<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 1-11666
GENESIS HEALTH VENTURES, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 06-1132947
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
148 West State Street
Kennett Square, Pennsylvania 19348
(Address, including zip code, of principal executive offices)
(610) 444-6350
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
YES [x] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of May 8, 1996: 24,509,545
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TABLE OF CONTENTS
Page
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PART I. FINANCIAL INFORMATION........................................ 1
Item 1. Financial Statements.................................... 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 6
PART II. OTHER INFORMATION........................................... 11
Item 1. Legal Proceedings....................................... 11
Item 2. Changes in Securities................................... 11
Item 3. Defaults Upon Senior Securities......................... 11
Item 4. Submission of Matters to a Vote of Security Holders..... 11
Item 5. Other Information....................................... 11
Item 6. Exhibits and Reports on Form 8-K........................ 11
SIGNATURES............................................................ 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 7,798 $ 10,387
Accounts receivable, net of allowance for
doubtful accounts of $7,557 at March 31,
1996 and $6,179 at September 30, 1995 120,874 101,124
Cost report receivables 31,936 26,271
Inventory 11,828 9,601
Other current assets 33,856 43,674
--------- ---------
Total current assets 206,292 191,057
--------- ---------
Property, plant and equipment 360,604 294,769
Accumulated depreciation (56,594) (51,108)
--------- ---------
304,010 243,661
Goodwill and other intangibles, net 154,998 114,947
Other assets 68,776 50,724
--------- ---------
TOTAL ASSETS $ 734,076 $ 600,389
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 58,958 $ 52,522
Current installments of long-term debt 2,438 2,539
Income taxes payable 411 1,882
--------- ---------
Total current liabilities 61,807 56,943
--------- ---------
Long-term debt 392,210 308,052
Deferred income taxes 5,783 8,698
Deferred gain and other liabilities 4,671 5,149
Shareholders' Equity:
Common stock, par value $.02, authorized
60,000,000 shares, issued and outstanding,
24,494,572 and 24,448,971 at March 31, 1996;
22,081,267 and 22,035,666 at
September 30, 1995 331 294
Additional paid-in capital 190,280 155,927
Retained earnings 79,237 65,569
-------- --------
269,848 221,790
Less treasury stock, at cost ( 243) (243)
-------- --------
Total shareholders' equity 269,605 221,547
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $734,076 $600,389
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
-----------
Three Months Ended
March 31,
---------------------
1996 1995
---- ----
Net revenues:
Basic healthcare services $ 83,066 $ 69,058
Specialty medical services 61,811 41,469
Management services and other 9,862 6,426
----------- -----------
Total net revenues 154,739 116,953
Operating expenses:
Salaries, wages and benefits 77,283 57,546
Other operating expenses 41,798 33,201
General corporate expense 6,262 4,142
Depreciation and amortization 6,087 4,652
Lease expense 4,068 3,408
Interest expense, net 6,939 4,816
----------- -----------
Earnings before income taxes 12,302 9,188
Income taxes 4,492 3,375
----------- -----------
Net income $ 7,810 $ 5,813
=========== ===========
Per common share data:
Primary
Net income $ 0.31 $ 0.26
Weighted average shares of
Common Stock and equivalents 25,306,685 22,674,336
Fully diluted
Net income $ 0.30 $ 0.24
Weighted average shares of
Common Stock and equivalents 28,797,732 28,411,333
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
-----------
Six Months Ended
March 31,
----------------------
1996 1995
---- ----
Net revenues:
Basic healthcare services $ 155,260 $ 136,372
Specialty medical services 115,001 80,145
Management services and other 17,256 11,989
----------- -----------
Total net revenues 287,517 228,506
Operating expenses:
Salaries, wages and benefits 142,325 113,603
Other operating expenses 79,394 64,800
General corporate expense 11,101 8,281
Debenture conversion expense 1,090 ---
Depreciation and amortization 11,235 8,984
Lease expense 7,861 6,730
Interest expense, net 12,979 9,393
----------- -----------
Earnings before income taxes 21,532 16,715
Income taxes 7,864 6,092
----------- -----------
Net income $ 13,668 $ 10,623
=========== ===========
Per common share data:
Primary
Earnings excluding debenture
conversion expense $ 0.58 $ 0.47
Debenture conversion expense (0.03)
Net income 0.55 0.47
Weighted average shares of Common
Stock and equivalents 24,730,819 22,618,641
Fully diluted
Earnings excluding debenture
conversion expense $ 0.55 $ 0.44
Debenture conversion expense (0.02)
Net income 0.53 0.44
Weighted average shares of Common
Stock and equivalents 28,816,719 28,369,497
See accompanying notes to condensed consolidated financial statements.
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GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
-----------
Six Months Ended
March 31,
---------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 13,668 $ 10,623
Adjustments to reconcile net income to net cash
provided by operating activities:
Charges (credits) included in operations not
requiring funds:
Provision for deferred taxes 1,966 1,523
Depreciation and amortization 11,235 8,984
Amortization of deferred gain (230) (230)
Debenture conversion expense 1,090 ---
Changes in assets and liabilities excluding
effects of acquisitions:
Increase in accounts receivable (7,519) (8,843)
Increase in cost report receivables (6,941) (4,992)
Increase in inventory (1,548) (753)
(Increase) decrease in other current assets (10,932) (5,734)
Increase (decrease) in accounts payable and
accrued expenses 5,355 4,784
Increase in income taxes payable 1,508 636
--------- --------
Total adjustments (6,016) (4,625)
--------- --------
Net cash provided by operating activities 7,652 5,998
Cash flows from investing activities:
Capital expenditures (12,776) (9,723)
Cash paid net--acquisitions (93,316) (934)
Deferred and other long-term asset
additions, net (11,593) (5,225)
Increase in trustee-held funds (60) (168)
--------- --------
Net cash used in investing activities (117,745) (16,050)
--------- --------
Cash flows from financing activities:
Net borrowings (repayments) under bank
credit facility 107,200 9,800
Repayment of long-term debt (322) (382)
Debenture conversion expense (1,090) ---
Proceeds from exercise of common stock
options 1,716 681
--------- --------
Net cash provided by financing activities 107,504 10,099
--------- --------
Net increase (decrease) in cash and cash
equivalents (2,589) 47
--------- --------
Cash and cash equivalents:
Beginning of the period 10,387 3,817
--------- --------
End of the period $ 7,798 $ 3,864
========= ========
Supplemental disclosure of cash flow information:
Interest paid $ 11,876 $ 9,177
--------- --------
Income taxes paid $ 12,005 $ 5,072
========= ========
See accompanying notes to condensed consolidated financial statements.
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GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's annual report for the fiscal year
ended September 30, 1995. The information furnished is unaudited but reflects
all adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial information for the periods shown. Such
adjustments are of a normal recurring nature. Interim results are not
necessarily indicative of results expected for the full year.
2. Earnings Per Share
Primary and fully-diluted earnings per share are based on the weighted
average number of common shares outstanding and the dilutive effect of stock
options, convertible debentures and other common stock equivalents.
3. McKerley Acquisition Pro Forma Financial Information
On November 30, 1995, the Company acquired all of the issued and
outstanding stock and partnership interests of McKerley Health Care Centers,
Inc., McKerley Health Care Center - Concord, Inc., McKerley Health Facilities
and McKerley Health Care Center - Concord, L.P. (collectively, the "McKerley
Entities"). The Company acquired the outstanding stock and partnership
interests of the McKerley Entities for approximately $68.7 million, including
assumed debt and after giving effect to the funds placed in escrow by the
principals as described below. An additional $6.0 million of purchase price is
payable if certain financial objectives are achieved through October 1997. The
transaction was financed with borrowings under the Company's bank credit
facility.
Pursuant to certain agreements executed on November 30, 1995, the Company
directly or through one or more subsidiaries, agreed to provide certain
services to the principals during the period ending November 30, 1998, and the
principals agreed to make certain lease payments on behalf of the Company with
respect to certain lease obligations of the McKerley Entities. As security for
the principals' or their affiliates' obligation to make the required payments
as they become due, the principals placed approximately $6.5 million in an
account with a third party escrow agent.
The following unaudited pro forma statement of operations information gives
effect to the McKerley acquisition described above as though it had occurred
at the beginning of the periods presented, after giving effect to certain
adjustments, including amortization of goodwill, additional depreciation
expense, increased interest expense on debt related to the acquisition and
related income tax effects. The pro forma financial information does not
necessarily reflect the results of operations that would have occurred had the
acquisition occurred at the beginning of the periods presented.
(In thousands, except per share data)
Six Months Ended
March 31, March 31,
1996 1995
--------- ---------
Pro Forma Statement of Operations Information:
Total net revenues $ 297,393 $ 256,576
Net income 13,950 10,918
Primary earnings per share 0.56 0.48
Fully diluted earnings per share $ 0.54 $ 0.45
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Since the Company began operations in July 1985, it has focused its efforts
on providing an expanding array of specialty medical services to elderly
customers. The delivery of these services was originally concentrated in the
eldercare centers owned and leased by the Company, but now also includes
managed eldercare centers, independent healthcare facilities, outpatient
clinics and home health care.
The Company generates revenues from three sources: basic healthcare
services, specialty medical services and management services. The Company
includes in basic healthcare services revenues all room and board charges from
its elderly customers at its owned and leased eldercare centers. Specialty
medical services include all revenues from providing rehabilitation therapies,
institutional pharmacy and medical supply services, subacute care programs,
home health care, physician services, and other specialized services.
Management services include fees earned for management of eldercare centers
and development of life care communities.
Genesis delivers its services through three divisions. The largest, in
terms of revenues, is Genesis Health Centers, which at March 31, 1996 included
68 owned and leased eldercare centers. The second, Genesis Health Services,
provides specialty medical services to all centers owned, leased or managed by
Genesis as well as to over 500 independent healthcare providers. The third,
Genesis Management Resources, Inc., manages 39 eldercare centers.
Certain Transactions
In May 1996, the Company agreed to acquire the outstanding stock of
National Health Care Affiliates, Inc., Oak Hill Center, Inc., Derby Nursing
Center Corporation, EIDOS, Inc. and Versalink, Inc., and all of the
outstanding partnership interests of Delaware Avenue Partnership
(collectively, "National Health") for total consideration of approximately
$133,600,000, including assumed debt, subject to adjustment. The transaction
is expected to close in the second calendar quarter of 1996 and is subject to
normal regulatory approvals and certain third party consents. The
consideration will be comprised of approximately $79,400,000 in cash and the
assumption of approximately $54,200,000 of indebtedness. Genesis intends to
repay all but approximately $18,000,000 of the assumed indebtedness
concurrently with the closing of the transaction. The cash portion of the
purchase price and repayment of indebtedness will be financed by borrowings
under the Company's bank credit facilities. National Health owns six eldercare
centers in Florida with 863 beds, leases four eldercare centers in Florida
with 368 beds, owns six eldercare centers in Virginia with 1,168 beds, and
leases one eldercare center in Connecticut with 120 beds. National Health also
provides enteral nutrition and rehabilitation therapy services to the
eldercare centers which it owns and leases. In addition, National Health
manages four eldercare centers in Colorado with 283 beds pursuant to an
agreement which expires in October 1997. Certain businesses, including home
health care, infusion therapy and assisted living facilities in New York State,
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<PAGE>
which are currently owned by National Health, will not be acquired by Genesis
as part of the transaction.
In April 1996, the Company agreed to acquire the outstanding stock of
NeighborCare Pharmacies, Inc. and certain related entities (collectively,
"NeighborCare"), a privately held institutional pharmacy, infusion therapy and
retail pharmacy business based in Baltimore, Maryland for approximately
$57,250,000, including assumed debt. The transaction is expected to close in
the second calendar quarter of 1996 and is subject to normal regulatory
approvals. The consideration will be comprised of $29,250,000 in cash, the
issuance of $10,000,000 in Common Stock and the assumption of NeighborCare
debt of approximately $18,000,000. Genesis intends to repay substantially all
of the assumed bank indebtedness concurrently with the closing of the
transaction. The cash portion of the purchase price and repayment of debt will
be financed by borrowings under the Company's bank credit facilities. The
number of shares issued will be based on the average closing price of the
Common Stock for a period prior to the closing of the transaction.
In March 1996, the Company acquired for total consideration of
approximately $31,900,000, including assumed debt, the remaining approximately
71% joint venture interests of four eldercare centers in Maryland and the
remaining 50% joint venture interest of an eldercare center in Florida (the
"Partnership Interest Purchase") which had been acquired as part of the
acquisition of substantially all of the assets of Meridian, Inc., Meridian
HealthCare, Inc. and their affiliated entities (the "Meridian Transaction").
In March 1996, the Company entered into a strategic alliance with Doctors
Community Hospital, a 250-bed acute care hospital in Maryland, pursuant to
which the Company sold to an affiliate of the hospital a 51% interest in
Magnolia Gardens Center, a 104-bed eldercare center for approximately
$2,900,000 (the "Magnolia Gardens Transaction"). As part of this transaction,
the Company entered into a long-term agreement to manage the center.
In March 1996, the Company sold four eldercare centers and a pharmacy in
Indiana for approximately $22,250,000 (the "Indiana Transaction"). The
properties were acquired as part of the Meridian Transaction.
In January 1996, the Company acquired the speech therapy, occupational
therapy and physical therapy services businesses of Medical and Rehab Support
Services, Inc., Professional Rehabilitation Network, Inc. and Healthcare Rehab
Services, Inc. (collectively, "Therapy Companies") for approximately
$9,300,000. The Therapy Companies provide these services in the Company's
Baltimore, Maryland/ Washington, D.C. market. The acquisition was financed
with borrowings under the Company's bank credit facilities.
Prior to January 1, 1996, the Company provided management, development and
marketing services to life care communities operated by Adult Community Total
Services, Inc. ("ACTS"), a Pennsylvania non-profit corporation, pursuant to a
management agreement which was to expire in April 1998. Effective January 1,
1996, Genesis restructured its relationship with ACTS. Under the revised
arrangement, Genesis was paid a $2,000,000 restructuring fee and will no
longer manage the ACTS life care communities. Genesis will continue to provide
development services for a fee in an amount equal to five percent of the total
cost of developing and completing facilities developed by ACTS. The
development portion of the contract has been extended to December 2002 and
Genesis is guaranteed a minimum annual development fee of approximately
$1,500,000 per year. Genesis also continues to provide certain ancillary
services to the ACTS communities.
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<PAGE>
In November 1995, the Company acquired McKerley Health Care Centers, Inc.
and certain related entities (collectively, "McKerley") for total
consideration of approximately $68,700,000. The transaction also provides for
up to an additional $6,000,000 of contingent consideration payable upon the
achievement of certain financial objectives through October 1997. McKerley
owns or leases 15 eldercare centers in New Hampshire and Vermont with a total
of 1,535 beds and operates a home healthcare company. The acquisition was
financed with borrowings under the Company's bank credit facilities.
In September 1995, the Company sold, and simultaneously entered into a
three-year contract to manage, five eldercare centers totaling 606 beds to the
Age Institute of Massachusetts for $19,570,000 (the "AIMASS Transaction").
Results of Operations
Three months ended March 31, 1996 compared to three months ended March 31,
1995.
The Company's total net revenues for the quarter ended March 31, 1996 were
$154,739,000 compared to $116,953,000 for the quarter ended March 31, 1995, an
increase of $37,786,000, or 32%. Basic healthcare services increased
$14,008,000, or 20% due principally to the acquisition of the McKerley
Entities, the Partnership Interest Purchase, a shift in payor mix from
Medicaid to Medicare and rate increases; the increase was partially offset by
the Indiana Transaction. Specialty medical services increased $20,342,000, or
49%, of which approximately $10,728,000 is due to the acquisitions of
specialty medical business including the Therapy Companies, and approximately
$1,096,000 is due to the commencement of pharmacy, medical supply and
rehabilitation therapy business in the Florida market with the remainder due
to volume growth in the institutional pharmacy, medical supply and contract
therapy divisions. Specialty medical service revenue per patient day in the
health centers division increased 15% to $29.04 in the quarter ended March 31,
1996 as compared to $25.23 for the same quarter in the prior year due
primarily to treatment of higher acuity patients. Management services and
other income increased $3,436,000, or 53%, including a net gain of
approximately $2,700,000 recognized in connection with the sale of four
eldercare centers and a pharmacy in Indiana, with the remainder primarily due
to the sale of a majority interest in one eldercare center in Maryland and new
management contracts with six eldercare centers (primarily as a result of the
AIMASS Transaction) and an eldercare center and hospital-based subacute unit
in Maryland (as a result of the Magnolia Gardens Transaction).
The Company's operating expenses before depreciation, amortization and
lease expense were $125,343,000 in the quarter ended March 31, 1996 compared
to $94,889,000 in the comparable prior period, an increase of $30,454,000, or
32%, which was primarily due to the acquisition of the McKerley Entities, an
increase in cost of goods sold related to increased sales of specialty medical
services and inflationary wage and benefit increases.
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<PAGE>
Interest expense increased $2,123,000 or 44%. This increase reflects
increased debt levels used to fund acquisitions and operations and a higher
average prevailing interest rate due to the issuance of $120,000,000 of 9.75%
Senior Subordinated Debentures due 2005.
Six months ended March 31, 1996 compared to six months ended March 31,
1995.
The Company's total net revenues for the six months ended March 31, 1996
were $287,517,000 compared to $228,506,000 for the six months ended March 31,
1995, an increase of $59,011,000 or 26%. Basic healthcare services increased
$18,888,000 or 14%, which is primarily due to the acquisition of the McKerley
Entities, the Partnership Interest Purchase, a shift in payor mix from
Medicaid to Medicare and rate increases; the increase was partially offset by
the AIMASS Transaction and the Indiana Transaction. Specialty medical service
revenue increased $34,856,000 or 43%, of which approximately $14,520,000 is
due to acquisitions of special medical businesses, including the Therapy
Companies, approximately $2,199,000 is due to the commencement of pharmacy,
medical supply and rehabilitation therapy business in Florida, with the
remainder due to other volume growth in the institutional pharmacy, medical
supply and contract therapy divisions. Specialty medical service revenue per
patient day in the health centers division increased 23% to $28.51 in the six
months ended March 31, 1996 as compared to $23.18 for the same period in the
prior year due primarily to treatment of higher acuity patients. Management
services and other income increased $5,267,000 or 44% including a net gain of
approximately $2,700,000 recognized in connection with the sale of four
eldercare centers and a pharmacy in Indiana, the sale of a majority interest
in one eldercare center in Maryland, and new management contracts with six
eldercare centers in Massachusetts (primarily as a result of the AIMASS
Transaction) and an eldercare center and hospital-based subacute unit in
Maryland (as a result of the Magnolia Gardens Transactions).
The Company's operating expenses before debenture conversion expense,
depreciation, amortization and lease expense were $232,820,000 compared to
$186,684,000 in the comparable prior period, an increase of $46,136,000 or
25%, which was primarily due to the acquisition of the McKerley Entities, an
increase in cost of goods sold related to increased specialty medical service
revenues, and inflationary wage and benefit increases.
In the quarter ended December 31, 1995 the Company converted approximately
$33,500,000 of its 6% Convertible Senior Subordinated Debentures (the
"Debentures") due 2003. In connection with the early conversion of the
Debentures, the Company paid approximately $1,100,000 representing the
prepayment of interest to converting debenture holders. The non-recurring cash
payment is presented as debenture conversion expense in the results of
operations for the six months ended March 31, 1996.
Interest expense increased $3,586,000 or 38%. This increase reflects
increased debt levels used to fund acquisitions and operations and a higher
average prevailing interest rate due to the issuance of $120,000,000 of 9.75%
Senior Subordinated Debentures due 2005.
Liquidity and Capital Resources
Working capital increased to $144, 485 ,000 at March 31, 1996 from
$134,114,000 at September 30, 1995. Accounts receivable increased to
$120,874,000 at March 31, 1996 from $101,124,000 at September 30, 1995.
Approximately $4,800,000 of this increase relates to accounts receivables
purchased as part of the acquisition of the McKerley Entities, approximately
$3,000,000 relates to accounts receivables purchased as part of the
acquisition of three rehabilitation therapy companies in January 1996,
approximately $3,800,000 relates to the acquisition of the remaining interest
of four eldercare centers in Maryland and one eldercare center in Florida, and
the remaining $8,150,000 relates primarily to the continuing shift in business
mix to specialty medical services including the specialty medical businesses
acquired during fiscal 1995. Days of revenue in accounts receivable decreased
from 72 to 71 during this period.
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<PAGE>
In May 1996, the Company filed a registration statement with the Securities
and Exhange Commission to sell 6,000,000 shares of Common Stock. The Company
intends to use the net proceeds from the offering to repay amounts outstanding
under its bank credit facilities.
In March 1996, the Company sold four eldercare centers and a pharmacy in
Indiana for approximately $22,250,000. The Company used the net proceeds from
the sale to repay a portion of its revolving credit facility.
In November 1995, the Company received in cash approximately $18,000,000 in
connection with the September 1995 sale of five facilities in Massachusetts.
The Company used the proceeds from the sale to repay a portion of the
revolving credit facility.
The Company's cash flow from operations for the six months ended March 31,
1996 was $7,652,000 compared to $5,998,000 for the six months ended March 31,
1996.
In the quarter ended December 31, 1995, the Company converted approximately
$33,500,000 of Debentures. In connection with the early conversion of the
Debentures, the Company paid approximately $1,100,000 representing the
prepayment of interest to converting debenture holders. The conversion of a
portion of the outstanding Debentures improves the Company's leverage and
provides the Company with the ability to borrow under its revolving credit
facilities at lower rates.
In September 1995, the Company amended and restructured its credit facility
to provide for a $200,000,000 revolving credit facility and a $100,000,000
acquisition credit facility. Both credit facilities bear interest at a
floating rate equal, at the Company's option, to prime rate or LIBOR plus
1.25%. Amounts outstanding under the credit facilities in September 1998
convert to a term loan that provides for equal annual amortization payable
quarterly. At March 31, 1996, $73,700,000 was outstanding under the revolving
credit facility and $100,000,000 was outstanding under the acquisition credit
facility. The Company used the borrowings under the acquisition credit
facility to fund the acquisitions of the McKerley Entities, the Partnership
Interest Purchase, and the Therapy Companies. The credit facilities are
secured by the stock of the Company's subsidiaries and first priority liens on
the Company's accounts receivable, inventory and all other personal property.
In June 1995, the Company completed an offering of $120,000,000 of 9 3/4%
Senior Subordinated Notes due 2005 resulting in net proceeds of approximately
$115,800,000. The Company used $100,000,000 of the net proceeds from the
offering to repay in full the term loan component of the credit facility and
the remaining net proceeds to repay a part of the revolving portion of the
credit facility.
The Company believes that its liquidity needs can be met by expected
operating cash flow and availability of borrowings under its bank credit
facilities. At May 10, 1996, $169,900,000 was outstanding under the credit
facility, and $13,200,000 was outstanding under letters of credit issued under
the credit facilities.
Seasonality
The Company's earnings generally fluctuate from quarter to quarter. This
seasonality is related to a combination of factors which include the timing of
Medicaid rate increases, seasonal census cycles, and the number of calendar
days in a given quarter.
Impact of Inflation
The healthcare industry is labor intensive. Wages and other labor costs are
especially sensitive to inflation and resulting marketplace labor shortages.
To date, the Company has offset its increased operating costs by increasing
charges for its services and expanding its services. Genesis has also
implemented cost control measures to limit increases in operating costs and
expenses but cannot predict its ability to control such operating cost
increases in the future.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
Effective March 29, 1996, the Company declared a partial
stock split of its Common Stock in the form of a
three-for-two stock dividend.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
On February 28, 1996, the Company held its Annual
Meeting of Shareholders (the "Annual Meeting"). Proxies
were solicited for the Annual Meeting pursuant to
Regulation 14 of the Securities Exchange Act of 1934.
At the Annual Meeting the following matters were voted
on: (i) Allen R. Freedman, Richard R. Howard and Samuel
H. Howard were all elected to serve on the Board of
Directors of the Company for three-year terms and until
their respective successors are duly elected and
qualified, each receiving 11,993,370 votes for their
election and 236,400 votes against their election (with
103,400 broker non-votes and abstentions); and (ii) an
amendment to the Company's 1985 Amended and Restated
Employee Stock Option Plan increasing the number of
shares which may be issued under the plan to 2,500,000
shares was approved by a vote of 7,605,568 votes for
the amendment and 4,540,442 votes against the amendment
(with 187,247 broker non-votes and abstentions).
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
2.1 Agreement to Purchase Partnership Interests,
made as of March 1, 1996, by and among
Meridian Health, Inc., Fairmont Associates, Inc.
and MHC Holding Company.
2.2 Purchase and Sale Agreement, dated January 16,
1996, by and among Genesis Health Ventures of
Indiana, Inc. and Hallmark Healthcare Limited
Partnership, as seller, and Hunter
Acquisitions, L.L.C., as purchaser.
3.1 Articles of Incorporation.
11 Earnings Per Share Calculation.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated
April 21, 1996, reporting an agreement by the Company to
acquire the outstanding stock of NeighborCare for
consideration of approximately $57,250,000, including
assumed debt.
The Company filed a Current Report on Form 8-K dated May
3, 1996 reporting the agreement by the company to acquire
National Health Care Affiliates, Inc. and related
entities which included the following financial
statements:
Audited Combined Financial Statements as of and
for the year ended December 31, 1995.
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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 thereto duly authorized.
GENESIS HEALTH VENTURES, INC.
Date: May 15, 1996 /s/ George V. Hager, Jr.
-------------------------------------------------
George V. Hager, Jr.
Senior Vice President and Chief Financial Officer
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EXHIBIT 2.1
AGREEMENT TO PURCHASE PARTNERSHIP INTERESTS
AGREEMENT, made as of this 1st day of March, 1996, by and among
Meridian Health, Inc., a Pennsylvania corporation ("Buyer"), Fairmount
Associates, Inc., a Maryland corporation ("Fairmount") and MHC Holding Company,
a Maryland corporation ("MHC") (Fairmount and MHC are hereinafter sometimes
collectively referred to as "Sellers").
BACKGROUND
Fairmount and MHC own an aggregate of 50% of the issued and outstanding
limited partnership interests in Polk Meridian Limited Partnership, a Maryland
limited partnership ("POLK"). Fairmount owns a 1% general partnership interest
and Fairmount and MHC together own an aggregate 69.7071% limited partnership
interest in Meridian/Constellation Limited Partnership, a Maryland limited
partnership ("MCLP"). MCLP owns a 99% limited partnership interest in each of
the following Maryland limited partnerships: Meridian Valley View Limited
Partnership, Meridian Edgewood Limited Partnership, Meridian Perring Limited
Partnership and Meridian Valley Limited Partnership. All of the partnership
interests owned by Fairmount and MHC in Polk are hereinafter sometimes referred
to as the "Polk Interests." All of the partnership interests owned by Fairmount
and MHC in MCLP are hereinafter sometime referred to as the "MCLP Interests."
The Polk Interests and MCLP Interests are hereinafter sometimes referred to as
the "Seller Partnership Interests." Buyer owns 49% of the issued and outstanding
limited partnership interests of Polk and is an affiliate of Meridian
Healthcare, Inc., a Pennsylvania corporation and a general and limited partner
of MCLP that owns all of the general and limited partnership interests of MCLP
not owned by Sellers. Sellers desire to sell the Seller Partnership Interests to
Buyer and Buyer desires to purchase the Seller Partnership Interests on the
terms stated in this Agreement.
NOW, THEREFORE intending to be legally bound, and in consideration of
the mutual agreements and covenants contained herein, the parties agree as
follows:
1. Certain Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, (1) the
terms defined in this Section have the meanings assigned to them in this
Section, wherever they appear in this Agreement (2) all accounting terms not
otherwise defined herein have the meanings assigned under generally accepted
accounting principles consistently applied and as in effect on the date hereof
("GAAP") and (3) all words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision.
1.1 "Affiliate" means, with respect to a specified Person, any
other Person that directly or indirectly through one or more intermediaries
controls, is controlled by, or is under common control with, the specified
Person.
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1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Consent" means any consent, approval, order or authorization
of, or any declaration, filing or registration with, or any application,
notice 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.
1.4 "Contract" means any written or oral contract, agreement,
instrument, order, commitment or binding arrangement, express or implied, of
any nature whatsoever.
1.5 "Documents" means and includes any document, agreement,
instrument, certificate, notice, Consent, affidavit, correspondence (by
letter, telegram, telex or otherwise), written statement, schedule or exhibit
whatsoever.
1.6 "Encumbrance" means any lien, security interest, pledge,
mortgage, easement, leasehold, assessment, covenant, restriction, or any other
encumbrance, claim, burden or charge of any kind or nature whatsoever.
1.7 "Hazardous Substances" means any dangerous, toxic or hazardous
pollutant, contaminant, waste, chemical, material or substance as defined in
or governed by any federal, state or local Law, or other requirement of any
governmental agency relating to such substances or otherwise relating to human
health or safety or the environment, and also including, but not limited to,
urea-formaldehyde, polychlorinated byphenyls, asbestos or asbestos-containing
materials, nuclear or radioactive fuel or waste, radon, explosives, known and
suspected carcinogens, petroleum, petroleum products, biomedical,
biohazardous, infectious or other medical waste, or any other waste, material,
substance, pollutant or contaminant that would subject the Sellers, the Buyer
or the Partnerships to any claims, causes of action, costs damages, penalties,
expenses, demands or liabilities, however defined, under any applicable Law.
1.8 "Indebtedness" means all items which, in accordance with GAAP,
would be included in determining total liabilities as shown on the liability
side of a balance sheet as of the date Indebtedness is to be determined.
1.9 "Judgment" means any order, writ, injunction, fine, citation,
award, decree or any other judgment of any kind whatsoever of any foreign,
federal, state or local court, governmental body, administrative agency,
regulatory authority or arbitration tribunal.
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1.10 "Law" means any provision of any law, statute, ordinance,
order, constitution, charter, treaty, rule or regulation enacted, approved or
adopted by any governmental, administrative or regulatory authority.
1.11 "Liabilities" means any direct or indirect Indebtedness,
liability, claim, loss, damage, Judgment, deficiency or obligation, known or
unknown, fixed or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise whether or not of a kind required
by GAAP to be set forth on financial statements.
1.12 "Losses" means any and all Liabilities, Proceedings, causes
of action, costs and expenses including, without limitation, costs of
investigation, actual interest costs, penalties and attorneys' fees.
1.13 "Obligation" means any debt, Liability or obligation of any
nature whatsoever, whether secured, unsecured, recourse, nonrecourse,
liquidated, unliquidated, accrued, absolute, fixed, contingent, ascertained,
unascertained, known, unknown or otherwise.
1.14 "Person" means any individual, sole proprietorship, joint
venture, partnership, corporation, limited liability company or partnership,
association, joint-stock company, unincorporated organization, cooperative,
trust, estate, government entity or authority (including any branch,
subdivision or agency thereof), administrative or regulatory authority, or any
other entity of any kind or nature whatsoever.
1.15 "Proceeding" means any claim, suit, action, equitable action,
litigation, investigation, arbitration, administrative hearing or any other
judicial or administrative proceeding of any kind or nature whatsoever.
1.16 "Taxes" include (1) any foreign, federal, state or local
income, earnings, profits, franchise, capital stock, sales, use, occupancy,
property, transfer, excise, unemployment compensation tax or other tax of any
kind or nature whatsoever, (2) any foreign, federal, state or local corporate
or other organizational fee, qualification fee, annual report fee, filing fee,
occupation fee, assessment, sewer rent or other fee or charge of any kind or
nature whatsoever, or (3) any deficiency, interest or penalty imposed with
respect to any of the foregoing.
1.17 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
2. Sale and Purchase of Seller Partnership Interests. On the Closing
Date (as defined in Section 4), and subject to the other provisions of this
Agreement, Sellers shall sell, assign and transfer to Buyer, and Buyer shall
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purchase from Sellers, all of Sellers' right, title and interest in and to the
Seller Partnership Interests.
3. Purchase Price for Partnership Interests.
3.1 In consideration of the sale, transfer, conveyance and
delivery to Buyer of the Seller Partnership Interests, and in reliance upon
the representations and warranties made herein by Sellers to Buyer, Buyer
shall, in full payment thereof, pay to Sellers the following consideration
(the "Purchase Price"):
(1) Cash Payment On Closing Date. On the Closing Date, Buyer
shall pay to Sellers by wire transfer of immediately available funds
$8,940,000 plus an amount of interest on such amount calculated at the rate of
6% per annum from March 1, 1996 to the Closing Date.
(2) Contingent Payment. Buyer shall pay to Sellers an amount
(the "Contingent Payment") equal to the sum of (i) 50% multiplied by the
amount by which the balance in all third party reimbursement accounts of Polk
as of September 30, 1995 (as finally determined after considering changes to
such accounts (if any) from September 30, 1995 to September 30, 1996) exceeds
$1,063,912 and (ii) 70.7071% multiplied by the amount by which the balance in
all third party reimbursement accounts of MCLP as of September 30, 1995 (as
finally determined after considering changes to such accounts (if any) from
September 30, 1995 to September 30, 1996) exceeds the negative amount of
($763,694). Notwithstanding anything to the contrary contained herein the
amount, if any, payable pursuant to this Section 3.1(2) shall be reduced by
(i) 50% of the amount, if any, by which the balance in all third party
reimbursement accounts of Polk as of September 30, 1995 (as finally determined
after considering changes to such accounts (if any) from September 30, 1995 to
September 30, 1996) is less than $1,063,912 and (ii) 70.7071% of the amount,
if any, by which the balance in all third party reimbursement accounts of MCLP
as of September 30, 1995 (as finally determined after considering changes to
such accounts (if any) from September 30, 1995 to September 30, 1996) is less
than the negative amount of ($763,694). The Contingent Payment, if any, shall
be paid by wire transfer of immediately available funds on November 15, 1996.
(3) Partnership Distributions. Buyer shall (i) cause Polk to
distribute to Sellers 50% of the book earnings before taxes, depreciation and
amortization of Polk from October 1, 1995 through February 29, 1996 and (ii)
cause MCLP to distribute to Sellers 70.7071% of the book earnings before
taxes, depreciation and amortization of MCLP from October 1, 1996 to February
29, 1996 less a credit in the amount of $468,723.02 which was previously
distributed to Sellers with respect to MCLP for such period. The amount
payable pursuant to this Section shall be determined by Buyer in consultation
with Sellers and, together with interest on such amount calculated at the rate
of 6% per annum from March 1, 1996 until paid by Buyer, shall be paid to
Sellers by wire transfer of immediately available funds within 60 days after the
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Closing Date or, if Sellers dispute the amount determined by Buyers to be
payable on such dates as such amount is finally determined by the Arbitrator
(so hereinafter defined).
3.2 If Sellers dispute the amount determined by Buyer to be
payable pursuant to Section 3.1(2) or Section 3.1(3) Buyer shall be notified
in writing within 10 business days after Sellers' receipt of Buyer's
determination of such amount and such notice shall specify in reasonable
detail the nature of the dispute. During the 30-day period following the
receipt of such notice by Buyer, the Sellers and Buyer shall attempt to
resolve such dispute. If at the end of the 30-day period, the Sellers and
Buyer shall have failed to reach a written agreement with respect to such
dispute, the matter shall be referred to KPMG Peat Marwick LLP (the
"Arbitrator"), which shall act as an arbitrator and shall issue its report as
to the amount payable pursuant to Section 3.1(2) or 3.1(3) within sixty (60)
days after such dispute is referred to the Arbitrator. Each of the parties
hereto shall bear all costs and expenses incurred by it in connection with
such arbitration, except that the fees and expenses of the Arbitrator
hereunder shall be borne equally by the Sellers and Buyer; provided, however,
(i) if the amounts determined payable by the Arbitrator is less than $50,000
more than the amount determined payable by the Buyer then such fees and
expenses shall be paid by the Sellers; and (ii) if the amount determined
payable by the Arbitrator is more than $50,000 more than the amount determined
payable by the Buyer then such fees and expenses shall be paid by the Buyer.
This provision for arbitration shall be specifically enforceable by the
parties and the decision of the Arbitrator in accordance with the provisions
hereof shall be final and binding and there shall be no right of appeal
therefrom.
4. Closing. Consummation of the transactions contemplated by this
Agreement with respect to the purchase and sale of the Seller Partnership
Interests (the "Closing") shall take place on the "Closing Date." The term
"Closing Date" shall mean any date on or prior to March 15, 1996 on which the
parties mutually agree in writing to consummate the transactions contemplated in
this Agreement. The Closing shall take place at the offices of Blank, Rome,
Comisky & McCauley, 12 Four Penn Center, Philadelphia, PA 19103, commencing at
10:00 a.m., on the Closing Date, or at such other time or place as the parties
may agree in writing. Notwithstanding anything to the contrary set forth herein,
Buyer may elect to consummate the Closing of the Polk Interests on a date which
is later than the date on which the purchase of the MCLP Interests is
consummated but not later than March 29, 1996 (the "Election"). The Election
shall be effective upon Buyer giving notice in writing to Sellers that it has
made the Election. If the Election is in effect, then upon consummation of the
Closing with respect to the MCLP Interests and satisfaction of all conditions
precedent to the consummation of the Closing with respect to the Polk Interests,
(i) Buyer shall deposit with Gallagher, Evelius & Jones ("Escrow Agent")
$1,820,000, which amount represents the portion of the cash payable by Buyer to
Sellers with respect to the Purchase Price pursuant to Section 3.1(1) which is
allocable to the purchase of the Polk Interests and (ii) Buyer and Sellers shall
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execute and deliver to the Escrow Agent the documents required to be delivered
pursuant to Sections 8.3 and 9.2. Upon making such deposit with the Escrow
Agent, Buyer shall be deemed to have satisfied in full its obligations pursuant
to Section 3.1(1). The funds deposited with the Escrow Agent shall be held and
distributed in accordance with the terms of the Escrow Agreement (as hereinafter
defined). If the Election is in effect, the term "Closing" or "Closing Date"
shall be deemed to refer to two separate closings or closing dates, a first
closing on the closing date for the consummation of the acquisition of the MCLP
Interests and a second closing on the closing date for the consummation of the
acquisition of the Polk Interests (which shall occur on or before March 29,
1996).
5. Representations and Warranties. Knowing that Buyer relies thereon,
Sellers represent, warrant and covenant to Buyer on the date hereof and on and
as of the Closing Date as follows:
5.1 Due Organization and Authority of Fairmount. Fairmount is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Fairmount has the full power and
authority to own, lease and operate its assets, Properties and business, to
carry on its business as and where such business is now conducted and, to
enter into and perform this Agreement and to consummate the transactions
contemplated hereby upon the terms and conditions herein provided. Schedule
5.1 sets forth all names under which and addresses at which Fairmount has done
business at any time since January 1, 1991. Schedule 5.1 sets forth the names
of all shareholders of Fairmount (the "Shareholders"). Fairmount is not a
party to or bound by any agreement relating to the sale or other disposition
of any portion of the Seller Partnership Interests owed by it.
5.2 Due Organization and Authority of MHC. MHC is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. MHC has the full power and authority to own,
lease and operate its assets, Properties and business, to carry on its
business as and where such business is now conducted and, to enter into and
perform this Agreement and to consummate the transactions contemplated hereby
upon the terms and conditions herein provided. Schedule 5.2 sets forth all
names under which and addresses at which MHC has done business at any time
since January 1, 1991. MHC is not a party to or bound by any agreement
relating to the sale or other disposition of any portion of the Seller
Partnership Interests owed by it.
5.3 Title to Seller Partnership Interests. Sellers owns outright
and have good and marketable title to the Seller Partnership Interests free
and clear of all Encumbrances. Upon consummation of the transactions
contemplated in this Agreement, Buyer will have acquired the Seller
Partnership Interests free and clear of all Encumbrances.
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5.4 Partnership Interests. There are no outstanding
subscriptions, rights, options, warrants, calls, commitments or agreements to
which any Seller is a party or by which any Seller is bound or may be bound
which relate to sale of any ownership interest in Polk or MCLP.
5.5 Authority to Execute and Perform Agreement. Sellers have the
full legal right and power and all authority and approvals required to enter
into, execute, deliver and perform this Agreement and their Obligations
hereunder. The execution, delivery and performance of this Agreement (and all
other agreements required to effect the transactions contemplated) and the
consummation of the transactions contemplated herein have been duly authorized
by all action required under Sellers' Certificates or Articles of
Incorporation or Bylaws. This Agreement, and each other agreement to be
executed by Sellers to effect the transactions, contemplated by this
Agreement, is and will be the valid and legally binding obligation of Sellers
enforceable in accordance with its terms, except as enforceability hereof may
be limited by bankruptcy, insolvency, reorganization or other laws affecting
the enforcement of creditors' rights or contractual obligations generally.
5.6 No Breach. Except as set forth in Schedule 5.6, the
consummation of the transactions herein contemplated including, without
limitation, the execution, delivery and consummation of this Agreement and the
documents required to effect the transactions herein contemplated, do not and
will not (1) constitute a violation of or default under (either immediately or
upon notice, lapse of time or both), conflict with or result in a breach of
(a) the Certificate or Articles of Incorporation of any Seller, (b) the terms
of any Contract to which any Seller is a party, (c) any Judgment, or (d) any
Laws; or (2) result in the creation or imposition of any Encumbrance on the
Seller Partnership Interests or give to any Person any interest or right in
the Seller Partnership Interests.
5.7 Consents; Proceedings. Except as set forth in Schedule 5.7, no
Consent is required in connection with the execution, delivery and performance
by Sellers of this Agreement or the consummation by Sellers of the
transactions contemplated hereby. There are no Proceedings existing, and
Sellers have no knowledge of any such Proceedings pending or threatened
against or affecting any of the Sellers which would prevent the consummation
of the transactions contemplated herein.
5.8 No Broker. No broker, finder, agent or similar intermediary
has acted for or on behalf of Sellers 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
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commission in connection therewith based on any agreement, arrangement or
understanding with Sellers or any action taken by Sellers.
5.9 Full Disclosure. All exhibits, schedules, notices and
affidavits delivered by or on behalf of Sellers in connection with this
Agreement and the transactions contemplated hereby are true and complete; all
such exhibits, schedules, notices and affidavits are authentic. The
information furnished by or on behalf of Sellers to Buyer in connection with
this Agreement and the transactions contemplated hereby do not contain any
untrue statement of material fact and do not fail to state any material fact
necessary to make the statements made, in the context in which they are made,
not false or misleading.
5.10 Representations and Warranties on Closing Date. The
representations and warranties contained in this Section 5 shall be true on
and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
6. Representations and Warranties of Buyer and Genesis. Knowing
that Sellers rely thereon, Buyer represents, warrants and covenants to Sellers
on the date hereof and on the Closing Date as follows:
6.1 Organization. Buyer is a corporation duly organized, validly
existing and in6.1 good standing under the laws of Pennsylvania, the state of
its incorporation. Buyer is qualified as a foreign corporation in good
standing to transact business in each jurisdiction in which the nature of its
business or location of its business, properties or employees requires such
qualification, except where the failure to do so would not have any material
adverse effect on Buyer's business, assets or financial condition and would
not subject Buyer to any material penalty. Buyer has the full corporate power
and authority to own its assets, conduct its business as and where such
business is presently conducted, and, subject to the approval of its board of
directors, enter into this Agreement.
6.2 Effect of Agreement. Buyer's execution, delivery and
performance of this Agreement, and the consummation by Buyer of the
transactions contemplated hereby, (a) upon the approval hereof by the board of
directors of Buyer will have been duly authorized by all necessary corporate
action of Buyer, (b) do not constitute a violation of or default under Buyer's
Articles of Incorporation or bylaws or any contract or agreement to which
Buyer is a party or by which Buyer is bound, (c) do not constitute a violation
of any Law or Judgment, applicable to Buyer, and (d) do not require the
Consent of any Person. This Agreement constitutes the valid and legally
binding agreement of Buyer, enforceable against Buyer in accordance with its
terms.
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6.3 Proceedings. There are no Proceedings existing, and Buyer has
no knowledge of any such Proceedings pending or threatened, against or
affecting Buyer, which would prevent the consummation of the transactions
contemplated herein.
6.4 No Broker. No broker, finder, agent or similar intermediary
has acted for or on behalf of Buyer 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 Buyer or any action taken by Buyer.
6.5 Full Disclosure. All exhibits, schedules, notices or
affidavits delivered by or on behalf of Buyer in connection with this
Agreement and the transactions contemplated hereby are true and complete; all
such exhibits, schedules, notices or affidavits are authentic. The information
furnished by or on behalf of Buyer to Sellers in connection with this
Agreement and the transactions contemplated hereby do not contain any untrue
statement of material fact and do not fail to state any material fact
necessary to make the statements made, in the context in which they are made,
not false or misleading.
6.6 Representations and Warranties on Closing Date. The
representations and warranties contained in this Section 6 shall be true on
and as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
7. Covenants and Agreements. The parties agree and covenant as follows
7.1 Continued Effectiveness of Representations and Warranties of
Sellers. From the date hereof through the Closing Date, Sellers will conduct
their affairs in such a manner so that the representations and warranties
contained in Section 5 herein shall continue to be true and correct on and as
of the Closing Date as if made on and as of the Closing Date, and Buyer shall
promptly be given notice of any event, condition or circumstance known to
Sellers and occurring from the date hereof through the Closing Date which
would cause any of such representations and warranties to become untrue in any
respect.
7.2 No Shopping. Sellers shall not, directly or indirectly,
through any director, officer, employee, agent or otherwise, solicit, initiate
or encourage submission of proposals or offers from any Person relating,
directly or indirectly, to any acquisition of any of the Seller Partnership
Interests or participate in any negotiation 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 or seek, directly or indirectly, to acquire any
of the Seller Partnership Interests. Sellers shall promptly notify Buyer if
any such proposal or offer, or any inquiry or contact with any Person with
respect thereto, is made.
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7.3 Taxes and Tax Returns. Buyer and Sellers acknowledge and agree
that the sale of Seller Partnership Interests, as set forth herein, will
result in a termination of Polk and MCLP for federal income tax and certain
state and local tax purposes. Buyer will cause to be filed all Tax Returns for
all taxable periods which end on or prior to the Closing Date as a result of
such termination. Prior to filing such Tax Returns, Buyer shall provide to
Sellers an opportunity to review and comment upon such Tax Returns. The income
and expenses of Polk and MCLP will be apportioned to the period up to and
including the Effective Time (as hereinafter defined) and the period after the
Effective Time by closing the books of Polk and MCLP as of the end of the
Effective Time. Sellers and Buyer hereby agree that each party to this
Agreement shall be liable for their respective allocable shares (as defined
below) of any Taxes which may arise as a result of the transactions
contemplated in this Agreement and which are either imposed upon Polk or MCLP,
as the case may be, and/or allocated to the partners of such entities in their
capacity as partners of either Polk or MCLP. For purposes of the immediately
preceding sentence, a partner's allocable share of any Taxes shall be based on
such partner's relative percentage partnership interests in Polk or MCLP, as
the case may be, as determined immediately prior to the Closing Date.
7.4 Allocation. The Purchase Price shall be allocated in
accordance with Schedule 7.4 hereto. Sellers and Buyer shall file Internal
Revenue Service Form 8594, if required, as jointly prepared, with respect to
the assets of Polk and MCLP. Sellers and Buyer shall (with respect to any
asset sold or acquired by such party pursuant to this Agreement) use the
respective allocations set forth on Schedule 7.4 and on Form 8594 for all
reporting purposes including, without limitation, all matters relating to
federal, state and local income and franchise taxes. Sellers, if requested by
Buyer, will consent to the filing of a Code Section 754 election by Polk or
MCLP, and will timely execute any instrument required to effect such an
election.
8. Conditions Precedent to the Obligations of Buyer. Each and every
obligation of Buyer to complete the Closing is subject to the satisfaction
of the following conditions (any one or more of which may be waived in writing
by Buyer):
8.1 Agreements, Representations and Warranties. The agreements,
representations and warranties of Sellers contained in this Agreement shall be
true on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Sellers shall have performed and complied
with all covenants and agreements required by this Agreement to be performed
or complied with by them on or prior to the Closing Date. Sellers shall have
delivered to Buyer a Certificate dated as of the Closing Date and signed by
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the Vice President and Controller of Fairmount and MHC, certifying that all
representations and warranties of Sellers are true on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date, that all conditions to Buyers obligations hereunder have been satisfied.
8.2 Board Approval. The board of directors of Buyer shall have
approved and authorized this Agreement and all the transactions contemplated
thereby.
8.3 Delivery of Documents. Sellers shall have executed and/or
delivered to Buyer, on or before the Closing Date, the following, which shall
be in form and substance acceptable to Buyer and Buyer's counsel:
(1) Documents and instruments of transfer for the Seller
Partnership Interests including, without limitation, Sellers withdrawal as
partners of Polk and MHLC and any required amendments to the limited
partnership certificates and agreements of Polk and MHLC;
(2) A certificate, dated no earlier than thirty days prior to
the Closing Date, that Sellers are in good standing in their states of
organization;
(3) A receipt acknowledging Buyer's payment to Sellers of the
Purchase Price payable on the Closing Date;
(4) Certificate of incumbency and specimen signatures of all
signatory officers of Sellers;
(5) A guarantee executed by each of the Shareholders, in
substantially the form attached hereto as Exhibit A, which guarantees the
prompt performance by Sellers of all their obligations under this Agreement,
including, without limitation, the indemnification obligations set forth in
Section 12.
(6) If the Election is in effect, an escrow agreement executed
by Buyer, Sellers and the Escrow Agent, in substantially the form attached
hereto as Exhibit B (the "Escrow Agreement").
(7) All such further Documents and Contracts which may be
requested by Buyer or its counsel, in order to more effectively transfer title
to the Seller Partnership Interests, or to effectuate and carry out any
provision of this Agreement and the transaction provided herein.
(8) Copies of resolutions of the board of directors of Sellers
authorizing the execution and delivery of this agreement, certified by
officers of Sellers.
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8.4 Proceedings. No Proceeding shall have been instituted or
threatened to restrain or prevent the carrying out of the transactions
contemplated hereby or to seek damages in connection with such transactions.
8.5 Permits and Consents. Buyer shall have obtained any and all
Permits and Consents from any Person required for the consummation of the
Closing, all of which shall be in form and substance satisfactory to Buyer.
8.6 Due Diligence. Buyer shall be satisfied with the results of
its due diligence investigation.
9. Conditions Precedent to the Obligations of Sellers. Each and
every obligation of Sellers to complete the Closing is subject to the payment of
the Purchase Price payable on the Closing Date and satisfaction of the following
conditions (any one or more of which may be waived in writing by Sellers):
9.1 Agreements, Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement shall be
true on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Buyer shall have performed and complied
with all covenants and agreements required by this Agreement to be performed
or complied with by it on or before the Closing Date. Buyer shall have
delivered to Sellers a Certificate dated as of the Closing Date and signed by
an officer of Buyer, certifying that all representations and warranties of
Buyer are true on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date and that all conditions to Sellers
obligations hereunder have been satisfied.
9.2 Delivery of Documents. Buyer shall have executed and/or
delivered to Sellers on or before the Closing Date the following, which shall
be in form and substance acceptable to Sellers and Sellers' counsel:
(1) A certificate, dated no earlier than thirty days prior to
the Closing Date, that Buyer is a corporation in good standing in the state of
incorporation;
(2) Copies of resolutions of the appropriate authority of
Buyer authorizing the execution and delivery of this Agreement, certified by
an officer of Buyer;
(3) A certificate of incumbency and specimen signatures of all
signatory officers of Buyer, certified by an officer of Buyer;
(4) If the Election is in effect, an escrow agreement executed
by Buyer, Sellers and the Escrow Agent, in substantially the form attached
hereto as Exhibit B (the "Escrow Agreement").
-12-
<PAGE>
(5) All such further documents that may be requested by
Sellers or their counsel, in order to effectuate and carry out any provision
of this Agreement and the transaction provided herein.
9.3 Proceedings. No Proceeding shall have been instituted or
threatened to restrain or prevent the carrying out of the transactions
contemplated hereby or to seek damages in connection with such transactions.
10. Termination. Anything herein to the contrary notwithstanding:
10.1 The obligations of Buyer and Sellers under this Agreement
may be terminated (i) by written mutual consent of Buyer and Sellers, or (ii)
by Buyer pursuant to notice in writing delivered to Sellers prior to the
Closing Date if Buyer is not reasonably satisfied with the results of its due
diligence review.
10.2 In the event this Agreement is terminated pursuant to this
Section, written notice shall be given to the other party and this Agreement
shall terminate and the transactions contemplated by this Agreement shall be
abandoned. Upon such termination, no party shall have any further obligation
to the other with respect to such obligations; provided however, nothing
herein shall be a waiver of or prejudice the rights and remedies of any party
arising from any default under or breach of the provisions of this Agreement.
11. Interpretation and Survival of Representations and Warranties.
Each warranty, representation and covenant contained herein is independent of
all other warranties, representations and covenants contained herein (whether or
not covering identical or related subject matter) and must be independently and
separately complied with and satisfied. All representations, warranties,
covenants and agreements shall survive the execution and delivery hereof and the
Closing for a period of one year, except, however, the representation and
warranty contained in Section 5.3 shall survive indefinitely.
12. Indemnification.
12.1 Sellers' Obligation to Indemnify. From and after the Closing
Date, Sellers shall indemnify and hold harmless Buyer (and its respective
successors, assigns, directors and officers) from and against any and all
Losses arising out of or caused by, directly or indirectly, any or all of the
following:
(1) Any misrepresentation, breach or failure of any warranty,
representation or certification made by Sellers in this Agreement or pursuant
hereto;
-13-
<PAGE>
(2) Any failure or refusal by Sellers to satisfy or perform
any term or condition of this Agreement to be satisfied or performed by
Sellers.
(3) Any failure by the Sellers to pay their allocable share
of any Taxes referred to in Section 7.3 of this Agreement.
12.2 Indemnification for Environmental Matters. From and after
the Closing Date Sellers shall indemnify and hold harmless Buyer (and its
respective successors, assigns, directors and officers) from and against any
and all Losses imposed upon, suffered by or asserted against Buyer by reason
of the presence, release or threat of release, between November 30, 1993 and
the Closing Date, of any Hazardous Substances on, under, above or from the
real property owned directly or indirectly by the Partnerships, (hereinafter
"Environmental Contamination"), provided, however, that Sellers' duty of
indemnification under this Section (a) shall not extend to Environmental
Contamination which first arises after the Closing Date; and (b) shall be in
proportion to their respective interests in Polk and MCLP.
12.3 Notice to Indemnifying Party. If any party (the
"Indemnitee") receives notice of any claim or the commencement of any
Proceeding with respect to which any other party (or parties) is obligated to
provide indemnification (the "Indemnifying Party") pursuant to Section 12.1,
the Indemnitee shall promptly give the Indemnifying Party notice thereof. Such
notice shall be a condition precedent to any Liability of the Indemnifying
Party under the provisions for indemnification contained in this Agreement.
Except as provided below, the Indemnifying Party may compromise, settle or
defend, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any such matter involving the asserted Liability of the
Indemnitee. In any event, the Indemnitee, the Indemnifying Party and the
Indemnifying Party's counsel, as the case may be, shall cooperate in the
compromise of, settlement or defense against, any such asserted Liability. The
Indemnifying Party shall defend any asserted liability and the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such
defense.
12.4 Limitations on Sellers' Obligations to Indemnify.
Notwithstanding anything to the contrary contained herein, Sellers shall have
no obligation to indemnify Buyer (i) unless Buyer's claims for Losses exceed
in the aggregate $50,000, provided, however, with respect to claims relating
to Taxes there shall be limitation on Sellers' obligation to indemnify Buyer;
and (ii) with respect to matters relating to Taxes unless Buyer's claim for
indemnification is made within seven years after the Closing Date and with
respect to environmental matters unless Buyer's claim for indemnification is
made within 18 months after the Closing Date.
-14-
<PAGE>
13. Expenses. Whether or not the transactions contemplated by this
Agreement shall be consummated, each party shall pay its own expenses incident
to preparing for, entering into and carrying into effect this Agreement and the
transactions contemplated hereby.
14. Further Assurances.
14.1 At any time and from time to time after the Closing Date, at
Buyer's request and without further consideration, Sellers will promptly
execute and deliver all such further Documents or perform such acts as Buyer
may reasonably request in order to more fully consummate the transactions
contemplated herein and in order to more effectively vest, transfer, confirm,
protect and defend the right, title and interest of Buyer in the Seller
Partnership Interests and to assist Buyer in exercising its rights and
privileges with respect thereto.
15. Trade Secrets. Sellers, jointly and severally, will not, at
any time after the date hereof, except with the express prior written consent of
Buyer, directly or indirectly, disclose, communicate or divulge to any Person,
or use for the benefit of any Person, any secret, confidential or proprietary
knowledge or information with respect to the conduct or details of the business
of Polk or MCLP including, but not limited to, customers, prospects, costs,
designs, marketing methods and strategies, finances and suppliers.
16. Miscellaneous.
16.1 Publicity. The parties will treat this Agreement and the
transaction contemplated by this Agreement with strict confidence and will
consult with one another prior to issuing any press release, trade release or
making any statement that could become public, unless otherwise required by
Law.
16.2 Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and either delivered personally to
the addressee, telegraphed, telecopied or telexed to the addressee or mailed,
certified or registered mail or express mail, postage prepaid, or sent by a
nationally recognized courier service, service charges prepaid, and shall be
deemed given when so delivered personally, telegraphed, telecopied or telexed,
if by certified or registered mail, four days after the date of mailing or if
express mailed or sent by a nationally recognized courier service, two days
after the date of mailing, as follows:
-15-
<PAGE>
(1) If to Buyer:
148 West State Street
Kennett Square, PA 19348
Attention: Chairman and Chief Executive Officer
With a required copy to:
Blank, Rome, Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Stephen E. Luongo, Esquire
(2) If to Sellers:
Fairmount Associates, Inc.
515 Fairmount Avenue, Suite 900
Towson, MD 21286
Attention: Michael J. Batza, Jr.
With a required copy to:
Gallagher, Evelius & Jones
Park Charles, Suite 400
218 North Charles Street
Baltimore, MD 21201
Attention: Thomas B. Lewis, Esquire
and to such other address or addresses as Buyer or Sellers, as the case may be,
may designate to the other by notice as set forth above.
16.3 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) contains the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior or contemporaneous
agreements, written or oral, with respect thereto.
16.4 Waivers and Amendments. This Agreement may be amended,
modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by all
the parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part
of any party of any right, power or privilege hereunder, nor shall any single
or partial exercise of any right, power or privilege hereunder preclude any
-16-
<PAGE>
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies which any party may otherwise have
at law or in equity. The rights and remedies of any party arising out of or
otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in this Agreement shall in no way be
limited by the fact that the act, omission, occurrence, or other state of facts
upon which any claim of any such inaccuracy or breach is based may also be the
subject matter of any other representation, warranty, covenant or agreement
contained in this Agreement (or in any other agreement between the parties) as
to which there is no inaccuracy or breach.
16.5 Binding Agreement. All of the terms and provisions of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
each of the parties hereto and their respective heirs, legal representatives,
executors, successors and assigns.
16.6 Assignment. This Agreement and the rights and obligations of
the parties hereto shall not be assigned by any party to any one or more
Persons, except Buyer may assign and/or delegate any or all of its rights and
obligations hereunder to one or more Persons which are direct or indirect
wholly-owned subsidiaries of Genesis Health Ventures, Inc. Nothing in this
Agreement, unless otherwise expressly provided, is intended to confer upon any
Person, other than the parties hereto and their successors and permitted
assigns, any rights or remedies under or by reason of this Agreement.
16.7 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
16.8 Severability. If any provision of this Agreement shall be
determined by a court of competent jurisdiction to be invalid or
unenforceable, such determination shall not affect the remaining provisions of
this Agreement, all of which shall remain in full force and effect.
16.9 Governing Law. This Agreement shall be governed and
construed in accordance with the Laws of the Commonwealth of Pennsylvania
applicable to agreements made, delivered and to be performed entirely within
the Commonwealth of Pennsylvania.
16.10 Consent to Jurisdiction and Service of Process. Any
Proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby shall be instituted in the Court of Common Please of
Philadelphia County or, if jurisdiction for the matter exists solely in
federal court, in the District Court of the Eastern District of Pennsylvania,
-17-
<PAGE>
and each party waives any objection which such party may now or hereafter have
to the laying of the venue of any such Proceeding, and irrevocably submits to
the jurisdiction of any such court in any such Proceeding. Any and all service
of process and any other notice in any such Proceeding shall be effective
against any party if given by registered or certified mail, return receipt
requested, or by any other means of mail which requires a signed receipt,
postage prepaid, mailed to such party as herein provided. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law or to commence legal Proceedings or otherwise
proceed against any other party in any jurisdiction other than Pennsylvania.
16.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
16.12 Exhibits and Schedules. The Exhibits and Schedules to this
Agreement are a part of this Agreement as if set forth in full herein.
16.13 Effective Time. Notwithstanding anything to the contrary
contained herein, the effective time of the consummation of the transaction
contemplated herein shall be deemed to have occurred as of 12:01 a.m. on March
1, 1996 (the "Effective Time").
16.14 Option Regarding Structure. At any time prior to the
Closing with respect to the Polk Interests, Buyer may elect to change the
structure of the transaction from the purchase of partnership interests from
Sellers (followed by the redemption by Polk of all its outstanding limited
partnership interests and the subsequent liquidation of Polk and distribution
of all its assets to Meridian Healthcare, Inc.) to the purchase of
substantially all of the assets of Polk by Meridian Healthcare, Inc. or
another wholly-owned subsidiary of Genesis Health Ventures, Inc. followed by a
liquidation of Polk and distribution of its assets to its partners. So long as
such change shall have no substantive negative economic effect to the Sellers,
the execution of this Agreement by Sellers shall be deemed Sellers' consent as
partners of Polk to such sale of assets. Any change in structure shall be
accomplished by Buyer and Sellers in a manner which changes the rights and
obligations of the parties hereto and the terms and conditions of this
Agreement only to the extent necessary to accommodate changes which are
necessary to reflect the change in structure.
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<PAGE>
16.15 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MERIDIAN HEALTH, INC.
By:_____________________________________________
Name:
Title
FAIRMOUNT ASSOCIATES, INC.
By:_____________________________________________
Name:
Title:
MHC HOLDING COMPANY
By:_____________________________________________
Name:
Title:
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<PAGE>
SCHEDULE 5.1
Names and Address of Fairmount and Shareholders
1. Fairmount Associates, Inc.
515 Fairmount Avenue, Suite 900
Towson, MD 21286
2. Michael J. Batza, Jr.
Edward A. Burchell
Earl L. Linehan
Roger C. Lipitz
Arnold I. Richman
(All c/o Fairmount Associates, Inc. at above address)
<PAGE>
SCHEDULE 5.2
Names and Addresses of MHC
515 Fairmount Avenue, Suite 900
Towson, MD 21286
<PAGE>
SCHEDULE 5.6
No Breach
(Except to the extent the contemplated transactions would
cause a breach under financing documents which are intended to
be paid off and terminated concurrently with Closing
hereunder).
<PAGE>
SCHEDULE 5.7
Consents
(Except to the extent the contemplated transactions would
cause a consent to be required to be obtained pursuant to the
financing documents which are intended to be paid off and
terminated with Closing hereunder).
<PAGE>
SCHEDULE 7.4
Allocation of Purchase Price
Polk Interests - $1,820,000
MCLP Interests - $7,120,000
<PAGE>
EXHIBIT 2.2
PURCHASE AND SALE AGREEMENT
by and among
GENESIS HEALTH VENTURES OF INDIANA, INC.
and
HALLMARK HEALTHCARE LIMITED PARTNERSHIP, collectively, as Seller
and
HUNTER ACQUISITION L.L.C., as Purchaser
for the following:
(1) Meridian Nursing Center-Cardinal, 1121 E. LaSalle Ave., South Bend,
Indiana 46617;
(2) Meridian Nursing Center-Dyer, 601 Sheffield Avenue, Dyer, Indiana 46311;
(3) Meridian Nursing Center-East Lake, 1900 Jeanwood Drive, Elkhart, Indiana
46514;
(4) Meridian Nursing Center-River Park, 915 S. 27th Street, South Bend,
Indiana 46615;
and
(5) an institutional pharmacy business in the State of Indiana commonly known
as "ASCO".
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1.1 PURCHASE AND SALE...............................................................................2
A. Purchase of the Facilities.............................................................2
B. Purchase of The Pharmaceutical Business................................................3
1.2 EXCLUDED ASSETS.................................................................................4
2. PURCHASE PRICE; LIABILITIES.....................................................................5
3. CLOSING.........................................................................................6
4. CONVEYANCES.....................................................................................6
5. COSTS AND EXPENSES..............................................................................6
6. PRORATIONS......................................................................................7
7. PATIENT ACCOUNTING..............................................................................7
8. POSSESSION......................................................................................7
9. SELLER REPRESENTATIONS AND WARRANTIES...........................................................7
(a) Status of Seller.......................................................................7
(b) Authority..............................................................................8
(c) Title..................................................................................8
(d) The Facilities.........................................................................8
(e) Licensure..............................................................................8
(f) Cost Reports...........................................................................9
(g) Patients...............................................................................9
(h) Employees of the Property; Unions......................................................9
(i) Facilities' Compliance with Law.......................................................10
(j) The Pharmaceutical Business' Compliance with Laws.....................................10
(k) Surveys and Reports...................................................................11
(l) Necessary Action......................................................................11
(m) Inventory.............................................................................11
(n) Taxes and Tax Returns.................................................................11
(o) Litigation............................................................................11
(p) Liens.................................................................................12
(q) Defaults Under Contracts and Leases...................................................12
(r) Financial Statements..................................................................12
(s) Life Safety Code Waivers, Etc.........................................................12
(t) [Intentionally deleted]...............................................................12
<PAGE>
(u) Insurability..........................................................................12
(v) Liabilities...........................................................................12
(w) Full Disclosure.......................................................................13
(x) Utilities.............................................................................13
(y) Improvements and Personal Property....................................................13
10. PURCHASER REPRESENTATIONS AND WARRANTIES.......................................................13
(a) Status of Purchaser...................................................................13
(b) Authority.............................................................................13
(c) Necessary Action......................................................................14
(d) Litigation............................................................................14
(e) Full Disclosure.......................................................................14
11. BROKER.........................................................................................14
12. SELLER COVENANTS...............................................................................14
(a) Pre-Closing...........................................................................14
(b) Casualty/Condemnation.................................................................17
(c) Closing...............................................................................18
(d) Title Insurance Premium...............................................................19
(e) Post-Closing..........................................................................19
13. PURCHASER COVENANTS............................................................................20
(a) Pre-Closing...........................................................................20
(b) Closing...............................................................................20
(c) Post-Closing..........................................................................20
14. MUTUAL COVENANTS...............................................................................21
15. CONDITIONS TO PURCHASER'S OBLIGATIONS..........................................................22
(a) Seller's Representations, Warranties and Covenants True at Closing....................22
(b) Seller's Performance..................................................................22
(c) Hart-Scott Condition Precedent........................................................22
(d) Title Insurance.......................................................................22
(e) No Defaults...........................................................................22
(f) Inspection............................................................................22
(g) Absence of Litigation.................................................................23
(h) Licenses and Consents.................................................................23
(i) No Material Change....................................................................23
(j) Removal of Personal Property Liens....................................................23
(k) Environmental Matters.................................................................23
-ii-
<PAGE>
16. CONDITIONS TO SELLER'S OBLIGATIONS.............................................................23
(a) Purchaser's Representations, Warranties and Covenants True at Closing. ...............23
(b) Purchaser's Performance...............................................................23
(c) Absence of Litigation.................................................................24
(d) Hart-Scott Condition Precedent........................................................24
17. TERMINATION....................................................................................24
18. INDEMNIFICATION................................................................................24
19. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS..........................................26
20. SURVEYS AND TITLE POLICIES.....................................................................26
21. ACCOUNTS RECEIVABLE............................................................................27
22. PATIENT FUNDS..................................................................................29
23. TRANSFER OF PATIENT FUNDS......................................................................29
24. SELLER INDEMNITY REGARDING PATIENT FUNDS.......................................................29
25. EMPLOYEE MATTERS AND PATIENT RECORDS...........................................................29
26. TERMINATION OF SELLER EMPLOYEES................................................................29
27. DELIVERY OF MEDICAL RECORDS....................................................................29
28. BULK SALES LAW.................................................................................30
29. NOTICES........................................................................................30
30. ASSIGNMENT.....................................................................................30
31. SOLE AGREEMENT.................................................................................31
32. SUCCESSORS.....................................................................................31
33. CAPTIONS.......................................................................................31
34. GOVERNING LAW..................................................................................31
35. SEVERABILITY...................................................................................31
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<PAGE>
36. GENDER.........................................................................................31
37. RISK OF LOSS...................................................................................31
38. HOLIDAYS.......................................................................................31
39. COUNTERPARTS...................................................................................31
40. DEFINITION OF KNOWLEDGE........................................................................31
</TABLE>
LIST OF EXHIBITS
A. Description of Real Property of Nursing Homes
B. Pharmaceutical Business Services and Products
C. Leases with respect to the Nursing Homes
D. Assumed Contracts for the Facilities
E. Description of Pharmacy Real Property
F. Pharmacy Personal Property
G. Assumed Pharmacy Contracts, Program Agreements and Blue Cross and Other
Third Party Payor Contracts
H. Allocation of Purchase Price
H(a). Form of Estoppel Certificate
I. Facilities Contracts Not Terminable Without Penalty in Thirty Days
J. Employee Grievances
K. Life Safety Code Waivers, Vendor Holds and Decertification Proceedings
L. Copies of Pharmacy Licenses, Deficiency Reports and List of Licensing
Regulatory Bodies
M. Opinion of Counsel for Seller
N. Opinion of Counsel for Purchaser
O. Allocated Amounts of Title Insurance
-iv-
<PAGE>
LIST OF SCHEDULES
Schedule 1(A)(e) -- List of Provider Agreements
Schedule 1.1(A)(f) -- List of Licenses
Schedule 1.1(B)(j) -- List of Pharmacy Intangibles
Schedule 4 -- List of Title Exceptions
Schedule 9(e)(i) -- List of License Restrictions
Schedule 9(i)(iii) -- Notices of Claims from Licensing Agencies
Schedule 9(o) -- List of Litigation
-v-
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("Agreement") is made and
entered into this ______ day of January, 1996 by and among GENESIS HEALTH
VENTURES OF INDIANA, INC., a Pennsylvania corporation ("Genesis") and HALLMARK
HEALTHCARE LIMITED PARTNERSHIP, a Maryland limited partnership ("Hallmark")
(Genesis and Hallmark collectively "Seller") and HUNTER ACQUISITION L.L.C., an
Illinois limited liability company, or its nominee or assignee ("Purchaser").
WITNESSETH:
WHEREAS, Seller owns four long term care skilled and
intermediate care nursing homes in the State of Indiana, having the following
common names, located at the following common addresses and each having the
respective number of beds so indicated for each such nursing home (collectively,
the "Nursing Homes"):
(1) Meridian Nursing Center-Cardinal, 1121 E. LaSalle Ave., South Bend,
Indiana 46617, containing 291 beds;
(2) Meridian Nursing Center-Dyer, 601 Sheffield Avenue, Dyer, Indiana
46311, containing 140 beds;
(3) Meridian Nursing Center-East Lake, 1900 Jeanwood Drive, Elkhart,
Indiana 46514, containing 160 beds;
(4) Meridian Nursing Center-River Park, 915 S. 27th Street, South Bend,
Indiana 46615, containing 44 beds
WHEREAS, the legal description and square footage of the real
property upon which each such Nursing Home is located is more particularly
described in the legal descriptions attached hereto as Exhibit A and made a part
hereof by this reference (collectively, the "Land");
WHEREAS, Seller owns and operates an institutional pharmacy
business in the State of Indiana, commonly known as ASCO, all as more
particularly described on Exhibit B attached hereto and made a part hereof,
which Exhibit B sets forth the type of services and products provided by Seller
from the pharmacy to the approximately 635 beds which it serves (all of the
business and assets comprising that certain institutional pharmacy, including
all inventory and carts, the "Pharmaceutical Business");
WHEREAS, except for the Excluded Assets (as such term is
defined in Section 1.2 hereinbelow), Seller desires to sell and transfer to
Purchaser the Property (as such term is defined in Section 1.1(B) below) to
Purchaser, and Purchaser desires to purchase the same from Seller, subject to
the terms and conditions set forth in this Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises, the mutual
covenants contained in this Agreement and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:
1.1 PURCHASE AND SALE. On the terms and conditions set forth
herein, Seller shall sell, assign, transfer, convey and deliver to Purchaser
and Purchaser shall purchase from Seller the following:
A. Purchase of the Facilities:
(a) The Land which is more particularly described in Exhibit A
attached hereto and made a part hereof by this reference, together with all
right, title and interest of Seller in and to all easements, tenements,
hereditaments, privileges and appurtenances belonging thereto and the
improvements, and structures located thereon that constitute each of the
Nursing Homes, as well as any other structures located thereon (collectively
the "Real Property");
(b) All equipment, furniture, furnishings, and fixtures,
inventory, supplies and other tangible personal property owned and/or leased
by Seller and located on the Real Property and/or used in connection with the
operation of the skilled and/or intermediate care nursing home located on the
Real Property and as of the Closing (the "Personal Property");
(c) Those leases or rental agreements specifically assumed by
Purchaser set forth on Exhibit C attached hereto ("Leases");
(d) All intangible property, whether enumerated herein or not,
in which Seller has an interest, now or hereafter used in connection with the
operation of the Real Property and the skilled and/or intermediate care
nursing homes located upon the Land ("Intangibles"), including, but not
limited to, Seller's licenses, permits and certificates with respect to the
Facilities (as such term is described in this Section 1.1(A)) to the extent
assignable to Purchaser, and all service contracts for the benefit of the
Facilities specifically assumed by Purchaser as set forth on Exhibit D
attached hereto ("Contracts");
(e) The rights of Seller under the provider agreements with
Medicare, Medicaid or any other third-party payor programs (excluding the
right to any reimbursement accrued prior to the Closing Date (hereinafter
defined)), to the extent assignable by Seller and accepted and assumed by
Purchaser ("Provider Agreements") listed on Schedule 1.1(A)(e);
(f) The licenses, permits, accreditation, and certificates of
occupancy listed on Schedule 1.1(A)(f) issued by any federal, state, municipal
or quasi-governmental authority relating to the use, maintenance or operation
of the Nursing Homes, running to, or in favor of, Seller, to the extent
assignable by Seller and accepted and assumed by Purchaser ("Licenses");
-2-
<PAGE>
(g) All documents, charts, personnel records, property
manuals, resident/patient records and lists of the Facilities (subject to the
resident's rights to access to his/her medical records as provided by law and
confidentiality requirements), books, records, files and other business
records attributable to the business or operations of the Nursing Homes
("Records"), except for those Excluded Assets (hereinafter defined);
(h) All existing agreements with residents and any guarantors
thereof of the Nursing Homes, to the extent assignable by Seller and accepted
and assumed by Purchaser ("Resident Agreements");
(i) All claims and causes of actions of Seller against any
third parties relating to the Facilities heretofore existing or hereinafter
accruing to Seller ("Claims"); and
(j) The business of the Seller as conducted at each Nursing
Home located on one of the Real Properties as a going concern, including but
not limited to the name of the business conducted thereon and all telephone
numbers presently in use therein (the "Nursing Home Business").
The Real Property, Personal Property, Leases, Intangibles, Contracts, Provider
Agreements, Licenses, Records, Resident Agreements, Claims, and Nursing Home
Business are collectively referred to as the "Facilities."
B. Purchase of The Pharmaceutical Business:
(a) All right, title and interest in the assets listed on the
Exhibits and Schedules referred to in this Section 1.1(B), free and clear of
all encumbrances, mortgages, pledges, liens, security interests, obligations
and liabilities other than the Assumed Pharmacy Contracts (as defined in
Section 1.1(B)(i) below), as follows:
(b) All right, title and interest of Seller in and to the
land and real estate owned or leased by Seller and used in connection with the
Pharmaceutical Business, as listed on Exhibit E attached hereto (any existing
leases or rental agreements collectively, the "Pharmacy Leases"), together
with all right, title and interest of Seller in and to all easements,
tenements, hereditaments, privileges and appurtenances belonging thereto and
the improvements, and structures located thereon that constitute the Pharmacy,
as well as any other structures located thereon (collectively, the "Pharmacy
Real Property");
(c) The equipment, computers, furniture, furnishings,
fixtures, inventory, supplies and other tangible personal property owned
and/or leased by Seller, used in connection with the Pharmaceutical Business
and located on Pharmacy Real Property (collectively, the "Pharmacy Personal
Property"), the computers and inventory being listed on Exhibit F attached
hereto;
(d) All accounts and inventory of goods and supplies used or
maintained in connection with the Pharmaceutical Business (collectively, the
"Pharmacy Inventory");
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(e) All patient, medical, personnel and other records
related to the Pharmaceutical Business (including both hard and microfiche
copies) to the extent assignable; and all manuals, books and records used in
operating the Pharmaceutical Business, including, without limitation,
personnel policies and files and manuals, accounting records and computer
software (the "Pharmacy Records");
(f) To the full extent transferable, all licenses, permits,
registrations, certificates, consents, accreditations, approvals and
franchises necessary to operate and conduct the Pharmaceutical Business,
together with assignments thereof, if required, and all waivers which Seller
currently has, if any, of any requirements pertaining to such licenses,
permits, registrations, certificates, consents, accreditations; approvals and
franchises (the "Pharmacy Licenses");
(g) All goodwill, and, to the extent assignable by Seller,
all warranties (express or implied) and rights and claims related to the
assets or the operation of the Pharmaceutical Business (the "Pharmacy
Goodwill");
(h) [intentionally deleted];
(i) The contract and leasehold rights and interests pursuant
to contracts for purchase or lease of personal property, franchise agreements,
contracts for purchase, sale or lease of pharmaceuticals, supplies, equipment,
goods or services currently furnished or to be furnished in connection with
the Pharmaceutical Business that are specifically assumed by Purchaser, as set
forth on Exhibit G attached hereto (the "Assumed Pharmacy Contracts"); and
(j) The intangible or intellectual property listed on
Schedule 1.1(B)(j) (the "Pharmacy Intangibles");
The Pharmacy Lease, the Pharmacy Real Property, the Pharmacy Personal Property,
the Pharmacy Inventory, the Pharmacy Records, the Pharmacy Licenses, the
Pharmacy Goodwill, the Assumed Pharmacy Contracts, the Pharmacy Intangibles and
the Pharmaceutical Business are collectively herein referred to as the "Pharmacy
Assets". The Facilities and the Pharmacy Assets are collectively herein referred
to as the "Property".
1.2 EXCLUDED ASSETS. Seller is not selling, assigning or
conveying to Purchaser any assets, rights or property of Seller not
specifically referred to in Section 1.1. Without limiting the foregoing, the
following shall be excluded from the Property sold by Seller to Purchaser
hereunder (the "Excluded Assets"):
(a) The consideration delivered to Seller pursuant to this
Agreement;
(b) Seller's cash, cash equivalents and accounts receivable
on and as of the Closing Date;
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(c) any tangible or intangible property, wherever located,
owned by third parties not affiliated with Seller or
not used by Seller in the operations of the Facilities
or the Pharmaceutical Business;
(d) the capital stock owned or held by Seller in any
subsidiary or affiliate of Seller or the corporate and
partnership records of Seller;
(e) the assets owned or held by any subsidiary or affiliate
of Seller or any other division of Seller;
(f) the names Meridian Healthcare, Genesis Health Ventures,
ASCO Healthcare, Hallmark Healthcare and all
derivations of those names; and
(g) all of Seller's proprietary manuals, such as employee
training manuals, policy manuals, any manuals that
relate to Seller or Genesis Health Ventures, Inc., a
Pennsylvania corporation ("Parent") and all of Seller's
minute books and stock records.
2. PURCHASE PRICE; LIABILITIES.
(a) The purchase price (the "Purchase Price") payable by
Purchaser to Seller for the Property shall be Twenty Two Million Two Hundred
Fifty Thousand Dollars ($22,250,000.00), plus or minus normal and customary
prorations and shall be allocated as set forth on Exhibit H attached hereto
(the "Allocation"). The Purchase Price shall be payable as follows:
(i) Upon execution of this Agreement by all parties hereto
an earnest money deposit (the "Earnest Deposit") in the amount of
$500,000.00 shall be deposited by Purchaser by wire transfer of
immediately available funds with Lawyers Title Insurance Company in its
capacity as escrow agent (the "Escrowee") into an interest bearing
escrow account with the interest for the benefit of Purchaser.
(ii) A payment in immediately available funds at Closing (as
herein defined) of the balance of the Purchase Price less the Earnest
Deposit plus or minus the prorations specified in this Agreement.
(b) Purchaser shall not assume or pay, and Seller shall
continue to be responsible for, any debt, obligation or liability of any kind
or nature, fixed or contingent, known or unknown, of Seller not expressly
assumed by Purchaser in this Agreement. Specifically, without limiting the
foregoing, Purchaser shall not assume any claim, action, suit or proceeding
pending as of the Closing or any subsequent claim, action, suit or proceeding
arising out of or relating to any such other event occurring with respect to
the manner in which Seller conducted its business on or prior to the date of
the Closing.
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(c) The parties to this Agreement expressly agree that the
Allocation set forth on Exhibit H hereto shall be used by them for all
purposes including tax, reimbursement and other purposes. Each party to this
Agreement agrees that it will report the transaction completed pursuant to
this Agreement in accordance with the Allocation, including any report made
under Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), and that no such party will take a position inconsistent with the
Allocation except with the prior written consent of the other parties hereto.
3. CLOSING. The closing of the purchase and sale pursuant to
this Agreement (the "Closing") shall take place through a "New York Style"
escrow (the "Closing Escrow") to be established with Lawyers Title Insurance
Company (the "Title Company") pursuant to form escrow instructions which shall
be modified to be consistent with the terms and provisions of this Agreement
and which shall be mutually agreed upon by the parties hereto in order to
effect a New York Style closing. The Closing shall take place on March 1, 1996
("Closing Date") or such earlier or later date upon which Purchaser and Seller
may agree in writing.
4. CONVEYANCES. Conveyance of the Property to Purchaser
shall be effected by: (i) special warranty deeds and bills of sale (each of
the foregoing with covenants solely against grantor's acts) in forms
acceptable to counsel for both Seller and Purchaser; and (ii) to the extent
Seller occupies the Pharmacy Real Property as a tenant pursuant to a Pharmacy
Lease, an assignment of tenant's rights in said Pharmacy Lease consented to by
the Lessor thereunder and any underlying mortgagee, if required, together with
an estoppel certificate from said Lessor in substantially the form attached as
Exhibit H(a). Fee simple marketable title to the Real Property and Pharmacy
Real Property, and marketable title to the Personal Property and Pharmacy
Personal Property, shall be conveyed from Seller to Purchaser free and clear
of all liens, charges, easements and encumbrances of any kind, other than the
"Permitted Exceptions", as such term is defined in this Section 4. The term
"Permitted Exceptions" shall mean: (i) each of the items on Schedule 4
attached hereto, public, private and utility easements and building line and
use or occupancy restrictions and covenants of record, provided that none of
the foregoing are violated by the existing improvements or the present use
thereof; (ii) the lien of real estate taxes, water, rent and sewer charges
that are not yet due and payable on the Closing Date; (iii) matters disclosed
by the "Surveys", as such term is defined in Section 20 hereinbelow; (iv) such
other title matters existing on the Closing Date that are accepted or deemed
accepted by Purchaser pursuant to Section 20 hereinbelow; (v) the rights of
patients in possession; and (vi) zoning, use and building laws, regulations,
ordinances and codes of any governmental authority or agency applicable to the
Real Property, provided that the existing improvements on, and the uses of,
the Real Property are in substantial compliance with the foregoing.
5. COSTS AND EXPENSES.
(a) Seller shall pay any federal, state, county and local
transfer, sales, purchase, use, value added, excise or similar taxes arising
out of the transfer of the Property and shall pay for any documentary or
revenue stamps required as a result of the transfer hereunder of the Property.
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(b) Seller shall pay up to $40,000 of the cost of the Title
Policies described in Section 20 hereof; Purchaser shall pay the cost of the
Surveys described in Section 20.
(c) Purchaser and Seller shall each pay their own attorney's
fees.
(d) Seller and Purchaser shall share any Escrow fees on a
50-50 basis.
(e) Purchaser shall pay the filing fee required in
connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
(f) Seller shall be and remain responsible for any employee
severance pay which may be or become payable arising out of any contractual
obligation between Seller and any of its employees at the Property.
6. PRORATIONS. The following shall be prorated as of and
shall be settled as soon as practicable after the Closing Date:
(a) (i) General and special real and other ad valorem taxes
affecting the Real Property; (ii) taxes and assessments and tax escrow amounts
held by the Lessor of the Pharmacy Real Property; and (iii) any other real and
personal property taxes which are accrued but not yet due and payable. Said
prorations shall be made on an accrual basis with reference to the most recent
available tax information with a further adjustment being made after Closing
within twenty (20) days after the receipt of the actual tax bill. Any tax
escrows for the payment of future real estate taxes relating to the Real
Property shall be returned to Seller.
(b) Charges and deposits for water, fuel, gas, oil, heat,
electricity and other utility and operating charges and prepaid service
contracts. Seller shall, if possible, obtain final utility meter readings as
of the Closing Date.
7. PATIENT ACCOUNTING. Seller shall deliver to Purchaser on
the Closing Date any advance payments by patients of the Facilities or
customers of the Pharmacy and, as provided in Sections 22-24 below, any
patient funds held in trust by Seller.
8. POSSESSION. Purchaser shall be entitled to possession of
the Property on the Closing Date subject to the possessory rights of patients
and to the Permitted Exceptions, at which time Seller shall deliver to
Purchaser all patient records and other relevant records used or developed in
connection with the business conducted at the Property.
9. SELLER REPRESENTATIONS AND WARRANTIES. Seller hereby
warrants and represents to Purchaser that:
(a) Status of Seller. Genesis is a corporation duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania and Hallmark is a limited partnership duly organized and
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validly existing under the laws of the State of Maryland and each is duly
qualified to own their respective property and conduct their respective
business in the State of Indiana.
(b) Authority. Genesis has the full corporate power and
authority and Hallmark has the full partnership power and authority to execute
and to deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein, and Parent has the full corporate power and
authority to execute the Joinder to this Agreement and to carry out the
transactions contemplated therein. This Agreement is, and all instruments and
documents delivered pursuant hereto at the Closing will be, valid, binding and
enforceable against Seller in accordance with their respective terms, subject
to bankruptcy, insolvency, reorganization, fraudulent transfer and similar
laws affecting creditors' rights generally. The execution, delivery and
performance of this Agreement and all related documents and the consummation
of the transaction contemplated herein will not: (a) result in a breach of the
terms and conditions of nor constitute a default under or violation of the
organizational documents of Seller or any law, regulation, court order,
mortgage, note, bond, indenture, agreement, license, charter, by-laws, or
other instrument or obligation to which Seller is now a party or by which
Seller or any of the assets of Seller may be bound or affected; or (b) result
in the creation of any mortgage, pledge, lien, claim, charge, encumbrance or
other adverse interest upon the Property; or (c) terminate or modify, or give
any party the right to terminate or modify, any Contract, Lease, Pharmacy
Contract or Pharmacy Lease.
(c) Title. Seller will convey to Purchaser title to the
Property free and clear of all liens, encumbrances, covenants, conditions,
restrictions, leases, tenancies, licenses, claims, options and other matters
affecting title thereto except only the matters permitted under Sections 4 and
20 hereof.
(d) The Facilities. Each of the Facilities is licensed for
the number of beds set forth opposite the name of the applicable Facility in
the First Recital to this Agreement and, to Seller's knowledge, the Personal
Property at each Facility includes all equipment and property required under
applicable state and federal law to operate each Facility as a skilled and/or
intermediate care nursing home with the number of beds applicable to each such
Facility as set forth in said First Recital. All rights, properties and assets
used in the operation of the Facilities are either owned by Seller or licensed
or leased to Seller and are included in the assets to be transferred
hereunder, and, to Seller's knowledge, all such properties and assets are in
good operating condition and repair, ordinary wear and tear excepted. Except
as provided in Exhibit I, there are no leases or other agreements affecting
the Facilities which cannot be terminated, without penalty, by Seller or its
assignees upon thirty (30) or fewer days' notice.
(e) Licensure.
(i) The Facilities. Each of the Facilities is a duly and
properly licensed, skilled and/or intermediate care nursing home
Facility pursuant to a license containing no restrictions except as set
forth on Schedule 9(e)(i) attached hereto and has current provider
agreements under Title XVIII and Title XIX of the Social Security Act
(herein "Title XVIII and XIX") for reimbursement for skilled and
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intermediate nursing care. There is no action pending, or, to Seller's
knowledge, threatened or recommended by the appropriate state or federal
agency having jurisdiction thereof, to revoke, withdraw or suspend any
license to operate the Facilities, to terminate the participation of the
Facilities in the Title XVIII and XIX programs, to terminate or fail to
renew any provider agreement related to the Facilities, or to take any
action of any other type (other than actions applicable to long-term
care facilities generally) which would have a material adverse effect on
the Facilities, their operations or business.
(ii) The Pharmaceutical Business. Seller has all Pharmacy
Licenses necessary for Seller to occupy, operate and conduct in all
material respects the Pharmaceutical Business and there do not exist any
waivers or exemptions relating thereto. There is no default on the part
of Seller or, to Seller's knowledge, any other party under any of the
Pharmacy Licenses. To Seller's knowledge there exist no actions pending
or, to Seller's knowledge, recommended for revocation, suspension or
limitation of any of the Pharmacy Licenses. Copies of each of the
Licenses and Permits are attached to and listed on Exhibit L attached
hereto. The most recent licensure surveys and deficiency reports related
to each of these items has also been included in Exhibit L. Seller is,
and at the time of Closing will be, licensed by the regulatory bodies
listed on Exhibit L. No notices have been received by Seller with
respect to any threatened, pending, or possible revocation, termination,
suspension or limitation of the Pharmacy Licenses. Each employee of
Seller has all Pharmacy Licenses required for each such employee to
perform such employees' designated functions and duties for Seller in
connection with conducting in all material respects the Pharmaceutical
Business, and there exists no waivers or exemptions relating thereto.
There is no default under, nor, to Seller's knowledge, does there exist
any grounds for revocation, suspension or limitation of, any such
Pharmacy Licenses. The Pharmaceutical Business currently serves, and on
the Closing will serve, 635 beds, as listed on Exhibit B.
(f) Cost Reports. Seller has filed all cost reports (the
"Cost Reports") required to be filed as of the date hereof under Title XVIII
and Title XIX. All such Cost Reports have been prepared in all material
respects in accordance with and in substantial compliance with all applicable
government rules and regulations and to Seller's knowledge do not contain any
errors, omissions or disallowable costs or expenses.
(g) Patients. There are no patient care agreements or life
care contracts with residents of the Facilities or with any other persons or
organizations which deviate in any material respect from the standard form
customarily used at the Facilities. All patient records at the Facilities,
including patient trust fund accounts, are true and correct in all material
respects.
(h) Employees of the Property; Unions. Seller is not a party
to any collective bargaining agreement, severance pay, or pension or
retirement plans with respect to its employees at either the Facilities or the
Pharmaceutical Business. Seller is not a party to or aware of any labor
dispute or grievance with respect to either the Facilities or the
Pharmaceutical Business, except as set forth in Exhibit J attached hereto.
Except as disclosed in Exhibit J, no person or party (including, without
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limitation, any governmental agency) has asserted, or to the best knowledge of
Seller, has threatened to assert, any claim for any action or proceeding,
against Seller (or any officer, director, employee, agent or shareholder of
Seller) arising out of any statute, ordinance or regulation relating to wages,
collective bargaining, discrimination in employment or employment practices or
occupational safety and health standards (including, without limitation, the
Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, as
amended, the Occupational Safety and Health Act, the Age Discrimination in
Employment Act of 1967, the Americans With Disabilities Act or the Family and
Medical Leave Act).
(i) Facilities' Compliance with Law.
(i) The Facilities and their operation and use now are in
substantial compliance (without waivers) with all applicable municipal,
county, state and federal laws, regulations, ordinances, standards and
orders and with all municipal, including without limitation, all health,
building, fire and zoning ordinances and life safety codes;
(ii) To Seller's knowledge there are no outstanding
deficiencies or work orders of any authority having jurisdiction over
the Facilities requiring conformity to any applicable statute,
regulation, ordinance or by-law pertaining to nursing homes in general,
including but not limited to the Medicare and Medicaid Programs;
(iii) Except as set forth in Schedule 9(i)(iii), Seller has
not received any notice of any claim, requirement or demand of any
licensing or certifying agency supervising or having authority over the
Facilities or otherwise to rework or redesign it or to provide
additional furniture, fixtures, equipment or inventory so as to conform
to or comply with any existing law, code or standard which has not been
fully satisfied prior to the date hereof or which will not be satisfied
prior to the Closing Date; and
(iv) The Facilities are in compliance, in all material
respects, with all Conditions and Standards of Participation in the
Medicaid Program.
(j) The Pharmaceutical Business' Compliance with Laws.
(i) The Pharmaceutical Business participates in the Medicare
and Medicaid Programs (the "Programs"). A list of and copies of its
existing Medicare and Medicaid contracts or, if such contracts do not
exist, other documentation evidencing such participation (collectively,
the "Program Agreements") are included in Exhibit G attached hereto.
Seller is, and will be at the time of Closing, in substantial compliance
with all of the material terms, conditions and provisions of the Program
Agreements.
(ii) No notice of any offsets against future reimbursements
under or pursuant to the Programs has been received by Seller, nor, to
Seller's knowledge, is there any basis therefor. There are no pending
appeals, adjustments, challenges, audits, litigation or notices of intent
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to recoup past or present reimbursements with respect to the Programs.
Seller has not been subject to or, to its knowledge, threatened with
loss of waiver of liability for utilization review denials with respect
to the Programs during the past twelve (12) months, nor has Seller
received notice of any pending, threatened or possible decertification
or other loss of participation in, any of the Programs.
(iii) Seller currently has contractual arrangements with
Blue Cross and other third party payors. A list of and copies of its
existing Blue Cross contracts and other third party payor contract(s)
are included in Exhibit G attached hereto. Seller is, and will be at the
time of Closing, in full compliance with all of the material terms,
conditions and provisions of such contracts.
(k) Surveys and Reports. Complete copies of survey reports,
any waivers of deficiencies, plans of correction, and any other governmental
investigation reports issued with respect to the Facilities during the past 24
months have been provided to Purchaser prior to, or will be provided to
Purchaser promptly following, execution of this Agreement.
(l) Necessary Action. The Board of Directors of Genesis has
taken all appropriate corporate action necessary to enter into this Agreement
and to carry out the terms of this Agreement; the Board of Directors of each
of the general partners of Hallmark has taken all appropriate partnership
action necessary to enter into this Agreement and to carry out the terms of
this Agreement; and the Board of Directors of Parent has taken all appropriate
corporate action necessary to authorize Seller to enter into this Agreement
and to carry out the terms of this Agreement and to authorize Parent to
execute the Joinder to this Agreement and to carry out the terms of this
Agreement applicable to Parent as set forth in said Joinder.
(m) Inventory.
(i) Facilities' Inventory. All inventories of non-perishable
food, central supplies, linen, housekeeping and other supplies located
at the Facilities are in sufficient quantity to operate the Facilities
as currently being operated for a period of at least one week.
(ii) Pharmacy Inventory. The Pharmacy Inventory is, and on
Closing will be, of a quantity presently used by Seller in the ordinary
course of business determined and valued consistent with Seller's past
practice.
(n) Taxes and Tax Returns. All returns, reports and filings
of any kind or nature, other than the Cost Reports referred to in Section 9(f)
hereof, required to be filed by Seller prior to Closing which relate to the
Facilities have been completed and timely filed in compliance with all
applicable requirements and all taxes or other obligations which are due and
payable have been timely paid.
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(o) Litigation. Except as set forth in Schedule 9(o), there
is no litigation, investigation or other proceedings pending or, to Seller's
knowledge, threatened against or relating to business, Seller's right to carry
on and conduct its business, or to this Agreement, including, but not limited
to, condemnation proceedings, and the transactions contemplated herein have
not been challenged by any governmental agency or any other person, nor does
Seller know or have reasonable grounds to know, of any basis for any such
litigation, investigation or other proceeding.
(p) Liens. As of the Closing, there will be no mechanics',
materialmen's or similar claims or liens claimed or which may be claimed
against any of the Property for work performed or commenced prior to the
Closing Date, Seller having made or caused to be made arrangements for
payments of all those improvements now under construction or development.
(q) Defaults Under Contracts and Leases. Seller is not in
material default under any material monetary or other obligation on its part
to be observed or performed under any of the Contracts, Pharmacy Contracts,
Leases or Pharmacy Leases.
(r) Financial Statements. Seller has furnished to Purchaser
copies of the unaudited income and expense statements, operating statements
and balance sheet which relate to the operations of the all of the Property
(collectively the "Financial Statements") for the calendar years 1993 and 1994
and fiscal year ending September 30, 1995. The Financial Statements which have
been delivered to Purchaser or will be delivered to Purchaser have been
prepared in accordance with generally accepted accounting principles as of the
date thereof.
(s) Life Safety Code Waivers, Etc. Exhibit K to this
Agreement contains a complete and accurate list of all life safety code
waivers, vendor holds, decertification proceedings or licensure revocations,
termination or suspension proceedings affecting the Facilities during the
prior eighteen (18) months.
(t) [Intentionally deleted].
(u) Insurability. Seller has not received any notice or
request from any insurance company or board of fire underwriters setting forth
any defects or inadequacies in any of the Property which might affect the
insurability thereof, requesting the performance of any work or alteration of
the Property or of any defect or inadequacy in Seller's operation of the
Property which would materially and adversely affect the ability of Seller or
of Purchaser, following Closing, to: (i) operate each of the Facilities as a
skilled and/or intermediate care nursing home with the number of beds
applicable to each such Facility as set forth in the First Recital to this
Agreement; and (ii) operate the Pharmaceutical Business in material compliance
with all applicable laws, rules and regulations governing the same.
(v) Liabilities. Seller has paid, will pay or will provide
for the payment of, all of its debts, liabilities and obligations arising from
the ownership and operation of the Property including, but not limited to,
salaries, taxes and accounts payable incurred by Seller for the period
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prior to the Closing Date, and such liabilities have been paid, will be paid, or
provisions will be made for the payment of the same, by Seller in the ordinary
course of business.
(w) Full Disclosure. No representation or warranty by Seller
in this Agreement or in any instrument, certificate or statement furnished to
Purchaser pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained
herein or therein not misleading.
(x) Utilities. To Seller's knowledge, all utilities are
installed and available to each of the Facilities in an amount adequate and
sufficient for purpose of operating each of the Facilities.
(y) Improvements and Personal Property. To Seller's
knowledge there are no defects in the improvements on the Real Property or
Pharmacy Real Property, all systems therein, all structural components of the
buildings located thereon (including by way of illustration and not limitation
the roofs and the exterior walls) and the Personal Property and Pharmacy
Personal Property. To Seller's knowledge, all operating systems of the
Facilities and Pharmaceutical Property, including, without limitation, the air
conditioning system, the heating system, the plumbing system, the electrical
system, the fire alarm system, if any, the sprinkling system, if any, and the
elevators, if any, and all Personal Property and Pharmacy Personal Property
are adequate and in good working order and condition and will be in good
working condition on the Closing Date.
10. PURCHASER REPRESENTATIONS AND WARRANTIES. Purchaser
hereby warrants and represents to Seller that:
(a) Status of Purchaser. Purchaser is a limited liability
company duly organized and validly existing under the laws of the State of
Illinois and is duly qualified to own property and conduct its business in the
State of Illinois.
(b) Authority. Purchaser has full power and authority to
execute and to deliver this Agreement and all related documents, and to carry
out the transaction contemplated herein. This Agreement is, and all
instruments and documents delivered pursuant hereto at the Closing will be,
valid and binding documents enforceable against Purchaser in accordance with
their respective terms, subject to bankruptcy, insolvency, reorganization,
fraudulent transfer and similar laws affecting creditors' rights generally.
The execution, delivery and performance of this Agreement and all related
documents and the consummation of the transaction contemplated herein will not
(a) result in a breach of the terms and conditions of nor constitute a default
under or violation of Purchaser's organizational agreement, or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license
or other instrument or obligation to which Purchaser is now a party or by
which Purchaser or any of the assets of Purchaser may be bound or affected; or
(b) terminate, accelerate or modify, or give any party the right to terminate,
accelerate or modify any notes or other financing arrangements or agreements
to which any of the shareholders of Purchaser is a party or by which any of
them may be bound or affected.
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(c) Necessary Action. Purchaser has taken all action
required under its organizational agreement necessary to enter into this
Agreement and to carry out the terms of this Agreement. This Agreement has
been, and the other documents to be executed by Purchaser when delivered at
Closing will have been, duly executed and delivered by Purchaser.
(d) Litigation. To the best of Purchaser's knowledge, there
is no litigation, investigation or other proceeding pending or threatened
against or relating to Purchaser, its properties or business, Purchaser's
right to carry on and conduct its business, or to this Agreement and the
transaction contemplated herein has not been challenged by any governmental
agency or any other person, nor does Purchaser know or have reasonable grounds
to know of any basis for any such action.
(e) Full Disclosure. No representation or warranty by
Purchaser in this Agreement or in any instrument, certificate or statement
furnished to Purchaser pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
11. BROKER. Purchaser hereby represents, covenants, and
warrants to Seller that it has not employed any broker, agent or finder in
connection with the transaction contemplated herein and agrees to indemnify
Seller against any claim for any commission made by any broker claiming to
have been retained by Purchaser. Seller hereby represents, covenants and
warrants to Purchaser that it has not employed any broker, agent or finder in
connection with the transaction contemplated herein, and agrees to indemnify
Purchaser against any claim for any commission made by any broker claiming to
have been retained by Seller.
12. SELLER COVENANTS. Seller covenants that:
(a) Pre-Closing. Between the date hereof and the Closing
Date, except as contemplated by this Agreement or with the prior written
consent of Purchaser:
(i) Seller will operate the Property only in the ordinary
course of business and with due regard to the proper maintenance and
repair of the Real Property, the Pharmacy Real Property, the Personal
Property and Pharmacy Personal Property;
(ii) Seller will take all actions reasonably necessary to
preserve the goodwill and the present patient occupancy level of the
Facilities and to preserve the goodwill of the Pharmaceutical Business
and all of the suppliers, clientele, patients and others having business
relations with Seller, the Facilities or the Pharmaceutical Business;
(iii) Seller will make no material change in the operation
of the Property nor sell or agree to sell any items of machinery,
equipment or other assets of the Property (other than such sales of
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Pharmaceutical Inventory as are sold in the Pharmaceutical Business in
the ordinary course of business) nor otherwise enter into an agreement
affecting the Property;
(iv) Seller will use commercially reasonable efforts to
retain the services and goodwill of the employees of Seller;
(v) Seller will maintain in force the existing hazard and
liability insurance policies, or comparable coverage, for all of the
Property as now in effect;
(vi) Seller will maintain the inventories of perishable
food, non-perishable food, central supplies, linen, housekeeping and
other supplies at the Facilities at substantially the same condition and
quantity as presently being maintained;
(vii) Seller will not increase the compensation or other
benefits or bonuses payable or to become payable to any of the Seller's
employees and Seller shall, following the Closing, offer health
continuation coverage as required under Internal Revenue Code Section
4980B to all of Seller's employees and their eligible dependents.
(viii) Seller will not enter into any material contract or
commitment affecting the Property except in the ordinary course of
business;
(ix) Other than as set forth in Section 4 hereof, Seller
will satisfy and discharge all claims, liens, security interests,
tenancies, liabilities or other financial obligations which constitute a
lien or encumbrance on any of the Personal Property or Pharmacy Personal
Property;
(x) During normal business hours and at mutually agreeable
times and locations, Seller will provide designated representatives of
Purchaser with access to any of the Property, provided: (1) Purchaser
does not materially interfere with the operation of any of the Property,
and (2) Purchaser provides Shirley Liguori with sufficient advance
notice to enable Shirley Liguori to arrange for Purchaser or its
representatives to have access to the Property for the purpose of
conducting the inspections permitted to be conducted by Purchaser under
this Agreement. At such times Seller shall permit Purchaser to inspect
the books and records of any of the Property in order to ascertain that
the records and books of any of the Property are true and accurate and
have been kept in accordance with generally accepted accounting
principles, provided that if for any reason the Closing fails to take
place, Purchaser shall maintain the confidentiality of, and shall not
disclose to any third party, any proprietary or other confidential
information of Seller obtained through any such inspections;
(xi) Seller will file all returns, reports and filings of
any kind or nature, including but not limited to, cost reports referred
to in Section 9(f) hereof, required to be filed by Seller on a timely
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basis and will timely pay all taxes or other obligations and liabilities
which are due and payable with respect to the Property in the ordinary
course of business;
(xii) Seller will cause all of the Property to be operated
in compliance with all applicable municipal, county, state and federal
laws, regulations, ordinances, standards and orders as now in effect
(including without limitation, the life safety code as currently applied
and waived with respect to the Facilities) where the failure to comply
therewith could have a material adverse effect on the business,
property, condition (financial or otherwise) or operation of the
Facilities taken as a whole as skilled and/or intermediate nursing care
Facilities with the applicable number of beds per Facility as are set
forth in the First Recital to this Agreement or the Pharmaceutical
Business;
(xiii) Seller will take all actions reasonably necessary to
achieve compliance with any laws, regulations, ordinances, standards and
orders which are entered after execution of this Agreement and prior to
Closing;
(xiv) There will be no change in ownership or control of any
of the Property prior to Closing and Seller will not take any other
action inconsistent with its obligations under this Agreement or which
could hinder or delay the consummation of the transaction contemplated
by this Agreement;
(xv) Seller will maintain all of the Property in
substantially the same condition as it was on the date of Purchaser's
inspection thereof, ordinary wear and tear excepted;
(xvi) Seller will promptly notify Purchaser in writing of
any material adverse change of which Seller becomes aware in the
condition or prospects of the Property including, but not limited to,
sending Purchaser, within three (3) days after receipt copies of all
surveys and inspection reports of all governmental agencies received
after the date hereof and prior to Closing;
(xvii) Seller shall obtain all necessary third party
consents for the valid conveyance, transfer, assignment or delivery of
the material assets constituting the Property to the extent that
assignment is required under this Agreement;
(xviii) Within fifteen (15) days after the date hereof,
Seller will deliver to Purchaser certificates dated after the date
hereof evidencing the results of searches conducted to ascertain the
existence of any financing statements and tax and judgment liens
affecting or relating to all of the Property which have been filed or
recorded with the Office of the Secretary of State in which the Property
is located and the appropriate County Recorder's Office and in the State
wherein Seller is domiciled and incorporated (the "UCC Searches");
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(xix) Seller will promptly comply with any notices received
pursuant to Section 9(u) hereof and shall deliver to Purchaser a copy of
any notice received pursuant to that Section and evidence of compliance
with such notice; and
(xx) Seller will (with the assistance of the Purchaser if
and when required) timely and promptly make, and Purchaser will or if
Purchaser is not the "ultimate parent entity" it will cause its
"ultimate parent entity" (with the assistance of Seller if and when
required) to timely and promptly make, all filings which are required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"Antitrust Improvements Act"). The parties will use commercially
reasonable efforts, and it shall be a condition precedent to Purchaser's
Obligations to consummate the transactions contemplated by this
Agreement (the "Hart-Scott Condition Precedent"), to obtain the approval
of the United States Federal Trade Commission or the Antitrust Division
of the United States Department of Justice, as the case may be, to the
purchase of the Property by Purchaser or expiration or early termination
prior to the Closing Date of the waiting period under the Antitrust
Improvements Act without the commencement of litigation, or threat
thereof, by the appropriate governmental enforcement agency to restrain
the transactions contemplated by this Agreement.
(b) Casualty/Condemnation.
(i) Seller shall promptly notify Purchaser of any casualty
damage or notice of condemnation which Seller receives prior to the
Closing Date. Seller shall timely notify any insurance companies with
respect to any damage and shall promptly submit claims for such damage.
(ii) If: (a) any portion of a Nursing Home is damaged by
fire or casualty after the Execution Date and is not repaired and
restored substantially to its original condition prior to Closing, and
(b) at the time of Closing the estimated cost of repairs is Five Hundred
Thousand Dollars ($500,000.00) or less as determined by an independent
adjuster, there shall be no abatement or adjustment in the Purchase
Price and Purchaser shall be required to purchase the Property in
accordance with the terms of this Agreement and Purchaser shall either:
(x) receive a credit at Closing of the estimated cost or repairs as
determined by the aforesaid independent adjuster; or (y) at Closing
Seller shall: (1) assign to Purchaser, without recourse, all insurance
claims and proceeds with respect thereto (less sums theretofore
expended, if any, by Seller for temporary repairs or barricades) (in
which event Purchaser shall have the right to participate in the
adjustment and settlement of any insurance claim relating to said
damage), and (2) pay to Purchaser an amount equal to Seller's insurance
deductible. Seller shall have no liability or obligation with respect to
the condition of the Property as a result of such fire or casualty.
If, at the time of Closing, the estimated cost of repairing
such damage is more than Five Hundred Thousand Dollars ($500,000.00) as
determined by such independent adjuster, Purchaser may, at its sole
option: (x) terminate this Agreement with respect to the Nursing Home and
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the associated Real Property affected by the fire or casualty only by
notice to Seller, in which event the Purchase Price shall be reduced by
an amount equal to the amount attributable to the Nursing Home as set
forth on Exhibit H attached hereto, Seller shall return to Purchaser the
portion of the Earnest Deposit attributable to such Nursing Home, and
the parties shall proceed to Closing with respect to the remainder of
the Property, and no party shall have any further liability to any other
party under this Agreement with respect to such Nursing Home and
associated Real Property, except as otherwise provided in this
Agreement; or (y) proceed to Closing as provided in this Paragraph for
fires or casualties under Five Hundred Thousand Dollars ($500,000.00).
Seller agrees to maintain its existing property insurance coverage with
respect to the Real Property.
(iii) If, prior to Closing, any of the Nursing Homes is
materially taken by eminent domain, this Agreement shall become null and
void with respect to such Nursing Home and its associated Real Property
at Purchaser's option, and upon receipt by Seller of written notice of
an election by Purchaser to treat this Agreement as null and void with
respect to such Nursing Home and its associated Real Property, the
Purchase Price shall be reduced by an amount equal to the amount
attributable to the Nursing Home as set forth on Exhibit H attached
hereto, Seller shall return to Purchaser the portion of the Earnest
Deposit attributable to such Nursing Home, and the parties shall proceed
to Closing with respect to the remainder of the Property. If Purchaser
elects to proceed and to consummate the purchase despite said material
taking (such election being deemed to have been made unless Purchaser
notifies Seller to the contrary within fifteen (15) days after notice
from Seller to Purchaser of any taking), or if there is less than a
material taking prior to Closing, there shall be no reduction in or
abatement of the Purchase Price and Purchaser shall be required to
purchase the Property in accordance with the terms of this Agreement,
and Seller shall assign to Purchaser, without recourse, all of Seller's
right, title and interest in and to any award made or to be made in the
condemnation proceeding (in which event Purchaser shall have the right
to participate in the adjustment and settlement of any insurance claim
relating to said damage). For the purpose of this Paragraph, the term
"materially" shall mean any taking of in excess of ten percent (10%) of
the square footage of either of a particular Nursing Home or fifty
percent (50%) of the Real Property associated with any Nursing Home,
provided, further, that: (i) Purchaser shall have the ability after said
taking to operate the applicable Nursing Home in compliance with the
Licenses applicable to said Nursing Home with the same number of beds at
the applicable Nursing Home as are existing with respect to said Nursing
Home as of the date of this Agreement; (ii) there remains after said
taking means of egress and ingress to and from the Nursing Home to a
public highway; and (iii) the use of the Nursing Home after said taking
is in compliance with all applicable zoning and building rules,
regulations and ordinances.
(c) Closing. On or before the Closing Date, Seller agrees
that it will deliver the following documents into the Escrow (hereinafter the
"Closing Documents"):
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(i) Executed warranty deeds and bills of sale satisfying the
requirements of Section 4(i), endorsements, assignments and other
instruments of transfer and conveyance as shall be reasonably
satisfactory in form and substance to counsel for Purchaser transferring
and assigning to Purchaser the Property to be transferred as herein
provided ("Instruments of Assignment");
(ii) An opinion of counsel for Seller, dated as of the
Closing Date in the form attached hereto as Exhibit M;
(iii) A certificate of a responsible officer of Seller dated
as of the date of Closing, certifying to Purchaser the fulfillment of
the conditions set forth in Section 15(a) hereof;
(iv) The patient trust fund accounting more fully described
in Section 22 hereof;
(v) The employee benefits schedules more fully described in
Section 25 hereof;
(vi) Seller shall deliver to Purchaser certificates of good
standing from the Secretary of State of its state of organization, and
from each jurisdiction in which Seller is qualified to do business,
certified copies of the Bylaws and Charter of Seller (all dated the most
recent practical date prior to Closing), certified copies of the
resolutions of the Board of Directors of Seller authorizing the
execution, delivery and consummation of this Agreement and the
execution, delivery and consummation of all other agreements and
documents executed in connection herewith by them, including all deeds,
bills of sale and other instruments required hereunder, sufficient in
form and content to meet the requirements of the law of the state of
Seller's incorporation relevant to such transactions and certified by
the Secretary of Seller as adopted and in full force and effect and
unamended as of Closing; and
(vii) A certificate of non-foreign status signed by the
appropriate party and sufficient in form and substance to relieve
Purchaser of all withholding obligations under Section 1445 of the Code.
(d) Title Insurance Premium. At Closing, Seller will pay in
accordance with Section 5(b) hereinabove the premium for the title insurance
coverage in connection with the title insurance policy described in Section 20
hereof.
(e) Post-Closing. After the Closing, Seller agrees that it
will take such actions and properly execute and deliver to Purchaser such
further instruments of assignment, conveyance and transfer as, in the
reasonable opinion of counsel for Purchaser, may be necessary to assure,
complete and evidence the full and effective transfer and conveyance of the
Property.
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13. PURCHASER COVENANTS. Purchaser hereby covenants as
follows:
(a) Pre-Closing. Between the date hereof and the Closing
Date, except as contemplated by this Agreement or with the consent of Seller,
Purchaser agrees that it will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the
consummation of the transaction contemplated by this Agreement.
(b) Closing. On or before the Closing Date, Purchaser agrees
that it will:
(i) Deposit the cash portion of the Purchase Price due at
Closing in accordance with the requirements of Section 2(a) hereof into
the Closing Escrow;
(ii) Deliver into the Closing Escrow (the "Closing
Documents") an opinion of counsel of Purchaser, dated as of the Closing
Date in the form attached hereto as Exhibit N;
(iii) Deliver into the Closing Escrow a certificate of a
responsible officer of Purchaser dated as of the date of Closing,
certifying to Seller the fulfillment of the conditions set forth in
Section 16(a) hereof; and
(iv) Deliver to Seller certificates of good standing from
the Secretary of State of its state or organization, and from each
jurisdiction in which Purchaser is qualified to do business, certified
copies of the Bylaws and Charter of Purchaser (all dated the most recent
practical date prior to Closing), certified copies of the resolutions of
the Board of Directors of Purchaser authorizing the execution, delivery
and consummation of this Agreement and the execution, delivery and
consummation of all other agreements and documents executed in
connection herewith by it, including all instruments required hereunder,
sufficient in form and content to meet the requirements of the law of
the state of Purchaser's incorporation relevant to such transactions and
certified by the Secretary of Purchaser as adopted and in full force and
effect and unamended as of Closing.
(c) Post-Closing. On or after the Closing of this Agreement,
Purchaser agrees that it will:
(i) Provide Seller with access during normal business hours
to any books or records which Seller may need to file or to defend cost
reports, tax returns or other filings or with respect to any pending
litigation filed prior or subsequent to the Closing Date which relate to
periods prior to the Closing Date;
(ii) Take such actions and properly execute and deliver such
further instruments as may be convenient or necessary to assure,
complete and evidence the transactions provided for in this Agreement;
and
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(iii) within thirty (30) days following the Closing remove
or cause to be removed all signs on the Real Property containing the
names of Seller listed as an item of the Excluded Assets in Section
1.2(d) hereinabove.
14. MUTUAL COVENANTS. Following the execution of this
Agreement, Purchaser and Seller agree:
(a) If any event should occur, either within or without the
knowledge or control of Purchaser or Seller, which would prevent fulfillment
of the conditions to the obligations of any party hereto to consummate the
transaction contemplated by this Agreement, to use commercially reasonable
efforts to cure the same as expeditiously as possible;
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other reasonable actions with respect to, any
applications, requests, or actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any
third party or to accomplish the transaction contemplated by this Agreement;
and
(c) Purchaser has received from Seller a Phase I
Environmental Audit of the Real Property dated January, 1994 and prepared by
Dames & Moore. Purchaser shall have the right at its sole expense to
commission a Phase I Environmental Audit of the Real Property from an
environmental consultant selected by Purchaser (said entity, the
"Environmental Consultant"). If the Environmental Consultant recommends that a
Phase II Environmental Audit be prepared and the financial institution
providing financing for Purchaser's acquisition of the Property requires that
a Phase II Environmental Audit be prepared, Purchaser (at Purchaser's sole
cost and expense) shall have the right until February 16, 1996 (the
"Inspection Period") to have a Phase II Environmental Audit prepared provided,
however, that Seller shall be entitled to receive prior written notice that
any such Phase II Environmental Audit is to be prepared and to participate in
the preparation of the same, said participation being intended to include the
right of Seller to have advance notice of any borings to be made to the soil
located on the Real Property and to have such of its agents present at the
Real Property during the preparation of any such Phase II Environmental Audit.
The Phase II Environmental Audit shall be performed by the Environmental
Consultant and shall include such sampling and testing as shall be necessary
and prudent to confirm the presence or absence of hazardous substances and
hazardous materials. If the Phase II Environmental Audit confirms the
existence of hazardous materials or hazardous substances at any of the Real
Property sites and the aggregate cost of remediation required to remedy any
violations of Environmental Laws resulting from the existence of said
hazardous materials or hazardous substances exceeds Two Hundred Thousand
Dollars ($200,000.00), Purchaser, within the expiration of the Inspection
Period, may either: (i) terminate this Agreement, in which event the Earnest
Deposit shall be returned to Purchaser; or (ii) waive its right to terminate
this Agreement pursuant to this Section 14(c), whereupon the transactions
contemplated by this Agreement shall be consummated as scheduled and Purchaser
shall take title to the Real Property and the improvements subject to the
existence of said hazardous materials. For purposes of this Agreement, the
term "hazardous materials "shall mean any asbestos, urea formaldehyde or other
hazardous wastes and substances defined as "hazardous substances" in the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended 42 U.S.C. Sec. 9601 et seq. P.L. 96-510, the Resource Conservation
and Recovery Act, 42 U.S.C. Sec. 6901 et seq., the Superfund Amendments and
Reauthorization Act of 1986, P.L. 99- 499 and the Federal Water Pollution
Control Act, as amended, Sec. 311(b)(A)(2), P.L. 92-500 and all amendments
thereto and regulations adopted pursuant to said laws (all of the foregoing
collectively, the "Environmental Laws").
15. CONDITIONS TO PURCHASER'S OBLIGATIONS. All obligations
of Purchaser under this Agreement are subject to fulfillment, prior to or at
Closing, of each of the following conditions, any one or all of which may be
waived in writing by Purchaser.
(a) Seller's Representations, Warranties and Covenants True
at Closing. Seller's representations, warranties and covenants contained in
this Agreement or in any certificate or docu ment delivered in connection with
this Agreement or the transactions contemplated herein shall be true at the
date hereof and as of the Closing Date in all material respects as though such
representations, warranties and covenants were then again made.
(b) Seller's Performance. Seller shall have substantially
performed in all material respects all of its obligations and covenants under
this Agreement that are to be performed prior to or at Closing.
(c) Hart-Scott Condition Precedent. Prior to the Closing
Date, the Hart-Scott Condition Precedent shall have been satisfied.
(d) Title Insurance. A title insurance company acceptable to
the parties shall have committed to issue to Purchaser as of the date of
Closing owners' policies of title insurance in accordance with the
requirements of Section 20 hereof.
(e) No Defaults. Seller shall not be in material default
under any Lease, Contract Pharmacy Lease or Pharmacy Contract or under any
other mortgage, contract, lease or other agreement affecting or relating to
any of the Property.
(f) Inspection. Until the expiration of the Inspection
Period, Purchaser shall have the right to inspect the Property and be
satisfied with the results of the inspection. If the inspection of the
Property reveals, with respect to the Real Property, structural defects in the
air conditioning system, parking lot, the heating system, the plumbing system,
the electrical system, the fire alarm system, if any, the sprinkling system,
if any, the elevators, if any, and the roof and roof components (said defects
collectively, the "Structural Defects") which in the judgment of the third
parties inspecting the Real Property (the "Inspectors") reveals the existence
of Structural Defects and the aggregate cost of remediation required to remedy
any Structural Defects exceeds Three Hundred Thousand Dollars ($300,000.00),
as estimated by the Inspectors, Purchaser, within the expiration of the
Inspection Period, may either: (i) terminate this Agreement, in which event
the Earnest Deposit shall be returned to Purchaser; or (ii) waive its right to
terminate this Agreement pursuant to this Section 15(f), whereupon the
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transactions contemplated by this Agreement shall be consummated as scheduled
and Purchaser shall take title to the Real Property and the improvements
subject to the existence of said Structural Defects.
(g) Absence of Litigation. No action or proceeding shall
have been instituted, nor any judgment, order or decree entered by any court
or governmental body or authority preventing the acquisition by Purchaser of
the Property or the consummation of the transaction contemplated hereby.
(h) Licenses and Consents. Purchaser shall have received no
written notice that any licenses, permits, accreditation, certifications,
consents and other authorizations required for the continued operation of the
Property as now operated, including the continuation of presently existing
reimbursement arrangements with Medicaid and Medicare, will not be issued.
(i) No Material Change. No material adverse change shall
have occurred, in the reasonable opinion of Purchaser, in the physical
condition or business of the Property.
(j) Removal of Personal Property Liens. Seller shall have
removed all personal property liens disclosed by the UCC Searches which are
related to the Property and the Property shall be free and clear of all liens,
claims and encumbrances other than those permitted by Sections 4 and 20
hereof.
(k) Environmental Matters. Purchaser shall have waived its
right to terminate this Agreement pursuant to Section 14(c) hereinabove.
In the event Purchaser is dissatisfied with the results of
any of its due diligence or any of the conditions set forth in Sections 15(a)
through (e) and (g) through (j) have not been satisfied prior to the Closing
Date, Purchaser may terminate this Agreement with no liability to either party
hereunder and the Earnest Deposit shall be returned to Purchaser.
16. CONDITIONS TO SELLER'S OBLIGATIONS. All obligations of
Seller under this Agreement are subject to the fulfillment, prior to or at
Closing, of each of the following conditions, any one or all of which may be
waived by Seller in writing.
(a) Purchaser's Representations, Warranties and Covenants
True at Closing. Purchaser's representations, warranties and covenants
contained in this Agreement or in any certificate or document delivered in
connection with this Agreement or the transactions contemplated herein shall
be true at the date hereof and as of the date of Closing as though such
representations, warranties and covenants were then again made.
(b) Purchaser's Performance. Purchaser shall have
substantially performed its obligations and covenants under this Agreement
that are to be performed prior to or at Closing.
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(c) Absence of Litigation. No action or proceeding shall
have been instituted, nor any judgment, order or decree entered by any court
or governmental body or authority preventing the acquisition by Purchaser of
the Property or the consummation of the transaction contemplated hereby.
(d) Hart-Scott Condition Precedent. Prior to the Closing
Date, the Hart-Scott Condition Precedent shall have been satisfied.
17. TERMINATION.
(a) Either party may terminate this Agreement if a condition
to its obligation to consummate the transaction contemplated by this Agreement
has not been satisfied by the Closing Date. In that event, if the other party
is not in default under this Agreement, the parties shall have no further
obligations or liabilities to one another and the Earnest Deposit shall be
returned to Purchaser.
(b) If Seller is in material breach of its obligation to
consummate the transaction contemplated by this Agreement pursuant to the
terms hereof, then Purchaser may at its option elect as its remedy to (i) seek
specific performance of this Agreement or (ii) have the Earnest Deposit
returned to Purchaser. In either event, Purchaser shall have the right to
recover its costs and expenses incurred in such actions, including, but not
limited to, reasonable attorney's fees.
(c) If Purchaser is in material breach of its obligation to
consummate the transaction contemplated by this Agreement pursuant to the
terms hereof, then, as Seller's sole and exclusive remedy for Purchaser's
default, the Earnest Deposit shall be delivered to Seller as liquidated
damages and not as a penalty.
(d) Upon termination of this Agreement for any reason, and
subject to the foregoing Paragraphs, the parties hereto agree to promptly
direct the Escrowee to deliver the Earnest Money in accordance with the terms
of this Agreement.
18. INDEMNIFICATION.
(a) Seller, for itself and its successors and assigns,
hereby indemnifies and agrees to defend and hold Purchaser and its successors,
assigns, affiliates, directors, officers, agents, servants and employees
harmless from any and all claims, demands, obligations, losses, liabilities,
damages, recoveries and deficiencies (including interest, penalties and
reasonable attorneys' fees, costs and expenses) which any of them may suffer
as a result of the untruth of any of the representations or breach of any of
the warranties of Seller herein or given pursuant hereto, or any default by
Seller in the performance of any of its commitments, covenants or obligations
under this Agreement, or with respect to any suits, arbitration proceedings,
administrative actions or investigations which relate to the ownership and use
of the Property by Seller or for any liability which may arise from operations
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of the Property prior to the Closing Date, including but not limited to any
liabilities or obligations under the Indiana Family & Social Service
Administration and Medicare Programs supervised by the Department of Health and
Human Services. It is acknowledged and agreed that any claims, liabilities or
charges arising or any provider assessment program, under the Medicare and
Medicaid or other reimbursement programs for the period prior to the Closing
Date shall be the sole responsibility of Seller and Purchaser shall in no way be
liable therefore. Seller shall be solely and exclusively responsible for any
overpayments made to the Property in which a repayment amount is owed to the
Department of Public Aid. The rights of Purchaser under this paragraph are
without prejudice to any other remedies not inconsistent herewith which
Purchaser may have against Seller. Purchaser shall notify Seller in writing of
any claim or demand. Within thirty (30) days after such notice and subject to
the terms and provisions of Section 18(e) hereinbelow, Seller shall promptly pay
to Purchaser a sum of money sufficient to pay in full such claim or demand, or
promptly cure such breach or contest such claim in accordance with Section 18(c)
hereinbelow.
(b) Purchaser, for itself and its successors and assigns,
hereby indemnifies and agrees to defend and hold Seller, its successors,
assigns, affiliates, directors, officers, agents, servants and employees
harmless from any and all claims, demands, obligations, losses, liabilities,
damages, recoveries and deficiencies (including interest, penalties and
reasonable attorneys' fees, costs and expenses) which Seller may suffer as a
result of the untruth of any of the representations or breach of any of the
warranties of Purchaser herein or given pursuant hereto, or any default by
Purchaser in the performance of any of its commitments, covenants or
obligations under this Agreement, or with respect to any suits, arbitration
proceedings, administrative actions or investigations which relate to the
ownership and use of the Property by Purchaser or for any liability which may
arise from operation of the Property or the nursing home located thereon
following the Closing Date.
(c) If any party (the "Indemnitee") receives notice of any
claim or the commencement of any proceeding with respect to which any other
party (or parties) is obligated to provide indemnification (the "Indemnifying
Party") pursuant to Section 18(a) or 18(b), the Indemnitee shall promptly give
the Indemnifying Party notice thereof. Except as provided below, the
Indemnifying Party may compromise, settle or defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, any such
matter involving the asserted liability of the Indemnitee. In any event, the
Indemnitee, the Indemnifying Party and the Indemnifying Party's counsel shall
cooperate in the compromise of, settlement or defense against, any such
asserted Liability. Both the Indemnitee and the Indemnifying Party may
participate in the defense of such asserted liability and neither may settle
or compromise any claim over the reasonable objection of the other.
Notwithstanding anything to the contrary contained herein, if Purchaser is the
Indemnitee, Purchaser may, at its option, assume control of the defense or
resolution of any such matter if Purchaser reasonably believes that the
defense or resolution of such matter might materially and adversely affect the
Property and so long as Seller has not commenced a compromise of, settlement
or defense against an asserted liability within thirty (30) days of the date
of the notice of any claim, provided that Seller shall continue to be
obligated to indemnify Purchaser in connection with such matter and that
Purchaser may not settle or compromise any such matter without the consent of
Seller which shall not be unreasonably withheld. If the Indemnifying Party
chooses to defend any claim, the Indemnitee shall make available to the
Indemnifying Party, at reasonable times and upon reasonable notice, any books,
records or other documents within its control that are necessary or
appropriate for such defense.
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(d) The sole and exclusive obligation of Purchaser or
Seller, or any of Purchaser's or Seller's subsidiaries and affiliated
companies or any of their respective directors, officers, agents, servants and
employees, for any misrepresentation herein or breach of warranty hereunder,
or for any failure by Seller or Purchaser or any of Seller's or Purchaser's
subsidiaries and affiliated companies to perform any of its covenants, or for
any act or omission of Seller or Purchaser, shall be the liabilities and
obligations of Seller or Purchaser under, and subject to the conditions and
limitations of, this Section 18.
(e) Seller will have no liability (for indemnification or
otherwise) with respect to the matters described in Section 18(a) until the
total of all damages with respect to such matters exceeds Four Hundred Fifty
Thousand Dollars ($450,000), and then only for the amount by which such
damages exceed Four Hundred Fifty Thousand Dollars ($450,000). In addition,
the liability of Seller to indemnify Purchaser under Section 18(a) shall be
limited to a maximum aggregate amount of $5,000,000.00.
19. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties and covenants in this Agreement, or in any
certificate or other writing delivered pursuant hereto, shall survive the
closing of the transaction described in this Agreement for a period of twelve
(12) months. Further, with respect to any matter as to which a claim has been
asserted hereunder and is pending or unresolved at the end of the foregoing
period, such claim shall continue to be covered by the indemnification
provisions hereof, and the indemnitor shall remain liable therefor, until
finally terminated or otherwise resolved.
20. SURVEYS AND TITLE POLICIES. Seller has provided to
Purchaser photocopies of Seller's owner's title insurance policies issued by
the Title Company with respect to the Real Property (the "Prior Title
Policies") and ALTA surveys for each of the Nursing Homes (the "Current
Surveys") . During the term of the Inspection Period, Purchaser shall at its
expense order updates of the Current Surveys (the "Survey Updates"), which
Survey Updates shall reflect thereon all visible utility easements, and shall
apply to the Title Company for new title insurance commitments (ALTA Form "B")
(collectively, the "Title Commitments") agreeing to issue to Purchaser, upon
recording of the deeds required to be delivered pursuant to Section 4
hereinabove owner's policies of title insurance (collectively, the "Title
Policies") in the aggregate amount of the Purchase Price, allocated to each
Nursing Home in the amounts set forth on Exhibit O attached hereto. Said Title
Commitments shall agree: (i) to insure the proposed title of the Purchaser to
the Real Property subject only to the Permitted Exceptions, such other title
exceptions as Purchaser has agreed to accept or is deemed to have accepted
pursuant to this Section 20, and any other exceptions which shall be
discharged by Seller at or before Closing; and (ii) to delete the standard
general exceptions and insure by 3.1 zoning endorsements that the Real
Property is in compliance with all applicable zoning and building codes, laws,
rules, ordinances and regulations. If: (i) title to the Real Property contains
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title exceptions other than the Permitted Exceptions to which Purchaser
reasonably objects or the Title Company is unable to perform the matters set
forth in clause (ii) of the preceding sentence (any of the foregoing a "Title
Defect"); or (ii) the Survey Updates reflect any matters which raise
exceptions other than Permitted Exceptions to which Purchaser reasonably
objects ("Survey Defects"), Purchaser shall notify Seller of such fact, which
notice shall specify the Title Defect or Survey Defect and shall be
accompanied with information sufficient to Seller, in Seller's sole judgment,
to enable Seller to respond. Purchaser's notice shall be given no later than
thirty (30) days from the date hereof, after which Seller shall have the
right, but not the obligation, to cure such Title Defect or Survey Defect, and
if Seller elects to attempt to cure the Title Defect or Survey Defect, and
such Title Defect or Survey Defect cannot or is not cured on or before the
Closing Date, then Closing (as hereinafter defined), may be extended by Seller
for up to sixty (60) days to enable Seller to effect such cure. If the Title
Defect or Survey Defect is not cured, Purchaser shall have the option, as its
sole and exclusive remedy, of: (i) accepting title to the Real Property
without abatement of the Purchase Price (provided, however, that if any such
Title Defects are liens of a definite and ascertainable amount and are not the
current mortgages encumbering the Real Property as set forth on Exhibit O
attached hereto, Purchaser shall have the right to deduct from the Purchase
Price the amount of such lien unless Seller elects to deposit with the Title
Company an amount sufficient to cause the Title Company to delete said lien as
an exception to the applicable Title Policy); or (ii) terminating this
Agreement by giving notice to Seller of such election within five (5) days
after receipt of Seller's notice that Seller does not intend or is unable to
cure the Title Defect or Survey Defect, and in the latter event, the rights
and liabilities of the parties hereto shall cease and terminate, except as
otherwise provided in this Agreement and Purchaser shall be entitled to the
return not only of the Earnest Deposit but an amount equal to the amounts paid
by Purchaser for the Title Commitments and Survey Updates. Notwithstanding the
foregoing, Purchaser shall be deemed to have accepted the condition of title
and any such Title Defect unless it has given Seller notice of the Title
Defect within thirty (30) days of the date hereof as herein provided, after
which time any such Title Defect shall automatically be a Permitted Exception.
21. ACCOUNTS RECEIVABLE.
(a) Purchaser shall assume responsibility for remitting to
Seller any payments received by Purchaser on account of services rendered by
Seller on and after the Closing Date.
(b) Seller shall continue to own all accounts receivable due
to Seller (the "Seller's Accounts Receivable") for any and all services
rendered or goods provided prior to the Closing Date. At Closing, Seller shall
deliver to Purchaser a schedule identifying Seller's Accounts Receivable and
specifically identifying the accounts receivable due Seller from private pay
patients ("Seller's Private Pay Receivables"). (For purposes of this Agreement
private pay patients shall not include any patient who has applied for public
aid and such public aid application has been denied.) Any payments received by
Purchaser from Medicare, Medicaid or other third party government or financial
payor which are allocated to a particular receivable and time period shall be
applied in payment of the particular receivable and time period to which such
payment has been so allocated, except, however, for social security checks,
which will be credited to the payment due in the month in which such checks
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<PAGE>
were received. With respect to the post-closing billing practice to be applied
with respect to Seller's Private Pay Receivables, promptly after Closing
Seller will prepare and send to the private pay patients their private-pay
bills for all periods up to and including the Closing Date, with instructions
notifying the private-pay patient or responsible party to send payment to
Seller, with said payment payable to Seller or such other party as Seller
directs. Payments received by Purchaser with respect to a private pay patient
shall be applied first to payment of the particular Seller's Private Pay
Receivable until such private pay receivable is paid.
(c) The term "Seller's Public Pay Receivables" shall mean
all of Seller's Accounts Receivables due Seller from Medicare, Medicaid or
other third party government of financial payor. With respect to the
post-closing billing practice to be applied with respect to Seller's
Non-Private Pay Receivables, the billing for the same shall be made
post-Closing from each of the Nursing Homes, with the exception of Medicare
Part A bills for the months of December, 1995 and January, 1996. For a period
of one hundred and twenty (120) days following Closing, Seller shall upon
twenty four (24) hours' prior notice be allowed access during Purchaser's
normal business hours to such books and records of Purchaser as are necessary
in order for Seller at its own cost to prepare the bills for Seller's Public
Pay Receivables. In order to account for all sums received by Seller for
Seller's non- Private Pay Receivables, Seller shall also immediately notify
Aetna Fort Washington, its Medicare intermediary, to remit payment directly to
Seller. To the extent that Purchaser receives any remittances payable to
Purchaser which are in fact attributable to Seller's Accounts Receivables,
Purchaser shall deposit such remittances in its account. To the extent any
such remittances are in the form of checks or other negotiable instruments
payable to Seller, Purchaser shall forward said checks or negotiable
instruments directly to Seller. Every Monday during the first 120 days
following Closing, Purchaser shall provide to Seller a weekly reconciliation
(the "Receipts Report") for Seller's review and approval, together with a copy
of the remittance advice sent to Purchaser by any third party intermediary
with respect to Seller's Non-Private Pay Receivables. The Receipts Report
shall be sent by Purchaser to Seller every other Monday once the first 120
days after Closing have expired until such time as all of Seller's Accounts
Receivables have been paid to Seller and during such period following said
first 120 days after Closing Seller shall upon twenty four hours (24) prior
notice be allowed access necessary in order for Seller at its own cost to
verify the Receipts Reports that it has received from Purchaser, which access
right shall in all events expire at the earlier of sixty (60) days following
Seller's receipt of the final Receipts Report or two (2) years following the
Closing Date. Seller hereby acknowledges that all receipts attributable to
Seller's Accounts Receivable will be commingled with Purchaser's funds but, in
all events shall be remitted to Seller no later than the third business day
next following the date when the Receipts Report was, or should have been,
delivered to Seller. Seller shall instruct Blue Cross to remit payments under
Seller's current provider number directly to Seller.
(d) For a period of one hundred and twenty (120) days
following Closing, Seller shall also upon twenty-four (24) hours' prior notice
be allowed access during Purchaser's normal business hours to such books and
records of Purchaser as are necessary for Seller to review in order for Seller
to verify that Seller is being remitted the payments required to be remitted
to Seller pursuant to this Paragraph 21.
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<PAGE>
22. PATIENT FUNDS. On the Closing Date, Seller shall provide
Purchaser with an accounting of all funds belonging to patients at the
Property which are held by Seller in a custodial capacity. Such accounting
shall set forth the names of the patients for whom such funds are held, the
amounts held on behalf of each such patient and the Seller's warranty that the
accounting is true, correct and complete.
23. TRANSFER OF PATIENT FUNDS. On the Closing Date, Seller,
in accordance with all applicable rules and regulations, shall transfer the
funds referred to in Section 22 hereof to a bank account designated by
Purchaser, and Purchaser shall in writing acknowledge receipt of and expressly
assume all the Seller's financial and custodial obligations with respect
thereto.
24. SELLER INDEMNITY REGARDING PATIENT FUNDS.
Notwithstanding the foregoing, Seller will indemnify and hold Purchaser
harmless from all liabilities, claims and demands, including reasonable
attorney's fees, in the event the amount of funds, if any, transferred to
Purchaser's bank account as provided in Section 23 above, did not represent
the full amount of the funds then or thereafter shown to have been delivered
to Seller as custodian or with respect to any matters relating to patient
funds which arise or relate to any period prior to the Closing Date.
25. EMPLOYEE MATTERS AND PATIENT RECORDS. At the Closing
Date, Seller shall provide Purchaser with a schedule of the gross amount of
all earned and accrued sick pay, vacation pay, personal holiday pay, FICA,
federal unemployment taxes and workers' compensation payments as of the
Closing Date ("Seller's Benefits"), which schedule shall include the names and
addresses of the employees to whom Seller's Benefits are owed. Purchaser shall
be entitled to a credit against the cash portion of the Purchase Price equal
to the amount of Seller's Benefits.
26. TERMINATION OF SELLER EMPLOYEES. Effective as of 11:00
p.m. on the day immediately preceding the Closing Date, the Seller shall
terminate the employment of all of the employees and shall pay to all of the
employees all salaries, wages due or accrued for periods prior to 11:01 p.m.
on the day immediately preceding the Closing Date. The Seller timely shall pay
to all applicable governmental and regulatory authorities all
employment-related taxes due with respect to the employees for periods prior
to 11:01 p.m. on the day immediately preceding the Closing Date. On the
Closing Date, the Purchaser shall offer employment to such employees as
Purchaser may elect in its sole discretion. Such offers of employment shall be
on such terms and at such salary or wage and benefit levels as Purchaser may
determine. Anything to the contrary notwithstanding, this Agreement shall not
be deemed to create any third party beneficiary rights to any third party.
27. DELIVERY OF MEDICAL RECORDS. Seller shall, on the
Closing Date, transfer and deliver to Purchaser all medical records and other
personal information concerning all patients residing at the Property as of
the Closing Date. Such transfer and delivery shall be in accordance with all
applicable laws, rules and regulations concerning the transfer of medical
records and other types of patient records.
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<PAGE>
28. BULK SALES LAW. Purchaser hereby waives compliance by
Seller with the provisions of any applicable Bulk Sales Law. Seller hereby
agrees to indemnify and hold Purchaser harmless against and in respect of any
claims, losses, liabilities, damages or expenses (including reasonable
attorney's fees) incurred by or asserted against Purchaser as a result of such
non-compliance; provided that nothing herein shall prevent Seller from
contesting any such liability in good faith.
29. NOTICES. Any notice, request or other communication to
be given by any party hereunder shall be in writing and shall be sent by
recognized overnight courier or registered or certified mail, postage prepaid,
return receipt requested to the following address:
To Seller: Genesis Development Group
Attn: Joseph Travaglini
375 Morris Road, P.O. Box 200
West Point, Pennsylvania 19486
Copy to: Blank, Rome, Comisky & McCauley
Attn: Stephen E. Luongo, Esq.
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
To Purchaser: Hunter Acquisition L.L.C.
c/o Eric Rothner
5301 W. Touhy Avenue
Skokie, Illinois 60077
Copy to: Albert Milstein, Esq.
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Notice shall be deemed delivered three (3) days after deposit in the mail or
upon receipt from an overnight courier.
30. ASSIGNMENT. Neither party may assign its rights
hereunder without the other party's prior written consent, provided, however,
that Purchaser shall have the right to cause to be formed prior to the Closing
such number of Indiana limited liability companies as Purchaser in its sole
discretion deems appropriate for purposes of being designated by Purchaser the
nominee or nominees, as the case may be, of Purchaser's rights and obligations
under this Agreement and Purchaser shall not be relieved of any liability
under this Agreement as a result of such assignment.
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<PAGE>
31. SOLE AGREEMENT. This Agreement may not be amended or
modified in any respect whatsoever except by an instrument in writing signed
by the parties hereto. This Agreement constitutes the entire agreement between
the parties hereto.
32. SUCCESSORS. Subject to the limitations on assignment set
forth above, all the terms of this Agreement shall be binding upon and inure
to the benefit of and be enforceable by and against the heirs, successors and
assigns of the parties hereto.
33. CAPTIONS. The captions of this Agreement are for
convenience of reference only and shall not define or limit any of the terms
or provisions hereof.
34. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana.
35. SEVERABILITY. Should any one or more of the provisions
of this Agreement be determined to be invalid, unlawful or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be affected or impaired thereby and
each such provision shall be valid and remain in full force and effect.
36. GENDER. All nouns and pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, neuter, singular
or plural as the identity of the person or persons, firm or firms, corporation
or corporations, entity or entities or any other thing or things may require.
37. RISK OF LOSS. Until the Closing the risk of loss for the
Property shall be that of the Seller. The Purchaser shall bear the risk of
loss of the Property from and after the Closing.
38. HOLIDAYS. Whenever under the terms and provisions of
this Agreement the time for performance falls upon a Saturday, Sunday or legal
holiday, such time for performance shall be extended to the next business day.
39. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
40. DEFINITION OF KNOWLEDGE. As used in this Agreement, an
individual will be deemed to have "knowledge" of a particular fact or other
matter if such individual is actually aware of such fact or other matter. A
Person other than an individual will be deemed to have "knowledge" of a
particular fact or other matter if any individual who is serving as a
director, officer or partner of such person has "knowledge" of such fact or
other matter.
[Signature Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement by parties legally entitled to do so as of the day and year first
set forth above.
SELLER: PURCHASER:
GENESIS HEALTH VENTURES OF HUNTER ACQUISITION L.L.C., an
INDIANA, INC., a Pennsylvania Illinois limited liability company
corporation
By: By:
------------------------------- --------------------------------
Its: Eric Rothner, one of its managing
------------------------ members
HALLMARK HEALTHCARE LIMITED
PARTNERSHIP, a Maryland limited
partnership
By: Meridian Inc., a Pennsylvania
corporation and one of its
General Partners
By:
-----------------------
Its:
----------------
JOINDER
GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation, hereby joins
in the execution of this Agreement for the purpose of joining in as an
Indemnifying Party on behalf of Seller with respect to the obligations of
Seller set forth in Sections 18(a) and 12(a)(vii) of this Agreement.
GENESIS HEALTH VENTURES, INC., a
Pennsylvania corporation
By:
----------------------------------
Its:
---------------------------------
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<PAGE>
Exhibit H(a)
FORM OF ESTOPPEL CERTIFICATE
DATED: __________________
TO: Hunter Acquisition L.L.C.
c/o Eric Rothner
5301 W. Touhy Avenue
Skokie, Illinois 60077
Re: That certain property commonly known as
--------------------------------
-----------------------------------------------------------------------
(the "Building").
-------------------------------------
Gentlemen:
The following statements are made with the knowledge that you are
relying on them in connection with the assignment to ______________________,
your nominee (the "Nominee") of the Lease referred to below in connection
therewith, and you and your Nominee and your respective successors and assigns
may rely on them for that purpose. The undersigned hereby acknowledges receipt
of that certain Assignment and Assumption Agreement executed by Tenant and
Nominee and consents to the terms and conditions thereof.
The undersigned ("Landlord"), being the Landlord under the lease
referred to in Paragraph 1 below, covering certain premises ("Leased
Premises") in the Building hereby certifies to you that the following
statements are true, correct and complete as of the date hereof:
1. ___________________________________ ("Tenant") is the tenant under a
lease with Landlord dated ______, 19 ___, demising to Tenant _________________
square feet in the Building. The initial term of the lease commenced on
____________, 19 __, will expire on , exclusive of unexercised renewal options
and extension options contained in the lease. There have been no amendments,
modifications or revisions to the lease, and there are no agreements of any
kind between Landlord and Tenant regarding the Leased Premises, except as
provided in the lease or except as follows: (if none, write "none").
The lease, and all amendments and other agreements referred to above are
referred to in the following portions of this letter collectively as the
"Lease."
2. The Lease has been duly authorized and executed by Landlord and is in
full force and effect, and Landlord has attached hereto a true, correct and
complete copy of the Lease.
3. Tenant has accepted and is in sole possession of the Leased Premises
and is presently occupying the Leased Premises. The Lease has not been
assigned, by operation of law or otherwise, by Landlord or Tenant and no
sublease, concession agreement or license, covering the Leased Premises, or
any portion of the Leased Premises, has been entered into by Tenant.
<PAGE>
4. Tenant began paying rent on ___________. Tenant is obligated to pay
fixed or base rent under the Lease in the annual amount of $____________,
payable in monthly installments of $_______________. No rent under the Lease
has been paid more than one (1) month in advance, and no other sums have been
deposited with Landlord other than $_______________ deposited as security
under the Lease. Except as specifically stated in the Lease, Tenant is
entitled to no rent concessions or free rent. Percentage Rent for the last
lease year ending ________, 19 ___, in the amount of $________________ based
on Tenant's receipts of $__________________ has been paid by Tenant to
Landlord. The Lease provides for the Tenant to pay _________________ percent
(_______________%) of any increase in operating expenses and real property
taxes in excess of the ____________ base year operating expenses and real
property taxes of $_______________.
5. All conditions and obligations of Landlord relating to completion of
tenant improvements and making the Leased Premises ready for occupancy by
Tenant have been satisfied or performed and all other conditions and
obligations under the Lease to be satisfied or performed, or to have been
satisfied or performed, by Landlord as of the date hereof have been fully
satisfied or performed.
6. There exists no defense to, or right of offset against, enforcement
of the Lease by Landlord. Neither Landlord nor Tenant is in default under the
Lease and no event has occurred which, with the giving of notice or passage of
time, or both, could result in such a default.
7. Landlord has not received any notice of any present violation of any
federal, state, county or municipal laws, regulations, ordinances, orders or
directives relating to the use or condition of the Leased Premises or the
Building.
8. Except as specifically stated in the Lease, Tenant has not been
granted: (a) any option to extend the term of the Lease, (b) any option to
expand the Leased Premises or to lease additional space within the Building,
(c) any right of first refusal on any space in the Building, (d) any right to
terminate the Lease prior to its stated expiration, or (e) any option or right
of first refusal to purchase the Leased Premises or the Building or any part
thereof.
LANDLORD
----------------------------------------
(Name of Landlord)
By:
-------------------------------------
Title:
--------------------------------
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<PAGE>
EXHIBIT 3.1
Microfilm Number ________ Filed with the Department of State on Feb 12, 1993
-------------
Entity Number 869683
--------- ------------------------------------------------
Secretary of the Commonwealth
GENESIS HEALTH VENTURES, INC.
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: Genesis Health Ventures, Inc.
----------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 148 West State Street Kennett Square PA 19348 Chester
- -------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:___________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it
was incorporated is: Act of May 5, 1933 (P.L. 364), as amended
------------------------------------------------------
4. The date of its incorporation is: May 16, 1985
---------------------------------------
5. (Check, and if appropriate complete, one of the following):
__x__ The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
_____ The amendment shall be effective
on:__________________________at____________________________
Date Hour
6. (Check one of the following):
__x__ The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S. ss. 1914(a) and (b).
_____ The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
__x__ The amendment adopted by the corporation, set forth in full, is as
follows:
RESOLVED, that the Articles of Incorporation of the Company be and
they hereby are amended and restated in their entirety as set forth on
Exhibit "A" hereto.
_____ The amendment adopted by the corporation is set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
8. (Check if the amendment restates the Articles):
__x__ The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
_______ day of ________, 1993.
GENESIS HEALTH VENTURES, INC.
By: /s/ Lewis J. Hoch
--------------------------------
Lewis J. Hoch
Secretary
<PAGE>
EXHIBIT "A"
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF GENESIS HEALTH VENTURES, INC.
1. The name of the corporation is Genesis Health Ventures, Inc.
2. The location and address of the registered office of the
corporation is 148 West State Street, Kennett Square, Pennsylvania 19348.
3. The corporation is incorporated under the Business Corporation Law
of the Commonwealth of Pennsylvania for the following purposes:
To have unlimited power to engage in or to do any lawful act
concerning any or all lawful businesses for which corporations
may be incorporated under the Pennsylvania Business
Corporation Law, as amended, and to own, operate and manage
businesses engaged in healthcare services.
4. The term for which the corporation is to exist is perpetual.
5. The aggregate number of shares which the corporation shall have
authority to issue is twenty-five million (25,000,000) shares, consisting of
(a) twenty million (20,000,000) shares of common stock, par value $.02 per
share, and (b) five million (5,000,000) shares of preferred stock, as more
fully described in Article 6 below ("Preferred Stock").
6. The shares of Preferred Stock may be divided and issued from time
to time in one or more series as may be designated by the Board of Directors
of the corporation, each such series to be distinctly titled and to consist of
the number of shares designated by the Board of Directors. All shares of any
one series of Preferred Stock so designated by the Board of Directors shall be
alike in every particular, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon (if
any) shall accrue or be cumulative (or both). The designations, preferences,
qualifications, limitations, restrictions, and special or relative rights (if
any) of any series of Preferred Stock may differ from those of any and all
other series at any time outstanding. The Board of Directors of the
corporation is hereby expressly vested with authority to fix by resolution the
designations, preferences, qualifications, limitations, restrictions and
special or relative rights (if any) of the Preferred Stock and each series
thereof which may be designated by the Board of Directors, including, but
without limiting the generality of the foregoing, the following:
(a) the voting rights and powers (if any) of the Preferred Stock and
each series thereof;
(b) the rates and times at which, and the terms and conditions on
which, dividends (if any) on Preferred Stock, and each series thereof, will be
paid, and any dividend preferences or rights of cumulation;
(c) the rights (if any) of holders of Preferred Stock, and each
series thereof, to convert the same into, or exchange the same for, shares of
other classes (or series of classes) of capital stock of the corporation and
the terms and conditions for such conversion or exchange, including provisions
<PAGE>
for adjustment of conversion or exchange prices or rates in such events as the
Board of Directors shall determine;
(d) the redemption rights (if any) of the corporation and the
holders of the Preferred Stock and each series thereof and the times at which,
and the terms and conditions on which, Preferred Stock, and each series thereof,
may be redeemed; and
(e) the rights and preferences (if any) of the holders of
Preferred Stock, and each series thereof, upon the voluntary liquidation,
dissolution or winding up of the corporation.
7. Shareholders of the corporation are not entitled to cumulate their
votes in the election of directors.
8. (a) The Board of Directors shall be divided into three classes,
Class I, Class II and Class III, which shall be as nearly equal in number as
possible. Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was
elected; provided, however, that each director in Class I shall hold office
until the annual meeting of shareholders in 1995 (or until the action of
shareholders in lieu thereof); each director in Class II shall hold office
until the annual meeting of shareholders in 1996 (or until the action of
shareholders in lieu thereof); and each director in Class III shall hold
office until the annual meeting of shareholders in 1994 (or until the action
of shareholders in lieu thereof).
(b) The number of directors which shall constitute the whole Board
of Directors of the corporation shall be the number from time to time fixed by
the bylaws of the corporation (which number shall not be less than three), and
such number of directors so fixed in such bylaws may be changed only by
receiving the affirmative vote of (i) the holders of at least eighty percent
(80%) of all the shares of the corporation then entitled to vote on such
change, or (ii) seventy-five percent (75%) of the directors in office at the
time of vote. When the number of directors is changed, any increase or
decrease in the number of directorships shall be apportioned among the classes
so as to make all classes as nearly equal in number as possible. The directors
of this corporation need not be shareholders.
(c) Each director shall serve until his successor is elected and
qualified or until his death, retirement, resignation or removal. Should a
vacancy occur or be created, whether arising through death, resignation,
retirement or removal of a director, such vacancy shall be filled by a
majority vote of the remaining directors. A director so elected to fill a
vacancy shall serve for the remainder of the then present term of office of
the class to which he was elected.
(d) Any director, or the entire Board of Directors, may be removed
from office at any time, with or without cause, but only by the affirmative
vote of the holders of at least eighty percent (80%) of all of the outstanding
shares of capital stock of the corporation entitled to vote for that purpose,
except that if the Board of Directors, by an affirmative vote of at least
seventy-five percent (75%) of the entire Board of Directors, recommends
removal of a director to the shareholders, such removal may be effected by the
affirmative vote of the holders of at least a majority of the outstanding
shares of capital stock of the corporation entitled to vote on the election of
directors at a meeting of shareholders called for that purpose.
9. Special meetings of the shareholders, for any purpose or purposes,
may be called by the Chairman of the Board and shall be called by the
Secretary at the request in writing of a majority of the Board of Directors or
shareholders entitled to cast thirty percent (30%) of the votes which all
A-2
<PAGE>
shareholders are entitled to cast at the particular meeting. Any such request
of directors or shareholders shall state the purpose or purposes of the
proposed meeting.
10. Except for a "Business Combination" (as defined below) which has
been approved by the affirmative vote of at least seventy-five percent (75%) of
the entire Board of Directors of the corporation, any Business Combination, in
addition to any affirmative vote required by law, shall require the affirmative
vote of the holders of at least eighty percent (80%) of the voting power of the
then outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors (the "Voting Stock"), voting together as
a single class (it being understood that for purposes of this Article 10, each
share of the Voting Stock shall have the number of votes granted to it pursuant
to Articles 5 and 6 of these Articles of Incorporation). Such affirmative vote
shall be required notwithstanding the fact that no vote may be required, or that
a lesser percentage may be specified, by law or in any agreement with any
national securities exchange or otherwise. The term "Business Combination" as
used in this Article 10 shall mean:
(a) any merger or consolidation of the corporation or any
corporation of which the shares of stock having a majority of the
general voting power in electing the Board of Directors are, at the
time as of which any determination is being made, owned by the
corporation either directly or indirectly ("Subsidiary"); or
(b) any sale, lease, exchange, transfer or other disposition
(in one transaction or a series of transactions) of all or
substantially all of the assets of the corporation and its
Subsidiaries; provided that transactions which are financing
transactions (such as sale-leaseback transactions) shall not be
deemed to be Business Combinations for purposes of this Article 10;
or
(c) the adoption of any plan or proposal for the liquidation
or dissolution of the corporation; or
(d) any reclassification of securities (including any reverse
stock split) or recapitalization of the corporation, or any merger or
consolidation of the corporation with any Subsidiary.
11. Notwithstanding any other provisions of these Amended and Restated
Articles of Incorporation or the bylaws of the corporation (and notwithstanding
the fact that a lesser percentage may be specified by law, these Amended and
Restated Articles of Incorporation or the bylaws of the corporation), the
affirmative vote of the holders of eighty percent (80%) or more of the
outstanding Voting Stock, voting together as a single class, shall be required
to amend or repeal, or adopt any provisions inconsistent with (collectively,
"Amend") Articles 8, 9, 10, 11, 12 or 13 of these Articles of Incorporation,
unless such Amendment has been approved by the affirmative vote of at least
seventy-five percent (75%) of the entire Board of Directors of the corporation,
in which event such Amendment may be approved by the affirmative vote the
holders of a majority of the outstanding Voting Stock, voting together as a
single class.
12. As provided in the corporation's Amended and Restated Articles of
Incorporation filed on March 29, 1991 with the Department of State of the
Commonwealth of Pennsylvania, the corporation reaffirms that the provisions
contained in Subchapters E, G, H, I and J of Chapter 25 of the Pennsylvania
Business Corporation Law, as it may be amended from time to time, shall not be
applicable to the corporation.
A-3
<PAGE>
13. (a) The Board of Directors may, if it deems it advisable, oppose a
tender or other offer for the corporation's securities, whether the offer is in
cash or in securities of a corporation or otherwise. When considering whether to
oppose an offer, the Board of Directors may, but it is not legally obligated to,
consider any pertinent issues. By way of illustration, but not of limitation,
the Board of Directors may, but shall not be legally obligated to consider any
and all of the following:
(i) whether the offer price is acceptable based on the
historical and present operating results or financial conditions of
the corporation;
(ii) whether a more favorable price could be obtained for
the corporation's securities in the future;
(iii) the impact which an acquisition of the corporation
would have on the employees, suppliers and customers of the
corporation and its Subsidiaries and on the communities served by the
corporation and its Subsidiaries;
(iv) the reputation and business practices of the offeror
and its management and affiliates as they would affect the employees,
suppliers and customers of the corporation and its Subsidiaries and
the future value of the corporation's stock;
(v) the value of the securities, if any, which the offeror
is offering in exchange for the corporation's securities, based on an
analysis of the worth of the corporation as compared to the entity
whose securities are being offered; and
(vi) any antitrust or other legal and regulatory issues that
are raised by the offer.
(b) If the Board of Directors determines that an offer should
be rejected, it may take any lawful action to accomplish its purpose including,
but not limited to, any and all of the following: (i) advising shareholders not
to accept the offer; (ii) commencing litigation against the offeror; (iii)
filing complaints with all governmental and regulatory authorities; (iv)
acquiring the corporation's securities; (v) selling or otherwise issuing
authorized but unissued securities or treasury stock or granting options with
respect thereto; (vi) acquiring a company to create an antitrust or other
regulatory problem for the offeror; and (vii) obtaining a more favorable offer
from another individual or entity.
A-4
<PAGE>
Microfilm Number ________ Filed with the Department of State on March 11, 1994
-------------
Entity Number 869683
--------- ------------------------------------------------
Secretary of the Commonwealth
GENESIS HEALTH VENTURES, INC.
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: Genesis Health Ventures, Inc.
----------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 148 West State Street Kennett Square PA 19348 Chester
- ------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:___________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it
was incorporated is: Pennsylvania Business Corporation Law of 1988
------------------------------------------------------
4. The date of its incorporation is: May 16, 1985
---------------------------------------
5. (Check, and if appropriate complete, one of the following):
__x__ The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
_____ The amendment shall be effective
on:__________________________at____________________________
Date Hour
6. (Check one of the following):
__x__ The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S. ss. 1914(a) and (b).
_____ The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
__x__ The amendment adopted by the corporation, set forth in full, is as
follows:
RESOLVED, that Article 5 of the Articles of Incorporation of Genesis
Health Ventures, Inc. should be amended and restated to read in full as
follows:
5. The aggregate number of shares which the corporation shall
have the authority to issue is Thirty million (30,000,000) shares,
consisting of (a) Twenty-five million (25,000,000) shares of common
stock, par value $.02 per share, and (b) Five million (5,000,000)
shares of preferred stock, as more fully described in Article 6 below
("Preferred Stock").
<PAGE>
8. (Check if the amendment restates the Articles):
_____ The restated Articles of Incorporation supersede the original
Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this 8th
day of March, 1994.
GENESIS HEALTH VENTURES, INC.
By: /s/ Lewis J. Hoch
---------------------------------------------
Lewis J. Hoch
Vice President, General Counsel & Secretary
<PAGE>
Microfilm Number ________ Filed with the Department of State on March 21, 1995
-------------
Entity Number 869683
--------- ------------------------------------------------
Secretary of the Commonwealth
GENESIS HEALTH VENTURES, INC.
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: Genesis Health Ventures, Inc.
----------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 148 West State Street Kennett Square PA 19348 Chester
- ------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:___________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was incorporated
is: Business Corporation Law, May 5, 1933, P.L. 364, as amended
-----------------------------------------------------------
4. The date of its incorporation is: May 16, 1985
---------------------------------------
5. (Check, and if appropriate complete, one of the following):
__x__ The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
_____ The amendment shall be effective
on:__________________________at____________________________
Date Hour
6. (Check one of the following):
__x__ The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S. ss. 1914(a) and (b).
_____ The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
__x__ The amendment adopted by the corporation, set forth in full, is as
follows:
Article 5 of the Articles of Incorporation of Genesis Health
Ventures, Inc. should be amended and restated to read in full as
follows:
5. The aggregate number of shares which the corporation shall have
authority to issue is Forty-five million (45,000,000) shares,
consisting of (a) Forty million (40,000,000) shares of common stock,
par value $.02 per share, and (b) Five million (5,000,000) shares of
preferred stock, as more fully described in Article 6 below
("Preferred Stock").
<PAGE>
8. (Check if the amendment restates the Articles):
_____ The restated Articles of Incorporation supersede the original Articles
and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
16th day of March , 1995.
GENESIS HEALTH VENTURES, INC.
By: /s/ Lewis J. Hoch
------------------------------------------
Lewis J. Hoch
Vice President, General Counsel & Secretary
<PAGE>
Microfilm Number ________ Filed with the Department of State on May 11, 1995
-------------
Entity Number 869083
--------- ------------------------------------------------
Secretary of the Commonwealth
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
DSCB:15-1522 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1522(b) (relating
to statement with respect to shares), the undersigned corporation, desiring to
state the designation and voting rights, preferences, limitations, and special
rights, if any, of a class or series of its shares, hereby states that:
1. The name of the corporation is: Genesis Health Ventures, Inc.
----------------------------
- --------------------------------------------------------------------------------
2. (Check and complete one of the following):
_____ The resolution amending the Articles under 15 Pa.C.S. ss. 1522(b)
(relating to divisions and determinations by the board), set forth in
full, is as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__X__ The resolution amending the Articles under 15 Pa.C.S. ss. 1522(b) is
set forth in full in Exhibit A attached hereto and made a part hereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements, if any, filed
under 15 Pa.C.S. ss. 1522 or corresponding provisions of prior law with
respect thereto, and (c) any other provision of the Articles is 100,000
shares.
4. The resolution was adopted by the Board of Directors or an authorized
committee thereof on: April 20, 1995.
5. (Check, and if appropriate complete, one of the following):
__x__ The resolution shall be effective upon the filing of this statement
with respect to shares in the Department of State.
_____ The amendment shall be effective
on:__________________________at____________________________
Date Hour
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
statement to be signed by a duly authorized officer thereof this 11th day of
May, 1995.
GENESIS HEALTH VENTURES, INC.
BY: /s/ George V. Hager, Jr.
-------------------------------------------------
George V. Hager, Jr.
Senior Vice President and Chief Financial Officer
<PAGE>
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
GENESIS HEALTH VENTURES, INC.
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the corporation (the "Board") by the
provisions of Article 6 of the Amended and Restated Articles of Incorporation of
the corporation ("Articles") and the provisions of Sections 1521 and 1522 of the
Pennsylvania Business Corporation Law of 1988, as amended, the Board hereby
creates a series of preferred stock, par value $.01 per share, and determines
the designation and number of shares which constitute such series and the
relative rights, preferences and limitations of such series as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be 100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of Preferred Stock (or any similar stock) ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of Common Stock, par
value $0.02 per share (the "Common Stock"), of the corporation, and of any
other junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable on the first business day of February, May, August
and November in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date") as provided in paragraphs (B) and (C) of
this Section 2 in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $1.00 in cash or (b) subject to the provision for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount
(payable in cash) of all cash dividends, and 1,000 times the aggregate per
share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. If the corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
A-1
<PAGE>
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that was outstanding immediately prior to such event.
(B) The corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, if no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share payable in cash
on the Series A Preferred Stock shall nevertheless accrue and be cumulative on
the outstanding shares of Series A Preferred Stock as provided in paragraph (C)
of this Section 2.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the date
of issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of holders
of shares of Series A Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than 60 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the corporation.
If the corporation shall at any time declare of pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number the of shares of Common Stock that was outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the corporation having
A-2
<PAGE>
general voting rights shall vote together as one class on all matters
submitted to a vote of stockholders of the corporation.
(C) Except as set forth herein or as otherwise provided by law, holders
of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, or declared and a sum sufficient for the payment therefor be
set apart for payment and be in the process of payment, the corporation shall
not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled:
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
A Preferred Stock, provided that the corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the corporation ranking junior
(as to both dividends and upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock or any shares of stock ranking
on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the holders of the
respective series or classes.
(B) The corporation shall not permit any subsidiary of the corporation
to purchase or otherwise acquire for consideration any shares of stock of the
corporation unless the corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
A-3
<PAGE>
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in
the Articles of Incorporation, or in any other Certificate of Designation
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or as to amounts payable upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the holders of Series A
Preferred Stock shall have received an amount per share (rounded to the nearest
cent) equal to greater of (a) $1,000 per share, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of Common
Stock, plus, in either case, an amount equal to accrued and unpaid dividends and
distribution thereon, whether or not declared, to the date of such payment, or
(2) to the holders of stock ranking on a parity (either as to dividends or as to
amounts payable upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such Shares are entitled upon such liquidation, dissolution or
winding up. If the corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1)(b) of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding after such event and the denominator of which
is the number of shares of Common Stock that was outstanding immediately prior
to such event.
Section 7. Consolidation, Merger, etc. If the corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, or any combination thereof, then in any
such case each share of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provisions for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount of stock, securities, cash or any other property (payable in
kind), or any combination thereof, as the case may be, into which or for which
each share of Common Stock is changed or exchanged. If the corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that was outstanding immediately
prior to such event.
Section 8. Redemption. The shares of Series A Preferred Stock shall not
be redeemable. So long as any shares of Series A Preferred Stock remain
outstanding, the corporation shall not purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock (except
as provided in 4(A)(iii))unless the corporation shall substantially concurrently
also purchase or acquire for consideration a proportionate number of shares of
Series A Preferred Stock.
A-4
<PAGE>
Section 9. Rank. The Series A Preferred Stock shall rank, with respect
to payment of dividends and the distribution of assets, junior to all series of
any other class of the corporation's Preferred Stock provided the Board in its
absolute discretion may issue other such series or classes of the corporation's
Preferred Stock which rank junior to the Series A Preferred Stock.
Section 10. Amendment. The Articles of Incorporation of the corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences, privileges or special rights of the Series A Preferred
Stock so as to affect them adversely without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Series A Preferred Stock,
voting together as a single class.
A-5
<PAGE>
Microfilm Number ________ Filed with the Department of State on March 13, 1996
-------------
Entity Number 869683
--------- ------------------------------------------------
Secretary of the Commonwealth
GENESIS HEALTH VENTURES, INC.
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. ss. 1915 (relating to
articles of amendment), the undersigned business corporation, desiring to amend
its Articles, hereby states that:
1. The name of the corporation is: Genesis Health Ventures, Inc.
----------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
(a) 148 West State Street Kennett Square PA 19348 Chester
- ------------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:___________________________________________________________________
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it
was incorporated is: Act of May 5, 1933 (P.L. 364), as amended
------------------------------------------------------
4. The date of its incorporation is: May 16, 1985
---------------------------------------
5. (Check, and if appropriate complete, one of the following):
_____ The amendment shall be effective upon filing these Articles of
Amendment in the Department of State.
__x__ The amendment shall be effective
on: March 15, 1996 at 12:01 a.m.
------------------------- -------------------------------------
Date Hour
6. (Check one of the following):
_____ The amendment was adopted by the shareholders (or members) pursuant
to 15 Pa.C.S. ss. 1914(a) and (b).
__x__ The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. ss. 1914(c).
7. (Check, and if appropriate complete, one of the following):
_____ The amendment adopted by the corporation, set forth in full, is as
follows:
__x__ The amendment adopted by the corporation is set forth in full in
Exhibit A attached hereto and made a part hereof.
<PAGE>
8. (Check if the amendment restates the Articles):
_____ The restated Articles of Incorporation supersede the original Article
and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this 7th
day of March, 1996.
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
-----------------------------------------
Michael R. Walker
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT "A"
GENESIS HEALTH VENTURES, INC.
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
Article 5 of the Articles of Incorporation of the corporation, as
amended, shall be amended to read in full as follows:
"The aggregate number of shares which the corporation shall
have authority to issue is Sixty-Five Million (65,000,000)
shares, consisting of: (a) Sixty Million (60,000,000) shares
of common stock, par value $.02 per share, and (b) Five
Million (5,000,000) shares of preferred stock, as more fully
described in Article 6."
<PAGE>
EXHIBIT 11
GENESIS HEALTH VENTURES
COMPARATIVE EARNINGS PER SHARE CALCULATION
QUARTERS ENDED MARCH 31, 1996 AND 1995
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
3/31/96 3/31/95
--------- ---------
<S> <C> <C>
Primary Earnings Per Share:
Reported earnings before debenture conversion expense $ 7,809 $ 5,813
Debenture conversion expense, net of tax
----------- -----------
Reported net income $ 7,809 $ 5,813
----------- -----------
Weighted average shares & CSE's: 25,306,685 22,674,336
----------- -----------
Primary EPS before debenture conversion expense $ 0.31 $ 0.26
Primary EPS - Debenture conversion expense
=========== ===========
Primary EPS - Net income $ 0.31 $ 0.26
=========== ===========
Fully Diluted Earnings Per Share:
Reported earnings before debenture conversion expense $ 7,809 $ 5,813
Debenture conversion expense, net of tax
----------- -----------
Reported net income $ 7,809 $ 5,813
----------- -----------
Adjustments to net income:
Interest expense, amortization and other costs
related to the assumed conversion of the
Convertible Debentures, net of tax 697 975
----------- -----------
Adjusted net income $ 8,506 $ 6,788
----------- -----------
Weighted average shares & CSE's:
Common shares 25,306,685 22,674,336
Additional option shares 26,591
Convertible Debenture shares 3,491,048 5,710,407
----------- -----------
Total 28,797,732 28,411,334
----------- -----------
Fully diluted EPS before debenture conversion expense $ 0.30 $ 0.24
and cumulative effect of a change in
Fully diluted EPS - Debenture conversion expense
=========== ===========
Fully diluted EPS - Net income $ 0.30 $ 0.24
=========== ===========
</TABLE>
<PAGE>
GENESIS HEALTH VENTURES
COMPARATIVE EARNINGS PER SHARE CALCULATION
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
3/31/96 3/31/95
--------- ----------
<S> <C> <C>
Primary Earnings Per Share:
Reported earnings before debenture conversion expense $ 14,355 $ 10,623
Debenture conversion expense, net of tax (687)
------------ ------------
Reported net income $ 13,668 $ 10,623
------------ ------------
Weighted average shares & CSE's: 24,730,820 22,618,641
------------ ------------
Primary EPS before debenture conversion expense $ 0.58 $ 0.47
Primary EPS - Debenture conversion expense ($ 0.03)
------------ ------------
Primary EPS - Net income $ 0.55 $ 0.47
Fully Diluted Earnings Per Share:
Reported earnings before debenture conversion expense $ 14,355 $ 10,623
Debenture conversion expense, net of tax (687)
Cumulative effect on prior years of
changing to a different method of
accounting for income taxes
------------ ------------
Reported net income 13,668 10,623
Adjustments to net income:
Interest expense, amortization and other costs
related to the assumed conversion of the
Convertible Debentures, net of tax 1,485 1,966
------------ ------------
Adjusted net income $ 15,153 $ 12,589
------------ ------------
Weighted average shares & CSE's:
Common shares 24,730,820 22,618,641
Additional option shares 40,449
Convertible Debenture shares 4,085,900 5,710,407
------------ ------------
Total 28,816,719 28,369,497
------------ ------------
Fully diluted EPS before debenture conversion expense $ 0.55 $ 0.44
Fully diluted EPS - Debenture conversion expense ($ 0.02)
============ ============
Fully diluted EPS - Net income $ 0.53 $ 0.44
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,798
<SECURITIES> 0
<RECEIVABLES> 128,431
<ALLOWANCES> 7,557
<INVENTORY> 11,828
<CURRENT-ASSETS> 206,292
<PP&E> 360,604
<DEPRECIATION> (56,594)
<TOTAL-ASSETS> 734,076
<CURRENT-LIABILITIES> 61,807
<BONDS> 0
0
0
<COMMON> 331
<OTHER-SE> 269,274
<TOTAL-LIABILITY-AND-EQUITY> 734,076
<SALES> 287,517
<TOTAL-REVENUES> 287,517
<CGS> 233,910
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,096
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,979
<INCOME-PRETAX> 21,532
<INCOME-TAX> 7,864
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,608
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.53
</TABLE>
