SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 28, 1996
Geriatric & Medical Companies, Inc.
Exact name of registrant as specified in its charter
Delaware 0-3997 23-1713341
(State or
other Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
5601 Chestnut Street, Philadelphia, Pennsylvania 19139
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (215) 476-2250
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ITEM 5. Other Events
Agreement and Plan of Merger
On July 11, 1996, Geriatric & Medical Companies, Inc., a Delaware corporation
(the "Company"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Genesis Health Ventures, Inc., a Pennsylvania corporation
("Acquiror"), and G Acquisition Corporation, a Delaware corporation ("Newco").
Under the terms of the Merger Agreement, at the Effective Time (as defined in
the Merger Agreement), Newco (Acquiror's wholly-owned subsidiary) will be merged
with and into the Company (the "Merger"). Following the Merger, the separate
corporate existence of Newco will cease and the Company will continue as the
surviving corporation (the "Surviving Corporation"). The certificate of
incorporation and by-laws of Newco as in effect immediately prior to the
Effective Time will be the certificate of incorporation and by-laws,
respectively, of the Surviving Corporation. Pursuant to the Merger Agreement,
each issued and outstanding share of the capital stock of Newco will be
converted into and become one fully paid and nonassessable share of common
stock, no par value, of the Surviving Corporation, and each issued and
outstanding share of common stock of the Company ("Company Common Stock"), other
than shares owned directly or indirectly by Acquiror, by Newco, or by the
Company, and other than Dissenting Shares (as hereinafter defined), will be
converted into the right to receive Five Dollars Seventy-Five Cents ($5.75) in
cash, without interest (the "Merger Consideration"). As of the Effective Time,
all such shares of Company Common Stock will no longer be outstanding, will
automatically be canceled and retired, and will cease to exist, and each holder
of a certificate representing any shares of Company Common Stock will cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
As a result of the Merger, the Company will become a wholly-owned subsidiary of
Acquiror. At the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Newco will vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Newco will become the
debts, liabilities and duties of the Surviving Corporation.
Any issued and outstanding shares of Company Common Stock held by a person who
objects to the Merger and complies with all of the provisions of applicable law
concerning the rights of holders who dissent from the Merger and require
appraisal of their shares of Company Common Stock ("Dissenting Shares"), will
become the right to receive such consideration as may be determined to be due
under the Delaware General Corporation Law.
The consummation of the Merger is subject to various conditions, including, the
following: (i) all permits and consents required to consummate the transaction
shall have been obtained; (ii) the transaction shall have been duly approved by
the affirmative vote of the majority of the outstanding shares of Common Stock
of the Company; (iii) the representations and warranties of the parties
contained in the Merger Agreement shall be true and correct in all material
respects on the closing date; (iv) no proceeding shall
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have been instituted which could be reasonably expected to result in a material
adverse effect or which seeks to or does prohibit or restrain the consummation
of the Merger; (v) there shall not have been any material adverse change in the
business, assets, financial condition or results of operations of the Company;
and (vi) the applicable waiting period under the Hart-Scott- Rodino Anti-Trust
Improvements Act of 1976, as amended, shall have expired or been terminated.
The Company intends to convene a special stockholders meeting for the purpose of
approving and adopting the Merger Agreement as soon as reasonably practicable.
The Effective Time of the Merger is anticipated to occur promptly after
satisfaction of all conditions precedent to Closing.
The Merger Agreement may be terminated and the transactions abandoned at any
time prior to the Closing, whether or not the Merger has been approved by the
stockholders of the Company: (i) by mutual agreement of the parties; (ii) by the
Company or by Acquiror, as the case may be, (a) if the Closing shall not have
occurred on or prior to February 1, 1997, for any reason or (b) if it has become
reasonably certain that any condition to the closing obligations of such party
will not be satisfied and such condition has not been waived by such party,
unless, in either case, the failure of the Closing to occur or such condition to
be satisfied is due to the failure of the party seeking to terminate the Merger
Agreement to perform or observe its agreements and conditions set forth therein
to be performed or observed by such party at or before the Closing; (iii) by
Acquiror or the Company, if the other shall have materially breached any of its
obligations under the Merger Agreement and shall have failed to remedy such
breach within ten (10) days after written notice from the nonbreaching party
specifying the nature of the breach and requesting that such breach be remedied;
(iv) by the Company, in order to enter into a definitive agreement relating to
an Acquisition Proposal (as defined in the Merger Agreement) with a potential
acquiror with which the Company is permitted to negotiate pursuant to the Merger
Agreement in order for the Board to discharge its fiduciary duties under
Delaware law, provided that the Company first provides notice to Acquiror of its
intent to terminate the Merger Agreement and pays Acquiror a termination fee in
the amount of $5,000,000 plus expenses in an amount not to exceed $750,000; or
(v) by Acquiror or Newco, if (a) the Board of Directors of the Company
withdraws, modifies or changes its recommendation of the Merger Agreement or the
Merger in a manner adverse to Acquiror or Newco or (b) the Board of Directors of
the Company recommends an Acquisition Proposal to the stockholders of the
Company.
Prior to the execution of the Merger Agreement, there was no material
relationship between the Company and Acquiror or Newco or any of the Company's,
Acquiror's or Newco's respective affiliates, directors or officers.
In connection with the execution of the Merger Agreement, Daniel Veloric
("Veloric"), the Chairman of the Board of Directors of the Company, and certain
companies, of which Veloric is the beneficial owner, have reached certain
understandings with Acquiror. The Special Committee of the Board of Directors of
the Company and its independent legal counsel have been advised as to the
character and terms of the understandings reached by Veloric and Acquiror.
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Tomahawk Holdings, Inc. ("Holdings"), Tomahawk Mt. Laurel, Inc. ("Mt. Laurel"),
and Tomahawk Capital Investments, Inc. ("Investments," and together with
Holdings and Mt. Laurel, "Tomahawk") have reached an agreement in principle with
Acquiror regarding (i) Acquiror's operation of a long-term care facility located
in New Jersey licensed for 280 beds, and a residential facility located in New
Jersey licensed for 55 beds (collectively, the "Facility") owned by Investments
and (ii) Acquiror's option to purchase all of the issued and outstanding capital
stock of Mt. Laurel and Investments from Holdings (the "Option"). The definitive
form of such transactions is subject to final negotiation by the parties;
however, it is currently anticipated that Acquiror will operate the Facility for
a period of five years and that Acquiror's aggregate monthly payments therefor
will be $40,000 net of all expenses relating to the operation of the Facility
(including, for example, insurance, taxes and utility costs, and the debt
service payments on the indebtedness secured by a mortgage on the Facility, in
the original principal amount of $10,100,000). If the net working capital
deficit of the Facility on the date Acquiror commences operating the Facility
exceeds $3,000,000 net of a deferred gain accounted for as a current liability
on the balance sheet of the Facility, Tomahawk is obligated to contribute an
amount necessary to bring such deficit to $3,000,000. In consideration for the
grant of the Option, Acquiror will pay $1,500,000 to Holdings.
The assets of Tomahawk include the Facility, approximately 26.6 acres of
additional land adjacent to the Facility, and three residential rental
properties. The Option is exercisable at any time during the term of Acquiror's
operation of the Facility at an aggregate purchase price of $6,000,000. The
purchase price is allocated $4,000,000 to the Facility, and $2,000,000 to the
other assets.
In connection with the Merger, Holdings, Tomahawk Capital Holdings, Inc., and
Veloric (collectively, the "Stockholder"), Acquiror and Newco entered into a
Stockholder Option and Proxy Agreement dated as of July 11, 1996 (the
"Agreement") pursuant to which Stockholder granted to Newco (i) an option (the
"Stock Option") to purchase the shares of common stock of the Company owned by
Stockholder (the "Shares") and (ii) an irrevocable proxy (the "Proxy") with
respect to the Shares. The Stock Option entitles Acquiror to purchase the Shares
owned by the Stockholder for a purchase price (the "Exercise Price") of $5.75
per Share. Stockholder owns 3,748,178 shares of Company Common Stock,
representing approximately 24.2% of the issued and outstanding shares of Company
Common Stock. Under the Agreement, the Stockholder agrees to vote (or cause to
be voted) the Shares owned by it in any circumstance in which the vote or
approval of the stockholders of the Company is sought (i) in favor of adoption
and approval of the Merger Agreement and the Merger and the terms thereof and
each of the other actions contemplated by the Merger Agreement and the
Agreement; (ii) against any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
the Company contained in the Merger Agreement or of any Stockholder under the
Agreement; and (iii) against any action, agreement or transaction that is
intended or could reasonably be expected to facilitate a person other than Newco
or its affiliates in acquiring control of the Company or any other action,
agreement or transaction (other than the Merger Agreement or the transactions
contemplated thereby) that is intended, or could reasonably be expected to
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impede, interfere or be inconsistent with, delay, postpone, discourage or
materially adversely affect the consummation of the Merger or the performance by
the parties of their respective obligations under this Agreement. Under the
Agreement, the Stockholder irrevocably granted to Newco and appointed Newco
(with full power of substitution) its proxy to vote the Shares owned by the
Stockholder in the manner described above. The proxy terminates on the earlier
of the day following the Effective Time and the date which is one year following
the termination of the Merger Agreement.
The Company and Veloric have entered into a Termination Agreement dated as of
July 11, 1996, pursuant to which the Company and Veloric have agreed that, at
the Effective Time, that certain Employment Agreement effective June 1, 1993
(the "Veloric Employment Agreement") will terminate. The Veloric Employment
Agreement currently expires on May 31, 2001. The Veloric Employment Agreement
provides for annual base compensation of $500,000 per year. The Veloric
Employment Agreement also provides for a bonus equal to five percent (5%) of the
Company's annual increase in profits, the award of phantom stock based on the
annual incremental increase in the average price of Company Common Stock, and a
death benefit of $1,000,000. In consideration of the termination of the Veloric
Employment Agreement, the Company will pay Veloric the sum of $1,000,000,
payable $200,000 at the Effective Time and $200,000 on each of the first four
anniversaries of the Effective Time.
The Company and Veloric have also entered into that certain Restrictive
Covenants Agreement dated July 11, 1996 by which Veloric agreed that, among
other things, for a period of ten years after the Effective Time of the Merger,
he will not, directly or indirectly, for his own account, or the benefit of any
other person, without the prior written consent of Acquiror, (a) engage in any
business competitive with the businesses of the Company or Acquiror in its
respective geographic markets, or (b) hire any employee of the Company or
Acquiror, or solicit, induce, or divert any of them to work for him or any other
person. In consideration of the foregoing, the Company has agreed to pay Veloric
the sum of $475,000 at the Effective Time of the Merger.
In addition, Acquiror and Veloric have reached an agreement in principle
pursuant to which Veloric will provide consulting services to Acquiror after the
Effective Time of the Merger. While the definitive form of the consulting
agreement is still being negotiated, it is expected that the term of such
consulting agreement will be for a period of four years. During the first year
of the consulting agreement, it is expected that Acquiror will pay Veloric a
consulting fee of $100,000. After the expiration of the first year of such
consulting agreement any further consulting fees shall be in an amount
determined by Acquiror in its sole discretion. It is also expected that Veloric
will be granted an option to purchase 25,000 shares of the common stock of
Acquiror at a price equal to the fair market value of Acquiror's common stock at
the Effective Time of the Merger. Veloric will also be provided with an office,
car and health insurance for the entire term of the consulting agreement.
The Company and Esther Ponnocks, Senior Executive Vice President of the Company
("Ponnocks"), have entered into a Termination Agreement dated as of July 11,
1996, pursuant to which the Company and Ponnocks have agreed that, at the
Effective Time that certain Employment Agreement dated as of June
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1, 1992 (the "Ponnocks Employment Agreement") will terminate. The Ponnocks
Employment Agreement provides for annual base compensation of $200,000 per year
and a term of three years, with annual extensions through not later than May 31,
2002, plus severance compensation equal to two times her annual base
compensation. In consideration of the termination of the Ponnocks Employment
Agreement, the Company will pay Ponnocks $200,000 at the Effective Time and up
to $600,000 to fund Ponnocks' secured supplemental pension plan provided in the
Ponnocks Employment Agreement, to provide an annuity for Ponnocks' lifetime,
commencing on the first day of the month following the first anniversary of the
Effective Time, in the amount of $75,000 per annum. In addition, the Company
will pay to Ponnocks up to $250,000, representing income taxes to be incurred by
Ponnocks in connection with such funding.
In addition, Acquiror and Ponnocks have reached an agreement in principle
pursuant to which Ponnocks will provide consulting services to Acquiror after
the Effective Time of the Merger. While the definitive form of the consulting
agreement is still being negotiated, it is expected that the term of such
consulting agreement will be for a period of two years. During the first year of
the consulting agreement, it is expected that Acquiror will pay Ponnocks a
consulting fee of $60,000. After the expiration of the first year of such
consulting agreement any further consulting fees shall be in an amount
determined by Acquiror in its sole discretion. Ponnocks will also be provided
with an office, car and health insurance for the term of the consulting
agreement.
Status of Life Support Ambulance, Inc.
Life Support Ambulance, Inc. ("LSA"), a subsidiary of the Company, received
notice of suspension of payments relating to Medicare billing submitted to its
Medicare carrier effective April 6, 1995. The carrier has alleged that
overpayments have occurred related to prior LSA billings.
In August 1995, the carrier partially lifted the suspension and has since paid
LSA 75% of all subsequently approved billings. As of June 30, 1996, the carrier
had withheld approximately $4,800,000 in escrow pending resolution of this
matter.
On April 2, 1996, LSA received notice of the results of the carrier's audit,
including a calculated overpayment of approximately $5,000,000 through March 31,
1995. On June 28, 1996, LSA received notice of the results of the carrier's
audit for the period commencing April 1, 1995 and ending March 31, 1996. The
carrier calculated an overpayment of approximately $1,800,000 for such period.
LSA is reviewing the carrier's results and believes that there are errors in,
among other things, (i) the sampling techniques used, (ii) the conclusions
reached relative to the appropriateness of payments for claims in the audit
sample, and (iii) the projection technique of the ultimate overpayment
calculation.
LSA believes that it has operated at all times in substantial compliance with
all provisions required by Medicare relating to reimbursement
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for services. The Company is not able at this time to predict the ultimate
outcome of this matter.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits.
Exhibit No. Exhibit
2.1 Agreement and Plan of Merger dated July 11, 1996,
by and among Genesis Health Ventures, Inc.,
Geriatric & Medical Companies, Inc. and
G Acquisition Corporation.
2.2 Termination Agreement dated July 11, 1996 by and
between Geriatric & Medical Companies, Inc. and Daniel
Veloric.
2.3 Termination Agreement dated July 11, 1996 by and
between Geriatric & Medical Companies, Inc. and Esther
Ponnocks.
2.4 Restrictive Covenants Agreement dated July 11, 1996 by
and between Geriatric & Medical Companies, Inc. and
Daniel Veloric.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GERIATRIC & MEDICAL COMPANIES, INC.
By: /s/ James J. O'Malley
Vice President and
Chief Financial Officer
Date: July 24, 1996
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AGREEMENT AND PLAN OF MERGER
Parties: GENESIS HEALTH VENTURES, INC.
a Pennsylvania corporation ("Acquiror")
148 West State Street
Kennett Square, PA 19348
GERIATRIC & MEDICAL COMPANIES, INC.
a Delaware corporation ("GMC")
5601 Chestnut Street
Philadelphia, PA 19139
G ACQUISITION CORPORATION a Delaware corporation
("Newco") 148 West State Street Kennett Square, PA
19348
Dated as of: July 11, 1996
Background:
WHEREAS, the respective Boards of Directors of Acquiror, Newco and GMC
have approved the merger of Newco into GMC, as set forth below (the "Merger"),
upon the terms and subject to the conditions set forth in this Agreement,
whereby each issued and outstanding share of Common Stock, par value $.10 per
share, of GMC (the "GMC Common Stock"), other than shares owned directly or
indirectly by Acquiror or GMC and Dissenting Shares (as defined in Section
2.5(d)), will be converted into the right to receive the Merger Consideration
(as defined in Section 2.5(c)); and
WHEREAS Acquiror, Newco and GMC desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein and subject to the satisfaction of the
terms and conditions set forth herein, the parties, intending to be legally
bound, agree as follows:
SECTION : DEFINED TERMS
Certain defined terms used in this Agreement and not specifically
defined in context are defined in this Section 1, as follows:
"Accounts Receivable" means (a) any right to payment for goods sold,
leased or licensed or for services rendered, whether or not it has been earned
by performance, whether billed or unbilled, and whether or not it is evidenced
by any Contract, (b) any note receivable, or (c) any other receivable or right
to payment of any nature.
"Asset" means any real, personal, mixed, tangible or intangible
property of any nature, including, but not limited to, (a) Cash Assets, (b)
Accounts Receivable, (c) other current assets of any nature including, but not
limited to, prepayments, deposits and escrows, (d) Tangible Property, (e) Real
Property, (f) Software, (g) Intangibles, (h) Contract Rights, (i) claims, causes
of action and other legal rights and remedies of any nature, and (j)good will
and miscellaneous assets of any nature including, but not limited to, rights
with respect to telephone numbers, rights with respect to telephone and other
directory listings, marketing materials and advertisements, books and records,
correspondence files, data bases, customer lists, prospect lists,supplier lists,
and other files and records of any nature, whether stored in written form or on
any type of computer, electronic or other media.
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"Businesses" means the pharmacy, medical supplies, durable medical
equipment, rehabilitative therapies, ambulance transportation, paratransit,
contract management, financial, diagnostic services, home care, assisted living,
comprehensive personal care, residential health care and long-term care
businesses and other businesses conducted by the GMC Companies.
"Cash Asset" means any cash on hand, cash in bank or other accounts,
readily marketable securities, and other cash-equivalent liquid assets of any
nature.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent" means any consent, approval, order or authorization of, or
any declaration, filing or registration with, or any application or report to,
or any waiver by, or any other action (whether similar or dissimilar to any of
the foregoing) of, by or with, any Person which is necessary in order to take a
specified action or actions in a specified manner and/or to achieve a specified
result or to avoid the occurrence of a default or breach.
"Contract" means any written or oral contract, agreement, instrument,
order, arrangement, commitment or understanding of any nature, including, but
not limited to, sales orders, purchase orders, leases, subleases, maintenance
agreements, license agreements, sublicense agreements, loan agreements,
promissory notes, security agreements, pledge agreements, deeds, mortgages,
guaranties, indemnities, warranties, employment agreements, consulting
agreements, sales representative agreements, joint venture agreements,
settlement agreements, release agreements, termination agreements, buy-sell
agreements, options or warrants; but not including Employee Benefit Plans.
"Contract Right" means, with respect to any Person, any right, power
or remedy of any nature of such Person under any Contract including, but not
limited to, rights to receive property or services or otherwise derive benefits
from the payment, satisfaction or performance of another party's Obligations,
rights to demand that another party accept property or services or take any
other actions, and rights to pursue or exercise remedies or options.
"Employee Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA, or any other plan, trust agreement, program, policy or
arrangement for or regarding bonuses, commissions, incentive compensation,
severance, hospitalization, vacation, deferred compensation, pensions, profit
sharing, retirement, payroll savings, stock options, stock purchases, stock
awards, stock ownership, equity compensation, phantom stock, stock
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appreciation rights, medical/dental expense payment or reimbursement, disability
income or protection, sick pay, group insurance, self insurance, death benefits,
employee welfare or fringe benefits of any nature, including without limitation,
those benefiting retirees or former employees; but not including employment
Contracts with individual employees.
"Encumbrance" means any lien, security interest, pledge, mortgage,
judgment, easement, leasehold, assessment, covenant, restriction, reservation,
conditional sale, prior assignment, or other encumbrance, claim, burden or
charge of any nature.
"Environmental Laws" means all Laws relating to pollution, protection of
the environment, health, safety, or the exposure of persons to Hazardous
Substances, including, without limitation, Laws relating to emissions,
discharges, releases or threatened releases into the environment (including,
without limitation, ambient air, surface water, ground water or land) of any
Hazardous Substances identified or regulated under any such Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended
"Facilities" means assisted living residences, comprehensive personal care
facilities, residential health care facilities and long term care facilities
owned, operated or managed by any of the GMC Companies.
"GAAP" means generally accepted accounting principles under United States
accounting rules and regulations, as in effect from time to time, consistently
applied.
"GMC Companies" means GMC, the GMC Subsidiaries and the GMC
Partnerships.
"GMC Partnerships" means each general or limited partnership in which any
GMC Company holds any partnership interest.
"GMC Subsidiaries" means each of the Subsidiaries of GMC.
"Hazardous Substances" means any substance, waste, contaminant, pollutant
or material that has been determined by any Law or any United States federal
government authority, or any state or local government authority having
jurisdiction over Real Property owned, leased, used or occupied by any of the
GMC Companies, to be capable of posing a risk of injury or damage to health,
safety, property or the environment, including, but not limited to, (a) all
substances, wastes, contaminants, pollutants and materials defined or designated
as hazardous, dangerous or toxic pursuant to any Law of the state in which such
Real Property is located or any United States Law, and (b) ureaformaldehyde,
polychlorinated byphenyls, asbestos or asbestos-containing materials, nuclear or
radioactive fuel or waste, radon, explosives, known carcinogens, petroleum,
petroleum products, or any other waste, material,
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substance, pollutant or contaminant that might cause any injury to human health
or safety or to the environment or might subject the owner, operator, possessor
or occupier of such Real Property to any claims, causes of action, costs
damages, penalties, expenses, demands or liabilities, however defined, under any
applicable Law.
"Insurance Policy" means any public liability, product liability, general
liability, comprehensive, property damage, vehicle, life, hospital, medical,
dental, disability, workers' compensation, key man, fidelity bond, theft,
forgery, errors and omissions, directors' and officers' liability, owner's
title, or other insurance policy or binder of any nature.
"Intangible" means any name, corporate name, fictitious name, trademark,
trademark application, service mark, service mark application, trade name, brand
name, product name, slogan, trade secret, know-how, patent, patent application,
copyright, copyright application, Software, design, logo, formula, invention,
product right or other intangible asset of any nature, whether in use, under
development or design, or inactive.
"Inventory" means any raw materials, supplies, work-in-progress, finished
goods, parts or other inventory of any nature whatsoever.
"Judgment" means any order, writ, injunction, fine, citation, award,
decree or other judgment of any nature of any foreign, federal, state or local
court, governmental body, administrative agency, regulatory authority or
arbitration tribunal.
"Knowledge" with reference to the phrases "to the Knowledge of the GMC
Companies" or "to the best of the GMC Companies' Knowledge" or similar phrases
means that none of the directors of GMC, none of the executive officers of GMC
set forth on Schedule 1.24, and none of the chief operating officers of each of
the Businesses set forth on Schedule 1.24 have any actual knowledge or actual
belief after due inquiry that the statement made is incorrect.
"Law" means any provision of any foreign, federal, state or local law,
statute, ordinance, order, charter, constitution, treaty, rule or regulation,
guideline, consent order, decree or agreement, including without limitation,
common law.
"Material Adverse Change" or "Material Adverse Effect" means any change or
effect which, when taken together with all other adverse changes and effects
which are not individually deemed to be a "Material Adverse Change" or have a
"Material Adverse Effect", is or is reasonably likely to be materially adverse
to the Assets, business, financial condition or results of operations of the GMC
Companies, taken as a whole, excluding in all cases: (i) events or conditions
generally affecting the industries in which the GMC Companies operate or arising
from changes in general business or economic conditions; (ii) all reasonable
out-of-pocket fees and expenses (including, without limitation, reasonable
legal, accounting, investigatory and other fees and expenses) incurred by GMC in
connection with the transactions contemplated by this Agreement; (iii) the
payment by the GMC Companies of all amounts due to any officers or employees of
the GMC Companies under employment contracts
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or other employee benefit plans or programs in effect as of the date hereof and
disclosed to Acquiror prior to the date hereof and not in breach of any of the
terms of this Agreement; (iv) any effect resulting from any change in Law or
GAAP, which affects generally entities such as the GMC Companies; and (v) any
effect resulting from compliance by the GMC Companies with the terms of this
Agreement.
"Obligation" means any debt, liability or obligation of any nature,
whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated,
accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown
or otherwise.
"Permit" means any license, permit, approval, certificate, consent,
waiver, order, authorization, registration, right or privilege of any nature,
granted, issued, approved or allowed by any foreign, federal, state or local
governmental body, administrative agency or regulatory authority or any Person
acting on behalf of any such body, agency or authority.
"Person" means any individual, sole proprietorship, joint venture,
partnership, corporation, limited liability company or partnership, association,
cooperative, trust, estate, governmental body, administrative agency, regulatory
authority or other entity of any nature.
"Proceeding" means any claim, demand, suit, action, litigation,
investigation, arbitration, audit, hearing or other legal proceeding of any
nature, or any formal demand which might lead to any of the foregoing.
"Real Property" means any real estate, land, building, condominium,
town house, structure, improvement or other real property of any nature, all
shares of stock or other ownership interests in cooperative or condominium
associations or any other corporation owning real estate, partnership interests
in partnerships, membership interests in limited liability companies or other
forms of ownership interest through which interests in real estate are held, and
all appurtenant and ancillary rights thereto, including, but not limited to,
easements, covenants, water rights, sewer rights and utility rights.
"Securities Act" means the Securities Act of 1933, as amended.
"Software" means any computer program, operating system, applications
system, firmware or software of any nature, whether operational, under
development or inactive, including, but not limited to, all object code, source
code, technical manuals, user manuals and other documentation therefor, whether
in machine-readable form, programming language or any other language or symbols,
and whether stored, encoded, recorded or written on disk, tape, film, memory
device, paper or other media of any nature.
"Subsidiary" means any Person in which a majority of any direct or
indirect equity or ownership interest is owned, of record or beneficially, by
another Person or a direct or indirect Subsidiary of such other Person.
"Tangible Property" means any furniture, fixtures, buildings,
leasehold improvements, vehicles, office equipment, computer equipment, other
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equipment, machinery, tools, forms, supplies or other tangible personal property
of any nature, whether constituting fixed assets, inventory or otherwise.
"Tax" means (a) any foreign, federal, state or local income, earnings,
profits, gross receipts, franchise, capital stock, net worth, sales, use,
occupancy, general property, real property, personal property, intangible
property, realty transfer, fuel, excise, payroll, withholding, unemployment
compensation, social security or other tax of any nature, (b) any foreign,
federal, state or local organization fee, qualification fee, annual report fee,
filing fee, occupation fee, assessment, sewer rent or other fee or charge of any
nature, and (c) any deficiency, interest or penalty imposed with respect to any
of the foregoing.
SECTION : THE MERGER
The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Newco shall be merged with and into GMC at the Effective Time (as
hereinafter defined). Following the Merger, the separate corporate existence of
Newco shall cease and GMC shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of GMC and Newco in accordance with the DGCL. At the election of
Acquiror, any direct or indirect wholly owned Subsidiary of Acquiror may be
substituted for Newco as a constituent corporation in the Merger. In such event,
the parties agree to execute an appropriate amendment to this Agreement in order
to reflect the foregoing.
Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m. on a date to be specified by Acquiror or Newco, which may be on, but
shall be no later than the third business day after, the day on which there have
been satisfaction or waiver of the conditions set forth in Section 8 and Section
9 (the "Closing Date"), at the offices of Blank Rome Comisky & McCauley,
Philadelphia, Pennsylvania, unless another date or place is agreed to in writing
by the parties hereto.
Effective Time. On the Closing Date, or as soon as practicable
thereafter, the parties shall file a certificate of merger or other appropriate
documents (in any such case, the "Certificate of Merger") executed in accordance
with the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Secretary of State of
the State of Delaware, or at such other time as Newco and GMC shall agree should
be specified in the Certificate of Merger (the time the Merger becomes effective
being the "Effective Time").
Effects of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL. Without, limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of GMC and Newco shall vest in the Surviving Corporation,
and all debts, liabilities and duties of GMC and Newco shall become the debts,
liabilities and duties of the Surviving Corporation.
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Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action an the part of the holder of any shares of GMC
Common Stock or any shares of capital stock of Newco:
(a) Capital Stock of Newco. Each share of the capital stock of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common
stock, no par value, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Acquiror Owned Stock. Each share
of GMC Common Stock that is owned by GMC or by any GMC Subsidiary and each share
of GMC Common Stock that is owned by Acquiror, Newco or any other Subsidiary of
Acquiror shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Conversion of GMC Common Stock. Subject to Section 2.5(d), each
issued and outstanding share of GMC Common Stock (other than shares to be
canceled in accordance with Section 2.5(b)) shall be converted into the right to
receive from the Surviving Corporation $5.75 in cash, without interest (the
"Merger Consideration"). As of the Effective Time, all such shares of GMC Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate representing
any such shares of GMC Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of GMC Common
Stock held by a Person (a "Dissenting Stockholder") who objects to the Merger
and complies with all the provisions of the DGCL concerning the right of
stockholders to dissent from the Merger and require appraisal of their shares of
GMC Common Stock ("Dissenting Shares") shall not be converted as described in
Section 2.5(c) but shall become the right to receive such consideration as may
be determined to be due to such Dissenting Stockholder pursuant to DGCL. If,
after the Effective Time, such Dissenting Stockholder withdraws his demand for
appraisal or fails to perfect or otherwise loses his right of appraisal, in any
case pursuant to the DGCL, his shares of GMC Common Stock shall be deemed to be
converted as of the Effective Time into the right to receive the Merger
Consideration, without interest. GMC shall give Acquiror (i) prompt notice of
any demands for appraisal of shares of GMC Common Stock received by GMC and (ii)
the opportunity to participate in and direct all negotiations and proceedings
with respect to any such demands. GMC shall not, without the prior written
consent of Acquiror, make any payment with respect to, or settle, offer to
settle or otherwise negotiate, any such demands.
Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, Acquiror shall
designate a bank or trust company to act as paying agent (the "Paying Agent")
for the payment of the Merger Consideration, and Acquiror shall deposit or
shall cause to be deposited with the Paying Agent in a separate fund
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established for the benefit of the stockholders of GMC Common Stock (the
"Stockholders"), for payment in accordance with this Section 2, through the
Paying Agent (the "Payment Fund"), immediately available funds in amounts
necessary to make the aggregate payments pursuant to Section 2.5(c) to
Stockholders (other than GMC, any GMC Subsidiary, Acquiror, Newco or any other
Subsidiary of Acquiror, or holders of Dissenting Shares). The Paying Agent
shall, pursuant to irrevocable instructions, pay the Merger Consideration out of
the Payment Fund.
The Paying Agent shall invest portions of the Payment Fund as Acquiror
directs in obligations of or guaranteed by the United States of America, in
commercial paper obligations receiving the highest investment grade rating from
both Moody's Investors Services, Inc. and Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1,000,000,000 (collectively, "Permitted
Investments"); provided, however, that the maturities of Permitted Investments
shall be such as to permit the Paying Agent to make prompt payment to former
Stockholders entitled thereto as contemplated by this Section. All earnings of
Permitted Investments shall be paid to Acquiror. If for any reason (including
losses) the Payment Fund in inadequate to pay the amounts to which Stockholders
shall be entitled under Section 2.5(c), Acquiror shall nonetheless be liable for
payment thereof. The Payment Fund shall not be used for any purpose except as
expressly provided in this Agreement. On the first business day which is three
months after the Effective Time, all portions of the Payment Fund not
theretofore paid to former Stockholders shall be remitted to the Surviving
Corporation and former Stockholders shall thereafter look solely to the
Surviving Corporation for payment of the Merger Consideration.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each Stockholder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of GMC Common Stock (the "Certificates") whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.5, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Acquiror may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Acquiror, together with such letter of transmittal, duly executed
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the shares of GMC Common Stock theretofore represented
by such Certificate shall have been converted pursuant to Section 2.5, and the
Certificate so surrendered shall forthwith be canceled. If the Merger
Consideration (or any portion thereof) is to be delivered to a Person other than
the Person in whose name the Certificates surrendered in exchange therefor are
registered, it shall be a condition to the payment of the Merger Consideration
to such Person that the Certificates so surrendered shall be properly endorsed
or accompanied by appropriate stock powers and otherwise in proper form for
transfer, that such
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transfer otherwise be proper and that the Person requesting such transfer pay to
the Paying Agent any transfer or other Taxes payable by reason of the foregoing
or establish to the satisfaction of Acquiror that such Taxes have been paid or
are not required to be paid. In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such certificate to be lost, stolen or destroyed, the Paying Agent will
issue in exchange for such lost, stolen or destroyed certificate the Merger
Consideration deliverable in respect thereof, provided that the Person to whom
the Merger Consideration is paid shall, as a condition precedent to the payment
thereof, give the Surviving Corporation a bond in such sum as it may direct or
to otherwise indemnify the Surviving Corporation in a manner satisfactory to it
against any claim that may be made against the Surviving Corporation with
respect to the Certificate alleged to have been lost, stolen or destroyed. Until
surrendered as contemplated by this Section 2.6, each Certificate shall after
the Effective Time represent only the right to receive upon such surrender the
amount of cash, without interest, into which the shares of GMC Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 2.5. No interest will be paid or will accrue on the cash payable upon
the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. All cash paid
upon the surrender of Certificates in accordance with the terms of this Section
2 shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of GMC Common Stock theretofore represented by such
Certificates, and there shall be no further registration of transfers, on the
stock transfer books of the Surviving Corporation of the shares of GMC Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Paying Agent for any reason, they shall be canceled and exchanged as
provided in this Section 2, except as otherwise provided by Law.
(d) No Liability. None of Acquiror, Newco, GMC or the Paying
Agent shall be liable to any Person in respect of any cash delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
(e) Withholding Rights. Acquiror shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any Stockholder such amounts as Acquiror is required to deduct and withhold with
respect to the making of such payment under the Code or any provision of state,
local or foreign Tax Law. To the extent that amounts are so withheld by
Acquiror, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Stockholder in respect of which such
deduction and withholding was made by Acquiror.
Stock Options and Warrants. The Board of Directors of GMC (or, if
appropriate, any Committee thereof) (a) contemporaneously with the approval of
this Agreement has adopted appropriate resolutions and taken all other actions
necessary to provide that, effective immediately prior to the Effective Time,
each outstanding stock option held by employees or directors of GMC or other
Persons to purchase GMC Common Stock (such stock options are hereinafter
referred to collectively as the "Options") heretofore granted
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under any GMC Option Plans or the LTIP (as such terms are defined in Section
3.5)), and (b) as soon as practicable following the date of this Agreement shall
use its reasonable efforts to provide that outstanding warrants to purchase
100,000 shares of GMC Common Stock under that certain agreement between GMC and
Tripp & Co., Inc. (the "Tripp Warrant"), in either case whether or not then
vested or exercisable, shall no longer be exercisable for the purchase of shares
of GMC Common Stock but shall entitle each holder thereof, in cancellation and
settlement therefor, to a payment in cash (subject to any applicable withholding
taxes, the "Cash Payment"), equal to the product of (x) the total number of
shares of GMC Common Stock subject to each such Option or the Tripp Warrant held
by such holder and (y) the excess of the Merger Consideration over the
respective exercise price per share of GMC Common Stock subject to such Option
or the Tripp Warrant. The Surviving Corporation shall pay each such Cash Payment
to each holder of an outstanding Option or the Tripp Warrant on the date or
dates occurring on or after the Effective Time on which such holder surrenders
such Option or the Tripp Warrant for payment. Any stock appreciation rights,
phantom stock rights, cash performance units, or similar rights including,
without limitation, long term incentive plans (except for the LTIP with respect
to outstanding awards set forth on Schedule 3.5), shall be cancelled as of
immediately prior to the Effective Time without any payment therefor. As
provided herein, the GMC Option Plans, the LTIP and any other Contract, plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of GMC or any GMC Subsidiary (collectively with
the GMC Option Plans, referred to as the "GMC Stock Plans") shall terminate as
of the Effective Time. GMC has taken all steps necessary to ensure that no GMC
Company is or will be bound by any Options or the Tripp Warrant (except as
otherwise required by this Section), other options, warrants, rights or
Contracts which would entitle any Person, other than Acquiror or its affiliates,
to own any capital stock of Acquiror, the Surviving Corporation or any of their
respective Subsidiaries or to receive any payment in respect thereof. GMC shall
use its best efforts to obtain all necessary Consents to ensure that after the
Effective Time, the only rights of the holders of Options or the Tripp Warrant
to purchase shares of Common Stock in respect of such Options or the Tripp
Warrant will be to receive the Cash Payment in cancellation and settlement
thereof as described above.
Certificate of Incorporation and By-Laws.
(a) The certificate of incorporation of Newco as in effect immediately
prior to the Effective Time shall be the certificate of incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable Law.
(b) The Bylaws of Newco as in effect at the Effective Time shall be the
Bylaws of the Surviving Corporation, until thereafter changed or amended as
provided therein or by Law.
Directors. The directors of Newco immediately prior to the Effective
Time shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
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Officers. The officers of Newco immediately prior to the Effective
Time shall become the officers of the Surviving Corporation, until the earlier
of their resignation or removal or removal or until their successors are duly
and elected and qualified, as the case may be.
Resignations. At the Closing, GMC shall use reasonable efforts to make
available to Acquiror and Newco the written resignations of such officers and
directors of each GMC Company as Acquiror shall request from all officerships
and directorships at the GMC Companies, effective as of the Closing Date.
2.12 Obligation with Respect to Certain Employee Benefits. Acquiror
hereby agrees that, as soon as reasonably practicable after the Effective Time,
Acquiror shall take such action as may be necessary to cause each of the GMC
Companies to maintain and provide for those employees of the GMC Companies not
covered by union or collective bargaining agreements, the employee welfare plans
and employee pension plans which are generally made available from time to time
to the employees of the Acquiror and its subsidiaries consistent with grade
levels.
SECTION : REPRESENTATIONS OF GMC
GMC represents and warrants to Acquiror and Newco as follows:
Organization and Subsidiaries. GMC and each of the GMC Subsidiaries is
a corporation duly organized, validly existing, and in good standing under the
Laws of the state of its incorporation. Each of the GMC Partnerships is a
partnership duly formed and validly existing under the Laws of the jurisdiction
of its formation. Each of the GMC Companies is duly qualified or registered to
do business as a foreign entity in each jurisdiction where the transaction of
its respective Businesses requires such qualification or registration except
where the failure to so qualify or register would not, or would not reasonably
be expected to, have any Material Adverse Effect. Schedule 3.1 sets forth an
accurate and complete list of each GMC Company, setting forth as to each GMC
Company, as applicable: (a) its exact legal name; (b) its jurisdiction and date
of formation; (c) its federal employer identification number; (d) its directors
and officers or partners, as applicable, indicating all current title(s) of each
individual; (e) its registered agent and/or office in its jurisdiction of
formation (if applicable); (f) all foreign jurisdictions in which it is
qualified or registered to do business and its registered agent and/or office in
each such jurisdiction (if applicable); (g) all fictitious, assumed or other
names of any type that are registered or used by it or under which it has done
business at any time since June 1, 1995; (h) any name changes, recapitalization,
mergers, reorganizations or similar events since June 1, 1995 and (i) the name
of and the percentage and nature of the interest or percentage of voting
securities owned by GMC or any GMC Company. Each of the GMC Companies has the
requisite power and authority to own its respective Assets and conduct its
respective Businesses as such Businesses are presently conducted. GMC has the
requisite corporate power and authority to enter into and perform this
Agreement. Accurate and complete copies of the charter and bylaws, partnership
agreements and other organizational documents, as applicable, of each of the GMC
Companies, each as amended to date, have been provided to
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Acquiror. All of the issued and outstanding capital stock of each of GMC's
Subsidiaries is duly authorized, validly issued, fully paid and non-assessable,
and was not issued in violation of, any preemptive rights. GMC owns, directly or
through a Subsidiary, all of the issued and outstanding capital stock of each of
the GMC Subsidiaries, free and clear of all Encumbrances. Except for the GMC
Subsidiaries listed on Schedule 3.1, none of the GMC Companies owns any capital
stock or other securities of, or any interest in, any Person.
Authorization of Agreement. The execution, delivery, and performance of
this Agreement by GMC, and the consummation by GMC of the transactions
contemplated hereby, (a) have been authorized by all necessary corporate actions
by GMC's Board of Directors, (b) do not constitute a violation of or default
under (either immediately or upon notice, lapse of time or both) (i) the charter
or bylaws, partnership agreements or other organizational documents, as
applicable, of any of the GMC Companies, (ii) any material Permits held by any
of the GMC Companies or (iii) any material Contract to which any of the GMC
Companies is a party or by which any of the GMC Companies is bound, (c) do not
constitute a violation of any Law or Judgment which is applicable to any of the
GMC Companies or to any of the GMC Companies' Assets or Businesses, the
violation of which would, or would reasonably be expected to, have a Material
Adverse Effect, (d) except as set forth on Schedule 3.2, do not accelerate or
otherwise modify, or give any Person the right to accelerate or modify, any
material Obligation of any of the GMC Companies, (e) do not result in the
creation of any material Encumbrance upon, or give to any Person any material
interest in, any of the GMC Companies' Assets or Businesses or any shares of
capital stock or other security of GMC or any of GMC's Subsidiaries, and (f) do
not require the Consent of any Person except for (i) the approval of the board
of directors of GMC, which has already been obtained, (ii) the approval of the
stockholders of GMC as described in Section 5 of this Agreement, (iii) the
filing with the Securities and Exchange Commission ("SEC") of (x) a proxy
statement relating to the approval by GMC's stockholders of this Agreement (as
amended or supplemented from time to time, the "Proxy Statement") and (y) such
reports under Section 13(a) of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this Agreement, (iv)
filings and approvals under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "Hart-Scott-Rodino Act"), (v) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware, (vi) Consents of
government regulatory authorities described on Schedule 3.2, and (vii) other
Consents described on Schedule 3.2. This Agreement constitutes the valid and
legally binding agreement of GMC, enforceable against GMC in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar Laws affecting creditors' rights generally and to general
principles of equity (whether considered in a proceeding in equity or at Law).
GMC has received an opinion of CS First Boston Corporation to the effect that,
as of the date of this Agreement, the consideration to be received by the
holders of GMC Common Stock (as defined in Section 3.5 below) pursuant to the
Merger are fair to such holders from a financial point of view. That certain
Stock Option Agreement dated July 11, 1996 among inter alia Tomahawk Capital
Holdings, Inc., Tomahawk Holdings, Inc., Daniel Veloric, Newco and Acquiror has
been approved by the Board of Directors of GMC so that
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Section 203 of the DGCL will not apply to the Stock Option Agreement, this
Agreement or the transactions contemplated thereby and hereby.
Compliance with Law. Each GMC Company's operations and the conduct of
each GMC Company's Businesses (including any discontinued or inactive business
or operations) as such Businesses have been or presently are conducted, have and
continue to comply with all applicable Laws, except where the failure to do so
would not, and would not reasonably be expected to, have any Material Adverse
Effect. Set forth on Schedule 3.3 is a complete list in all material respects of
all inspection reports, surveys, investigation reports, and audit reports made
or initiated by or reported to federal, state or local governmental agencies,
authorities and other Persons since May 31, 1994 regarding any Laws applicable
to any of the GMC Companies or their respective Businesses or Assets. To the
Knowledge of the GMC Companies, each GMC Company has filed all reports required
by all Laws to be filed including, without limitation, any and all Medicare and
Medicaid cost reports and all such reports complied in all material respects
with the requirements of applicable laws and regulations. Each of the GMC
Companies has duly paid or accrued on its books of account all applicable duties
and charges due or assessed against it pursuant to such reports, except duties
and charges with respect to which it has a bona fide dispute and which, if
resolved adversely to the GMC Companies, would not have a Material Adverse
Effect.
Permits. Each GMC Company has obtained and currently maintains in full
force and effect all material Permits required by Law or necessary to conduct
its respective Businesses as presently conducted, all of which Permits are
listed on Schedule 3.4(a). Each of the GMC Companies, each of the Facilities and
each of the Businesses set forth on Schedule 3.4(b), where applicable, are
eligible, and are fully certified and have the requisite Permits to participate
as providers under and to receive payment from Medicare, Medicaid (in each state
in which they operate), Civilian Health and Medical Program of the Uniformed
Services ("CHAMPUS"), Civilian Health and Medical Program of the Veteran's
Administration ("CHAMPVA") and any other Veterans Administration program. Except
as set forth on Schedule 3.4(c), no material violations or waivers have been
recorded in respect of any such Permit since May 31, 1994 and no Proceeding is
pending or, to the Knowledge of the GMC Companies, threatened to revoke,
terminate, suspend or limit any such Permit or any GMC Company, Facility or
Business, or any assignee or successor thereof, from applying for such Permits
or developing or expanding any business in any material respect. Except as set
forth in Schedule 3.4(c), no GMC Company has received any notice of any claim of
material default or noncompliance with respect to any such Permit or any notice
of any other material claim or Proceeding (or threatened Proceeding) relating to
any such Permit. No GMC Company is in material default with respect to any such
Permits. To the extent applicable to its respective Businesses, and except as
disclosed on Schedule 3.4(c), each GMC Company has correctly maintained in all
material respects all records required by applicable Laws or government agencies
in connection with any such Permits, including without limitation, by the FDA,
DEA and State Boards and pursuant to the requirements of Title XVIII and XIX of
the Social Security Act.
GMC's Stock. The authorized capital stock of GMC consists of: (a)
16,000,000 shares of preferred stock, par value $.10 per share ("GMC Preferred
Stock"), of which no shares have been issued; and (b) 30,000,000 shares of
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common stock, par value $.10 per share ("GMC Common Stock"), of which (i)
15,429,746 shares are issued and outstanding, (ii) 535,254 shares are reserved
for issuance pursuant to outstanding options granted under GMC's 1982 Incentive
Stock Option Plan, 1985 Stock Option Plan for Medical Directors, 1989 Stock
Option and Restricted Stock Plan, 1990 Stock Option Plan for Directors and 1994
Stock Option and Restricted Stock Plan for Directors (collectively, "GMC Option
Plans"), (iii) 100,000 shares are reserved for issuance pursuant to the exercise
of the Tripp Warrant, (iv) 493,500 shares are reserved for issuance pursuant to
outstanding awards under the Management Long Term Incentive Plan issued pursuant
to the 1995 Equity Incentive Plan (the "LTIP"), (v) no shares of which are held
in treasury and (vi) any changes to the foregoing caused by shares issued
pursuant to the exercise of outstanding stock options on the date hereof (GMC
Preferred Stock and GMC Common Stock being collectively referred to as "GMC
Stock"). All shares of GMC Stock which are outstanding are duly authorized and
validly issued, and are fully paid and nonassessable, and were not issued in
violation of, any preemptive rights. The number, price and material terms of the
options or awards outstanding under the GMC Option Plans and the LTIP are set
forth on Schedule 3.5. There are no voting trusts or other arrangements or
understandings to which GMC is a party in favor of any Person with respect to
the voting of GMC Stock or any other interest in GMC. Except as identified on
Schedule 3.5, there are no outstanding options, puts, calls, warrants,
subscriptions, stock appreciation rights, phantom stock, cash performance units,
or other Contracts or Contract rights granted by GMC relating to the GMC Stock
or to the offering, sale, issuance, redemption or disposition of the GMC Stock
or any shares of capital stock or other securities of any of the GMC Companies.
GMC Financial Statements. The consolidated balance sheets of GMC and
the GMC Subsidiaries as of May 31, 1995 and the end of the four fiscal years
immediately preceding and the related consolidated statements of operations,
cash flows (or changes in financial position) and changes in stockholders'
equity (deficit) of GMC and the GMC Subsidiaries for each of the five fiscal
years ended May 31, 1995, and the unaudited consolidated balance sheets of GMC
and the GMC Subsidiaries as of August 31, 1995, November 30, 1995 and February
29, 1996 and the related consolidated statements of operations and cash flows of
GMC and the GMC Subsidiaries for the respective periods then ended, including
the related notes and schedules, which are contained in the SEC Documents (as
defined in Section 3.26), have been prepared in accordance with GAAP, complied
in all material respects as to form with applicable accounting requirements and
the rules and regulations of the SEC with respect thereto, are true and complete
in all material respects and fairly present the consolidated financial condition
and results of operations, cash flows (or changes in financial position) and
changes in stockholders' equity (deficit) of GMC and the GMC Subsidiaries as of
the dates and for the periods indicated subject, in the case of the unaudited
consolidated financial statements, to normal and recurring year-end adjustments
which were not and are not expected, individually or in the aggregate, to have a
Material Adverse Effect. The consolidated balance sheets of GMC and the GMC
Subsidiaries as of April 30, 1996 and the related consolidated statements of
operations for the eleven months ended April 30, 1996 which are attached on
Schedule 3.6 have been prepared by GMC in a manner consistent with GMC's past
practices, are true and complete in all material respects and fairly present the
consolidated
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financial condition and results of operations for the eleven months ended
April 30, 1996. The financial statements referred to in this section are
collectively referred to as "GMC's Financial Statements."
Assets. The GMC Companies own or lease all of the material Assets
necessary for the operation of the Businesses of the GMC Companies as presently
conducted. Each of the GMC Companies has good and valid title to all of its
Assets, free and clear of any material Encumbrance except for those subject to
security interests granted pursuant to loans or capital leases identified on
Schedule 3.11. To the Knowledge of the GMC Companies, all Assets owned by, under
lease to or otherwise used by any of the GMC Companies are in good condition,
ordinary wear and tear excepted.
Real Property.
(a) Schedule 3.8 sets forth a true and correct list of (i) the Real
Property owned, operated, managed, leased or otherwise occupied or possessed by
any GMC Company (collectively, the "GMC Real Property"); (ii) all material
Contracts under which any GMC Company is lessor, lessee, sublessor or sublessee
of any Real Property; (iii) all options held or given by any GMC Company and all
Obligations on the part of any GMC Company, to sell, purchase or acquire any
interest in Real Property; and (iv) all material Contracts securing or secured
by any of the Real Property owned by any GMC Company, including, without
limitation, all mortgages, security agreements, notes or other obligations.
(b) (i) Except as set forth in Schedule 3.8, each of the GMC Companies
has good and marketable title, insurable as such by a reputable title insurance
company doing business in the applicable jurisdiction at regular rates, to each
parcel of Real Property owned by it, free and clear of all mortgages, pledges,
liens, encumbrances and security interests, except (A) those reflected or
reserved against in GMC's Financial Statements, (B) taxes and general and
special assessments not in default and payable without penalty or interest, (C)
Permitted Liens (as hereinafter defined), and (D) other liens, mortgages,
pledges, encumbrances and security interests which are not material to any
Facility or to any other material property.
(ii) "Permitted Liens" shall mean (A) any Encumbrances disclosed on
the GMC's Financial Statements or on Schedule 3.8, (B) liens for Taxes,
assessments or charges of any governmental authority which are not yet due and
payable or which are being contested by any of the GMC Companies in good faith,
(C) mechanics', carriers', workmen's, repairmen's or other like liens arising or
incurred in the ordinary course of business, (D) liens arising under original
purchase price conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business, (E) easements
(including, without limitation, reciprocal easement agreements and utility
agreements), zoning and subdivision requirements, rights of way, covenants,
consents, agreements, reservations, encroachments, variances, special
exceptions, non-conforming uses and other similar restrictions, charges or
encumbrances (whether or not recorded) that do not, individually or in the
aggregate, materially impair the continued use and operation of the GMC Real
Property to which they relate in the business of the GMC Companies as presently
conducted, (F) liens created by or existing from
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any litigation or legal proceeding that are being contested by any of the GMC
Companies in good faith or which are otherwise disclosed or referred to in
Schedule 3.16, and (G) extensions, renewals or replacements of any lien for
money borrowed by the GMC Companies identified in Schedule 3.8.
(iii) The GMC Companies have no actual knowledge of claims of defects of
title to GMC Real Property that would materially adversely affect the operations
of any individual Facility or other material property.
(c) Except as set forth on Schedule 3.8, there are no material
violations of applicable Law or breaches of the terms of any material Contract
affecting the GMC Real Property.
(d) The GMC Companies have made available to Acquiror all of the files
relating to the GMC Real Property. No condemnation Proceeding is pending or, to
the best Knowledge and belief of the GMC Companies, threatened, against any GMC
Real Property. No material uninsured casualty has occurred at any GMC Real
Property within the last twelve months.
(e) Environmental Matters.
(1) To the Knowledge of the GMC Companies, the GMC Companies have
complied with applicable Environmental Laws except for such failures to comply
which would not have, and would not reasonably be expected to have, a Material
Adverse Effect.
(2) None of the GMC Companies has received any written notice of
any citation, summons, order, complaint, penalty, investigation or review by any
governmental entity or other Person (a) with respect to any alleged violation by
any GMC Company of any Environmental Law, or (b) with respect to any alleged
failure by any GMC Company to have any environmental Permit or Consent required
in connection with its business or (c) with respect to any generation,
treatment, storage, recycling, transportation or disposal ("Management") of any
Hazardous Substance, except for such violations, failures of management which
would not, and would not reasonably be expected to, have a Material Adverse
Effect.
(3) To the Knowledge of the GMC Companies, no GMC Company has
received any written request for information, notice of claim, demand or
notification that it is or may be potentially responsible with respect to any
investigation or clean-up of any threatened or actual release of any Hazardous
Substance or any claim for material damages to persons or property.
(4) To the Knowledge of the GMC Companies, there are no
environmental liens on any properties owned or leased by any GMC Company and no
governmental actions have been taken which would subject any of such properties
to such liens.
(5) To the Knowledge of the GMC Companies, no Hazardous Substance
has been emitted, discharged, disposed of, deposited, or otherwise released by
the GMC Companies and, to the knowledge of the GMC Companies, there is no threat
of release by the GMC Companies, in, on, under
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or from any GMC Real Property (as hereafter defined) (including but not limited
to any surface or subsurface waters on or flowing through any GMC Real Property)
except for such emissions, discharges, disposals, deposits or releases which
would not, and would not reasonably be expected to, have a Material Adverse
Effect.
(6) To the Knowledge of the GMC Companies, no underground storage
tank located on or under any GMC Real Property, and the piping appurtenant
thereto, will result in any material Obligation to the GMC Companies.
(7) To the Knowledge of the GMC Companies, no GMC Real Property is
or has ever been listed in the EPA's National Priorities List or in any other
list, schedule, log, inventory or record, however defined, maintained by any
governmental agency with respect to sites where Hazardous Substances have or may
have been disposed of or where there is, has been or may be a release or threat
of a release of any Hazardous Substance and no off-site waste storage, treatment
or disposal location to which any of the GMC Companies' wastes have been taken,
appears or has appeared on any such list.
(8) For purposes of this Section 3.8(e), the term "GMC Real
Property" shall also mean and include all facilities and properties now or
previously owned, operated, managed, leased or otherwise occupied or possessed
by any GMC Company.
Obligations. None of the GMC Companies has any material Obligations other than
(i) Obligations reflected on the consolidated balance sheet of GMC and the GMC
Subsidiaries as of April 30, 1996 (the "April 1996 Balance Sheet"), (ii)
Obligations set forth in Schedule 3.9, (iii) Obligations under Contracts of the
type listed or not required to be listed on Schedule 3.8 or Schedule 3.11
provided that no such Obligation consisted of or resulted from a material
default under or violation of any such Contract, and (iv) Obligations incurred
since April 30, 1996 and not in breach in any material respect of any of the
representations and warranties made in Section 3.10 or the covenants of Section
6.1. Except as set forth in Schedule 3.9 and except to the extent specifically
reflected or reserved against in the Financial Statements, no GMC Company is
directly or indirectly liable, by guarantee or otherwise, upon or with respect
to, or obligated to guarantee or assume, any material Obligation of any Person,
except endorsements made in the ordinary course of business in connection with
the deposit of items for collection. Except as described on Schedule 3.9, no
material Obligations of any of the GMC Companies are guaranteed by any Person
other than another GMC Company.
Operations Since April 30, 1996. Except as disclosed on Schedule 3.10, since
April 30, 1996, through the date of this Agreement the GMC Companies have
conducted their Businesses in the ordinary course consistent with past practices
and:
(a) Except in the ordinary course of its business consistent with its
past practices, none of the GMC Companies has (i) created or assumed any
material Encumbrance upon any of its businesses or Assets, (ii) incurred any
material Obligation, (iii) made any material loan or advance, (iv) assumed,
guaranteed or otherwise become liable for any material Obligation of
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any Person, (v) committed for any material capital expenditure, (vi) sold,
abandoned or otherwise disposed of any of its material Assets, (vii) waived any
material right or canceled any debt or claim, (viii) assumed or entered into any
material Contract other than this Agreement and any other Contract contemplated
herein, (ix) increased, or authorized an increase in, the compensation or
benefits paid or provided to any of its directors, officers, employees, agents
or representatives, (x) directly or indirectly redeemed or acquired any of GMC's
Stock or any other securities of GMC, or (xi) declared, paid or set aside for
payment any dividend or other distribution.
(b) None of the GMC Companies has borrowed or lent any funds, leased any
equipment or Real Property, involving individually an amount exceeding $250,000
for any one transaction or series of related transactions.
(c) There has been no Material Adverse Change.
Contracts.
(a) Set forth on Schedule 3.11 or in the list of material contracts of GMC
set forth in GMC's Annual Report on Form 10-K for the fiscal year ended May 31,
1995 is a true and correct list of all material Contracts to which any GMC
Company or the Assets of any GMC Company is bound or subject. None of the GMC
Companies is a party to or bound by (i) joint venture Contracts relating to the
Assets or Businesses of any GMC Company or by or to which any GMC Company or its
Assets are bound or subject or (ii) Contracts which limit, restrict or prohibit
the right of any GMC Company to conduct any business or to compete with any
other Person.
(b) True and correct copies of all such written Contracts have been made
available to Acquiror. Schedule 3.8 and Schedule 3.11 include a complete and
accurate description in all material respects of all oral Contracts meeting the
criteria set forth in subsection (a) above. All of the Contracts set forth on
Schedule 3.8 and Schedule 3.11 or referred to in this Agreement or in the other
Schedules hereto are in full force and effect and no GMC Company party thereto
is in material default thereunder nor, to the Knowledge of the GMC Companies, is
any other party to any such Contract in material default thereunder.
Intangibles. Except as described in Schedule 3.12, each GMC Company has good
and valid title to, or license to use, all of its respective material
Intangibles, free and clear of any Encumbrances and maintains or has access to
all source code listings for all material Software owned or licensed by any GMC
Company. To the Knowledge of the GMC Companies, none of the GMC Companies'
Intangibles or its past or current uses, has violated or infringed upon or is
violating or infringing upon any Intangible of any Person, and no Person is
violating or infringing upon any of the GMC Companies' Intangibles, except in
any such case which would not, and would not reasonably be expected to, have a
Material Adverse Effect. Except as described in Schedule 3.12, none of the
material GMC Companies' Intangibles is owned by or registered in the name of any
current or former stockholder, director, officer, employee, salesman, agent,
representative or contractor of any of the GMC Companies, nor does any such
Person have any interest therein or right thereto. Except as described on
Schedule 3.12, no GMC Company has licensed any Person to use any
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Intangibles of any GMC Company, nor is any GMC Company obligated to pay any
material royalties, licensing fees or similar payments to any Person.
Employee Benefit Plans. Except as set forth in Schedule 3.13, no GMC Company has
established, maintained or contributed to any Employee Benefit Plans and no GMC
Company has proposed any Employee Benefit Plans which any GMC Company will
establish or maintain, or to which any GMC Company will contribute, and, except
as provided in this Agreement, no GMC Company has proposed any material changes
to any Employee Benefit Plans now in effect (all of the preceding referred to
collectively hereinafter as "GMC's Employee Benefit Plans"). True and correct
copies and summaries and/or descriptions thereof of all of GMC's Employee
Benefit Plans have been provided to Acquiror. If permitted and/or required by
applicable Law, the GMC Companies have properly submitted or intend to submit
all of GMC's Employee Benefit Plans in good faith to meet the applicable
requirements of ERISA and/or the Code to the IRS for its approval within the
time prescribed therefor under applicable federal regulations. To the Knowledge
of the GMC Companies, favorable letters of determination of such tax-qualified
status of Employee Benefit Plans have been received from the IRS. GMC has made
available a true and correct copy of the most current Form 5500 and any other
form or filing required to be submitted to any governmental agency with regard
to any of GMC's Employee Benefit Plans. To the Knowledge of the GMC Companies,
all of GMC's Employee Benefit Plans are, and have been, operated in substantial
compliance with their provisions and with all applicable Laws including, without
limitation, ERISA and the Code and the regulations and rulings thereunder. Other
than any defined benefit pension set forth in the employment arrangement of
Esther Ponnocks, none of the GMC Companies has established, maintained,
contributed to or has any Obligations under any defined benefit plan or
Multiemployer Plan (as defined in ERISA or the Code). To the Knowledge of the
GMC Companies, there are no pending or threatened Proceedings which have been
asserted or instituted against any of GMC's Employee Benefit Plans, the Assets
of any of the trusts under such plans, the plan sponsor, the plan administrator
or against any fiduciary of any of GMC's Employee Benefit Plans (other than
routine benefit claims) nor does any GMC Company have Knowledge of facts which
could form the basis for any such Proceeding. There are no investigations or
audits of any of GMC's Employee Benefit Plans, any trusts under such plans, the
plan sponsor, the plan administrator or any fiduciary of any of GMC's Employee
Benefit Plans which have been threatened or instituted nor does any GMC Company
have Knowledge of facts which could form the basis for any such investigation or
audit. Except as disclosed in Schedule 3.13 or as contemplated by this
Agreement, no event has occurred which will result in any material Obligation of
any GMC Company in connection with any Employee Benefit Plan established,
maintained, or contributed to (currently or previously) by any GMC Company or by
any other entity which, together with such GMC Company, constitute elements of
either (i) a controlled group of corporations (within the meaning of Section
414(b) of the Code), (ii) a group of trades or businesses under common control
(within the meaning of Sections 414(c) of the Code or 4001 of ERISA), (iii) an
affiliated service group (within the meaning of Section 414(m) of the Code), or
(iv) another arrangement covered by Section 414(o) of the Code.
Labor Matters. Except as set forth in Schedule 3.14, no GMC
Company is a party to any collective bargaining agreement or any other Con-
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tract with any labor unions or any other representatives of any employee of any
GMC Company. Except as set forth in Schedule 3.14, no collective bargaining
agreement is currently being negotiated by or on behalf of any GMC Company.
Except as described on Schedule 3.14, there is no present or, to the Knowledge
of the GMC Companies, threatened walk-out or strike or any pending arbitration,
unfair labor practice, or other similar Proceeding with respect to any GMC
Company or its employees and there has been no such walk-out, strike, similar
Proceeding or litigation for the past eighteen months or which remains
unresolved on the date hereof. Except as set forth on Schedule 3.14, to the
Knowledge of the GMC Companies, during the past five years, or, if shorter,
during the period of time that GMC owned, directly or indirectly, any GMC
Company, no union attempts to organize or represent the employees of any GMC
Company have been made, nor has any GMC Company been notified by any labor
organization that it is soliciting or intends to solicit its employees to select
a bargaining agent. Each of the GMC Companies are in compliance in all material
respects with all Laws respecting employment practices.
Taxes. Accurate and complete copies of all material federal, state, local
and foreign corporate income, excise, franchise, sales and other material Tax
returns and reports filed by any of the GMC Companies with respect to their last
five fiscal years have been made available to Acquiror. Except as described on
Schedule 3.15, (a) GMC and each of GMC's Subsidiaries have properly and timely
filed all Tax returns and reports required to be filed by them, all of which
were accurately prepared and completed; (b) GMC and each of GMC's Subsidiaries
have properly withheld from payments to its employees, agents, representatives,
contractors and suppliers all amounts required by Law to be withheld; (c) GMC
and each of GMC's Subsidiaries have paid all Taxes required to be paid by them
and have made adequate provision in GMC's Financial Statements for Taxes not yet
due and payable or Taxes which are being contested in good faith by appropriate
Proceedings diligently prosecuted; (d) no audit of any of the GMC Companies by
any governmental taxing authority is currently pending or, to the Knowledge of
the GMC Companies, threatened; (e) no notice of any Tax audit, or of any Tax
deficiency or adjustment, has been received by any of the GMC Companies, and, to
the Knowledge of the GMC Companies, there is no basis for any Tax deficiency or
adjustment to be assessed against any of the GMC Companies; (f) there are no
Contracts or waivers in effect that provide for an extension of time for the
assessment of any Tax against any of the GMC Companies; (g) there are no federal
Tax elections under any section (or predecessor section) of the Code in effect
with respect to any of the GMC Companies; and (h) none of the GMC Companies is a
party to, is bound by, or has any Obligation under any Tax sharing agreement or
similar Contract or arrangement excluding any such Contract or arrangement to
which only GMC Companies are parties or are bound. There is no dispute or claim
pending or, to the Knowledge of the GMC Companies, threatened concerning any
material Tax liability of any of the GMC Companies. None of the GMC Companies
has been a member of an affiliated group filing a consolidated federal income
tax return (other than the group the common parent of which is GMC) or has any
liability for the Taxes of any Person other than the GMC Companies under Treas.
Reg. ss.1.1502-6 or any similar provision of state, local or foreign Law, as a
transferee or successor, by contract or otherwise.
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Proceedings and Judgments. Except as described on Schedule 3.16, (a)
except for workers' compensation claims and Proceedings for which damages of
less than $50,000 are claimed, there is no Proceeding pending or, to the
Knowledge of the GMC Companies, threatened against or relating to any of the GMC
Companies, any of its Businesses or Assets, which, if adversely determined,
would, or would reasonably be expected to, have a Material Adverse Effect, (b)
there are no outstanding Judgments against any of the GMC Companies or any of
its businesses or Assets or against any of its officers, directors or employees,
which would or would reasonably be expected to have a Material Adverse Effect.
As to each item described on Schedule 3.16, accurate and complete copies of all
relevant pleadings, judgments, orders and correspondence have been made
available to Acquiror. Summaries of all open workers' compensation claims have
been delivered to Acquiror.
Insurance. All Insurance Policies held by or on behalf of each GMC
Company insure against risks of the kind customarily insured against and in
amounts customarily carried by insureds similarly situated. All such Insurance
Policies are enforceable and in full force and effect. No GMC Company is in
default with respect to any provision contained in any such Insurance Policy in
a manner which could impair coverage thereunder in any material respect nor has
any GMC Company failed to give any material notice or present any material claim
under any such Insurance Policy in due and timely fashion. No GMC Company has
received a notice of cancellation, non-renewal or audit of any such Insurance
Policy which has not or will not be cured on or before Closing Date.
Related Party Transactions. Except as disclosed in the SEC Documents,
there are no real estate leases, personal property leases, loans, guarantees, or
other material Contracts, arrangements or transactions of any nature between any
of the GMC Companies and any of stockholders, officers, directors or affiliates
(as such term is defined for the purpose of the Exchange Act) of any of any of
the GMC Companies (excluding oral Contracts for "at will" employment with such
persons in their capacities as employees), or between any of the GMC Companies
and any Person which is an affiliate or an immediate family member of any such
stockholder, officer, director or affiliate.
Questionable Payments. To the Knowledge of the GMC Companies, neither
any GMC Company, nor any of the current or former stockholders, directors,
officers, employees, agents or representatives of any GMC Company, directly or
indirectly, have (a) used any funds of any of the GMC Companies for any illegal
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (b) used any corporate funds of any of the GMC Companies for
any direct or indirect unlawful payments to any foreign or domestic government
officials or employees, (c) violated any provision of the Foreign Corrupt
Practices Act of 1977, (d) established or maintained any unlawful or unrecorded
fund of corporate monies or other assets of the GMC Companies, (e) made any
false or fictitious entries on the books and records of any of the GMC
Companies, (f) made on behalf of any GMC Company or received any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment of any nature
other than third party payments subsequently revised, adjusted or disallowed on
routine Medicare, Medicaid or other third party audits, (g) offered, paid,
submitted for payment, solicited or received any
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remuneration in violation of Medicare or Title XIX of the Social Security Act
("Medicaid"), including without limitation, the Medicare and Medicaid Patient
and Program Protection Act of 1987, the Medicare and Medicaid Anti-Kickback Act,
the Federal False Claims Act and Federal Laws limiting certain physician
referrals (the "Stark Laws"), or (h) made any material favor or gift which is
not deductible for federal income tax purposes using funds of any of the GMC
Companies (collectively a "Questionable Payment").
Suppliers and Customers. Set forth on Schedule 3.20 is a list of each single
customer or supplier which provides more than five percent (5%) of the sales or
purchases of the GMC Companies (each, a "material customer or supplier"). The
relationships of the GMC Companies with its material customers or suppliers are
good commercial working relationships. Except as described on Schedule 3.20,
during the last 12 months, no material customer or supplier has canceled or
otherwise terminated, or threatened in writing to cancel or otherwise terminate,
its relationship with any GMC Company or has during the last 12 months decreased
materially, or threatened to decrease or limit materially, its services,
supplies or materials to any GMC Company or its usage of the services or
products of any GMC Company. No GMC Company has any Knowledge (a) that any
material customer or supplier intends to cancel or otherwise modify its
relationship with any GMC Company in any material respect or to decrease
materially or limit its services, supplies or materials to any GMC Company or
its usage of the services or products of any GMC Company or (c) that the
consummation of the transactions contemplated by this Agreement will adversely
affect in any material respect the relationship with any such material customer
or supplier.
Brokerage Fees. Except as described on Schedule 3.21, no broker, finder, agent
or similar intermediary has acted for or on behalf of any GMC Company in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's fee,
finder's fee, or similar fee or commission in connection therewith based on any
agreement, arrangement or understanding with any GMC Company or any action taken
by or on behalf of any GMC Company.
Potential Conflicts of Interest. To the Knowledge of the GMC Companies, no
physician or "family member" has a "financial interest" in any GMC Company (as
such terms are defined in 42 U.S.C. ss.1395 nn and implementing regulations)
other than holdings of GMC Common Stock purchased or received in the ordinary
course.
Third Party Payment Contracts. In addition to the Permits to provide services
under the Medicare, Pennsylvania and New Jersey Medicaid Programs and other
programs specified in Section 3.4, each GMC Company, each Facility and each
Business conducted by a GMC Company, where appropriate, is an approved provider
of services in the third party payment programs identified in Schedule 3.23(a),
including without limitation: (a) Pennsylvania and New Jersey Blue Cross,
Pennsylvania and New Jersey Blue Shield; and (b) other payor plans. Except as
set forth on Schedule 3.23(c), no action is pending, or to the Knowledge of the
GMC Companies threatened, to suspend, limit, terminate, fail to renew or revoke
the status of any such GMC Company, Facility or Business as a provider in any
such program, and no such GMC Company, Facility or Business has been provided
notice by any such third-
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party payor of its intention to suspend, limit, terminate, revoke or fail to
renew any contractual arrangement with such GMC Company, Facility or Business as
a participating provider of services. No known and unresolved allegations have
been made regarding the conduct of any GMC Company, Facility or Business, which
if true, would likely result in a suspension, limitation, termination or failure
to renew any contractual arrangement between any such third party payor and any
such GMC Company, Facility or Business. Except as set forth on Schedule 3.23(d),
since May 31, 1991, no GMC Company, Business or Facility has ever been denied,
disapproved or prohibited from participating in any payment plan or payor
program and no GMC Company, Business or Facility has ever not applied for
participation in a payment plan or payor program because it believed it would
not be accepted for participation or to receive payment.
Third Party Payment Filings. To the extent required for the conduct of its
respective Businesses and to receive payment for all services rendered, each GMC
Company has filed within the required time substantially all claims required to
be filed to secure payment under the Medicare, Medical Assistance, Blue Cross
and other third-party payment programs. At the time of filing, all such claims
were and continue to be true and accurate.
No Criminal Proceedings. Except as described in Schedule 3.25, there are no
pending or, to the Knowledge of the GMC Companies, threatened actions, charges,
indictments, information, or investigation of any GMC Company or of any of their
agents, officers or employees which involve allegations of criminal violations
of any Law, including without limitation, Medicare or Medicaid.
SEC Documents. GMC has filed all registration statements, proxy statements,
reports and other filings, including, without limitation, (i) its Annual Reports
on Form 10-K for the fiscal years ended May 31, 1993, 1994 and 1995,
respectively, (ii) its Quarterly Reports on Form 10-Q for the periods ended
August 31, 1995, November 30, 1995 and February 29, 1996, (iii) all proxy
statements relating to meetings of GMC's stockholders (whether annual or
special) held since May 31, 1993, (iv) all other forms, reports and registration
statements and, in each case, all amendments thereto required to be made, which
it was required to file with the SEC (collectively, "SEC Documents"). True and
correct copies of all SEC Documents filed by or on behalf of GMC since June 1,
1993 have been made available to Acquiror. Except as set forth on Schedule 3.26,
all SEC Documents were prepared in all material respects in accordance with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations thereunder, and, as of its date of filing, none of such documents
contained any untrue statement of material fact, or omitted any material fact
required to be stated therein or necessary to make the statements therein not
misleading. GMC has heretofore furnished to Acquiror complete and correct copies
of all amendments and modifications that have not been filed by GMC with the SEC
to all Contracts, documents and other instruments that previously had been filed
by GMC with the SEC and are currently in effect. No GMC Company (other than GMC)
is required to file any form, report or other document with the SEC.
Absence of Anti-Takeover Plans. Neither GMC nor any GMC
Subsidiary has in effect any plan, scheme, device or arrangement commonly or
colloquially known as a "poison pill" or "anti-takeover" plan or any similar
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plan, scheme, device or arrangement other than provisions providing for a
staggered Board of Directors.
Information Supplied. At the date the Proxy Statement is first mailed to GMC's
stockholders or at the time of the meeting of GMC's stockholders held to vote on
approval and adoption of this Agreement, none of the information contained or
incorporated by reference in the Proxy Statement shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation or warranty is made by GMC with respect to statements made or
incorporated by reference therein based on information supplied by Acquiror or
Newco specifically for inclusion or incorporation by reference therein. The
Proxy Statement shall comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by GMC with respect to
statements made or incorporated by reference therein based on information
supplied by Acquiror or Newco specifically for inclusion or incorporation by
reference therein.
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SECTION : REPRESENTATIONS OF ACQUIROR AND NEWCO
Acquiror and Newco, jointly and severally, represent and warrant to GMC as
follows:
Organization. Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania. Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Acquiror and Newco has full corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby upon the terms and conditions herein provided. Acquiror owns
directly or indirectly all of the outstanding capital stock of Newco.
Authorization of Agreement. The execution, delivery, and performance of this
Agreement by Acquiror and Newco, and the consummation by Acquiror and Newco of
the transactions contemplated hereby, (a) have been authorized by all necessary
corporate actions by Acquiror's and Newco's respective boards of directors, (b)
do not constitute a violation of or default under (either immediately or upon
notice, lapse of time or both) (i) the charter or bylaws of Acquiror or Newco,
(ii) any material Permits held by Acquiror or Newco or (iii) any material
Contract to which Acquiror or Newco is a party or by which Acquiror or Newco is
bound, (c) do not constitute a violation of any Law or Judgment which is
applicable to Acquiror or Newco, the violation of which would, or would
reasonably be expected to, have a material adverse effect on Acquiror and its
Subsidiaries taken as a whole, (d) do not accelerate or otherwise modify, or
give any Person the right to accelerate or modify, any material Obligation of
Acquiror or Newco, and (e) do not require the Consent of any Person to be
obtained by Acquiror or Newco except for (i) the filing with the SEC of such
reports under Section 13(a) of the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated by this Agreement, (ii)
filings and approvals under the Hart- Scott-Rodino Act, and (iii) the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware.
This Agreement constitutes the valid and legally binding agreement of Acquiror
and Newco, enforceable against Acquiror and Newco in accordance with its terms
except as such enforceability may be limited by applicable bankruptcy,
insolvency and similar Laws affecting creditors' rights generally and to general
principles of equity (whether considered in a proceeding in equity or at Law).
Proceedings. There are no Proceedings existing, and neither Acquiror nor Newco
has any Knowledge of any such Proceedings pending or threatened, against
Acquiror or Newco, which would prevent or impair Acquiror's or Newco's ability
to consummate the transactions contemplated herein.
Brokerage Fees. Except for Alex. Brown & Sons Incorporated, no broker, finder,
agent or similar intermediary has acted for or on behalf of Acquiror or Newco in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's fee,
finder's fee, or similar fee or commission in connection therewith based on any
agreement,
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arrangement or understanding with Acquiror or Newco or any action taken by
Acquiror or Newco.
Financing. Acquiror has the ability to finance the payment of the
Merger Consideration with cash on hand or available under existing lines of
credit or credit facilities.
Information Supplied. At the date the Proxy Statement is first mailed to GMC's
stockholders or at the time of the meeting of GMC's stockholders held to vote an
approval and adoption of this Agreement, none of the information supplied or to
be supplied by Acquiror or Newco for inclusion or incorporation by reference in
the Proxy Statement shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
SECTION : APPROVAL OF STOCKHOLDERS
b Stockholders Meeting. As soon as reasonably practicable after the date of the
Agreement, GMC shall duly call, give notice of, convene and hold a meeting of
the holders of the GMC Common Stock (the "Stockholders Meeting") for the purpose
of approving this Agreement and the transactions contemplated by this Agreement.
Subject to the fiduciary duties of the Board of Directors of GMC to the
Stockholders of GMC under applicable Law, as advised by counsel, the Board of
Directors of GMC shall recommend to its Stockholders that they approve the
Merger and the other transactions contemplated hereby and shall solicit proxies
from its Stockholders in favor of the Merger for use at the Stockholders
Meeting. Acquiror shall vote all shares of GMC Common Stock held by it in favor
of approval of the Merger. Acquiror shall take all actions necessary to obtain
the approval of Acquiror as the sole stockholder of Newco of this Agreement and
the transactions contemplated hereby.
Preparation of the Proxy Statement. As soon as reasonably practicable
after the date of this Agreement, GMC shall reasonably prepare and file a
preliminary Proxy Statement with the SEC and use commercially reasonable efforts
to respond to any comments of the SEC or its staff and to cause the Proxy
Statement to be mailed to GMC's stockholders as promptly as practicable after
responding to all such comments to the satisfaction of the staff. GMC shall give
Acquiror and Newco and their counsel the opportunity to review the Proxy
Statement prior to its being filed with the SEC and shall give Acquiror and
Newco and their counsel the opportunity to review all amendments and supplements
to the Proxy Statement and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC.
Acquiror and Newco shall reasonably cooperate in the preparation of the Proxy
Statement. GMC shall notify Acquiror promptly of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and shall
supply Acquiror with copies of all correspondence between GMC or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. If at any time prior to the
Stockholders Meeting there shall occur any event that should be set forth in an
amendment or supplement to the
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Proxy Statement, GMC shall promptly prepare and mail to its stockholders such an
amendment or supplement. GMC shall not mail any Proxy Statement with respect to
this Agreement and the transactions contemplated hereby, or any amendment or
supplement thereto, to which Acquiror reasonably objects unless GMC is advised
by its counsel that the mailing of such Proxy Statement and any amendment or
supplement thereto in the form proposed by GMC is required by applicable Law.
SECTION : CERTAIN OBLIGATIONS OF GMC PENDING CLOSING
Conduct of GMC's Businesses. Between the date of this Agreement and the
Closing Date, except with the prior written consent of Acquiror:
(a) GMC shall, and shall cause each of the GMC Companies to, conduct its
businesses in a diligent manner consistent with past practices; GMC shall not,
and shall cause each of the GMC Companies not to, make any material change in
its business practices; and GMC shall, and shall cause each of the GMC Companies
to, in good faith, use commercially reasonable efforts to (i) preserve its
business organizations intact, (ii) keep available the services of its current
officers and key employees and (iii) maintain the good will of its suppliers,
customers and other Persons having business relations with any of the GMC
Companies. When requested by Acquiror, GMC and each of the GMC Companies shall
consult with Acquiror as to the management of GMC's and the GMC Companies'
respective Businesses, Facilities and affairs.
(b) Except in the ordinary course of its businesses consistent with
past practices, GMC shall not, and shall cause each of the GMC Companies not to,
(i) create or assume any material Encumbrance upon any of its businesses or
Assets, (ii) incur any Obligation, (iii) make any material loan or advance, (iv)
assume, guarantee or otherwise become liable for any material Obligation of any
Person, (v) commit for any material capital expenditure, (vi) lease, sell,
transfer, abandon or otherwise dispose of any of its material Assets, (vii)
waive any material right or cancel any debt or claim, (viii) assume or enter
into any Contract other than this Agreement (and any other Contract contemplated
herein), (ix) increase, or authorize an increase in, the compensation or
benefits paid or provided to any of its directors, officers, employees, agents
or representatives, (x) directly or indirectly acquire any GMC Common Stock or
any other securities of GMC, or (xi) declare, pay or set aside for payment any
dividend or other distribution. Notwithstanding the provisions of this Section
6.1, GMC may extend the term of its existing line of credit agreement with
Commerce Bank and increase such line to an amount not to exceed $8,500,000.
(c) Even in the ordinary course of their businesses consistent with
past practices, GMC shall not, and shall cause each of the GMC Companies not to,
borrow or lend any funds, purchase any goods or services, lease any equipment,
incur any Obligation, or enter into any Contract (excluding customer Contracts,
working capital advances, sale of accounts receivable transactions, and related
commitments entered into in the ordinary course of business consistent with past
practices) or other transaction, or do any of the other things described in
paragraph (b) above involving individually an amount exceeding $250,000 for any
one transaction or series of related
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transactions. Acquiror shall not unreasonably withhold its consent to any
request for approval of any transaction subject to this paragraph (c).
(d) GMC shall not, and shall cause each of the GMC Companies not to,
(i) adopt, sponsor or enter into any new Employee Benefit Plan or employment
agreement or modify any employment agreement or, except as required by
applicable Law, any existing Employee Benefit Plan, (ii) except as provided in
Section 6.5, participate in any merger, consolidation, division, or
reorganization (other than the Merger), (iii) engage in any new type of
business, (iv) acquire the business or any bulk Assets of any Person, (v)
completely or partially liquidate or dissolve, (vi) terminate any material part
of its Businesses, (vii) issue, sell, transfer, pledge, hypothecate or otherwise
encumber or dispose of any GMC Stock or any of the capital stock or other
securities of any GMC Subsidiary, (viii) except in consultation with and with
the prior written consent of Acquiror (which shall not be withheld
unreasonably), enter into or renew any union or collective bargaining agreement
or modify any existing union or collective bargaining agreement, or (ix) settle
or compromise any material Proceeding.
(e) GMC shall not, and shall not permit any of the GMC Companies to,
amend its charters or bylaws, partnership agreements or other organizational
documents, as applicable.
(f) GMC shall not, and shall cause each of the GMC Companies not to,
redeem, retire or purchase, or create, grant or issue any Contracts, options,
warrants or other rights with respect to, any GMC Stock or any of the capital
stock of any of the GMC Companies or any other securities of GMC or any of the
GMC Companies, or create, grant or issue any stock appreciation rights, phantom
shares, cash performance units or other similar rights. Without limiting the
generality of the foregoing, GMC shall not issue, or permit the further accrual
of, any options or awards under the GMC Option Plans, the LTIP or any employment
agreement.
(g) Neither GMC nor any of its Subsidiaries shall enter into any
Contract which commits any of them to take any action or omit to take any action
which would be inconsistent with any of the provisions of this Section 6.1.
Access to Information. (a) Between the date of this Agreement and the Closing
Date, GMC shall, and shall cause each of the GMC Companies to (i) permit
Acquiror and its authorized representatives to have reasonable access to each of
the GMC Companies' facilities and offices during normal business hours, to
conduct such environmental studies as Acquiror shall reasonably deem necessary
or appropriate, to observe each of the GMC Companies' operations, to meet with
each of the GMC Companies' officers, employees, accountants, counsel, financial
advisors and other representatives, to contact each of the GMC Companies'
customers and suppliers and to audit, examine and copy each of the GMC
Companies' files, books, records and other documents and papers, and (ii)
provide to Acquiror and its authorized representatives all information
concerning each of the GMC Companies and its Businesses, Assets and financial
condition, which Acquiror reasonably requests. Acquiror shall pay its own
out-of-pocket costs and expenses with respect to any such investigation.
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(b) GMC shall permit Acquiror and its representatives to make
reasonable investigations and inquiries concerning the status, scope and nature
of all Proceedings pending or threatened against any GMC Company, or which in
any way affect the Businesses of any GMC Company or their Assets. GMC shall, and
shall cause its representatives to, assist Acquiror and its representatives in
conducting such investigations and inquiries, including without limitation,
attending any meetings with government representatives. Without limiting the
generality of the foregoing, GMC expressly authorizes Acquiror and its
representatives to communicate directly with such government representatives.
Acquiror shall not institute any conversations or meetings with any governmental
representative (excluding conversations or meetings to obtain Permits in the
ordinary course) involving any GMC Company without first providing GMC with an
opportunity to initiate and participate in such conversations and meetings.
Acquiror shall not initiate or communicate directly with any government
representatives with respect to any criminal Proceeding involving any GMC
Company without the presence of a representative of GMC.
Compliance with ISRA. With respect to each GMC Real Property located in the
State of New Jersey, the GMC Companies shall comply with the terms and
conditions of the Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq.
("ISRA") and any and all regulations, orders or directives issued pursuant
thereto and, as a condition precedent to Acquiror's obligation to complete
Closing, shall obtain from the NJDEP, a letter of non-applicability or written
acceptance of a Negative Declaration in accordance with Law and deliver such
documents to Acquiror no later than ten (10) days before Closing. Any filing
fees, professional fees and other expenses incurred by any of the GMC Companies
in complying with ISRA shall be the GMC Companies' sole responsibility, which
responsibility shall survive the Closing or termination of this Agreement.
Material Consents. Between the date of this Agreement and the Closing Date, GMC
and each of its Subsidiaries shall in good faith use commercially reasonable
efforts to (a) obtain all Consents required to be obtained by GMC of all
governmental regulatory authorities, lenders, lessors, vendors, customers, and
other Persons necessary to permit the Merger and other transactions contemplated
by this Agreement to be consummated without violating any Law to which GMC or
any of its Subsidiaries is bound, any Permit held by GMC or any of its
Subsidiaries or any loan agreement, lease or other material Contract to which
GMC or any of its Subsidiaries is a party or by which GMC or any of its
Subsidiaries is bound, (b) give the notices and make the filings described on
Schedule 3.2 and (c) request estoppel certificates from all lenders and lessors
as reasonably requested by Acquiror.
Acquisition Proposals. Neither GMC nor any GMC Company shall, directly or
indirectly, through any stockholder, officer, director, partner, employee,
agent, representative or otherwise, solicit, initiate or encourage the
submission of any proposal or offer (including, without limitation, any tender
offer) from any Person relating to any acquisition or purchase of all or (other
than in the ordinary course of business) any significant portion of the Assets
of, or any equity interest in, GMC or any GMC Company or any business
combination with GMC or any GMC Company (collectively, an "Acquisition
Proposal"), or participate in any negotiations regarding, or
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furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other Person to do or seek any of the foregoing.
GMC immediately shall cease and cause to be terminated all existing discussions
or negotiations with any parties conducted heretofore with respect to any of the
foregoing. GMC shall notify Acquiror promptly if any such proposal or offer, or
any inquiry or contact with any Person with respect thereto, is made and shall,
in any such notice to Acquiror, indicate in reasonable detail the identity of
the Person making such proposal, offer, inquiry or contact and the material
terms and conditions of such proposal, offer, inquiry or contact.
Notwithstanding the foregoing, GMC may furnish information and access, or cause
such information or access to be furnished, in response to unsolicited requests
therefor, to any Person or group (each a "Potential Acquiror"), including
parties with whom GMC or its representatives have had discussions on any basis
prior to the date hereof, pursuant to appropriate confidentiality agreements,
and may (and may cause its representatives to) participate in discussion and
negotiate with such Potential Acquirors concerning any Acquisition Proposal only
if (i) the Potential Acquiror has, in circumstances not involving any prior
breach by GMC of any of the foregoing provisions, made a bona fide Acquisition
Proposal, and (ii) the Board of Directors of GMC determines in its good faith
judgment in the exercise of its fiduciary duties to the stockholders of GMC
under applicable state Law based upon the advice of its legal counsel and after
consultation with its financial advisors, that such action is required by such
fiduciary duties. In the event GMC shall take any action pursuant to the
foregoing sentence, it shall promptly inform Acquiror as to that fact and shall
furnish to Acquiror the specifics thereof. GMC may not enter into a definitive
agreement for an Acquisition Proposal with a Potential Acquiror with which it is
permitted to negotiate pursuant to this Section except as provided in Section
11.1(e). Nothing contained in this Agreement shall prohibit GMC and its
directors from (a) issuing a press release or otherwise publicly disclosing the
terms of any Acquisition Proposal, if required by applicable Law, (b) making to
its stockholders any recommendation and related filings with the SEC as required
by Rules 14e-2 and 14d-9 under the Exchange Act with respect to any tender offer
or (c) making any disclosure to GMC's stockholders which the Board of Directors
of GMC determines, after consultation with outside counsel, is required under
applicable Law (including, without limitation, Laws relating to the fiduciary
duties of directors).
Hart-Scott-Rodino Filings. As promptly as practicable after the date of this
Agreement, GMC shall make all filings under the Hart-Scott-Rodino Act which are
required in connection with the transactions contemplated by this Agreement. GMC
shall cooperate with Acquiror in connection with Acquiror's filings under the
Hart-Scott-Rodino Act including, without limitation, providing all information
reasonably requested by Acquiror and taking all reasonable actions to cause the
early termination of all applicable waiting periods.
Reports. GMC shall provide Acquiror with GMC's Financial Statements for the year
ended May 31, 1996 and any interim period thereafter as and when such Financial
Statements are completed. As of its date, none of such documents will contain
any untrue statement of material fact or omit any
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material fact required to be stated therein or necessary to make the statements
therein not misleading.
Advice of Changes. Between the date of this Agreement and the Closing Date, GMC
shall promptly advise Acquiror of any fact of which it obtains Knowledge and
which, if existing or known as of the date of this Agreement, would have been
required to be set forth or disclosed in or pursuant to this Agreement (it being
understood that such advice shall not be deemed to modify GMC's representations,
warranties or covenants contained in this Agreement).
Reasonable Efforts. Subject to the fiduciary duties of the Board of Director's
of GMC to GMC's Stockholders under applicable Laws as advised by counsel, GMC
shall use all reasonable efforts, and cause each GMC Company to use all
reasonable efforts, to consummate the Merger and the transactions contemplated
by this Agreement as of the earliest practicable date including, without
limitation, causing the conditions set forth in Section 9 to be satisfied, and
GMC shall not take, cause or, to the best of its reasonable ability permit to be
taken, and shall not permit or cause any GMC Company to take, cause or permit to
be taken, any action that would impair the prospect of completing the Merger and
the transactions contemplated by this Agreement.
SECTION : CERTAIN OBLIGATIONS OF ACQUIROR PENDING CLOSING
Hart-Scott-Rodino Filings. As promptly as practicable after the date of this
Agreement, Acquiror shall make all filings under the Hart-Scott-Rodino Act
which are required in connection with the transactions contemplated by this
Agreement. Acquiror shall cooperate with GMC in connection with GMC's filings
under the Hart-Scott-Rodino Act, including without limitation, providing all
information reasonably requested by GMC and taking all reasonable actions to
cause the early termination of all applicable waiting periods.
Advice of Changes. Between the date of this Agreement and the Closing Date,
Acquiror shall promptly advise GMC in writing of any fact of which it obtains
Knowledge and which, if existing or known as of the date of this Agreement,
would have been required to be set forth or disclosed in or pursuant to this
Agreement (it being understood that such advice shall not be deemed to modify
Acquiror's representations, warranties or covenants contained in this
Agreement).
Reasonable Efforts. Acquiror and Newco shall use all reasonable efforts to
consummate the Merger and the transactions contemplated by this Agreement as of
the earliest practicable date including, without limitation, causing the
conditions set forth in Section 8 to be satisfied, and neither Acquiror nor
Newco shall take, or cause or to the best of its reasonable ability permit to be
taken, any action that would impair the prospect of completing the Merger and
the transactions contemplated by this Agreement.
Material Consent and Permits. Between the date of this Agreement and the Closing
Date, Acquiror and Newco shall in good faith cooperate with GMC in its efforts
to obtain the Consents and Permits referenced in Section 6.4, provided, however,
that neither Acquiror nor Newco shall (i) be required
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to assume, guaranty or act as surety for the Obligation of any Person, (ii)
breach or violate any Contract to which Acquiror, Newco or any of their
respective Subsidiaries is a party or by which any of them are bound or (iii)
consent to the amendment of any Contract or Permit which Acquiror determines in
its sole discretion would be adverse to the GMC Companies or the Acquiror.
SECTION : CONDITIONS PRECEDENT TO GMC'S
CLOSING OBLIGATIONS
Each obligation of GMC to be performed on the Closing Date shall be
subject to the satisfaction of each of the conditions stated in this Section 8,
except to the extent that such satisfaction is waived by GMC in writing.
Stockholder Approval. The Merger shall have been duly approved by the
affirmative vote of the holders of a majority of the outstanding shares of GMC
Common Stock in accordance with Section 251 of the DGCL.
Acquiror's and Newco's Representations. Each representation and warranty made by
Acquiror and Newco in this Agreement shall be true and correct (a) in all
material respects with respect to representations and warranties which are not
modified by materiality and (b) in all respects with respect to representations
and warranties which are modified by materiality, in either case, on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date except for those representations and warranties made as of a
specified date which shall continue to be true and correct as of such date.
Acquiror's and Newco's Performance. All of the terms and
conditions of this Agreement to be satisfied or performed by Acquiror or Newco
on or before the Closing Date shall have been satisfied or performed in all
material respects.
Closing Documents. Acquiror and Newco shall have delivered all
of the documents provided for in Section 10.2.
Hart-Scott-Rodino Waiting Periods. All applicable waiting periods
with respect to the Merger under the Hart-Scott-Rodino Act shall have expired.
8.6 Legal Opinion. Newco shall have received the favorable opinion of Blank
Rome Comisky & McCauley, counsel to Acquiror, dated the Closing Date, addressed
to GMC and in form and substance materially acceptable to the parties.
SECTION : CONDITIONS PRECEDENT TO ACQUIROR'S
CLOSING OBLIGATIONS
Each obligation of Acquiror to be performed on the Closing Date shall
be subject to the satisfaction of each of the conditions stated in this Section
9, except to the extent that such satisfaction is waived by Acquiror in writing.
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Material Consents and Permits. On or before the Closing Date, GMC, Acquiror
and/or Newco shall have received all Consents and Permits necessary to permit
the Merger and the other transactions contemplated by this Agreement to be
consummated. All such Consents and Permits shall be in form and substance
reasonably satisfactory to Acquiror and all applicable notice periods shall have
expired.
Stockholder Approval. The Merger shall have been duly approved by the
affirmative vote of the holders of a majority of the outstanding shares of GMC
Common Stock in accordance with Section 251 of the DGCL.
GMC's Representations. Each representation and warranty made by GMC in this
Agreement shall be true and correct (a) in all material respects with respect to
representations and warranties which are not modified by materiality (excluding
the representations and warranties set forth in the first two sentences of
Section 3.5) and (b) in all respects with respect to representations and
warranties which are set forth in the first two sentences of Section 3.5 or
which are modified by materiality, in any case, as of the date of this
Agreement, and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date except for those representations and
warranties made as of a specified date which shall continue to be true and
correct as of such date.
GMC's Performance. All of the terms and conditions of this Agreement to be
satisfied or performed by GMC on or before the Closing Date shall have been
satisfied or performed in all material respects.
Closing Documents. GMC shall have delivered all of the documents
provided for in Section 10.1.
Absence of Proceedings. No Proceeding shall have been instituted (excluding any
such action, suit or proceeding initiated by or on behalf of Acquiror or any of
its Subsidiaries or affiliates), no Judgment or order shall have been issued,
and no new Law shall have been enacted, on or before the Closing Date, in any
event which seeks damages which would or would be reasonably expected to result
in a Material Adverse Effect as a result of, or which seeks to or does prohibit
or restrain, the consummation of the Merger or any of the other transactions
contemplated by this Agreement.
No Material Adverse Changes. There shall not have been any Material Adverse
Change, or any event or omission that is reasonably likely to have a Material
Adverse Effect, between April 30, 1996 and the Closing Date.
Hart-Scott-Rodino Waiting Periods. All applicable waiting periods
with respect to the Merger under the Hart-Scott-Rodino Act shall have expired.
Legal Opinion. Acquiror shall have received the favorable opinions of Mesirov
Gelman Jaffe Cramer & Jamieson, counsel to GMC, and Buchanan & Ingersoll,
regulatory counsel to GMC, each dated the Closing Date, addressed to Acquiror
and in form and substance mutually acceptable to the parties.
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SECTION : CLOSING DELIVERIES
GMC's Obligations at Closing. GMC shall deliver to Acquiror, at the Closing, the
following:
(a) Resignations of all directors of GMC, releases (in form and substance
reasonably satisfactory to the parties) and, if requested by Acquiror,
resignations of any and all officers or directors, as such, of the GMC
Companies, in form and substance satisfactory to Acquiror, dated the Closing
Date and duly executed by each such director and officer.
(b) A certificate dated the Closing Date, in form and substance
satisfactory to Acquiror, of the Chief Executive Officer and the Chief Financial
Officer of GMC, certifying that to the actual Knowledge of such officer after
reasonable inquiry (i) all representations and warranties made by GMC in this
Agreement are true and correct as required by Section 9.3, (ii) all of the terms
and conditions of this Agreement to be satisfied or performed by GMC on or
before the Closing Date have been satisfied or performed in all material
respects, and (iii) there has not been any Material Adverse Change between April
30, 1996 and the Closing Date.
(c) Good standing certificates for each GMC Company, dated no earlier
than ten days before the Closing Date, from its jurisdiction of formation and
each respective jurisdiction in which any of the GMC Companies currently or at
the Closing Date is qualified or registered to do business as a foreign
corporation or partnership.
(d) All other agreements, certificates, instruments and documents
reasonably requested by Acquiror in order to fully consummate the transactions
contemplated hereby and carry out the purposes and intent of this Agreement.
Acquiror's or Newco's Obligations at Closing. Acquiror or Newco
shall deliver to GMC at the Closing the following:
(a) A certificate dated the Closing Date, in form and substance
satisfactory to GMC, of the Chief Executive Officer and the Chief Financial
Officer of each of Acquiror and Newco, certifying that to the actual Knowledge
of such officer after reasonable inquiry (i) all representations and warranties
made by Acquiror or Newco in this Agreement are true and correct to the extent
required by Section 8.2 and (ii) all of the terms and conditions of this
Agreement to be satisfied or performed by Acquiror or Newco on or before the
Closing Date have been satisfied or performed in all material respects.
(b) Good standing certificates for Acquiror and Newco dated no earlier
than ten days before the Closing Date, from its jurisdictions of incorporation.
(c) All other agreements, certificates, instruments and documents
reasonably requested by GMC in order to fully consummate the transactions
contemplated hereby and carry out the purposes and intent of this Agreement.
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SECTION : TERMINATION
Termination. At any time prior to the Closing, whether or not the Merger has
been approved by the Stockholders, this Agreement may be terminated and the
transactions contemplated hereby may be abandoned, in accordance with any of the
following methods:
(a) by mutual consent of Acquiror, Newco and GMC, authorized by
their respective boards of directors;
(b) by Acquiror or GMC, as the case may be, (i) if the Closing shall not
have occurred on or prior to February 1, 1997 for any reason or (ii) if it has
become reasonably certain that any condition to the closing obligations of such
party will not be satisfied and such condition has not been waived by such
party, unless, in either case, the failure of the Closing to occur or such
condition to be satisfied shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe its agreements and conditions set
forth herein to be performed or observed by such party at or before the Closing;
(c) by Acquiror, if there shall have been material breach of any
obligation of GMC hereunder and such breach shall have not been remedied within
10 days after receipt by GMC of notice in writing from Acquiror specifying the
nature of such breach and requesting that it be remedied;
(d) by GMC, if there shall have been any material breach of any
obligation of Acquiror hereunder and such breach shall not have been remedied
within 10 days after receipt by Acquiror of notice in writing from GMC
specifying the nature of such breach and requesting that it be remedied;
(e) by GMC in order to enter into a definitive agreement for an
Acquisition Proposal with a Potential Acquiror with which it is permitted to
negotiate pursuant to Section 6.5, provided that GMC shall have first (i) paid
the Termination Fee to Acquiror pursuant to Section 12.2 and (ii) given the
Acquiror at least three business days' notice of its intention to terminate this
Agreement, such notice to include all of the material terms of such definitive
agreement; and
(f) by Acquiror or Newco, if (i) the Board of Directors of GMC shall
withdraw, modify or change its recommendation of this Agreement or the Merger in
a manner adverse to Acquiror or Newco or shall have resolved to do any of the
foregoing or (ii) if the Board of Directors of GMC shall have recommended to the
shareholders of GMC an Acquisition Proposal.
Effect of Termination. In the event of the termination of this Agreement
pursuant to Section 11.1 hereof by Acquiror, on the one hand, or GMC, on the
other hand, written notice thereof shall forthwith be given to the other party
or parties specifying the provision hereof pursuant to which such termination is
made, and this Agreement shall become void and have no effect, and no party
shall have any further Obligation under this Agreement except as provided in
Section 12.1 or 12.2; provided, however, that termination of this Agreement
pursuant to Section 11.1 (b), (c) or (d), shall
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not relieve any party to this Agreement of liability for any default or breach
of this Agreement.
SECTION : OTHER PROVISIONS
Confidentiality and Publicity. Acquiror and Newco shall hold in confidence all
confidential information concerning the GMC Companies which is disclosed to it
in connection with the transactions contemplated hereby, and GMC and each of the
GMC Subsidiaries shall hold in confidence all confidential information
concerning Acquiror which is disclosed to them in connection with the
transactions contemplated hereby. GMC and Acquiror shall consult with each other
as to the form and substance of any press release or other public disclosure of
matters related to this Agreement and the transactions contemplated hereby and
thereby and neither party shall make any such press release or other public
disclosure without the consent of the other party, which such consent shall not
be unreasonably withheld or delayed; provided, however, that nothing in this
Section 12.1 shall be deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to fulfill
such party's disclosure obligations imposed by Law. In the event that the Merger
is not consummated, each party shall promptly return to the other party all
confidential information concerning such other party including copies thereof.
Fees and Expenses. (a) Except as set forth in this Section 12.2, Acquiror shall
pay all of the fees and expenses incurred by it, and GMC shall pay all of the
fees and expenses incurred by GMC, in negotiating and preparing this Agreement
(and all other Contracts and documents executed in connection herewith or
therewith) and in consummating the transactions contemplated hereby and thereby.
(b) The parties acknowledge that as a condition to its willingness to enter into
this Agreement, Acquiror has requested GMC to pay a termination fee in the
amount of $5,000,000 plus Expenses (as hereinafter defined) in an amount not to
exceed $750,000 (collectively, the "Termination Fee") in certain circumstances.
To induce Acquiror to enter into this Agreement, GMC agrees to pay the
Termination Fee to Acquiror, (i) as a precondition to GMC's right to terminate
this Agreement pursuant to Section 11.1(e) hereof, (ii) in the event that
Acquiror or Newco terminate this Agreement pursuant to Section 11.1(f), or (iii)
in the event that a Third Party Acquisition (as defined below) shall have
occurred at any time (A) this Agreement is in effect or (B) during the first 12
months immediately following the termination of this Agreement (other than a
Termination pursuant to Section 11.1(b) or (d) due to a breach of this Agreement
by Acquiror or Newco); provided that in the case of any Third Party Acquisition
under clause (B), such Third Party Acquisition is at a per share value (or
implied per share value) higher than $5.75 per share of GMC Common Stock.
(c) "Expenses" means the sum of all of Acquiror's and Newco's accountable
out-of-pocket expenses and fees incurred or accrued by either of them or on
their behalf in connection with the transactions contemplated hereby.
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(d) "Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of GMC by merger, consolidation or other business
combination transaction by any Person other than Acquiror, Newco or any
affiliate thereof (a "Third Party"), or the public announcement of a Contract
providing for such a transaction; (ii) the acquisition by any Third Party of 50%
or more of the total assets of the GMC Companies, taken as a whole, or the
public announcement of a Contract providing for such a transaction; or (iii) the
acquisition by a Third Party of 50% or more of the outstanding GMC Stock whether
by tender offer, exchange offer or otherwise, or the public announcement of a
Contract providing for such a transaction.
(e) In the event that GMC shall fail to pay the Termination Fee when due, there
shall also be payable to the Acquiror the costs and expenses actually incurred
or accrued by Acquiror and Newco (including, without limitation, fees and
expenses of counsel) in connection with the collection under and enforcement of
this Section 12.2, together with interest on such unpaid Termination Fee and
expenses, commencing on the date that the Termination Fee became due, at a rate
equal to the rate of interest publicly announced by Mellon Bank, N.A., from time
to time, as such bank's Base Rate.
(f) The Payment of the Termination Fee shall be due and payable by GMC: (i)
prior to the termination of this Agreement by GMC pursuant to Section 11.1(e) or
(ii) within five business days following (A) the termination of this Agreement
pursuant to 11.1(f) or (B) the occurrence of any Third Party Acquisition
requiring the Termination Fee to be paid pursuant to Section 12.2(b).
(g) In addition to any other rights and remedies it may have at law or in
equity, Acquiror shall have the right to have an injunction, issued by any court
of equity having jurisdiction, enjoining the GMC Companies and any other Person
from entering into a definitive agreement for an Acquisition Proposal or
consummating a Third Party Acquisition until the Termination Fee has been paid
to Acquiror in full.
(h) In addition to any other rights and remedies it may have at law or in
equity, Acquiror and Newco shall be entitled to be reimbursed by GMC for their
Expenses in the event of, and payable within five business days after, any
termination of this Agreement by Acquiror pursuant to Section 11.1(b) or Section
11.1(c) due to a material breach of this Agreement by GMC.
Notices. All notices, consents or other communications required or permitted to
be given under this Agreement shall be in writing and shall be deemed to have
been duly given when (a) delivered personally, delivery charges prepaid, or (b)
three business days after being sent by registered or certified mail (return
receipt requested), postage prepaid, or (c) one business day after being sent by
a nationally recognized express courier service, postage or delivery charges
prepaid, in any case to the parties at its addresses stated on the first page of
this Agreement. Notices may also be given by prepaid telegram or facsimile and
shall be effective on the date transmitted if confirmed within 24 hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. A copy of each notice to GMC shall be simultaneously sent to Mesirov
Gelman Jaffe Cramer & Jamieson, 1735 Market Street, Philadelphia, Pennsylvania
19103, Attention: Robert P.
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<PAGE>
Krauss, Esquire. A copy of each notice to Acquiror or Newco shall be sent to
Blank Rome Comisky & McCauley, Four Penn Center Plaza, Philadelphia,
Pennsylvania 19103, Attention: Stephen E. Luongo, Esquire. Any party may change
its address for notice and the address to which copies must be sent by giving
notice of the new addresses to the other party in accordance with this Section
12.3, provided that any such change of address notice shall not be effective
unless and until received.
Survival of Representations. The respective representations, warranties, and
covenants of the parties in this Agreement shall not survive the Closing Date
and shall terminate on the Closing Date, except for the representations,
warranties and covenants contained in Sections 12.1, 12.2 and 12.13 which shall
survive without limitation of time. However, such termination shall not be
deemed to deprive any of the parties hereto or their Subsidiaries, or any of
their directors, officers or controlling Persons, of any defense in law or
equity which otherwise would be available against the claims of any Person,
including, but not limited to, any stockholder or former stockholder of the
parties hereto. Before and on the Closing Date, each party shall be deemed to
have relied upon each of the representations and warranties made to it in this
Agreement or pursuant hereto, regardless of any investigation made by or on
behalf of such party or the right of investigation of such party.
Entire Understanding. This Agreement, together with the Exhibits and Schedules
hereto, and that certain Confidentiality Agreement dated February 3, 1995
between Acquiror and GMC, state the entire understanding among the parties with
respect to the subject matter hereof and thereof, and supersedes all prior and
contemporaneous oral and written communications and agreements with respect to
the subject matter hereof. No amendment or modification of this Agreement shall
be effective unless in writing and signed by the party against whom enforcement
is sought. Each of the parties may agree to any amendment or supplement to this
Agreement, or a waiver of any provision of this Agreement, either before or
after the approval of such party's stockholders (as provided in this Agreement)
and without seeking further stockholder approval, so long as such amendment,
supplement or waiver does not change the Merger Consideration. This Agreement
shall not be terminated except as provided in Section 11.1.
Parties in Interest. This Agreement shall bind, benefit, and be enforceable by
and against GMC, Acquiror and Newco and their respective successors and assigns.
No party shall in any manner assign any of its rights or obligations under this
Agreement without the express prior written consent of the other parties.
Nothing in this Agreement is intended to confer, or shall be deemed to confer,
any rights or remedies upon any Persons other than the parties hereto.
No Waivers. No waiver with respect to this Agreement shall be enforceable unless
in writing and signed by the party against whom enforcement is sought. Except as
otherwise expressly provided herein, no failure to exercise, delay in
exercising, or single or partial exercise of any right, power or remedy by any
party, and no course of dealing between or among any of the parties, shall
constitute a waiver of, or shall preclude any other or further exercise of, any
right, power or remedy.
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<PAGE>
Severability. If any provision of this Agreement is construed to be invalid,
illegal or unenforceable as to any party or generally, then that provision shall
be enforceable by the other parties and the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original hereof, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one counterpart hereof.
Section Headings. Section and subsection headings in this
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
Controlling Law. THIS AGREEMENT IS MADE UNDER, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Directors' and Officers' Indemnification and Insurance.
(a) The charter or bylaws of the Surviving Corporation shall contain provisions
no less favorable with respect to indemnification than are set forth in the
charter or bylaws of GMC, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
the Effective Time were directors, officers, employees, fiduciaries or agents of
GMC, unless such modification shall be required by Law.
(b) GMC shall, to the fullest extent permitted under applicable Law and
regardless of whether the Merger becomes effective, indemnify and hold harmless,
and, after the Effective Time, the Surviving Corporation shall, to the fullest
extent permitted under applicable Law, indemnify and hold harmless, each present
and former director and officer of each GMC Subsidiary (collectively, the
"Indemnified Parties") against all costs and expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission in their capacity as an officer or director, whether
occurring before or after the Effective Time, for a period of six years after
the date hereof. In the event of any such claim, action, suit, proceeding or
investigation, (i) GMC or the Surviving Corporation, as the case may be, shall
pay the reasonable fees and expenses of counsel selected by the Indemnified
Parties, which counsel shall be reasonably satisfactory to GMC or the Surviving
Corporation, promptly after statements therefor are received and (ii) GMC and
the Surviving Corporation shall cooperate in the defense of any such matter
provided, however, that
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<PAGE>
neither GMC nor the Surviving Corporation shall be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld); and provided, further, that neither GMC nor the Surviving Corporation
shall be obligated pursuant to this Section 12.13(b) to pay the fees and
expenses of more than one counsel for all Indemnified Parties in any single
action except to the extent that two or more of such Indemnified Parties shall
have conflicting interests in the outcome of such action; and provided, further,
that, in the event that any claim for indemnification is asserted or made within
such six-year period, all rights to indemnification in respect of such claim
shall continue until the disposition of such claim.
(c) The Surviving Corporation shall use its commercially reasonable efforts to
maintain in effect for three years from the Effective Time, if available, the
current directors' and officers' liability insurance policies maintained by GMC
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 12.13(c) more than an amount per year equal
to 150% of current annual premiums paid by GMC for such insurance (which
premiums GMC represents and warrants to be $249,720 in the aggregate).
(d) In the event GMC or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of GMC or the
Surviving Corporation, as the case may be, or at Acquiror's option, Acquiror
shall assume the obligations set forth in this Section 12.13.
Jurisdiction and Process; Specific Performance. (a) In any action between or
among any of the parties, whether arising out of this Agreement or otherwise,
(i) each of the parties irrevocably consents to the exclusive jurisdiction and
venue of the federal and state courts located in the Commonwealth of
Pennsylvania; (ii) if any such action is commenced in a state court, then,
subject to applicable law, no party shall object to the removal of such action
to any federal court located in the Commonwealth of Pennsylvania; (iii) each of
the parties irrevocably waives the right to trial by jury; and (iv) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 12.3.
(b) The parties hereto agree that irreparable damage would occur to Acquiror and
Newco in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that Acquiror and Newco shall be entitled
to specific performance of the terms hereof, in addition to any other remedy at
law or equity.
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<PAGE>
WITNESS THE DUE EXECUTION AND DELIVERY HEREOF as of the date first stated above.
GENESIS HEALTH VENTURES, INC.
By:/s/ Michael Walker
Chairman of the Board and
Chief Executive Officer
GERIATRIC & MEDICAL COMPANIES, INC.
By: /s/ Daniel Veloric
Chairman of the Board and
President
G ACQUISITION CORPORATION
By: /s/ Michael Walker
Chairman of the Board and
Chief Executive Officer
-41-
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (the "Agreement") is made and entered into this 11th
day of July, 1996, by and between GERIATRIC & MEDICAL COMPANIES, INC., a
Delaware corporation (hereinafter "GMC") and DANIEL VELORIC (hereinafter
"Employee").
B A C K G R O U N D
GMC and Employee are parties to an Employment Agreement dated as of March 4,
1994, effective June 1, 1993 (the "Employment Agreement"), a true and correct
copy of which is attached hereto.
GMC and GENESIS HEALTH VENTURES, INC., a Delaware corporation ("GHV") are about
to enter into a "Merger Agreement" pursuant to which GHV, or its affiliate, will
become the owner of all the issued and outstanding stock of GMC and the GMC
shareholders shall receive cash for their shares. All defined terms herein shall
have the meanings ascribed to them in the Merger Agreement unless the context
clearly requires the contrary.
A condition of GHV to entering into the Merger Agreement is the agreement by
Employee to cancel the Employment Agreement.
Employee has agreed to cancel the Employment Agreement, effective upon the
"Effective Time" of the merger contemplated by the Merger Agreement, under and
subject to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1
<PAGE>
1. Effective as of the "Effective Time" of the proposed merger between GMC and
GHV (or an affiliate of GHV) pursuant to the Merger Agreement, the Employment
Agreement be and the same shall be terminated and of no further force or effect.
In the event the Effective Time does not occur on or before February 1, 1997,
this Agreement shall terminate and cease to be of any further force or effect.
2. In consideration of this Agreement, GMC shall pay Employee the sum of
$1,000,000 payable $200,000 per annum for five years commencing on the Effective
Time and on the first four consecutive anniversaries thereof.
3. (i) Employee hereby releases, acquits and discharges GMC and GHV and their
agents, employees, officers, directors and shareholders and their predecessors,
successors and assigns from and against all claims, actions and causes of action
(collectively the "claims"), of every kind, nature and description, whenever
they arose, arising out of or related to her employment and the termination
thereof, or relating to GMC's and GHV's actions prior to the execution of this
Agreement, whether known or unknown, asserted or unasserted, including, but not
limited to, all claims for reinstatement, reemployment, damages, wages, monies,
costs and attorneys fees, arising under or out of any federal, state and local
laws and statutes, including but not limited to, the National Labor Relations
Act, as amended, Title VII of the Civil Rights Acts of 1964, as amended, the
Civil Rights Act of 1991, the Rehabilitation Act of 1973, the Age Discrimination
in Employment Act, the Commonwealth of Pennsylvania Human Relations Act,
Employee Retirement Income Security Act (ERISA), Consolidated Omnibus Budget
Reconciliation Act (COBRA), Older Workers Benefit Protection Act (OWBPA), wage
and hour and wage payment collection laws, health, medical, or fringe
benefitrelated law, worker's compensation laws, any express or implied public
policy of the United States, the Commonwealth of Pennsylvania, or any state,
county or locality, the common law, civil codes, constitution, express or
implied contracts, actions in tort,
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<PAGE>
or wrongful discharge or breach of contract, case decisions, or any other source
whatsoever. Employee expressly waives all rights he may have under such laws and
statutes and any other labor and employment related laws and statutes arising or
relating to GMC's and GHV's actions prior to the execution of this Agreement.
(ii) Employee acknowledges that he has been instructed to and has had the
opportunity to review this Agreement with an attorney or any representative of
her choosing before signing it. Employee further acknowledges that he will have
twenty-one days from the date hereof until the Effective Time to consider this
Agreement.
(iii) Employee understands that he shall have seven days to revoke this
Agreement after he has executed it. Employee further understands that this
Agreement shall not be effective or enforceable until after the revocation
period has expired.
4. This Agreement: (i) contains the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous agreements with respect to such subject matter; (ii)
may not be amended or modified except in writing signed by each of the parties
hereto; (iii) shall be construed in accordance with the internal laws of the
Commonwealth of Pennsylvania; and (iv) shall be
3
<PAGE>
binding upon and inure to the benefit of the parties hereto and their respective
successors, assigns, and legal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
Cancellation Agreement as of the date and year first above written.
GERIATRIC & MEDICAL COMPANIES, INC.
BY:/s/ Arthur A. Carr, Jr.
Executive Vice President
WITNESS: EMPLOYEE:
- --------------------- -----------------------------------
DANIEL VELORIC
4
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT (the "Agreement") is made and entered into this 11th
day of July, 1996, by and between GERIATRIC & MEDICAL COMPANIES, INC., a
Delaware corporation (hereinafter "GMC") and ESTHER PONNOCKS (hereinafter
"Employee").
B A C K G R O U N D
GMC and Employee are parties to an Employment Agreement dated as of June 1, 1992
(the "Employment Agreement"), a true and correct copy of which is attached
hereto.
GMC and GENESIS HEALTH VENTURES, INC., a Delaware corporation ("GHV") are about
to enter into a Merger Agreement (the "Merger Agreement") pursuant to which GHV,
or its affiliate, will become the owner of all the issued and outstanding stock
of GMC and the GMC shareholder shall receive cash for their shares. All defined
terms herein shall have the meanings ascribed to them in the Merger Agreement
unless the context clearly requires the contrary.
A condition of GHV to entering into the Merger Agreement is the agreement by
Employee to cancel the Employment Agreement.
Employee has agreed to cancel the Employment Agreement, effective upon the
Effective Time of the merger contemplated by the Merger Agreement (the
"Effective Time"), under and subject to the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
1
<PAGE>
1. Effective as of the "Effective Time" of the proposed merger between GMC and
GHV (or an affiliate of GHV) pursuant to the Merger Agreement, the Employment
Agreement be and the same shall be terminated and of no further force or effect.
In the event the Effective Time does not occur on or before February 1, 1997,
this Agreement shall terminate and cease to be of any further force or effect.
2. On the Effective Time, GMC shall pay Employee the sum of
$200,000.
3. On the Effective Time, GMC shall pay up to $600,000 to Karr Barth Associates,
or its designee, to fund, Employee's secured supplemental pension plan to
provide an annuity for Employee's lifetime, commencing on the first day of the
month following the first anniversary of the Effective Time, in the amount of
$75,000 per year. In addition, GMC shall pay to Employee, or cause GMC to pay to
Employee, up to $250,000, being an amount equal to the income taxes to be
incurred by Employee in connection with such funding.
4. Upon termination of the consulting agreement, GMC shall transfer to Employee,
or shall cause GMC to transfer to Employee, the vehicle presently made available
to her, without any cost or expense to her.
5. (i) Employee hereby releases, acquits and discharges GMC and GHV and their
agents, employees, officers, directors and shareholders and their predecessors,
successors and assigns from and against all claims, actions and causes of action
(collectively the "claims"), of every kind, nature and description, whenever
they arose, arising out of or related to her employment and the termination
thereof, or relating to GMC's and GHV's actions prior to the execution of this
Agreement, whether known or unknown, asserted or unasserted, including, but not
limited to, all claims for reinstatement,
2
<PAGE>
reemployment, damages, wages, monies, costs and attorneys fees, arising under or
out of any federal, state and local laws and statutes, including but not limited
to, the National Labor Relations Act, as amended, Title VII of the Civil Rights
Acts of 1964, as amended, the Civil Rights Act of 1991, the Rehabilitation Act
of 1973, the Age Discrimination in Employment Act, the Commonwealth of
Pennsylvania Human Relations Act, Employee Retirement Income Security Act
(ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), Older Workers
Benefit Protection Act (OWBPA), wage and hour and wage payment collection laws,
health, medical, or fringe benefit- related law, worker's compensation laws, any
express or implied public policy of the United States, the Commonwealth of
Pennsylvania, or any state, county or locality, the common law, civil codes,
constitution, express or implied contracts, actions in tort, or wrongful
discharge or breach of contract, case decisions, or any other source whatsoever.
Employee expressly waives all rights she may have under such laws and statutes
and any other labor and employment related laws and statutes arising or relating
to GMC's and GHV's actions prior to the execution of this Agreement.
(ii) Employee acknowledges that she has been instructed to and has had the
opportunity to review this Agreement with an attorney or any representative of
her choosing before signing it. Employee further acknowledges that she will have
twenty-one days from the date hereof until the Effective Time to consider this
Agreement.
(iii) Employee understands that she shall have seven days to revoke this
Agreement after she has executed it. Employee further understands that this
Agreement shall not be effective or enforceable until after the revocation
period has expired.
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<PAGE>
6. This Agreement: (i) contains the entire agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes all
prior or contemporaneous agreements with respect to such subject matter; (ii)
may not be amended or modified except in writing signed by each of the parties
hereto; (iii) shall be construed in accordance with the internal laws of the
Commonwealth of Pennsylvania; and (iv) shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, and
legal representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
GERIATRIC & MEDICAL COMPANIES, INC.
BY: /s/ Daniel Veloric
Chairman of the Board and
President
WITNESS: EMPLOYEE:
- --------------------- -----------------------------------
ESTHER PONNOCKS
4
RESTRICTIVE COVENANTS AGREEMENT
THIS RESTRICTIVE COVENANTS AGREEMENT ("Agreement") is made and entered into as
of this 11th day of July, 1996, by and between Geriatric & Medical Companies,
Inc., a Delaware corporation (collectively with all of its affiliates, "G&MC")
and Daniel Veloric ("Veloric").
BACKGROUND
WHEREAS, G&MC, Genesis Health Ventures, Inc., a Pennsylvania corporation
("Genesis"), and a wholly owned subsidiary of Genesis ("Newco") have entered
into an Agreement and Plan of Merger dated the date hereof (the "Merger
Agreement"), pursuant to which Newco, at the Effective Time (as defined in
Section 2.3 of the Merger Agreement), will merge with and into G&MC making G&MC
a wholly owned subsidiary of Genesis (the "Merger"); and
WHEREAS, prior to the Effective Time of the Merger, Veloric has been and
will be an employee of G&MC; and
WHEREAS, after the Effective Time of the Merger, G&MC intends to continue its
business and will enter into a consulting agreement with Veloric; and
WHEREAS, Veloric has substantial experience in the health care industry in
which G&MC conducts its business; and
WHEREAS, G&MC and Genesis would suffer damages, including the loss of profits,
if Veloric or any person, corporation, partnership or any other entity
affiliated with Veloric (an "Affiliate") engaged in, solicited on behalf of,
supported, or promoted, directly or indirectly, a Competitive Business (as
defined in Section 1.2); and
WHEREAS, G&MC and Genesis would not have entered into the Merger Agreement
absent the execution by Veloric of this Agreement; and
WHEREAS, it is in the interest of Veloric that the transactions
contemplated by the Merger Agreement be consummated; and
WHEREAS, this Agreement has been reached in good faith in arms-length
negotiations.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound hereby, the parties agree as
follows:
<PAGE>
Trade Secrets and Covenant Not-To-Compete.
Veloric shall not, at any time after the Effective Time of the Merger, except
with the express prior written consent of G&MC or Genesis, directly or
indirectly, disclose, communicate or divulge to any Person, or use for the
benefit of any Person, any secret, confidential or proprietary knowledge or
information with respect to the conduct or details of G&MC or the business
engaged in by G&MC including, but not limited to, technical know-how, Software,
methods of production, processes, customers, prospects, costs, designs,
marketing methods and strategies, finances and suppliers. For the purposes of
this subsection, "Software" means any computer program, operating system,
applications system, firmware or software of any kind or nature whatsoever,
including, without limitation, all object code, source code, technical manuals,
user manuals and other documentation therefor, whether in machine-readable form,
a programming language or any other language or symbols, and whether stored,
encoded, recorded or written on disk, tape, film, memory device, paper or other
media. The provisions of this Section 1.1 shall not apply to any information
which at the time of disclosure (i) is generally available to or known to the
public (other than as a result of disclosure directly or indirectly by Veloric)
or (ii) Veloric, at the direction and authorization of G&MC, is required to
disclose in connection with the performance by Veloric of his responsibilities
as a consultant of G&MC. If Veloric is required in a judicial, administrative or
governmental proceeding to disclose any information which is the subject of the
restrictions contained in this Section, then Veloric will notify G&MC as soon as
possible so that G&MC may either seek an appropriate protective order or relief,
or waive the provisions of this Section. If, in the absence of such an order,
relief or waiver, Veloric is required, in the written opinion of counsel, to
disclose such information to any court, administrative agency or governmental
authority or else stand liable for contempt or other penalty, then Veloric may
disclose such information without liability under this Agreement.
Veloric shall not, for a period of ten (10) years after the Effective Time of
the Merger, in any capacity (including, but not limited to, owner, partner,
shareholder, consultant, agent, employee, officer, director or otherwise),
directly or indirectly, for his own account or for the benefit of any Person,
establish, engage in or be connected with any Competitive Business. As used
herein, the term "Competitive Business" means any business conducted in any
geographic markets in which G&MC or Genesis now or hereafter conducts its
business and which relates to the provision of home care services and equipment,
life support and ambulance services, family support services, physician
services, pharmaceutical and medical supplies, pharmacy benefit management
services, healthcare hospitality services, retirement communities, assisted
living communities, diagnostic and rehabilitation services, short- or long-term
care, care of elderly populations or any other services in the health care
industry.
Veloric shall not, for a period of ten (10) years after the Effective Time of
the Merger, except with the express prior written consent of G&MC or Genesis or
otherwise contemplated by the Merger Agreement, directly or indirectly, whether
as a consultant, employee, owner, partner, agent, director, officer, shareholder
or in any other capacity, for his own account or for the benefit of any Person:
(i) solicit, divert or induce any of GM&C's or Genesis' employees to leave or to
work for him or any Person with which he is connected; or (ii) hire any of
G&MC's or Genesis' employees other than employees who have been involuntarily
terminated by G&MC or Genesis or (iii) communicate with or solicit any Person
who is or during such period becomes a customer, supplier, salesman, agent or
representative of G&MC, in any manner which interferes or might interfere with
such Person's relationship with G&MC, or in an effort to
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obtain such Person as a customer, supplier, salesman, agent, or representative
of any Competitive Business.
1.4 Notwithstanding the foregoing, without being deemed to have breached the
covenants or agreements contained in this Section 1, Veloric may acquire
investment or ownership interests (direct or indirect) in a company which is
engaged in a Competitive Business, so long as Veloric is not actively involved
in the management of such company or its business.
Consideration. As consideration for the covenants and agreements of Veloric
contained herein, G&MC shall pay Veloric $475,000 at the Effective Time of the
Merger. Provided that Veloric has not breached any of the covenants and
agreements of the Veloric set forth in Section 1, the continuing effect of such
covenants and agreements shall be subject to and contingent upon G&MC satisfying
in full its obligation to provide the consideration set forth in this Section 2.
Equitable Remedies. The parties to this Agreement agree that any breach by
Veloric of the covenants and agreements contained in Section 1 will result in
irreparable injury to G&MC and/or Genesis for which money damages could not
adequately compensate G&MC and/or Genesis. Therefore, in the event of any such
breach, G&MC and/or Genesis shall be entitled (in addition to any other rights
and remedies which it may have at law or in equity) to have an injunction issued
by any competent court of equity enjoining and restraining Veloric and/or any
other Person involved therein from continuing such breach. In any action to
enforce the provisions of Section 1, Veloric and/or any other Person involved
therein shall expressly waive the defense that G&MC's and/or Genesis' remedy at
law is adequate. The existence of any claim or cause of action which Veloric may
have against G&MC, Genesis or any other Person (whether under this Agreement or
otherwise) shall not constitute a defense to or bar the enforcement of any of
the covenants or agreements contained in Section 1. If G&MC and/or Genesis is
obligated to resort to the courts for the enforcement of any of the covenants or
agreements contained herein, or if the covenants or agreements are otherwise the
subject of litigation between the parties, then, upon the determination by a
court of competent jurisdiction that Veloric is in breach of any of the
covenants contained in this Agreement, the term of the covenants set forth in
this Agreement shall be extended for a period of time equal to the period of
such breach.
Enforceability. If any portion of the covenants or agreements contained herein,
or the application thereof, is construed to be invalid or unenforceable, then
the other portions of such covenant(s) or agreement(s) or the application
thereof shall not be affected and shall be given full force and effect without
regard to the invalid or unenforceable portions. If any covenant or agreement
herein is held to be unenforceable because of the area covered, the duration
thereof, or the scope thereof, then the court making such determination shall
have, for purposes of enforcement in equity, the power to reduce the area and/or
duration and/or limit the scope thereof, and the covenant or agreement shall
then be enforceable in its reduced form.
Intent of Parties. Each of the parties hereto recognizes and agrees that this
Agreement is necessary and essential to enable G&MC and Genesis to realize and
derive all of the benefits, rights and expectation of the Merger Agreement; that
the area and duration of the covenants herein are in all things, under the
circumstances of the Merger Agreement, reasonable; and that good and valuable
consideration exists for Veloric's agreeing to be bound by such covenants.
Definition. As used herein, the term "Person" means any individual, sole
proprietorship, joint venture, partnership, corporation, association,
joint-stock company, unincorporated organization, cooperative, trust, estate,
government (or any branch, subdivision or agency thereof), governmental,
administrative or regulatory authority, or any other entity of any kind or
nature whatsoever.
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Parties In Interest. This Agreement and all terms, covenants and conditions
contained herein shall inure to the benefit of and shall be binding upon the
undersigned parties and their respective heirs, executors, administrators,
trustees, successors and assigns. None of Veloric's rights or obligations
hereunder are transferrable or assignable to any other party and, subject to
such restriction, the provisions hereof shall extend to and be binding upon
Veloric's respective successors and assigns. Genesis shall be deemed a third
party beneficiary under this Agreement. The covenants of Veloric contained in
this Agreement may be assigned by Genesis to any Person who acquires, whether by
purchase or otherwise, G&MC.
Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original and all of which shall constitute one and
the same instrument, but only one of which need be produced.
Headings. The headings of this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
GERIATRIC & MEDICAL COMPANIES, INC.
By: /s/ Arthur A. Carr, Jr.
Executive Vice President
DANIEL VELORIC
