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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 26, 1996
GENESIS HEALTH VENTURES, INC.
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(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Pennsylvania 1-11666 06-1132947
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<S> <C> <C>
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
148 West State Street
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 2. Acquisition or Disposition of Assets.
On July 26, 1996, Genesis Health Ventures, Inc., a
Pennsylvania corporation ("Genesis"), pursuant to the terms of a certain
Purchase Agreement, dated May 3, 1996, as modified by a certain Purchase
Agreement Addendum, dated July 24, 1996, acquired the outstanding stock of
National Health Care Affiliates, Inc., Oak Hill Health Center, Inc., Derby
Nursing Center Corporation, EIDOS, Inc. and VersaLink, Inc. (collectively,
"National Health"), for a total consideration of approximately $68,700,000,
including assumed debt, subject to adjustment. Prior to the acquisition by
Genesis of the stock of National Health, an affiliate of a financial institution
purchased nine eldercare centers owned by National Health for $67.7 million and
subsequently leased the centers to a subsidiary of Genesis under the terms of
operating lease agreements. The cash portion of the purchase price
(approximately $51.8 million) was funded with available cash and the repayment
of assumed indebtedness (approximately $7.9 million) was financed by borrowings
under the Company's bank credit facilities.
As a result of the foregoing transactions, Genesis now owns or
leases and operates an additional 16 long-term care centers with 2,202 licensed
nursing and assisted living beds in Florida (10 centers), Virginia (5 centers)
and Connecticut (1 center) and manages four eldercare centers in Colorado with
283 beds pursuant to an agreement which expires in October 1997. In addition,
Genesis acquired businesses which provide enteral nutrition and rehabilitation
therapy services to the eldercare centers operated by National Health.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of businesses acquired.
The following Financial Statements are incorporated by
reference to the Form 8-K/A (Number 1) of Genesis for
May 3, 1996:
National Health Care Affiliates, Inc. and Related
Entities -- Audited Combined Financial Statements for
the Year-Ended December 31, 1995
Report of Independent Auditors
Combined Balance Sheet
Combined Statement of Earnings
Combined Statement of Owners' Equity
Combined Statement of Cash Flows
Notes to Combined Financial Statements
National Health Care Affiliates, Inc. and Related
Entities -- Unaudited Combined Financial Statements for
the Quarter ended March 31, 1996
Combined Balance Sheet
Combined Statement of Earnings
Combined Statement of Cash Flows
(b) Pro Forma Financial Information
It is impracticable to provide the required pro forma
financial information at the time this report is being filed.
The required pro forma financial information will be filed as
soon as practicable, but not later than 60 days after this
report is required to be filed.
(c) Exhibits.
Number Title
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1. Purchase Agreement, dated May 3, 1996, by and among Mark E.
Hamister, Oliver C. Hamister, George E. Hamister, Julia L.
Hamister, The George E. Hamister Trust, The Oliver C.
Hamister Trust, National Health Care Affiliates, Inc., Oak
Hill Health Care Center, Inc., Derby Nursing Center
Corporation, Delaware Avenue Partnership, EIDOS, Inc.,
VersaLink Inc., certain other individuals and Genesis Health
Ventures, Inc. (Incorporated by reference to Exhibit No. 1
filed with the Form 8-K of Genesis for May 3, 1996)
2. Purchase Agreement Addendum, dated July 24, 1996, by and
among Mark E. Hamister, Oliver C. Hamister, George E.
Hamister, Julia L. Hamister, The George E. Hamister Trust,
The Oliver C. Hamister Trust, National Health Care
Affiliates, Inc., Oak Hill Health Care Center, Inc., Derby
-1-
<PAGE>
Nursing Center Corporation, Delaware Avenue Partners, EIDOS,
Inc., VersaLink Inc., certain other individuals and Genesis
Health Ventures, Inc.
3. Press Release, dated July 26, 1996.
-2-
<PAGE>
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: August 12, 1996
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EXHIBIT 2
EXECUTION COPY
PURCHASE AGREEMENT ADDENDUM
THIS AGREEMENT (the "Agreement") is made on this 24th day of July, 1996, by
and among Mark E. Hamister, an individual residing at 9715 Rocky Point,
Clarence, New York, Oliver C. Hamister, an individual residing at 6430 Sun Eagle
Lane, Bradenton, Florida, George E. Hamister, an individual residing at 112 The
Waterways, 9604 Cortez Road, Bradenton, Florida, Julia L. Hamister, an
individual residing at 6430 Sun Eagle Lane, Bradenton, Florida, The George E.
Hamister Trust, an irrevocable trust established under the terms of a trust
agreement dated December 31, 1991, and The Oliver C. Hamister Trust, an
irrevocable trust established under the terms of an agreement dated December 31,
1991 (collectively, the "Hamisters"), National Health Care Affiliates, Inc., a
Florida corporation with an office at 651 Delaware Avenue, Buffalo, New York
("NHCA"), Oak Hill Health Care Center, Inc., a Virginia corporation with an
office at 651 Delaware Avenue, Buffalo, New York ("Oak Hill"), Derby Nursing
Center Corporation, a Connecticut corporation with an office at 651 Delaware
Avenue, Buffalo, New York ("Derby Nursing Center"), Delaware Avenue Partners, a
New York General Partnership with an office at 651 Delaware Avenue, Buffalo, New
York ("DAP"), EIDOS, Inc., a Florida corporation with an office at 222 S.
Westmonte Drive, #200, Altamonte Springs, Florida ("EIDOS"), VersaLink, Inc., a
Delaware corporation with an office at 651 Delaware Avenue, Buffalo, New York
("VersaLink"), each of the individuals identified in Exhibit "A" attached
hereto (each of such individuals being hereinafter sometimes referred to
individually as a "Minority Shareholder" and collectively as the "Minority
Shareholders") and Sal H. Alfiero and Gerald S. Lippes (Mr. Alfiero and Mr.
Lippes being hereinafter individually referred to as an "Optionee" and
collectively referred to as the "Optionees") and Genesis Health Ventures, Inc.,
a Pennsylvania corporation with an office at 148 West State Street, Kennett
Square, Pennsylvania (the "Buyer").
RECITALS:
On May 3, 1996, the above referenced parties (other than the Estate of
George Hart, which is a party to this Agreement as a result of Mr. Hart's death
on May 18, 1996) entered into a purchase agreement (the "Purchase Agreement")
providing, among other things, for the purchase by the Buyer of all the issued
and outstanding common stock of NHCA, Oak Hill, Derby Nursing Center, EIDOS and
VersaLink and further providing for the purchase by the Buyer of all the issued
and outstanding partnership interests of DAP.
Section 14.9 of the Purchase Agreement permits the Buyer, at its option, to
restructure the form of transaction contemplated by the Purchase Agreement to,
among other things, include a transaction whereby some or all of the assets of
the Skilled Nursing Facilities Business are purchased by the Buyer or a nominee
of the Buyer. Buyer has determined to exercise such option and desires that
certain parcels of real property (each a "Land Interest") and certain facilities
currently located thereon (each a "Facility") (each such Land Interest, together
with such Facility, are referred to individually as a "Site" and collectively as
the "Sites" and are identified on Exhibit "B" attached hereto) will be
transferred to Mellon, Financial Services Corporation #4 ("Mellon Leasing")
prior to consummation of the transactions contemplated by the Purchase
Agreement.
<PAGE>
The Purchase Agreement contemplates that all the outstanding partnership
interests of DAP could be sold, other than to the Buyer or an affiliate of the
Buyer, prior to the sale of the Skilled Nursing Facilities Business. American
Housing Foundation I, Inc. ("AHF") has expressed an interest in purchasing the
outstanding partnership interests in DAP pursuant to a transaction which will be
structured as described in a letter agreement dated June 5, 1996 and made by and
between AHF, the Buyer and NHCA, a copy of which is attached hereto as Exhibit
"C" (such letter agreement being hereinafter referred to as the "AHF Letter of
Intent"). However, Mark E. Hamister, George E. Hamister and Oliver C. Hamister
(hereinafter collectively referred to as the "DAP Partners") and the Buyer
acknowledge that, as of the Closing Date, the sale of the partnership interests
in DAP as provided for by the AHF Letter of Intent will not have occurred.
The Purchase Agreement inadvertently identifies the New York General
Partnership known as "Delaware Avenue Partners" as "Delaware Avenue
Partnership". In addition, the Purchase Agreement inadvertently indicates that
Oak Hill, a Virginia corporation, is a Florida corporation.
The Hamisters, NHCA, Oak Hill, Derby Nursing Center, DAP, EIDOS, VersaLink,
the Minority Shareholders, the Optionees and Buyer (sometimes hereinafter
collectively referred to as the "Parties") desire to set forth in writing
certain modifications to the structure of the transaction contemplated by the
Purchase Agreement and to make certain other miscellaneous changes to the terms
of the Purchase Agreement, all as permitted by Sections 14.5 and 14.9 of the
Purchase Agreement.
CONSIDERATION:
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements hereinafter set forth, the Parties hereby agree as follows:
1. Except as expressly set forth in this Agreement, capitalized terms
used in this Agreement shall have the meaning ascribed to them in the
Purchase Agreement.
2. Each Reference to "Delaware Avenue Partnership" and "DAP" contained
in the Purchase Agreement and any other document to be executed and
delivered by the Parties in connection with the consummation of the
transactions contemplated by the Purchase Agreement shall be deemed and
construed to mean Delaware Avenue Partners, a New York General Partnership
with an office at 651 Delaware Avenue, Buffalo, New York. Each reference to
"Oak Hill Health Care Center, Inc." and "Oak Hill" contained in the Purchase
Agreement and any other document to be executed and delivered by the Parties
in connection with the consummation of the transactions contemplated by the
Purchase Agreement shall be deemed and construed to mean Oak Hill Health
Care Center, Inc., a Virginia corporation with an office at 651 Delaware
Avenue, Buffalo, New York. Any references to the Purchase Agreement in any
other documents to be executed and delivered by and between the Parties (or
any of them) hereto in connection with the consummation of the transactions
contemplated by the Purchase Agreement shall be deemed and construed to mean
the Purchase Agreement as supplemented, modified and amended by this
Agreement.
3. Notwithstanding anything to the contrary contained in the Purchase
Agreement, the Base Price (subject to such adjustments as may be required by
the Purchase Agreement, as supplemented and modified by this Agreement)
shall equal One Hundred Thirty Four Million, Four Hundred Eighty Thousand
Dollars ($134,480,000).
<PAGE>
4. Notwithstanding anything to the contrary contained in the Purchase
Agreement, prior to consummation of the transactions contemplated by the
Purchase Agreement, the Hamisters shall cause the Sites to be sold,
transferred, conveyed and assigned to Mellon Leasing for a total purchase
price to be paid by Mellon Leasing to NHCA of $67,700,000 (hereinafter the
"Mellon Leasing Payment"). All instruments necessary to effectuate the
transfer of the Sites shall be reasonably acceptable to Mellon Leasing and
the Buyer. The sale, transfer and conveyance of the Sites to Mellon Leasing
shall not limit or affect in any way the representations and warranties of
the Hamisters under the Purchase Agreement or the Buyer's rights to
indemnification thereunder.
5. The Parties acknowledge that the Purchase Agreement provides that,
since the Closing of the sale of the stock of NHCA, Oak Hill, Derby Nursing
Center, EIDOS and Versalink will not occur prior to July 24, 1996, the
Hamisters are required to deliver a June 30, 1996 balance sheet of the
Skilled Nursing Facilities Business to the Buyer at least five (5) days
prior to the Closing. The Parties wish to close the transactions
contemplated by the Purchase Agreement (as modified by this Agreement) prior
to the delivery by the Hamisters of the June 30, 1996 balance sheet of the
Skilled Nursing Facilities Business. However, the Parties wish to provide
that the Final Purchase Price will be based on a June 30, 1996 balance sheet
of the Skilled Nursing Facilities Business. In order to accomplish this
result, the Parties are willing to close the transactions contemplated by
the Purchase Agreement (as modified by this Agreement) using the May 31,
1996 balance sheet of the Skilled Nursing Facilities Business as the balance
sheet which will be used for determining the amount of the closing
adjustment pursuant to Section 2.04 of the Purchase Agreement and to
determine the amount of the Final Purchase Price by using the June 30, 1996
balance sheet of the Skilled Nursing Facilities Business as the balance
sheet which will be used for determining the Post-Closing Working Capital
Adjustment and the Post Closing Net Worth Adjustment. Accordingly, the
Parties hereby agree that, notwithstanding anything to the contrary
contained in the Purchase Agreement, the Purchase Agreement shall be deemed
and construed to be modified and amended to the extent necessary to provide
that:
(a) for purposes of determining the amount payable by the Buyer at
the Closing (but not for purposes of determining the amount of the
Final Purchase Price), the Closing Balance Sheet shall be deemed to be
the unaudited May 31, 1996 balance sheet of the Skilled Nursing
Facilities Business which has previously been delivered to Buyer;
(b) on or before August 15, 1996, the Hamisters shall deliver to
Buyer, an unaudited combined (after elimination of intercompany
transactions) balance sheet of the Skilled Nursing Facilities Business
as of June 30, 1996 (the "June 30 Balance Sheet") together with the
related statement of income for the Skilled Nursing Facilities Business
for the year-to-date period ended on June 30, 1996;
(c) the June 30 Balance Sheet and related statement of income shall
be prepared in accordance with the same principles set forth in Section
2.03 of the Purchase Agreement for calculation of the Closing Balance
Sheet except that any assets, liabilities, income or expenses reflected
in the June 30 Balance Sheet and related statement of income shall be
determined as of June 30, 1996;
(d) for purposes of determining the amount of the Final Purchase
Price, the Buyer shall notify the Hamisters in writing of any dispute
it may have with respect to the accuracy of the June 30 Balance Sheet
no later than September 29, 1996 and, if Buyer disputes the accuracy of
the June 30 Balance Sheet, such written notice shall specify the nature
of the dispute in reasonable detail;
<PAGE>
(e) if Buyer does not deliver written notice to the Hamisters of
any dispute it may have with respect to the accuracy of the June 30
Balance Sheet by September 29, 1996, the Buyer shall be deemed to have
accepted the accuracy of the June 30 Balance Sheet;
(f) if the Buyer disputes the accuracy of the June 30 Balance Sheet
and delivers written notice of such dispute to the Hamisters on or
before September 29, 1996, the procedures (including applicable time
periods) for determining the amounts to be reflected in the June 30
Balance Sheet shall be the same as the procedures contained in Section
2.05 of the Purchase Agreement for determining the amount of the
Closing Balance Sheet; and
(g) after the June 30 Balance Sheet has been finalized, whether by
the Buyer's Agreement to the entries contained in the June 30 Balance
Sheet prepared and delivered by the Hamisters, as a result of a
resolution of a dispute concerning the June 30 Balance Sheet which is
mutually agreeable to the Buyer and Mark E. Hamister or as a result of
a decision of the Arbitrator, the June 30 Balance Sheet, as so
finalized, shall be deemed to be the "Final Balance Sheet" for purposes
of the Agreement.
6. The Parties agree that, notwithstanding anything to the contrary
contained in the Purchase Agreement, for purposes of Section 2.02(a) of the
Purchase Agreement the amount of the Closing Payment shall be deemed and
construed to mean an amount equal to the Base Price, decreased by the
Discharged and Assumed Debt, decreased by the amount of the Mellon Leasing
Payment and increased or decreased, as the case may be (as provided in
Section 2.04), by the amount of the Closing Adjustments. Notwithstanding the
foregoing or anything to the contrary contained in the Agreement, for
purposes of Section 2.02(b) the Closing Payment shall be deemed and
construed to include the amount of the Mellon Leasing Payment.
7. The Parties agree that notwithstanding anything to the contrary
contained in the Purchase Agreement, the obligation of the Hamisters to fund
up to $750,000 in purchase price adjustments payable to Buyer pursuant to
Section 2.02(b) of the Purchase Agreement (as modified by this Agreement)
shall be deemed to be a joint obligation of the Owners and the Optionees up
to an amount equal to $750,000 together with any interest thereon. However,
notwithstanding the foregoing, the Parties further agree that to the extent
that the amount of any payment which Buyer is entitled to pursuant to
Section 2.02 of the Purchase Agreement (as modified by this Agreement)
exceeds $750,000, the obligation to pay to the Buyer the amount by which any
such payment exceeds $750,000 (excluding any interest thereon) shall not be
an obligation of the Minority Shareholders or the Optionees and shall be
solely and exclusively an obligation of the Hamisters.
<PAGE>
8. The Parties acknowledge that the Minority Shareholders and the
Optionees have also agreed to have a portion of the amount which they would
otherwise be entitled to receive in connection with the consummation of the
transactions contemplated by the Purchase Agreement (as modified by this
Agreement) paid to the Escrow Account. Accordingly, the Parties acknowledge
that, in addition to serving as security for the indemnification and other
obligations of the Hamisters contained in the Purchase Agreement (as
modified by this Agreement), the funds deposited in the Escrow Account shall
also serve as security for the indemnification and other obligations of the
Minority Shareholders and the Optionees contained in the Purchase Agreement
(as modified by this Agreement). In this regard, the Parties (including,
specifically, the Minority Shareholders and the Optionees) hereby agree that
the Purchase Agreement shall be deemed and construed to be modified and
amended to the extent necessary to provide that the Minority Shareholders
and the Optionees shall be liable for all the indemnification and other
obligations of the Hamisters provided for in the Purchase Agreement (as
modified by this Agreement), subject to all the limitations on such
liabilities provided for by the Purchase Agreement (as modified by this
Agreement) including, without limitation, those limitations which provide
(under certain circumstances) that the liability of any particular
indemnifying party is a several liability (as opposed to a joint and several
liability) and is limited to the percentage of indemnifiable damages set
forth for any such indemnifying party in the supplement to Schedule 13.01(b)
and limitations on the obligation of an indemnifying party (or the
indemnifying parties) to indemnify Buyer and the Buyer Group in the event
that the amount of Damages suffered as a result of certain specifically
identified claims, individually or in the aggregate, do not exceed a certain
indemnification threshold. In addition to the foregoing, the Parties hereby
agree that the indemnification and other obligations of each Minority
Shareholder and each Optionee as contained in this Section 8 are and shall
be deemed and construed to be limited, in all cases, to an amount equal to
the amount, if any, which is held in the Escrow Account for any such
Minority Shareholder or optionee.
9. The Parties hereby agree that notwithstanding anything to the
contrary contained in the Purchase Agreement:
(a) the DAP partnership interests shall not be sold to the Buyer on
the Closing Date and the Buyer and each of the DAP Partners shall use
their best efforts to cause the sale of the DAP partnership interests
(or substantially all of the assets of DAP) to AHF and the other
transactions described in the AHF Letter of Intent to be consummated as
soon as possible following the date hereof;
(b) on or prior to the Closing Date, NHCA shall assign to Gradior
Health Services Corporation, a Florida corporation which is a successor
in interest to the home health care businesses of NHCA (hereinafter
"Gradior") all of the rights of NHCA arising under the terms of the
existing management agreement for the Kensington Gardens facility
between DAP and NHCA, as amended through the date hereof (the
"Management Agreement");
(c) during the period between the date hereof and the date the DAP
partnership interests (or substantially all the assets of DAP) are
sold, the ownership of DAP by the DAP Partners and the management of
the Kensington Garden facility by Gradior shall not be deemed or
construed to violate or otherwise conflict with the provisions of the
Purchase Agreement which restrict the rights of the Hamisters and the
Hamister Affiliates to engage in a competitive business;
<PAGE>
(d) during the period between the date hereof and the date the DAP
partnership interests (or substantially all the assets are sold), the
Hamisters shall use their reasonable best efforts to improve the
standing of the Kensington Gardens facility with respect to the rules
and regulations of the Virginia Department of Social Services for adult
care facilities and, in this regard, Buyer shall cooperate with the DAP
Partners and shall make available to the DAP Partners for reasonable
periods of time, appropriate personnel who are knowledgeable with
respect to the operations of the Kensington Gardens facility,
including, but not limited to Tod Mahoney and Dianne Farthing (as long
as such individuals are employees of Buyer or its affiliates), in order
to enable the DAP Partners to develop and implement plans and programs
which will increase the likelihood that the adult care facility license
currently held by DAP will be continued;
(e) since the Partnership interests (and substantially all the
assets of DAP) will not have been purchased by the Buyer at the
Closing, for purposes of calculating the amount which is payable by the
Buyer in connection with the closing of the transactions contemplated
by the Purchase Agreement: (i) the amount of the Discharged and Assumed
Debt described in Schedule 2.01 attached to the Purchase Agreement
shall be calculated without giving effect to the indebtedness of DAP to
Huntoon Hastings Capital Corp.; and (ii) the Base Price shall be
reduced by the dollar amount set forth in Section 2.08 of the Purchase
Agreement;
(f) in the event that the issued and outstanding partnership
interests of DAP (or substantially all of the assets of DAP) have not
been sold by the DAP Partners on or before December 31, 1996 as
contemplated by Section 2.08 of the Purchase Agreement, the Buyer shall
be obligated to purchase all the issued and outstanding partnership
interests of DAP (and in connection therewith, to assume all
liabilities and obligations of DAP, including, without limitation, all
liabilities arising under the terms of the indebtedness of DAP which is
payable to Huntoon Hastings Capital Corp.) subject only to: (i) the
receipt by the Buyer of written notice from the DAP Partners of their
intent to sell the DAP partnership interests to the Buyer; (ii) the
consent of the U.S. Department of Housing and Urban Development to the
purchase by the Buyer of the outstanding partnership interests of DAP;
(iii) the correction or remediation of the environmental problems which
currently exist at the Kensington Gardens facility as more particularly
identified in a letter, dated July 3, 1996, by Kenneth N. Klass, Esq.
to Ira Gubernick, Esq. (a copy of which is attached hereto as Exhibit
"D"); (iv) the payment by the DAP Partners to the Buyer by wire
transfer of immediately available funds in an amount equal to
$1,000,000 minus the difference between $9,368,011 and the outstanding
principal amount of the indebtedness of DAP to Huntoon Hastings Capital
Corp. on the date that the DAP partnership interests are transferred to
the Buyer; (v) all representations and warranties of the Hamisters set
forth in the Purchase Agreement which are given with respect to DAP or
which apply to DAP shall be true and correct in all material respects
as of the date the partnership interests of DAP are transferred to the
Buyer; (vi) all covenants of the Hamisters and the Buyer set forth in
the Purchase Agreement which relate to or could apply to DAP shall have
been performed and complied with by the Hamisters and the Buyer, as the
case may be, on or prior to the date the partnership interests of DAP
are transferred to the Buyer; and (vii) all conditions precedent to the
obligations of Buyer and the Owners set forth in the Purchase Agreement
which relate to or could apply in the case of a sale of the partnership
interests of DAP (or substantially all the assets of DAP) to the Buyer,
shall have been satisfied on or before the date the partnership
interests of DAP are transferred to the Buyer; and
<PAGE>
(g) in the event that the DAP Partners are able to sell the
Kensington Gardens facility to AHF or its assignee, the Buyer shall be
obligated to assume the obligations of Gradior under the Management
Agreement with DAP upon written direction from the DAP Partners,
subject only to the satisfaction of the conditions set forth in Section
9(d) and (f) hereof.
In the event that the DAP Partners deliver written notice of their
intent to sell the DAP partnership interests to the Buyer as provided by
subparagraph 9(f)(i) above, or in the event the DAP Partners elect to assign
their rights to manage Kensington Gardens to DAP as contemplated by
subparagraph 9(g) above, Buyer agrees to promptly cooperate with all
reasonable requests of the DAP Partners relating to the effectuation of the
sale of the DAP partnership interests to the Buyer (or the assumption of
rights and obligations of NHCA under the management agreement) and the
obtaining of the consent of the U.S. Department of Housing and Urban
Development to such sale. In the event that the conditions to the Buyer's
obligation to purchase the partnership interests of DAP have not been
satisfied on or before June 30, 1997 the Buyer shall have no further
obligation to purchase the partnership interests of DAP (or substantially
all the assets of DAP) as provided for above.
Notwithstanding anything to the contrary contained above in this
Section 9, if the DAP Partners elect to transfer their partnership interests
to the Buyer and the Buyer does not, for any reason other than the DAP
Partner's inability to deliver good and marketable title to the DAP
partnership interests (or the DAP assets) or a bad faith failure of the DAP
Partners to comply with their covenants set forth above, consummate the
purchase of such DAP Partnership interests by June 30, 1997, Buyer shall
promptly pay to the DAP Partners, in cash or immediately available funds, an
amount equal to $734,000. Upon receipt by the DAP Partners of such sum,
Buyer's obligation to purchase the partnership interests or manage
Kensington Gardens shall terminate. If Buyer purchases the DAP partnership
interests, Gradior shall assign all of its rights under the Management
Agreement to Buyer. If Buyer fails to assume the obligations of Gradior
under the Management Agreement pursuant to subsection (g) above, upon the
later of the closing of the sale of the DAP partnership interests (or
substantially all the assets of DAP) and thirty (30) days following receipt
by Buyer of written notice of the intention of the DAP Partners to make such
sale ("Assumption Date"), the Buyer shall, no later than ten (10) days
following the Assumption Date, pay to the DAP Partners, in cash or
immediately available funds, an amount equal to $734,000. Upon receipt by
the DAP Partners of such sum, Buyer's obligation to purchase the DAP
partnership interests or manage Kensington Gardens shall terminate.
10. The Parties acknowledge that, as listed in Schedule 4.17 to the
Purchase Agreement, the consent of Health Care Property Investors, Inc.
("HCPI") is required to be obtained in connection with the consummation of
the transactions contemplated by the Purchase Agreement. The Parties further
acknowledge that HCPI has agreed to consent to the transactions contemplated
by the Purchase Agreement upon the payment to HCPI, at the Closing, of an
amount equal to $4.15 million. In order to provide for the payment of these
funds, the Parties hereby agree that the Purchase Agreement shall be deemed
and construed to be modified and amended to the extent necessary to treat
the amount payable to HCPI as additional indebtedness of NHCA to be
discharged at the Closing with the same effect as though such amount was
included in Schedule 2.01 as discharged debt. Such amount shall be paid by
Buyer to HCPI by wire transfer at Closing of immediately available funds.
<PAGE>
11. The Purchase Agreement contemplates that, following the Closing
Date, NHCA will continue to maintain and provide to employees of the Skilled
Nursing Facilities Business, the opportunity to participate in the employee
pension plans that, as of the date of execution of the Purchase Agreement,
were made available to employees of the Skilled Nursing Facilities Business.
The Parties wish to modify the Purchase Agreement with respect to the
obligations of the Buyer and NHCA relating to employee pension plans
maintained for employees of the Skilled Nursing Facilities Business.
Accordingly, the Parties hereby agree that the Purchase Agreement shall be
deemed and construed to be modified and amended to the extent necessary to
provide that:
(a) on or before the Closing Date, NHCA shall except as
contemplated by subparagraph 11(e) below, assign to Gradior Health
Services Corporation, a Florida corporation which Mark E. Hamister has
caused to be formed in order to carry on the operations of the Retained
Businesses after the Closing Date (such corporation being hereinafter
referred to as "Gradior"), all the rights of NHCA as plan sponsor of
the 401(k) retirement plan known as the NHCA Employee's Retirement Plan
(hereinafter the "Plan"), including, without limitation, all rights to
amend the Plan, all rights to appoint and remove a plan administrator
and all rights to appoint and remove the trustee of the assets held
pursuant to the terms of the Plan;
(b) on or before the Closing Date, Mark E. Hamister, George E.
Hamister, Gerald S. Lippes, Sal H. Alfiero, and Jack Turesky,
constituting all the members of the Board of Directors of Gradior
(hereinafter the "Gradior Directors"), shall take such action as may be
necessary to cause Gradior to assume all obligations of NHCA as plan
sponsor of the Plan;
(c) the Gradior Directors shall take such action as may be
reasonably necessary to cause the Plan to pay benefits to participants
in the Plan as and when the same shall be due under the current terms
and conditions of the Plan;
(d) the Gradior Directors shall take such action as may be
reasonably necessary to cause Gradior and the Plan to permit employees
of each of NHCA, Oak Hill, Derby Nursing Center, EIDOS and VersaLink
(such companies being hereinafter referred to collectively as the
"Acquired Companies") to continue to actively participate in the Plan
after the Closing Date until December 31, 1996, at which time, the
right of employees of the Acquired Companies to actively participate in
the Plan shall be terminated;
(e) each of the Acquired Companies hereby acknowledge and agree
that they shall be deemed to be contributing sponsors to the Plan
during the period from the Closing Date through and including December
31, 1996;
(f) each of the Acquired Companies hereby agrees to remit all
employee deferrals to the Plan for deposit into the trust maintained in
connection with the Plan promptly, but in no event later than the time
provided by applicable rules and regulations of the Code, ERISA, the
Internal Revenue Service, and the U.S. Department of Labor relating to
the time for depositing of employees 401(k) deferrals;
<PAGE>
(g) each of the Acquired Companies hereby agrees to remit to the
Plan all employer matching contributions required to be made with
respect to employee deferrals made by the employees of each such
Acquired Company, promptly following the end of the calendar month in
which the employee deferrals giving rise to such employer matching
contributions were made but in no event later than the time provided by
the applicable rules and regulations of the Code, ERISA, the Internal
Revenue Service and the U.S. Department of Labor relating to the time
for depositing of employer matching contributions in the trust
maintained pursuant to the Plan;
(h) each of the Acquired Companies hereby agrees to provide Gradior
with such information as may reasonably be requested by Gradior in
connection with its administration of the Plan for the benefit of the
employees of the Acquired Companies;
(i) each of the Acquired Companies hereby agrees to indemnify and
hold Gradior and each of its officers, directors, agents and employees
harmless from and against any loss, cost or damage arising as a result
of the failure of any of the Acquired Companies to promptly remit any
employee deferrals or employer matching contributions to Gradior for
deposit pursuant to the terms of the Plan or as a result of any
incorrect information supplied to Gradior in connection with its
administration of the Plan;
(j) the Gradior Directors agree to take such action as may
reasonably be necessary to: (i) cause the Buyer to be provided, as soon
as possible after December 31, 1996 and in a form which is reasonably
acceptable to Buyer: (A) a statement of the aggregate value determined
as of December 31, 1996, of the accounts of all employees of the
Acquired Companies that are participants in the Plan; and (B) a
statement of the value, as of December 31, 1996, of each individual
account of each participant in the Plan that is an employee of the
Acquired Companies; and (ii) cause the Buyer to be provided with a list
of the name and social security number of each participant in the Plan
that is an employee of the Acquired Companies determined as of December
31, 1996;
(k) the Gradior Directors agree to take such action as may be
reasonably necessary to cause the Plan to transfer the assets of the
Plan which are attributable to participants in the Plan that are
employees of the Acquired Companies, in cash or by wire transfer of
immediately available funds, to a trust established under the terms of
a tax qualified retirement plan maintained by the Buyer (or an
affiliate of the Buyer) as soon as practicable following December 31,
1996 using a date for the valuation of accounts of participants that
are employees of the Acquired Companies which is made not more than 30
days prior to the date on which such assets are transferred; and
(1) the Gradior Directors agree to take such action as may
reasonably be necessary to cause Gradior to cooperate with each of the
Acquired Companies and each of the Acquired Companies agree to
cooperate with Gradior in connection with: (i) the maintenance of the
Plan by Gradior between the Closing Date and December 31, 1996; and
(ii) the transfer of the assets of the Plan attributable to employees
of the Acquired Companies to the trust maintained by the Buyer (or an
affiliate of the Buyer) pursuant to the terms of a tax qualified
retirement plan maintained by the Buyer (or an affiliate of the Buyer),
all as contemplated by this Section 6.
<PAGE>
12. The Parties acknowledge that, in connection with the transactions
contemplated by the Purchase Agreement, the State of Connecticut has
performed a "Change - of - Ownership" Inspection of the Derby Nursing Center
facility located at 210 Chatfield Street, Derby, Connecticut (hereinafter
the "Derby Facility") and issued a written report, (a copy of which is
attached hereto as Exhibit "E") with respect to matters requiring
correction, clarification or additional information by letter addressed to
Martha E. Meng and dated June 28, 1996 (such report being hereinafter
referred to as the "Inspection Report"). In response to the Inspection
Report, the Buyer has prepared or will prepare a Plan of Correction which
addresses the concerns and requirements of the State of Connecticut
Department of Public Health for the license to be issued to the Buyer or its
assignee. In consideration of the reduction of the Base Price by $100,000
(as reflected in Section 3 above), the Parties agree that the Purchase
Agreement shall be deemed and construed to be modified and amended to the
extent necessary to provide that the costs of performing the repairs,
maintenance and other items identified in the Buyer's Plan of Correction
shall be the sole responsibility of the Buyer. The Parties hereby further
agree that the Purchase Agreement shall be deemed and construed to be
modified and amended to the extent necessary to provide that the fact that
the State of Connecticut Department of Public Health has required certain
repairs, maintenance and other items to be performed at the Derby Facility,
the existence of the conditions identified in the Inspection Report and the
costs incurred by the Buyer to secure a license from the State of
Connecticut Department of Public Health for the Derby Facility shall not be
deemed or construed as a breach of any representation or warranty made by
the Hamisters in the Purchase Agreement, shall not be deemed or construed to
constitute Damages within the meaning of the Purchase Agreement and shall
not be deemed or construed to create or give rise to any cause of action for
indemnification of Damages as provided for by the Purchase Agreement.
13. The Parties acknowledge that NHCA and Oak Hill intend to pay a
bonus to Mark E. Hamister in an aggregate amount equal to $5.4 million from
the proceeds of the sale of the Sites to Mellon Leasing. In addition, the
Parties acknowledge that a portion of the proceeds of the sale of the Sites
to Mellon Leasing will be used to pay certain "stay bonuses" and certain
performance bonuses to the individuals identified in Exhibit "F" attached
hereto in amounts to be determined at the discretion of Mark E. Hamister.
The Parties hereby further acknowledge that, following the payment of the
bonuses described above in this Section 13, NHCA intends to distribute the
balance of the Mellon Leasing Payment to the shareholders of NHCA as a
distribution of sales proceeds reflecting the fact that NHCA is a Subchapter
S Corporation. The Parties hereby agree that, notwithstanding anything to
the contrary contained in the Purchase Agreement, the payment of the bonuses
described in the preceding provisions of this Section 13 and the
distribution of the remaining proceeds from the sale of the Sites to the
shareholders of Oak Hill and NHCA described above in the preceding
provisions of this Section 13 shall not be deemed or construed to violate
any covenant, representation, warranty or other term or condition contained
in the Purchase Agreement.
<PAGE>
14. Section 12.4 of the Purchase Agreement is hereby amended by adding
at the end thereof new subsections (g), (h) and (i) to read as follows:
"(g) the failure of the Virginia Department of Environmental Quality to
issue No Further Action Letters in forms reasonably acceptable to the
Buyer with respect to contamination at the Williamsburg, Virginia and
Staunton, Virginia facilities, identified in the June 17, 1996 and June
27, 1996 letter reports prepared by Ray F. Weston, Inc., without
requiring any further analysis, investigation, remediation or other
work whatsoever prior to the issuance of such letters; (h) any costs
which are incurred by Buyer to remove the asbestos containing
fireproofing materials located underneath the stairwells at the Windham
facility; or (i) any claims made by unrelated third parties or
governmental authorities against NHCA arising as a result of its
management of the Kensington Gardens facility of DAP prior to the
Closing Date."
15. Section 13.1 (a) of the Purchase Agreement is hereby amended to
read in its entirety as follows:
"13.1 Limitation on the Hamisters' Indemnity and Adjustment
Obligations. (a) The obligation of the Hamisters to indemnify and hold
Buyer harmless from and against any Damages incurred as a result of
Claims described in subclauses (a), (c), (d), (e), (g), (h) and (i) of
Section 12.4 shall apply with respect to the full amount of any and all
Damages incurred by Buyer and the Buyer Group as a result of such
Claims."
16. The Parties agree that, notwithstanding anything to the contrary
contained in the Purchase Agreement, the costs of removal of the asbestos
containing fireproofing at the Windham facility shall be paid by the Owners
and the Optionees. In addition, notwithstanding anything to the contrary
contained in the Purchase Agreement, the Parties hereby agree that the
Purchase Agreement shall be deemed and construed to be modified and amended
to the extent necessary to provide that, following the Closing, the Buyer
shall promptly following receipt by the Buyer of an itemized statement of
such charges, reimburse to the Owners, the normal and reasonable operating
costs and expenses attributable to the corporate headquarters operations of
NHCA to the extent that such costs are attributable to the Skilled Nursing
Facilities Business and then only to the extent that such costs and expenses
are accrued and unpaid as of the Closing Date. The Owners agree that Buyer
shall be permitted to review all underlying documentation and other records
which support the amount of such charges. Payment of the expenses required
to be reimbursed to the Owners pursuant to this Section 16 shall be made by
wire transfer of immediately available funds to an account specified by Mark
E. Hamister in writing to Buyer. The Parties agree that the Medicare cost
allocation methodology shall be used for purposes of determining the portion
of the normal and ordinary operating expenses of the corporate headquarters
facility which is attributable to the Skilled Nursing Facilities Business.
The Parties hereby further agree that the portion of the purchase price
which shall be allocated to the tangible personal property of each of NHCA,
Oak Hill, Derby Nursing Center, EIDOS, VersaLink and DAP (if applicable)
shall be equal to the net book value of such tangible personal property
determined as of December 31, 1995 and as more particularly set forth in
Exhibit "G" attached hereto.
17. The Parties agree that except as expressly modified or amended by
this Agreement, all other terms, conditions and provision of the Purchase
Agreement shall be and remain in full force and effect and shall be binding
on each of the Parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the date first set forth above.
/s/ Mark E. Hamister
------------------------------
Mark E. Hamister
*
------------------------------
Oliver C. Hamister
*
------------------------------
George E. Hamister
*
------------------------------
Julia L. Hamister
THE GEORGE E. HAMISTER TRUST
By: *
----------------------------
Trustee
*
-----------------------------
Trustee
THE OLIVER C. HAMISTER TRUST
By: *
------------------------------
Trustee
*
------------------------------
Trustee
EIDOS, INC.
/s/ Mark E. Hamister
----------------------------------
Mark E. Hamister
Chief Executive Officer
<PAGE>
VERSALINK, INC.
/s/ Mark E. Hamister
-----------------------------------
Mark E. Hamister
Chief Executive Officer
NATIONAL HEALTH CARE AFFILIATES, INC.
/s/ Mark E. Hamister
-------------------------------------
Mark E. Hamister
Chief Executive Officer
OAK HILL HEALTH CARE CENTER
/s/ Mark E. Hamister
--------------------------------------
Mark E. Hamister
Chief Executive Officer
DERBY NURSING CENTER CORPORATION
/s/ Mark E. Hamister
---------------------------------------
Mark E. Hamister
Chief Executive Officer
DELAWARE AVENUE PARTNERS
/s/ Mark E. Hamister
---------------------------------------
Mark E. Hamister
Chief Executive Officer
<PAGE>
*
---------------------------------------
Jack A. Turesky
/s/ David R. Taber
---------------------------------------
David R. Taber
/s/ Lisa Clark Driscoll
---------------------------------------
Lisa Clark Driscoll
*
---------------------------------------
Sal H. Alfiero
*
---------------------------------------
Gerald S. Lippes
ESTATE OF GEORGE E. HART
By: *
-------------------------------------
Administratrix
*By: /s/ Mark E. Hamister
-------------------------------------
Mark E. Hamister
Attorney-in-Fact
GENESIS HEALTH VENTURES, INC.
/s/ Edward B. Romanov, Jr.
-----------------------------------------
Edward B. Romanov, Jr.
Senior Vice President
Development/Finance
<PAGE>
EXHIBIT 3
Genesis Health Ventures(SM)
News Release
148 West State Street
Contact: George V. Hager, Jr. Kennett Square, PA 19348
Tel 610 444 6350
Senior Vice President & Chief Financial Officer Fax 610 444 3365
610-444-6350
For Immediate Release
Genesis Health Ventures, Inc. Closes Acquisition Of
National Health Care Affiliates, Inc.
KENNETT SQUARE, PA -- July 26, 1996 -- Genesis Health Ventures, Inc. (NYSE:GHV)
today announced that it has closed the previously announced acquisition of the
outstanding stock of National Health Care Affiliates, Inc. ("NHCA") and four
related entities. The acquired companies owned or leased and operated 16
long-term care centers, a contract rehabilitation therapy business and a
nutritional therapy company. Prior to the closing of the stock acquisitions, an
affiliate of a financial institution purchased nine of the eldercare centers for
$67.7 million and subsequently leased the centers to a subsidiary of Genesis
Health Ventures under the terms of the operating lease agreements. The balance
of the total valuation was funded with available cash ($51.8 million) and
assumed debt ($7.9 million).
The transaction will add 16 centers with 2,202 licensed nursing and assisted
living beds in Florida (10 centers), Virginia (5 centers) and Connecticut (1
center). NHCA also provides rehabilitation therapy and nutritional therapy
primarily to customers in its centers and manages four eldercare centers in
Colorado with 283 beds.
A leader in the healthcare industry, Genesis Health Ventures was founded in 1985
to redefine how America cares for the elderly, utilizing a coordinated,
comprehensive approach that helps older people define and live a full life. The
Company has established Genesis ElderCare(SM) Networks in five major
metropolitan markets in the eastern United States and currently serves more than
70,000 customers.
###
Genesis Health Ventures, Inc.(SM) is the parent company's
corporate name and does business as Genesis ElderCare(SM)
