters under such Registration.

     (d) Upon receipt of a written request pursuant to Section 2(b), Company shall promptly cause
all such Registrable Securities to be Registered, to the extent required to permit sale or
disposition as set forth in the written request.

 

 

     (e) If a registration described in this paragraph is to involve an underwritten public
offering, in whole or in part, Company will require that the Registrable Securities requested for
inclusion pursuant to this paragraph be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters. If, however, in the
good faith judgment of the managing underwriter of such public offering, the inclusion of all the
Registrable Securities covered by such request for registration would prevent the successful
marketing of the securities offered by Company (if Company initiated the registration) or by any
other selling security holder (if the registration was initiated pursuant to such other security
holder’s registration rights), the number of Registrable Securities and the number of securities
offered by persons or entities (including Company) other than the one initiating the registration
shall be reduced pro rata, and those securities which are excluded from the underwritten public
offering shall be withheld from the market by Company or the holders thereof for a period, not to
exceed ninety (90) days, which the managing underwriter reasonably determines is necessary in order
to effect the underwritten public offering.

     (f) Registrable Securities that Holder does not request be included in an underwritten public
offering pursuant to Section 2 shall be withheld from the market by the Holder for a period, not to
exceed 12 months following a public offering, that the managing underwriter reasonable determines
is necessary in order to effect the underwritten public offering. Holder of such Shares shall
execute such documentation as the managing underwriter reasonably requests to evidence this
lock-up. Notwithstanding the foregoing, Holder shall not be required to lock-up any Registrable
Securities which are eligible for resale under Rule 144 during the effectiveness of an underwritten
public offering or which become eligible for resale under Rule 144 during any lock-up period.

     (g) The registration rights provided by this Agreement shall expire with respect to any
Registrable Security upon the earliest to occur of (i) the effectiveness of a Registration
Statement that includes in the Registration effected thereby, at the request of a Selling
Shareholder, such Registrable Security and the actual sale of such Registrable Security pursuant to
such Registration Statement; (ii) the date on which such Registrable Security is eligible for
resale under Rule 144 without regard to the volume limitations thereof; and (iii) ten years from
the date hereof.

     3. Registration Procedures. If and whenever Company is required by the provisions of
paragraph 2 to effect the registration of Registrable Securities under the Securities Act, Company
will:

     (a) In accordance with the Act and the rules and regulations of the Securities and Exchange
Commission (the “Commission”) prepare and file with the Commission a registration statement with
respect to such Registrable Securities and, subject to 3(b) below, use its best efforts to cause
such registration statement to become and remain effective until the Registrable Securities
covered by such registration statement have been sold;

     (b) Prepare and file with the Commission such amendments to such registration statement and
supplements to any prospectus contained therein as may be necessary to keep such

2

 

registration statement effective and prospectus accurate until the Registrable Securities covered
by such registration statement have been sold; provided, that Company shall have no obligation to
maintain the effectiveness of the registration statement for more than 180 days from the effective
date unless such registration statement contemplates a delayed or continuous offering within the
meaning of Rule 415 of Regulation C promulgated under the Act;

     (c) Furnish to Holder and to the underwriters of the securities such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus and such other
documents as Holder or such underwriters may reasonably request in order to facilitate the public
offering of such Registrable Securities;

     (d) Register or qualify the Registrable Securities covered by such registration statement
under such state securities or blue sky laws of such jurisdictions as Holder or such underwriters
may reasonably request within twenty (20) days following the original filing of such registration
statement, except that Company shall not for any purpose be required to execute a general consent
to service of process or to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified;

     (e) Notify Holder and the security holders participating in such registration, promptly after
it shall receive notice thereof, of the date and time when such registration statement has become
effective and each post-effective amendment thereto has become effective or when a supplement to
any prospectus forming a part of such registration statement has been filed;

     (f) As expeditiously as possible after the effectiveness of any registration statement
pursuant to this Agreement and prior to such dates as shall be certified to Company as the date
upon which the transfer contemplated by such registration statement will be effected by Holder,
deliver in exchange for certificates representing shares so registered bearing restrictive legends
therefor not bearing restrictive legends as shall be required to effect such transfers;

     (g) Notify Holder and such security holders promptly of any request by the Commission for the
amending or supplementing of such registration statement or prospectus or for additional
information;

     (h) Prepare and file with the Commission, promptly upon the request of Holder or any such
security holders, any amendments or supplements to such registration statement or prospectus which
are required under the Securities Act or the rules and regulations thereunder in connection with
the distribution of the Registrable Securities and such other securities covered by such
registration statement by Holder or such holders;

     (i) Prepare and promptly file with the Commission and promptly notify Holder and such
security holders of the filing of such amendments or supplements to such registration statement or
prospectus as may be necessary to correct any statements or omissions if, at the time when a
prospectus is required to be delivered under the Securities Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus or offering circular as then in
effect would include an untrue statement of a material fact or omit to state any

3

 

material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading;

     (j) In case Holder or any of such security holders or any underwriters for Holder or any such
security holders is required to deliver a prospectus at a time when the prospectus then in effect
may no longer be used under the Securities Act or the rules and regulations of the Commission,
prepare promptly upon request such amendments or supplements to such registration statement and
such prospectus or prospectus as may be necessary to permit compliance with the requirements of
the Securities Act and such rules and regulations;

     (k) Advise Holder and such security holders, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any order by the Commission suspending the effectiveness of
such registration statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;

     (l) Enter into and perform such written underwriting agreements (and other agreements
reasonably requested and customarily used in offerings of the type involved) in form and substance
reasonably satisfactory to the managing underwriter or underwriters of the public offering and to
Holder and such security holders, if the offering is to be underwritten in whole or in part;

     (m) Not file any amendment or supplement to such registration statement or prospectus to
which Holder has reasonably objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities Act or the rules and
regulations thereunder, after having been furnished with a copy thereof at least five (5) business
days prior to the filing thereof; provided, however, that the failure of Holder or its counsel to
review or object to any amendment or supplement to such registration statement or prospectus shall
not affect the rights of Holder or any controlling person or persons thereof or any underwriter or
underwriters therefor under paragraph 6 hereof; and

     (n) At the request of Holder (i) furnish to Holder on the effective date of the registration
statement or, if such registration includes an underwritten public offering, at the closing
provided for in the underwriting agreement, an opinion, dated such date, of the counsel
representing Company for the purposes of such registration, addressed to the underwriters, if any,
and to Holder, covering such matters with respect to the registration statement, the prospectus and
each amendment or supplement thereto, proceedings under state and federal securities laws, other
matters relating to Company, the securities being registered and the offer and sale of such
securities as are customarily the subject of opinions of Company’s counsel provided to underwriters
in underwritten public offerings, and such opinion of counsel shall additionally cover such legal
and factual matters with respect to the registration as Holder may reasonably request (except that
such counsel need express no opinion as to financial statements or financial data contained
therein), and (ii) use its best efforts to furnish to Holder letters dated each such effective date
and such closing date, from the independent certified public accountants of Company, addressed to
the underwriters, if any, and to Holder, stating that they are independent

4

 

certified public accountants within the meaning of the Securities Act and covering such financial
matters as underwriters may request, or, if the offering is not underwritten, as Holder may
reasonably request, that in the opinion of such accountants the financial statements and other
financial data of Company included in the registration statement or the prospectus or any amendment
or supplement thereto comply in all material respects with the applicable accounting requirements
of the Act, and additionally covering such other financial matters, including information as to the
period ending not more than five (5) business days prior to the date of such letter with respect to
the registration statement and prospectus, as Holder may reasonably request.

     4. Obligation of Holder. In connection with an offering of Registrable Securities
pursuant to paragraph 2 hereof, Holder shall:

     (a) Use its best efforts to comply with reasonable requests of Company for information
regarding Holder which is required for inclusion in the registration statement or prospectus and
promptly advise Company of any information relating to Holder contained in the registration
statement or prospectus which is inaccurate in any material respect;

     (b) Promptly upon receipt of written notice from Company to the effect that a prospectus
utilized in connection with the offering is inaccurate or incomplete in any material respect, cease
further sales of Registrable Securities in reliance of such prospectus; and

     (c) Enter into such agreements as may be reasonably requested by a managing underwriter in
connection with the offering.

     5. Expenses.

     (a) With respect to each inclusion of Registrable Securities in a registration statement
pursuant to paragraph 2 hereof, Company shall bear all costs, fees and expenses in connection with
all post-effective amendments or new registration statements, including without limitation, the
Company’s legal and accounting fees, printing expenses, blue sky fees and expenses, except the
Company shall not pay for any costs, fees and expenses except as set forth in subparagraph (b),
below.

     (b) The fees, costs and expenses of registration to be borne by Holder shall be the following:
Holder’s pro rata share of all registration, filing and National Association of Security Dealer’s
fees, Holder’s pro rata share of underwriter’s fees which Holder and any other selling security
holders are required by any applicable law to bear, and fees and disbursements of counsel or
accountants for Holder.

6. Indemnification.

     (a) Company will indemnify and hold harmless Holder and each holder of securities which are
included in a registration statement pursuant hereto and any underwriter (as defined in the
Securities Act) for Holder or such holder, and each person, if any, who controls such holder or
such underwriter within the meaning of the Securities Act, from and against, and will

5

 

reimburse Holder, such holder, such underwriter and such controlling person with respect to, any
and all claims, actions, demands, losses, damages, liabilities, costs and expenses to which
Holder, such holder, such underwriter or such controlling person may become subject under the
Securities Act, the Securities Exchange Act of 1934 or state securities or blue sky laws, or
otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or
expenses arise out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of, or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not misleading;
provided; however, that Company will not be liable in any such case to the extent that any such
claim, action, demand, loss, damage, liability, cost or expense arose out of, or is based upon, an
untrue statement or alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by Holder, such holder, such underwriter or such controlling person in
writing specifically for use in the preparation thereof, or out of transactions by Holder after
the receipt of the notice and during the cessation period specified in Section 4(b) hereof.

     (b) Holder will indemnify and hold harmless Company (and each of its directors, each of its
officers who have signed any registration statement, any underwriter of Company’s Securities
included in such registration, and any controlling person of Company or any such underwriter) from
and against, and will reimburse Company or such controlling person with respect to, any and all
claims, actions, demands, losses, damages, liabilities, cost and expense to which Company, any of
its directors, such officers, such underwriter or such controlling person may become subject under
the Securities Act or the Securities Exchange Act of 1934 or state securities or blue sky laws, or
otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or
expenses arise out of or based upon any untrue or alleged untrue statement of any material fact
relating to Holder and contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of the omission or the alleged omission to
state therein a material fact relating to Holder required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that Holder will be liable in any such case only to the extent that
any such claim, action, demand, loss, damage, liability, cost or expense arose out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished or supplied by Holder in writing specifically for use in the
preparation thereof.

     (c) Promptly after receipt by an indemnified party pursuant to the provisions of
subparagraphs (a) or (b) hereof notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is
to be made against the indemnifying party pursuant to the provisions of said subparagraph (a) or
(b), notify the indemnifying party of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to an indemnified
party otherwise than under this paragraph and shall not relieve the indemnifying party from
liability under this paragraph unless such indemnifying party is prejudiced by such omission. In

6

 

case such action is brought against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party shall have the right to participate in, and,
to the extent that it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant
to the provision of said subparagraphs (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense thereof. No indemnifying party
shall be liable to an indemnified party for any settlement of any action or claim without the
consent of the indemnifying party, which consent may not be unreasonably withheld.

     7. Termination of Offering. Upon the sale of all of the Registrable Securities
included in any offering pursuant hereto, Holder shall promptly notify Company that the offering
has been completed.

     8. Choice of Law; Venue.

     (a) The parties agree that this Agreement shall be governed by and construed under the laws of
the Commonwealth of Pennsylvania, without regard to such state’s conflicts of laws or choice of law
rules.

     (b) The parties hereby consent to the Federal District Court, Northern District of Ohio,
Eastern Division as the sole court of proper venue for any and all actions arising from this
Agreement, and hereby waive all defenses pertaining to jurisdiction, venue, or forum
nonconveniens in any action maintained in such court.

     9. Counterpart Signatures. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually executing such
counterparts and all of which together shall constitute one instrument.

     10. Integration. All agreements, contracts, understandings or other arrangements
which may have been heretofore made or had with reference to the subject matter of this Agreement
are hereby wholly abrogated, superseded, discharged and annulled, it being agreed between the
parties that this Agreement constitutes and expresses the entire understanding between them, all
other promises, undertakings, representations, agreements, understandings and arrangements being
herein merged.

     11. Amendments. No amendment or variation of the terms and conditions of this
Agreement shall be valid unless evidence by a writing signed by all parties to this Agreement.

     12. Captions. The captions used in the sections of this Agreement are inserted only
for the purpose of reference and shall not be deemed to govern, limit, modify or in any other
manner affect the scope, meaning or intent of the provisions of this Agreement.

7

 

     13. Assignment. Holder may assign its rights under this Agreement to any transferee
of the Shares subject to Section 14 of the Warrant Agreement by and between the Company and Holder.

     14. Binding Effect. This Agreement is binding on and inures to the benefit of the
heirs, executors, successors and assigns of the parties hereto.

     The parties have executed this Agreement on the date first above written.

	 	 	 	 	 	 
	 	 	TANDEM HEALTH CARE, INC.

	 

	 	By:
	 	/s/ Lawrence R. Deering
	 

	 	 	 	 
	 

	 	Its:
	 	Chairman and CEO

	 	 	HOLDER:

	 	 	/s/ James B. Renacci
	 	 	 
	 	 	The James B. Renacci Trust - 1998

8

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