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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): July 11, 1996
Genesis Health Ventures, Inc.
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(Exact name of registrant as specified in its charter)
Pennsylvania 1-11666 06-1132947
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
148 West State Street, Suite 100
Kennett Square, Pennsylvania 19348
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(Address of principal executive offices,
including zip code)
Registrant's telephone number, including area code: (610) 444-6350
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Item 5. Other Events.
On July 11, 1996, Genesis Health Ventures, Inc. ("Genesis") and its
wholly-owned subsidiary G Acquisition Corporation ("Newco") entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Geriatric & Medical
Companies, Inc. ("GMC"). Pursuant to the Merger Agreement, Newco will merge into
GMC and GMC will become a wholly-owned subsidiary of Genesis (the "Merger").
Each share of GMC common stock shall be converted into the right to receive
$5.75 in cash, subject to statutory appraisal rights. The total consideration to
be paid to stockholders of GMC to acquire their shares (including shares which
may be issued upon exercise of outstanding warrants, options and long-term
incentive plans) is approximately $91.0 million. GMC currently has outstanding
approximately $132,000,000 of indebtedness.
GMC owns and operates 18 long-term care facilities and six assisted
living facilities with approximately 3,000 licensed beds; 11 of these facilities
are located in the eastern Pennsylvania market and nine are located in New
Jersey. GMC also operates an ambulance transportation business, a medical supply
business, a pharmacy business, a contract management service business, a
diagnostic and rehabilitative management services business and a financial
services and information systems business. In addition, GMC currently is
developing two long-term care facilities with approximately 240 beds.
The conditions precedent to the parties' obligation to consummate the
transaction include 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 GMC; (iii) the agreements, 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 have been
instituted which could be reasonably expected to result in a material adverse
effect as a result of the Merger 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 GMC; and (vi) the applicable waiting period under Hart-Scott
Rodino Anti-Trust Improvements Act of 1976, as amended, shall have expired or
been terminated.
The Merger Agreement may be terminated and the transaction abandoned
(i) by the mutual agreement of the parties; (ii) by either party if the
transactions are not consummated by February 1, 1997 or if it becomes reasonably
certain that a condition precedent to any party's obligation to close will not
be satisfied; (iii) by the non-breaching party upon the occurrence of an uncured
material breach; (iv) by GMC in order to enter into an alternative
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acquisition proposal from a third party if inter alia required by the GMC's
board of directors fiduciary duties; or (v) by Genesis if the board of directors
of GMC shall have withdrawn or modify its recommendation of the Merger or has
recommended to the shareholders of GMC that they accept an alternative
acquisition proposal from a third party. In the event that the Agreement is
terminated as described in clause (iv) or (v) above, or a third-party
acquisition for a higher price per share occurs within 12 months after the
termination of the Merger Agreement, GMC has agreed to pay Genesis $5,000,000,
plus expenses of up to $750,000.
In connection with the Merger Newco, Genesis, Tomahawk Holdings, Inc.
("Shareholder"), Tomahawk Capital Holdings, Inc. and Daniel Veloric
(Shareholder, Tomahawk Capital Holdings, Inc. and Daniel Veloric are referred to
collectively herein as the "Owners") entered into a Stockholder Option and Proxy
Agreement dated as of July 11, 1996 (the "Agreement") pursuant to which Owners
granted to Newco (i) an option (the "Stock Option") to purchase the Shares of
GMC owned by Shareholder (the "Shares") and (ii) an irrevocable proxy (the
"Proxy"). The Shareholder currently owns approximately 24.3% of the outstanding
Common Stock of GMC. The Stock Option entitles Newco to purchase the Shares of
GMC owned by the Shareholder for a purchase price (the "Exercise Price") of
$5.75 per Share. Under the Agreement, the Owners agree to vote (or cause to be
voted) the Shares owned by them in any circumstance in which the vote or
approval of the shareholders of GMC 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 GMC
contained in the Merger Agreement or of any Shareholder in this 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 affiliate
in acquiring control of GMC 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 impede, interfere or be
inconsistent with, delay, postpone, discourage or materially adversely affect
the consummation of the Merger or the performance by the parties hereto of their
respective obligations under this Agreement. Under the Agreement, the
Shareholder irrevocably grants to Newco and appoints Newco (with full power of
substitution) its proxy to vote the Shares owned by Shareholder in the manner
described above.
In connection with the proposed transaction, Daniel Veloric and certain
companies which he controls have agreed upon the effective date of the Merger,
as currently contemplated, to lease to Genesis for five years a long-term care
facility located in New Jersey with 335 licensed beds (the "New Jersey
Facility"). As currently contemplated, the lease will require that Genesis pay
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$40,000 per month plus debt service on the property and will be net of all
operating expenses of the facility. Mr. Veloric and certain companies which he
controls have also agreed upon the effective date of the Merger to sell to
Genesis for $1,500,000 a five year option to acquire the stock of the companies
which own the New Jersey Facility for $6,000,000 (plus the assumption of
outstanding debt).
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
The following exhibits are being filed as part of this report:
(c) Exhibits.
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The following Exhibits are filed herewith:
Number Title
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1. Agreement and Plan of Merger, dated as of
July 11, 1996, by and among Genesis Health
Ventures, Inc., a Pennsylvania corporation,
G Acquisition Corporation, a Delaware
corporation and Geriatric & Medical
Companies, Inc., a Delaware corporation.
2. Stockholder Option and Proxy Agreement dated
as of July 11, 1996 between G Acquisition
Corporation, Tomahawk Holdings, Inc., Tomahawk
Capital Holdings, Inc., Daniel J. Veloric and
Genesis Health Ventures, Inc.
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SIGNATURES
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.
GENESIS HEALTH VENTURES, INC.
By: /s/ George V. Hager, Jr.
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George V. Hager, Jr.
Senior Vice President and
Chief Financial Officer
Date: July 22, 1996
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EXHIBIT 1
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 1: DEFINED TERMS
Certain defined terms used in this Agreement and not specifically
defined in context are defined in this Section 1, as follows:
1.1 "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.
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1.2 "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.
1.3 "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.
1.4 "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.
1.5 "Code" means the Internal Revenue Code of 1986, as
amended.
1.6 "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.
1.7 "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.
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1.8 "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.
1.9 "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 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.
1.10 "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.
1.11 "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.
1.12 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.13 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.14 "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.
1.15 "GAAP" means generally accepted accounting principles under United
States accounting rules and regulations, as in effect from time to time,
consistently applied.
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1.16 "GMC Companies" means GMC, the GMC Subsidiaries and the
GMC Partnerships.
1.17 "GMC Partnerships" means each general or limited partnership in
which any GMC Company holds any partnership interest.
1.18 "GMC Subsidiaries" means each of the Subsidiaries of GMC.
1.19 "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) urea- formaldehyde,
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, 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.
1.20 "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.
1.21 "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.
1.22 "Inventory" means any raw materials, supplies, work-in-progress,
finished goods, parts or other inventory of any nature whatsoever.
1.23 "Judgment" means any order, writ, injunction, fine, citation,
award, decree or other judgment of any nature of any
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foreign, federal, state or local court, governmental body, administrative
agency, regulatory authority or arbitration tribunal.
1.24 "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.
1.25 "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.
1.26 "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 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.
1.27 "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.
1.28 "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
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body, administrative agency or regulatory authority or any Person acting on
behalf of any such body, agency or authority.
1.29 "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.
1.30 "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.
1.31 "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.
1.32 "Securities Act" means the Securities Act of 1933, as
amended.
1.33 "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.
1.34 "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.
1.35 "Tangible Property" means any furniture, fixtures, buildings,
leasehold improvements, vehicles, office equipment, computer equipment, other
equipment, machinery, tools, forms, supplies or other tangible personal property
of any nature, whether constituting fixed assets, inventory or otherwise.
1.36 "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
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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 2: THE MERGER
2.1 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.
2.2 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.
2.3 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").
2.4 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
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Newco shall become the debts, liabilities and duties of the Surviving
Corporation.
2.5 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
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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.
2.6 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 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
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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 ap propriate stock powers and otherwise in proper form for
transfer, that such 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
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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.
2.7 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 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
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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.
2.8 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.
2.9 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.
2.10 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.
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2.11 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 3: REPRESENTATIONS OF GMC
GMC represents and warrants to Acquiror and Newco as follows:
3.1 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
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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 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.
3.2 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
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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 Section 203 of the DGCL will not apply to the Stock Option
Agreement, this Agreement or the transactions contemplated thereby and hereby.
3.3 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.
3.4 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
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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.
3.5 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
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,
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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.
3.6 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 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."
3.7 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.
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3.8 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 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.
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(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,
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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 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.
3.9 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.
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3.10 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 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.
3.11 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
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nor, to the Knowledge of the GMC Companies, is any other party to any such
Contract in material default thereunder.
3.12 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 Intangibles of
any GMC Company, nor is any GMC Company obligated to pay any material royalties,
licensing fees or similar payments to any Person.
3.13 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
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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.
3.14 Labor Matters. Except as set forth in Schedule 3.14, no GMC
Company is a party to any collective bargaining agreement or any other Contract
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.
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3.15 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.
Section 1.1502-6 or any similar provision of state, local or foreign Law, as a
transferee or successor, by contract or otherwise.
3.16 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
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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.
3.17 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.
3.18 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.
3.19 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 remuneration in
violation of Medicare or Title XIX
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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").
3.20 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.
3.21 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.
3.22 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. Section 1395 nn and implementing
regulations) other than holdings of GMC Common Stock purchased or received in
the ordinary course.
3.23 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
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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 iden tified 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-party payor of its intention to sus pend, 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.
3.24 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.
3.25 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.
3.26 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
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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.
3.27 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 plan, scheme,
device or arrangement other than provisions providing for a staggered Board of
Directors.
3.28 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 4: REPRESENTATIONS OF ACQUIROR AND NEWCO
Acquiror and Newco, jointly and severally, represent and warrant to GMC
as follows:
4.1 Organization. Acquiror is a corporation duly organ ized, 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.
4.2 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).
4.3 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.
4.4 Brokerage Fees. Except for Alex. Brown & Sons Incorporated, no
broker, finder, agent or similar intermediary
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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,
arrangement or understanding with Acquiror or Newco or any action taken by
Acquiror or Newco.
4.5 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.
4.6 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 5: APPROVAL OF STOCKHOLDERS
5.1 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.
5.2 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
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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 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 6: CERTAIN OBLIGATIONS OF GMC PENDING CLOSING
6.1 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
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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 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.
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(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.
6.2 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.
(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
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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.
6.3 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.
6.4 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.
6.5 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 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
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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).
6.6 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.
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6.7 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 material fact
required to be stated therein or necessary to make the statements therein not
misleading.
6.8 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).
6.9 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 7: CERTAIN OBLIGATIONS OF ACQUIROR PENDING CLOSING
7.1 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.
7.2 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).
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7.3 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.
7.4 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 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 8: 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.
8.1 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.
8.2 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.
8.3 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.
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8.4 Closing Documents. Acquiror and Newco shall have delivered all of
the documents provided for in Section 10.2.
8.5 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 9: 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.
9.1 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.
9.2 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.
9.3 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.
9.4 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.
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9.5 Closing Documents. GMC shall have delivered all of the documents
provided for in Section 10.1.
9.6 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.
9.7 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.
9.8 Hart-Scott-Rodino Waiting Periods. All applicable waiting periods
with respect to the Merger under the Hart-Scott- Rodino Act shall have expired.
9.9 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.
SECTION 10: CLOSING DELIVERIES
10.1 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.
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(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.
10.2 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.
SECTION 11: TERMINATION
11.1 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
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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.
11.2 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 not relieve any party
to this Agreement of liability for any default or breach of this Agreement.
SECTION 12: OTHER PROVISIONS
12.1 Confidentiality and Publicity. Acquiror and Newco shall hold in
confidence all confidential information concerning
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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.
12.2 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.
12.3 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
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(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. 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.
12.4 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.
12.5 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
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<PAGE>
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.
12.6 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.
12.7 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.
12.8 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.
12.9 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.
12.10 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.
12.11 References. All words used in this Agreement shall be construed
to be of such number and gender as the context requires or permits.
12.12 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.
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<PAGE>
12.13 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 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
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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.
12.14 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 R. Walker
--------------------------------
Michael R. Walker, Chairman of
the Board and Chief Executive
Officer
GERIATRIC & MEDICAL COMPANIES, INC.
By: /s/ Daniel Veloric
---------------------------------
Daniel Veloric, Chairman of
the Board and President
G ACQUISITION CORPORATION
By: /s/ Michael R. Walker
----------------------------------
Michael R. Walker, Chairman of
the Board and Chief Executive
Officer
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<PAGE>
SCHEDULES
The following Schedules have been omitted pursuant to Item 601(b)(2) of
Regulation S-K:
Schedule 1.24 - Executive Officers
Schedule 3.1 - Organization and Subsidiaries
Schedule 3.2 - Authorization of Agreement
Schedule 3.3 - Compliance with Law
Schedule 3.4 - Permits
Schedule 3.5 - GMC's Stock
Schedule 3.6 - GMC Financial Statements
Schedule 3.8 - Real Property
Schedule 3.9 - Obligations
Schedule 3.10 - Operations Since April 30, 1996
Schedule 3.11 - Contracts
Schedule 3.12 - Intangibles
Schedule 3.13 - Employee Benefit Plans
Schedule 3.14 - Labor Matters
Schedule 3.15 - Taxes
Schedule 3.16 - Proceedings and Judgements
Schedule 3.20 - Suppliers and Customers
Schedule 3.21 - Brokerage Fees
Schedule 3.23 - Third Party Payment Contracts
Schedule 3.25 - Criminal Proceedings
Schedule 3.26 - SEC Documents
The Registrant agrees to furnish supplementally a copy of any omitted
Schedule to the Commission upon request.
<PAGE>
STOCKHOLDER OPTION AND PROXY AGREEMENT
AGREEMENT, dated as of July 11, 1996, among G Acquisition Corporation,
a Delaware corporation (the "Purchaser"), Tomahawk Holdings, Inc., a Delaware
corporation ("Stockholder"), Tomahawk Capital Holdings, Inc., a Pennsylvania
corporation ("Capital"), Daniel Veloric ("Mr. Veloric") and Genesis Health
Ventures, Inc., a Pennsylvania Corporation ("Genesis"). Stockholder, Capital and
Mr. Veloric are referred to collectively hereinafter individually as an "Owner"
and collectively as "Owners".
WHEREAS, Genesis, the Purchaser and Geriatric & Medical Companies,
Inc., a Delaware corporation (the "Company") are entering into an Agreement and
Plan of Merger simultaneously herewith (the "Merger Agreement") pursuant to
which the Purchaser will merge with and into the Company (the "Merger"); and
WHEREAS, Stockholder is the owner of the number of shares of common
stock, par value $.10 per share ("Common Stock"), of the Company set forth on
the signature page hereof (the "Shares"); and
WHEREAS, Capital owns 100% of the outstanding capital stock of
Stockholder; and
WHEREAS, Mr. Veloric owns 100% of the outstanding capital stock of
Capital; and
WHEREAS, the Purchaser wishes to consummate the Merger pursuant to the
terms and conditions of the Merger Agreement; however, before executing the
Merger Agreement, Purchaser requires certain assurances and commitments from the
Owners as set forth herein; and
WHEREAS, in order to induce the Purchaser to enter into the Merger
Agreement, the Owners desire to give the Purchaser an option to purchase the
Shares, and further desire to make certain other agreements regarding voting and
sales of the Shares, all upon the terms and conditions set forth below;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Grant of Option. The Stockholder hereby grants to the Purchaser, an
exclusive and irrevocable option (the "Option") to purchase any or all of the
Shares at a price of $5.75 per Share, subject to adjustment as provided in
Section 4 hereof (the "Exercise Price").
2. Exercise of Option.
a. The Option, subject to the conditions set forth in Section
3 hereof, may be exercised by the Purchaser, in whole or in part, at any time or
from time to time on and after the date hereof and prior to the earlier of (i)
the day following the Effective Time (as defined in the Merger Agreement) or
(ii) (A) one year after the termination of the Merger Agreement, if the Merger
is not approved by a vote of more than 50% of the shares of the Company or if
the Agreement is terminated after the Company has willfully taken actions or
willfully failed to take actions which cause a default under the Agreement or a
condition to Purchaser's consummation of the Agreement not to be met; (B) six
months after termination of an unsuccessful proposed Third Party Acquisition if
the Agreement had been terminated under Section 11.1(e) or (f) of the Merger
Agreement as a result of a proposed Third Party Acquisition, (C) upon
termination of the Merger Agreement if the Merger Agreement is terminated by the
Company upon a default by Genesis and (D) three months after the termination of
the Agreement if the Agreement is terminated for any reason other than
2(a)(ii)(A), (B) or (C) above. The Owners will not, prior to the termination of
the Option, take, or refrain from taking, any action which would have the effect
of preventing or disabling the Stockholder from delivering the Shares to the
Purchaser upon exercise of the Option or otherwise performing their obligations
under this Agreement.
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<PAGE>
b. In the event the Purchaser elects to exercise the Option in
accordance with Section 2(a) hereof, the Purchaser shall send a written notice
to the Stockholder specifying the number of the Shares the Purchaser will
purchase and the place and date (not later than ten business days nor earlier
than one business day) from the date such notice is mailed but not earlier than
the expiration of any applicable waiting period under Title II of the Hart-Scott
Rodino Antitrust Improvements Act of 1976 ("Hart-Scott Act") for the closing of
such purchase.
c. The Owners agree to comply with the following procedures
for the simultaneous exercise of the Option by purchase and sale and delivery of
the Option Shares by the Owners, the provisions of subsection (b) above to the
contrary notwithstanding (provided that the applicable waiting period under the
Hart-Scott Act has expired at the time of such delivery). The Purchaser shall be
entitled to deliver to the Stockholder a non-binding notice of intention to
exercise the Option, specifying the time, date and place of Purchaser's intended
exercise and purchase, no later than 24 hours prior to such time and date. Upon
receipt of such notice, the Owners shall take all steps necessary to enable them
to, and shall, effect the sale and delivery of the Option Shares to the
Purchaser upon simultaneous exercise of the Option, as provided and subject to
the conditions in Section 3 below, at such place, on such date (which may be a
weekend or legal holiday), and at such time (which may be outside of business
hours, such as 12:02 a.m. on a given day). The Purchaser shall have no liability
to the Owners, and all of the terms and conditions of this Agreement shall
remain in effect, including this subsection (c), if the Option is in fact not
exercised in the manner contemplated by such non-binding notice of intention.
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<PAGE>
3. Payment and Delivery of Certificate(s). At any closing of a purchase
of any of the Shares hereunder, (a) the Purchaser will pay to the Stockholder
the Exercise Price for all of the Shares so purchased by certified check,
cashier's check or wire transfer and (b) the Stockholders will deliver or cause
to be delivered to the Purchaser a certificate or certificates representing (or
cause to be made book-entry delivery to an account designated by the Purchaser
of) the number of the Shares so purchased, duly endorsed or accompanied by stock
powers duly executed in blank in the case of certificates.
4. Adjustment in Exercise Price. In the event that at any time after
the date hereof and up to and including the Effective Time the highest price
paid by the Purchaser (or any subsidiary or affiliate of the Purchaser) for any
share of Company Common Stock exceeds the Exercise Price set forth in Section 1
hereof (as previously adjusted pursuant to this Section 4) then (a) the Exercise
Price shall thereupon be adjusted to the highest such price, and (b) as to
Shares as to which the Option has previously been exercised, the Purchaser or
Genesis shall promptly deliver to the Stockholder a certified check, cashier's
check or wire transfer in the amount of the product of (i) the amount of such
excess price per share, multiplied by (ii) the number of Shares as to which the
Option has previously been exercised; provided, however, that if shares of
Company Common Stock are purchased under any tender offer by Purchaser for
shares of the Company by Purchaser or other affiliate of Genesis (an "Offer"),
the Exercise Price shall in no event exceed the price paid in such Offer.
5. Additional Payment Under Certain Circumstances. If, after the
Purchaser has exercised the Option and prior to the consummation of the Merger,
the Purchaser directly or indirectly sells or otherwise disposes of any Shares
purchased pursuant to the Option (other than
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<PAGE>
in the Merger or to Genesis or any direct or indirect wholly owned subsidiary of
Genesis, which transferee agrees to be bound by this Agreement as if such
transferee were the "Purchaser" hereunder) then the Purchaser or Genesis shall
pay to the Stockholder, as promptly as practicable after such sale or other
disposition, the amount (the "Excess Amount") on a per share basis, if any, by
which the net proceeds received by the Purchaser upon the sale or other
disposition exceeds the aggregate price paid by the Purchaser to the Stockholder
upon exercise of the Option for the purchase of such Share. In the event that
the Purchaser receives securities or other property other than cash upon any
sale or disposition of a Share, the "price" of such Share which the Purchaser
will be deemed to have paid at the time the Purchaser purchased such Share for
purposes of calculating the Excess Amount, if any, shall be deemed to be the
amount of cash received upon the sale of such Share plus the fair market value
of such securities and other property at the time of receipt. For purposes of
the foregoing, (i) the fair market value of securities which are publicly traded
shall be deemed to be the closing price of such securities on the date of
receipt (or, if not a business day, on the next preceding business day) on the
New York Stock Exchange, if the securities are listed thereon, or, if not so
listed, on any other national securities exchange on which such securities are
listed and principally traded, or, if not listed on any national securities
exchange, the average of the closing bid and asked prices in the
over-the-counter market on the date of receipt (or, if not a business day, on
the next preceding business day) and; (ii) the fair market value of any other
property shall be as determined by a nationally recognized investment banking
firm (the fees of which will be borne equally by the Company and the Purchaser)
mutually selected by the parties or, if none can be so selected, then as
selected by the President of the New York Stock Exchange. If the Purchaser has
not (and is not deemed to
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<PAGE>
have) sold or disposed of all of the Shares which the Purchaser has acquired by
exercising the Option by April 1, 1997, then the Excess Amount shall be
determined solely with respect to each Share sold or disposed of (or deemed to
have been sold or disposed of) by such date and the provisions of this Section 5
shall thereupon terminate with respect to Shares not sold or disposed of (and
not so deemed to have been sold or disposed of) as of such date.
6. Certain Covenants of the Owners.
a. Until the expiration of the Option pursuant to Section 2
hereof, except as described in Section 8(d) hereof, the Owners will not sell,
transfer, pledge, hypothecate or otherwise dispose of any of the Shares (or any
interest therein), and will not enter into any contract, agreement, commitment
or arrangement with respect to any of the foregoing, without the prior written
consent of the Purchaser, other than to the Purchaser pursuant to any Offer or
upon the exercise of the Option by the Purchaser or consummation of the Merger,
and the Stockholder is expressly permitted to tender its shares to Purchaser or
Genesis pursuant to any Offer and to be paid in accordance with any such Offer.
b. The Owners hereby agree promptly to endorse the certificate
or certificates representing the Shares with a legend referring to this
Agreement (in a form satisfactory to the Purchaser) and, if requested by
Purchaser, to take such actions as to enable the Stockholder to deliver such
certificate or certificates to an escrowholder satisfactory to the Purchaser (or
promptly to make book-entry delivery of the Shares to an account acceptable to
the Purchaser) to be held in escrow pending delivery hereunder.
c. From and after the date of this Agreement and prior to the
earlier of the Effective Time and the termination of the Merger Agreement
according to its terms, the Owners
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<PAGE>
shall not (i) purchase, or enter into any contract to purchase, any shares of
Company Common Stock, (ii) tender any shares of Company Common Stock pursuant to
any tender offer or exchange offer other than any Offer, or (iii) grant any
person a proxy or other right to vote or direct the vote of any shares of
Company Common Stock, except in order to comply with paragraphs 6(d) and (f).
d. When the Merger Agreement is submitted to the stockholders
of the Company for approval, the Stockholder shall take all action necessary as
a stockholder to approve and implement the Merger Agreement. The Owners shall
not seek to assert any appraisal right.
e. From and after the date of this Agreement and prior to the
termination of the Merger Agreement according to its terms, other than with
respect to any Offer and the Merger, the Owners will not form or participate in
any Group (as that term is used in Rule 13(d)(3) of the Securities Exchange Act
of 1934, as amended) which intends to seek control of the Company or any
subsidiary thereof (other than a Group of which Genesis is a member). The Owners
will immediately notify the Purchaser (i) if any Owner receives any inquiries or
proposals relating to the formation of such a Group and (ii) if any information
is requested from, or any negotiations or discussions are sought to be initiated
with, the Company or the Owners with respect to the formation of such a Group.
f. The Owners hereby agree that, from and after the date
hereof and until the Expiration Date (as defined in Section 7), at any meeting
of the stockholders of the Company, however called, or in connection with any
written consent of the stockholders of the Company, and to the extent permitted
by applicable law, the Owners shall vote (or cause to be voted) or act by
written consent with respect to the Shares (a) in favor of adoption and approval
of the Merger
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<PAGE>
Agreement and the Merger and the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement; (b) 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 of the Owners contained in this Agreement; and (c)
against any action, agreement or transaction that is intended or could
reasonably be expected to facilitate a person other than the Purchaser or its
affiliate in acquiring control of the Company ("Competing Transaction") 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 impede, interfere or be inconsistent with, delay, postpone,
discourage or materially adversely affect the consummation of the Merger or the
performance by the parties hereto of their respective obligations under this
Agreement, including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or its subsidiaries; (ii) a sale, lease or transfer of a
material amount of assets of the Company and its subsidiaries or a
reorganization, recapitalization or liquidation of the Company or its
subsidiaries; (iii) a material change in the policies or management of the
Company, except as otherwise agreed to in writing by Purchaser; (iv) an election
of new members to the board of directors of the Company, except where the vote
is cast in favor of the nominees of a majority of the existing directors of the
Company; (v) any material change in the present capitalization or dividend
policy of the Company or any amendment of the Company's certificate of
incorporation or bylaws; or (vi) any other material change in the Company's
corporate structure or business. The Owners shall not enter into any agreement
or understanding with any person or entity prior to the Expiration Date to vote
any Company
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<PAGE>
Common Stock or give instructions in any manner inconsistent with clauses (a),
(b) or (c) of the preceding sentence.
g. The Stockholder hereby agrees, while this Agreement is in
effect, to promptly notify the Purchaser of the number of any additional shares
of Company Common Stock acquired by the Owners, if any, after the date hereof.
h. The Owners hereby agree, except with respect to Purchaser
and its affiliates, on or after the date hereof, that the Owners shall not
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to any matter described in Section 6 (a),
(c) or (e) hereof or any Competing Transaction, participate in any negotiations
concerning, or provide to any other person any information or data relating to
the Company or its subsidiaries for the purpose of, or have any substantive
discussions with any person relating to, or otherwise cooperate with or assist
or participate in, or facilitate, any inquiries or the making of any proposal
which constitutes, or would reasonably be expected to lead to, any effort to
attempt by any other person to seek to effect any matter described in Section
6(a), (c) or (e) hereof or any Competing Transaction, or agree to or endorse any
Competing Transaction; provided, however, that notwithstanding anything to the
contrary contained herein, at any time Mr. Veloric is a director of the Company,
Mr. Veloric, in his capacity as a director of the Company at such time, may take
such actions in respect of a Competing Transaction as the directors of the
Company are permitted to take by Section 6.5 of the Merger Agreement. The Owners
agree to immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any possible Competing Transactions or any matter described in Section 6 (a),
(c) or (e) hereof.
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<PAGE>
i. Mr. Veloric shall cause each of the Stockholder, and
Capital and each other corporation, partnership or other entity controlled by
Mr. Veloric which owns, directly or indirectly, an equity interest in the
Stockholder to comply with the obligations of the Owners hereunder. Mr. Veloric
hereby guarantees the performance by each other Owner of its obligations
hereunder.
7. Proxy. THE STOCKHOLDER HEREBY GRANTS TO A PERSON TO BE DESIGNATED BY
PURCHASER, AND ANY SUCCESSOR PERSON, THE STOCKHOLDER'S PROXY AND APPOINTS SUCH
PERSON AS ITS ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE OR ACT
BY WRITTEN CONSENT, TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, WITH RESPECT
TO THE SHARES IN ACCORDANCE WITH SECTION 6 HEREOF. THIS PROXY IS COUPLED WITH AN
INTEREST AND SHALL BE IRREVOCABLE, AND THE STOCKHOLDER WILL TAKE SUCH FURTHER
ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE
INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY IT WITH
RESPECT TO THE SHARES.
The proxy set forth in this Section 7 hereof shall terminate on the
Expiration Date. As used herein, the term "Expiration Date" means the earlier of
the (i) day following the Effective Time and (ii) the date which is one year
following the termination of the Merger Agreement in accordance with the terms
thereof or such shorter period as may be required by applicable law (unless
extended by the mutual written consent of the parties hereto).
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<PAGE>
8. Representations and Warranties.
The Owners represent and warrant to Purchaser that, subject to
Section 8(d) below:
a. The Stockholder is the sole owner of the Shares and has
full right, power and authority to sell and vote the Shares, to enter into and
perform this Agreement and to grant the Option granted herein. Capital owns 100%
of the outstanding voting stock of Stockholder. Mr. Veloric owns 100% of the
outstanding capital stock of Capital. The execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by Mr. Veloric and the board of directors of each of the
Stockholder and Capital and the Agreement is the valid and binding obligation of
each Owner, enforceable against such Owner in accordance with its terms;
b. Each of the Stockholder and Capital is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation;
c. None of the Owners owns any options, warrants or other
rights to acquire any shares of Company Common Stock except for the Shares;
d. The Stockholder does now, and at all times prior to the
expiration of the Option will, own the Shares free and clear of all liens,
claims, encumbrances security interests and rights or interests of others of any
kind other than the Purchaser, except for (i) security interests granted by the
Stockholder to Commerce Bank and Prudential Securities (collectively, the
"Current Lenders") in order to secure certain future obligations of the
Stockholder to the Current Lenders for borrowed money and (ii) future succeeding
security interests granted by Stockholder to future lenders (collectively, the
"Future Lenders") which replace the Current Lender's security interest in order
to secure obligations of the Stockholder to such Future Lenders provided that
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<PAGE>
Stockholder enters into an agreement prior to granting such security interest on
the following terms: The agreement will be reasonably satisfactory to Purchaser
and provide (i) that the Future Lenders authorize Purchaser to exercise its
Option hereunder by paying all or a portion of the Purchase Price to such Future
Lenders, (ii) that Purchaser shall otherwise enjoy the full benefits
contemplated hereunder and (iii) that Future Lenders will not interfere with
Purchaser's rights hereunder. Owners further agree that at no time may more than
two Current Lenders and Future Lenders in the aggregate have a security interest
in the Shares;
e. The Owners agree to use their best efforts to enter into an
agreement with Current Lenders whereby Current Lenders will authorize Purchaser
to exercise its Option and enjoy the full benefits contemplated hereunder and
agree to not interfere with Purchaser's rights hereunder. Owners further agree
that upon any exercise of the Option, Purchaser can pay all or a portion of the
Purchase Price to Current Lenders or any Future Lenders in order to obtain the
Shares free and clear of any lien of any Current Lender or Future Lender on such
Shares; and
f. Upon exercise of the Option granted herein, the Purchaser
will receive good and marketable title to the Shares, free of all liens, claims,
encumbrances, security interests and rights or interests of others of any kind.
9. Description of Shares. For all purposes of this Agreement, the
Shares shall mean the Shares as defined in Section 1 hereof, and all securities
or property (including cash) issued or exchanged with respect to such Shares
from and after the date of this Agreement in connection with any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, or other
distribution to stockholders of the Company or combination of the Company Common
Stock or any other
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<PAGE>
change in its capital structure. In the event of any such change, the Exercise
Price per Share shall be appropriately adjusted, so as to fairly and equitably
preserve, as far as practicable, the original rights of the Purchaser and
Stockholder hereunder.
10. Specific Performance. The Owners acknowledge that the Option
granted to the Purchaser herein, and all the agreements of the Owners contained
herein are unique and that the parties hereto will not have adequate remedies at
law if any of them fails to perform any of its obligations under this Agreement.
Accordingly, each party hereto agrees that each other party hereto shall have
the right, in addition to any other rights which it may have, to specific
performance and equitable injunctive relief, without the requirement for the
posting of a bond, if such party shall fail or threaten to fail to perform any
of its obligations under this Agreement.
11. Miscellaneous.
a. Assignability. The rights and obligations of the Purchaser
shall be assignable by the Purchaser to and only to any direct or indirect
wholly owned subsidiary of Genesis, if and only if such other party shall, by a
written instrument reasonably satisfactory to the Stockholder, agree to assume
all of the Purchaser's obligations hereunder and to be bound by all of the terms
and conditions of this Agreement. The obligations of the Owners shall not be
assignable without the prior written consent of the Purchaser, and any purported
assignment without such prior written consent shall be null and void.
b. Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any third
party any rights or remedies by virtue of this Agreement or any exercise or
non-exercise of the Option granted hereby.
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<PAGE>
c. Amendments. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
d. Notices. Except as otherwise expressly provided herein, all
notices, requests, claims, demands and other communications hereunder shall be
in writing and shall be furnished by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier services, such as
Federal Express), or by any courier service such as Federal Express providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Owners:
(i) Daniel J. Veloric
1000 Broadmoor Avenue
Bryn Mawr, PA 19010
Fax: (215) 748-8118
(ii) Tomahawk Capital Holdings, Inc.
Tomahawk Holdings, Inc.
1000 Broadmoor Avenue
Bryn Mawr, PA 19010
Fax: (215) 748-8118
Attn: Chairman and Chief Executive Officer
Attn: Law Department
With a copy to:
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103-7598
Fax: (215) 994-1111
Attn: Robert P. Krauss, Esquire
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<PAGE>
If to the Purchaser:
(i) G Acquisition Corporation
148 West State Street
Kennett Square, PA 19348
Fax: (610) 444-7483
Attn: Chairman and Chief Executive Officer
Attn: Law Department
With a copy to:
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Fax: (215) 569-5555
Attn: Stephen E. Luongo, Esquire
If to Genesis Health Ventures, Inc.:
148 West State Street
Kennett Square, PA 19348
Fax: (610) 444-7483
Attn: Chairman and Chief Executive Officer
Attn: Law Department
With a copy to:
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Fax: (215) 569-5555
Attn: Stephen E. Luongo, Esquire
The addresses set forth above may be changed by any party hereto upon furnishing
to the other parties hereto a notice of such change in accordance with the terms
of this paragraph.
e. Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive law of the Commonwealth of
Pennsylvania applicable to contracts made and to be performed in such
commonwealth.
f. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
g. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction thereof.
h. Time of the Essence. The parties hereto agree that time
shall be of the essence in the performance of all obligations hereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TOMAHAWK CAPITAL HOLDINGS, INC.
By: /s/ Daniel J. Veloric
----------------------------------
Name: Daniel J. Veloric
Title: Chief Executive Officer
TOMAHAWK HOLDINGS, INC.
By: /s/ Daniel J. Veloric
----------------------------------
Name: Daniel J. Veloric
Title: Chief Executive Officer
/s/ Daniel J. Veloric
----------------------------------
Daniel J. Veloric
Number of Shares: 3,748,178
G ACQUISITION CORPORATION.
By: /s/ Michael R. Walker
----------------------------------
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
----------------------------------
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer
