Document:

Exhibit 10.3

 

Exhibit 10.3

TANDEM HEALTH CARE, INC.

REGISTRATION RIGHTS AGREEMENT

Dated as of September 8, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	1.	 	Registration Rights	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.1	 	Definitions	 	 	1	 
	 
	 	1.2	 	Company Registration	 	 	2	 
	 
	 	1.3	 	Form S-3	 	 	3	 
	 
	 	1.4	 	Expenses of Registration	 	 	5	 
	 
	 	1.5	 	Registration Procedures	 	 	5	 
	 
	 	1.6	 	Indemnification	 	 	7	 
	 
	 	1.7	 	Information by Holders	 	 	9	 
	 
	 	1.8	 	Rule 144 Reporting	 	 	9	 
	 
	 	1.9	 	Transfer of Registration Rights	 	 	9	 
	 
	 	1.10	 	“Market Stand-Off” Agreement	 	 	9	 
	 
	 	1.11	 	Black-out Periods	 	 	10	 
	 
	 	1.12	 	Termination of Registration Rights	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	2.	 	General	 	 	10	 
	 
	 	 	 	 	 	 	 	 
	 
	 	2.1	 	Waivers and Amendments	 	 	10	 
	 
	 	2.2	 	Governing Law	 	 	10	 
	 
	 	2.3	 	Successors and Assigns	 	 	10	 
	 
	 	2.4	 	Entire Agreement	 	 	10	 
	 
	 	2.5	 	Notice	 	 	11	 
	 
	 	2.6	 	Severability	 	 	11	 
	 
	 	2.7	 	Titles and Subtitles	 	 	11	 
	 
	 	2.8	 	Counterparts	 	 	11	 
	 
	 	2.9	 	Stock Splits.	 	 	11	 

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TANDEM HEALTH CARE, INC.

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is entered into effective as of September
8, 2005, by and among Tandem Health Care, Inc., a Pennsylvania corporation (the “Company”), and
Health Care REIT, Inc. (“HCRI”).

RECITALS

     WHEREAS, simultaneously herewith, the Company and HCRI are entering into that certain
Agreement (the “Modification Agreement”); and

     WHEREAS, pursuant to the Modification Agreement, the Company, among other things, is issuing
HCRI a warrant (the “Warrant”) to purchase 100,000 shares of the Company’s common stock, par value
$0.00008 (the “Common Stock”); and

     WHEREAS, the Company and HCRI desire to clarify HCRI’s registration rights associated with the
shares of the Company’s Common Stock issuable upon exercise of the Warrant;

     WHEREAS, the Company is also party to a registration rights agreement dated as of March 25,
1998, as amended (the “Rights Agreement”) by and among Behrman Capital II L.P. (“Behrman”), Glen A.
Tobias (“Tobias”), Robert W. Gluskin (“Gluskin”), Strategic Entrepreneur Fund II, L.P. (“SEF”, and
with Behrman, Tobias and Gluskin, the “Behrman Entities”), Lawrence R. Deering (“Deering”), the
Lawrence R. Deering Grantor Retained Annuity Trust (the “GRAT”) and Joseph D. Conte (“Conte”, and
with Deering and the GRAT, the “Founders”).

     NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein, the
parties, intending to be legally bound, hereto further agree as follows:

AGREEMENT

     1. Registration Rights.  

          1.1 Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:

            (a) The terms “register,” “registered” and “registration” refer to (i) a registration of an
offering of securities effected by preparing and filing a registration statement in compliance with
the Securities Act (as defined below), and the declaration or ordering of the effectiveness of such
registration statement and (ii) the qualification or compliance of such offering of securities
under applicable state blue-sky laws, and the filing of all necessary amendments or undertakings
therefor.

 

 

            (b) The term “Registrable Securities” means any and all (i) shares of Common Stock or other
securities of the Company issued or issuable upon exercise of the Warrant, and (ii) securities into
which such shares of Common Stock shall have been converted; provided, however,
that the above shares shall cease to be Registrable Securities once they have been sold in any
public offering.

            (c) The terms “Holder” or “Holders” means any person who holds Registrable Securities or
securities convertible into Registrable Securities.

            (d) The term “Other Holder” or “Other Holders” means any person, other than a Holder or
Holders, who holds securities of the Company and has the right to require the Company to register
such securities.

            (e) The term “Participating Holders” means any Holders or Other Holders who have, by proper
notice, requested inclusion of Registrable Securities in the relevant public offering and who have,
if applicable, agreed to participate in any related underwriting.

            (f) The term “SEC” means the Securities and Exchange Commission.

            (g) The term “Securities Act” means the Securities Act of 1933, as amended, or any similar
successor federal statute and the rules and regulations thereunder.

            (h) The term “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
similar successor federal statute and the rules and regulations thereunder.

            (i) The term “public offering” means a registered offering of the Company’s securities to the
general public (other than an offering covered by a registration statement relating solely to a
sale of securities to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a transaction within the scope of Rule 145 promulgated under the Securities Act).
The first public offering of the Company shall be termed the “Initial Public Offering.”

          1.2 Company Registration.

            (a) Registration. If the Company shall determine to register any of its shares of
Common Stock for its own account or for the account of other shareholders, or both, the Company
will:

                  (i) promptly give to each Holder written notice thereof; and

                  (ii) include in such registration, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests received by the Company from any
Holder within twenty (20) days after written notice has been provided by the Company to each
Holder, except as limited under Section 1.2(b) below.

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     Notwithstanding the foregoing, the Company shall not be required to notify Holders or include
Registrable Securities in any registration (i) relating solely to employee stock option or purchase
plans on Form S-1, S-3 or S-8, or any successor form, or for any other similar limited purpose, or
(ii) relating solely to a transaction within the scope of Rule 145 on Form S-4, or any successor
form, or for any other similar limited purpose.

            (b) Underwriting. If the registration of which the Company gives notice is for a
public offering involving an underwriting, the Company shall so advise each Holder as a part of the
written notice given pursuant to Section 1.2(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.2 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the
extent provided herein. The Company, the Holder and all Other Holders proposing to distribute
their securities through such underwriting shall enter into an underwriting agreement in customary
form with the underwriters selected by the Company. Notwithstanding any other provision of this
Section 1.2, if the underwriters determine that marketing factors require a limitation of the
number of shares to be underwritten, the underwriters and the Company may limit the number of
Registrable Securities held by the Holder and securities held by any Other Holder to be included in
the registration and underwriting, or may exclude Registrable Securities held by the Holder and
securities held by any Other Holder entirely from such registration and underwriting. If there is
a limitation on the number of Registrable Securities and securities held by any Other Holder to be
included in such registration, the following rules apply: the Registrable Securities requested to
be included in such registration by a Holder shall be included in such registration pro rata with
the shares of Common Stock requested to be registered in such registration statement by any Other
Holder based on the number of shares of Common Stock requested to be registered by such Holder and
all Other Holders. The Company shall advise each Holder and each Other Holder of any such
limitation, and the number of Registrable Securities and securities held by any Other Holder that
may be included in the registration and underwriting after the underwriter’s determination, it
being understood that shares of Common Stock shall be allocated first to the Company, then to the
Holder and all Other Holders on a pro rata basis based on the number of Registrable Securities and
securities held by any Other Holder so requested to be included. If the Holder or any Other Holder
disapproves of the terms of any such underwriting, such party may elect to withdraw therefrom by
written notice to the Company and the underwriter.

          1.3 Form S-3.

            (a) Following the Company’s Initial Public Offering, the Company shall use its reasonable best
efforts to become eligible to register offerings of securities on Form S-3 or its successor form.
After the Company has qualified for the use of Form S-3 or its successor form, the Holder shall
have the right to request unlimited registrations on Form S-3 or its successor form (which request
shall be in writing and shall state the number of Registrable Securities to be registered and the
intended method of disposition of such Registrable Securities by such Holder); provided,
however, that the Company shall not be obligated to effect more than one (1) such
registration on Form S-3 during any twelve-month period provided that such registration on
Form S-3 has been declared or ordered effective and has remained effective until the earlier of (A)
nine (9)

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months after the date of effectiveness, or (B) the date all Registrable Securities registered
thereunder have been sold (the “S-3 Registration”).

     Notwithstanding the foregoing:

                  (i) The Company shall not be required to effect a registration pursuant to this Section 1.3
within 135 days of the effective date of any registration pursuant to this Section 1.3 or Section
1.2.

                  (ii) The Company shall not be required to effect a registration pursuant to this Section 1.3
unless the Holder proposes to dispose of Registrable Securities having an anticipated aggregate
price to the public (net of underwriting discounts and expenses of sale) of at least $250,000;

                  (iii) The Company shall have the right to defer filing a registration statement pursuant to
this Section 1.3 for a period of up to 90 days following the requested filing date (the “Blocking
Right”) if the Company furnishes to each Holder requesting such registration a certificate signed
by the Chief Executive Officer or Chief Financial Officer of the Company stating that in the good
faith judgment of the Company’s Board of Directors it would be seriously detrimental to the Company
and its shareholders for a registration statement to be filed at the time requested (the
"Certificate”); provided, however, that the Company may not utilize this Blocking Right more than
once in any twelve-month period;

                  (iv) The Company shall give written notice to each Holder and to each Other Holder of the
receipt of a request for registration pursuant to this Section 1.3 within ten (10) business days of
the receipt of such request and shall provide a reasonable opportunity for each Holder and Other
Holders to participate in the registration. Subject to the foregoing, the Company will use its
reasonable best efforts to effect promptly the registration of all Registrable Securities and other
securities held by an Other Holder on Form S-3 or its successor form to the extent requested by a
Holder or Other Holder thereof for purposes of disposition; and

                  (v) The Company shall not be required to effect more than one (1) underwritten public offering
pursuant to this Section 1.3.

            (b) Underwriting. If the requesting Holder intends to distribute the Registrable
Securities covered by its request by means of an underwriting, it shall so advise the Company as
part of its request made pursuant to this Section 1.3. The Company shall include such information
in the written notice referred to in Section 1.3(a)(iv). In such event, the underwriters shall be
selected by the requesting Holder and must be reasonably acceptable to the Board of Directors of
the Company. The Company and all Participating Holders, if any, shall enter into an underwriting
agreement in customary form with the underwriters. Notwithstanding any other provision of this
Section 1.3, if the underwriters determine that marketing factors require a limitation of the
number of shares to be underwritten, the underwriters may limit the number of Registrable
Securities or securities held by any Participating Holder to be included in the registration and

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underwriting, or may exclude Registrable Securities or securities held by any Participating
Holder entirely from such registration and underwriting.

            (c) If marketing factors require a limitation on the number of Registrable Securities held by
the Holder and securities held by any Participating Holder to be included in such registration, the
following rules apply: the Registrable Securities requested to be included in such registration by
a Holder shall be included in such registration pro rata with the shares of Common Stock requested
to be registered in such registration statement by a Participating Holder based on the number of
shares of Common Stock requested to be registered by such Holder and all Participating Holders.
The Company shall advise the Holder and all Participating Holders of any such limitation, and the
number of securities held by the Holder and such Participating Holders that may be included in the
registration and underwriting after the underwriter’s allotment shall be allocated as provided for
above.

            (d) If any Participating Holder disapproves of the terms of the underwriting, such
Participating Holder may elect to withdraw therefrom by written notice to the Company, the
underwriter and the Participating Holders.

          1.4 Expenses of Registration. All expenses incurred in connection with any
registration pursuant to this Section 1 shall be borne by the Company except as follows:

            (a) The Company shall not be required to pay underwriters’ fees, discounts, commissions or
transfer taxes relating to Registrable Securities; and

            (b) The Company shall not be required to pay the fees of any counsel of a Holder.

     All expenses of any registered offering not otherwise borne by the Company shall be borne pro
rata among the Participating Holders on the basis of the number of shares registered.

          1.5 Registration Procedures. In the case of each registration effected by the Company
pursuant to this Agreement, the Company will keep each Participating Holder advised in writing as
to the initiation of registration, qualification and compliance and as to the completion thereof.
Except as otherwise provided in Section 1.4, at its expense the Company will:

            (a) Prepare and file with the SEC a registration statement with respect to the offering of
such Registrable Securities and use its reasonable best efforts to cause such registration
statement to become effective, and upon the request of the Participating Holders holding a majority
of the Registrable Securities registered thereunder, keep such registration statement effective for
up to nine (9) months or, such earlier time that the Participating Holders have completed the
distribution related thereto.

            (b) Prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as

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may be necessary to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement.

                  (c) Furnish to the Participating Holders such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities Act, and such other
documents as they may reasonably request in order to facilitate the disposition of their securities
covered by such registration statement.

                  (d) Use its reasonable best efforts to register and qualify the securities covered by such
registration statement under such other securities or blue sky laws of such jurisdictions as shall
be reasonably requested by the Participating Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by the Securities
Act.

                  (e) In the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter of such
offering. Each Participating Holder shall also enter into and perform its obligations under such
agreement.

                  (f) Notify each Participating Holder (i) when such registration statement, or any
post-effective amendment thereto, shall have become effective, (ii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending the effectiveness of
such registration statement of the initiation of proceedings for that purpose, and (iii) at any
time when a prospectus relating thereto is required to be delivered under the Securities Act or
upon the happening of any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.

                  (g) Cause all securities covered by such registration statement to be listed on each
securities exchange or authorized for quotation on each automated quotation system on which similar
securities issued by the Company are then listed or authorized for quotation.

                  (h) Provide a transfer agent and registrar for all securities covered by such registration
statement and a CUSIP number for all such Registrable Securities, in each case not later than the
effective date of such registration.

                  (i) Furnish, at the request of any Participating Holder, on the date that the securities are
delivered to the underwriters for sale in connection with a registration being sold through
underwriters, (i) an opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to the Participating
Holders and (ii) a letter dated such date, from the independent certified public accountants of the
Company,

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in form and substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the
Participating Holders requesting registration of Registrable Securities.

          1.6 Indemnification.

            (a) By the Company. The Company will indemnify and hold harmless each Holder with
respect to which registration has been effected pursuant to this Agreement, each of its officers,
directors, members and partners, each person controlling such Holders, each underwriter, broker or
dealer of offerings effected pursuant to this Agreement, if any, and each person who controls any
such underwriter, broker or dealer, against all claims, losses, expenses, damages and liabilities
(or actions in respect thereto), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering circular or other
document (including any related registration statement, notification or the like) incident to any
such registration, or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statement therein not misleading, or any
violation or alleged violation by the Company of the Securities Act, the Exchange Act or any state
securities law applicable to the Company or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any such state law and relating to action or inaction required of the
Company in connection with any such registration. The Company will reimburse each such Holder,
each of its officers, directors, members and partners, and each person controlling such Holders,
each such underwriter, broker or dealer and each person who controls any such underwriter, broker
or dealer, promptly after such expense is incurred for any reasonable legal and any other expenses
incurred in connection with investigating, defending or settling any such claim, loss, damage,
liability or action; provided, however, that the indemnity agreement contained in
this Section 1.6(a) shall not apply to amounts paid in settlement of any such claim, loss, damage,
liability, or action if such settlement is effected without the consent of the Company;
provided further, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the Company by an
instrument duly executed by such Holder or underwriter specifically for use therein.

            (b) By the Holders. Each Holder will, as to each registration in which such Holder is
a Participating Holder, indemnify and hold harmless the Company, each of its directors and
officers, each underwriter, if any, of the Company’s securities covered by such a registration
statement, each person who controls the Company within the meaning of the Securities Act, and each
other such Holder, each of its officers, directors and partners and each person controlling such
Holder, against all claims, losses, expenses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering circular or other
document, or any 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 such Holders, directors, officers, partners, persons and underwriters for any
reasonable legal or any other expenses incurred in connection with investigating, defending or
settling any such claim,

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loss, damage, liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in
such registration statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument duly executed by
such Holder specifically for use therein; provided, however, that (i) the indemnity
agreement contained in this Section 1.6(b) shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is effected without the consent of
the Holders holding a majority of the Registrable Securities (which consent shall not be
unreasonably withheld) and (ii) that the total amount for which any Holder shall be liable under
this Section 1.6(b) shall not in any event exceed the aggregate gross proceeds received by such
Holder from the sale of Registrable Securities held by such Holder in such registration, except in
the case of fraud by such Holder.

            (c) Indemnification Procedures. Each party entitled to indemnification under this
Section 1.6 (the “Indemnified Party”) shall give written notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party
to assume the defense of any such claim or any litigation resulting therefrom; provided,
however, that counsel for the Indemnifying Party proposed to conduct the defense of such
claim or litigation shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party’s election and expense; provided further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its
obligations hereunder, unless (and only to the extent that) such failure resulted in prejudice to
the Indemnifying Party; and provided further, that an Indemnified Party (together
with all other Indemnified Parties which may be represented without conflict by one counsel) shall
have the right to retain one separate counsel, with the fees and expenses of such counsel to be
paid by the Indemnifying Party, if representation of such Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate due to actual or potential differing interests
between such Indemnified Party and any other party represented by counsel for the Indemnifying
Party in such proceeding. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to all Indemnified Parties of a release from all liability in respect to such
claim or litigation.

     If the indemnification provided for in this Section 1.6 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statement or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant equitable consideration;
provided, however, that in no event shall any contribution by a Holder under this
Section 1.6 exceed the gross proceeds from the offering received by such Holder, except in the case
of fraud by such Holder. The relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by reference to, among

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other things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

            (d) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in direct conflict with the foregoing provisions, the provisions
in the underwriting agreement shall control.

            (e) The obligations of the Company and the Holders under this Section 1.6 shall survive the
completion of any offering of Registrable Securities in a registration statement under this Section
1.

          1.7 Information by Holders. Any Participating Holders shall promptly furnish in
writing to the Company such information regarding such Participating Holders and the distribution
proposed by such Participating Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification or compliance referred to
herein.

          1.8 Rule 144 Reporting. With a view to making available to Holders the benefits of
certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to
the public without registration, the Company agrees at all times to make its best efforts to:

            (a) make and keep public information available, as those terms are understood and defined in
Rule 144 promulgated under the Securities Act (“Rule 144”), after the effective date of the
registration for the Initial Public Offering; and

            (b) file with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act (at any time after the Company has become
subject to such reporting requirements).

          1.9 Transfer of Registration Rights. A Holder’s rights to cause the Company to
register its Registrable Securities and to keep information available, granted to it by the Company
under Section 1 hereto, may be assigned to a transferee or assignee who receives all of the
Registrable Securities then held by such transferring or assigning Holder; provided, that
the Company is given written notice by such Holder at the time of said transfer, stating the name
and address of said transferee or assignee and identifying the securities with respect to which
such rights are being assigned; provided further, that upon request by the Company,
such permitted transferee or assignee executes a counterpart to this Agreement. The Company may
prohibit the transfer of any Holder’s rights under this Section 1.9 to any proposed transferee or
assignee who the Company reasonably believes is a competitor of the Company as is determined by the
Board of Directors in its reasonable discretion.

          1.10 “Market Stand-Off” Agreement. Each Holder hereby agrees that at the request of
the underwriter managing of any underwritten public offering of the Company’s securities, or the
Company or its counsel on the underwriter’s behalf, it will enter into a customary form of
underwriter’s lockup agreement that specifies that during the period of duration (not to

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exceed 180 days) specified by the Company or an underwriter of Common Stock or other
securities of the Company following the effective date of such offering, it shall not, to the
extent requested by the Company or such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of any securities of the Company held by it at any time during such
period; provided, however, that such agreement shall not be required unless all (a)
executive officers and directors of the Company, and (b) shareholders of the Company holding
greater than 1.0% Company’s outstanding Common Stock, enter into similar agreements.

     In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares of securities of every
other person subject to the foregoing restriction) until the end of such period.

          1.11 Black-out Periods. Notwithstanding anything in this Agreement to the contrary,
the Board of Directors of the Company may, in its sole discretion, impose black-out periods during
which no sales may be made under any registration hereunder so long as such blackout is applicable
generally to sales of stock by all directors and executive officers of the Company and any other
registration rights agreement related to the Company’s Common Stock.

          1.12 Termination of Registration Rights. The obligations of the Company pursuant to
this Section 1 shall terminate with respect to any Holder at such time as a Holder is able to sell
under Rule 144 during a 3-month period all of the remaining Registrable Securities issued or
issuable to such Holder.

     2. General.  

          2.1 Waivers and Amendments. No term of this Agreement may be amended or terminated,
nor the observance of any term of this Agreement waived (either generally or in a particular
instance and either retroactively or prospectively), without the written consent of the Holder or
Holders of a majority-in-interest of the Registrable Securities permitted to be registered pursuant
to this Agreement and the Company. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each party to this Agreement, any person who may become a party to
this Agreement, and the Company.

          2.2 Governing Law. This Agreement shall be construed in accordance with, and governed
in all respects by, the laws of the Commonwealth of Pennsylvania, without giving effect to
principles of conflicts of laws.

          2.3 Successors and Assigns. Except as otherwise expressly provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.

          2.4 Entire Agreement. This Agreement and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and this Agreement shall supersede and cancel all prior
agreements between the parties hereto with regard to the subject matter hereof, including but not
limited to that certain Supplemental Agreement (as such term is defined in the Amendment);

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provided, however, that solely with respect to the Behrman Entities and the
Founders, this Agreement shall not in any manner supersede such parties rights and obligations
under the Rights Agreement.

          2.5 Notice. All notices and other communications required or permitted hereunder
shall be in writing and shall be effective upon personal delivery, delivery to a reputable
overnight courier, machine confirmed facsimile transmittal or mailing by certified or registered
mail, postage prepaid and return receipt requested, addressed (a) if to HCRI, at HCRI’s address as
set forth on the signature page hereto, or at such other address as HCRI shall have furnished to
the Company in writing, (b) if to the Company, at the Company’s address as set forth on the
signature page hereto, or at such other address as the Company shall have furnished to HCRI in
writing, or (c) if to any Other Holder, at such address as such Other Holder shall have furnished
to the Company in writing.

          2.6 Severability. In case any provision of this Agreement shall be invalid, illegal,
or unenforceable, the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.

          2.7 Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in construing this
Agreement.

          2.8 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original, but all of which together shall constitute one instrument.

          2.9 Stock Splits. All references to numbers of shares in this Agreement shall be
appropriately adjusted to reflect any stock dividend, split, combination or other recapitalization
of shares by the Company occurring after the date of this Agreement.

-11-

 

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set
forth above.

	 	 	 	 	 
	 	 	COMPANY:
	 
	 	 	 	 
	 	 	TANDEM HEALTH CARE, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence R. Deering
	 

	 	 	 	 
	 

	 	 	 	Lawrence R. Deering
	 

	 	 	 	Chairman and Chief Executive Officer
	 
	 	 	 	 
	 	 	Address: 800 Concourse Parkway S
	 

	 	 	 	Suite 200
	 

	 	 	 	Maitland, FL 32751
	 

	 	 	 	Fax: (407) 571-0595
	 
	 	 	 	 
	 	 	HOLDER:
	 
	 	 	 	 
	 	 	HEALTH CARE REIT, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Erin C. Ibele
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Erin C. Ibele
	 

	 	 	 	 
	 

	 	 	 	(Print Name)
	 
	 	 	 	 
	 

	 	Title:
	 	Vice President-Administration
and Corporate Secretary
	 
	 	 	 	 
	 

	 	Address:
	 	One Seagate, Suite 1500
	 

	 	 	 	P.O. Box 1475
	 

	 	 	 	Toledo, OH 43603-1475
	 

	 	 	 	Fax: (419) 247-2826

 

 

	 	 	 	 	 
	 	 	OTHER HOLDERS:
	 
	 	 	 	 
	 	 	/s/ Lawrence R. Deering
	 	 	 
	 	 	Lawrence R. Deering
	 
	 	 	 	 
	 	 	/s/ Joseph D. Conte
	 	 	 
	 	 	Joseph D. Conte
	 
	 	 	 	 
	 	 	/s/ Robert W. Gluskin
	 	 	 
	 	 	Robert W. Gluskin
	 
	 	 	 	 
	 	 	/s/ Glen A. Tobias
	 	 	 
	 	 	Glen A. Tobias
	 
	 	 	 	 
	 	 	BEHRMAN CAPITAL II L.P.
	 
	 	 	 	 
	 

	 	By:
	 	Behrman Brothers, L.L.C.,
	 	 	its general partner
	 
	 	 	 	 
	 

	 	By:
	 	/s/ William M. Matthes
	 

	 	 	 	 
	 

	 	 	 	William M. Matthes
	 

	 	 	 	Managing Member
	 
	 	 	 	 
	 	 	STRATEGIC ENTREPRENEUR FUND II, L.P.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ William M. Matthes
	 

	 	 	 	 
	 

	 	 	 	William M. Matthes
	 

	 	 	 	General Partner

 

 

	 	 	 	 	 
	 	 	LAWRENCE R. DEERING GRANTOR RETAINED ANNUITY
TRUST
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Lawrence R. Deering
	 

	 	 	 	 
	 

	 	 	 	Lawrence R. Deering
	 

	 	 	 	TrusteeExhibit 10.4

 

Exhibit 10.4

SECURITIES PURCHASE AGREEMENT

Among

TANDEM HEALTH CARE, INC.,

BEHRMAN CAPITAL II L.P.,

STRATEGIC ENTREPRENEUR FUND II, L.P.

and

ROBERT W. GLUSKIN

Dated as of April 26, 2005

 

 

SECURITIES PURCHASE AGREEMENT

     SECURITIES PURCHASE AGREEMENT, dated as of April 26, 2005, among TANDEM HEALTH CARE, INC., a
Pennsylvania corporation (the “Company”), BEHRMAN CAPITAL II L.P., a Delaware limited
partnership (“Behrman Capital II”), STRATEGIC ENTREPRENEUR FUND II, L.P., a Delaware
limited partnership (“SEFII”) and Robert W. Gluskin, an individual residing in the State of
Texas (Gluskin, Behrman Capital II and SEFII being hereinafter referred to individually as a
“Purchaser” and collectively as the “Purchasers”).

     WHEREAS, the Company is in the business of providing post-acute care services and acquiring or
developing additional skilled nursing facilities and other businesses related to the provision of
post-acute care services (collectively, the “Business”); and

     WHEREAS, on the Closing Date, the Company wishes to issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, wish to purchase on the terms and subject to the conditions
hereinafter set forth, an aggregate of 3,497,023 shares of Series G Convertible Preferred Stock,
par value $0.01 per share, (the “Convertible Preferred Shares”), and an aggregate of
2,098,215 shares of Series H Redeemable Preferred Stock (the “Redeemable Preferred
Shares”), in the amounts set forth opposite the name of each such Purchaser in Schedule
I attached hereto under the headings “Convertible Preferred Shares” and “Redeemable Preferred
Shares” as the case may be, for acquisitions, to finance working capital and for general corporate
purposes.

     NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, and
intending to be legally bound, the parties hereto agree as follows:

 

 

ARTICLE I

PURCHASE AND SALE OF SECURITIES

     Section 1.01 Issuance, Sale and Delivery of Convertible Preferred Shares and Redeemable
Preferred Shares on the Closing Date.

     (a) Subject to the terms and conditions set forth herein, on the Closing Date, the Company
shall issue, sell and deliver to each Purchaser, and each Purchaser shall purchase from the
Company, (i) the number of Convertible Preferred Shares set forth opposite the name of such
Purchaser in Schedule I hereto under the heading “Convertible Preferred Shares,” at a
purchase price of $2.52 per Convertible Preferred Share, and (ii) the number of Redeemable
Preferred Shares set forth opposite the name of such Purchaser in Schedule I hereto under
the heading “Redeemable Preferred Shares,” at a purchase price of $2.52 per Redeemable Preferred
Share (collectively referred to herein as the “Preferred Stock”). On the Closing Date, the
Company shall issue certificates in definitive form, registered in the name of each Purchaser,
evidencing the Convertible Preferred Shares and Redeemable Preferred Shares being purchased by each
such Purchaser hereunder.

     (b) Subject to the terms and conditions set forth herein, on the Closing Date, each Purchaser
shall deliver to the Company, as payment in full for the Convertible Preferred Shares and the
Redeemable Preferred Shares being purchased by each such Purchaser hereunder, an amount set forth
opposite the name of such Purchaser on Schedule I hereto under the heading “Aggregate
Purchase Price,” in immediately available United States funds.

     Section 1.02 Closing Date. The closing of the sale and purchase of the Convertible
Preferred Shares and Redeemable Preferred Shares shall take place at the offices of Buchanan

- 2 -

 

Ingersoll PC, One Oxford Centre, 301 Grant Street, 20th Floor, Pittsburgh,
Pennsylvania, 15219-1410, at 10:00 a.m., Eastern Time, on April 26, 2005, or at such other date and
time as may be mutually agreed upon among the Purchasers and the Company (such closing being herein
called the “Closing” and such date and time being herein called the “Closing
Date”).

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company represents and warrants to the Purchasers as follows:

     Section 2.01 Organization, Qualification and Corporate Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Except as set forth in Schedule 2.01 hereto, neither the
nature of the business transacted by the Company nor the character of the properties owned or held
by it makes licensing or qualification as a foreign corporation in any other jurisdiction
necessary, except where the failure to be so licensed or qualified would not have a material
adverse effect on the properties, assets, condition (financial or other), prospects, operating
results or business of the Company or any of its subsidiaries (a “Material Adverse
Effect”). The Company has the corporate power and authority to own and hold its properties and
to carry on its business as currently conducted and to execute, deliver and perform this Agreement
and to issue its Preferred Stock as provided for herein.

     Section 2.02 Authorization of Agreement, etc. (a) Each of (i) the execution and
delivery by the Company of this Agreement and (ii) the performance by the Company of its
obligations hereunder has been duly authorized by all requisite corporate action and will not (x)
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

- 3 -

 

other instrument to which the Company or any of its subsidiaries is a party or by which it or
any of its properties or assets is bound or affected, (y) 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 (z) 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 or any of its
subsidiaries.

     (b) The issuance and delivery of the Preferred Stock has been duly authorized by the Company,
and, when issued and delivered, such Preferred Stock will be validly issued and outstanding, fully
paid and nonassessable shares of the Company’s capital stock. The issuance and delivery of the
Preferred Stock is not subject to any preemptive rights of shareholders of the Company or any
subsidiary, or to any right of first refusal or other similar right in favor of any person, that
has not been waived in writing.

     Section 2.03 Validity. 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.

     Section 2.04 Governmental Approvals. No registration or filing with, or consent or
approval of, or other action by, any federal, state or other governmental agency or instrumentality
is or will be necessary for the valid execution, delivery and performance of this Agreement by the
Company or any of its subsidiaries, or the issuance and delivery by the Company of the Preferred
Stock.

     Section 2.05 Absence of Adverse Changes. No material adverse change in the business,
results of operations or financial condition of the Company and its subsidiaries, taken as a whole,
has occurred since December 31, 2004.

ARTICLE III

- 4 -

 

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

     Each Purchaser, severally and not jointly, represents and warrants to the Company as follows:

     Section 3.01 Authorization of Agreement, etc. The execution and delivery by such
Purchaser of this Agreement has been duly authorized by all requisite action on the part of such
Purchaser and will not violate any provision of law, any order of any court or other agency of
government, and to the extent such Purchaser is an entity, the charter or other governing documents
of such Purchaser, or any provision of any indenture, agreement or other instrument by which such
Purchaser or any of such Purchaser’s properties or assets are 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 any claim upon any of the properties or
assets of such Purchaser.

     Section 3.02 Validity. This Agreement has been duly executed and delivered by such
Purchaser and constitutes the legal, valid and binding obligation of such Purchaser, enforceable
against such Purchaser in accordance with its terms.

     Section 3.03 Investment Representations. (a) Such Purchaser is acquiring the
Preferred Stock being purchased by such Purchaser hereunder for such Purchaser’s own account, for
investment, and not with a view toward the resale or distribution thereof.

     (b) Such Purchaser understands that he or it must bear the economic risk of such Purchaser’s
investment for an indefinite period of time, because the Preferred Stock is not registered under
the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state
securities laws and may not be resold unless subsequently registered under the Securities Act and
such other laws or unless an exemption from such registration is available. Such

- 5 -

 

Purchaser also understands that it is not contemplated that any registration will be made
under the Securities Act or that the Company will take steps that will make the provisions of Rule
144 or Rule 144A under the Securities Act available to permit resale of the Preferred Stock. Such
Purchaser agrees not to pledge, transfer, convey or otherwise dispose of any of the Preferred
Stock, except in a transaction that is the subject of either (i) an effective registration
statement under the Securities Act and any applicable state securities laws, or (ii) an opinion of
counsel to the effect that such registration is not required (which opinion and counsel shall be
reasonably satisfactory to the Company, and may be relied on by the Company in making such
determination).

     (c) Such Purchaser is able to fend for himself or itself in the transactions contemplated by
this Agreement and has the ability to bear the economic risks of the investment in the Preferred
Stock being purchased by him or it hereunder for an indefinite period of time.

     (d) Behrman Capital II and SEFII each represents that it has been organized and is existing as
a limited partnership under the laws of the State of Delaware.

     (e) Gluskin represents that he is an individual residing in the State of Texas.

     Section 3.04. Governmental Approvals. No registration or filing with, or consent or
approval of, or other action by, any federal, state or other governmental agency or instrumentality
is or will be necessary by such Purchaser for the valid execution, delivery and performance of this
Agreement.

- 6 -

 

ARTICLE IV

CONDITIONS PRECEDENT TO CLOSING

     Section 4.01. Conditions of Company. The obligations of each Purchaser to carry out
its obligations under this Agreement are, at its option, subject to the satisfaction, on or before
the Closing Date, of the following conditions:

     (a) The representations and warranties of the Company contained in this Agreement shall be
true and correct in all material respects on the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of such date.

     (b) The Company shall have performed and complied with all agreements and conditions contained
herein required to be performed or complied with by it prior to or on the Closing Date.

     (c) All corporate and other proceedings to be taken by the Company and all waivers and
consents to be obtained by the Company and its subsidiaries in connection with the transactions
contemplated hereby shall have been taken or obtained by the Company and all documents incident
thereto shall be satisfactory in form and substance to the Purchasers and their counsel.

     (d) No legal action or proceeding shall have been instituted or threatened seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby.

     (e) The Company shall have obtained all consents required to be obtained pursuant to Section
5.04 hereof.

- 7 -

 

     (f) On or prior to the Closing Date, the shareholders of the Company shall have approved the
Company’s Fifth Amended and Restated Articles of Incorporation as attached hereto as Exhibit
Y.

     Section 4.02. Conditions of Purchasers. The obligations of the Company to carry out
its obligations under this Agreement, are, at its option, subject to the satisfaction, on or before
the Closing Date, of the following conditions:

     (a) The representations and warranties of the Purchasers contained in this Agreement shall be
true and correct in all material respects on the Closing Date, with the same force and effect as
though such representations and warranties had been made on and as of such date.

     (b) The Purchasers have performed and complied with all agreements and conditions contained
herein required to be performed or complied with by them prior to or on the Closing Date.

     (c) All corporate and other proceedings to be taken by the Purchasers and all waivers and
consents to be obtained by the Purchasers and their subsidiaries in connection with the
transactions contemplated hereby shall have been taken or obtained by the Purchasers and all
documents incident thereto shall be satisfactory in form and substance to the Company and its
counsel.

     (d) No legal action or proceeding shall have been instituted or threatened seeking to
restrain, prohibit, invalidate or otherwise affect the consummation of the transactions
contemplated hereby.

- 8 -

 

ARTICLE V

COVENANTS

     Section 5.01 Financial Statements, Reports, etc. So long as any Purchaser or any
transferee thereof shall hold any of the Preferred Stock purchased by it pursuant to this
Agreement, the Company shall furnish to each such Purchaser and to each such subsequent holder:

     (a) within 120 days after the end of each fiscal year of the Company, a consolidated balance
sheet of the Company and each of its subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations and retained earnings, changes in stockholders’ equity and
cash flows of the Company and each of its subsidiaries for the fiscal year then ended, together
with supporting notes thereto, certified in accordance with generally accepted accounting
principles, without qualification as to scope of audit, by a firm of independent public accountants
of recognized national standing selected by the Company and reasonably acceptable to the
Purchasers;

     (b) within 45 days after the end of each fiscal quarter in each fiscal year (other than the
last fiscal quarter in each fiscal year), a consolidated balance sheet of the Company and each of
its subsidiaries and the related consolidated statements of operations and retained earnings and
cash flows of the Company and each of its subsidiaries, unaudited but certified by the principal
financial officer of the Company and each such subsidiary, respectively, such balance sheet to be
as of the end of such fiscal quarter and such statements of operations and retained earnings and
cash flows to be for such fiscal quarter, for the corresponding fiscal quarter of the immediately
preceding fiscal year, for the period from the beginning of the fiscal year to the end of such
fiscal quarter and for the period from the beginning of the immediately preceding fiscal year to
the end

- 9 -

 

of the corresponding fiscal quarter in such fiscal year, in each case subject to normal
year-end adjustments;

     (c) within 45 days after the end of each month in each fiscal year (other than the last month
in each fiscal quarter), a consolidated balance sheet of the Company and each of its subsidiaries
and the related consolidated statement of operations and retained earnings, unaudited but certified
by the principal financial officer of the Company and each of its subsidiaries, such balance sheets
to be as of the end of such month and such statements of operations and retained earnings to be for
such month and for the period from the beginning of the fiscal year to the end of such month, in
each case subject to normal year-end adjustments;

     (d) prior to the beginning of each fiscal year of the Company (and with respect to any
revision thereof, promptly after such revision has been prepared), a proposed annual operating
budget for the Company and each of its subsidiaries, including projected monthly income statements,
cash flow statements during such fiscal year and a projected consolidated balance sheet as of the
end of such fiscal year, and each monthly financial statement furnished pursuant to (c) above shall
reflect variances from such operating budget, as the same may from time to time be revised;

     (e) promptly upon filing, copies of all registration statements, prospectuses, periodic
reports and other documents filed by the Company or any of its subsidiaries with the Securities and
Exchange Commission; and

     (f) promptly, from time to time, such other information regarding the operations, business,
affairs and financial condition of the Company or any subsidiary as any Purchaser may reasonably
request.

- 10 -

 

     The obligations of the Company under paragraphs (c), (d) and (e) above shall cease at such
time as the Company shall have effected an initial public offering of its equity securities
registered under the Securities Act.

     Section 5.02 Rights of Inspection. The Company shall, and shall cause its
subsidiaries, officers, directors, employees, representatives, advisors and agents to, afford, from
the date hereof, the representatives, advisors and agents of Behrman Capital II complete access at
all reasonable times during normal business hours to its officers, employees, agents, properties,
books, records and work papers, and shall furnish Behrman Capital II all financial, operating and
other information and data that Behrman Capital II may reasonably request through such
representatives, advisors or agents. The Company shall promptly furnish to Behrman Capital II a
copy of all material written correspondence, filings, communications (or memoranda setting forth
the substance thereof) between the Company or any of its officers, employees, representatives,
advisors or agents and any governmental entity with respect to the obtaining of any waivers,
consents or approvals and the making of any registrations or filings that are necessary to the
transactions contemplated by this Agreement. Behrman Capital II agrees to keep confidential any
confidential business information that may be provided to it by the Company pursuant to this
Agreement, unless disclosure is required by law as advised by counsel.

     Section 5.03 Notice of Certain Events. The Company shall give the Purchasers prompt
notice of (i) the occurrence, or failure to occur, of any event that such party believes would be
likely to cause (x) any of the representations or warranties of the Company contained in this
Agreement to be untrue or inaccurate in any material respect at any time from the date hereof or
(y) any covenant, condition or agreement contained in this Agreement not to be complied with or
satisfied in any material respect; (ii) any failure of the Company, or any officer, director,

- 11 -

 

employee or agent thereof, to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by it hereunder;
(iii) any event of default under any agreement with respect to indebtedness for borrowed money or a
purchase money obligation, and any event which, upon notice or lapse of time or both, would
constitute such an event of default, that would permit the holder of such indebtedness or
obligation to accelerate the maturity thereof; (iv) any material default under any agreement with
Health Care REIT, Inc. or any agreement with a similar entity engaged in the financing of
post-acute care facilities; and (v) any action, suit or proceeding at law or in equity or by or
before any governmental instrumentality or agency which, if adversely determined, would materially
impair the right of the Company to carry on its business substantially as now or then conducted,
and which, in the case of each of the items set forth in clauses (i) through (v) above, would be
likely to have a Material Adverse Effect.

     Section 5.04 Consents and Approval. Prior to the Closing Date, the Company shall
promptly apply for or otherwise seek and use its best efforts to obtain all authorizations,
consents, waivers and approvals (whether by or from any person, entity, court or governmental
agency or authority) as may be required in connection with the consummation of this Agreement and
the transactions contemplated hereby.

     Section 5.05 Compliance with Laws. The Company shall comply, and shall cause each of
its subsidiaries to comply, with all applicable laws, rules, regulations and orders, the
noncompliance with which could have a Material Adverse Effect.

- 12 -

 

ARTICLE VI

MISCELLANEOUS

     Section 6.01 Notices. Any notice or other communications required or permitted
hereunder shall be deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by national overnight courier service or first class certified mail, postage prepaid,
or by telecopy addressed to such party at the address or telecopy number set forth below:

	 	 	 	 	 	 	 
	 

	 	 	(1	)	 	if to the Company, to it at:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Tandem Health Care, Inc.
	 

	 	 	 	 	 	800 Concourse Parkway South
	 

	 	 	 	 	 	Suite 200
	 

	 	 	 	 	 	Maitland, FL 32751
	 

	 	 	 	 	 	Attention:          Lawrence R. Deering
	 

	 	 	 	 	 	Facsimile:          (407) 571-0595
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	With a copy to:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	Tandem Health Care, Inc.
	 

	 	 	 	 	 	One Oxford Center
	 

	 	 	 	 	 	Suite 1600
	 

	 	 	 	 	 	Pittsburgh, PA 15219
	 

	 	 	 	 	 	Attention:          Rosemary L. Corsetti, Esq.
	 

	 	 	 	 	 	Facsimile:          (412) 281-4435
	 
	 	 	 	 	 	 
	 

	 	 	(2	)	 	if to Behrman Capital II or SEF II, to it at:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	126 East 56th Street
	 

	 	 	 	 	 	New York, NY 10022
	 

	 	 	 	 	 	Attention:          Mark P. Visser
	 

	 	 	 	 	 	Facsimile:          (212) 980-7024
	 
	 	 	 	 	 	 
	 

	 	 	(3	)	 	if to Robert W. Gluskin, to him at:
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	421 Hideaway Lane Central
	 

	 	 	 	 	 	Lindale, TX 75771
	 

	 	 	 	 	 	Facsimile:          (903) 882-1676

or, in any case, at such other address or addresses as shall have been furnished in writing by such
party to the other parties hereto. All such notices and other communications shall be deemed to

- 13 -

 

have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the
case of national overnight courier service, on the first business day following delivery to such
service, (c) in the case of mailing, on the fifth business day following the date of such mailing
and (d) in the case of facsimile, when received.

     Section 6.02 Brokerage. Each party hereto will indemnify and hold harmless the others
against and in respect of any claim for brokerage or other commissions relative to this Agreement
or to the transactions contemplated hereby, based in any way on agreements, arrangements or
understandings made or claimed to have been made by such party with any third party.

     Section 6.03 Parties in Interest. All covenants and agreements contained in this
Agreement by or on behalf of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or not.

     Section 6.04 Entire Agreement; Assignment. This Agreement (together with its
Schedules, Exhibits and Annexes) constitutes the entire agreement of the parties with respect to
the subject matter hereof and may not be amended or modified nor any provisions waived except in a
writing signed by the parties hereto. This Agreement may not be assigned by any party without the
prior written consent of the others.

     Section 6.05 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but
all such counterparts shall constitute but one agreement.

     Section 6.06 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.

- 14 -

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day
and year first above written.

	 	 	 	 	 	 	 
	 	 	TANDEM HEALTH CARE, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Lawrence R. Deering 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	          Chairman and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	BEHRMAN CAPITAL II L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Behrman Brothers LLC,	 	 
	 

	 	 	 	its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ William M. Matthes 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	          Managing Member	 	 
	 
	 	 	 	 	 	 
	 	 	STRATEGIC ENTREPRENEUR FUND II, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ William M. Matthes 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	          General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	/s/ Robert W. Gluskin	 	 
	 

	 	 	 	 
	 

	 	Robert W. Gluskin	 	 

 

 

Schedule I

Purchasers

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Name and Address of Purchaser	 	Convertible	 	 	Redeemable	 	 	Aggregate	 
	 	 	Preferred	 	 	Preferred	 	 	Purchase Price	 
	 	 	Shares	 	 	Shares	 	 	 	 	 
	Behrman Capital II L.P.
	 	 	3,425,773	 	 	 	2,055,464	 	 	$	13,812,717.24	 
	Strategic Entrepreneur
Fund II, L.P.
	 	 	46,449	 	 	 	27,870	 	 	$	187,283.88	 
	Robert W. Gluskin
	 	 	24,801	 	 	 	14,881	 	 	$	99,998.64	 
	Total
	 	 	3,497,023	 	 	 	2,098,215	 	 	$	14,099,999.76

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