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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
GENESIS HEALTH VENTURES, INC.
................................................
(Name of Registrant as Specified In Its Charter)
Not Applicable
................................................................................
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement no.:
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3) Filing Party:
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4) Date Filed:
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GENESIS HEALTH VENTURES, INC.
101 EAST STATE STREET
KENNETT SQUARE, PA 19348-3021
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
_______________, 1999
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To our shareholders:
You are cordially invited to attend a special meeting of Genesis Health
Ventures, Inc. which will be held at [ ], on [ ], 1999 at
10:00 a.m. for the following purposes:
o To approve an amendment to Genesis' articles of incorporation increasing
the number of authorized shares of common stock from 60,000,000 to
200,000,000 shares and creating a class of non-voting common stock.
o To approve, in connection with the restructuring of the joint venture
relating to our ownership of The Multicare Companies, Inc. and in
accordance with the rules of The New York Stock Exchange, the issuance of
the following securities:
o 12.5 million shares of our voting common stock,
o warrants to purchase 2 million shares of our voting common stock,
o 24,369 shares of our Series H Senior Convertible Participating
Cumulative Preferred Stock, which is initially convertible into
27,850,590 shares of our voting common stock, and
o 17,631 shares of our Series I Senior Convertible Exchangeable
Participating Cumulative Preferred Stock, which is initially
convertible into 20,149,410 shares of our non-voting common stock.
These securities are proposed to be issued in transactions described in
the attached proxy statement under the caption "Proposal Two --
Restructing Agreement." In connection with the transactions described in
"Proposal Two," in exchange for these securities Genesis will receive,
among other things, $50 million in additional equity capital.
o To transact such other business as may properly come before the meeting
or any postponement or adjournment thereof.
The board of directors has fixed _______________, 1999 as the record date
for the determination of shareholders entitled to vote at the special meeting or
any postponement or adjournment of the special meeting.
IF YOU PLAN TO ATTEND:
Only shareholders as of the record date, or their duly appointed proxies,
may attend the meeting. Seating is limited. Admission to the meeting will be on
a first-come, first-served basis. Registration and seating will begin at 9:30
a.m. Each shareholder may be asked to present valid picture identification, such
as a driver's license or passport. Please note that if your shares, or the
person or entity for whom you are the duly appointed proxy, are held in "street
name" (that is, through a broker or other nominee), you will need to bring a
copy of a brokerage statement reflecting stock ownership as of the record date.
Cameras, recording devices and other electronic devices will not be permitted at
the meeting.
Whether or not you expect to attend the meeting in person, you are urged to
sign and date the enclosed proxy card and return it promptly in the envelope
provided for that purpose.
By Order of the Board of Directors
/s/ Ira C. Gubernick
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IRA C. GUBERNICK
Vice President -- Office of the Chairman
and Corporate Secretary
[INSERT MAILING DATE], 1999
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GENESIS HEALTH VENTURES, INC.
101 EAST STATE STREET
KENNETT SQUARE, PA 19348-3021
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PROXY STATEMENT
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These proxy materials are delivered in connection with the solicitation by
the board of directors of Genesis Health Ventures, Inc. of proxies to be voted
at the special meeting and at any adjournment or postponement of the special
meeting.
These proxy materials are first being mailed to shareholders on or about
[INSERT MAILING DATE], 1999.
Shareholders Entitled to Vote; Voting Securities
Holders of record of Genesis common stock and Genesis Series G Cumulative
Convertible Preferred Stock at the close of business on [INSERT RECORD DATE] are
entitled to receive this notice and to vote their shares at the special meeting.
At the close of business on [INSERT RECORD DATE], Genesis' outstanding
voting securities consisted of 36,145,678 shares of common stock and [590,253]
shares of Series G Preferred Stock. Holders of common stock are entitled to one
vote per share, and holders of Series G Preferred Stock are entitled to [13.44]
votes per share.
HCR Manor Care, Inc., the beneficial owner of 586,240 shares of Series G
Preferred Stock, entered into a Rights Agreement dated April 26, 1998 with
Genesis whereby Manor Care agreed to vote under most circumstances, including on
the matters described in this proxy, its shares of Series G Preferred Stock in
accordance with the recommendation of Genesis' board of directors.
Quorum
The presence, in person or represented by proxy, of the holders of a
majority of the outstanding shares of Genesis' common stock and Series G
Preferred Stock will constitute a quorum for the transaction of business at the
special meeting. All shares of Genesis' common stock and Series G Preferred
Stock present in person or represented by proxy and entitled to vote at the
special meeting, no matter how they are voted or whether they abstain from
voting, will be counted in determining the presence of a quorum
Proxies
All proxies that have been properly given and not revoked will be voted in
accordance with your instructions. If you sign your proxy card but do not give
voting instructions, the shares represented by that proxy will be voted as
recommended by the board of directors. Sending in a signed proxy will in no way
limit your right to vote at the special meeting if you later decide to attend
the special meeting in person. Any shareholder giving a proxy may revoke it at
any time before it is voted at the meeting by delivering a later dated proxy or
by giving written notice to the Secretary of Genesis.
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Voting of Other Matters
If any other matters are properly presented at the special meeting for
consideration, the persons named in the enclosed proxy card will have the
discretion to vote on these matters for you. As of the date of this proxy
statement, we do not know of any other matter to be raised at the special
meeting.
Cost of Proxy Solicitation
The cost of this solicitation will be borne by Genesis. In addition to
solicitation by mail, proxies may be solicited in person or by telephone or
facsimile, by directors, officers or employees of Genesis and its subsidiaries
without additional compensation. In addition, ChaseMellon Shareholder Services,
L.L.C. will provide solicitation services to Genesis for a fee of approximately
$__________ plus out-of-pocket expenses. Genesis will, on request, reimburse
shareholders of record who are brokers, dealers, banks or voting trustees, or
their nominees, for their reasonable expenses in sending proxy materials to the
beneficial owners of the shares they hold of record.
Principal Shareholders
The following table sets forth certain information regarding the beneficial
ownership of Genesis' common stock as of August 31, 1999, by:
o each person who is known by Genesis to be the beneficial owner of more
than five percent of Genesis common stock,
o each of Genesis' directors;
o Genesis' chief executive officer and each of the other four most highly
compensated executive officers; and
o all of Genesis' directors and executive officers as a group.
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Beneficial ownership is determined in accordance with the rules of the SEC,
and generally includes securities as to which the person has or shares voting or
investment power.
Shares of
Common Stock Percent of
Beneficially Common
Owned Stock Owned
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Putnam Investments, Inc. (1)
One Post Office Square
Boston, Massachusetts 02109 .............. 3,289,151 9.1%
HCR Manor Care, Inc.
One Seagate
Toledo, OH 43604-2616 (2) ................ 7,879,570 17.9%
Jack R. Anderson (3) ..................... 304,500 *
Richard R. Howard (4) .................... 383,350 *
Samuel H. Howard (5) ..................... 22,500 *
Roger C. Lipitz (6) ...................... 117,500 *
Stephen E. Luongo (7) .................... 56,918 *
Alan B. Miller (8) ....................... 32,500 *
Michael R. Walker (9) .................... 1,026,400 *
David C. Barr (10) ....................... 261,770 *
George V. Hager, Jr. (11) ................ 161,353 *
Michael G. Bronfein (12) ................. 296,911 *
All executive officers and directors
as a group (18 persons) .................. 2,973,897 8.2%
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* Less than one percent.
(1) Based upon a Schedule 13G, dated January 28, 1998. Consists of 3,092,550
shares beneficially owned by Putnam Investment Management, Inc. and 196,601
shares beneficially owned by The Putnam Advisory Company, Inc. which are
registered investment advisors, and are wholly-owned by Putnam Investments,
Inc. Putnam Investments, Inc. is a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc.
(2) Consists of 586,240 shares of Series G Preferred Stock which are
convertible into 7,879,570 shares of common stock. Does not include shares
of common stock beneficially owned by Jack R. Anderson who is HCR Manor
Care's designee to the Board of Directors.
(3) Does not include shares of common stock beneficially owned by HCR Manor
Care; Jack R. Anderson is HCR Manor Care's designee to the Board of
Directors. Includes 4,500 shares of common stock which may be acquired upon
the exercise of stock options.
(4) Includes 280,650 shares of common stock which may be acquired upon the
exercise of stock options.
(5) Consists of 22,500 shares of common stock which may be acquired upon the
exercise of stock options.
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(6) Includes 22,500 shares of common stock which may be acquired upon the
exercise of stock options.
(7) Includes 34,500 shares of common stock which may be acquired upon the
exercise of stock options.
(8) Includes 27,000 shares of common stock which may be acquired upon the
exercise of stock options.
(9) Includes 567,500 shares of common stock which may be acquired upon the
exercise of stock options.
(10) Includes 231,770 shares of common stock which may be acquired upon the
exercise of stock options.
(11) Includes 129,500 shares of common stock which may be acquired upon the
exercise of stock options.
(12) Includes 80,000 shares of common stock which may be acquired upon the
exercise of stock options.
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PROPOSAL ONE
Approval of Amendment to Genesis'
Articles of Incorporation
Under Genesis' articles of incorporation, Genesis is authorized to issue up
to 60,000,000 shares of common stock. As of August 31, 1999, 36,145,678 shares
of common stock were issued and outstanding, 5,350,781 shares of common stock
were reserved for issuance under Genesis' stock option plans and 7,933,508
shares of common stock were reserved for issuance upon the conversion of the
Series G Preferred Stock. Thus, of the 60,000,000 shares of common stock
currently authorized, 10,570,033 shares are unissued and unreserved.
On __________ 1999, the Genesis board of directors approved an amendment to
Genesis' articles of incorporation that increased the maximum number of
authorized shares of common stock by 185,000,000 shares to a total of
250,000,000 shares, subject to approval by the shareholders of Genesis. If the
shareholders do not approve this amendment to the articles of incorporation,
then the number of authorized shares of Genesis' common stock will remain at
60,000,000. In addition, subject to shareholder approval, the amendment to
Genesis' articles provides for the creation of a class of non-voting common
stock. This non-voting common stock is identical in all respects to the existing
common stock except that holders of the non-voting common stock do not have the
right to vote other than as provided by law.
IF THIS PROPOSAL ONE IS NOT APPROVED, GENESIS WILL NOT HAVE SUFFICIENT
AUTHORIZED AND UNISSUED SHARES UNDER ITS ARTICLES OF INCORPORATION TO CONSUMMATE
THE RESTRUCTURING OF THE MULTICARE JOINT VENTURE DESCRIBED IN PROPOSAL TWO.
The purpose of the proposed amendment to Genesis' articles of incorporation
is to provide sufficient shares of common stock for the restructuring of the
Multicare joint venture. In addition, additional shares are being authorized to
provide sufficient shares for:
o future acquisitions;
o benefit plans;
o recapitalizations; and
o other corporate purposes.
Once authorized, the additional shares of common stock may be issued by the
board of directors without further action by the shareholders, unless such
action is required by law or applicable stock exchange requirements.
Accordingly, this solicitation may be the only opportunity for the shareholders
to take action in connection with certain acquisitions, benefit plans,
recapitalizations and other corporate actions.
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The resolutions to be considered by the shareholders at the meeting read 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
authority to issue is two hundred fifty million (250,000,000) shares, consisting
of (a) two hundred million (200,000,000) shares of common stock, par value $.02
per share, as more fully described in this Article 5, (b) forty five million
(45,000,000) shares of non-voting common stock, par value $.02 per share, as
more fully described in this Article 5, and (c) five million (5,000,000) shares
of preferred stock, as more fully described in Article 6 below.
Except as otherwise provided below in this Article 5, all shares of common
stock and non-voting common stock shall be identical and shall entitle the
holders thereof to the same rights and privileges.
Except as otherwise required by law or as otherwise provided herein, on all
matters submitted to the corporation's stockholders, (i) the holders of common
stock will be entitled to one vote per share and (ii) the holders of non-voting
common stock will have no right to vote.
When and as dividends are declared thereof, whether payable in cash,
property or securities of the corporation, the holders of common stock and the
holders of non-voting common stock will be entitled to share equally, share for
share, in such dividends, provided, that if dividends are declared which are
payable in shares of common stock or non-voting common stock, dividends will be
declared which are payable at the same rate on each of the common stock and the
non-voting common stock, and the dividends payable in shares of common stock
will be payable to holders of common stock, and the dividends payable in shares
of non-voting common stock will be payable to holders of non-voting common
stock.
If the corporation in any manner subdivides, splits or combines the
outstanding shares of common stock or non-voting common stock, the outstanding
shares of the other will be proportionally subdivided, split or combined. In the
case of any other capital reorganization of the corporation, or any
reclassification or recapitalization of the capital stock of the corporation, or
any consolidation or merger of the corporation with or into another entity, or
any sale or conveyance of all or substantially all of the assets of the
corporation, or any other transaction where in any of such cases shares of stock
or other securities or property are to be received or distributed to holders of
common stock and non-voting common stock, the holders of common stock and
non-voting common stock shall participate proportionately with all other shares
of common stock and non-voting common stock.
In the event of the dissolution, liquidation or winding up of the
corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the corporation and the
preferential amounts required to be paid to the holders of preferred stock, each
share of common stock and each share of non-voting common stock shall be
entitled to share ratably with all other shares of common stock and non-voting
common stock in the remaining net assets of the corporation.
FURTHER RESOLVED, that the proper officers of Genesis Health Ventures, Inc.
are hereby authorized and directed to execute, under its corporate seal,
Articles of Amendment to the Articles of Incorporation and to file such Articles
of Amendment with the Pennsylvania Department of State.
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FURTHER RESOLVED, that the Board of Directors of Genesis Health Ventures,
Inc. may, notwithstanding approval by the shareholders of Genesis Health
Ventures, Inc., at any time prior to the filing of the Articles of Amendment
with the Pennsylvania Department of State, terminate the proposed amendment and
all transactions contemplated by or incident thereto."
Required Vote
Shareholder approval of this proposal is required under Pennsylvania law.
Approval of this proposal requires the affirmative vote of the holders of a
majority of the votes cast by all shareholders entitled to vote on the proposal.
Abstentions and broker non-votes will not be counted for purposes of approving
this matter. A broker non-vote occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner.
The Board of Directors unanimously recommends that you vote "FOR" approval
of the amendment to Genesis' articles of incorporation.
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PROPOSAL TWO
Approval of Issuance of Common Stock, Warrants to Purchase
Common Stock, Series H Preferred Stock and Series I Preferred Stock
in Connection with the Restructuring of the Multicare Joint Venture
Background
In October 1997, Genesis, affiliates of The Cypress Group L.L.C., TPG
Partners II, L.P. and certain of its affiliates and an affiliate of Nazem, Inc.
acquired all of the issued and outstanding common stock of Genesis ElderCare
Corp., a Delaware corporation. Cypress, TPG and Nazem purchased 210,000, 199,500
and 10,500 shares of Genesis ElderCare Corp. common stock, respectively,
representing in the aggregate approximately 56.4% of the issued and outstanding
common stock of Genesis ElderCare Corp., for an aggregate purchase price of $420
million. Genesis purchased 325,000 shares of Genesis ElderCare Corp. common
stock, representing approximately 43.6% of the issued and outstanding common
stock of Genesis ElderCare Corp., for an aggregate purchase price of $325
million. Cypress, TPG and Nazem are sometimes collectively referred to as the
Sponsors in this proxy statement.
In October 1997, as a result of a tender offer and a merger transaction,
Genesis ElderCare Corp. acquired 100% of the outstanding shares of common stock
of The Multicare Companies, Inc., making Multicare a wholly-owned subsidiary of
Genesis ElderCare Corp.
Management Agreement between Genesis and Multicare
Management Agreement. On October 9, 1997, Genesis ElderCare Corp. and
Genesis ElderCare Network Services, Inc., a wholly-owned subsidiary of Genesis,
entered into a management agreement, referred to as the Management Agreement,
pursuant to which Genesis ElderCare Network Services manages Multicare's
operations. The Management Agreement has an initial term of five years and,
unless either party gives prior notice of termination, automatically renews for
an initial renewal period of two years and successive renewal periods of one
year. For services provided under the Management Agreement, Genesis ElderCare
Network Services earns a monthly fee equal to the greater of 6% of Multicare's
net revenues for the month and $1,991,666. With respect to the fee earned in any
month, the greater of 4% of Multicare's net revenues for the month and
$1,991,666 is paid in cash and the balance is accrued.
Under the Management Agreement, Genesis ElderCare Network Services is
responsible for Multicare's non-extraordinary sales, general and administrative
expenses (other than certain specified third-party expenses), and all other
expenses of Multicare are paid by Multicare.
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Agreements among Genesis, Cypress, TPG, and Nazem
Stockholders Agreement. In connection with their investments in the common
stock of Genesis ElderCare Corp., Genesis, Cypress, TPG and Nazem entered into a
stockholders agreement, referred to as the Stockholders Agreement, dated as of
October 9, 1997, relating to their respective ownership interests in Genesis
ElderCare Corp. According to the terms and conditions of the Stockholders
Agreement:
o each of Cypress, TPG and Genesis has the right to designate one third of
the directors on the board of directors of Genesis ElderCare Corp.;
o specified actions require the approval of at least one designee of each
of Cypress, TPG and Genesis on the board of directors of Genesis
ElderCare Corp.;
o Genesis ElderCare Corp. maintains an operating committee of the board of
directors, consisting of one nominee of each of Cypress, TPG and Genesis,
to perform functions specified under the Management Agreement;
o there are restrictions on the transfer of the common stock of Genesis
ElderCare Corp.; and
o each of Cypress, TPG and Genesis has a pre-emptive right to maintain its
percentage ownership of Genesis ElderCare Corp.
As described below, the Stockholders Agreement is proposed to be amended in
connection with the restructuring of the Multicare joint venture. See
"Restructuring Agreement -- Amendment to Stockholders Agreement."
Put/Call Agreement. Genesis, Cypress, TPG and Nazem also entered into an
agreement, dated as of October 9, 1997, referred to as the Put/Call Agreement.
Under the Put/Call Agreement, Genesis has the option, on the terms and
conditions set forth in the Put/Call Agreement, to purchase, referred to as the
Call, the common stock of Genesis ElderCare Corp. held by Cypress, TPG and Nazem
for a period of 270 days commencing on October 9, 2001, at a price determined in
accordance with the terms of the Put/Call Agreement, as described below. Under
the Put/Call Agreement, Cypress, TPG and Nazem have the option, on the terms and
conditions set forth in the Put/Call Agreement, to require Genesis to purchase,
referred to as the Put, the common stock of Genesis ElderCare Corp. held by them
for a period of one year, commencing on October 9, 2002, at a price determined
in accordance with the Put/Call Agreement, as described below.
The prices determined for the Put and the Call are based on a formula that
calculates the equity value attributable to the common stock of Genesis
ElderCare Corp. held by Cypress, TPG and Nazem plus a portion of the Genesis
pharmacy business, referred to as the Calculated Equity Value. The Calculated
Equity Value is determined based upon a multiple of Genesis ElderCare Corp.'s
earnings before interest, taxes, depreciation, amortization and rental expenses,
as adjusted, referred to as EBITDAR, plus a portion of the EDITDAR related to
the Genesis pharmacy business and after deducting certain liabilities. The
multiple to be applied to EDITDAR depends on whether the Put or the Call is
being exercised. Any payment to Cypress, TPG or Nazem under the Call or the Put
may be in the form of cash or, subject to satisfying certain conditions, Genesis
common stock at Genesis' option. Upon exercise of the Call, Cypress, TPG and
Nazem will receive at a minimum their original investment plus a 25% compound
annual return thereon regardless of the Calculated Equity Value. Any additional
Calculated Equity Value attributable to the Sponsors' Genesis ElderCare Corp.
common stock will be allocated among the Sponsors on the basis set forth in the
Put/Call Agreement which provides generally for additional Calculated Equity
Value to be divided based upon the proportionate share of the capital
contributions of the stockholders to Genesis ElderCare Corp. Upon exercise of
the Put, there will be no guaranteed minimum return to Cypress, TPG or Nazem;
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any payment to the Sponsors will be determined pursuant to a formula set forth
in the terms of the Put/Call Agreement which provides generally for the
preferential return of the Sponsors' capital contributions (subject to certain
priorities), a 25% compound annual return on the Sponsors' capital contributions
and the remaining Calculated Equity Value to be divided based upon the
proportionate share of the capital contributions of the stockholders to Genesis
ElderCare Corp.
The rights to exercise the Put will be accelerated upon an event of
bankruptcy of Genesis, a change of control of Genesis or an extraordinary
dividend or distributions or the occurrence of the leveraged recapitalization of
Genesis. Upon an event of acceleration or the failure by Genesis to satisfy its
obligations upon exercise of the Put, Cypress and TPG have the right to
terminate the Stockholders Agreement, Genesis ElderCare Network Services has the
right to terminate the Management Agreement and Cypress and TPG have the right
to control the sale or liquidation of Genesis ElderCare Corp. In the event of
such sale, the proceeds from the sale will be distributed among the parties as
contemplated by the formula for the Put option exercise price and Cypress, TPG
and Nazem will retain a claim against Genesis for the difference, if any,
between the proceeds of the sale and the Put option exercise price. In the event
of a bankruptcy or change of control of Genesis, the option price shall be
payable solely in cash provided any such payment will be subordinated to the
payment of principal and interest under the Genesis' bank credit facility.
Commencing on October 10, 2003, if the Put has not been exercised, subject
to a right of first offer for the benefit of Genesis, Cypress and TPG have the
right to sell their stock of Genesis ElderCare Corp. Genesis and Nazem shall
each have the right to participate in this sale and Cypress and TPG shall have
the right to require Genesis and Nazem to participate in this sale. Upon this
sale, Genesis will pay to Cypress and TPG (in cash or Genesis common stock at
Genesis' option) the difference between the proceeds received by them and the
amount they would have received had they exercised the Put on October 10, 2003.
The Put/Call Agreement also contains certain restrictions on Genesis' right
to take certain corporate actions including its ability to sell all or a portion
of its pharmacy business.
As described below, the Put/Call Agreement is proposed to be amended in
connection with the restructuring of the Multicare joint venture. See
"Restructuring Agreement -- Amendment to Put/Call Agreement; Issuance of
Preferred Stock."
Restructuring Agreement
On [ ], Genesis entered into a restructuring agreement with Cypress, TPG
and Nazem, referred to as the Restructuring Agreement, to restructure their
joint investment in Genesis ElderCare Corp., the parent company of Multicare.
The following is a brief summary of the material terms of the Restructuring
Agreement. This summary is qualified in its entirety by reference to the
Restructuring Agreement, which is incorporated by reference and attached to this
proxy statement as Annex A. You are urged to read the Restructuring Agreement
carefully.
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Amendment to Put/Call Agreement; Issuance of Preferred Stock
Upon consummation of the restructuring transaction, the Put under the
Put/Call Agreement will be terminated in exchange for:
o 24,369 shares of Genesis' Series H Senior Convertible Participating
Cumulative Preferred Stock to be issued to Cypress, TPG and Nazem, or
their affiliated investment funds, in proportion to their respective
investments in Genesis ElderCare Corp., and
o 17,631 shares of Genesis' Series I Senior Convertible Exchangeable
Participating Cumulative Preferred Stock to be issued to Cypress, TPG and
Nazem, or their affiliated investment funds, in proportion to their
respective investments in Genesis ElderCare Corp.
For a summary of the material terms of the Series H Preferred Stock and the
Series I Preferred Stock, see "Description of Genesis' Series H and Series I
Preferred Stock" on page [ ]. In addition, the certificates of designation
establishing the terms of the Series H and Series I Preferred Stock are attached
as Exhibits B and C to the Restructuring Agreement, which is attached as Annex A
to this proxy statement. We urge you to read the certificates of designation in
their entirety.
Upon consummation of the restructuring transaction, the restrictions in the
Put/Call Agreement related to Genesis' right to take certain corporate actions,
including its ability to sell all or a portion of its pharmacy business, will be
terminated. In addition, the Call under the Put/Call Agreement will be amended
to provide Genesis with the right to purchase all of the shares of common stock
of Genesis ElderCare Corp. not owned by Genesis for two million dollars in cash
at any time prior to the 10th anniversary of the closing date of the
restructuring transaction.
The full text of the Amended and Restated Put/Call Agreement is attached as
Exhibit A to the Restructuring Agreement, which is attached as Annex A to this
proxy statement. We urge you to read the Amended and Restated Put/Call Agreement
in its entirety.
Investment in Genesis
Each of Cypress and TPG has agreed to invest, directly or through
affiliated investment funds, $25 million into Genesis in exchange for 6.25
million shares of Genesis common stock. In connection with this investment, each
of Cypress and TPG will receive a ten year warrant to purchase 1 million shares
of Genesis common stock at an exercise price of $5.00 per share. In other words,
Cypress and TPG will in the aggregate invest $50 million in Genesis for an
aggregate of 12.5 million shares of Genesis common stock and warrants to
purchase 2 million shares of Genesis common stock.
For a summary of the material terms of the warrants, see "Description of
the Warrants" on page [ ]. The warrant certificate establishing the terms and
conditions of the warrants is attached as Exhibit D to the Restructuring
Agreement, which is attached as Annex A to this proxy statement. We urge you to
read the warrant certificate in its entirety.
For a discussion of the ownership interest and voting rights that the
Sponsors will have upon completion of the restructuring transaction, see "--
Sponsors' Ownership and Voting Power."
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Registration Rights
Subject to limitations contained in the Restructuring Agreement, the
holders of the Genesis common stock, warrants, Series H Preferred Stock and
Series I Preferred Stock issued in connection with the restructuring transaction
and all securities issued or distributed in respect of these securities will
have the right on five occasions to demand registration under the Securities Act
of these securities. Genesis is required to pay all registration expenses,
subject to limitations contained in the Restructuring Agreement.
In addition, holders of the Genesis common stock, warrants, Series H
Preferred Stock and Series I Preferred Stock issued in connection with the
restructuring transaction and all securities issued or distributed in respect of
these securities will have "piggyback" registration rights under which they have
the right to include these securities in a registered offering of securities of
Genesis effected on behalf of Genesis or another selling shareholder, subject to
reduction by the managing underwriter of that offering, if any, if marketing
factors so require.
Amendment to Stockholders Agreement
Upon the consummation of the restructuring transaction, the Stockholders
Agreement will be amended to:
o provide that all shareholders will grant to Genesis an irrevocable
proxy to vote their shares of common stock of Genesis ElderCare Corp. on
all matters to be voted on by shareholders, including the election of
directors;
o provide that Genesis may appoint two-thirds of the members of the Genesis
ElderCare Corp. board of directors;
o omit the requirement that specified significant actions receive the
approval of at least one designee of each of Cypress, TPG and Genesis;
o permit Cypress, TPG and Nazem and their affiliates to sell their Genesis
ElderCare Corp. stock;
o provide that Genesis may appoint 100% of the members of the operating
committee of the board of directors of Genesis ElderCare Corp.; and
o eliminate all pre-emptive rights.
The full text of the Amended and Restated Stockholders Agreement is
attached as Exhibit E to the Restructuring Agreement, which is attached as Annex
A to this proxy statement. We urge you to read the Amended and Restated
Stockholders Agreement in its entirety.
Irrevocable Proxy
Cypress, TPG and Nazem and their affiliated investment funds will give to
Genesis an irrevocable power of attorney directing Genesis to cast for, against
or as an abstention in the same proportion as the other Genesis voting
securities are cast, the number of shares of securities of Genesis so that
Cypress, TPG and Nazem together will not have the right to vote more than 35% of
the total voting power of Genesis in connection with any vote other than a vote
relating to an amendment to Genesis' articles of incorporation to amend, modify
or change the terms of any class or series of preferred stock.
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This power of attorney will terminate upon the existence of the circumstances
that would cause the standstill to terminate as described below under "--
Standstill."
Directors of Genesis Upon Consummation of the Restructuring Transaction
Pursuant to the terms of the Series H Preferred Stock, upon the
consummation of the restructuring transaction, Cypress and TPG, acting jointly,
or in the event that only one of Cypress and TPG then owns or has the right to
acquire Genesis common stock, Cypress or TPG, as applicable, will be entitled to
designate a number of directors of Genesis representing at least 23% of the
total number of directors constituting the full board of directors of Genesis.
However, for so long as the total number of directors constituting the full
board of directors of Genesis is nine or fewer, Cypress and/or TPG will only be
entitled to designate two directors on the Genesis board of directors. Cypress
and TPG will have this right to designate directors so long as they own any
combination of Genesis voting securities or securities convertible into Genesis
voting securities constituting more that 10% of Genesis' total voting power. For
this purpose, the Series I Preferred Stock and the non-voting common stock
issued upon conversion of the Series I Preferred Stock will be considered voting
securities.
Each committee of the Genesis board of directors will include at least one
director designated by Cypress and/or TPG unless applicable law or the rules or
regulations of the primary exchange or quotation system on which Genesis' common
stock is then listed or quoted prohibits the appointment of a Cypress and/or TPG
designated director to a particular committee.
For so long as Cypress and/or TPG have the right to designate directors on
the Genesis board of directors, Genesis shall not, without the consent of at
least two of the Cypress/TPG designated directors:
o enter into any transaction or series of transactions which would
constitute a change in control, as defined in the Restructuring
Agreement; or
o engage in a "going private" transaction.
In addition, for so long as Cypress and/or TPG have the right to designate
directors on the Genesis board of directors, Genesis shall not without the
unanimous consent of the members of the litigation committee of Genesis' board
of directors settle any action at law or suit in equity disclosed in any public
filing made by Genesis with the U.S. Securities and Exchange Commission or any
claim or demand made by a third party arising out of or related to the facts or
circumstances underlying any such action or suit.
Pre-emptive Rights
Upon consummation of the restructuring transaction, Cypress and TPG will
each have a right, subject to the limitations contained in the Restructuring
Agreement, to participate in future offerings of any shares of, or securities
exchangeable, convertible or exercisable for any shares of, any class of
Genesis' capital stock. However, Cypress' and TPG's right to participate will
not apply to the following:
o sales of securities in underwritten public offerings;
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o sales of warrants offered in connection with sales of debt securities
pursuant to Rule 144A of the Securities Act;
o the issuance of securities in exchange for assets or all of the stock of
another company;
o issuances and sales of securities to employees and directors pursuant to
benefit plans; and
o issuances and sales of securities in connection with joint ventures or
other strategic relationships relating to a Healthcare Related Business,
as such phrase is defined in the Restructuring Agreement; provided that
the securities issued do not represent more than 5% of the total voting
power of Genesis.
Standstill
Effective upon consummation of the restructuring transaction, the Sponsors
have agreed that neither they nor their affiliates will, without Genesis' prior
written consent, either alone or as part or a group, acquire any voting
securities of Genesis, except for the voting securities to be issued in the
restructuring transaction and pursuant to stock splits, stock dividends or other
distributions or offerings made available to holders of Genesis voting
securities generally. However, these restrictions will terminate if:
o the Genesis board of directors approves a transaction with any person
which would result in that person:
o beneficially owning securities representing more than 35% of the total
voting power of Genesis; or
o owning all or substantially all of Genesis' assets;
o any person, other than Genesis in the case of an exchange offer, has
commenced a tender or exchange offer for Genesis voting securities or
securities exchangeable, convertible or exercisable for Genesis voting
securities where all of these voting securities represent more than 35%
of the total voting power of Genesis; or
o Cypress and TPG no longer have the right to designate directors on the
Genesis board of directors as described above under "-- Directors of
Genesis Upon the Consummation of the Restructuring Transaction."
Representations and Warranties
The Restructuring Agreement contains statements and promises, called
representations and warranties, made by Genesis, Cypress, TPG and Nazem.
Genesis' representations and warranties relate to the following:
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o organization and good standing;
o capitalization;
o issuance of securities and securities issuable upon conversion, exercise
or exchange or in payment of dividends;
o authority relative to the Restructuring Agreement and related agreements;
o no conflicts; required filings, consents and approvals;
o SEC reports and financial statements;
o listing of Genesis common stock on The New York Stock Exchange;
o rights plan amended to allow restructuring transactions;
o state takeover statutes and other antitakeover provisions contained in
Genesis' governing documents not applicable to restructuring
transactions; and
o offering of securities not in violation of the Securities Act.
Cypress, TPG and Nazem's representations and warranties relate to the
following:
o organization, good standing and power;
o authority relative to the Restructuring Agreement and related agreements;
o no conflicts; required filings and consents; and
o purchase for investment.
To review the full text of the representations and warranties contained in
the Restructuring Agreement you should read the Restructuring Agreement which is
attached as Annex A.
Conditions to Closing
The completion of the restructuring transaction depends upon the
satisfaction of a number of conditions. The obligation of each party to complete
the restructuring transaction is conditioned on each of the following:
o no injunctions or restraints and
o required filings and consents other than regulatory consents in
connection with the disposition by Cypress, TPG and Nazem of their
Genesis ElderCare Corp. stock.
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Cypress, TPG and Nazem's obligation to close is further conditioned on the
following:
o listing of Genesis common stock;
o customary opinions of Genesis' counsel;
o representations and warranties of Genesis being true and correct in all
material respects when given and at closing;
o reasonable satisfaction with corporate and other proceedings;
o Genesis' taking appropriate actions to issue or prepare for the issuance
of the common stock and the preferred stock in connection with the
restructuring transaction;
o Genesis' taking appropriate actions to effect the agreements related to
the restructuring transaction;
o no change of control, as defined in the Restructuring Agreement, of
Genesis will have occurred;
o no material breach of covenants by Genesis; and
o regulatory consents in connection with the disposition by Cypress, TPG
and Nazem and their affiliates of their Genesis ElderCare Corp. stock in
one or more transactions satisfactory to Cypress, TPG and Nazem.
o no event, circumstance, condition, fact or other matter has occurred
which has had a material adverse effect on Genesis' business or financial
condition;
o Genesis will have entered into the amended Put/Call Agreement and the
amended Stockholders Agreement; and
o Genesis will have reimbursed Cypress and TPG for their expenses incurred
in connection with the Restructuring Agreement and related transactions,
including fees and expenses of professional advisors, not to exceed
$1,000,000.
Genesis' obligation to close is further conditioned on the following:
o representations and warranties of Cypress, TPG and Nazem being true and
correct in all material respects when given and at closing;
o no material breach of covenants by Cypress, TPG and Nazem;
o each of Cypress and TPG will have entered into the amended Put/Call
Agreement and the amended Stockholders Agreement;
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o Genesis will have received from Cypress and TPG the purchase price for
the common stock and the warrants; and
o customary opinions of Cypress and TPG's counsel.
Covenants
The Restructuring Agreement includes covenants and agreements of Genesis,
Cypress, TPG and Nazem. These covenants relate to the following:
o reasonable best efforts to consummate the restructuring transaction,
including reasonable best efforts to obtain all necessary consents and
approvals, including:
o regulatory approval;
o shareholder approval;
o third party consents; and
o termination of the waiting period with respect to filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
o presentation and recommendation of the proposals to shareholders
necessary to consummate the restructuring transaction;
o prior to the closing of the restructuring transaction and subject to
reasonable exceptions:
o Genesis will conduct its business only in the ordinary course
consistent with past practice;
o Genesis will not enter into any transaction or series of transactions
which would constitute a change in control, as defined in the
Restructuring Agreement;
o Genesis will not engage in a "going private" transaction;
o there will be no issuance, split, combination or reclassification of
Genesis' capital stock and Genesis will not pledge, encumber or
otherwise dispose of any of its capital stock;
o there will be no dividends or distributions on Genesis' common stock;
and
o there will be no amendments to Genesis' articles of incorporation or
by-laws;
o there will be no acts or omissions materially impairing Genesis' ability
to consummate the restructuring transaction or causing a condition not to
be satisfied;
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o Genesis will present proposals necessary to obtain the shareholder
approvals required in connection with the Restructuring Agreement and the
related transactions;
o Genesis will advise Cypress, TPG and Nazem of any change, development or
condition that may materially impair Genesis' ability to consummate the
restructuring transaction or cause a condition not to be satisfied;
o Genesis will not make public announcements regarding the Restructuring
Agreement or the related transactions without the consent of Cypress and
TPG or unless such announcements are required by law;
o Genesis will reserve securities issuable upon conversion, exchange or
exercise sufficient to make the issuance of securities under the
Restructuring Agreement;
o Genesis will file certificates of designation and an amendment to
Genesis' articles of incorporation as contemplated by the Restructuring
Agreement;
o Genesis will provide information concerning Genesis, including
information sufficient to permit sales of securities under Rule 144 under
the Securities Act;
o if the closing occurs, Genesis will pay the expenses of Cypress and TPG,
including fees and expenses of professional advisors, not to exceed
$1,000,000;
o Genesis will not amend its articles of incorporation, by-laws,
shareholder rights agreement or other constituent document in a manner
adverse to Cypress, TPG or Nazem, other than in a manner that affects the
Cypress, TPG and Nazem the same as other shareholders of Genesis.
o Genesis' board of directors will take all actions necessary to effect the
designation to the board of directors of Genesis the directors designated
by TPG and Cypress in accordance with the certificate of designations of
the Series H Preferred Stock;
Cypress, TPG and Nazem's covenants relate to the following:
o using reasonable best efforts to consummate the restructuring
transactions, including reasonable best efforts to obtain all necessary
consents and approvals, including;
o regulatory approval;
o shareholder approval;
o third party consents; and
o termination of the waiting period with respect to filings under the
Hart-Scott- Rodino Antitrust Improvements Act of 1976.
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o no affirmative acts materially impairing Cypress', TPG's or Nazem's
ability to consummate the restructuring transaction; and
o not making public announcements regarding the Restructuring Agreement or
the related transactions without the consent of Genesis or unless such
announcements are required by law.
o for so long as the standstill is in effect, not selling Genesis' voting
securities to:
o any person in a transaction or a series of transactions where the
voting securities, togther with any other voting securities known to
have been sold to the buyer by Cypress, TPG or Nazem, represent more
than 15% of Genesis' total voting power; or
o to any competitor of Genesis, as defined in the Restructuring
Agreement, which is attached as Annex A; and
o Cypress, TPG and Nazem will give notice to Genesis of any transfer of
securities that it acquired in the restructuring transaction.
Indemnification
The Restructuring Agreement provides for the reciprocal indemnification
between Genesis, on the one hand, and Cypress, TPG and Nazem, on the other hand,
for breaches of representations and warranties and breaches of covenants. The
right to indemnification described in the prior sentence is subject to
exceptions. You should read the Restructuring Agreement, which is attached as
Annex A, for a more complete discussion of the indemnification provisions. In
addition, the Restructuring Agreement also provides for the indemnification of
Cypress' and TPG's designees to the Genesis board of directors to the fullest
extent permitted by law, consistent with the indemnification of Genesis' other
directors. Finally, the Restructuring Agreement provides for the indemnification
of Sponsors in connection with the restructuring transaction, other than in
respect of losses arising out of losses of value of the Sponsors' investments,
claims by the limited partners in the Sponsors' affiliated investment funds and
the tax consequences of the restructuring transaction.
Sponsors' Ownership and Voting Power
Upon consummation of the restructuring transaction and assuming conversion
of the Series H Preferred Stock and Series I Preferred Stock and exercise the
warrants to be purchased by Cypress and TPG or their affiliated investment
funds, Cypress, TPG and Nazem and their affiliated investment funds will
together beneficially own 58% of Genesis' outstanding common stock and
non-voting common stock representing 49% of Genesis' outstanding voting power.
To the extent that dividends on the Series H Preferred Stock and the Series I
Preferred Stock accrue instead of being paid in cash, the percentage ownership
interest of Genesis' outstanding common stock and non-voting common stock
represented by these securities will increase. Genesis expects it will not pay
cash dividends on the Series H Preferred Stock or the Series I Preferred Stock
for at least the first five years after issuance. To the extent that shares of
the Series I Preferred Stock are exchanged for Series H Preferred Stock, the
voting power represented by the Series H Preferred Stock will increase.
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Opinion of Financial Advisor to Genesis
On September 15, 1999, Merrill Lynch delivered to Genesis' board of
directors a written opinion to the effect that, as of such date, and based upon
and subject to the factors and assumptions described in its opinion, the
restructuring transaction was fair from a financial point of view to Genesis.
The full text of Merrill Lynch's opinion, which sets forth the assumptions
made, matters considered and qualifications and limitations on the review
undertaken by Merrill Lynch, is attached as Annex B and is incorporated by
reference in this proxy statement. The summary of Merrill Lynch's opinion set
forth in this proxy statement is qualified in its entirety by reference to the
full text of Merrill Lynch's opinion. We urge you to read the opinion carefully
and in its entirety.
Merrill Lynch's opinion was provided to Genesis' board of directors for its
information and is directed only to the fairness from a financial point of view
to Genesis of the restructuring transaction. Merrill Lynch's opinion does not
address any other aspect of the restructuring transaction, including the merits
of the underlying decision by Genesis to engage in the restructuring
transaction, and does not constitute a recommendation to any stockholder as to
how such stockholder should vote on any matter relating to the proposed
restructuring transaction.
In arriving at its opinion, Merrill Lynch, among other things:
(1) reviewed certain publicly available business and financial information
relating to Genesis and business and financial information concerning
Genesis ElderCare Corp. that Merrill Lynch deemed to be relevant;
(2) reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets, liabilities and prospects
of Genesis and Genesis ElderCare Corp. furnished to Merrill Lynch by
Genesis;
(3) conducted discussions with members of senior management and
representatives of Genesis concerning the matters described in clauses
1 and 2 above, as well as the prospects of Genesis and Genesis
ElderCare Corp. before and after giving effect to the proposed
restructuring transaction;
(4) reviewed the market prices and valuation multiples for the shares of
Genesis common stock, and compared them with those of certain publicly
traded companies that Merrill Lynch deemed to be relevant;
(5) participated in certain discussions and negotiations among
representatives of Genesis, certain of the Sponsors and their
respective financial and legal advisors;
(6) reviewed the potential pro forma impact of the proposed restructuring
transaction;
(7) reviewed drafts dated September 15, 1999 of the Restructuring
Agreement, the certificates of designation of the Series H Preferred
Stock and the Series I Preferred Stock, the Amended and Restated
Put/Call Agreement, the Warrant and the Amended and Restated
Stockholders Agreement; and
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(8) reviewed such other financial studies and analyses and took into
account such other matters as Merrill Lynch deemed necessary, including
Merrill Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying such information and Merrill Lynch has not undertaken an independent
evaluation or appraisal of any of the assets or liabilities of Genesis or
Genesis ElderCare Corp. or been furnished with any such evaluation or appraisal.
In addition, Merrill Lynch did not assume any obligation to conduct, nor did
Merrill Lynch conduct, any physical inspection of the properties or facilities
of Genesis or Genesis ElderCare Corp. With respect to the financial forecast
information furnished to or discussed with Merrill Lynch by Genesis, Merrill
Lynch assumed that this information had been reasonably prepared and reflected
the best currently available estimates and judgment of Genesis' management as to
the expected future financial performance of Genesis or Genesis ElderCare Corp.,
as the case may be. Merrill Lynch also assumed that the final forms of the
Restructuring Agreement, the certificates of designation of the Series H
Preferred Stock and the Series I Preferred Stock, the Amended and Restated
Put/Call Agreement, the Warrant and the Amended and Restated Stockholders
Agreement would be substantially similar to the last draft of each such document
reviewed by it.
Merrill Lynch did not express any opinion as to the prices at which the
shares of common stock and the warrants to be purchased by the Cypress and TPG,
or the shares of the Series H Preferred and the Series I Preferred Stock to be
issued to the Sponsors in the restructuring transaction, may trade following the
completion of the restructuring transaction.
Merrill Lynch's opinion is necessarily based on market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Merrill Lynch as of, the date of the opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the restructuring
transaction, no restrictions will be imposed that will have a material adverse
effect on the contemplated benefits of the restructuring transaction. Although
Merrill Lynch evaluated the restructuring transaction from a financial point of
view, Merrill Lynch was not requested to, and did not, address the merits of the
underlying decision of Genesis to engage in the restructuring transaction and
did not recommend to any shareholder as to how such shareholder should vote on
the proposed restructuring transaction or any related matter.
Merrill Lynch currently provides, and has in the past provided, financial
advisory and financing services to Genesis, Cypress, TPG and Nazem, including
having acted as financial advisor to Genesis in connection with its acquisition
of Vitalink Pharmacy Services, Inc. in 1998, and Merrill Lynch may continue to
provide such services to such parties, and Merrill Lynch has received, and may
receive, fees for the rendering of those services. In the ordinary course of
Merrill Lynch's business, it may actively trade securities of Genesis for its
own account and for the account of its customers, and accordingly, may at any
time hold a long or short position in those securities.
In preparing its opinion to Genesis' board of directors, Merrill Lynch
performed a variety of financial and comparative analyses, including those
described below. The summary below does not purport to be a complete description
of the analyses underlying Merrill Lynch's opinion or the presentation made by
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Merrill Lynch to Genesis' board of directors. The preparation of a fairness
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances, and, therefore, such an
opinion is not readily susceptible to partial analysis or summary description.
In arriving at its opinion, Merrill Lynch did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering all
analyses, would create an incomplete view of the process underlying its opinion.
No company, business or transaction used in such analyses as a comparison is
identical to Genesis, Genesis ElderCare Corp. or the restructuring transaction,
nor is an evaluation of the results of such analyses entirely mathematical,
rather it involves complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments or
transactions being analyzed.
In performing its analyses, Merrill Lynch considered numerous factors
including industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Genesis or Genesis ElderCare Corp. Any estimates contained in the
analyses performed by Merrill Lynch and the ranges of valuations resulting from
any particular analysis are not necessarily indicative of actual values or
predictive of future results or actual values, which may be significantly more
or less favorable than those suggested by such analyses. Additionally, estimates
of the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which such businesses or securities might actually be
sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. In addition, as described above, Merrill Lynch's
opinion was among several factors taken into consideration by Genesis' board of
directors in making its determination to approve the restructuring transaction.
Consequently, the Merrill Lynch analyses described below should not be viewed as
determinative of the decision of Genesis' board of directors or Genesis'
management with respect to the fairness of the restructuring transaction.
The following is a summary of the material financial analyses performed by
Merrill Lynch in arriving at its opinion and presented to Genesis' board of
directors. The Merrill Lynch opinion is based upon Merrill Lynch's consideration
of the collective results of all such analyses, together with the other factors
referred to in its opinion letter.
Valuation of Restructuring Transaction - Preferred Stock and Put
Merrill Lynch performed an analysis and comparison of (i) the theoretical
value of the Series H Preferred Stock and the Series I Preferred Stock to be
issued in the restructuring transaction and (ii) the present value of the
hypothetical cost to Genesis in 2002 of an exercise of the Put by the Sponsors.
To perform this hypothetical valuation, Merrill Lynch derived a range of
theoretical values for the Series H Preferred Stock and the Series I Preferred
Stock. This range of theoretical values for the Series H Preferred Stock and
Series I Preferred Stock was derived taking into account valuation principles
and variables customarily applied in the valuation of similar securities,
including duration of term, conversion features, dividend rate, method of
dividend payment, appropriate discount rates taking into consideration the
relative position of the security in a company's capital structure, and
potential future volatility of the underlying security. In addition, Merrill
Lynch used the existing terms of the Put/Call Agreement and estimates of 1999 to
2002 earnings and other financial
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information for Genesis and Genesis ElderCare Corp. provided by the management
of Genesis to calculate the hypothetical implied cost to Genesis in 2002 of an
exercise of the Put by the Sponsors and then discounted such hypothetical
implied cost to September 1999 values using a range of discount rates. The
calculation of this hypothetical implied 2002 cost was performed by Merrill
Lynch assuming two scenarios for the Medicare payment system. The first scenario
(the "current Medicare rate system") assumed that the current Medicare payment
system remained in effect, and the second scenario (the "higher Medicare rate
system") assumed that, beginning in 2002, the Medicare payment system would
provide for the payment of $20 per patient day in excess of the payment per
patient day provided for in the current Medicare payment system.
This analysis indicated that (i) the hypothetical implied cost to Genesis
in 2002 of an exercise of the Put by the Sponsors was $398.2 million under the
current Medicare rate system and $536.7 million under the higher Medicare rate
system, (ii) under both the current and the higher Medicare rate system, the
theoretical value of the Series H Preferred Stock and the Series I Preferred
Stock was significantly lower than the hypothetical implied cost to Genesis in
2002 of an exercise of the Put by the Sponsors, (iii) under the current Medicare
rate system, the theoretical value of the Series H Preferred Stock and the
Series I Preferred Stock ranged from being slightly lower to marginally higher
than the present value of the hypothetical implied cost to Genesis in 2002 of an
exercise of the Put by the Sponsors, and (iv) under the higher Medicare rate
system, the theoretical value of the Series H Preferred Stock and the Series I
Preferred Stock was significantly lower than the present value of the
hypothetical implied cost to Genesis in 2002 of an exercise of the Put by the
Sponsors.
Valuation of Restructuring Transaction - Common Stock and Warrants
Merrill Lynch performed an analysis of the hypothetical value of the shares
of common stock and the warrants to be purchased by Cypress and TPG in the
restructuring transaction. Merrill Lynch derived a range of hypothetical values
for the shares of common stock to be purchased by Cypress and TPG in the
restructuring transaction using the closing share price of Genesis common stock
on July 27, 1999 as well as the average closing share price of Genesis common
stock over the 5, 15 and 30 consecutive trading days ending on July 27, 1999.
Merrill Lynch derived a range of hypothetical values for the warrants to be
purchased by the Sponsors in the restructuring transaction taking into account
valuation principles and variables customarily applied in the valuation of
similar securities, including duration of term, exercise price, market price of
the underlying security, appropriate discount rates and potential future
volatility of the underlying security. In its calculation of the range of
hypothetical values for the warrants, Merrill Lynch used the closing share price
of Genesis common stock on July 27, 1999 as well as the average closing share
price of Genesis common stock over the 5, 15 and 30 consecutive trading days
ending on July 27, 1999 and applied volatility rates ranging from 30% to 45%.
This analysis indicated that the hypothetical value of the shares of common
stock to be purchased by Cypress and TPG in the restructuring transaction ranged
from $39.8 million to $46.9 million and that the hypothetical value of the
warrants to be purchased by Cypress and TPG in the restructuring transaction
ranged from $2.6 million to $4.4 million. This analysis indicated that the total
hypothetical value of the shares of common stock and the warrants to be
purchased by Cypress and TPG in the restructuring transaction ranged from $42.4
million to $51.3 million.
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Pro Forma Analysis of Restructuring Transaction
Merrill Lynch analyzed the potential pro forma effect on the estimated
earnings per share of common stock of Genesis through 2005, assuming,
alternatively, that (i) the restructuring transaction is completed and the
Put/Call Agreement is terminated and (ii) the restructuring transaction is not
completed, the Put/Call Agreement remains in effect, the Sponsors exercise the
Put in 2002 and Genesis satisfies its obligations under the Put through the
issuance of shares of Genesis common stock. This analysis was based on estimates
of future earnings of Genesis and Genesis ElderCare Corp. provided to Merrill
Lynch by the management of Genesis. In its analysis, Merrill Lynch applied a
range of hypothetical share prices for Genesis common stock and analyzed each
potential scenario under both the current Medicare rate system and the higher
Medicare rate system.
This analysis indicated that, under all potential scenarios, the completion
of the restructuring transaction and the termination of the Put/Call Agreement
would result in greater earnings per share growth during the period from 1999 to
2005 and higher earnings per share in 2003, 2004 and 2005 as compared to the
earnings per share growth during the period from 1999 to 2005 and earnings per
share in 2003, 2004 and 2005 that would result under any potential scenario if
the restructuring transaction is not completed, the Put/Call Agreement remains
in effect, the Sponsors exercise the Put in 2002 and Genesis satisfies its
obligations under the Put through the issuance of shares of Genesis common
stock.
Pro Forma Ownership Resulting From Restructuring Transaction
Merrill Lynch analyzed the potential pro forma effect on the pro forma
ownership of Genesis common stock by the Sponsors from 1999 to 2005, assuming,
alternatively, that (i) the restructuring transaction is completed and the
Put/Call Agreement is terminated and (ii) the restructuring transaction is not
completed, the Put/Call Agreement remains in effect, the Sponsors exercise the
Put in 2002 and Genesis satisfies its obligations under the Put through the
issuance of shares of Genesis common stock. For the scenario in which the
restructuring transaction is completed, Merrill Lynch calculated pro forma
ownership assuming full conversion of the shares of the Series H Preferred Stock
and the Series I Preferred Stock to be issued to the Sponsors in the
restructuring transaction and full exercise of the warrants to be purchased by
Cypress and TPG in the restructuring transaction. For the scenario in which the
restructuring transaction is not completed, Merrill Lynch calculated pro forma
ownership using the estimated share price of Genesis common stock in 2002 as
derived by applying share price to earnings multiples of 10x, 12.5x and 15x to
estimates of 2003 earnings per share provided by the management of Genesis, and
analyzed each potential scenario under both the current Medicare rate system and
the higher Medicare rate system.
This analysis indicated that, beginning in 2002 when the Put becomes
exercisable, under all potential scenarios, the completion of the restructuring
transaction and the termination of the Put/Call Agreement would result in the
Sponsors having a lower pro forma ownership of Genesis as compared to the pro
forma ownership of Genesis by the Sponsors that would result under any potential
scenario if the restructuring transaction is not completed, the Put/Call
Agreement remains in effect, the Sponsors exercise the Put in 2002 and Genesis
satisfies its obligations under the Put through the issuance of shares of
Genesis common stock. Specifically, this analysis indicated that for the period
from 2002 to 2005 the pro forma ownership of Genesis by the Sponsors (i) would
range from 63.1% to 91% if the restructuring transaction is not completed, the
Put/Call Agreement remains in effect, the Sponsors exercise the Put in 2002 and
Genesis satisfies its obligations under the Put through the issuance of shares
of Genesis common stock, and (ii) would range from 59.0% to 60.3% if the
restructuring transaction is completed and the Put/Call Agreement is terminated.
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Under the terms of Merrill Lynch's engagement, if the proposed
restructuring transaction is completed, Merrill Lynch will receive a cash fee
equal to $2 million. In addition, under the terms of Merrill Lynch's engagement,
a cash fee equal to $1 million became payable by Genesis to Merrill Lynch upon
the execution of the letter of intent relating to the proposed restructuring
transaction. Genesis also has agreed to reimburse Merrill Lynch for all
out-of-pocket expenses incurred by Merrill Lynch in performing its services,
including fees and expenses of legal counsel, and to indemnify Merrill Lynch and
related persons and entities against liabilities, including liabilities under
the federal securities laws, arising out of Merrill Lynch's engagement.
Genesis retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking and
advisory firm. Merrill Lynch, as part of its investment banking business, is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
Genesis' Reasons for the Restructuring Transaction
The Genesis board of directors has unanimously determined that the terms of
the restructuring transaction are fair to, and in the best interests of, Genesis
and its shareholders. In reaching its determination the Genesis board of
directors consulted with Genesis management, as well as its legal counsel,
accountants and financial advisors and gave significant consideration to a
number of factors bearing on its decision. The following are the reasons the
Genesis board of directors believes the restructuring transaction will be
beneficial to Genesis and its shareholders:
o the restructuring transaction will result in the infusion of $50 million
of equity capital into Genesis;
o under Genesis' Fourth Amended and Restated Credit Agreement, certain of
Genesis' lenders have agreed to make available a $40 million senior
credit line to Genesis subject to, among other things, completion of the
restructuring transaction;
o the termination of the Put eliminates a substantial near-term obligation
of Genesis, the exact amount of which is uncertain, in exchange for a
preferred stock interest in Genesis, the financial impact of which is
more readily quantified;
o the restructuring transaction provides Genesis with the ability to
integrate the Multicare and Genesis operations without regard to the
impact on the potential cost of the Put to Genesis or the Sponsors' other
rights under the Put/Call Agreement;
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o the restructuring transaction allows Genesis to pursue divestitures,
asset based financings, acquisitions, asset swaps and other transactions
on a basis that is most rational for Multicare and Genesis, as an
enterprise, and without regard to the impact on the potential cost of the
Put to Genesis or the Sponsors' other rights under the Put/Call
Agreement;
o the restructuring transaction eliminates potential conflicts of interest
between Multicare and Genesis equity holders;
o Genesis would receive the benefit of improved Medicare payment rates if
healthcare reform is adopted and implemented without the offsetting
increase in the cost of the Put to Genesis that would otherwise result
from the formula for the exercise price of the Put;
o the restructuring transaction reduces confusion and uncertainty in the
marketplace with respect to the Multicare joint venture, including the
Put\Call formula, and may improve Genesis' access to the capital markets;
o the restructuring transaction provides an opportunity for a higher
earnings per share growth rate for Genesis for the period 1999 through
2005 and higher earnings per share for the periods 2003, 2004 and 2005
than Genesis is likely to achieve if the transaction is not completed;
and
o Cypress, TPG and Nazem receive a significantly lower percentage of equity
ownership and voting power in Genesis than would likely result if
Cypress, TPG and Nazem were to exercise the Put and the obligation were
satisfied by Genesis through the issuance of its common stock under the
current market conditions.
The Genesis board of directors also considered a number of potentially
negative factors in its deliberation concerning the restructuring transaction,
including:
o the restructuring transaction will be dilutive in the short-term to
Genesis' earnings;
o the restructuring transaction will increase consolidated indebtedness;
and
o Cypress and TPG will have significant influence over the management of
Genesis, as they will be able to vote 35% of the total voting power of
Genesis in connection with any shareholder vote and they will be able to
designate at least 23% of the directors on Genesis' board of directors.
As a result of their holdings of our securities, Cypress and TPG will
have significant influence over matters voted upon by our shareholders,
including the election of directors and whether to approve significant
corporate transactions that require shareholder approval. In addition, as
a result of their board representation, Cypress and TPG will have
significant influence over matters determined by our board of directors,
including decisions affecting our capital structure, the issuance of
additional capital stock, the implementation of stock repurchase programs
and the declaration of dividends. We cannot assure you that the interests
of Cypress and TPG will not conflict with your interests as shareholders.
The Genesis board of directors concluded, however, that the benefits of the
transaction to Genesis and its shareholders outweighed the risks associated with
these negative factors.
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Accounting Effects of the Restructuring Transaction
Currently, Genesis accounts for its investment in Multicare using the
equity method of accounting. Upon consummation of the restructuring transaction,
Genesis will consolidate the financial results of Multicare since Genesis will
have managerial, operational and financial control of Multicare under the terms
of the restructuring agreement. Accordingly, Multicare's assets, liabilities,
revenues and expenses will be consolidated at their recorded historical amounts
and the financial impact of all transactions between Genesis and Multicare will
be eliminated in consolidation. In the accompanying Unaudited Proforma Condensed
Consolidated Balance Sheet the minority shareholders' remaining 56.4% interest
in Multicare is carried as minority interest based on their proportionate share
of Multicare's historical book equity. For so long as there is a minority
interest in Multicare, the minority shareholders' proportionate share of
Multicare's net income or loss will be recorded through adjustment to minority
interest.
In connection with the restructuring transaction, Genesis intends to record
a charge of approximately $422 million representing the estimated cost to
terminate the Put. See "Unaudited Pro Forma Financial Information."
REQUIRED VOTE
Genesis is seeking the approval of this proposal from its shareholders in
accordance with the shareholder approval policy of The New York Stock Exchange.
The approval of this proposal requires the affirmative vote of a majority of the
total votes cast on the proposal, provided that the total votes cast on the
proposal represent over 50% in interest of all securities entitled to vote on
the proposal. Abstentions and broker non-votes will not be counted for purposes
of approving this matter. In addition, abstentions and broker non-votes will not
be counted as votes cast for purposes of determining whether the total votes
cast on the proposal represent over 50% in interest of all securities entitled
to vote on the proposal.
The Board of Directors unanimously recommends that you vote FOR the
issuance of Genesis common stock, warrants to purchase common stock, Series H
Preferred Stock and Series I Preferred Stock in connection with the
restructuring of the Multicare joint venture.
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Description of Genesis' Series H and Series I Preferred Stock
The following summary description of the Series H Preferred Stock and the
Series I Preferred Stock to be issued by Genesis does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
certificates of designations governing the Genesis Series H and Series I
Preferred Stock, copies of which are attached as Exhibits B and C to the
Restructuring Agreement, which is attached as Annex A to this proxy statement.
GENERAL
The Series H Preferred Stock and the Series I Preferred Stock will be
authorized as new series of preferred stock. Article 6 of Genesis' articles of
incorporation authorizes Genesis' board of directors to divide the Genesis
preferred stock into one or more series and to determine the relative rights and
preferences of the shares within each series, including voting rights.
Series H Senior Convertible Participating Cumulative Preferred Stock
Liquidation Preference
The liquidation preference is $10,000 per share, plus accrued and unpaid
dividends.
Upon any liquidation, winding-up or dissolution of Genesis, before any
distribution or payment is made to any equity security of Genesis ranking junior
to the Series H Preferred Stock, the holders of the Series H Preferred Stock
will be paid the greater of :
o the then effective liquidation preference plus accrued and unpaid
dividends from the most recent dividend payment date through the date of
liquidation, winding-up or dissolution; and
o the amount that would be payable to the holders of shares of the Series H
Preferred Stock if the holders of the Series H Preferred Stock had
converted all outstanding shares of Series H Preferred Stock into shares
of common stock of Genesis immediately prior to the liquidation,
winding-up or dissolution.
If upon any liquidation, winding-up or dissolution of Genesis, the assets
of Genesis are insufficient to pay in full the amount due on the Series H
Preferred Stock and the amount due on any parity securities, then the assets of
Genesis will be distributed among the holders of the Series H Preferred Stock
and the holders of the other securities ratably.
Dividends
The dividend rate is the greater of:
o the then effective dividend rate per annum of the then effective
liquidation preference; and
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o the quarterly dividend last declared with respect to Genesis' common
stock, to be paid on each share of Series H Preferred Stock as if
converted into Genesis common stock immediately prior to the applicable
record date.
Dividends will be payable quarterly, when as and if declared by Genesis'
board of directors, and if not paid on the applicable dividend payment date will
be added to the liquidation preference.
Dividend payments made prior to the fifth anniversary of the issue date
will be paid in shares of Series I Preferred Stock. Dividend payments made after
the fifth anniversary of the issue date will be paid in cash; provided, that
dividend payments after the fifth anniversary of the issue date may be made in
shares of Series I Preferred Stock to the extent that Genesis is prohibited from
paying these dividends in cash under the terms of its then existing senior or
senior subordinated indebtedness.
The dividend rate will increase by 0.50% per annum beginning in the sixth
year following the issue date up to a maximum of 8.5%. If at any time Genesis is
in default of its obligation to redeem any shares of the Series H Preferred
Stock, the dividend rate will be increased to the then effective dividend rate
plus 2.00% per annum.
Ranking
The Series H Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding-up and dissolution:
o rank senior to all classes of Genesis common stock, all currently
outstanding shares of preferred stock and each future series of preferred
stock of Genesis which does not expressly provide that it ranks senior to
or on a parity with the Series H Preferred Stock;
o rank on a parity with Genesis' Series I Preferred Stock and with each
future series of preferred stock of Genesis not issued in violation of
the terms of the Series H Preferred Stock and which by its terms
expressly provide that it shall rank on a parity with the Series H
Preferred Stock; and
o rank junior to each future series of preferred stock of Genesis not
issued in violation of the terms of the Series H Preferred Stock and
which by its terms expressly provide that it shall rank senior to the
Series H Preferred Stock.
Conversion
Conversion is at the option of the holder at any time prior to actual
redemption into the number of shares of Genesis common stock equal to the then
effective liquidation preference plus accrued and unpaid dividends from the most
recent dividend payment date through the date of conversion, divided by 8.75.
The conversion rights include provisions that protect the holders thereof
against dilution by adjustment of the conversion price in certain events
including, among other events, stock dividends, stock splits and issuances by
Genesis of any class of Genesis common stock at a price per share below the fair
market value, other than in connection with an acquisition or a public offering.
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Optional Redemption
Genesis will not have the right to redeem the Series H Preferred Stock at
any time prior to the third anniversary of the issue date.
Thereafter and prior to the fifth anniversary of the issue date, Genesis
will have the right, upon not less than 30 days nor more than 120 days notice,
to redeem the Series H Preferred Stock in whole but not in part at a price per
share in cash equal to the then effective per share liquidation preference plus
accrued and unpaid dividends from the most recent dividend payment date through
the date of redemption if the average closing price of Genesis' common stock for
the 30 consecutive trading days ending on the date of notice of Genesis' intent
to redeem the Series H Preferred Stock exceeds 135% of the conversion price then
in effect.
On and after the fifth anniversary of the issue date and prior to the
twelfth anniversary of the issue date, Genesis will have the right, upon not
less than 30 days nor more than 120 days notice, to redeem the Series H
Preferred Stock in whole but not in part at a price per share in cash set forth
below (expressed as a percentage of the then effective per share liquidation
preference plus accrued and unpaid dividends from the most recent dividend
payment date through the date of redemption), if redeemed during the 12-month
period beginning on the anniversary of the issue date in the years indicated
below:
Year Percentage
---- ----------
2004 ................... 103.500%
2005 ................... 102.333
2006 ................... 101.167
2007 and thereafter .... 100.000
Mandatory Redemption
To the extent that Genesis has funds legally available, on the twelfth
anniversary of the issue date (and to the extent that Genesis does not then have
funds legally available, as soon thereafter as Genesis has funds legally
available), Genesis will redeem all outstanding shares of the Series H Preferred
Stock at a price per share in cash equal to the then effective per share
liquidation preference plus accrued and unpaid dividends from the most recent
dividend payment date through the date of redemption.
Voting Rights
General
The Series H Preferred Stock will have the right to vote, together with all
of Genesis' other securities entitled to vote, on all matters on which Genesis'
common stockholders are entitled to vote. Each share of Series H Preferred Stock
will have the number of votes equal to the number of shares of common stock then
issuable upon conversion of each share of Series H Preferred Stock.
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Upon a Default
If and whenever:
o following the fifth anniversary of the issue date Genesis has failed to
pay dividends in cash for four consecutive fiscal quarters while Genesis
was not prohibited from paying these dividends in cash under the terms of
its then existing senior or senior subordinated indebtedness, or
o Genesis is in default of any of its obligations to redeem any shares of
Series H Preferred Stock,
then the holders of the Series H Preferred Stock, together with the holders of
the Series I Preferred Stock if the Series I Preferred Stock is also in default,
voting together as a single class, will be entitled to elect 2 directors on
Genesis' board of directors by majority vote.
Class Vote
Genesis will not, without consent of the holders of at least a majority of
the number of shares of Series H Preferred Stock and Series I Preferred Stock at
the time outstanding voting together as a class:
o increase the number of shares of authorized Series H Preferred Stock or
Series I Preferred Stock or issue any additional shares of Series H
Preferred Stock or Series I Preferred Stock, other than as contemplated
by the terms of the Series I Preferred Stock or the Series H Preferred
Stock;
o amend or modify the relative rights, preferences or limitations of the
Series H Preferred Stock or the Series I Preferred Stock or amend, alter
or repeal any of the provisions of Genesis' articles of incorporation or
by-laws (including by merger or similar transaction or otherwise) so as
to eliminate the Series H Preferred Stock or the Series I Preferred Stock
or otherwise affect adversely the powers, preferences or rights of the
holders of Series H Preferred Stock or Series I Preferred Stock;
o other than the Series I Preferred Stock and the Series H Preferred Stock,
create, authorize, issue or permit to exist any class of capital stock or
series of preferred stock that ranks senior to or pari passu with the
Series H Preferred Stock (other than preferred stock with an aggregate
liquidation preference and accrued and unpaid dividends not exceeding $75
million at any time outstanding ranking pari passu with the Series H
Preferred Stock) with respect to dividend rights or rights on
liquidation, winding up or dissolution, or reclassify any class or series
of any junior stock into, or authorize any securities exchangeable for,
convertible into or evidencing the right to purchase, any such class or
series; or
o enter into any transaction or series of transactions which would
constitute a change in control, as defined in the certificate of
designations, or engage in any "going private" transaction, except in a
transaction where the holders of the Series H Preferred Stock receive
cash consideration equal to the greater of
o 101% of the then effective liquidation preference plus accrued and
unpaid dividends from the most recent dividend payment date and
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o the fair market value of the consideration they would be entitled to
receive if they were to convert their Series H Preferred Stock into
Genesis common stock immediately prior to the effective time of the
transaction.
Special Right to Appoint Directors
Cypress and TPG, acting jointly, or in the event that only one of Cypress
and TPG then owns or has the right to acquire Genesis common stock, Cypress or
TPG, as applicable, will be entitled to designate a number of directors of
Genesis representing at least 23% of the total number of directors constituting
the full board of directors of Genesis. However, for so long as the total number
of directors constituting the full board of directors of Genesis is nine or
fewer, Cypress and/or TPG will only be entitled to designate two directors on
the Genesis board of directors. Cypress and TPG will have this right to
designate directors so long as they own any combination of Genesis voting
securities or securities convertible into Genesis voting securities constituting
more that 10% of Genesis' total voting power. For this purpose, the Series I
Preferred Stock and the non-voting common stock issued upon conversion of the
Series I Preferred Stock will be considered voting securities.
Each committee of the Genesis board of directors will include at least one
director designated by Cypress and/or TPG, unless the rules or regulations of
the primary exchange or quotation system on which Genesis' common stock is then
listed or quoted prohibits the appointment of a Cypress and/or TPG designated
director to a particular committee.
Series I Senior Convertible Exchangeable Participating Cumulative Preferred
Stock
Liquidation Preference
The liquidation preference is $10,000 per share, plus accrued and unpaid
dividends.
Upon any liquidation, winding-up or dissolution of Genesis, before any
distribution or payment is made to any equity security of Genesis ranking junior
to the Series I Preferred Stock, the holders of the Series I Preferred Stock
shall be paid the greater of :
o the then effective liquidation preference plus accrued and unpaid
dividends from the most recent dividend payment date through the date of
liquidation, winding-up or dissolution, and
o the amount that would be payable to the holders of shares of the Series I
Preferred Stock if the holders of the Series I Preferred Stock had
converted all outstanding shares of Series I Preferred Stock into shares
of common stock of Genesis immediately prior to such liquidation,
winding-up or dissolution.
If upon any liquidation, winding-up or dissolution of Genesis, the assets
of Genesis are insufficient to pay in full the amount due on the Series I
Preferred Stock and the amount due on any parity securities, then those assets
will be distributed among the holders of the Series I Preferred Stock and the
holders of the other securities ratably.
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Dividends
The dividend rate is the greater of:
o the then effective dividend rate per annum of the then effective
liquidation preference, and
o the quarterly dividend last declared with respect to Genesis's common
stock, to be paid on each share of Series I Preferred Stock as if
converted into Genesis common stock immediately prior to the applicable
record date.
Dividends will be payable quarterly in cash, when, as and if declared by
Genesis' board of directors, and if not paid on the applicable dividend payment
date will be added to the liquidation preference.
The dividend rate will increase by 0.50% per annum beginning in the sixth
year following the issue date. If at any time Genesis is in default of its
obligation to redeem any shares of the Series I Preferred Stock, the dividend
rate will be increased to the then effective dividend rate plus 2.00% per annum.
Dividend Rate Reset
In the event on any dividend payment date occurring on or after the second
anniversary of the issue date of the Series H Preferred Stock, referred to as
the Series H Issue Date, the exchange by Genesis of any shares of Series I
Preferred Stock held by any person for shares of Series H Preferred Stock would
not result in that person beneficially owning voting stock of Genesis or
securities convertible or exercisable for voting stock of Genesis where all such
voting stock represents more than 49% of the total voting stock of Genesis, the
dividend rate for all shares of Series I Preferred held by that person will be
increased to the greater of:
o the then effective dividend rate plus 8.00% per annum of the then
effective liquidation preference, and
o the quarterly dividend last declared with respect to Genesis' common
stock.
For this purpose, voting stock is defined as such phrase is defined in
Genesis' senior subordinated debt.
Ranking
The Series I Preferred Stock will, with respect to dividend rights and
rights on liquidation, winding-up and dissolution:
o rank senior to all shares of Genesis common stock, all currently
outstanding shares of preferred stock and each future series of preferred
stock of Genesis which does not expressly provide that it ranks senior to
or on a parity with the Series I Preferred Stock;
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o rank on a parity with Genesis' Series H Preferred Stock and with each
future series of Genesis preferred stock not issued in violation of the
terms of the Series I Preferred Stock and which by its terms expressly
provide that it shall rank on a parity with the Series I Preferred Stock;
and
o rank junior to each future series of preferred stock of Genesis not
issued in violation of the terms of the Series I Preferred Stock and
which by its terms expressly provide that it shall rank senior to the
Series I Preferred Stock.
Conversion
Conversion is at the option of the holder at any time prior to actual
redemption into the number of shares of a new class of common stock of Genesis
(identical in all respects to the common stock issuable upon conversion of the
Series H Preferred Stock except that this new series of common stock will not
have the right to vote other than as provided by law) equal to the then
effective liquidation preference plus accrued and unpaid dividends from the most
recent dividend payment date through the date of conversion, divided by 8.75.
The conversion rights include provisions that protect the holders thereof
against dilution by adjustment of the conversion price in certain events
including, among other events, stock dividends, stock splits and issuances by
Genesis of any class of Genesis common stock at a price per share below the fair
market value, other than in connection with an acquisition or a public offering.
Optional Redemption
Genesis will not have the right to redeem the Series I Preferred Stock at
any time.
Mandatory Redemption
At any time on or after the twelfth anniversary of the Series H Issue Date,
the Series I Preferred Stock will be redeemed in whole or in part at the option
of the holders at a price per share in cash equal to the then effective per
share liquidation preference plus accrued and unpaid dividends from the most
recent dividend payment date through the date of redemption.
Exchange
The Series I Preferred Stock will be exchangeable at the option of Genesis
at any time into a number of shares of Series H Preferred Stock with a
liquidation preference equal to the then effective liquidation preference plus
accrued and unpaid dividends from the most recent dividend payment date through
the date of exchange of the shares of Series I Preferred Stock then being
exchanged.
Voting Rights
General
The Series I Preferred Stock will have no voting rights other than as set
forth below.
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Upon a Default
If and whenever:
o following the fifth anniversary of the issue date Genesis has failed to
pay dividends in cash for four consecutive fiscal quarters while Genesis
was not prohibited from paying such dividends in cash under the terms of
its then outstanding senior or subordinated indebtedness; or
o Genesis is in default of any of its obligations to redeem any shares of
Series I Preferred Stock,
then the holders of the Series I Preferred Stock, together with the holders of
the Series H Preferred Stock if the Series H Preferred Stock is also in default,
voting together as a single class, shall be entitled to elect 2 directors on
Genesis' board of directors by a majority vote.
Class Vote
Genesis will not, without consent of the holders of at least two-thirds of
the number of shares of Series I Preferred Stock and Series H Preferred Stock at
the time outstanding voting together as a class:
o increase the number of shares of authorized Series I Preferred Stock or
Series H Preferred Stock or issue any additional shares of Series I
Preferred Stock or Series H Preferred Stock, other than as contemplated
by the terms of the Series H Preferred Stock or the Series I Preferred
Stock;
o amend or modify the relative rights, preferences or limitations of the
Series I Preferred Stock or the Series H Preferred Stock or amend, alter
or repeal any of the provisions of Genesis' articles of incorporation or
by-laws (including by merger or similar transaction or otherwise) so as
to eliminate the Series I Preferred Stock or the Series H Preferred Stock
or otherwise affect adversely the powers, preferences or rights of the
holders of Series I Preferred Stock or Series H Preferred Stock;
o other than the Series H Preferred Stock and the Series I Preferred Stock,
create, authorize issue or permit to exist any class of capital stock or
series of preferred stock that ranks senior to or pari passu with the
Series I Preferred Stock (other than preferred stock with an aggregate
liquidation preference and accrued and unpaid dividends not exceeding $75
million at any time outstanding ranking pari passu with the Series I
Preferred Stock) with respect to dividend rights or rights on
liquidation, winding up or dissolution, or reclassify any class or series
of any junior stock into, or authorize any securities exchangeable for,
convertible into or evidencing the right to purchase, any such class or
series; or
o enter into any transaction or series of related transactions which would
constitute a change in control, as defined in the certificate of
designations, or engage in any "going private" transaction, except in a
transaction where the holders of the Series I Preferred Stock receive
cash consideration equal to the greater of
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o 101% of the then effective liquidation preference plus accrued and unpaid
dividends from the most recent dividend payment date and
o the fair market value of the consideration they would be entitled to
receive if they were to convert their Series I Preferred Stock into
Genesis non-voting common stock as provided in its certificate of
designations immediately prior to the effective time of the transaction.
Description of the Warrants
The following summary description of the warrants to be issued by Genesis
does not purport to be complete and is qualified in its entirety by reference
to, the warrant certificate which is attached as Exhibit D to the Restructuring
Agreement, which is attached as Annex A to this proxy statement.
In connection with the restructuring transaction, Genesis is issuing
warrants to purchase up to 2,000,000 shares of Genesis common stock at an
exercise price of $5.00 per share, subject to adjustment. The warrants are
exercisable at any time for a period of ten years commencing on the date of
issuance.
The warrants contain provisions that protect the holders thereof against
dilution by adjustment of the exercise price and the number of shares purchased
under the warrant in certain events, including, among other events, stock
dividends, stock splits and issuances by Genesis of any class of Genesis common
stock at a price per share below the fair market value, other than in connection
with an acquisition or a public offering. The warrants are freely transferable,
except as limited by federal or state security laws. Holders of warrants do not
possess any rights as shareholders of Genesis unless and until they exercise the
warrants.
Certain Litigation
On May 7, 1999, Genesis and Vitalink Pharmacy Services (d/b/a
NeighborCare(SM), a subsidiary of Genesis, filed multiple lawsuits requesting
injunctive relief and compensatory damages against HCR Manor Care, Inc. and two
of its subsidiaries and principals. The lawsuits arise from HCR Manor Care's
threatened termination of two long term pharmacy services contracts effective
June 1, 1999.
Vitalink filed a complaint against HCR Manor Care and two of it
subsidiaries in Baltimore City, Maryland circuit court. Genesis filed a
complaint against HCR Manor Care and two of its subsidiaries and principals in
federal district court in Delaware including, among other counts, securities
fraud. Vitalink has also instituted an arbitration action in Maryland.
Vitalink is seeking an injunction preventing HCR Manor Care's threatened
termination of two of its long term pharmacy service contracts and a declaration
that it has a right to provide pharmacy, infusion therapy and related services
to all HCR Manor Care's facilities. Genesis and Vitalink seek over $100 million
in compensatory damages and enforcement of a 10-year non-competition clause.
Genesis acquired Vitalink from Manor Care in August 1998. In 1991, Vitalink
and Manor Care entered into long term master pharmacy agreements which gave
Vitalink the right to provide pharmacy services to all facilities owned or
licensed by Manor Care and its affiliates. In 1998, the terms of the pharmacy
service agreements were extended to September, 2004.
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Under the two master service agreements, Genesis and Vitalink receive
revenues at the rate of approximately $100 million per year.
By agreement dated May 13, 1999, the parties agreed to consolidate the
Maryland State Court Claims relating to the master service agreements with the
Arbitration matter. Until such time as a final decision is rendered in said
Arbitration, the parties have agreed to maintain the master service agreements
in full force and effect. Genesis still maintains its Delaware federal court
complaint.
On July 26, 1999, NeighborCare, through its Maryland counsel, filed an
additional complaint against Omnicare Inc. and Heartland Healthcare (a joint
venture between Omnicare and HCR Manor Care) seeking injunctive relief and
compensatory and punitive damages. The complaint includes counts for tortious
interference with Vitalink's contractual rights under its three exclusive long
term service contracts with HCR Manor Care.
On August 27, 1999 Manor Care Inc., a wholly owned subsidiary of HCR Manor
Care Inc., filed a lawsuit against Genesis Health Ventures, Inc. in the United
States District Court for the District of Delaware based upon Section 11 and
Section 12 of the Securities Act. The plaintiffs allege that in connection with
the sale of the Genesis Series G Preferred Stock issued as part of the purchase
price to acquire Vitalink Pharmacy Services Inc., Genesis failed to disclose or
made misrepresentations related to the effects of the conversion to the
prospective pay system, the restructuring of the Multicare joint venture, the
impact of the acquisition of Multicare, the status of Genesis labor relations,
Genesis' ability to declare dividends on the Series G Preferred Stock and
information relating to the ratio of combined fixed charges and preference
dividends to earnings. Manor Care Inc. seeks, among other things, compensatory
damages and recission of the purchase of the Series G Preferred Stock.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information gives effect to (1)
the restructuring of the Multicare joint venture, which will result in the
consolidation of Multicare with Genesis for financial reporting purposes and (2)
Genesis' purchase on August 28, 1998 of Vitalink Pharmacy Services, Inc. (the
"Vitalink Transaction"), which was accounted for using the purchase method.
The Vitalink Transaction Adjustments in the Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the twelve months ended September 30,
1998 include the effects of the Vitalink Transaction as if it had occurred on
October 1, 1997. No pro forma adjustments related to the Vitalink Transaction
are included in the Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended June 30, 1999 since the Vitalink operations
are included in Genesis' Historical operating results for the entire period. No
pro forma balance sheet adjustments are presented because the Vitalink
Transaction was consummated prior to June 30, 1999 and therefore is reflected in
the Genesis Historical balance sheet presented at June 30, 1999. The Vitalink
Historical results in the Unaudited Pro Forma Condensed Consolidated Statement
of Operations for the twelve months ended September 30, 1998 reflect eleven
months of operations since Vitalink's September 1998 operating results are
included in the Genesis Historical results.
The Multicare Restructuring Transaction Pro Forma Adjustments in the
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
twelve months ended September 30, 1998 and the nine months ended June 30, 1999
include the effect of the restructuring of the Multicare joint venture as if it
had occurred on October 1, 1997. The Multicare Restructuring Transaction Pro
Forma adjustments in the Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of June 30, 1999, include the effect of the restructuring of the
Multicare joint venture as if it had occurred on June 30, 1999.
The pro forma adjustments are based on available information and certain
assumptions that management believes are reasonable and described in the
accompanying notes. No changes in operating revenues or expenses have been made
to reflect the results of any modification to operations that might have been
made had the transactions been consummated on the assumed effective dates for
purposes of pro forma results. The unaudited pro forma financial information for
the consolidated company is provided for informational purposes only and does
not purport to represent what Genesis' results of operations or financial
position would actually have been had the transactions described above actually
occurred at such dates or to project Genesis' results of operations or financial
position at or for any future date or period.
The unaudited pro forma financial information for the Vitalink Transaction
has been prepared using the purchase method of accounting, whereby merger
consideration is allocated to the tangible and intangible assets acquired and
liabilities assumed based on their estimated respective fair values at the
effective date of the transaction.
The unaudited pro forma financial information for the restructuring of the
Multicare joint venture has been prepared assuming Genesis will consolidate the
financial results of Multicare. Accordingly, Multicare's assets, liabilities,
revenues and expenses are presented at their recorded historical amounts and the
financial impact of all transactions between Genesis and Multicare are
eliminated in consolidation. In the accompanying Unaudited Pro Forma Condensed
Consolidated Balance Sheet, the minority shareholders remaining 56.4% interest
in Multicare is presented as minority interest based upon their proportionate
share of Multicare's historical book equity. For so long as there is a minority
interest in Multicare, the proportionate share of Multicare's net income or loss
will be attributed to the minority shareholders and will be reflected in the
consolidated financial statements as minority interest.
-38-
<PAGE>
The following unaudited pro forma financial information for the consolidated
company should be read in conjunction with the historical financial statements
of Genesis and Multicare for their fiscal years ended September 30, 1998 and
the nine months ended June 30, 1999, including the respective notes thereto,
which are incorporated by reference in this document.
-39-
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 1998
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Vitalink
Transaction
Genesis Vitalink Pro Forma
Historical Historical Adjustments
----------- ---------- -----------
<S> <C> <C> <C>
Net revenues $ 1,405,305 452,842 -
Expenses:
Operating expenses 1,122,619 391,438 (8,590)(5)(6)
General corporate expenses 53,179 - -
Loss on impairment of assets 94,817 - -
Lease expense 31,182 - -
Depreciation and amortization 52,385 17,015 2,547(1)
Interest expense, net 82,088 5,116 24,431(2)
----------- ------- -------
Total expenses 1,436,270 413,569 18,388
----------- ------- -------
Earnings (loss) before income taxes,
equity in net income (loss) of unconsolidated
affiliates, minority interest and extraordinary item (30,965) 39,273 (18,388)
Income tax expense (benefit) (8,158) 17,808 (7,249)(7)
----------- ------- -------
Earnings (loss) before equity in net income
(loss) of unconsolidated affiliates, minority
interest and extraordinary item (22,807) 21,465 (11,139)
Equity in net income (loss) of unconsolidated affiliates 486 - -
Minority interest - - -
----------- ------- -------
Earnings (loss) before extraordinary item (22,321) 21,465 (11,139)
Extraordinary item, net of tax (1,924) - -
----------- ------- -------
Net income (loss) (24,245) 21,465 (11,139)
Less: preferred stock dividends 1,655 - 15,893(3)
----------- ------- -------
Net income (loss) attributed to common shareholders $ (25,900) 21,465 (27,032)
============ ======= =======
Per common share data (4):
Basic:
Loss before extraordinary item (8) $ (0.68)
Weighted average shares of common stock 35,159,195
Diluted:
Loss before extraordinary item (8) $ (0.68)
Weighted average shares of common stock
and equivalents 35,159,195
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Multicare
Pro Forma Restructuring
Genesis Transaction
and Vitalink Multicare Pro Forma
Combined Historical Adjustments (13)
------------ ---------- -------------
<S> <C> <C> <C>
Net revenues 1,858,147 695,633 (67,352)(9)
Expenses:
Operating expenses 1,505,467 524,542 (25,117)(9)
General corporate expenses 53,179 42,235 (42,235)(9)
Loss on impairment of assets 94,817 - -
Lease expense 31,182 13,194 -
Depreciation and amortization 71,947 44,875 -
Interest expense, net 111,635 61,728 (4,250)(11)
--------- ------- --------
Total expenses 1,868,227 686,574 (71,602)
--------- ------- --------
Earnings (loss) before income taxes,
equity in net income (loss) of unconsolidated
affiliates, minority interest and extraordinary item (10,080) 9,059 4,250
Income tax expense (benefit) 2,401 8,821 1,530 (7)
--------- ------- --------
Earnings (loss) before equity in net income
(loss) of unconsolidated affiliates, minority
interest and extraordinary item (12,481) 238 2,720
Equity in net income (loss) of unconsolidated affiliates 486 - (104)(10)
Minority interest - - (134)(15)
--------- ------- --------
Earnings (loss) before extraordinary item (11,995) 238 2,482
Extraordinary item, net of tax (1,924) - -
--------- ------- --------
Net income (loss) (13,919) 238 2,482
Less: preferred stock dividends 17,548 - 25,914 (12)
--------- ------- --------
Net income (loss) attributed to common shareholders (31,467) 238 (23,432)
========= ======= ========
Per common share data (4):
Basic:
Loss before extraordinary item (8)
Weighted average shares of common stock 12,500,000 (14)
Diluted:
Loss before extraordinary item (8)
Weighted average shares of common stock
and equivalents 12,500,000 (14)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Genesis
Pro Forma
Consolidated
-------------
<S> <C>
Net revenues $ 2,486,428
Expenses:
Operating expenses 2,004,892
General corporate expenses 53,179
Loss on impairment of assets 94,817
Lease expense 44,376
Depreciation and amortization 116,822
Interest expense, net 169,113
----------
Total expenses 2,483,199
----------
Earnings (loss) before income taxes,
equity in net income (loss) of unconsolidated
affiliates, minority interest and extraordinary item 3,229
Income tax expense (benefit) 12,752
----------
Earnings (loss) before equity in net income
(loss) of unconsolidated affiliates, minority
interest and extraordinary item (9,523)
Equity in net income (loss) of unconsolidated affiliates 382
Minority interest (134)
----------
Earnings (loss) before extraordinary item (9,275)
Extraordinary item, net of tax (1,924)
----------
Net income (loss) (11,199)
Less: preferred stock dividends 43,462
----------
Net income (loss) attributed to common shareholders $ (54,661)
===========
Per common share data (4):
Basic:
Loss before extraordinary item (8) $ (1.11)
Weighted average shares of common stock 47,659,195
Diluted:
Loss before extraordinary item (8) $ (1.11)
Weighted average shares of common stock
and equivalents 47,659,195
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Operations
-40-
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Multicare
Restructuring
Transaction
Genesis Multicare Pro Forma
Historical Historical Adjustments (13)
-------------- ------------ ---------------
<S> <C> <C> <C>
Net revenues $ 1,408,911 480,504 (74,301)(9)
Expenses:
Operating expenses 1,172,685 385,145 (45,535)(9)
General corporate expenses 42,731 28,766 (28,766)(9)
Facility closure expense 9,701 - -
Lease expense 19,641 9,735 -
Depreciation and amortization 55,453 34,003 -
Interest expense, net 85,295 48,966 (3,188)(11)
----------- ------- ----------
Total expenses 1,385,506 506,615 (77,489)
----------- ------- ----------
Earnings (loss) before income taxes,
equity in net income (loss) of unconsolidated
affiliates, minority interest and
extraordinary items 23,405 (26,111) 3,188
Income tax expense (benefit) 10,851 (4,867) 1,148 (7)
----------- ------- ----------
Earnings (loss) before equity in net income
(loss) of unconsolidated affiliates, minority
interest and extraordinary items 12,554 (21,244) 2,040
Equity in net income (loss) of unconsolidated affiliates (8,626) - 9,262 (10)
Minority interest - - 11,982 (15)
----------- ------- ----------
Earnings (loss) before extraordinary items 3,928 (21,244) 23,284
Extraordinary items, net of tax (2,100) - -
----------- ------- ----------
Net income (loss) 1,828 (21,244) 23,284
Less: preferred stock dividends 13,106 - 19,436 (12)
----------- ------- ----------
Net income (loss) attributed to common shareholders $ (11,278) (21,244) 3,848
=========== ======= ==========
Per common share data (4):
Basic:
Loss before extraordinary items (8) $ (0.26)
Weighted average shares of common stock 35,268,910 12,500,000 (14)
Diluted:
Loss before extraordinary items (8) $ (0.26)
Weighted average shares of common stock
and equivalents 35,268,910 12,500,000 (14)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Genesis
Pro Forma
Consolidated
-------------
<S> <C>
Net revenues $ 1,815,114
Expenses:
Operating expenses 1,512,295
General corporate expenses 42,731
Facility closure expense 9,701
Lease expense 29,376
Depreciation and amortization 89,456
Interest expense, net 131,073
-----------
Total expenses 1,814,632
-----------
Earnings (loss) before income taxes,
equity in net income (loss) of unconsolidated
affiliates, minority interest and
extraordinary items 482
Income tax expense (benefit) 7,132
-----------
Earnings (loss) before equity in net income
(loss) of unconsolidated affiliates, minority
interest and extraordinary items (6,650)
Equity in net income (loss) of unconsolidated affiliates 636
Minority interest 11,982
-----------
Earnings (loss) before extraordinary items 5,968
Extraordinary items, net of tax (2,100)
-----------
Net income (loss) 3,868
Less: preferred stock dividends 32,542
-----------
Net income (loss) attributed to common shareholders $ (28,674)
===========
Per common share data (4):
Basic:
Loss before extraordinary items (8) $ (0.56)
Weighted average shares of common stock 47,768,910
Diluted:
Loss before extraordinary items (8) $ (0.56)
Weighted average shares of common stock
and equivalents 47,768,910
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Operations
-41-
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
Vitalink Transaction Pro Forma Adjustments
(1) Represents additional amortization relating to the goodwill and the
estimated fair value of pharmacy services agreements with Manor Care
recorded as a result of the Vitalink Transaction, less amortization of
pre-acquisition goodwill recorded by Vitalink.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Amortization of goodwill over 40 years $12,593 $ -
Amortization of the fair value of pharmacy services
agreements with Manor Care over 20 years 987 -
------- ------
13,580 -
Less: amortization of $342,560 of pre-acquisition
goodwill recorded by Vitalink over a remaining
useful life of 40 years and amortization and
depreciation of assets which have no future benefit 11,033 -
------- ------
Depreciation and amortization $ 2,547 $ -
======= ======
</TABLE>
(2) The Vitalink Transaction consideration and the repayment of certain amounts
under the Vitalink credit facility were financed, in part, through
borrowings under Genesis' revolving credit facility, resulting in
additional net interest expense, and the amortization of related direct
financing costs.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Interest expense - $383,811 borrowing under revolving
credit facility, 8.00% $27,845 $ -
Amortization of direct financing costs over 10 years 333 -
------- ------
28,178
Less: interest expense - $68,274 repayment
of Vitalink credit facility, 6.05% 3,747 -
------- ------
Interest expense $24,431 $ -
======= ======
</TABLE>
(3) Represents the dividend on the $295,155 of Genesis Series G Cumulative
Convertible Preferred Stock issued as part of the Vitalink Transaction.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Preferred stock dividends $15,893 $ -
======= ======
</TABLE>
(4) Pro forma basic and diluted loss per common share before extraordinary
items were calculated after deducting preferred stock dividends. The pro
forma per common share data does not assume the conversion of the Genesis
Series G Cumulative Convertible Preferred Stock or the Genesis Series H and
Series I Senior Convertible Participating Cumulative Preferred Stock as the
effect would be antidilutive.
-42-
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(5) Genesis identified certain operations of Vitalink for which it had a
discrete and identifiable plan to merge or dispose of. Additionally, under
existing pharmaceutical supply contracts, purchasing discounts on volume
increases were achieved.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Elimination of losses related to operations
merged or disposed of $ 1,155 $ -
Purchasing discounts on volume increases 1,904 -
------- ------
Operating expenses $ 3,059 $ -
======= ======
</TABLE>
(6) As a result of the Vitalink Transaction, certain duplicative functions
related to the prior ownership structure were merged and duplicative
positions were eliminated. Genesis identified duplicative physical
locations which were merged into existing Genesis administrative locations.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Personnel reductions to eliminate duplicative positions $ 2,811 $ -
Other administrative costs including legal and accounting
fees and office expense 2,720 -
------- ------
Operating expenses $ 5,531 $ -
======= ======
</TABLE>
(7) Represents income tax expense (benefit), excluding non-deductible
amortization, at 36%.
(8) Before the effect of extraordinary losses, net of tax, of $1,924 and $2,100
related to the early retirement of debt for the twelve months ended
September 30, 1998 and the nine months ended June 30, 1999, respectively.
Multicare Restructuring Transaction Pro Forma Adjustments
(9) Represents the elimination of the intercompany revenues and expenses
between Genesis and Multicare subsidiaries in accordance with consolidation
accounting. The elimination of operating expenses represents ancillary
service charges from Genesis to Multicare. The elimination of general
corporate expenses represents management fees charged from Genesis to
Multicare.
-43-
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Operating expenses $25,117 $45,535
General corporate expenses 42,235 28,766
------- -------
Net revenues $67,352 $74,301
======= =======
</TABLE>
(10) Represents the elimination of Genesis' 43.6% equity in the net income
(loss) of Multicare recorded in Genesis' Historical operating results.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Equity in net income (loss) of unconsolidated affiliates $ 104 $(9,262)
======= =======
</TABLE>
(11) Represents interest savings at 8.5% on debt repaid with proceeds from the
$50,000 equity investment made by Cypress and TPG.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Interest expense $ 4,250 $ 3,188
======= =======
</TABLE>
(12) Represents the dividend on $420,000 of Genesis Series H and Series I Senior
Convertible Participating Cumulative Preferred Stock issued in connection
with the restructuring of the Multicare joint venture.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Preferred stock dividends $25,914 $19,436
======= =======
</TABLE>
(13) Represents Genesis' estimated cost to complete the restructuring of the
Multicare joint venture, including the cost to terminate the Multicare Put
and certain professional costs of the restructuring to be incurred. These
costs were not considered in the Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the periods presented due to their
nonrecurring nature.
-44-
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Termination of the Multicare Put $420,000 $ -
Transaction related costs 2,000 -
======== =======
Multicare restructuring costs $422,000 $ -
======== =======
</TABLE>
(14) Represents the issuance of 12,500,000 shares of Genesis common stock in
consideration for Cypress' and TPG's $50,000 equity investment.
(15) Represents the 56.4% minority interest in the net income or loss of
Multicare for the periods presented.
<TABLE>
<CAPTION>
Twelve Months Nine Months
Ended Ended
September 30, June 30,
1998 1999
------------- -----------
<S> <C> <C>
Minority interest $ (134) $11,982
======= =======
</TABLE>
-45-
<PAGE>
Genesis Health Ventures, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1999
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Multicare
Restructuring
Transaction
Genesis Multicare Pro Forma
Assets: Historical Historical Adjustments
-------------- ------------ ---------------
<S> <C> <C> <C>
Current assets $ 606,688 154,731 (7,471)(1)
Property, plant, and equipment, net 624,688 714,295 -
Notes receivable and other investments 52,203 - -
Other long-term assets 89,638 59,610 (23,670)(1)
Investment in Multicare 328,337 - (328,337)(2)
Investments in other unconsolidated affiliates 31,783 - -
Goodwill and other intangibles, net 965,089 769,636 17,908 (2)
---------- --------- ----------
Total assets 2,698,426 1,698,272 (341,570)
========== ========= ==========
Liabilities and Shareholders' Equity:
Current liabilities 236,672 113,503 (5,471)(1)(2)
Long-term debt 1,468,840 743,789 (50,000)(3)
Deferred income taxes 70,747 104,926 -
Deferred gain and other long-term liabilities 55,199 24,060 (23,670)(1)
Minority interest - - 401,565 (2)
Redeemable preferred stock - - 420,000 (2)
Shareholders' equity:
Series G Cumulative Convertible Preferred Stock, par $.01, authorized
5,000,000 shares, 590,253 issued and outstanding at June 30, 1999 6 - -
Common stock, par $.02, authorized 60,000,000 shares, issued and
outstanding 48,645,678 and 48,633,578 at June 30, 1999 723 - 250 (3)
Additional paid-in capital 753,452 733,000 (683,250)(2)(3)
Retained earnings (deficit) 113,152 (21,006) (400,994)(2)
Accumulated other comprehensive income (loss) (122) - -
Treasury stock, at cost (243) - -
---------- --------- ----------
Total shareholders' equity 866,968 711,994 (1,083,994)
---------- --------- ----------
Total liabilities and shareholders' equity $2,698,426 1,698,272 (341,570)
========== ========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Genesis
Pro Forma
Assets: Consolidated
---------------
<S> <C>
Current assets $ 753,948
Property, plant, and equipment, net 1,338,983
Notes receivable and other investments 52,203
Other long-term assets 125,578
Investment in Multicare -
Investments in other unconsolidated affiliates 31,783
Goodwill and other intangibles, net 1,752,633
----------
Total assets 4,055,128
==========
Liabilities and Shareholders' Equity:
Current liabilities 344,704
Long-term debt 2,162,629
Deferred income taxes 175,673
Deferred gain and other long-term liabilities 55,589
Minority interest 401,565
Redeemable preferred stock 420,000
Shareholders' equity:
Series G Cumulative Convertible Preferred Stock, par $.01, authorized
5,000,000 shares, 590,253 issued and outstanding at June 30, 1999 6
Common stock, par $.02, authorized 60,000,000 shares, issued and
outstanding 48,645,678 and 48,633,578 at June 30, 1999 973
Additional paid-in capital 803,202
Retained earnings (deficit) (308,848)
Accumulated other comprehensive income (loss) (122)
Treasury stock, at cost (243)
----------
Total shareholders' equity 494,968
----------
Total liabilities and shareholders' equity $4,055,128
==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Balance
Sheet
-46-
<PAGE>
GENESIS HEALTH VENTURES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(in thousands, except share data)
(1) Represents the elimination of the receivables and payables between Genesis
and Multicare in accordance with consolidation accounting. The elimination
of current assets and liabilities consists primarily of trade receivables
due from Multicare to Genesis for unpaid ancillary services. The
elimination of other long-term assets and liabilities consists of
subordinated management fees due from Multicare to Genesis.
Current assets $ (7,471)
Other long-term assets (23,670)
Current liabilities (7,471)
Other long-term liabilities (23,670)
(2) (A) - Represents the issuance of Series H and Series I Senior
Convertible Participating Cumulative Preferred Stock issued to
Cypress and TPG in consideration for the termination of the Multicare
Put. Also included are $2,000 of estimated expenses for certain
costs of the restructuring, including legal and accounting fees.
(B) - Represents the reclassification to goodwill of Genesis' investment in
Multicare in excess of its original 43.6% interest in the equity of
Multicare.
(C) - Represents the elimination of accounts in accordance with
consolidation accounting.
<TABLE>
<CAPTION>
(A) (B)
--------- --------
<S> <C> <C>
Investment in Multicare $ - (17,908)
Goodwill and other intangibles, net - 17,908
--------- --------
Total Assets - -
========= ========
Current liabilities 2,000 -
Minority interest - -
Redeemable preferred stock 420,000 -
Additional paid in capital - -
Retained earnings (deficit) (422,000) -
--------- --------
Total Liabilities and Shareholders' Equity $ - -
========= ========
<CAPTION>
(C) Total
---------- ----------
<S> <C> <C>
Investment in Multicare (310,429) $ (328,337)
Goodwill and other intangibles, net - 17,908
---------- ----------
Total Assets (310,429) (310,429)
========== ==========
Current liabilities - 2,000
Minority interest 401,565 401,565
Redeemable preferred stock - 420,000
Additional paid in capital (733,000) (733,000)
Retained earnings (deficit) 21,006 (400,994)
---------- ----------
Total Liabilities and Shareholders' Equity (310,429) $ (310,429)
========== ==========
</TABLE>
<PAGE>
(3) Represents the issuance of 12,500,000 shares of Genesis common stock in
consideration for Cypress' and TPG's $50,000 equity investment and the
repayment of borrowings under the Genesis bank credit facility.
<TABLE>
<CAPTION>
<S> <C>
Long-term debt $ (50,000)
Common stock 250
Additional paid-in capital 49,750
</TABLE>
-47-
<PAGE>
Incorporation By Reference
The SEC also allows Genesis to "incorporate by reference" the information
it and Multicare files with the SEC, which means Genesis can disclose
information to you by referring you to another document filed separately with
the SEC. Information incorporated by reference is deemed to be part of this
proxy statement. Information filed by Genesis and Multicare with the SEC
subsequent to the date of this proxy statement and prior to the special meeting
will be deemed to be incorporated by reference in this proxy statement.
The following documents previously filed by Genesis and Multicare with the
SEC under the Exchange Act, are incorporated herein by this reference:
Genesis SEC Filings Period
- ------------------------------------------- ---------------------------------
Annual Report on Form 10-K Year ended September 30, 1998
Quarterly Reports on Form 10-Q (as amended) Quarters ended December 31, 1998,
March 31, 1999 and June 30, 1999
Multicare SEC Filings Period
- ------------------------------------------- ---------------------------------
Annual Report on Form 10-K Year ended September 30, 1998
Quarterly Reports on Form 10-Q (as amended) Quarters ended December 31, 1998,
March 31, 1999 and June 30, 1999
Copies of these documents are being delivered to each shareholder with this
proxy statement.
-48-
<PAGE>
Shareholder Proposals for 2000 Annual Meeting of Shareholders
A shareholder proposal regarding the Genesis' 2000 Annual Meeting of
Shareholders must be submitted to Genesis at its headquarters located at 101
East State Street, Kennett Square, Pennsylvania, 19348, by October 10, 1999 to
receive consideration for inclusion in Genesis' proxy materials related to the
2000 Annual Meeting of Shareholders. These proposals must also comply with the
proxy rules under the Exchange Act, including Rule 14a-8.
In addition, shareholders are notified that the deadline for providing
Genesis timely notice of any shareholder proposal to be submitted outside of the
Rule 14a-8 process for consideration at Genesis' 2000 Annual Meeting of
Shareholders is December 15, 1999. As to all matters of which Genesis does not
have notice on or prior to December 15, 1999, discretionary authority will be
granted to the persons designated in Genesis' proxy related to the 2000 Annual
Meeting of Shareholders to vote on such proposal.
Other Matters
Genesis is not presently aware of any matters which will be presented for
consideration at the special meeting which are not reflected in the attached
Notice of Special Meeting of Shareholders. The enclosed proxy confers
discretionary authority to vote with respect to any and all of the following
matters that may come before the special meeting:
o matters that the Genesis board of directors did not know, a reasonable
time before this solicitation, were to be presented at the special
meeting;
o approval of the minutes of a prior meeting of shareholders, if such
approval does not amount to ratification of the action taken at the
meeting;
o any proposal omitted from this proxy statement and the form of proxy
pursuant to Rule 14a-8 or Rule 14a-9 under the Exchange Act; and
o matters incidental to the conduct of the meeting.
If any such matters come before the meeting, the proxy agents named in the
accompanying proxy card will vote in accordance with their best judgment.
By Order of the Board of Directors
/s/ Ira C. Gubernick
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IRA C. GUBERNICK
Vice President -- Office of the
Chairman and Corporate Secretary
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ANNEX A
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RESTRUCTURING AGREEMENT
Among
The Cypress Group L.L.C.,
TPG Partners II, L.P.,
Nazem, Inc.
And
Genesis Health Ventures, Inc.
Dated as of
September , 1999
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS................................................................... 1
1.1 Certain Defined Terms............................................... 1
ARTICLE II
AMENDMENT OF PUT/CALL AGREEMENT .............................................. 6
2.1 Modification of Put/Call Agreement ................................. 6
2.2 Issuance of Preferred Securities ................................... 6
ARTICLE III
PURCHASE AND SALE OF GENESIS COMMON STOCKAND WARRANTS TO
PURCHASE GENESIS COMMON STOCK ................................................ 6
3.1 Agreement to Purchase and Sell; Purchase Price ..................... 7
ARTICLE IV
CLOSING....................................................................... 7
4.1 Closing............................................................. 7
4.2 Closing Obligations................................................. 7
ARTICLE V
ADDITIONAL AGREEMENTS......................................................... 9
5.1 Additional Voting Right............................................. 9
5.2 Stockholders Agreement ............................................. 9
5.3 Irrevocable Proxy...................................................10
5.4 Pre-emptive Rights .................................................10
5.5 Standstill Obligations .............................................11
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF GENESIS.....................................11
6.1 Organization and Good Standing......................................11
6.2 Capitalization......................................................11
6.3 Issuance of Securities..............................................12
6.4 Authority. .........................................................13
6.5 No Conflicts .......................................................13
6.6 Required Filings; Consents and Approvals............................13
6.7 SEC Filings; Financial Statements...................................13
6.8 Listing of Genesis Common Stock.....................................14
6.9 Rights Plan.........................................................14
6.10 Inapplicability of Antitakeover Statutes or Provisions..............14
6.11 Compliance With Securities Law......................................15
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE SPONSORS ...............................15
7.1 Organization and Good Standing .....................................15
7.2 Authority...........................................................15
7.3 No Conflicts .......................................................15
7.4 Required Filings; Consents and Approvals ...........................16
7.5 Purchase for Investment ............................................16
ARTICLE VIII
CONDITIONS TO CLOSING. .......................................................16
8.1 Conditions to Obligation of Each Party to Effect the Transactions...16
8.2 Conditions to Obligation of the Sponsors to Effect the Transactions.17
8.3 Conditions to Obligation of Genesis to Effect the Transactions......18
ARTICLE IX
COVENANTS OF GENESIS..........................................................19
9.1 Further Assurances..................................................19
9.2 Operation of Business; Certain Negative Covenants...................19
9.3 Stockholder Vote ...................................................20
9.4 No Acts or Omissions................................................20
9.5 Notice to Sponsors .................................................20
9.6 Public Announcements ...............................................20
9.7 Reservation of Securities...........................................21
9.8 Certificates of Designations; Amendment to Articles.................21
9.9 Disclosure .........................................................21
9.10 Fees and Expenses ..................................................21
9.11 No Amendment........................................................22
9.12 Tax Treatment of Preferred Stock. ..................................22
9.13 Appointment of Sponsor Directors....................................22
ARTICLE X
COVENANTS OF THE SPONSORS.....................................................22
10.1 Further Assurances..................................................22
10.2 No Acts or Omissions................................................23
10.3 Public Announcements................................................23
10.4 Restriction on Sales................................................23
ARTICLE XI
REGISTRATION RIGHTS...........................................................23
11.1 Incidental Registration ............................................23
11.2 Registration on Request ............................................25
11.3 Registration Procedures ............................................27
11.4 Indemnification ....................................................30
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ARTICLE XII
INDEMNIFICATION...............................................................33
12.2 Procedure for Indemnification .....................................34
ARTICLE XIII
MISCELLANEOUS.................................................................35
13.1 Notices ...........................................................35
13.2 Severability.......................................................37
13.3 Entire Agreement...................................................37
13.4 Amendment and Modification.........................................37
13.5 Termination .......................................................37
13.6 Assignment; Binding on Transferees.................................38
13.7 Legend.............................................................38
13.8 Governing Law .....................................................39
13.9 Headings...........................................................39
13.10 Counterparts ......................................................39
13.11 Submission to Jurisdiction; Waivers................................39
13.12 WAIVERS OF JURY TRIAL.............................................. 1
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RESTRUCTURING AGREEMENT
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RESTRUCTURING AGREEMENT, dated as of September __, 1999 (this
"Agreement"), among The Cypress Group L.L.C., a Delaware limited liability
company ("Cypress"), TPG Partners II, L.P., a Delaware limited partnership
("TPG"), Nazem, Inc., a Delaware corporation ("Nazem" and, together with Cypress
and TPG, the "Sponsors"), and Genesis Health Ventures, Inc., a Pennsylvania
corporation ("Genesis").
W I T N E S S E T H:
WHEREAS, the parties hereto, directly or through affiliates, own all
of the issued and outstanding capital stock of Genesis ElderCare Corp., a
Delaware corporation ("Parent");
WHEREAS, the parties hereto and Parent are parties to a Stockholders
Agreement, dated October 9, 1997 (the "Stockholders Agreement");
WHEREAS, the parties hereto are parties to a Put/Call Agreement, dated
October 9, 1997 (the "Put/Call Agreement");
WHEREAS, pursuant to a Letter of Intent, dated August 2, 1999, the
Sponsors and Genesis have agreed to restructure their investment in Parent; and
WHEREAS, the parties hereto desire to enter into this Agreement for
the purpose of setting forth certain agreements regarding rights and obligations
of the parties.
NOW, THEREFORE, in consideration of the mutual covenants and
conditions as hereinafter set forth, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. Capitalized terms used herein and
not otherwise defined herein shall have the following meanings:
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law to close.
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"Capital Stock" means any and all shares, interests, participations,
rights in or other equivalents (however designated and whether voting or
non-voting) or corporate stock, and any and all rights (other than any evidence
of indebtedness), warrants or options exchangeable for or convertible into such
corporate stock.
"Change in Control" shall be deemed to occur at any time that (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
in a single transaction or through a series of related transactions, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the total Voting Stock of
Genesis; (ii) Genesis consolidates or merges with or into another corporation or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any corporation consolidates or merges with or into Genesis, in any
such event pursuant to a transaction in which the outstanding Voting Stock of
Genesis is changed into or exchanged for cash, securities or other property,
other than any such transaction where (A) the outstanding Voting Stock of
Genesis is changed into or exchanged for (x) Voting Stock of the surviving
corporation which is not Redeemable Capital Stock or (y) cash, securities or
other property in an amount which, if there is Public Debt outstanding at the
time of such transaction, could be paid under the terms of such Public Debt and
(B) the holders of the Voting Stock of Genesis immediately prior to such
transaction own, directly or indirectly, not less than 50% of the Voting Stock
of the surviving corporation immediately after such transaction; (iii) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the board of directors of Genesis (together with any new
directors whose election by such board of directors or whose nomination for
election by the stockholders of Genesis was approved by a vote of at least
662/3% of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors of Genesis then in office; or (iv) Genesis is liquidated or
dissolved or adopts a plan of liquidation.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Company Indemnified Person" shall have the meaning set forth in
Section 12.1(b).
"Custody Agreement and Power of Attorney" shall have the meaning set
forth in Section 11.1(d) of this Agreement.
"Cypress" shall have the meaning set forth in the preamble to this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder, as the same may be amended from time to
time.
"GAAP" means generally accepted accounting principles, as in effect in
the United States of America on the date hereof and applied on a basis
consistent with the manner in
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which such principles were applied in the preparation of the historical
financial statements of Genesis.
"Genesis" shall have the meaning set forth in the preamble to this
Agreement.
"Genesis Common Stock" means the common stock, par value $.02 per
share, of Genesis and shall also include (i) capital stock of Genesis of any
other class (regardless of how denominated) issued to the holders of shares of
Genesis Common Stock upon any reclassification thereof in which the shares of
Genesis Common Stock are converted into a new class of capital stock and (ii)
shares of common stock of any successor or acquiring corporation received by or
distributed to the holders of Genesis Common Stock.
"Genesis Credit Agreement" means the Fourth Amended and Restated
Credit Agreement, dated August 20, 1999, by and among Genesis and certain of its
subsidiaries as borrowers, Mellon Bank, N.A. as issuer of letters of credit,
Mellon Bank, N.A. as administrative agent, Citicorp USA, Inc. as syndication
agent, First Union National Bank, as documentation agent, Bank of America, N.A.,
as syndication agent and certain other financial institutions identified therein
as lenders.
"Genesis Non-Voting Common Stock" means the non-voting common stock,
par value $.02 per share, of Genesis to be created pursuant to Section 9.8 and
shall also include (i) capital stock of Genesis of any other class (regardless
of how denominated) issued to the holders of shares of Genesis Non-Voting Common
Stock upon any reclassification thereof in which the shares of Genesis
Non-Voting Common Stock are converted into a new class of capital stock and (ii)
shares of common stock of any successor or acquiring corporation received by or
distributed to the holders of Genesis Non-Voting Common Stock.
"Genesis Rights Agreement" shall have the meaning set forth in
Section 6.9.
"Healthcare Related Business" means a business, the majority of whose
revenues result from healthcare, long-term care or managed care related
businesses or facilities, including businesses which provide insurance relating
to the costs of healthcare, long-term care or managed care services.
"Holder" means any Person who owns Registrable Securities.
"Losses" shall have the meaning set forth in Section 12.1(a).
"Material Adverse Effect" means any change or effect that, either
individually or in the aggregate with all other changes or effects, is
materially adverse to the business, operations, assets, liabilities (including
contingent liabilities), financial condition or results of operations of Genesis
and its subsidiaries taken as a whole.
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"Multicare" means The Multicare Companies, Inc., a wholly owned
subsidiary of Parent.
"Multicare Credit Agreement" means the Credit Agreement, dated October
9, 1997, as amended from time to time, among Multicare, certain of its
subsidiaries, Mellon as administrative agent, and certain other agents and
lenders referred to therein.
"Parent" shall have the meaning set forth in the recitals to this
Agreement.
"Person" means any individual, corporation, partnership, joint
venture, trust, business, unincorporated organization or other entity.
"Pre-emptive Right Notice" shall have the meaning specified in
Section 5.4(b).
"Public Debt" means obligations evidenced by bonds, notes, debentures
or other similar instruments issued in an underwritten public offering
registered under the Securities Act, in an offering pursuant to Rule 144A under
the Securities Act or in an exchange offer registered on Form S-4 under the
Securities Act.
"Redeemable Capital Stock" means, with respect to any Person, any
Capital Stock of such Person that, either by its terms, by the terms of any
security into which it is convertible or exchangeable or otherwise, is, or upon
the happening of an event or passage of time would be, required to be redeemed
prior to the last stated maturity of the principal of any Public Debt of such
Person outstanding at the time of issuance of such Capital Stock or is
redeemable at the option of the holder thereof at any time prior to any such
stated maturity, or is convertible into or exchangeable for debt securities at
any time prior to any such stated maturity at the option of the holder thereof.
"Registrable Securities" means (i) the Genesis Common Stock and
Warrants issued pursuant to Section 3.1, (ii) the Genesis Common Stock issued
upon exercise of the Warrants, (iii) the Series H Preferred Stock (whenever
issued), (iv) Series I Preferred Stock (whenever issued), (v) the Genesis Common
Stock issued upon conversion of the Series H Preferred Stock, (vi) the Genesis
Non-Voting Common Stock issued upon conversion of the Series I Preferred Stock
and (vii) any securities issued or distributed in respect of such Genesis Common
Stock, Genesis Non-Voting Common Stock, Warrants, Series H Preferred Stock or
Series I Preferred Stock by way of transfer, substitution, stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation, liquidation or other reorganization or otherwise. As to
any particular Registrable Securities, once issued such securities shall cease
to be Registrable Securities when (w) a registration statement with respect to
the sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (x) they shall have been distributed to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act, (y)
they shall have been otherwise transferred, new certificates for them not
bearing a legend restricting further transfer shall have been delivered by
Genesis and subsequent
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disposition of them shall not require registration or qualification of them
under the Securities Act or any state securities or blue sky law then in force
or (z) they shall have ceased to be outstanding.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with Sections 11.1, 11.2 and 11.3 of this
Agreement, including, without limitation, (i) all SEC and securities exchange or
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses of complying with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange pursuant to Section 4.3(h), (v) the fees and disbursements of counsel
for Genesis and of its independent public accountants, including the expenses of
any special audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (vi) the reasonable fees and disbursements of one
counsel, other than Genesis' counsel, selected by the holders of a majority of
the Registrable Securities being registered to represent all holders of the
Registrable Securities being registered in connection with each such
registration (it being understood that any such holder may, at its own expense,
retain separate counsel to represent it in connection with such registration),
(vii) any fees and disbursements of underwriters customarily paid by the issuers
or sellers of securities, and the reasonable fees and expenses of any special
experts retained in connection with the requested registration. Notwithstanding
anything to the contrary, Registration Expenses shall not include underwriting
discounts, commissions and transfer taxes, if any, relating to sales of
Registrable Securities.
"SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange Act.
"SEC Filings" shall have the meaning set forth in Section 6.7(a).
"Securities Act" means the Securities Act of 1933, and the rules and
regulations promulgated thereunder, as the same may be amended from time to
time.
"Sponsors" shall have the meaning set forth in the preamble to this
Agreement.
"Sponsor Affiliate" means any investment fund or investment vehicle
under common control with a Sponsor.
"Sponsor Indemnified Person" shall have the meaning set forth in
Section 12.1(a).
"Stockholders Agreement" shall have the meaning set forth in the
recitals to this
Agreement.
"Third Party Claim" have the meaning set forth in Section 12.2.
"TPG" shall have the meaning set forth in the preamble to this
Agreement.
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"Transaction Securities" shall have the meaning set forth in
Section 6.3.
"Transaction Voting Securities" shall have the meaning set forth in
Section 5.3(a).
"Voting Stock" means stock of the class or classes pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
a corporation (irrespective of whether or not at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"Warrants" means the collective reference to the warrants with the
terms and conditions set forth in the Warrant Certificate attached as Exhibit D
to this Agreement to be purchased and sold pursuant to Section 3.1.
ARTICLE II
AMENDMENT OF PUT/CALL AGREEMENT
Section 2.1 Modification of Put/Call Agreement. At the Closing, and
upon the terms and subject to the conditions set forth in this Agreement,
Cypress, TPG and Genesis shall enter into an Amended and Restated Put/Call
Agreement in the form of Exhibit A to this Agreement, which, among other things,
shall result in the termination of the put option under the Put/Call Agreement.
Section 2.2 Issuance of Preferred Securities. In consideration for the
termination of the put option under the Put/Call Agreement, at the Closing, upon
the terms and subject to the conditions set forth in this Agreement, Genesis
shall (a) issue to one or more Sponsor Affiliates designated by Cypress 12,185
shares of Genesis' Series H Senior Convertible Participating Cumulative
Preferred Stock with the relative rights, preferences and limitations set forth
in Exhibit B to this Agreement (the "Series H Preferred Stock") and 8,815
shares of Genesis' Series I Senior Convertible Exchangeable Participating
Cumulative Preferred Stock with the relative rights, preferences and limitations
set forth in Exhibit C to this Agreement (the "Series I Preferred Stock"), (b)
issue to TPG or one or more Sponsor Affiliates designated by TPG 11,575 shares
of Series H Preferred Stock and 8,375 shares of Series I Preferred Stock and
(c) issue to one or more Sponsor Affiliates designated by Nazem 609 shares of
Series H Preferred Stock and 441 shares of Series I Preferred Stock.
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ARTICLE III
PURCHASE AND SALE OF GENESIS COMMON STOCK
AND WARRANTS TO PURCHASE GENESIS COMMON STOCK
Section 3.1 Agreement to Purchase and Sell; Purchase Price. (a) At
the Closing, and upon the terms and subject to the conditions set forth in this
Agreement, Genesis shall sell to one or more Sponsor Affiliates designated by
Cypress, and Cypress shall cause such Sponsor Affiliates to purchase from
Genesis, (i) 6.25 million shares of Genesis Common Stock and (ii) Warrants to
purchase 1 million shares of Genesis Common Stock. The aggregate purchase price
for the securities to be purchased and sold pursuant to this Section 3.1(a)
shall be $25 million, payable in immediately available funds.
(b) At the Closing, and upon the terms and subject to the conditions
set forth in this Agreement, Genesis shall sell to TPG and/or one or more
Sponsor Affiliates designated by TPG, and TPG shall, and/or shall cause such
Sponsor Affiliates, as applicable, to purchase from Genesis, 6.25 million shares
of Genesis Common Stock and Warrants to purchase 1 million shares of Genesis
Common Stock. The aggregate purchase price for the securities to be purchased
and sold pursuant to this Section 3.1(b) shall be $25 million, payable in
immediately available funds.
ARTICLE II
CLOSING
Section 4.1 Closing. (a) The Closing shall take place shall take
place as soon as practicable after satisfaction or waiver of the conditions set
forth herein at the offices of Simpson Thacher and Bartlett, 425 Lexington
Avenue, New York, New York.
Section 4.2 Closing Obligations. (a) At the Closing, Genesis shall
deliver:
(i) to the Sponsor Affiliates designated by Cypress, to TPG
and/or the Sponsor Affiliates designated by TPG and to the Sponsor
Affiliates designated by Nazem, as applicable, certificates
representing the shares of the Series H Preferred Stock and the Series
I Preferred Stock being purchased and sold pursuant to Section 2.2 of
this Agreement;
(ii) to the Sponsor Affiliates designated by Cypress and to
TPG and/or the Sponsor Affiliates designated by TPG, as applicable,
certificates representing the Genesis Common Stock and the Warrants
substantially in the form of Exhibit D to this Agreement being
purchased and sold pursuant to Section 3.1 of this Agreement;
(iii) the opinion of Blank Rome Comisky & McCauley LLP
described in Section 8.2(b) of this Agreement;
(iv) the officer's certificate described in Section 8.2(j) of
this Agreement;
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(v) the Amended and Restated Put/Call Agreement as
contemplated by Section 2.1, authorized, executed and delivered by
Genesis;
(vi) the Amended and Restated Stockholders Agreement as
contemplated by Section 5.2, authorized, executed and delivered by
Genesis; and
(vii) to Cypress and TPG immediately available funds in
reimbursement in accordance with Section 9.10 of their expenses
incurred prior to the Closing.
(b) At the Closing, Cypress shall deliver:
(i) or shall cause the applicable Sponsor Affiliates to
deliver, to Genesis the purchase price for the Genesis Common Stock
and Warrants being purchased and sold pursuant to Section 3.1(a) of
this Agreement;
(ii) the certificate of an authorized person of Cypress
described in Section 8.3(d) of this Agreement;
(iii) the Amended and Restated Put/Call Agreement as
contemplated by Section 2.1, authorized, executed and delivered by
Cypress and its applicable Sponsor Affiliates;
(iv) the Amended and Restated Stockholders Agreement as
contemplated by Section 5.2, and the proxy related thereto, each
authorized, executed and delivered by Cypress and its applicable
Sponsor Affiliates; and
(v) the Irrevocable Proxy or Proxies which it is required to
grant or caused to be granted pursuant to Section 5.3 of this
Agreement.
(c) At the Closing, TPG shall deliver:
(i) or shall cause the applicable Sponsor Affiliates to
deliver, to Genesis the purchase price for the Genesis Common Stock
and Warrants being purchased and sold pursuant to Section 3.1(b) of
this Agreement;
(ii) the certificate of an authorized person of TPG described
in Section 8.3(d) of this Agreement;
(iii) the Amended and Restated Put/Call Agreement as
contemplated by Section 2.1, authorized, executed and delivered by TPG
and its applicable Sponsor Affiliates;
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(iv) the Amended and Restated Stockholders Agreement as
contemplated by Section 5.2, and the proxy related thereto, each
authorized, executed and delivered by TPG and its applicable Sponsor
Affiliates; and
(v) the Irrevocable Proxy or Proxies which it is required to
grant or caused to be granted pursuant to Section 5.3 of this
Agreement.
(d) At the Closing, Nazem shall deliver:
(i) the certificate of an authorized person of Nazem described
in Section 8.3(d) of this Agreement;
(ii) the Amended and Restated Put/Call Agreement as
contemplated by Section 2.1, authorized, executed and delivered by
Nazem and its applicable Sponsor Affiliates;
(iii) the Amended and Restated Stockholders Agreement as
contemplated by Section 5.2, and the proxy related thereto, each
authorized, executed and delivered by Nazem and its applicable Sponsor
Affiliates; and
(iv) the Irrevocable Proxy or Proxies which it is required to
grant or caused to be granted pursuant to Section 5.3 of this
Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Additional Voting Right. For so long as Cypress or TPG or
Sponsor Affiliates affiliated with Cypress or TPG have the right to designate
directors on the board of directors of Genesis pursuant to the terms of the
Series H Preferred Stock, Genesis shall not (i) without the consent of two of
the directors so designated, enter into any transaction or series of
transactions which would constitute a Change in Control or engage in any
transaction pursuant to Rule 13e-3 under the Exchange Act or (ii) without the
unanimous consent of the members of the litigation committee of Genesis' board
of directors settle any action at law or suit in equity disclosed in any public
filing made by Genesis with the U.S. Securities and Exchange Commission or any
claim or demand made by a third party arising out of or related to the facts or
circumstances underlying any such action or suit.
Section 5.2 Stockholders Agreement. At the Closing, and upon the
terms and subject to the conditions set forth in this Agreement, Cypress, TPG
and Genesis shall enter into an Amended and Restated Stockholders Agreement in
the form of Exhibit E to this Agreement (with such changes, additions or other
modifications thereto as the lenders under the Genesis Credit Agreement (or an
agent acting on behalf of such lenders) shall reasonably require).
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Section 5.3 Irrevocable Proxy. (a) Each Sponsor owning Series H
Preferred Stock, Genesis Common Stock issued upon conversion of Series H
Preferred Stock, Genesis Common Stock issued pursuant to Section 3.1 of this
Agreement or Genesis Common Stock issued upon exercise of Warrants
(collectively, the "Transaction Voting Securities") shall, and each Sponsor
shall cause each Sponsor Affiliate affiliated with such Sponsor owning
Transaction Voting Securities to, grant to Genesis an irrevocable proxy and
power of attorney substantially in the form of Exhibit F hereto.
(b) Prior to each vote of securityholders of Genesis in which the
holders of Genesis Common Stock are entitled to vote generally, each Sponsor
owning Transaction Voting Securities on the applicable record date shall, and
each Sponsor shall cause each Sponsor Affiliate affiliated with such Sponsor
owning Transaction Voting Securities on the applicable record date to, deliver
to Genesis no more than 10 days after the record date a true and correct
certificate setting forth the number and type of Transaction Voting Securities
owned by such person on the applicable record date. Not later than the later of
10 days prior to such vote or 10 days after the notice from the Sponsors,
Genesis shall provide notice with reasonable detail supporting its calculation
to each Sponsor and Sponsor Affiliate owning Transaction Voting Securities on
the applicable record date of the number and type of securities owned by such
Person on the applicable record date that Genesis is entitled to vote pursuant
to the irrevocable proxy and power of attorney.
Section 5.4 Pre-emptive Rights. (a) Cypress and TPG and the Sponsor
Affiliates affiliated with Cypress and TPG shall each have a pro rata right,
based on the number of shares of Genesis common stock held by them and the
number of shares of Genesis common stock issuable upon exercise or conversion of
other securities held by them, to participate in purchases of shares of Capital
Stock of Genesis and securities exchangeable, convertible or exercisable for
shares of Capital Stock of Genesis sold by Genesis; provided, that Cypress and
TPG and the Sponsor Affiliates affiliated with Cypress and TPG shall not have
such right in connection with (i) sales of securities in underwritten public
offerings, (ii) sales of warrants offered in connection with sales of debt
securities pursuant to Rule 144A under the Securities Act, (iii) the issuance of
securities solely in exchange for assets or all of the stock of another Person
(whether by merger, exchange or otherwise), (iv) issuances and sales of
securities to employees and directors pursuant to benefit plans and (v)
issuances and sales of securities in connection with joint ventures or other
strategic relationships relating to a Healthcare Related Business; provided,
however, that in the case of clause (v), the securities issued in connection
with any joint venture or strategic relationship or any series of related joint
ventures or strategic relationships do not represent more than 5% of the total
voting power of Genesis.
(b) Genesis shall give Cypress and TPG written notice (the
"Pre-emptive Right Notice") of any sale of securities to which the pre-emptive
rights established pursuant to Section 5.4(a) shall apply which notice shall
contain the terms and preferences of the securities being offered and the terms
upon which such securities are being offered, and each Person with pre-emptive
rights pursuant to Section 5.4(a) shall have the right, exercisable by written
notice to Genesis within ten Business Days from receipt of the Pre-emptive Right
Notice to purchase such
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securities in accordance with Section 5.4(a). Each Person electing to purchase
additional securities pursuant to Section 5.4(a) shall purchase such securities
on the terms specified in the Pre-Emptive Right Notice. The closing of the
purchase and sale of any such securities shall not take place earlier than
twenty Business Days from the date of the Pre-Emptive Right Notice.
Section 5.5 Standstill Obligations. (a) Effective as of the Closing,
each Sponsor agrees that, other than pursuant to or as contemplated by this
Agreement or the terms of the Transaction Securities and pursuant to stock
splits, stock dividends or other distributions or offerings made available to
holders of securities of Genesis generally, it shall not, and it shall cause its
Affiliates not to, without the prior written consent of Genesis, directly or
indirectly, alone or as part of a "group" (as defined in Section 13(d)(3) of the
Exchange Act), acquire any shares of Voting Stock of Genesis or securities
convertible into or exchangeable for any shares of Voting Stock of Genesis.
(b) The restrictions contained in Section 5.5(a) shall terminate if:
(i) the board of directors of Genesis approves a transaction with any "person"
(as that term is used in Sections 13(d) and 14(d) of the Exchange Act) and such
transaction would result in such person beneficially owning securities
representing more than 35% of the total voting power of Genesis or all or
substantially all of its assets; (ii) any person (other than Genesis in the case
of an exchange offer) shall have commenced a tender or exchange offer for voting
securities of Genesis or securities exchangeable, convertible or exercisable for
voting securities of Genesis where all such voting securities represent more
than 35% of the total voting power of Genesis; or (iii) none of Cypress, TPG and
Sponsor Affiliates affiliated with Cypress or TPG have the right to designate
directors on the board of directors of Genesis pursuant to the terms of the
Series H Preferred Stock.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF GENESIS
Genesis represents and warrants to the Sponsors as follows:
Section 6.1 Organization and Good Standing. Genesis is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all corporate powers required to carry on
its business as now conducted. Genesis is duly qualified to transact business as
a foreign corporation and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of its business
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 6.2 Capitalization. (a) As of the date hereof, the authorized
Capital Stock of Genesis consists solely of 60,000,000 shares of common stock
and 5,000,000 of preferred stock. As of July 31, 1999, there were [ ] shares of
Genesis common stock and [ ]
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shares of Genesis preferred stock (all of which were shares of Genesis' Series G
Cumulative Convertible Preferred Stock) outstanding. Each share of Capital Stock
of Genesis that is issued and outstanding has been duly authorized and validly
issued and is fully paid and nonassessable, and the issuance thereof was not
subject to any pre-emptive or other similar rights or made in violation of any
applicable law.
(b) Except as set forth on Schedule 6.2(b), there are no outstanding
options, warrants, agreements, conversion rights, exchange rights, pre-emptive
rights or other rights (whether contingent or not) to subscribe for, purchase or
acquire any issued or unissued shares of Capital Stock of Genesis or any
subsidiary of Genesis and there are no restrictions upon, or contracts or
understandings of Genesis or any Affiliate of Genesis with respect to, the
voting, issuance or transfer of any shares of Capital Stock of Genesis or any
subsidiary of Genesis.
Section 6.3 Issuance of Securities. The (i) shares of Series H
Preferred Stock issuable pursuant to Section 2.2 of this Agreement, (ii) shares
of Series I Preferred Stock issuable pursuant to Section 2.2 of this Agreement,
(iii) shares of Series H Preferred Stock issuable upon exchange of the Series I
Preferred Stock pursuant to the terms of the Series I Preferred Stock, (iv)
shares of Series I Preferred Stock issuable in the payment of dividends on the
Series H Preferred Stock pursuant to the terms of the Series H Preferred Stock,
(v) shares of Genesis Common Stock issuable upon conversion of the Series H
Preferred Stock pursuant to the terms of the Series H Preferred Stock, (vi)
shares of Genesis Non-Voting Common Stock issuable upon conversion of the Series
I Preferred Stock pursuant to the terms of the Series I Preferred Stock, (vii)
shares of Genesis Common Stock issuable pursuant to Section 3.1 of this
Agreement, (viii) Warrants issuable pursuant to Section 3.1 of this Agreement
and (ix) shares of Genesis Common Stock issuable upon exercise of the Warrants
(collectively, the "Transaction Securities"), in each case have been duly
authorized and when issued and delivered in accordance with the terms of this
Agreement and, to the extent applicable, the terms of the Series H Preferred
Stock, the Series I Preferred Stock and the Warrants, will be validly issued and
outstanding, fully paid and nonassessable free and clear of all liens, claims
and restrictions other than those created by the recipient, with no personal
liability attached to the ownership thereof; and the holders of the outstanding
Capital Stock of Genesis are not entitled to any pre-emptive or other rights to
subscribe for such shares.
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Section 6.4 Authority. The execution, delivery and performance of
this Agreement and the performance of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Genesis
and, except for the requisite shareholder approvals contemplated by Section 9.3,
no other proceedings on the part of Genesis are necessary to authorize and
approve this Agreement or any of the transactions contemplated hereby including,
without limitation, the amendment of Genesis' articles of incorporation as
contemplated by Section 9.8. This Agreement has been duly executed and delivered
by Genesis and constitutes the legal, valid and binding obligation of Genesis,
enforceable against Genesis in accordance with the terms hereof, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
general principles of equity and indemnification may be limited under federal
and state securities laws.
Section 6.5 No Conflicts. (i) The execution and delivery by Genesis
of this Agreement, the Amended and Restated Put/Call Agreement and the Amended
and Restated Stockholders Agreement, (ii) the issuance of the Transaction
Securities as contemplated hereby and, to the extent applicable, by the terms of
the Series H Preferred Stock, the Series I Preferred Stock and the Warrants and
(iii) the performance by Genesis of, and the consummation of the transactions
contemplated by, this Agreement, the Amended and Restated Put/Call Agreement and
the Amended and Restated Stockholders Agreement, do not and will not result in
the creation of any lien on, or security interest in, any of the assets of
Genesis or any of its subsidiaries or violate, conflict with or constitute a
breach of, or a default under, or give rise to any right of termination,
cancellation or acceleration under, (x) any material agreement, indenture or
instrument to which Genesis or any of its subsidiaries is a party or which is
binding on Genesis or any of its subsidiaries, (y) the terms of the articles of
incorporation or bylaws of Genesis or (z) any law or any order or regulation
applicable to Genesis of any court, regulatory body, administrative agency or
governmental body having jurisdiction over Genesis, except for any lien or
security interest or, in the case of clauses (x) and (z), any violation,
conflict, breach, termination, cancellation or acceleration that would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 6.6 Required Filings; Consents and Approvals. Except as set
forth in Schedule 6.6, no consent, approval or authorization of, or filing,
registration or qualification with, any court, governmental, administrative or
judicial authority or regulatory body or any Person (i) is required on the part
of Genesis for the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, other than those which have been duly obtained
or made or will be required in connection with Article XI of this Agreement
(which will be timely obtained or made) or (ii) is required on the part of the
Sponsors in connection with the disposition of their stock in Parent in one or
more transactions.
Section 6.7 SEC Filings; Financial Statements. (a) Genesis has timely
filed all reports, registration statements and other filings, together with any
amendments or supplements required to be made with respect thereto, that it has
been required to file with the SEC under the Securities Act or the Exchange Act
(all such reports, registration statements and other filings, as
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amended or supplemented and including all documents incorporated by reference
therein, filed since January 1, 1998, are referred to herein as the "SEC
Filings"). As of the respective dates of their filing with the SEC, the SEC
Filings complied in all material respects with the applicable provisions of
Securities Act and the Exchange Act and did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the historical financial statements of Genesis (including
any related notes or schedules) included in the SEC Filings was prepared in
accordance with GAAP (except as may be disclosed therein) and complied in all
material respects with the rules and regulations of the SEC. Such financial
statements fairly present the consolidated financial position of Genesis and its
subsidiaries as of the dates presented and the results of operations, cash flows
and changes in stockholders' equity for the periods presented (subject, in the
case of unaudited interim financial statements, to normal year-end audit
adjustments on a basis comparable with past periods).
Section 6.8 Listing of Genesis Common Stock. The shares of Genesis
Common Stock and Genesis Non-Voting Common Stock which constitute Transaction
Securities on the date of the issuance thereof, will be listed and eligible for
trading on the principal United States securities exchange on which the Genesis
Common Stock is then traded or on the NASDAQ National Market System, as the case
may be.
Section 6.9 Rights Plan. The Board of Directors of Genesis has
amended the Rights Agreement, dated as of April 20, 1995 (the "Genesis Rights
Agreement"), between Genesis and Mellon Securities Trust Company, as Rights
Agent, to exclude the Sponsors and the Sponsor Affiliates from the definition of
"Acquiring Person" (as such term is defined in the Genesis Rights Agreement).
Neither the execution and delivery of this Agreement nor the transactions
contemplated by this Agreement, including, without limitation, the receipt of
the Transaction Securities by Sponsors or the Sponsor Affiliates and the
issuance of Transaction Securities by Genesis, shall cause any rights under the
Genesis Rights Agreement or any other rights plan (poison pill) of Genesis or
any of its subsidiaries or its or their successors to issue or become
exercisable or result in any other adverse consequence under the Genesis Rights
Agreement or any other rights plan of Genesis to Sponsors or the Sponsor
Affiliates owning Transaction Securities.
Section 6.10 Inapplicability of Antitakeover Statutes or Provisions.
No state takeover statute or similar statute or regulation applies, purports to
apply or will, following the occurrence of any event contemplated hereby or
otherwise, apply to the transactions contemplated by this Agreement, including,
without limitation, the receipt of Transaction Securities by Sponsors or the
Sponsor Affiliates and the issuance of Transaction Securities by Genesis, and,
except as provided in this Agreement, no provision of the articles of
incorporation, bylaws or other governing documents of Genesis will, following
the occurrence of any event contemplated hereby or otherwise, restrict or impair
the ability of Sponsors or the Sponsor Affiliates or any subsequent transferee
to vote or otherwise exercise the rights of a stockholder
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with respect to Transaction Securities or otherwise obtain the benefits of this
Agreement. At least seventy-five percent (75%) of the entire Board of Directors
of Genesis has approved this Agreement and the transactions contemplated hereby,
and no vote of shareholders is required pursuant to the provisions of Article 10
of Genesis' articles of incorporation in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby.
Section 6.11 Compliance With Securities Law. Based, in part, on the
representations and warranties of the Sponsors contained in Section 7.5, the
offer and sale of the Transaction Securities are exempt from the registration
and prospectus delivery requirements of the Securities Act. Neither Genesis nor
anyone acting on Genesis' behalf has offered or sold or will offer or sell any
securities, or has taken or will take any other action, which would subject the
transactions contemplated hereby to the registration provisions of the
Securities Act.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE SPONSORS
Each of the Sponsors severally, and not jointly, represents and
warrants to Genesis as follows:
Section 7.1 Organization and Good Standing. Such Sponsor is duly
formed, validly existing and in good standing under the laws of the jurisdiction
of its formation and has all powers required to carry on its business as now
conducted.
Section 7.2 Authority. The execution, delivery and performance of
this Agreement has been duly authorized by all necessary action on the part of
such Sponsor. This Agreement has been duly executed and delivered by such
Sponsor and constitutes the legal, valid and binding obligation of such Sponsor,
enforceable against such Sponsor in accordance with the terms hereof, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting creditors' rights generally and by
general principles of equity and indemnification may be limited under federal
and state securities laws.
Section 7.3 No Conflicts. (i) The execution and delivery by such
Sponsor of this Agreement, the Amended and Restated Put/Call Agreement and the
Amended and Restated Stockholders Agreement and (ii) the performance by such
Sponsor of, and the consummation of the transactions contemplated by, this
Agreement, the Amended and Restated Put/Call Agreement and the Amended and
Restated Stockholders Agreement, do not and will not result in the creation of
any lien on, or security interest in, any of the assets of such Sponsor or
violate, conflict with or constitute a breach of, or a default under, or give
rise to any right of termination, cancellation or acceleration under, (x) any
material agreement, indenture or instrument to which such Sponsor is a party or
which is binding on such Sponsor, (y) the terms of the constituent documents of
such Sponsor or (z) any law or any order or regulation applicable to such
Sponsor
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of any court, regulatory body, administrative agency or governmental body having
jurisdiction over such Sponsor, except for any lien or security interest or, in
the case of clauses (x) and (z), any violation, conflict, breach, termination,
cancellation or acceleration that would not, individually or in the aggregate,
have a material adverse effect on such Sponsor.
Section 7.4 Required Filings; Consents and Approvals. Except as set
forth on Schedule 7.4, except as may be required on the part of the Sponsors by
any court, governmental, administrative or judicial authority or regulatory body
in connection with any the acquisition of the Transaction Securities and except
as may be required on the part of the Sponsors in connection with the
disposition of their stock in Parent in one or more transactions, no consent,
approval or authorization of, or filing, registration or qualification with, any
court, governmental, administrative or judicial authority or regulatory body or
any Person is required on the part of such Sponsor for the execution, delivery
and performance of this Agreement and the transactions contemplated hereby,
other than those which have been duly obtained or made.
Section 7.5 Purchase for Investment. Such Sponsor and/or, if
applicable, the Sponsor Affiliates affiliated with such Sponsor, are acquiring
the Transaction Securities for investment and not with a view to, or for sale in
connection with, any distribution thereof. Such Sponsor and/or, if applicable,
the Sponsor Affiliates affiliated with such Sponsor (either alone or together
with its advisors) have sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Transaction Securities and is capable of bearing the economic
risks of such investment.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligation of Each Party to Effect the
Transactions. The respective obligations of each party to consummate the Closing
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other governmental authority of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of the
Closing contemplated shall be in effect.
(b) Required Filings and Consents. Each of the parties shall have
obtained all necessary governmental, administrative, regulatory, shareholder and
third party consents and approvals in connection with the execution, delivery
and performance of this Agreement and the transactions contemplated hereby
(other than the consents contemplated in Section 8.2 (i) of this Agreement), and
such consents and approvals shall be in full force and effect. The waiting
period (and any extension thereof) applicable to the transactions contemplated
hereby under the
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Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall have
been terminated or shall have expired.
Section 8.2 Conditions to Obligation of the Sponsors to Effect the
Transactions. The respective obligations of the Sponsors to consummate the
Closing shall be subject to the satisfaction at or prior to the Closing of the
following conditions:
(a) Listing of Genesis Common Stock. The Genesis Common Stock to be
issued at the Closing shall be listed and eligible for trading on a principal
United States securities exchange on which the Genesis Common Stock is then
traded or on the NASDAQ National
Market System as the case may be.
(b) Opinion of Counsel. Genesis shall have delivered to the Sponsors
an opinion from Blank Rome Comisky & McCauley LLP, reasonably satisfactory to
the Sponsors, with respect to the matters addressed in Sections 6.1, 6.2, 6.3,
6.4, 6.5, 6.6, 6.9, 6.10 and 6.11. In rendering such opinion, such counsel may
rely on the opinion of Genesis' corporate counsel to the extent consistent with
past practice.
(c) Representations and Warranties. The representations and warranties
of Genesis contained herein shall be true and correct in all material respects
as of the date hereof and at, and as of, the Closing, with the same force and
effect as though made at, and as of, the Closing, except that, to the extent any
representation or warranty is made as of a specified date, it need be true only
as of such date (it being understood that, for purposes of determining the truth
and correctness of Genesis' representations and warranties, all Material Adverse
Effect and materiality qualifiers contained in such representations and
warranties shall be disregarded).
(d) Proceedings and Documents. All corporate proceedings on the part
of Genesis in connection with the transactions contemplated hereby and all
documents and instruments incident to the transactions contemplated hereby shall
be reasonably satisfactory to counsel for the Sponsors, and such counsel shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
(e) Certificates of Designation; Amendment to Articles of
Incorporation. The Certificates of Designation for the Series H Preferred Stock
and the Series I Preferred Stock substantially in the forms attached hereto as
Exhibits B and C, respectively, and the amendment to Genesis' articles of
incorporation as contemplated by Section 9.8 shall have been filed in accordance
with the laws of the Commonwealth of Pennsylvania.
(f) No Change of Control. No Change in Control shall have occurred.
(g) No Material Breach. Genesis shall have performed in all material
respects all of its obligations and covenants contained in this Agreement to be
performed by it at or prior to the Closing.
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(h) No Material Adverse Change. There shall not have occurred any
event, circumstance, condition, fact or other matter which has had a Material
Adverse Effect.
(i) Regulatory Consents. The Sponsors shall have obtained all
necessary governmental, administrative and regulatory consents and approvals,
and made all governmental, administrative and regulatory filings required to be
made at or prior to the Closing, in connection with the Sponsors' disposition of
their stock in Parent in one or more transactions satisfactory to the Sponsors.
(j) Officer's Certificate. The Sponsors shall have received a
certificate signed by an authorized officer of Genesis certifying as to the
fulfillment of the conditions set forth in Sections 8.2(a), (c), (e), (g), (h)
and (k).
(k) Other Agreements. Genesis shall have entered into each of the
Amended and Restated Put/Call Agreement and the Amended and Restated
Stockholders Agreement.
(l) Certificates. The Sponsors shall have received certificates
representing the Transaction Securities to be acquired by them at the Closing
pursuant to Sections 2.2 and 3.1.
(m) Expenses. Concurrently with the Closing, Genesis shall reimburse
Cypress and TPG in accordance with Section 9.10 for their expenses incurred
prior to the Closing.
Section 8.3 Conditions to Obligation of Genesis to Effect the
Transactions. The obligation of Genesis to consummate the Closing shall be
subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of each Sponsor contained herein shall be true and correct in all material
respects as of the date hereof and at, and as of, the Closing, with the same
force and effect as though made at, and as of, the Closing, except that, to the
extent any representation or warranty is made as of a specified date, it need be
true only as of such date (it being understood that, for purposes of determining
the truth and correctness of each Sponsor's representations and warranties, all
materiality qualifiers contained in such representations and warranties shall be
disregarded).
(b) Opinion of Counsel. Each of Cypress and TPG shall have delivered
to Genesis an opinion from its counsel, reasonably satisfactory to Genesis, with
respect to the matters addressed in Sections 7.2 and 7.3(y); provided, that such
counsel need not express any opinion concerning any law other than the law of
the State of New York, the federal law of the United States, the Delaware
General Corporation Law and the Delaware Uniform Limited Partnership Law, and,
provided, further, that such counsel need not express any opinion concerning any
matter of health care or insurance law or regulation.
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(c) No Material Breach. Each Sponsor shall have performed in all
material respects all of its obligations and covenants contained in this
Agreement to be performed by it at or prior to the Closing.
(d) Officer's Certificate. Genesis shall have received from each
Sponsor a certificate signed by an authorized person of such Sponsor certifying
as to the fulfillment of the conditions set forth in Sections 8.3(a), (c) and
(e).
(e) Other Agreements. Each of Cypress and TPG shall have entered into
each of the Amended and Restated Put/Call Agreement and the Amended and Restated
Stockholders Agreement.
(f) Purchase Price. Genesis shall have received the purchase price for
the Genesis Common Stock and the Warrants being purchased and sold at the
Closing pursuant to Section 3.1.
ARTICLE IX
COVENANTS OF GENESIS
Genesis covenants and agrees as follows for the benefit of each
Sponsor:
Section 9.1 Further Assurances. (a) Subject to the terms and
conditions hereof, Genesis shall use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable or reasonably requested by Cypress or TPG to
consummate and make effective, as promptly as practicable, the transactions
contemplated by this Agreement. In this regard, Genesis shall use its reasonable
best efforts to cause all of the obligations imposed upon it in this Agreement
to be duly complied with and to cause all conditions precedent to the
obligations of the parties to be satisfied.
(b) Genesis shall prepare, file and deliver, as applicable, all
applications and other notices and documents required in connection with, and
use its reasonable best efforts to obtain promptly and comply with any
conditions contained in all governmental, administrative, regulatory,
shareholder and third party consents and approvals required to be obtained by it
in connection with, the transactions contemplated by this Agreement, including,
without limitation, any filings under the HSR Act. Genesis shall use its
reasonable best efforts to cooperate with the Sponsors in connection with their
similar activities.
Section 9.2 Operation of Business; Certain Negative Covenants. From
the date hereof until the Closing, except as contemplated by this Agreement or
unless each of Cypress and TPG gives its prior written consent, Genesis shall
operate its business only in the normal course, consistent with past practice
and in compliance with applicable laws. From the
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date hereof until the Closing, unless each of Cypress and TPG gives its prior
written consent, Genesis shall not:
(a) enter into any transaction or series of transactions which would
constitute a Change in Control or engage in any transaction pursuant to Rule
13e-3 under the Exchange Act;
(b) issue, reissue, sell, pledge, encumber or otherwise dispose of,
reclassify, combine, split or subdivide any of its Capital Stock, or authorize
any of the foregoing, other than pursuant to commitments outstanding on the date
hereof or pursuant to employee benefit plans existing on the date hereof;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
Capital Stock of Genesis; or
(d) amend, modify, supplement or otherwise change any of the terms of
Genesis' articles of incorporation or bylaws.
Section 9.3 Stockholder Vote The Company shall (unless previously
adopted) present proposals, in accordance with all applicable laws and
regulations, to its stockholders at a special meeting held as promptly as
practicable after the date hereof, including, without limitation, proposals
seeking the approval of the amendment of Genesis' articles of incorporation as
contemplated by Section 9.8 and any approvals required by the New York Stock
Exchange, Inc. The members of the board of directors of Genesis shall, to the
extent consistent with their fiduciary duties, recommend approval of such
proposals. In connection with the foregoing, Genesis shall use its reasonable
best efforts to file and have cleared by the SEC, and will thereafter mail to
its stockholders as promptly as practicable, all proxy materials which are
necessary or advisable.
Section 9.4 No Acts or Omissions. Genesis shall not enter into any
agreement, take any action or fail to take any action that would materially
impair its ability to perform its obligations under this Agreement or cause any
condition to any parties' obligation hereunder to consummate the Closing to be
incapable of being satisfied.
Section 9.5 Notice to Sponsors. Genesis shall promptly advise the
Sponsors of any change, development or condition that may materially impair
Genesis' ability to consummate the Closing or cause any condition to any
parties' obligation hereunder to consummate the Closing to be incapable of being
satisfied.
Section 9.6 Public Announcements. Unless required by law, regulation
or legal or judicial process or the rules of any securities exchange or over the
counter market, prior to the Closing, neither Genesis nor any Person on Genesis'
behalf shall make any news release or other public disclosure regarding this
Agreement or the transactions contemplated hereby without the consent of Cypress
and TPG, which consent shall not be unreasonably withheld. If any such news
release or public disclosure shall be required by law, regulation or legal or
judicial process
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or the rules of any securities exchange or over the counter market and, in any
event, prior to any such news release or public disclosure following the
Closing, Genesis shall give Cypress and TPG notice thereof and consult with
Cypress and TPG with respect thereto.
Section 9.7 Reservation of Securities. For so long as any of the
Series H Preferred Stock or any Warrants are outstanding, Genesis shall reserve
and keep available, free from pre-emptive rights, (i) a sufficient number of
shares of Genesis Common Stock to satisfy its conversion obligation under the
terms of the Series H Preferred Stock and its obligation to issue shares of
Genesis Common upon exercise of Warrants and (ii) a sufficient number of shares
of the Series I Preferred Stock to enable Genesis to declare and pay dividends
on the Series H Preferred Stock in shares of Series I Preferred Stock, in
accordance with the terms of the Series H Preferred Stock. For so long as any of
the Series I Preferred Stock is outstanding, Genesis shall reserve and keep
available, free from pre-emptive rights, a sufficient number of shares of
Genesis Non-Voting Common Stock to satisfy its conversion obligation under the
terms of the Series I Preferred Stock and a sufficient number of shares of
Series H Preferred Stock to enable Genesis to exchange the Series I Preferred
Stock therefor in accordance with the terms of the Series I Preferred Stock.
Section 9.8 Certificates of Designations; Amendment to Articles. Prior
to the Closing, Genesis shall (i) file a certificate of designations for each of
the Series H Preferred Stock and the Series I Preferred Stock substantially in
the forms of Exhibits B and C hereto, respectively, in accordance with the laws
of the Commonwealth of Pennsylvania and (ii) file an amendment to Genesis'
articles of incorporation in form and substance reasonably satisfactory to
Cypress and TPG effecting such changes to Genesis' articles of incorporation as
may be necessary or advisable in connection with the transactions contemplated
by this Agreement, including, without limitation, (y) creating the Genesis
Non-Voting Common Stock (which shall have rights, preferences and limitations
which are identical in all respects to the Genesis Common Stock except that the
Genesis Non-Voting Common Stock shall not have the right to vote other than any
right to vote provided by law) and (z) providing for a sufficient number of
authorized shares of Genesis Common Stock and Genesis Non-Voting Common Stock
for issuance as contemplated by this Agreement, the Warrants, the Series H
Preferred Stock and the Series I Preferred Stock.
Section 9.9 Disclosure. Subject to reasonable confidentiality
provisions, Genesis shall promptly furnish Cypress and TPG with all financial
and other information concerning Genesis and related matters, and access to
personnel of Genesis, which Cypress and
TPG may reasonably request.
Section 9.10 Fees and Expenses. If the Closing shall occur, Genesis
shall promptly reimburse Cypress and TPG for their expenses incurred in
connection with the negotiation, execution, delivery and performance of this
Agreement and the transactions contemplated hereby (including the fees and
expenses of their professional advisors) up to a maximum aggregate amount of
$1,000,000.
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Section 9.11 No Amendment. Except as specifically contemplated
hereby, Genesis shall not amend, modify, supplement or otherwise change any of
the terms of its articles of incorporation, bylaws, shareholder rights agreement
or other constituent document in a manner that would be adverse to Sponsors
(other than an amendment, modification or supplement or other change which would
affect Sponsors the same as other shareholders of Genesis).
Section 9.12 Tax Treatment of Preferred Stock. Genesis (i) intends
that the Series H Preferred Stock and the Series I Preferred Stock will be
treated as stock that is other than "preferred stock" within the meaning of
Treasury regulation section 1.305-5(a) and (ii) shall prepare any and all
returns, reports and other statements (including, in each case, any schedule or
attachment thereto, or any amendment thereof) relating to United States federal
income taxation in a manner consistent with such treatment.
Section 9.13 Appointment of Sponsor Directors. Prior to the Closing,
the Board of Directors of Genesis shall take all actions necessary to appoint to
the Board of Directors of Genesis the number of directors to be nominated by TPG
and Cypress Merchant Banking Partners L.P. in accordance with Section 8 of the
Certificate of Designations of the Series H Preferred Stock, such appointments
to be effective from and after the Closing until the next annual meeting of
shareholders of Genesis.
ARTICLE X
COVENANTS OF THE SPONSORS
Each of the Sponsors severally, and not jointly, covenants and agrees
as follows:
Section 10.1 Further Assurances. (a) Subject to the terms and
conditions hereof, such Sponsor shall use its reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable or reasonably requested by Genesis to consummate
and make effective, as promptly as practicable, the transactions contemplated by
this Agreement. In this regard, such Sponsor shall use its reasonable best
efforts to cause all of the obligations imposed upon it in this Agreement to be
duly complied with and to cause all conditions precedent to the obligations of
the parties to be satisfied.
(b) Such Sponsor shall prepare, file and deliver, as applicable, all
applications and other notices and documents required in connection with, and
use its reasonable best efforts to obtain promptly and comply with any
conditions contained in all governmental, administrative, regulatory,
shareholder and third party consents and approvals required to be obtained by it
in connection with, the transactions contemplated by this Agreement, including,
without limitation, any filings under the HSR Act. Such Sponsor shall use its
reasonable best efforts to cooperate with Genesis in connection with its similar
activities.
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Section 10.2 No Acts or Omissions. Such Sponsor shall not enter into
any agreement or take any action that would materially impair its ability to
perform its obligations under this Agreement or cause any condition to any
parties' obligation hereunder to consummate the Closing to be incapable of being
satisfied.
Section 10.3 Public Announcements. Unless required by law, regulation
or legal or judicial process, prior to the Closing, neither such Sponsor nor any
Person on such Sponsor's behalf shall make any news release or other public
disclosure regarding this Agreement or the transactions contemplated hereby
without the consent of Genesis, which consent shall not be unreasonably
withheld. If any such news release or public disclosure shall be required by
law, regulation or legal or judicial process or the rules of any securities
exchange or over the counter market and, in any event, prior to any such news
release or public disclosure following the Closing, such Sponsor shall give
Genesis notice thereof and consult with Genesis with respect thereto.
Section 10.4 Restriction on Sales. For so long as the standstill
obligations set forth in Section 5.5 of this Agreement are in effect, such
Sponsor shall not sell Transaction Securities which are voting securities to (a)
any person in a transaction or a series of transactions where such voting
securities, together with any other voting securities known by such Sponsor to
have been sold to such person by any other Sponsor, represent more than 15% of
Genesis's total voting power or (b) to any "competitor" of Genesis, except, in
any case, in an underwritten public offering, in an underwritten offering
effected pursuant to Rule 144A (or any successor provision) under the Securities
Act or in a transaction approved by Genesis's board of directors. Such Sponsor
shall give notice to Genesis of any transfer of such securities, including the
name of the transferee and whether it believes the transferee and the selling
Sponsor are a "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act).
For purposes of this Section 10.4, "competitor" shall mean any person
which derives more than $500 million in revenues from the operation of long-term
care facilities and/or institutional pharmacy sales; provided, that any person
which derives more than $200 million in revenues from the operation of long-term
care facilities and/or institutional pharmacy sales solely within one or two
markets in which Genesis then operates (as most recently reported by Genesis in
its filings with the SEC) shall be a "competitor".
ARTICLE XI
REGISTRATION RIGHTS
Section 11.1 Incidental Registration. (a) Right to Include Registrable
Securities. Each time Genesis proposes to register securities under the
Securities Act (other than a registration on Form S-4 or S-8, or any successor
or other forms promulgated for similar purposes), whether or not for sale for
its own account, pursuant to a registration statement on which it is permissible
to register Registrable Securities for sale to the public under the Securities
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Act, it will give prompt written notice to all Holders of its intention to do so
and the Holders' rights under this Section 11.1(a). Upon the written request of
any Holder made within 15 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such Holder), Genesis will use its best efforts to effect the registration under
the Securities Act of all Registrable Securities which Genesis has been so
requested to register by the Holders thereof; provided, that (i) if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, Genesis shall determine for any reason not to proceed
with the proposed registration, Genesis may, at its election, give written
notice of such determination to each Holder and thereupon shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), and (ii) if such registration involves an underwritten
offering by Genesis (underwritten, at least in part, by Persons who are not
Affiliates of Genesis), all Holders requesting to have Registrable Securities
included in Genesis' registration must sell their Registrable Securities to such
underwriters who shall have been selected by Genesis on the same terms and
conditions as apply to Genesis, with such differences, including any with
respect to indemnification and contribution, as may be customary or appropriate
in combined primary and secondary offerings and such other differences as may be
customary or appropriate in light of the fact that Genesis and such Holders may
be selling different securities. If a proposed registration pursuant to this
Section 11.1(a) involves such an underwritten public offering, any Holder making
a request under this Section 11.1(a) in connection with such registration may
elect in writing, prior to the effective date of the registration statement
filed in connection with such registration, to withdraw such request and not to
have such securities registered in connection with such registration.
(b) Expenses. Genesis will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to Section
11.1(a), regardless of whether such registration statement becomes effective.
(c) Priority in Incidental Registrations. If a registration pursuant
to this Section 11.1 involves an underwritten offering by Genesis (as described
in Section 11.1(a)(ii)) and the managing underwriter with respect to such
offering advises Genesis in writing that, in its opinion, the number of
securities (including all Registrable Securities) which Genesis, the Holders and
any other persons intend to include in such registration exceeds the largest
number of securities which can be sold in such offering without having an
adverse effect on the offering of securities as contemplated by Genesis
(including the price at which Genesis proposes to sell such securities), then
Genesis will include in such registration (i) first, all the securities Genesis
proposes to sell for its own account, (ii) second, the number of shares of
Registrable Securities which the Holders have requested to be included in such
registration and (iii) third, the number of shares of securities as to which the
holders thereof have the right to include in such registration and which the
holders thereof have requested to be included in such registration, in each case
which, in the opinion of such managing underwriter, can be sold without having
the adverse effect referred to above.
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(d) Custody Agreement and Power of Attorney. Upon Genesis' request,
any Holder will execute and deliver a custody agreement and power of attorney in
form and substance reasonably satisfactory to Genesis with respect to the shares
of Registrable Securities to be registered pursuant to this Section 11.1 (a
"Custody Agreement and Power of Attorney"). The Custody Agreement and Power of
Attorney will provide, among other things, that the Holder will deliver to and
deposit in custody with the custodian and attorney-in-fact named therein a
certificate or certificates representing such Registrable Securities (duly
endorsed in blank by the registered owner or owners thereof or accompanied by
duly executed stock powers in blank) and irrevocably appoint said custodian and
attorney-in-fact as the Holder's agent and attorney-in-fact with full power and
authority to act under the Custody Agreement and Power of Attorney on the
Holder's behalf with respect to the matters specified therein.
(e) Other Agreements. Each Holder shall execute such other agreements
as Genesis may reasonably request to further accomplish the purposes of this
Section 11.1.
Section 11.2 Registration on Request. (a) Request by Holders. Upon the
written request of Cypress or TPG or the written request of any Holder or
Holders of outstanding Registrable Securities which, together with the shares of
Genesis Common Stock and the Genesis Non-Voting Common Stock issuable upon
exercise or conversion of such Registrable Securities, constitute more than 50%
of the shares of Genesis Common Stock and Genesis Non-Voting Common Stock that
are then Registrable Securities and the shares of Genesis Common Stock and
Genesis Non-Voting Common Stock then issuable upon exercise or conversion of
Registrable Securities, requesting that Genesis effect the registration under
the Securities Act of all or part of such Holder's or Holders' Registrable
Securities (which Registrable Securities requested to be registered have a
proposed aggregate public offering price as of the date of such request of not
less than $25 million or which constitute all or such Holder's or Holders'
Registrable Securities), and specifying the intended method of disposition
thereof, Genesis will promptly give written notice of such requested
registration to all other Holders, and thereupon will, as expeditiously as
possible, use its best efforts to effect the registration under the Securities
Act of:
(i) the Registrable Securities which Genesis has been so
requested to register by such Holders or Holder; and
(ii) all other Registrable Securities which Genesis has been
requested to register by any other Holder thereof by written request
given to Genesis within 30 days after the giving of such written
notice by Genesis (which request shall specify the intended method of
disposition of such Registrable Securities),
so as to permit the disposition (in accordance with the Holders' intended method
thereof) of the Registrable Securities so to be registered; provided, that
Genesis shall not be obligated to file a registration statement relating to any
registration request under this Section 11.2(a) (i) within a period of six
months after the effective date of any other registration statement relating to
(A) any registration request under this Section 11.2(a) or (B) any registration
of Registrable
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Securities effected under Section 11.1, (ii) if five registration statements
relating to registration requests under this Section 11.2(a) have previously
been filed and declared effective by the SEC or (iii) with respect to any
Registrable Securities other than Common Stock or Non-Voting Common Stock,
within 270 days after the Closing.
(b) Expenses. Genesis will pay all Registration Expenses in connection
with the five registrations of Registrable Securities pursuant to this Section
11.2 upon the written request of any of the Holders.
(c) Effective Registration Statement. A registration requested
pursuant to this Section 11.2 will not be deemed to have been effected unless it
has become effective; provided, that if, within the period ending on the earlier
to occur of (i) 180 days after the applicable registration statement has become
effective, or (ii) the date on which the distribution of the Registrable
Securities covered thereby has been completed, the offering of Registrable
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental agency
or court, such registration will be deemed not to have been effected.
(d) Shelf Registration. If Genesis is eligible to file a registration
statement on Form S-3 (or any equivalent successor form), then the Person or
Persons entitled to make a request for registration pursuant to Section 11.2(c)
may elect to require that the registration then requested be effected using a
shelf registration under Rule 415 of the Securities Act. Genesis will use its
reasonable best efforts to cause any registration pursuant to this Section 11.2
effected as a shelf registration under Rule 415 of the Securities Act to remain
effective for a period ending on the earlier of (i) two years after the
effective date of the registration statement plus such additional period of time
as Genesis or any Holder may be required under the Securities Act to deliver a
prospectus in connection with any sale of Registrable Securities pursuant to
such registration, and (ii) the date on which all Registrable Securities covered
by such registration statement have been sold.
(e) Selection of Underwriters. If a requested registration pursuant to
this Section 11.2 involves an underwritten offering, the Person or Persons
requesting registration shall have the right to select the investment banker or
bankers and managers to administer the offering; provided, however, that such
investment banker or bankers and managers shall be reasonably satisfactory to
Genesis.
(f) Priority in Requested Registrations. If a requested registration
pursuant to this Section 11.2 involves an underwritten offering and the managing
underwriter advises Genesis in writing that, in its opinion, the number of
securities requested to be included in such registration (including securities
of Genesis which are not Registrable Securities) exceeds the largest number of
securities which can be sold in such offering, Genesis will include in such
registration only the Registrable Securities requested to be included in such
registration. In the event that the number of Registrable Securities requested
to be included in such registration exceeds the number which, in the opinion of
such managing underwriter, can be sold, the number
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of such Registrable Securities to be included in such registration shall be
allocated pro rata (in the case of securities other than common stock of
Genesis, based on the number of shares of common stock then issuable upon
exercise or conversion thereof) among all requesting Holders on the basis of the
relative number of shares of Registrable Securities (in the case of securities
other than common stock of Genesis, based on the number of shares of common
stock then issuable upon exercise or conversion thereof) then held by each such
Holder; provided, that any securities thereby allocated to any such Holder that
exceed such Holder's request shall be reallocated among the remaining requesting
Holders in like manner. In the event that the number of Registrable Securities
requested to be included in such registration is less than the number which, in
the opinion of the managing underwriter, can be sold, Genesis may include in
such registration the securities Genesis or other Persons propose to sell up to
the number of securities that, in the opinion of the managing underwriter, can
be sold.
Section 11.3 Registration Procedures. If and whenever Genesis is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this Agreement,
Genesis will, as expeditiously as possible:
(a) prepare and, if the registration is pursuant to notice
given under Section 11.2(a), in any event within 45 days after the
giving of notice pursuant to Section 11.2(a), file with the SEC a
registration statement with respect to such Registrable Securities on
any form for which Genesis then qualifies or which counsel for Genesis
shall deem appropriate, and which form shall be available for the sale
of the Registrable Securities in accordance with the intended methods
of distribution thereof, and use its best efforts to cause such
registration statement to become and remain effective; provided,
however, that Genesis may discontinue any registration of its
securities which is being effected pursuant to Section 11.2 at any
time prior to the effective date of the registration statement
relating thereto;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of 180 days (or, in the case of a
shelf registration pursuant to Rule 415 under the Securities Act, two
years plus such additional period of time as Genesis or any Holder may
be required under the Securities Act to deliver a prospectus in
connection with any sale of Registrable Securities pursuant to such
registration) or such lesser period of time as Genesis or any Holder
may be required under the Securities Act to deliver a prospectus in
connection with any sale of Registrable Securities, and to comply with
the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the
Holder or Holders thereof set forth in such registration statement;
provided, that before filing a registration statement or prospectus,
or any amendments or supplements thereto, Genesis will furnish to the
Holders and their counsel copies of all documents proposed to be
filed, which documents will be subject to the review of such counsel
and will not be filed if such counsel reasonably objects;
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(c) furnish to each Holder of such Registrable Securities such
number of copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and summary
prospectus and prospectus supplement, as applicable), in conformity
with the requirements of the Securities Act, and such other documents
as such Holder may reasonably request in order to facilitate the
disposition of the Registrable Securities by such Holder;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each
Holder shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Holder, except that Genesis shall
not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction where, but for
the requirements of this Section 11.3(d), it would not be obligated to
be so qualified, to subject itself to taxation in any such
jurisdiction, or to consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the Holder or Holders thereof to consummate the
disposition of such Registrable Securities;
(f) notify each Holder of any such Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 11.3(b), of
Genesis' becoming aware that the prospectus included in such
registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and at the request of any such Holder, prepare and furnish
to such Holder a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable (but not more than
eighteen months) after the effective date of the registration
statement, an earnings statement which shall satisfy the provisions of
Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
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(h) (A) use its best efforts to cause all such Registrable
Securities which are shares of Genesis Common Stock or Genesis
Non-Voting Common Stock to be listed on any securities exchange on
which the Genesis Common Stock is then listed, if such Registrable
Securities are not already so listed and if such listing is then
permitted under the rules of such exchange and (B) provide a transfer
agent and registrar for such Registrable Securities covered by such
registration statement no later than the effective date of such
registration statement;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions
as sellers of Registrable Securities (on a converted or exercised
basis, as applicable, in the case of Series H Preferred Stock, Series
I Preferred Stock and Warrants) constituting a majority of the shares
of Registrable Securities (on a converted or exercised basis, as
applicable, in the case of Series H Preferred Stock, Series I
Preferred Stock and Warrants) being registered or the underwriters, if
any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities, including making
appropriate members of senior management of Genesis available for
customary participation in a "road show" presentation to potential
investors;
(j) obtain a "cold comfort" letter or letters from Genesis'
independent public accountants in customary form and covering matters
of the type customarily covered by "cold comfort" letters as Sellers
of Registrable Securities (on a converted or exercised basis, as
applicable, in the case of Series H Preferred Stock, Series I
Preferred Stock and Warrants) constituting a majority of the shares of
Registrable Securities (on a converted or exercised basis, as
applicable, in the case of Series H Preferred Stock, Series I
Preferred Stock and Warrants) being registered or issuable upon
exercise or conversion of Registrable Securities being registered
shall reasonably request (provided that Registrable Securities
constitute at least 25% of the securities covered by such registration
statement); and
(k) make available for inspection by representatives of the
Holders of the Registrable Securities covered by such registration
statement, by any underwriter participating in any disposition to be
effected pursuant to such registration statement and by any attorney,
accountant or other agent retained by such Holders or any such
underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of Genesis, and cause all of
Genesis' officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
Genesis may require each Holder of Registrable Securities as to which
any registration is being effected to furnish Genesis with such information
regarding such Holder and pertinent to the disclosure requirements relating to
the registration and the distribution of such securities as Genesis may from
time to time reasonably request in writing.
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Each Holder of Registrable Securities, upon receipt of any notice from
Genesis of the happening of any event of the kind described in Section 11.3(f),
shall forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 11.3(f), and, if so directed by Genesis, such Holder
shall deliver to Genesis (at Genesis' expense) all copies, other than permanent
file copies then in such Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event Genesis shall give any such notice, the period mentioned in Section
11.3(b) shall be extended by the number of days during the period from the date
of the giving of such notice pursuant to Section 11.3(f) and through the date
when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 11.3(f).
Section 11.4 Indemnification. (a) Indemnification by Genesis. In the
event of any registration of any securities of Genesis under the Securities Act
pursuant to Section 11.1 or 11.2, Genesis hereby indemnifies and agrees to hold
harmless, to the extent permitted by law, each Holder of Registrable Securities
covered by such registration statement, each affiliate of such Holder and their
respective directors and officers or general and limited partners (and the
directors, officers, affiliates and controlling Persons thereof), each other
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such Holder or any such
underwriter within the meaning of the Securities Act (collectively, the
"Indemnified Parties"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses to which such Indemnified Party may
become subject under the Securities Act, common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof, whether or not such Indemnified Party is a party thereto) arise
out of or are based upon (a) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement thereto, or
(b) any omission or alleged omission to state therein a material fact necessary
to make the statements made, in the light of the circumstances under which they
were made, not misleading, and Genesis will reimburse such Indemnified Party for
any legal or other expenses reasonably incurred by it in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that Genesis shall not be liable to any Indemnified Party
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, in any such preliminary, final or
summary prospectus, or any amendment or supplement thereto in reliance upon and
in conformity with written information with respect to such Indemnified Party
furnished to Genesis by such Indemnified Party for use in the preparation
thereof; and provided, further, that Genesis will not be liable to any Person
who participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, under the indemnity agreement in this Section
11.4(a) with respect to any preliminary prospectus or the final prospectus or
the final prospectus as amended or supplemented, as the case may be, to the
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extent that any such loss, claim, damage or liability of such underwriter or
controlling Person results from the fact that such underwriter sold Registrable
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the final prospectus (including any
documents incorporated by reference therein) or of the final prospectus as then
amended or supplemented (including any documents incorporated by reference
therein), whichever is most recent, if Genesis has previously furnished copies
thereof to such underwriter. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such Holder or
any Indemnified Party and shall survive the transfer of such securities by such
Holder.
(b) Indemnification by the Holders and Underwriters. Genesis may
require, as a condition to including any Registrable Securities in any
registration statement filed in accordance with Section 11.1 or 11.2 herein,
that Genesis shall have received an undertaking reasonably satisfactory to it
from the Holder of such Registrable Securities or any underwriter to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
Section 11.4(a)) Genesis, all other prospective Holders or any underwriter, as
the case may be, and any of their respective affiliates, directors, officers and
controlling Persons, with respect to any statement in or omission or alleged
omission from such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if such statement
or omission or alleged omission was made in reliance upon and in conformity with
written information with respect to such Holder or underwriter furnished to
Genesis by such Holder or underwriter expressly for use in the preparation of
such registration statement, preliminary, final or summary prospectus or
amendment or supplement, or a document incorporated by reference into any of the
foregoing. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of Genesis or any of the Holders, or any
of their respective affiliates, directors, officers or controlling Persons and
shall survive the transfer of such securities by such Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 11.4, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; provided, that the failure of
the indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under Sections 11.4(a) or 11.4(b), except
to the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation.
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If the indemnified party has been advised by counsel that having common counsel
would result in a conflict of interest between the interests of such indemnified
and indemnifying parties, then such indemnified party may employ separate
counsel reasonably acceptable to the indemnifying party to represent or defend
such indemnified party in such action, it being understood, however, that the
indemnifying party shall not be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties (and not more than one separate firm of local counsel at any time for
all such indemnified parties) in such action. No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) Other Indemnification. Indemnification similar to that specified
in this Section 11.4 (with appropriate modifications) shall be given by Genesis
and each Holder of Registrable Securities with respect to any required
registration or other qualification of securities under any federal or state law
or regulation or governmental authority other than the Securities Act.
(e) Contribution. If recovery is not available under the foregoing
indemnification provisions of this Section 11 for any reason other than as
expressly specified therein, the parties entitled to indemnification by the
terms thereof shall be entitled to contribution to liabilities and expenses
except to the extent that contribution is not permitted under Section 11(f) of
the Securities Act. In determining the amount of contribution to which the
respective parties are entitled, there shall be considered the relative benefits
received by each party from the offering of the Registrable Securities (taking
into account the portion of the proceeds realized by each), the parties'
relative knowledge and access to information concerning the matter with respect
to which the claim was asserted, the opportunity to correct and prevent any
misstatement or omission and any other equitable considerations appropriate
under the circumstances. The amount paid or payable by a party under this
Section 11.4 as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 11.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(f) Non-Exclusivity. The obligations of the parties under this Section
11 shall be in addition to any liability which any party may otherwise have to
any other party.
(g) Rule 144. Genesis covenants that it will timely file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations
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adopted by the SEC thereunder (or, if Genesis is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities, make
publicly available such information), and it will take such further action as
any Holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 or Rule 144A under the Securities Act, as
such Rules may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, Genesis will deliver to such Holder a written statement
as to whether it has complied with such requirements.
ARTICLE XII
INDEMNIFICATION
Section 12.1 (a) Genesis shall indemnify and hold harmless each
Sponsor and its respective Affiliates, officers, directors, members, employees,
advisors and agents (each, a "Sponsor Indemnified Person") from and against any
and all losses, claims, damages, liabilities, costs, expenses, actions, suits,
proceedings, interest, penalties and fines (including, without limitation, costs
of collection, attorneys' fees and expenses and costs of defense, investigation
and ongoing monitoring), whether or not involving a third party claim
(collectively, "Losses") to which such Sponsor Indemnified Person may become
subject or incur, directly or indirectly, based upon, arising out of or in
connection with a breach of any representation, warranty, agreement or covenant
of Genesis contained in this Agreement or in the officer's certificate delivered
pursuant to Section 8.2(j) of this Agreement; provided, however, that the
aggregate liability of Genesis to indemnify and hold harmless the Sponsor
Indemnified Persons in respect of breaches of the representations and warranties
set forth in Section 6.7 of this Agreement and the covenants set forth in
Sections 9.1, 9.4, 9.5, 9.6 and 9.10 of this Agreement shall be limited to $50
million.
(b) Each Sponsor shall indemnify and hold harmless Genesis and its
Affiliates, officers, directors, employees, advisors and agents (each, a
"Company Indemnified Person") from and against any and all Losses to which such
Company Indemnified Person may become subject or incur, directly or indirectly,
based upon, arising out of or in connection with a breach of any representation,
warranty, agreement or covenant of such Sponsor contained in this Agreement or
in the officer's certificate delivered pursuant to Section 8.3(d) of this
Agreement; provided, however, that the aggregate liability of such Sponsor to
indemnify and hold harmless the Company Indemnified Persons in respect of
breaches of the covenants set forth in Sections 10.1, 10.2 and 10.3 of this
Agreement shall be limited to $50 million.
(c) Genesis shall indemnify, and advance expenses to, the directors
designated by Cypress, TPG or by Sponsor Affiliates to serve on Genesis' board
of directors pursuant to the terms of the Series H Preferred Stock to the
fullest extent permitted by law. Genesis shall provide and maintain in effect
policies of directors' and officers' liability insurance for such directors,
which policies shall contain terms and conditions which are not less
advantageous than
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those policies maintained by Genesis at the date hereof and having the maximum
available coverage under the current policies of directors' and officers'
liability insurance.
(d) Genesis shall indemnify and hold harmless each Sponsor Indemnified
Person from and against any Losses to which such Sponsor Indemnified Person may
become subject or incur, directly or indirectly, based upon, arising out of or
in connection with the execution, delivery or performance of this Agreement or
the transactions contemplated hereby, including, without limitation, any claim
arising out of the actual or alleged breach by Genesis of any contract or other
agreement with any Person as a consequence of this Agreement or the transactions
contemplated hereby or any action, whether pending or threatened, asserting the
invalidity of the transactions contemplated hereby or otherwise challenging this
Agreement or the transactions contemplated hereby; provided, that Genesis shall
have no obligation under this Section 12.1(d) to indemnify or hold harmless any
Sponsor Indemnified Person in respect of Losses resulting from (i) losses in
value of the Transaction Securities, (ii) claims by the limited partners in the
Sponsor Affiliates or (iii) the tax consequences to the Sponsor Indemnified
Persons of their participation in the transactions contemplated hereby.
Section 12.2 Procedure for Indemnification. If any Person to be
indemnified under this Article XII has suffered or incurred any Losses with
respect to which indemnification is to be sought hereunder, the indemnified
party shall so notify the party from whom indemnification is sought promptly in
writing describing such Losses, the amount or estimated amount thereof, if known
or reasonably capable of estimation, and the method of computation of such
Losses. If a claim or demand by a third party is made against an indemnified
party or any action at law or suit in equity is instituted against an
indemnified party by a third party (each claim, demand, action or suit by a
third party, a "Third Party Claim"), and if an indemnified party intends to seek
indemnity with respect thereto under this Article XII, such indemnified party
shall promptly notify the indemnifying party in writing of such Third Party
Claim setting forth such Third Party Claim in reasonable detail and tender to
the indemnifying party the defense of such Third Party Claim. The failure of the
indemnified party to give the indemnifying party prompt notice, to provide
notice in the form required or tender the defense of a Third Party Claim as
provided herein shall not relieve the indemnifying party of any of its
obligations under this Article XII, except to the extent that the indemnifying
party is materially prejudiced by such failure. For 30 days after receipt of
such notice the indemnifying party shall have the right but not the obligation
to undertake the conduct and control, through counsel of its own choosing and at
its own expense, of the settlement or defense of any Third Party Claim, and the
indemnified party shall cooperate with the indemnifying party in connection
therewith; provided, that if the indemnifying party elects to undertake the
conduct and control of such settlement or defense, then the indemnified party
may participate in such settlement or defense through counsel chosen by such
indemnified party provided that the fees and expenses of such counsel shall be
borne by such indemnified party; provided, further, that pending the
indemnifying party's decision whether to exercise its right to undertake the
conduct and control of the settlement or defense of any Third Party Claim, the
indemnified party shall undertake, conduct and control the settlement or defense
thereof, through counsel of its own choosing. So long as the indemnifying party
is reasonably contesting any such claim in good faith, the indemnified party
shall not pay or settle
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any such Third Party Claim. Notwithstanding the foregoing, the indemnified party
shall have the right to pay or settle any such Third Party Claim; provided, that
in such event it shall waive any right to indemnity therefor by the indemnifying
party. If the indemnifying party does not notify the indemnified party within 30
days after the receipt of the indemnified party's notice of a claim of indemnity
hereunder in connection with a Third Party Claim that it elects to undertake the
settlement or defense thereof, the indemnified party shall have the right to
conduct and control the defense thereof and to contest, settle or compromise the
Third Party Claim but shall not thereby waive any right to indemnity therefor
pursuant to this Agreement. The indemnifying party shall not, except with the
consent of the indemnified party, enter into any settlement or consent to entry
of any judgment unless: (i) such settlement or judgment includes as an
unconditional term thereof the giving by the person or persons asserting such
claim to all indemnified parties an unconditional release from all liability
with respect to such claim and (ii) the relief provided in connection with such
settlement or judgment effected by the indemnifying party is satisfied entirely
by the indemnifying party.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Notices. (a) Except as provided in Section 13.1(b), all
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given when delivered in person or by telecopier (with a
confirmed receipt thereof), and on the next business day when sent by overnight
courier service, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to Cypress, to:
The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, NY 10022
Attention: William L. Spiegel
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: William E. Curbow, Esq.
Telecopier: 212-455-2502
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(ii) if to TPG, to:
TPG Partners II, L.P.
201 Main Street, Suite 2420
Fort Worth, TX 76102
Attention: Karl I. Peterson
Telecopier: 817-871-4010
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attention: Paul J. Shim, Esq.
Telecopier: 212-225-3999
(iii) if to Genesis, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, PA 19348
Attention: Ira C. Gubernick, Esq.
Telecopier: 610-444-3365
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen Luongo, Esq.
Telecopier: 215-569-5555
iv) if to Nazem, to:
Nazem, Inc.
645 Madison Avenue
New York, New York 10022
Attention: Fred Nazem
Telecopier: 212-371-2150
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with a copy to:
Bartoma Corporation, N.V.
Fokkerweg 26
Suite 12
Curacao, Netherlands Antilles
Attention: Marleen Janssen
Telecopier: 5999-465-39-07
(b) All notices and other communications to be given to any other
Person hereunder shall be in writing and shall be deemed to have been duly given
when delivered in person, on the next Business Day when sent by overnight
courier service and on the third Business Day when sent registered or certified
mail, return receipt requested, postage prepaid to such Person at its last known
address appearing on the books of Genesis maintained for such purpose.
Section 13.2 Severability. In the event any provision hereof is held
void or unenforceable by any court, then such provision shall be severable and
shall not affect the remaining provisions hereof.
Section 13.3 Entire Agreement. This Agreement (including the exhibits,
documents or instruments referred to herein) embody the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof and
thereof and supersede all prior agreements and understandings, both written and
oral, among the parties, or between any of them, with respect to the subject
matter hereof and thereof.
Section 13.4 Amendment and Modification. This Agreement may be
amended, modified or supplemented only by a written agreement signed by each of
Cypress, TPG and Genesis; provided, however, that neither Cypress nor TPG shall
enter into any amendment of this Agreement that would be materially more adverse
to the rights hereunder of Nazem and its Affiliate than it would be to the
rights of Cypress and TPG and their respective Sponsor Affiliates; and,
provided, further, that Nazem shall have received prior written notice of any
amendment hereto, including a draft of the proposed form of the amendment a
reasonable amount of time under the circumstances prior to the execution
thereof, and a copy of any executed amendment promptly following the execution
thereof. Any failure by a party hereto to comply with any obligation, agreement
or condition herein may be expressly waived in writing by Cypress, TPG and
Genesis, but such waiver or failure to insist upon strict compliance with such
obligation, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any such subsequent or other failure.
Section 13.5 Termination. (a) This Agreement may be terminated and the
transactions contemplated hereby abandoned by Genesis, Cypress and TPG by mutual
agreement at any time prior to the Closing.
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(b) This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at the option of Genesis, on the one hand, and Cypress
and TPG, on the other hand, on ________, 2000, if the Closing has not, through
no fault of the terminating Person or Persons, occurred by such date.
(c) In the event that this Agreement is terminated and the
transactions contemplated hereby are abandoned as provided above, no party shall
have any liability hereunder except for the obligations set forth in Sections
9.6, 10.3, 13.1, 13.4, 13.6, 13.8, 13.9, 13.10 and 13.11, the provisions of
which shall survive any termination of this Agreement and abandonment of the
transactions contemplated hereby; provided, that nothing herein shall relieve
any party from liability for any breach of any representation, warranty,
agreement or covenant set forth in this Agreement prior to such termination.
Except as specifically provided herein, the provisions of this Agreement shall
survive the Closing.
Section 13.6 Assignment; Binding on Transferees. The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto, their respective successors and assigns and, to the extent set forth
herein, any other Person which is a Holder. Cypress and TPG may assign any of
their rights and obligations hereunder to any of their respective Sponsor
Affiliates; provided, that in connection with any such assignment of liabilities
by Cypress, Cypress Merchant Banking Partners L.P. shall remain liable for such
liabilities, and no such assignment shall release TPG from any liability for its
obligations hereunder . Neither Genesis nor Nazem may assign any of its rights
or obligations hereunder to any Person without the written consent of Cypress
and TPG, acting jointly.
Section 13.7 Legend. Each certificate representing shares of
Transaction Securities shall bear the following legend (until such time as
subsequent transfers thereof are no longer restricted in accordance with the
Securities Act, at which time Genesis shall, upon request and at its expense,
issue a replacement certificate not bearing a legend):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE
SECURITIES LAWS OF ANY STATE, AND NO SALE, ASSIGNMENT, TRANSFER,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND IN COMPLIANCE WITH
ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR (B) IF THE
COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL WHICH SHALL BE
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH SALE,
ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS
NOT IN VIOLATION OF THE ACT OR APPLICABLE STATE SECURITIES LAWS.
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Section 13.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 13.9 Headings. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 13.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13.11 Submission to Jurisdiction; Waivers. Each of the parties
hereto agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address set forth in Section 13.1 of this Agreement or at such other address of
which such party shall have given notice pursuant thereto; and (iii) agrees that
nothing herein shall affect the right to effect service of process in any other
manner permitted by law or shall limit the right to sue in any other
jurisdiction.
[The next page is numbered S-1.]
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Section 13.12 WAIVERS OF JURY TRIAL. EACH PARTY HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND
FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first above written.
THE CYPRESS GROUP L.L.C.
By:______________________________
Name:
Title:
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:______________________________
Name:
Title:
NAZEM, INC.
By:______________________________
Name:
Title:
GENESIS HEALTH VENTURES, INC.
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT A
AMENDED AND RESTATED PUT/CALL AGREEMENT
Among
The Cypress Group L.L.C.,
TPG Partners II, L.P.,
Nazem, Inc.,
The Other Signatories Hereto
And
Genesis Health Ventures, Inc.
Dated
[ ], 1999
<PAGE>
AMENDED AND RESTATED PUT/CALL AGREEMENT
AMENDED and RESTATED PUT/CALL AGREEMENT, dated as of [ ],
1999 (this "Agreement"), among The Cypress Group L.L.C., a Delaware limited
liability company ("Cypress"), TPG Partners II, L.P., a Delaware limited
partnership ("TPG"), Nazem, Inc., a Delaware corporation ("Nazem" and, together
with Cypress and TPG, the "Sponsors"), the other signatories hereto, and Genesis
Health Ventures, Inc., a Pennsylvania corporation ("Genesis").
WITNESSETH
WHEREAS, Genesis and the Sponsors or their affiliated investment funds own
all of the issued and outstanding common stock, par value $.01 per share (the
"Common Stock") of Genesis ElderCare Corp., a Delaware corporation ("Parent").
WHEREAS, on October 9, 1997, Genesis and the Sponsors entered into a
Put/Call Agreement (the "Original Put/Call Agreement") related to the Common
Stock.
WHEREAS, the parties hereto desire to amend and restate the Original
Put/Call Agreement.
NOW, THEREFORE, in consideration of the mutual covenant and conditions as
hereinafter set forth, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the following meanings:
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"Agreement" is defined in the preamble hereto.
"Business Day" means any day other than a Saturday, Sun day or other day on
which commercial banks in the City of New York are authorized or required by
laws to close.
"Call Option" means the collective reference to the options granted
pursuant to Section 2.1.
"Call Optionee" means each Person who is or becomes a signatory hereto if
such Person owns Common Stock subject to the Call Option on the Notification
Date.
"Call Option Exercise Price" is defined in Section 2.1(a).
"Common Stock" is defined in the recitals hereto.
"Common Stock Transferee" means each Person other than an Affiliate of
Genesis who acquires shares of Common Stock from a Sponsor or an Affiliate of a
Sponsor or any other Common
Stock Transferee.
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"Cypress" is defined in the preamble hereto.
"Exercise Date" means the date specified for the closing of the exercise of
the Call Option, as set forth in a notice given pursuant to Section 2.1(b).
"Genesis" is defined in the preamble hereto.
"Nazem" is defined in the preamble hereto.
"Notification Date" means the date notification is given by Genesis under
the Call Option in accordance with Section 2.1(b).
"Parent" is defined in the recitals hereto.
"Person" means any individual, corporation, partnership, joint venture,
trust, business, unincorporated organization or other entity.
"Sponsors" is defined in the preamble hereto.
"Stockholders Agreement" means the Stockholders Agreement, dated October 9,
1997, among Cypress, Genesis, Nazem, Parent, and TPG, as amended.
"TPG" is defined in the preamble hereto.
ARTICLE II
CALL OPTION
Section 2.1 Call Option
(a) On the terms and subject to the conditions set forth herein, each
Sponsor, each Affiliate of a Sponsor owning Common Stock, and each Common Stock
Transferee hereby grants to Genesis an irrevocable option exercisable beginning
on the date hereof and ending on the tenth anniversary of the date hereof, to
purchase (and, upon exercise of such Call Option in accordance herewith, each
such Person irrevocably agrees to sell to Genesis), all, but not less than all,
of the Common Stock owned by such Person on the Notification Date; provided,
that Genesis shall be entitled to exercise the Call Option with respect to
shares owned by any Call Optionee on the Notification Date only if Genesis shall
exercise the Call Option with respect to shares of Common Stock owned by each
other Call Optionee on the Notification Date. The aggregate purchase price with
respect to all the shares of Common Stock subject to the Call Option shall be
equal to Two Million Dollars, subject to adjustment pursuant to Section 5.1(c)
(the "Call Option Exercise Price"). The Call Option Exercise Price shall be paid
in cash. The consideration to be paid for each share of Common Stock shall equal
the Call Option Exercise Price divided by the aggregate number of shares of
Common Stock subject to the Call Option on the Exercise Date.
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(b) Genesis shall give each Call Optionee written notice of exercise of the
Call Option no less than 60 days prior to the Business Day specified in such
notice for exercise of the Call Option. A notice of exercise of the Call Option
shall irrevocably commit Genesis and each Call Optionee to the purchase and sale
of the Common Stock in accordance with the Call Option. The closing of the Call
Option shall take place as provided in Article III.
ARTICLE III
CLOSING
Section 3.1 Payment of the Option Price. The closing of the purchase of
Common Stock pursuant to the exercise of the Call Option as provided in Section
2.1 shall take place on the Exercise Date. At the closing, Genesis shall deliver
cash in immediately available funds to, or upon the order of, each Call Optionee
against delivery of certificates representing the shares of Common Stock sold by
such Call Optionee, duly endorsed in blank or accompanied by duly executed stock
powers.
Section 3.2 Time and Place of Closing. The closing of the purchase of the
Common Stock shall be held at the offices of Blank Rome Comisky & McCauley LLP,
One Logan Square, Philadelphia, Pennsylvania, 19103 on the Exercise Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Representations and Warranties of the Parties. Each of Cypress,
TPG, Nazem and Genesis represents and warrants as follows:
(a) This Agreement has been duly executed and delivered by such Person and
constitutes the legal, valid and binding obligation of such Person, enforceable
against such Person in accordance with the terms hereof except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors' rights generally and by general principles of
equity; and
(b) The execution and delivery of this Agreement by such Person does not,
and the performance by it and its Affiliates of its and their obligations under
this Agreement will not, violate, conflict with or constitute a breach of, or a
default under, any material agreement, indenture or instrument to which such
Person is a party or which is binding on such Person, and will not result in the
creation of any lien on, or security interest in, any of the assets of such
Person.
Section 4.2 Representations and Warranties of Genesis. Genesis represents
and warrants to the Sponsors as follows:
(a) No consent, approval or authorization of, or filing, registration or
qualification with, any court, governmental, administrative or judicial
authority or regulatory body is required on the part of Genesis for the
execution, delivery and performance of this Agreement.
(b) As of the Exercise Date there will be no action or proceeding or
investigation pending or, to the best knowledge of Genesis, threatened against
Genesis or any of its subsidiaries which, if determined adversely could
adversely affect the consummation of the transactions contemplated by this
Agreement. There are no actions or proceedings challenging or seeking to
restrain, materially limit or prohibit the consummation of the transactions
contemplated hereby.
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(c) No state takeover statute or similar statute or regulation applies,
purports to apply or will, following the occurrence of any event contemplated
hereby or otherwise, apply to the transactions contemplated by this Agreement.
Section 4.3 Representations and Warranties of the Sponsors. Each of the
Sponsors represents and warrants to Genesis as follows:
(a) On the Exercise Date, such Person and its Affiliates, if any, owing
Common Stock will have good and valid title to the shares of Common Stock owned
by it, free and clear of all liens, encumbrances, equities and claims (other
than the Call Option).
(b) No consent, approval or authorization of, or filing, registration or
qualification with, any court, governmental, administrative or judicial
authority or regulatory body will be, as of the Exercise Date, required on the
part of such Person or any of its Affiliates owning Common Stock for the valid
sale and delivery of the Common Stock then owned by such Person or any of its
Affiliates to Genesis as contemplated herein.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Further Assurances.
(a) Subject to the terms and conditions hereof, Genesis and each Person
then subject to the Call Option agrees to use its best efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective, reasonably promptly the transactions contemplated by this Agreement.
(b) Promptly following the Notification Date, Genesis and each Person then
subject to the Call Option shall prepare and file all applications and other
notices required in connection with, and use their best efforts to obtain
promptly and comply with all conditions contained in, all necessary regulatory
approvals and any other consent, approval or other actions by, or notice to or
registration or filing with, any governmental or administrative agency or
authority required or necessary to be made, obtained or complied with, as the
case may be, by any such Person in connection with the performance of the
transactions contemplated by this Agreement, including without limitation any
premerger notifications pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"). Genesis agrees (i) to enter into with the Federal
Trade Commission and/or the Department of Justice such decrees, consent orders
and/or hold separate undertakings, and (ii) to effectuate any divestitures, in
each case involving assets or operations of either Parent or Genesis or its
Affiliates or both, as may be necessary in order to enable Genesis to purchase,
as soon as practicable following the Notification Date and in any event no later
than the Exercise Date, the Common Stock subject to the Call Option.
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(c) Genesis agrees to advance the Call Optionees reasonable expenses
(including attorney fees) in connection with the transactions contemplated by
this agreement. Genesis shall be permitted to deduct, up to a maximum aggregate
amount of $200,000, the reasonable expenses advanced pursuant to this Section
5.1(c) from the Call Option Exercise Price upon exercise of the Call.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Notices
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered in person or by
telecopier (with a confirmed receipt thereof), and on the next Business Day when
sent by overnight courier service, to any Common Stock Transferee at the address
of such Person, set forth on the Joinder hereto executed by such Person (the
form of which is attached hereto as Exhibit "A") pursuant to the Stockholders
Agreement or to Cypress, TPG, Genesis or Nazem at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Cypress, to:
The Cypress Group L.L.C.
65 East 55th Street - 19th Floor
New York, NY 10022
Attention: William L. Spiegel
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: William E. Curbow, Esquire
Telecopier: (212) 455-2502
(b) if to TPG, to:
TPG Partners II, L.P.
201 Main Street - Suite 2420
Fort Worth, TX 76102
Attention: Karl I. Peterson
Telecopier: (817) 871-4010
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with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attention: Paul J. Shim, Esquire
Telecopier: (212) 225-3999
(c) if to Genesis, to:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Attention: Ira C. Gubernick, Esquire
Telecopier: (610) 444-3365
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Attention: Stephen Luongo, Esquire
Telecopier: (215) 569-5555
(d) if to Nazem, to:
Nazem, Inc.
645 Madison Avenue
New York, NY 10022
Attention: Fred Nazem
Telecopier: (212) 371-2150
with a copy to:
Bartoma Corporation, N.V.
Fokkerweg 26 - Suite 12
Curacao, Netherlands Antilles
Attention: Marleen Janssen
Telecopier: 5999-465-39-07
Section 6.2 Severability. In the event any provision hereof is held void
or unenforceable by any court, then such provision shall be severable and shall
not affect the remaining provisions hereof.
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Section 6.3 Entire Agreement. This Agreement (including the documents and
instruments referred to herein) embody the entire agreement and understanding of
the parties hereto in respect of the subject matter hereof and thereof and
supersede all prior agreements and understandings, both written and oral, among
the parties, or between any of them, with respect to the subject matter hereof
and thereof.
Section 6.4 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written agreement signed by Genesis and each
other Person then subject to the Call Option. Any waiver or failure to insist
upon strict compliance with any obligation, agreement or condition herein shall
not operate as a waiver of, or estoppel with respect to, any such subsequent or
other failure.
Section 6.5 Assignment; Binding on Transferees. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors. Cypress and TPG may assign any of their rights
and obligations hereunder to any of their respective Affiliates. Neither Genesis
nor Nazem may assign any of its rights and obligations hereunder to any Person
without the written consent of Cypress and TPG, acting jointly, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing provision,
Genesis may assign any of its rights and obligations hereunder to any of its
Affiliates without the written consent of Cypress and TPG.
Section 6.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Section 6.7 Headings. This article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
Section 6.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.9 Specific Performance; Remedies. The parties hereto each
acknowledge that, in view of the uniqueness of the transactions contemplated
hereby, the other parties would not have an adequate remedy at law for money
damages if this Agreement has not been performed in accordance with its terms.
Each party therefore agrees that the other parties shall be entitled to specific
performance of the terms hereof. Any such remedy shall be in addition to any
other remedy that may be available at law or in equity.
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Section 6.10 Submission to Jurisdiction; Waivers. Each of the parties
hereto hereby irrevocably submits in any legal action or proceeding relating to
or arising out of this Agreement, or for recognition and enforcement of any
judgment in respect thereof, to the jurisdiction of the United States District
Court for the Southern District of New York, and appellate courts thereof. Each
of the parties hereto further: (i) consent that any such action or proceeding
may be brought in such court and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in such court or
that such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same; (ii) agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid, to
such party at its address set forth in Section 6.1 or at such other address of
which such party shall have given notice pursuant thereto; and (iii) agrees that
nothing herein shall affect the right to effect service of process in any other
manner permitted by law or shall limit the right to sue in any other
jurisdiction.
Section 6.11 WAIVERS OF ANY JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first above written.
THE CYPRESS GROUP L.L.C.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
TPG PARTNERS II, L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
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NAZEM, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
GENESIS HEALTH VENTURES, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
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The foregoing provisions of this Agreement applicable to Affiliates of
Sponsors owning Common Stock shall be binding upon and inure to the benefit of
the undersigned.
Affiliates of The Cypress Group L.L.C.
CYPRESS MERCHANT BANKING PARTNERS L.P.
By: Cypress Associates L.P.
By: The Cypress Group L.L.C.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
CYPRESS OFFSHORE PARTNERS L.P.
By: Cypress Associates L.P.
By: The Cypress Group L.L.C.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
Affiliates of TPG Partners II, L.P.
TPG PARALLEL II, L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
11
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TPG INVESTORS II, L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
TPG MC COINVESTMENT L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
Affiliate of Nazem
Genesis ElderCare Portfolio K, LP
By: Healthworth Associates I, L.L.C.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
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EXHIBIT A
Joinder
The undersigned hereby agrees that the provisions of the Amended and
Restated Put/Call Agreement attached hereto applicable to Common Stock
Transferees, Call Optionees or Persons subject to the Call Option shall be
binding on, and inure to the benefit of, the undersigned in accordance with the
terms thereof.
The address for notices or other communications to the undersigned under
the Amended and Restated Put/Call Agreement is:
[ ]
[ ]
[ ]
Attention:
Telecopier:
[ ]
______________________
Title:
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EXHIBIT B
GENESIS HEALTH VENTURES, INC.
CERTIFICATE OF DESIGNATION OF SERIES H SENIOR
CONVERTIBLE PARTICIPATING CUMULATIVE PREFERRED STOCK
Genesis Health Ventures, Inc. (hereinafter referred to as the "Company"), a
corporation organized and existing under the Pennsylvania Business Corporation
Law of 1988, as amended (the "Pennsylvania Law"), in accordance with the
provisions thereof, does HEREBY CERTIFY:
That, pursuant to authority expressly granted to and vested in the Board of
Directors of the Company (the "Board of Directors") by the provisions of Article
6 of the Amended and Restated Articles of Incorporation of the Company (the
"Articles") and the provisions of Sections 1521 and 1522 of the Pennsylvania
Law, the Board of Directors hereby creates a series of the Company's previously
authorized preferred stock, par value $.01 per share (the "Preferred Stock"),
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 H SENIOR CONVERTIBLE
PARTICIPATING CUMULATIVE PREFERRED STOCK
Section 1. Designation and Amount.
The shares of such series shall be designated as "Series H Senior
Convertible Participating Cumulative Preferred Stock" (the "Series H Preferred
Stock"), and the number of shares constituting the Series H Preferred Stock
shall be [_______]; provided, that the number of shares constituting the Series
H Preferred Stock shall be increased from time to time as necessary for the
issuance of additional shares of Series H Preferred Stock upon exchange of the
Company's Series I Senior Convertible Exchangeable Participating Cumulative
Preferred Stock (the "Series I Preferred Stock") in accordance with the terms
thereof. Capitalized terms used without previous definition herein are defined
in Section 10 hereof.
Section 2. Rank.
The Series H Preferred Stock shall, with respect to dividend rights and
rights on liquidation, winding-up and dissolution, rank senior to all classes of
common stock of the Company, each series of preferred stock of the Company
outstanding on the Issue Date and each other class of Capital Stock and series
of preferred stock of the Company hereafter created which does not expressly
provide that it ranks senior to or on a parity with the Series H Preferred Stock
as to dividend rights and rights on liquidation, winding-up and dissolution
(collectively, the "Junior Securities"). The Series H Preferred Stock shall,
with respect to dividend rights and rights on liquidation, winding-up and
dissolution, rank on a parity with the Series I Preferred Stock and each other
series of preferred stock of the Company hereafter created which expressly
provides that it ranks on a parity with the Series H Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively, the "Parity Securities"); provided, that any such securities not
issued in accordance with Section 4(c) hereof shall be deemed to be Junior
Securities. The Series H Preferred Stock shall, with respect to dividend rights
and rights on liquidation, winding-up and dissolution, rank junior to each
series of preferred stock of the Company hereafter created which expressly
provides that it ranks senior to the Series H Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively, the
"Senior Securities"); provided, that any such securities not issued in
accordance with Section 4(c) hereof shall be deemed to be Junior Securities.
<PAGE>
Section 3. Dividends.
(a) The holders of shares of Series H Preferred Stock shall be entitled to
receive with respect to each share of Series H Preferred Stock, when, as and if
declared by the Board of Directors, out of the assets of the Company legally
available therefor, cumulative preferential dividends for each Dividend Period
calculated based on the then effective Liquidation Preference per share at the
rate per annum equal to the greater of (i) the Common Equivalent Rate with
respect to such Dividend Period and (ii) the Accrual Rate.
(b) Prior to [ ], 2004, dividends (including accrued and unpaid dividends)
shall be payable in shares of Series I Preferred Stock. On and after [ ], 2004,
dividends (including accrued and unpaid dividends) shall be payable in cash;
provided, that such dividends shall be payable in shares of Series I Preferred
Stock to the extent that the terms of the Company's then existing indebtedness
under bank credit facilities or Public Debt prohibits the payments of such
dividends in cash. The number of shares of Series I Preferred Stock to be issued
in circumstances when dividends are paid with shares of Series I Preferred Stock
shall equal the amount of the dividend to be paid in shares of Series I
Preferred Stock divided by the then effective Liquidation Preference per share
of the Series I Preferred Stock, rounded down to the nearest full share after
taking into account all shares of Series H Preferred Stock owned by the holder
thereof. All shares of Series I Preferred Stock issued as a dividend on the
Series H Preferred Stock will thereupon be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof.
(c) Dividends shall be payable in arrears on each March 31, June 30,
September 30 and December 31, unless such day is not a Business Day, in which
event such dividends shall be payable on the next succeeding Business Day (each
such date being hereinafter referred to as a "Dividend Payment Date"),
commencing on the first Dividend Payment Date in respect of a share of Series H
Preferred Stock which is at least seven days after the issuance thereof. For
shares of Series H Preferred Stock issued on _________, 1999 (the "Issue Date"),
the first dividend payment shall be for the period from and including the Issue
Date to but excluding the date of the first Dividend Payment Date, and each
dividend payment thereafter shall be for the period from and including the most
recent Dividend Payment Date to but excluding the first Dividend Payment Date
thereafter. For shares of Series H Preferred Stock issued subsequent to the
Issue Date, the first dividend payment shall be for the period from and
including the date of issuance thereof to but excluding the date of the first
Dividend Payment Date thereafter, and each dividend payment thereafter shall be
for the period from and including the most recent Dividend Payment Date to but
excluding the first Dividend Payment Date thereafter. Each quarterly period
beginning on January 1, April 1, July 1 and October 1 in each year and ending on
and including the day next preceding the first day of the next such quarterly
period shall be a "Dividend Period". The amount of dividends payable for each
full Dividend Period shall be computed by dividing the annual dividend rate by
four. Dividends (or amounts equal to accrued and unpaid dividends) payable on
Series H Preferred Stock for any period less than a full quarterly Dividend
Period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual number of days elapsed in any period less than one month. The
record date for determination of holders of Series H Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon shall be, with
respect to the dividend payable on March 31, June 30, September 30 and December
31 of each year, the preceding March 1, June 1, September 1 and December 1,
respectively, or such other record date as shall be fixed by the Board of
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Directors which record date shall be no less than 30 and no more than 60
calendar days prior to the date fixed for the payment thereof. Dividends and
distributions shall be payable to holders of record as they shall appear on the
records of the Company on the applicable record date. Dividends on account of
arrears for any particular Dividend Period in which dividends were not paid on
the applicable Dividend Payment Date (including as a result of the rounding down
of the number of shares of Series I Preferred Stock issuable in the payment of
dividends as provided above in Section 3(b)) shall be added to the then
effective Liquidation Preference on the relevant Dividend Payment Date. Any
amounts so added to the then effective Liquidation Preference shall be subject
to reduction as provided below in Section 3(d).
(d) Accrued and unpaid dividends for any past Dividend Period may be
declared and paid (in shares of Series I Preferred Stock or in cash as provided
above in Section 3(b)) on any subsequent Dividend Payment Date to holders of
record on the corresponding record date. Each such payment shall automatically
reduce the then effective Liquidation Preference by an amount equal to such
payment; provided, however, that the Liquidation Preference shall not be reduced
below $10,000 per share.
(e) Dividends on the Series H Preferred Stock will accrue, whether or not
there are funds legally available for the payment of such dividends and whether
or not such dividends are declared, on a daily basis. Dividends will cease to
accrue in respect of Series H Preferred Stock on the date of the conversion or
redemption thereof.
(f) Dividends paid on the shares of Series H 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, and any remainder not paid as provided above
shall be added to the Liquidation Preference as provided above in Section 3(c).
(g) As long as any Series H Preferred Stock is outstanding, no dividends or
other distributions (other than dividends or other distributions payable in
shares of, or warrants, rights or options exerciseable for or convertible into
shares of, Junior Securities and cash in lieu of fractional shares of such
Junior Securities in connection with any such dividends) will be paid on any
Junior Securities unless: (i) full cumulative dividends on all outstanding
shares of Parity Securities and Series H Preferred Stock have been paid, or
declared and set aside for payment, for all Dividend Periods terminating on or
prior to the payment date of such dividend or distribution and for the current
Dividend Period; (ii) the Company has paid or set aside all amounts, if any,
then or theretofore required to be paid or set aside for all purchase,
retirement and sinking funds, if any, for any outstanding shares of Parity
Securities; and (iii) the Company is not in default of any of its obligations to
redeem any outstanding shares of Parity Securities or Series H Preferred Stock.
(h) As long as any Series H Preferred Stock is outstanding, no shares of
any Junior Securities may be purchased, redeemed or otherwise acquired by the
Company or any of its subsidiaries (except in connection with a reclassification
or exchange of any Junior Securities through the issuance of shares of, or
warrants, rights or options exerciseable for or convertible into shares of,
other Junior Securities (and cash in lieu of fractional shares of such Junior
Securities in connection therewith) or the purchase, redemption or other
acquisition of any Junior Securities with any shares of, or warrants, rights or
options exerciseable for or convertible into shares of, other Junior Securities
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(and cash in lieu of fractional shares of such Junior Securities in connection
therewith)), nor may any funds be set aside or made available for any sinking
fund for the purchase or redemption of any Junior Securities.
(i) As long as any Series H Preferred Stock is outstanding, no dividends or
other distributions (other than dividends or other distributions payable in
shares of, or warrants, rights or options exercisable for or convertible into
shares of, Junior Securities and cash in lieu of fractional shares of such
Junior Securities in connection with any such dividends) will be paid on any
Parity Securities unless such dividends or other distributions are declared and
paid pro rata so that the amounts of any such dividends or other distributions
declared and paid per share on outstanding Series H Preferred Stock and each
other share of such Parity Securities will in all cases bear to each other the
same ratio that the then effective Liquidation Preference per share of
outstanding Series H Preferred Stock and the liquidation preference per share of
such other outstanding shares of Parity Securities bear to each other.
(j) As long as any Series H Preferred Stock is outstanding, no shares of
any Parity Securities may be purchased, redeemed or otherwise acquired by the
Company or any of its subsidiaries (except with shares of, or warrants, rights
or options exercisable for or convertible into shares of, Junior Securities and
cash in lieu of fractional shares of such Junior Securities in connection
therewith) unless the Series H Preferred Stock and such Parity Securities are
purchased, redeemed or otherwise acquired pro rata so that the Fair Market Value
of the consideration applied to the purchase, redemption or other acquisition of
each share of Series H Preferred Stock and each other share of such Parity
Securities will in all cases bear to each other the same ratio that the then
effective Liquidation Preference per share of outstanding Series H Preferred
Stock and the liquidation preference per share of such other outstanding shares
of Parity Securities bear to each other.
(k) Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Junior Securities) as may be
determined from time to time by the Board of Directors may be declared and paid
on the shares of any Junior Securities and/or Parity Securities and from time to
time Junior Securities and/or Parity Securities may be purchased, redeemed or
otherwise acquired by the Company or any of its subsidiaries. In the event of
the declaration and payment of any such dividends or other distributions, the
holders of such Junior Securities and/or Parity Securities, as the case may be,
will be entitled, to the exclusion of holders of any outstanding Series H
Preferred Stock, to share therein according to their respective interests.
Section 4. Voting Rights.
(a) The holders of the Series H Preferred Stock (in addition to their
rights set forth in this Section 4 and otherwise provided by law) shall be
entitled to such number of votes for each share held as equals the number of
shares of Voting Common Stock into which such shares are convertible on the
record date set for determining who is entitled to vote a particular matter and
shall vote together with the holders of the Company's Voting Common Stock (and
any other class or series of Capital Stock, if any, similarly entitled to vote),
as a single class, on all matters to be voted on by holders of the Company's
Voting Common Stock. In addition to such voting rights, holders of the Series H
Preferred Stock shall be entitled to vote as a separate class on matters as to
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which the Pennsylvania Law requires a separate class vote of the Series H
Preferred Stock and shall have such other voting rights as are set forth in this
Section 4.
(b) If and whenever at any time (i) the Company shall be in default of any
of its obligations to redeem any outstanding shares of Series H Preferred Stock
or (ii) dividends payable in cash on shares of Series H Preferred Stock as
provided in Section 3(b) (i.e., dividends payable on and after [ ], 2004 to the
extent that the terms of the Company's then existing indebtedness under bank
credit facilities or Public Debt do not prohibit the payment of such dividends
in cash) have not been paid in full in cash for four consecutive fiscal
quarters, thereafter and until, in the case of clause (i), the Company shall
have fulfilled its redemption obligations and, in the case of clause (ii), until
all accrued and unpaid dividends payable in cash as provided in Section 3(b)
(i.e., dividends payable on and after [ ], 2004 to the extent that the terms of
the Company's then existing indebtedness under bank credit facilities or Public
Debt do not prohibit the payment of such dividends in cash), whether or not
declared, on the outstanding shares of Series H Preferred Stock shall have been
paid in full in cash or declared and cash set apart for the payment thereof, the
number of directors then constituting the Board of Directors shall be increased
by two and the holders of shares of Series H Preferred Stock and, to the extent
that the Series I Preferred Stock is entitled to participate in the election of
additional directors pursuant to Section 4(b) of the Certificate of Designations
relating to the Series I Preferred Stock, Series I Preferred Stock, voting as a
single class, shall be entitled to elect the two additional directors to serve
on the Board of Directors by majority vote at any annual meeting of stockholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Series H Preferred Stock and Series I Preferred Stock called as
hereinafter provided. The remaining directors of the Company shall be elected by
the classes of stock entitled to vote therefor, voting together, including the
Series H Preferred Stock, at each meeting of shareholders held for the purpose
of electing directors, all in accordance with the terms and procedures set forth
in the Company's Articles and By-Laws. At no time shall the holders of the
Series H Preferred Stock and Series I Preferred Stock be entitled to elect more
than two additional directors pursuant to this Section 4(b) and Section 4(b) of
the Certificate of Designations relating to the Series I Preferred Stock.
Whenever, in the case of clause (i), the Company shall have fulfilled its
redemption obligation and, in the case of clause (ii), all accrued and unpaid
dividends payable in cash as provided in Section 3(b) (i.e., dividends payable
on and after [ ], 2004 to the extent that the terms of the Company's then
existing indebtedness under bank credit facilities or Public Debt do not
prohibit the payment of such dividends in cash), whether or not declared, on the
outstanding shares of Series H Preferred Stock shall have been paid in full in
cash or declared and cash set apart for the payment thereof, then subject to any
right to elect additional directors pursuant to Section 4(b) of the Certificate
of Designations relating to Series I Preferred Stock the right of the holders of
the Series H Preferred Stock and Series I Preferred Stock to elect such
additional directors pursuant to this Section 4(b) shall cease and the term of
office of any person elected as director by the holders of the Series H
Preferred Stock and Series I Preferred Stock shall forthwith terminate and the
number of directors comprising the Board of Directors shall be reduced
accordingly. At any time after voting power to elect a director shall have
become vested and be continuing in the holders of Series H Preferred Stock and
Series I Preferred Stock pursuant to this Section 4(b) or if a vacancy shall
exist in the office of a director elected by the holders of Series H Preferred
Stock and Series I Preferred Stock, a proper officer of the Company may, and
upon the written request of the holders of record of at least twenty-five
percent (25%) of the shares of Series H Preferred Stock and Series I Preferred
Stock then outstanding addressed to the Secretary of the Company shall, call a
special meeting of the holders of Series H Preferred Stock and Series I
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Preferred Stock, for the purpose of electing the directors which such holders
are entitled to elect. If such meeting shall not be called by a proper officer
of the Company within twenty (20) days after personal service of written request
upon the Secretary of the Company, or within twenty (20) days after mailing the
same within the United States by certified mail, addressed to the Secretary of
the Company at its principal executive offices, then the holders of at least
twenty-five percent (25%) of the outstanding shares of Series H Preferred Stock
and Series I Preferred Stock may designate in writing one of their number to
call such meeting at the expense of the Company, and such meeting may be called
by the person so designated upon the notice required for the annual meeting of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders. Any holder of Series H Preferred Stock or
Series I Preferred Stock so designated shall have, and the Company shall
provide, access to the lists of stockholders to be called pursuant to the
provisions hereof.
(c) So long as any shares of Series H Preferred Stock are outstanding,
subject to the applicable provisions of the Pennsylvania Law, the Company shall
not, without consent of the holders of at least a majority of the number of
shares of Series H Preferred Stock and Series I Preferred Stock at the time
outstanding, voting as a class given in person or by proxy, either in writing or
by vote at a special meeting called for the purpose:
(i) increase the number of shares of authorized Series H Preferred
Stock or Series I Preferred Stock or issue any additional shares of Series
H Preferred Stock or Series I Preferred Stock, other than as contemplated
by the terms of the Series H Preferred Stock or the Series I Preferred
Stock;
(ii) amend or modify the relative rights, preferences and limitations
of the Series H Preferred Stock or Series I Preferred Stock or amend, alter
or repeal any of the provisions of the Company's Articles or By-Laws
(including by merger or similar transaction or otherwise) so as to
eliminate the Series H Preferred Stock or Series I Preferred Stock or
otherwise affect adversely the relative rights, preferences and limitations
of the Series H Preferred Stock or Series I Preferred Stock;
(iii) other than the Series I Preferred Stock and the Series H
Preferred Stock, create, authorize, issue or permit to exist any class of
Capital Stock or series of preferred stock that ranks senior to or on a
parity with the Series H Preferred Stock (other than preferred stock with
an aggregate liquidation preference and accrued and unpaid dividends not
exceeding $75 million at any time outstanding ranking on a parity with the
Series H Preferred Stock with respect to dividend rights and rights on
liquidation, winding-up and dissolution) with respect to dividend rights
and/or rights on liquidation, winding-up or dissolution, or reclassify any
class or series of any Junior Securities into, or authorize any securities
exchangeable for, convertible into or evidencing the right to purchase any
such class or series; or
(iv) enter into any transaction or series of transactions which would
constitute a Change of Control (as defined below) or engage in any
transaction pursuant to Rule 13e-3 under the Securities Exchange Act of
1934, as amended, except in a transaction in which each share of Series H
Preferred Stock is converted into or exchanged for the right to receive
cash consideration in an amount that is at least equal to the greater of
(x) 101% of the then effective Liquidation Preference plus accrued and
unpaid dividends from and including the most recent Dividend Payment Date
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and (y) the Fair Market Value of the consideration the holder of such share
of Series H Preferred Stock would be entitled to receive in respect of such
share if such holder were to convert such share into the Company's Voting
Common Stock as provided in Section 6 immediately prior to the effective
time of the transaction. For purposes of this clause (iv), a "Change of
Control" shall occur at any time that (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934)
(but not including, for purposes of this clause (i), to the extent
necessary, TPG, Cypress and any investment funds under common control with
TPG or Cypress, individually and in the aggregate), in a single transaction
or through a series of related transactions, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of more than 50% of the total Voting Stock
of the Company; (ii) the Company consolidates or merges with or into
another corporation or conveys, transfers or leases all or substantially
all of its assets to any Person, or any corporation consolidates or mergers
with or into the Company, in any such event pursuant to a transaction in
which the outstanding Voting Stock of the Company is changed into or
exchanged for cash, securities not issued in violation of Section 4(c) or
other property, other than any such transaction where (A) the outstanding
Voting Stock of the Company is changed into or exchanged for (x) Voting
Stock of the surviving corporation which is not Redeemable Capital Stock or
(y) cash, securities or other property in an amount which, if there is
Public Debt outstanding at the time of such transaction, could be paid
under the terms of such Public Debt and (B) the holders of the Voting Stock
of the Company immediately prior to such transaction own, directly or
indirectly, not less than 50% of the Voting Stock of the surviving
corporation immediately after such transaction; (iii) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of at
least 662/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors of the Company then in office; or (iv)
the Company is liquidated or dissolved or adopts a plan of liquidation.
Section 5. Redemption.
(a) The Company shall not have the right to redeem the Series H Preferred
Stock prior to the third anniversary of the Issue Date. Thereafter and prior to
the fifth anniversary of the Issue Date, the Company shall have the right to
redeem the Series H Preferred Stock, in whole but not in part, at a redemption
price per share in cash equal to the then effective Liquidation Preference plus
accrued and unpaid dividends for the period from and including the most recent
Dividend Payment Date through and including the date of redemption if the Market
Value of the Company's Voting Common Stock ending on the date of the Redemption
Notice exceeds 135% of the Conversion Price then in effect. On and after the
fifth anniversary of the Issue Date and prior to the twelfth anniversary of the
Issue Date, the Company shall have the right to redeem the Series H Preferred
Stock, in whole but not in part, at the redemption price per share in cash set
forth below (expressed as a percentage of the sum of the then effective
Liquidation Preference plus accrued and unpaid dividends for the period from and
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including the most recent Dividend Payment Date through and including the date
of redemption), if redeemed during the twelve-month period beginning on the
anniversary of the Issue Date in the years indicated below:
Year Percentage
---- ----------
2004 .................... 103.500%
2005 .................... 102.333
2006 .................... 101.167
2007 and thereafter ..... 100.000
(b) To the extent that the Company shall have funds legally available for
such payment, on the twelfth anniversary of the Issue Date (and to the extent
that the Company does not then have funds legally available, as soon thereafter
as the Company shall have funds legally available), the Company shall redeem all
outstanding shares of the Series H Preferred Stock, if any, at a redemption
price per share in cash equal to the then effective Liquidation Preference plus
accrued and unpaid dividends for the period from and including the most recent
Dividend Payment Date through and including the date of redemption.
(c) A notice of the Company's intent to redeem the Series H Preferred Stock
(the "Redemption Notice") shall be sent by or on behalf of the Company, by first
class mail, postage prepaid, to holders of record at their respective addresses
as they shall appear on the records of the Company, not less than 30 days nor
more than 120 days prior to the date fixed for redemption,
(i) notifying such holders of the election of the Company to redeem
such shares and of the date fixed for redemption;
(ii) stating that the Series H Preferred Stock may be converted until
the close of business on the Business Day prior to the date of redemption
by surrendering to the Company or its transfer agent for the Series H
Preferred Stock the certificate or certificates for the shares to be
converted, accompanied by written notice specifying the number of shares to
be converted, and stating the name and address of the transfer agent for
the Series H Preferred Stock, if any;
(iii) stating the place or places at which the shares called for
redemption shall, upon presentation and surrender of the certificates
evidencing such shares, be redeemed, and the redemption price to be paid
therefor;
(iv) stating that dividends shall cease to accrue on the date of
redemption unless the Company defaults in the payment of the redemption
price; and
(v) stating the name and address of the Redemption Agent.
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(d) The Company shall appoint one or more Redemption Agents. Following such
appointment and prior to any redemption, the Company shall deliver to the
Redemption Agent irrevocable written instructions authorizing the Redemption
Agent, on behalf and at the expense of the Company, to cause the Redemption
Notice to be duly mailed as soon as practicable after receipt of such
irrevocable instructions and in accordance with the above provisions. All funds
necessary for the redemption shall be deposited with the Redemption Agent in
trust at least two Business Days prior to the date fixed for redemption, for the
pro rata benefit of the holders of the Series H Preferred Stock, so as to be and
continue to be available therefor. Neither failure to mail any such Redemption
Notice, nor any defect in any Redemption Notice to one or more such holders
shall affect the sufficiency of the proceedings for redemption as to other
holders.
(e) If a Redemption Notice shall have been given as hereinbefore provided,
then each holder of Series H Preferred Stock shall be entitled to all relative
rights, preferences and limitations accorded to holders of the Series H
Preferred Stock until and including the date of redemption. Provided that the
Company shall have complied with its obligations pursuant to Sections 5(c) and
5(d), from and after the date of redemption, Series H Preferred Stock shall no
longer be deemed to be outstanding, and all rights of the holders of such shares
shall cease and terminate, except the right of the holders of such shares, upon
surrender of certificates therefor, to receive amounts to be paid hereunder.
(f) The deposit of monies in trust with the Redemption Agent shall be
irrevocable except that the Company shall be entitled to receive from the
Redemption Agent the interest or other earnings, if any, earned on any monies so
deposited in trust, and the holders of the shares redeemed shall have no claim
to such interest or other earnings, and any balance of monies so deposited by
the Company and unclaimed by the holders of the Series H Preferred Stock
entitled thereto at the expiration of two years from the date of redemption
shall be repaid, together with any interest or other earnings thereon, to the
Company, and after any such repayment, the holders of the shares entitled to the
funds so repaid to the Company shall look only to the Company for such payment,
without interest.
Section 6. Conversion Rights.
(a) Subject to and upon compliance with the provisions of this Section 6,
the holder of any share of Series H Preferred Stock shall have the right at such
holder's option to convert such share of Series H Preferred Stock into fully
paid and nonassessable shares of Voting Common Stock, in each case, at the
Conversion Price in effect on the date of conversion. If the Series H Preferred
Stock has been called for redemption, such right of conversion shall terminate
at the close of business on the Business Day prior to the date fixed for
redemption.
(b) Each share of Series H Preferred Stock shall be converted into a number
of shares of Voting Common Stock determined by dividing (i) the sum of the
Liquidation Preference on the date of conversion plus accrued and unpaid
dividends for the period from and including the most recent Dividend Payment
Date through and including the date of conversion by (ii) the Conversion Price
in effect on the date of conversion.
(c) The holder of any shares of Series H Preferred Stock may exercise the
conversion right specified in Section 6(a) by surrendering to the Company or its
transfer agent for the Series H Preferred Stock the certificate or certificates
for the shares to be converted, accompanied by written notice specifying the
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<PAGE>
number of shares to be converted. Conversion shall be deemed to have been
effected on the date when delivery of notice of an election to convert and
certificates for shares are received by the Company. Subject to the provisions
of Section 6(f)(vii), as promptly as practicable thereafter, the Company shall
issue and deliver to or upon the written order of such holder a certificate or
certificates for the number of full shares of Voting Common Stock to which such
holder is entitled and a check or cash with respect to any fractional interest
in a share of Voting Common Stock, as provided in Section 6(e).
(d) Subject to the provisions of Section 6(f)(vii), the person in whose
name the certificate or certificates for Voting Common Stock are to be issued
shall be deemed to have become a holder of record of such Voting Common Stock
immediately prior to the close of business on the date of conversion. Upon
conversion of only a portion of the number of shares covered by a certificate
representing shares of Series H Preferred Stock surrendered for conversion, the
Company shall issue and deliver to or upon the written order of the holder of
the certificate so surrendered for conversion, at the expense of the Company, a
new certificate covering the number of shares of Series H Preferred Stock
representing the unconverted portion of the certificate so surrendered.
(e) No fractional shares of Voting Common Stock shall be issued upon
conversion of shares of Series H Preferred Stock. If more than one share of
Series H Preferred Stock shall be surrendered for conversion at any one time by
the same holder, the number of full shares of Voting Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series H Preferred Stock so surrendered. Instead of any fractional
shares of Voting Common Stock that would otherwise be issuable upon conversion
of any shares of Series H Preferred Stock, the Company shall pay a cash
adjustment in respect of such fractional interest in an amount equal to that
fractional interest of a share multiplied by the Market Value of the Voting
Common Stock.
(f) The Conversion Price shall be subject to adjustment from time to time
as follows.
(i) Common Stock Issued at Less Than the Market Value. If the Company
shall issue any Common Stock, other than Excluded Stock or Common Stock issued
in an Excluded Transaction, without consideration or for a consideration per
share less than the Market Value immediately prior to such issuance, the
Conversion Price in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced to the price determined by
multiplying the Conversion Price in effect immediately prior to such issuance by
a fraction (A) the numerator of which is the sum of (1) the number of shares of
Voting Common Stock and Non-Voting Common Stock outstanding immediately prior to
such issuance and (2) the number of shares of Voting Common Stock and Non-Voting
Common Stock that the aggregate consideration, if any, received by the Company
upon such issuance, would purchase at such Market Value and (B) the denominator
of which is the total number of shares of Voting Common Stock and Non-Voting
Common Stock outstanding immediately after such issuance.
For the purposes of any adjustment of the Conversion Price
pursuant to clause (i), the following provisions shall be applicable.
(A) Cash. In the case of the issuance of Common Stock for cash,
the amount of the consideration received by the Company shall be
deemed to be the amount of the cash proceeds received by the Company
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for such Common Stock before deducting therefrom any discounts,
commissions, taxes or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with the
issuance and sale thereof.
(B) Consideration Other Than Cash. In the case of the issuance of
Common Stock (otherwise than upon the conversion of shares of Capital
Stock or other securities of the Company) for a consideration in whole
or in part other than cash, including securities acquired in exchange
therefor (other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be the Fair Market
Value thereof, irrespective of any accounting treatment.
(C) Options and Convertible Securities. In the case of the
issuance of (x) options, warrants or other rights to purchase or
acquire Common Stock (whether or not at the time exercisable) (but any
adjustment pursuant to this provision shall be made only to the extent
any adjustment shall have not been made pursuant to Section
6(f)(iv)(D)), (y) securities by their terms convertible into or
exchangeable for Common Stock (whether or not at the time so
convertible or exchangeable) or (z) options, warrants or rights to
purchase such convertible or exchangeable securities (whether or not
at the time exercisable),
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other rights to
purchase or acquire Common Stock shall be deemed to have been issued
at the time such options, warrants or rights were issued and for a
consideration equal to the consideration (determined in the manner
provided in subclauses (A) and (B) above), if any, received by the
Company upon the issuance of such options, warrants or rights plus the
minimum purchase price provided in such options, warrants or rights
for the shares of Common Stock covered thereby,
(2) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities, or upon the exercise of options, warrants
or other rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion or exchange
thereof, shall be deemed to have been issued at the time such
convertible or exchangeable securities were issued or such options,
warrants or rights were issued and for a consideration equal to the
consideration, if any, received by the Company for any such
convertible or exchangeable securities or options, warrants or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration (determined in the
manner provided in subclauses (A) and (B) above), if any, to be
received by the Company upon the conversion or exchange of such
securities, or upon the exercise of any related options, warrants or
rights to purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange thereof,
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<PAGE>
(3) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants or rights or
conversion or exchange of such convertible or exchangeable securities
or any change in the consideration to be received by the Company upon
such exercise, conversion or exchange (but excluding any change
resulting solely from the operation of the anti-dilution provisions
thereof if, and only if, such anti-dilution provisions would not
require an adjustment to the exercise price or conversion price
thereof in the event of any change to the Conversion Price pursuant to
the provisions of this Section 6), the Conversion Price as then in
effect shall forthwith be readjusted to such Conversion Price as would
have been obtained had an adjustment been made upon the issuance of
such options, warrants or rights not exercised prior to such change,
or of such convertible or exchangeable securities not converted or
exchanged prior to such change, upon the basis of such change,
(4) on the expiration or cancellation of any such options,
warrants or rights that are unexercised, or the termination of the
right to convert or exchange such convertible or exchangeable
securities, if the Conversion Price shall have been adjusted upon the
issuance thereof, the Conversion Price shall forthwith be readjusted
to such Conversion Price as would have been obtained had an adjustment
been made upon the issuance of such options, warrants, rights or such
convertible or exchangeable securities on the basis of the issuance of
only the number of shares of Common Stock actually issued upon the
exercise of such options, warrants or rights, or upon the conversion
or exchange of such convertible or exchangeable securities and
(5) if the Conversion Price shall have been adjusted upon
the issuance of any such options, warrants, rights or convertible or
exchangeable securities no further adjustment of the Conversion Price
shall be made for the actual issuance of Common Stock upon the
exercise, conversion or exchange thereof.
(ii) Excluded Stock. All shares of Excluded Stock which the Company
has reserved for issuance shall be deemed to be outstanding for all purposes of
computations under Section 6(f)(i).
(iii) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Company shall (A) declare a dividend or make a distribution
on its Common Stock in shares of its Common Stock, (B) subdivide, split or
reclassify (by merger, consolidation or otherwise) the outstanding shares of
Common Stock into a greater number of shares, (C) combine or reclassify (by
merger, consolidation or otherwise) the outstanding Common Stock into a smaller
number of shares or (D) issue any shares of its Common Stock in a
reclassification (by merger, consolidation or otherwise), the Conversion Price
in effect at the time of the record date for such dividend or distribution or
the effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares or Series H Preferred
Stock surrendered for conversion after such date shall be entitled to receive
the number of shares of Voting Common Stock which such holder would have owned
or been entitled to receive had such Series H Preferred Stock been converted
immediately prior to such date. Successive adjustments in the Conversion Price
shall be made whenever any event specified above shall occur.
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(iv) Other Distributions. In case the Company shall fix a record date
for the making of a distribution to all holders of shares of its Common Stock
(A) of shares of any class other than its Common Stock or (B) of evidence of
indebtedness of the Company or any subsidiary or (C) of assets or other
property, including but not limited to, securities issued by subsidiaries or
others (excluding regular cash dividends, and dividends or distributions
referred to in Section 6(f)(iii) above), or (D) of options, warrants or other
rights, in each such case the Conversion Price in effect immediately prior
thereto shall be reduced immediately thereafter to the price determined by
dividing (1) an amount equal to the difference resulting from (A) the sum of (i)
the number of shares of Voting Common Stock outstanding on such record date
multiplied by the Conversion Price per share on such record date and (ii) the
number of shares of NonVoting Common Stock outstanding on such record date
multiplied by the Conversion Price (determined in accordance with and pursuant
to the Certificate of Designations of Series I Preferred Stock) per share on
such record date, less (B) the Fair Market Value of such shares or evidences of
indebtedness or assets or rights or warrants to be so distributed, by (2) the
number of shares of Voting Common Stock and Non-Voting Common Stock outstanding
on such record date. Such adjustment shall be made successively whenever such a
record date is fixed. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines not to distribute such shares, evidences
of indebtedness, assets, property, options, rights or warrants, as the case may
be, to the Conversion Price which would then be in effect if such record date
had not been fixed. Rights (including, without limitation, those to be issued
pursuant to, and in accordance with, the Rights Agreement, dated as of April 20,
1995, between the Company and Mellon Securities Trust Company, as Rights Agent)
issued by the Company to all holders of Common Stock entitling the holders
thereof to subscribe for or purchase Equity Securities, which rights (x) are
deemed to be transferred with such shares of Common Stock, (y) are not
exercisable and (z) are also issued in respect of future issuances of Common
Stock, including shares of Common Stock issued upon conversion of the Series H
Preferred Stock, in each case in clauses (x) through (z) until the occurrence of
a specified event or events (a "Trigger Event"), shall for purposes of this
paragraph not be deemed issued until the occurrence of the earliest Trigger
Event.
(v) Consolidation, Merger, Sale, Lease or Conveyance. In case of any
consolidation or merger of the Company with or into another corporation or
entity, or in case of any sale, lease or conveyance to another corporation or
entity of the assets of the Company as an entirety or substantially as an
entirety, each share of Series H Preferred Stock shall after the date of such
consolidation, merger, sale, lease or conveyance be convertible into the number
of shares of stock or other securities or property (including cash) to which the
Voting Common Stock issuable (immediately prior to the time of such
consolidation, merger, sale, lease or conveyance) upon conversion of such share
of Series H Preferred Stock would have been entitled upon such consolidation,
merger, sale, lease or conveyance, and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interests thereafter
of the holders of the shares of Series H Preferred Stock shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be possible, to any
shares of stock or other securities or property thereafter deliverable on the
conversion of the shares of Series H Preferred Stock.
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(vi) Rounding of Calculations. All calculations under this
subparagraph (f) shall be made to the nearest cent or to the nearest one ten
thousandth of a share, as the case may be.
(vii) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this subparagraph (f) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event (A)
issuing to the holder of any share of Series H Preferred Stock converted after
such record date and before the occurrence of such event the additional shares
of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common Stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any amount of cash in lieu of a fractional share of Common Stock,
provided, that the Company, upon request, shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's right to receive
such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(g) Statement Regarding Adjustments. Whenever the Conversion Price shall be
adjusted, the Company shall forthwith file, at the office of the transfer agent
for the Series H Preferred Stock, if any, and at the principal office of the
Company, a statement showing in detail the facts requiring such adjustment and
the Conversion Price that shall be in effect after such adjustment, and the
Company shall also cause a copy of such statement to be sent by mail, first
class postage prepaid, to each holder of shares of Series H Preferred Stock at
its address appearing on the Company's records.
(h) Notice to Holders. In the event the Company shall propose to take any
action of the type described in clause (i) (but only if the action of the type
described in clause (i) would result in an adjustment in the Conversion Price),
(iii), (iv) or (v) of Section 6(f), the Company shall give notice to each holder
of shares of Series H Preferred Stock, in the manner set forth in subparagraph
6(g), which notice shall specify the record date, if any, with respect to any
such action and the approximate date on which such action is to take place. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which shall be
deliverable upon conversion of shares of Series H Preferred Stock. In the case
of any action which would require the fixing of a record date, such notice shall
be given at least ten days prior to the date so fixed, and in case of all other
action, such notice shall be given at least fifteen days prior to the taking of
such proposed action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(i) Treasury Stock. For the purposes of this paragraph 6, the sale or other
disposition of any Common Stock theretofore held in the Company's treasury shall
be deemed to be an issuance thereof.
(j) Costs. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of shares of Voting
Common Stock upon conversion of any shares of Series H Preferred Stock, provided
that the Company shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
H Preferred Stock in respect of which such shares are being issued.
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(k) Reservation of Shares. The Company shall reserve at all times so long
as any shares of Series H Preferred Stock remain outstanding, free from
preemptive rights, out of its treasury stock (if applicable) or its authorized
but unissued shares, or both, solely for the purpose of effecting the conversion
of the shares of Series H Preferred Stock, sufficient shares of Voting Common
Stock to provide for the conversion of all outstanding shares of Series H
Preferred Stock.
(l) Approvals. If any shares of Voting Common Stock to be reserved for the
purpose of conversion of shares of Series H Preferred Stock require registration
with or approval of any governmental authority under any Federal or state law
before such shares may be validly issued or delivered upon conversion, then the
Company will in good faith and as expeditiously as possible endeavor to secure
such registration or approval, as the case may be. If, and so long as, any
Voting Common Stock into which the shares of Series H Preferred Stock are then
convertible is listed on any national securities exchange, the Company will, if
permitted by the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all shares of such Voting Common Stock
issuable upon conversion.
(m) Valid Issuance. All shares of Voting Common Stock which may be issued
upon conversion of the shares of Series H Preferred Stock will upon issuance by
the Company be duly and validly issued, fully paid and nonassessable, not issued
in violation of any preemptive rights arising under law or contract and free
from all taxes, liens and charges with respect to the issuance thereof, and the
Company shall take no action which will cause a contrary result (including
without limitation, any action which would cause the Conversion Price to be less
than the par value, if any, of the Voting Common Stock).
Section 7. Liquidation Preference.
(a) In the event of the liquidation, winding-up or dissolution of the
business of the Company, whether voluntary or involuntary, the holders of Series
H Preferred Stock then outstanding, after payment or provision for payment of
the debts and other liabilities of the Company and the payment or provision for
payment of any distribution on any shares of the Company having a preference and
a priority over the Series H Preferred Stock on liquidation, and before any
distribution to holders of any shares of the Company that are junior and
subordinate to the Series H Preferred Stock on liquidation, shall be entitled to
be paid out of the assets of the Company available for distribution to its
stockholders in respect of each share of Series H Preferred Stock, the greater
of (i) the then effective Liquidation Preference per share of Series H Preferred
Stock plus accrued and unpaid dividends from and including the most recent
Dividend Payment Date through and including the date of liquidation, winding-up
or dissolution and (ii) the amount that would be payable to the holders of the
Series H Preferred Stock if the shares of Series H Preferred Stock had been
converted into shares of Voting Common Stock immediately prior to such
liquidation, winding-up or dissolution. In the event the assets of the Company
available for distribution to the holders of the Series H Preferred Stock upon
any dissolution, winding-up or liquidation of the Company shall be insufficient
to pay in full the liquidation payments payable to the holders of outstanding
Series H Preferred Stock and of all other Parity Securities, the holders of
Series H Preferred Stock and all other Parity Securities shall share ratably in
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such distribution of assets in proportion to the amount which would be payable
on such distribution if the amounts to which the holders of outstanding Series H
Preferred Stock and the holders of outstanding shares of such Parity Securities
were paid in full. Except as provided in this Section 7, holders of Series H
Preferred Stock shall not be entitled to any distribution in the event of the
liquidation, winding-up or dissolution of the Company.
(b) For the purposes of this Section 7, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding-up
of the Company:
(i) the sale, lease, transfer or exchange of all or substantially all
of the assets of the Company; or
(ii) the consolidation or merger of the Company with or into one or
more other corporations or entities (whether or not the Company is the
corporation surviving such consolidation or merger).
Section 8. Special Right to Appoint Directors. Beginning on the Issue Date
and continuing for so long as Cypress Merchant Banking Partners L.P. ("Cypress")
and TPG Partners II, L.P. ("TPG") and investment funds under common control with
Cypress or TPG own any combination of voting securities of the Company and
securities convertible into or exercisable for voting securities of the Company
where all such voting securities represent more than 10% of the Company's total
voting power, Cypress and TPG, acting jointly (or in the event that only one of
Cypress and investment funds under common control with Cypress, on the one hand,
and TPG and investment funds under common control with TPG, or the other hand,
shall then own or have the right to acquire voting securities of the Company,
then such Person), shall be entitled pursuant to this Section 8 to designate a
number of directors representing at least 23% of the total number of directors
constituting the full board of directors of the Company; provided, that for so
long as the total number of directors constituting the full board of directors
of the Company is 9 or fewer, Cypress and/or TPG, as the case may be, shall only
be entitled pursuant to this Section 8 to designate two directors on the board
of directors of the Company. For purposes of the calculation in this Section 8,
the Series I Preferred Stock and the securities issuable upon conversion of the
Series I Preferred Stock shall be counted as if they were voting securities.
Each of Cypress and TPG shall have the right to assign its rights under this
Section 8 to investment funds under common control with it.
Each committee of the board of directors of the Company shall include at
least one director designated by Cypress and/or TPG as provided above; provided,
that this requirement shall not apply with respect to the appointment of any
particular designee to a committee in the event that the rules or regulations of
the primary securities exchange or quotation system on which the Company's
Voting Common Stock is then listed or quoted or applicable law prohibits the
appointment of such director to such committee.
The Company and the Board of Directors shall take all actions necessary to
effect such designation to the Board of Directors (including, without
limitation, increasing the size of the Board of Directors and/or removing
directors) and to each committee thereof.
Section 9. Re-issuance. Series H Preferred Stock that has been issued and
reacquired in any manner, including shares purchased, exchanged or converted,
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shall not be reissued as shares of Series H Preferred Stock and shall (upon
compliance with any applicable provisions of the laws of the Commonwealth of
Pennsylvania) have the status of authorized and unissued shares of the Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of Preferred Stock (including Series H Preferred Stock issued in
accordance with Section 1).
Section 10. Definitions.
For the purposes hereof, the following definitions shall apply:
"Accrual Rate" means 5.00%; provided, that the then effective Accrual Rate
shall increase by 0.50% on [ ] of each year beginning on [ ], 2004 up to a
maximum of 8.50%; provided, further, that if at any time the Company shall be in
default of its obligation to redeem any shares of the Series H Preferred Stock,
the then effective Accrual Rate shall increase by 2.00%.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Stock" means any and all shares, interests, participations, rights
in or other equivalents (however designated and whether voting or non-voting) or
corporate stock, and any and all rights (other than any evidence of
indebtedness), warrants or options exchangeable for or convertible into such
corporate stock.
"Common Equivalent Rate" means, with respect to any Dividend Period, the
quotient of (a) the product of (i) all dividends declared during such Dividend
Period with respect to a share of Common Stock, (ii) four and (iii) the number
of shares of Common Stock issuable upon conversion of a share of Series H
Preferred Stock on the last day of such Dividend Period, divided by (b) the
Liquidation Preference of a share of Series H Preferred Stock on the first day
of such Dividend Period.
"Common Stock" means the Voting Common Stock or the Non-Voting Common
Stock.
"Conversion Price" means the price per share of Voting Common Stock used to
determine the number of shares of Voting Common Stock deliverable upon
conversion of a share of the Series H Preferred Stock, which price shall
initially be $8.75 per share, subject to adjustment in accordance with the
provisions of Section 7.
"Equity Securities" of any Person means any and all common stock, preferred
stock, any other class of capital stock and partnership or limited liability
company interests of such Person or any other similar interests of any Person
that is not a corporation, partnership or limited liability company.
"Excluded Stock" means shares of Voting Common Stock issued or reserved for
issuance by the Company (a) as a stock dividend payable in shares of Voting
Common Stock, (b) upon any subdivision or split-up of the outstanding shares of
Voting Common Stock, (c) upon conversion of shares of Series H Preferred Stock
or (d) pursuant to bona fide employee benefit plans, provided, that such shares
are issued for consideration equal to or greater than the fair value thereof on
the date of award.
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<PAGE>
"Excluded Transaction" means (i) an underwritten public offering of Common
Stock and (ii) the issuance of Common Stock solely in exchange for assets or all
of the stock of another Person (whether by merger, exchange or otherwise) in a
transaction in which a nationally recognized investment banking firm has advised
the Company that the transaction is fair and reasonable to the Company from a
financial point of view.
"Fair Market Value" of any securities shall mean the Market Value thereof
and of any consideration other than cash or securities shall mean the amount
which a willing buyer would pay to a willing seller in an arm's length
transaction as determined by an independent investment banking or appraisal firm
experienced in the valuation of such securities or property selected in good
faith by the Board of Directors.
"Liquidation Preference" means, on any date, the sum of $10,000 per share
of Series H Preferred Stock, plus accrued and unpaid dividends added to the
Liquidation Preference in accordance with Section 3(a).
"Market Value," with respect to any security, means the average of the
daily closing prices of such security for the 30 trading day period ending on
the relevant date of determination. The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the New York Stock Exchange, or, such security is
not listed or admitted to trading on the New York Stock Exchange, on the
American Stock Exchange, or, if such security is not listed or admitted to
trading on the American Stock Exchange, the average of the closing bid and asked
prices of such security in the over-the-counter market as reported on the NASDAQ
system of the National Association of Securities Dealers, Inc. or if such
security is not so quoted, the average of the closing bid and asked price of
such security in the over-the-counter market as furnished by any nationally
recognized New York Stock Exchange member firm selected by the Company for such
purpose. If such security is not so listed, quoted or traded, the closing price
shall mean the amount which a willing buyer would pay to a willing seller in an
arm's length transaction as determined by an independent investment banking or
appraisal firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors of the issuer of such security.
"Non-Voting Common Stock" means the Company's non-voting common stock, par
value $.02 per share and shall also include (i) capital stock of the Company of
any other class (regardless of how denominated) issued to the holders of shares
of Non-Voting Common Stock upon any reclassification thereof in which the shares
of Non-Voting Common Stock are converted into a new class of capital stock and
(ii) shares of common stock of any successor or acquiring corporation received
by or distributed to the holders of Non-Voting Common Stock.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Public Debt" means obligations evidenced by bonds, notes, debentures or
other similar instruments issued in an underwritten public offering registered
18
<PAGE>
under the Securities Act of 1933, in an offering pursuant to Rule 144A under the
Securities Act of 1933 or in an exchange offer registered on Form S-4.
"Redeemable Capital Stock" means, with respect to any Person, any Capital
Stock of such Person that, either by its terms, by the terms of any security
into which it is convertible or exchangeable or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the last stated maturity of the principal of any Public Debt of such Person
outstanding at the time of issuance of such Capital Stock or is redeemable at
the option of the holder thereof at any time prior to any such stated maturity,
or is convertible into or exchangeable for debt securities at any time prior to
any such stated maturity at the option of the holder thereof.
"Redemption Agent" means a bank or trust company in good standing,
organized under the laws of the United States of America or any jurisdiction
thereof, having capital, surplus and undivided profits aggregating at least One
Hundred Million Dollars, appointed by the Company to act as agent to redeem the
Series H Preferred Stock.
"Voting Common Stock" means the Company's common stock, par value $.02 per
share and shall also include (i) capital stock of the Company of any other class
(regardless of how denominated) issued to the holders of shares of Voting Common
Stock upon any reclassification thereof in which the shares of Voting Common
Stock are converted into a new class of capital stock and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Voting Common Stock.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency). and
That the issuance of [___] shares of Series H Senior Convertible
Participating Cumulative Preferred Stock has been initially authorized by the
Board of Directors of said Company.
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<PAGE>
In Witness Whereof, the Company has caused this Certificate of Designation
to be signed and acknowledged by , and its corporate seal to be hereunto affixed
and attested by , this the day of [ ], 1999.
Genesis Health Ventures, Inc.
By:________________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:______________________________
Name:
Title:
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<PAGE>
EXHIBIT C
GENESIS HEALTH VENTURES, INC.
CERTIFICATE OF DESIGNATION OF SERIES I SENIOR
CONVERTIBLE EXCHANGEABLE PARTICIPATING
CUMULATIVE PREFERRED STOCK
Genesis Health Ventures, Inc. (hereinafter referred to as the "Company"), a
corporation organized and existing under the Pennsylvania Business Corporation
Law of 1988, as amended (the "Pennsylvania Law"), in accordance with the
provisions thereof, does HEREBY CERTIFY:
That, pursuant to authority expressly granted to and vested in the Board of
Directors of the Company (the "Board of Directors") by the provisions of Article
6 of the Amended and Restated Articles of Incorporation of the Company (the
"Articles") and the provisions of Sections 1521 and 1522 of the Pennsylvania
Law, the Board of Directors hereby creates a series of the Company's previously
authorized preferred stock, par value $.01 per share (the "Preferred Stock"),
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 I SENIOR CONVERTIBLE EXCHANGEABLE
PARTICIPATING CUMULATIVE PREFERRED STOCK
Section 1. Designation and Amount.
The shares of such series shall be designated as "Series I Senior
Convertible Exchangeable Participating Cumulative Preferred Stock" (the "Series
I Preferred Stock"), and the number of shares constituting the Series I
Preferred Stock shall be [_______]; provided, that the number of shares
constituting the Series I Preferred Stock shall be increased from time to time
as necessary for the issuance of additional shares of Series I Preferred Stock
as dividends upon the Company's Series H Senior Convertible Participating
Cumulative Preferred Stock (the "Series H Preferred Stock") in accordance with
the terms thereof. Capitalized terms used without previous definition herein are
defined in Section 10 hereof.
Section 2. Rank.
The Series I Preferred Stock shall, with respect to dividend rights and
rights on liquidation, winding-up and dissolution, rank senior to all classes of
common stock of the Company, each series of preferred stock of the Company
outstanding on the Issue Date and each other class of Capital Stock and series
of preferred stock of the Company hereafter created which does not expressly
provide that it ranks senior to or on a parity with the Series I Preferred Stock
as to dividend rights and rights on liquidation, winding-up and dissolution
(collectively, the "Junior Securities"). The Series I Preferred Stock shall,
with respect to dividend rights and rights on liquidation, winding-up and
dissolution, rank on a parity with the Series H Preferred Stock and each other
series of preferred stock of the Company hereafter created which expressly
provides that it ranks on a parity with the Series I Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively, the "Parity Securities"); provided, that any such securities not
issued in accordance with Section 4(c) hereof shall be deemed to be Junior
Securities. The Series I Preferred Stock shall, with respect to dividend rights
and rights on liquidation, winding-up and dissolution, rank junior to each
series of preferred stock of the Company hereafter created which expressly
provides that it ranks senior to the Series I Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution (collectively, the
"Senior Securities"); provided, that any such securities not issued in
accordance with Section 4(c) hereof shall be deemed to be Junior Securities.
<PAGE>
Series I Preferred Stock
Section 3. Dividends.
(a) The holders of shares of Series I Preferred Stock shall be entitled to
receive with respect to each share of Series I Preferred Stock, when, as and if
declared by the Board of Directors, out of the assets of the Company legally
available therefor, cumulative preferential dividends for each Dividend Period
in cash calculated based on the then effective Liquidation Preference per share
at the rate per annum equal to the greater of (i) the Common Equivalent Rate
with respect to such Dividend Period and (ii) the Accrual Rate.
(b) Dividends shall be payable in arrears on each March 31, June 30,
September 30 and December 31, unless such day is not a Business Day, in which
event such dividends shall be payable on the next succeeding Business Day (each
such date being hereinafter referred to as a "Dividend Payment Date"),
commencing on the first Dividend Payment Date in respect of a share of Series I
Preferred Stock which is at least seven days after the issuance thereof. For
shares of Series I Preferred Stock issued on _________, 1999 (the "Issue Date"),
the first dividend payment shall be for the period from and including the Issue
Date to but excluding the date of the first Dividend Payment Date, and each
dividend payment thereafter shall be for the period from and including the most
recent Dividend Payment Date to but excluding the first Dividend Payment Date
thereafter. For shares of Series I Preferred Stock issued subsequent to the
Issue Date, the first dividend payment shall be for the period from and
including the date of issuance thereof to but excluding the date of the first
Dividend Payment Date thereafter, and each dividend payment thereafter shall be
for the period from and including the most recent Dividend Payment Date to but
excluding the first Dividend Payment Date thereafter. Each quarterly period
beginning on January 1, April 1, July 1 and October 1 in each year and ending on
and including the day next preceding the first day of the next such quarterly
period shall be a "Dividend Period". The amount of dividends payable for each
full Dividend Period shall be computed by dividing the annual dividend rate by
four. Dividends (or amounts equal to accrued and unpaid dividends) payable on
Series I Preferred Stock for any period less than a full quarterly Dividend
Period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual number of days elapsed in any period less than one month. The
record date for determination of holders of Series I Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon shall be, with
respect to the dividend payable on March 31, June 30, September 30 and December
31 of each year, the preceding March 1, June 1, September 1 and December 1,
respectively, or such other record date as shall be fixed by the Board of
Directors which record date shall be no less than 30 and no more than 60
calendar days prior to the date fixed for the payment thereof. Dividends and
distributions shall be payable to holders of record as they shall appear on the
records of the Company on the applicable record date. Dividends on account of
arrears for any particular Dividend Period in which dividends were not paid on
the applicable Dividend Payment Date shall be added to the then effective
Liquidation Preference on the relevant Dividend Payment Date. Any amounts so
added to the then effective Liquidation Preference shall be subject to reduction
as provided below in Section 3(c).
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<PAGE>
Series I Preferred Stock
(c) Accrued and unpaid dividends for any past Dividend Period may be
declared and paid on any subsequent Dividend Payment Date to holders of record
on the corresponding record date. Each such payment shall automatically reduce
the then effective Liquidation Preference by an amount equal to such payment;
provided, however, that the Liquidation Preference shall not be reduced below
$10,000 per share.
(d) Dividends on the Series I Preferred Stock will accrue, whether or not
there are funds legally available for the payment of such dividends and whether
or not such dividends are declared, on a daily basis. Dividends will cease to
accrue in respect of Series I Preferred Stock on the date of the conversion,
redemption or exchange thereof.
(e) Dividends paid on the shares of Series I 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, and any remainder not paid as provided above
shall be added to the Liquidation Preference as provided above in Section 3(b).
(f) As long as any Series I Preferred Stock is outstanding, no dividends or
other distributions (other than dividends or other distributions payable in
shares of, or warrants, rights or options exerciseable for or convertible into
shares of, Junior Securities and cash in lieu of fractional shares of such
Junior Securities in connection with any such dividends) will be paid on any
Junior Securities unless: (i) full cumulative dividends on all outstanding
shares of Parity Securities and full cumulative dividends accruing from and
after the fifth anniversary of the Issue Date on all outstanding shares of
Series I Preferred Stock have been paid, or declared and set aside for payment,
for all Dividend Periods terminating on or prior to the payment date of such
dividend or distribution and for the current Dividend Period; (ii) the Company
has paid or set aside all amounts, if any, then or theretofore required to be
paid or set aside for all purchase, retirement and sinking funds, if any, for
any outstanding shares of Parity Securities; and (iii) the Company is not in
default of any of its obligations to redeem any outstanding shares of Parity
Securities or Series I Preferred Stock.
(g) As long as any Series I Preferred Stock is outstanding, no shares of
any Junior Securities may be purchased, redeemed or otherwise acquired by the
Company or any of its subsidiaries (except in connection with a reclassification
or exchange of any Junior Securities through the issuance of shares of, or
warrants, rights or options exerciseable for or convertible into shares of,
other Junior Securities (and cash in lieu of fractional shares of such Junior
Securities in connection therewith) or the purchase, redemption or other
acquisition of any Junior Securities with any shares of, or warrants, rights or
options exerciseable for or convertible into shares of, other Junior Securities
(and cash in lieu of fractional shares of such Junior Securities in connection
therewith)), nor may any funds be set aside or made available for any sinking
fund for the purchase or redemption of any Junior Securities.
(h) As long as any Series I Preferred Stock is outstanding, no dividends or
other distributions (other than dividends or other distributions payable in
shares of, or warrants, rights or options exercisable for or convertible into
shares of, Junior Securities and cash in lieu of fractional shares of such
Junior Securities in connection with any such dividends) will be paid on any
Parity Securities unless such dividends or other distributions are declared and
paid pro rata so that the amounts of any such dividends or other distributions
declared and paid per share on outstanding Series I Preferred Stock and each
other share of such Parity Securities will in all cases bear to each other the
same ratio that the then effective Liquidation Preference per share of
outstanding Series I Preferred Stock and the liquidation preference per share of
such other outstanding shares of Parity Securities bear to each other.
3
<PAGE>
Series I Preferred Stock
(i) As long as any Series I Preferred Stock is outstanding, no shares of
any Parity Securities may be purchased, redeemed or otherwise acquired by the
Company or any of its subsidiaries (except with shares of, or warrants, rights
or options exercisable for or convertible into shares of, Junior Securities and
cash in lieu of fractional shares of such Junior Securities in connection
therewith) unless the Series I Preferred Stock and such Parity Securities are
purchased, redeemed or otherwise acquired pro rata so that the Fair Market Value
of the consideration applied to the purchase, redemption or other acquisition of
each share of Series I Preferred Stock and each other share of such Parity
Securities will in all cases bear to each other the same ratio that the then
effective Liquidation Preference per share of outstanding Series I Preferred
Stock and the liquidation preference per share of such other outstanding shares
of Parity Securities bear to each other.
(j) Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Junior Securities) as may be
determined from time to time by the Board of Directors may be declared and paid
on the shares of any Junior Securities and/or Parity Securities and from time to
time Junior Securities and/or Parity Securities may be purchased, redeemed or
otherwise acquired by the Company or any of its subsidiaries. In the event of
the declaration and payment of any such dividends or other distributions, the
holders of such Junior Securities and/or Parity Securities, as the case may be,
will be entitled, to the exclusion of holders of any outstanding Series I
Preferred Stock, to share therein according to their respective interests.
Section 4. Voting Rights.
(a) The holders of the Series I Preferred Stock shall have no voting rights
other than as set forth in this Section 4 or otherwise provided by law. Holders
of the Series I Preferred Stock shall be entitled to vote as a separate class on
matters as to which the Pennsylvania Law requires a separate class vote of the
Series I Preferred Stock and shall have such other voting rights as are set
forth in this Section 4.
(b) If and whenever at any time (i) the Company shall be in default of any
of its obligations to redeem any outstanding shares of Series I Preferred Stock
or (ii) dividends on shares of Series I Preferred Stock have not been paid in
full in cash for four consecutive fiscal quarters except to the extent that the
terms of the Company's then existing indebtedness under bank credit facilities
or Public Debt prohibits the payment of such dividends in cash, thereafter and
until, in the case of clause (i), the Company shall have fulfilled its
redemption obligations and, in the case of clause (ii), until all accrued and
unpaid dividends payable in cash, whether or not declared, on the outstanding
shares of Series I Preferred Stock shall have been paid in full in cash or
declared and cash set apart for the payment thereof (except to the extent that
the terms of the Company's then existing indebtedness under bank credit
facilities or Public Debt prohibits the payment of such dividends in cash), the
number of directors then constituting the Board of Directors shall be increased
by two and the holders of shares of Series I Preferred Stock and, to the extent
that the Series H Preferred Stock is entitled to participate in the election of
additional directors pursuant to Section 4(b) of the Certificate of Designations
relating to the Series H Preferred Stock, Series H Preferred Stock, voting as a
4
<PAGE>
Series I Preferred Stock
single class, shall be entitled to elect the two additional directors to serve
on the Board of Directors by majority vote at any annual meeting of stockholders
or special meeting held in place thereof, or at a special meeting of the holders
of the Series I Preferred Stock and Series H Preferred Stock called as
hereinafter provided. The remaining directors of the Company shall be elected by
the classes of stock entitled to vote therefor, voting together, at each meeting
of shareholders held for the purpose of electing directors, all in accordance
with the terms and procedures set forth in the Company's Articles and By-Laws.
At no time shall the holders of the Series I Preferred Stock and Series H
Preferred Stock be entitled to elect more than two additional directors pursuant
to this Section 4(b) and Section 4(b) of the Certificate of Designations
relating to the Series H Preferred Stock. Whenever, in the case of clause (i),
the Company shall have fulfilled its redemption obligation and, in the case of
clause (ii), all accrued and unpaid dividends payable in cash, whether or not
declared, on the outstanding shares of Series I Preferred Stock shall have been
paid in full in cash or declared and cash set apart for the payment thereof
(except to the extent that the terms of the Company's then existing indebtedness
under bank credit facilities or Public Debt prohibits the payment of such
dividends in cash), then, subject to any right to elect additional directors
pursuant to Section 4(b) of the Certificate of Designations relating to the
Series H Preferred Stock, the right of the holders of the Series I Preferred
Stock and Series H Preferred Stock to elect such additional directors pursuant
to this Section 4(b) shall cease and the term of office of any person elected as
director by the holders of the Series I Preferred Stock and Series H Preferred
Stock shall forthwith terminate and the number of directors comprising the Board
of Directors shall be reduced accordingly. At any time after voting power to
elect a director shall have become vested and be continuing in the holders of
Series I Preferred Stock and Series H Preferred Stock pursuant to this Section
4(b) or if a vacancy shall exist in the office of a director elected by the
holders of Series I Preferred Stock and Series H Preferred Stock, a proper
officer of the Company may, and upon the written request of the holders of
record of at least twenty-five percent (25%) of the shares of Series I Preferred
Stock and Series H Preferred Stock then outstanding addressed to the Secretary
of the Company shall, call a special meeting of the holders of Series I
Preferred Stock and Series H Preferred Stock, for the purpose of electing the
directors which such holders are entitled to elect. If such meeting shall not be
called by a proper officer of the Company within twenty (20) days after personal
service of written request upon the Secretary of the Company, or within twenty
(20) days after mailing the same within the United States by certified mail,
addressed to the Secretary of the Company at its principal executive offices,
then the holders of at least twenty-five percent (25%) of the outstanding shares
of Series I Preferred Stock and Series H Preferred Stock may designate in
writing one of their number to call such meeting at the expense of the Company,
and such meeting may be called by the person so designated upon the notice
required for the annual meeting of stockholders of the Company and shall be held
at the place for holding the annual meetings of stockholders. Any holder of
Series I Preferred Stock and Series H Preferred Stock so designated shall have,
and the Company shall provide, access to the lists of stockholders to be called
pursuant to the provisions hereof.
(c) So long as any shares of Series I Preferred Stock are outstanding,
subject to the applicable provisions of the Pennsylvania Law, the Company shall
not, without consent of the holders of at least a majority of the number of
shares of Series I Preferred Stock and Series H Preferred Stock at the time
outstanding, voting as a class given in person or by proxy, either in writing or
by vote at a special meeting called for the purpose:
5
<PAGE>
Series I Preferred Stock
(i) increase the number of shares of authorized Series I Preferred Stock or
Series H Preferred Stock or issue any additional shares of Series I Preferred
Stock or Series H Preferred Stock, other than as contemplated by the terms of
the Series I Preferred Stock or the Series H Preferred Stock;
(ii) amend or modify the relative rights, preferences and limitations of
the Series I Preferred Stock or Series H Preferred Stock or amend, alter or
repeal any of the provisions of the Company's Articles or By-Laws (including by
merger or similar transaction or otherwise) so as to eliminate the Series I
Preferred Stock or Series H Preferred Stock or otherwise affect adversely the
relative rights, preferences and limitations of the Series I Preferred Stock or
Series H Preferred Stock;
(iii) other than the Series I Preferred Stock and the Series H Preferred
Stock, create, authorize, issue or permit to exist any class of Capital Stock or
series of preferred stock that ranks senior to or on a parity with the Series I
Preferred Stock (other than preferred stock with an aggregate liquidation
preference and accrued and unpaid dividends not exceeding $75 million at any
time outstanding ranking on a parity with the Series I Preferred Stock with
respect to dividend rights and rights on liquidation, winding-up and
dissolution) with respect to dividend rights and/or rights on liquidation,
winding-up or dissolution, or reclassify any class or series of any Junior
Securities into, or authorize any securities exchangeable for, convertible into
or evidencing the right to purchase any such class or series; or
(iv) enter into any transaction or series of transactions which would
constitute a Change of Control (as defined below) or engage in any transaction
pursuant to Rule 13e-3 under the Securities Exchange Act of 1934, as amended,
except in a transaction in which each share of Series I Preferred Stock is
converted into or exchanged for the right to receive cash consideration in an
amount that is at least equal to the greater of (x) 101% of the then effective
Liquidation Preference plus accrued and unpaid dividends from and including the
most recent Dividend Payment Date and (y) the Fair Market Value of the
consideration the holder of such share of Series I Preferred Stock would be
entitled to receive in respect of such share if such holder were to convert such
share into the Company's Non-Voting Common Stock as provided in Section 6
immediately prior to the effective time of the transaction. For purposes of this
clause (iv), a "Change of Control" shall occur at any time that (i) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934), in a single transaction or through a series of related transactions,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) (but not including, for purposes of this clause
(i), to the extent necessary, TPG, Cypress and any investment funds under common
control with TPG or Cypress, individually or in the aggregate), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; (ii) the
Company consolidates or merges with or into another corporation or conveys,
transfers or leases all or substantially all of its assets to any Person, or any
corporation consolidates or mergers with or into the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is changed into or exchanged for cash, securities not issued in violation of
Section 4(c) or other property, other than any such transaction where (A) the
outstanding Voting Stock of the Company is changed into or
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<PAGE>
Series I Preferred Stock
exchanged for (x) Voting Stock of the surviving corporation which is not
Redeemable Capital Stock or (y) cash, securities or other property in an amount
which, if there is Public Debt outstanding at the time of such transaction,
could be paid under the terms of such Public Debt and (B) the holders of the
Voting Stock of the Company immediately prior to such transaction own, directly
or indirectly, not less than 50% of the Voting Stock of the surviving
corporation immediately after such transaction; (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of at least 662/3% of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (iv) the Company is liquidated or
dissolved or adopts a plan of liquidation.
Section 5. Redemption.
(a) The Series I Preferred Stock shall not be redeemable except as provided
in this Section 5. At any time on or after the twelfth anniversary of the Issue
Date, the Series I Preferred Stock shall be redeemable in whole or in part at
the option of the holders of the Series I Preferred Stock at a redemption price
per share in cash equal to the then effective Liquidation Preference plus
accrued and unpaid dividends for the period from and including the most recent
Dividend Payment Date through and including the date of redemption.
(b) If any holder of Series I Preferred Stock desires to exercise such
holder's redemption right pursuant to Section 5(a) hereof, such holder shall
give written notice to the Company stating such holder's election and specifying
the number of shares to be redeemed pursuant to Section 5(a) hereof. Within 10
days after the mailing of such notice, the Company shall give written notice
(the "Redemption Notice") to such holder, by first-class mail, postage prepaid,
at such holder's address as it appears on the records of the Company,
(i) notifying such holder of the date fixed for redemption (which shall
not be later than 30 days after the receipt by the Company of the
Redemption Notice);
(ii) stating that the Series I Preferred Stock may be converted until
the close of business on the Business Day prior to the date of redemption
by surrendering to the Company or its transfer agent for the Series I
Preferred Stock the certificate or certificates for the shares to be
converted, accompanied by written notice specifying the number of shares to
be converted, and stating the name and address of the transfer agent for
the Series I Preferred Stock, if any;
(iii) stating the place or places at which the shares called for
redemption shall, upon presentation and surrender of the certificates
evidencing such shares, be redeemed, and the redemption price to be paid
therefor;
(iv) stating that dividends shall cease to accrue on the date of
redemption unless the Company defaults in the payment of the redemption
price; and
(v) stating the name and address of the Redemption Agent.
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<PAGE>
Series I Preferred Stock
(c) The Company shall appoint one or more Redemption Agents. All funds
necessary for redemption shall be deposited with the Redemption Agent in trust
at least two Business Days prior to the date fixed for redemption, for the pro
rata benefit of the holders of the Series I Preferred Stock entitled thereto, so
as to be and continue to be available therefor.
(d) If a Redemption Notice shall have been given as hereinbefore provided,
then each holder of Series I Preferred Stock shall be entitled to all relative
rights, preferences and limitations accorded to holders of the Series I
Preferred Stock until and including the date of redemption. Provided that the
Company shall have complied with its obligations pursuant to Sections 5(b) and
5(c), from and after the date of redemption, Series I Preferred Stock shall no
longer be deemed to be outstanding, and all rights of the holders of such shares
shall cease and terminate, except the right of the holders of such shares, upon
surrender of certificates therefor, to receive amounts to be paid hereunder.
Upon redemption of only a portion of the number of shares covered by a
certificate representing shares of Series I Preferred Stock surrendered for
redemption, the Company shall issue and deliver to or upon the written order of
the holder of the certificate so surrendered for redemption, at the expense of
the Company, a new certificate covering the number of shares of Series I
Preferred Stock as to which redemption was not elected.
(e) The deposit of monies in trust with the Redemption Agent shall be
irrevocable except that the Company shall be entitled to receive from the
Redemption Agent the interest or other earnings, if any, earned on any monies so
deposited in trust, and the holders of the shares redeemed shall have no claim
to such interest or other earnings, and any balance of monies so deposited by
the Company and unclaimed by the holders of the Series I Preferred Stock
entitled thereto at the expiration of two years from the date of redemption
shall be repaid, together with any interest or other earnings thereon, to the
Company, and after any such repayment, the holders of the shares entitled to the
funds so repaid to the Company shall look only to the Company for such payment,
without interest.
Section 6. Conversion Rights.
(a) Subject to and upon compliance with the provisions of this Section 6,
the holder of any share of Series I Preferred Stock shall have the right at such
holder's option to convert such share of Series I Preferred Stock into fully
paid and nonassessable shares of Non-Voting Common Stock, in each case, at the
Conversion Price in effect on the date of conversion. The right to convert any
shares of Series I Preferred Stock as to which a Redemption Notice or an
Exchange Notice has been delivered shall terminate at the close of business on
the Business Day prior to the date fixed for redemption or exchange, as the case
may be.
(b) Each share of Series I Preferred Stock shall be converted into a number
of shares of Non-Voting Common Stock determined by dividing (i) the sum of the
Liquidation Preference on the date of conversion plus accrued and unpaid
dividends for the period from and including the most recent Dividend Payment
Date through and including the date of conversion by (ii) the Conversion Price
in effect on the date of conversion.
(c) The holder of any shares of Series I Preferred Stock may exercise the
conversion right specified in Section 6(a) by surrendering to the Company or its
transfer agent for the Series I Preferred Stock the certificate or certificates
for the shares to be converted, accompanied by written notice specifying the
number of shares to be converted. Conversion shall be deemed to have been
effected on the date when delivery of notice of an election to convert and
certificates for shares are received by the Company. Subject to the provisions
of Section 6(f)(vii), as promptly as practicable thereafter, the Company shall
issue and deliver to or upon the written order of such holder a certificate or
certificates for the number of full shares of Non-Voting Common Stock to which
such holder is entitled and a check or cash with respect to any fractional
interest in a share of Non-Voting Common Stock, as provided in Section 6(e).
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Series I Preferred Stock
(d) Subject to the provisions of Section 6(f)(vii), the person in whose
name the certificate or certificates for Non-Voting Common Stock are to be
issued shall be deemed to have become a holder of record of such Non-Voting
Common Stock immediately prior to the close of business on the date of
conversion. Upon conversion of only a portion of the number of shares covered by
a certificate representing shares of Series I Preferred Stock surrendered for
conversion, the Company shall issue and deliver to or upon the written order of
the holder of the certificate so surrendered for conversion, at the expense of
the Company, a new certificate covering the number of shares of Series I
Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(e) No fractional shares of Non-Voting Common Stock shall be issued upon
conversion of shares of Series I Preferred Stock. If more than one share of
Series I Preferred Stock shall be surrendered for conversion at any one time by
the same holder, the number of full shares of NonVoting Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of Series I Preferred Stock so surrendered. Instead of any fractional
shares of Non-Voting Common Stock that would otherwise be issuable upon
conversion of any shares of Series I Preferred Stock, the Company shall pay a
cash adjustment in respect of such fractional interest in an amount equal to
that fractional interest of a share multiplied by the Market Value of the Voting
Common Stock.
(f) The Conversion Price shall be subject to adjustment from time to time
as follows.
(i) Common Stock Issued at Less Than the Market Value. If the Company
shall issue any Common Stock, other than Excluded Stock or Common Stock issued
in an Excluded Transaction, without consideration or for a consideration per
share less than the Market Value immediately prior to such issuance, the
Conversion Price in effect immediately prior to each such issuance shall
immediately (except as provided below) be reduced to the price determined by
multiplying the Conversion Price in effect immediately prior to such issuance by
a fraction (A) the numerator of which is the sum of (1) the number of shares of
Voting Common Stock and Non-Voting Common Stock outstanding immediately prior to
such issuance and (2) the number of shares of Voting Common Stock and Non-Voting
Common Stock that the aggregate consideration, if any, received by the Company
upon such issuance, would purchase at such Market Value and (B) the denominator
of which is the total number of shares of Voting Common Stock and Non-Voting
Common Stock outstanding immediately after such issuance.
For the purposes of any adjustment of the Conversion Price
pursuant to clause (i), the following provisions shall be applicable.
(A) Cash. In the case of the issuance of Common Stock for
cash, the amount of the consideration received by the Company shall be
deemed to be the amount of the cash proceeds received by the Company for
such Common Stock before deducting therefrom any discounts, commissions,
taxes or other expenses allowed, paid or incurred by the Company for any
underwriting or otherwise in connection with the issuance and sale thereof.
9
<PAGE>
Series I Preferred Stock
(B) Consideration Other Than Cash. In the case of the
issuance of Non-Voting Common Stock (otherwise than upon the conversion of
shares of Capital Stock or other securities of the Company) for a
consideration in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be deemed to be the
Fair Market Value thereof, irrespective of any accounting treatment.
(C) Options and Convertible Securities. In the case of the
issuance of (x) options, warrants or other rights to purchase or acquire
Common Stock (whether or not at the time exercisable) (but any adjustment
pursuant to this provision shall be made only to the extent any adjustment
shall not have been made pursuant to Section 6(f)(iv)(D)), (y) securities
by their terms convertible into or exchangeable for Common Stock (whether
or not at the time so convertible or exchangeable) or (z) options, warrants
or rights to purchase such convertible or exchangeable securities (whether
or not at the time exercisable),
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options, warrants or other rights
to purchase or acquire Common Stock shall be deemed to have been issued at
the time such options, warrants or rights were issued and for a
consideration equal to the consideration (determined in the manner provided
in subclauses (A) and (B) above), if any, received by the Company upon the
issuance of such options, warrants or rights plus the minimum purchase
price provided in such options, warrants or rights for the shares of Common
Stock covered thereby,
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise of options,
warrants or other rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion or exchange thereof,
shall be deemed to have been issued at the time such convertible or
exchangeable securities were issued or such options, warrants or rights
were issued and for a consideration equal to the consideration, if any,
received by the Company for any such convertible or exchangeable securities
or options, warrants or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional consideration
(determined in the manner provided in subclauses (A) and (B) above), if
any, to be received by the Company upon the conversion or exchange of such
securities, or upon the exercise of any related options, warrants or rights
to purchase or acquire such convertible or exchangeable securities and the
subsequent conversion or exchange thereof,
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<PAGE>
Series I Preferred Stock
(3) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options, warrants or rights or
conversion or exchange of such convertible or exchangeable securities or
any change in the consideration to be received by the Company upon such
exercise, conversion or exchange (but excluding any change resulting solely
from the operation of the anti-dilution provisions thereof if, and only if,
such anti-dilution provisions would not require an adjustment to the
exercise price or conversion price thereof in the event of any change to
the Conversion Price pursuant to the provisions of this Section 6), the
Conversion Price as then in effect shall forthwith be readjusted to such
Conversion Price as would have been obtained had an adjustment been made
upon the issuance of such options, warrants or rights not exercised prior
to such change, or of such convertible or exchangeable securities not
converted or exchanged prior to such change, upon the basis of such change,
(4) on the expiration or cancellation of any such
options, warrants or rights that are unexercised, or the termination of the
right to convert or exchange such convertible or exchangeable securities,
if the Conversion Price shall have been adjusted upon the issuance thereof,
the Conversion Price shall forthwith be readjusted to such Conversion Price
as would have been obtained had an adjustment been made upon the issuance
of such options, warrants, rights or such convertible or exchangeable
securities on the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such options, warrants or
rights, or upon the conversion or exchange of such convertible or
exchangeable securities and
(5) if the Conversion Price shall have been adjusted
upon the issuance of any such options, warrants, rights or convertible or
exchangeable securities no further adjustment of the Conversion Price shall
be made for the actual issuance of Common Stock upon the exercise,
conversion or exchange thereof.
(ii) Excluded Stock. All shares of Excluded Stock which the Company has
reserved for issuance shall be deemed to be outstanding for all purposes of
computations under Section 6(f)(i).
(iii) Stock Dividends, Subdivisions, Reclassifications or Combinations. If
the Company shall (A) declare a dividend or make a distribution on its Common
Stock in shares of its Common Stock, (B) subdivide, split or reclassify (by
merger, consolidation or otherwise) the outstanding shares of Common Stock into
a greater number of shares, (C) combine or reclassify (by merger, consolidation
or otherwise) the outstanding Common Stock into a smaller number of shares or
(D) issue any shares of its Common Stock in a reclassification (by merger,
consolidation or otherwise), the Conversion Price in effect at the time of the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be proportionately adjusted
so that the holder of any shares or Series I Preferred Stock surrendered for
conversion after such date shall be entitled to receive the number of shares of
Common Stock which such holder would have owned or been entitled to receive had
such Series I Preferred Stock been converted immediately prior to such date.
Successive adjustments in the Conversion Price shall be made whenever any event
specified above shall occur.
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<PAGE>
Series I Preferred Stock
(iv) Other Distributions. In case the Company shall fix a record date
for the making of a distribution to all holders of shares of its Common Stock
(A) of shares of any class other than its Common Stock or (B) of evidence of
indebtedness of the Company or any subsidiary or (C) of assets or other
property, including but not limited to, securities issued by subsidiaries or
others (excluding regular cash dividends, and dividends or distributions
referred to in Section 6(f)(iii) above), or (D) of options, warrants or other
rights, in each such case the Conversion Price in effect immediately prior
thereto shall be reduced immediately thereafter to the price determined by
dividing (1) an amount equal to the difference resulting from (A) the sum of (i)
the number of shares of Non-Voting Common Stock outstanding on such record date
multiplied by the Conversion Price per share on such record date and (ii) the
number of shares of Voting Common Stock outstanding on such record date
multiplied by the Conversion Price (determined in accordance with and pursuant
to the Certificate of Designations of Series H Preferred Stock) per share on
such record date, less (B) the Fair Market Value of such shares or evidences of
indebtedness or assets or rights or warrants to be so distributed, by (2) the
number of shares of Voting Common Stock and Non-Voting Common Stock outstanding
on such record date. Such adjustment shall be made successively whenever such a
record date is fixed. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines not to distribute such shares, evidences
of indebtedness, assets, property, options, rights or warrants, as the case may
be, to the Conversion Price which would then be in effect if such record date
had not been fixed. Rights (including, without limitation, those to be issued
pursuant to, and in accordance with, the Rights Agreement, dated as of April 20,
1995, between the Company and Mellon Securities Trust Company, as Rights Agent)
issued by the Company to all holders of Common Stock entitling the holders
thereof to subscribe for or purchase Equity Securities, which rights (x) are
deemed to be transferred with such shares of Common Stock, (y) are not
exercisable and (z) are also issued in respect of future issuances of Common
Stock, including shares of Common Stock issued upon conversion of the Series I
Preferred Stock, in each case in clauses (x) through (z) until the occurrence of
a specified event or events (a "Trigger Event"), shall for purposes of this
paragraph not be deemed issued until the occurrence of the earliest Trigger
Event.
(v) Consolidation, Merger, Sale, Lease or Conveyance. In case of any
consolidation or merger of the Company with or into another corporation or
entity, or in case of any sale, lease or conveyance to another corporation or
entity of the assets of the Company as an entirety or substantially as an
entirety, each share of Series I Preferred Stock shall after the date of such
consolidation, merger, sale, lease or conveyance be convertible into the number
of shares of stock or other securities or property (including cash) to which the
Non-Voting Common Stock issuable (immediately prior to the time of such
consolidation, merger, sale, lease or conveyance) upon conversion of such share
of Series I Preferred Stock would have been entitled upon such consolidation,
merger, sale, lease or conveyance, and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interests thereafter
of the holders of the shares of Series I Preferred Stock shall be appropriately
adjusted so as to be applicable, as nearly as may reasonably be possible, to any
shares of stock or other securities or property thereafter deliverable on the
conversion of the shares of Series I Preferred Stock.
(vi) Rounding of Calculations. All calculations under this subparagraph
(f) shall be made to the nearest cent or to the nearest one ten thousandth of a
share, as the case may be.
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<PAGE>
Series I Preferred Stock
(vii) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this subparagraph (f) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event (A)
issuing to the holder of any share of Series I Preferred Stock converted after
such record date and before the occurrence of such event the additional shares
of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common Stock issuable upon
such conversion before giving effect to such adjustment and (B) paying to such
holder any amount of cash in lieu of a fractional share of Common Stock,
provided, that the Company, upon request, shall deliver to such holder a due
bill or other appropriate instrument evidencing such holder's right to receive
such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(g) Statement Regarding Adjustments. Whenever the Conversion Price shall be
adjusted, the Company shall forthwith file, at the office of the transfer agent
for the Series I Preferred Stock, if any, and at the principal office of the
Company, a statement showing in detail the facts requiring such adjustment and
the Conversion Price that shall be in effect after such adjustment, and the
Company shall also cause a copy of such statement to be sent by mail, first
class postage prepaid, to each holder of shares of Series I Preferred Stock at
its address appearing on the Company's records.
(h) Notice to Holders. In the event the Company shall propose to take any
action of the type described in clause (i) (but only if the action of the type
described in clause (i) would result in an adjustment in the Conversion Price),
(iii), (iv) or (v) of Section 6(f), the Company shall give notice to each holder
of shares of Series I Preferred Stock, in the manner set forth in subparagraph
6(g), which notice shall specify the record date, if any, with respect to any
such action and the approximate date on which such action is to take place. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which shall be
deliverable upon conversion of shares of Series I Preferred Stock. In the case
of any action which would require the fixing of a record date, such notice shall
be given at least ten days prior to the date so fixed, and in case of all other
action, such notice shall be given at least fifteen days prior to the taking of
such proposed action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(i) Treasury Stock. For the purposes of this paragraph 6, the sale or other
disposition of any Common Stock theretofore held in the Company's treasury shall
be deemed to be an issuance thereof.
(j) Costs. The Company shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of shares of
Non-Voting Common Stock upon conversion of any shares of Series I Preferred
Stock, provided that the Company shall not be required to pay any taxes which
may be payable in respect of any transfer involved in the issuance or delivery
of any certificate for such shares in a name other than that of the holder of
the shares of Series I Preferred Stock in respect of which such shares are being
issued.
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<PAGE>
Series I Preferred Stock
(k) Reservation of Shares. The Company shall reserve at all times so long
as any shares of Series I Preferred Stock remain outstanding, free from
preemptive rights, out of its treasury stock (if applicable) or its authorized
but unissued shares, or both, solely for the purpose of effecting the conversion
of the shares of Series I Preferred Stock, sufficient shares of Non-Voting
Common Stock to provide for the conversion of all outstanding shares of Series I
Preferred Stock.
(l) Approvals. If any shares of Non-Voting Common Stock to be reserved for
the purpose of conversion of shares of Series I Preferred Stock require
registration with or approval of any governmental authority under any Federal or
state law before such shares may be validly issued or delivered upon conversion,
then the Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be. If, and so long as,
any Non-Voting Common Stock into which the shares of Series I Preferred Stock
are then convertible is listed on any national securities exchange, the Company
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Non-Voting Common
Stock issuable upon conversion.
(m) Valid Issuance. All shares of Non-Voting Common Stock which may be
issued upon conversion of the shares of Series I Preferred Stock will upon
issuance by the Company be duly and validly issued, fully paid and
nonassessable, not issued in violation of any preemptive rights arising under
law or contract and free from all taxes, liens and charges with respect to the
issuance thereof, and the Company shall take no action which will cause a
contrary result (including without limitation, any action which would cause the
Conversion Price to be less than the par value, if any, of the Non-Voting Common
Stock).
Section 7. Liquidation Preference.
(a) In the event of the liquidation, winding-up or dissolution of the
business of the Company, whether voluntary or involuntary, the holders of Series
I Preferred Stock then outstanding, after payment or provision for payment of
the debts and other liabilities of the Company and the payment or provision for
payment of any distribution on any shares of the Company having a preference and
a priority over the Series I Preferred Stock on liquidation, and before any
distribution to holders of any shares of the Company that are junior and
subordinate to the Series I Preferred Stock on liquidation, shall be entitled to
be paid out of the assets of the Company available for distribution to its
stockholders in respect of each share of Series I Preferred Stock the greater of
(i) the then effective Liquidation Preference per share of Series I Preferred
Stock plus accrued and unpaid dividends from and including the most recent
Dividend Payment Date through and including the date of liquidation, winding-up
or dissolution and (ii) the amount that would be payable to the holders of the
Series I Preferred Stock if the shares of Series I Preferred Stock had been
converted into shares of Non-Voting Common Stock immediately prior to such
liquidation, winding-up or dissolution. In the event the assets of the Company
available for distribution to the holders of the Series I Preferred Stock upon
any dissolution, winding-up or liquidation of the Company shall be insufficient
to pay in full the liquidation payments payable to the holders of outstanding
Series I Preferred Stock and of all other Parity Securities, the holders of
Series I Preferred Stock and all other Parity Securities shall share ratably in
such distribution of assets in proportion to the amount which would be payable
on such distribution if the amounts to which the holders of outstanding Series I
Preferred Stock and the holders of outstanding shares of such Parity Securities
were paid in full. Except as provided in this Section 7, holders of Series I
Preferred Stock shall not be entitled to any distribution in the event of the
liquidation, winding-up or dissolution of the Company.
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Series I Preferred Stock
(b) For the purposes of this Section 7, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding-up
of the Company:
(i) the sale, lease, transfer or exchange of all or substantially all
of the assets of the Company; or
(ii) the consolidation or merger of the Company with or into one or
more other corporations or entities (whether or not the Company is the
corporation surviving such consolidation or merger).
Section 8. Exchange.
(a) The Company shall have the right to exchange the Series I Preferred
Stock, in whole or in part, at any time, for Series H Preferred Stock. The
number of shares of Series H Preferred Stock to be issued in exchange for each
share of Series I Preferred Stock shall equal the then effective Liquidation
Preference of a share of Series I Preferred Stock to be exchanged plus accrued
and unpaid dividends from and including the most recent Dividend Payment Date
through and including the date of exchange, divided by the then effective
Liquidation Preference per share of the Series H Preferred Stock, rounded up or
down to the nearest full share after taking into account all shares of Series I
Preferred Stock owned by the holder thereof; provided, that if such quotient
shall result in one-half of a share of Series H Preferred Stock, it shall be
rounded up.
(b) A notice of the Company's intent to exchange any shares of Series I
Preferred Stock (the "Exchange Notice") shall be sent by or on behalf of the
Company, by first class mail, postage prepaid, to each applicable holder of
record at such holder's address as it shall appear on the records of the
Company, not less than 30 days or more than 120 days prior to the date fixed for
exchange,
(i) notifying such holder of the election of the Company to exchange
such shares and of the date fixed for exchange;
(ii) stating the number of shares of Series I Preferred Stock held by
such holder that the Company intends to exchange;
(iii) stating the place or places at which the shares called for
exchange shall, upon presentation and surrender of the certificates
evidencing such shares, be exchanged, and the number of shares of Series H
Preferred Stock to be issued in exchange therefor; and
(iv) stating that dividends shall cease to accrue on the date of
exchange.
(c) On or before the date fixed for exchange, each holder of Series I
Preferred Stock called for exchange shall surrender a certificate or
certificates representing at least the number of shares of Series I Preferred
Stock owned by such holder called for exchange, in the manner and at the place
designated in the Exchange Notice. As promptly as practicable after the date
fixed for exchange, the Company shall issue and deliver to or upon the written
order of such holder a certificate or certificates for the number of shares of
Series H Preferred Stock to which such holder is entitled. Such shares of Series
H Preferred Stock will thereupon be duly authorized, validly issued, fully paid
and nonassessable.
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<PAGE>
Series I Preferred Stock
(d) The person in whose name the certificate or certificates for Series H
Preferred Stock are to be issued shall be deemed to have become a holder of
record of such Series H Preferred Stock immediately prior to the close of
business on the date fixed for exchange. Upon exchange of only a portion of the
number of shares covered by a certificate representing shares of Series I
Preferred Stock surrendered for exchange, the Company shall issue and deliver to
or upon the written order of the holder of the certificate so surrendered for
exchange, at the expense of the Company, a new certificate covering the number
of shares of Series I Preferred Stock representing the unexchanged portion of
the certificates so surrendered.
(e) If an Exchange Notice shall have been given as hereinafter provided,
then each holder of Series I Preferred Stock called for exchange shall, with
respect to such shares, be entitled to all relative rights, preferences and
limitations accorded to holders of the Series I Preferred Stock until and
including the date of exchange. From and after the date of exchange, Series I
Preferred Stock called for exchange shall no longer be deemed to be outstanding,
and all rights of the holders of such shares shall cease and terminate, except
the right of the holders of such shares to receive shares of Series H Preferred
Stock.
Section 9. Re-issuance. Series I Preferred Stock that has been issued and
reacquired in any manner, including shares purchased, exchanged or converted,
shall not be reissued as shares of Series I Preferred Stock and shall (upon
compliance with any applicable provisions of the laws of the Commonwealth of
Pennsylvania) have the status of authorized and unissued shares of the Preferred
Stock undesignated as to series and may be redesignated and reissued as part of
any series of Preferred Stock (including Series I Preferred Stock issued in
accordance with Section 1).
Section 10. Definitions.
For the purposes hereof, the following definitions shall apply:
"Accrual Rate" means 5.00%; provided, that the then effective Accrual Rate
shall increase by 0.50% on [ ] of each year beginning on [ ], 2004 up to a
maximum of 8.50%; provided, further, that in the event that on any Dividend
Payment Date occurring on or after the 2nd anniversary of the Issue Date the
exchange by the Company of any shares of Series I Preferred Stock held by (A)
Cypress Merchant Banking Partners, L.P. ("Cypress"), TPG Partners II, L.P.
("TPG") or any investment funds under common control with Cypress or TPG or (B)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934) for shares of Series H Preferred Stock would not result in
Cypress, TPG and such investment funds or any such "person," respectively,
beneficially owning Voting Stock of the Company or securities convertible into
or exercisable for Voting Stock of the Company where all such Voting Stock
represents more than 49% of the total Voting Stock of the Company, the Accrual
Rate for all shares of Series I Preferred Stock held by Cypress, TPG and such
investment funds or any
16
<PAGE>
Series I Preferred Stock
such "person," respectively, shall be increased to the then effective Accrual
Rate plus 8.00%; provided, further, that if at any time the Company shall be in
default of its obligation to redeem any shares of the Series I Preferred Stock,
the then effective Accrual Rate shall be further increased by 2.00%.
Notwithstanding the foregoing, if, and for so long as, at any time on or after
the 3rd anniversary of the Issue Date, (i) there are no shares of Series H
Preferred Stock outstanding and (ii) the exchange of any shares of Series I
Preferred Stock held by Cypress, TPG and such investment funds or any "person"
for Series H Preferred Stock would result in Cypress, TPG and such investment
funds or any such "person," respectively, beneficially owning Voting Stock of
the Company or Securities convertible or exercisable for Voting Stock of the
Company where all such Voting Stock represents more than 49% of the total Voting
Stock of the Company, the Accrual Rate for all shares of Series I Preferred
Stock held by Cypress, TPG and such investment funds or any such "person",
respectively, shall be 0.00%. For purposes of clause (i), shares of Series H
Preferred Stock called for redemption pursuant to Section 5 of the certificate
of designations relating to the Series H Preferred Stock shall not be considered
outstanding after the date fixed for redemption for such shares; provided, and
for so long as, the Company shall have complied in all material respects with
its obligations in connection with such redemption.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Stock" means any and all shares, interests, participations, rights
in or other equivalents (however designated and whether voting or non-voting) or
corporate stock, and any and all rights (other than any evidence of
indebtedness), warrants or options exchangeable for or convertible into such
corporate stock.
"Common Equivalent Rate" means, with respect to any Dividend Period, the
quotient of (a) the product of (i) all dividends declared during such Dividend
Period with respect to a share of Common Stock, (ii) four and (iii) the number
of shares of Common Stock issuable upon conversion of a share of Series I
Preferred Stock on the last day of such Dividend Period, divided by (b) the
Liquidation Preference of a share of Series I Preferred Stock on the first day
of such Dividend Period.
"Common Stock" means the Voting Common Stock or the Non-Voting Common
Stock.
"Conversion Price" means the price per share of Non-Voting Common Stock
used to determine the number of shares of Non-Voting Common Stock deliverable
upon conversion of a share of the Series I Preferred Stock, which price shall
initially be $8.75 per share, subject to adjustment in accordance with the
provisions of Section 6.
"Equity Securities" of any Person means any and all common stock, preferred
stock, any other class of capital stock and partnership or limited liability
company interests of such Person or any other similar interests of any Person
that is not a corporation, partnership or limited liability company.
"Excluded Stock" means shares of Non-Voting Common Stock issued or reserved
for issuance by the Company (a) as a stock dividend payable in shares of
Non-Voting Common Stock, (b) upon any subdivision or split-up of the outstanding
shares of Non-Voting Common Stock or (c) upon conversion of shares of Series I
Preferred Stock.
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<PAGE>
Series I Preferred Stock
"Excluded Transaction" means (i) an underwritten public offering of Common
Stock and (ii) the issuance of Common Stock solely in exchange for assets or all
of the stock of another Person (whether by merger, exchange or otherwise) in a
transaction in which a nationally recognized investment banking firm has advised
the Company that the transaction is fair and reasonable to the Company from a
financial point of view.
"Fair Market Value" of any securities shall mean the Market Value thereof
and of any consideration other than cash or securities shall mean the amount
which a willing buyer would pay to a willing seller in an arm's length
transaction as determined by an independent investment banking or appraisal firm
experienced in the valuation of such securities or property selected in good
faith by the Board of Directors.
"Liquidation Preference" means, on any date, the sum of $10,000 per share
of Series I Preferred Stock, plus accrued and unpaid dividends added to the
Liquidation Preference in accordance with Section 3(a).
"Market Value," with respect to any security, means the average of the
daily closing prices of such security for the 30 trading day period ending on
the relevant date of determination. The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the New York Stock Exchange, or, if such security
is not listed or admitted to trading on the New York Stock Exchange, on the
American Stock Exchange, or, if such security is not listed or admitted to
trading on the American Stock Exchange, the average of the closing bid and asked
prices of such security in the over-the-counter market as reported on the NASDAQ
system of the National Association of Securities Dealers, Inc. or if the such
security is not so quoted, the average of the closing bid and asked price of the
such security in the over-the-counter market as furnished by any nationally
recognized New York Stock Exchange member firm selected by the Company for such
purpose. If such security is not so listed, quoted or traded, the closing price
shall mean the amount which a willing buyer would pay to a willing seller in an
arm's length transaction as determined by an independent investment banking or
appraisal firm experienced in the valuation of such securities or property
selected in good faith by the Board of Directors of the issuer of such security.
"Non-Voting Common Stock" means the Company's non-voting common stock, par
value $.02 per share and shall also include (i) capital stock of the Company of
any other class (regardless of how denominated) issued to the holders of shares
of Non-Voting Common Stock upon any reclassification thereof in which the shares
of Non-Voting Common Stock are converted into a new class of capital stock and
(ii) shares of common stock of any successor or acquiring corporation received
by or distributed to the holders of Non-Voting Common Stock.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
"Public Debt" means obligations evidenced by bonds, notes, debentures or
other similar instruments issued in an underwritten public offering requested
under the Securities Act of 1933, in an offering pursuant to Rule 144A under the
Securities Act of 1933 or in an exchange offer registered on Form S-4.
18
<PAGE>
Series I Preferred Stock
"Redeemable Capital Stock" means, with respect to any Person, any Capital
Stock of such Person that, either by its terms, by the terms of any security
into which it is convertible or exchangeable or otherwise, is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the last stated maturity of the principal of any Public Debt of such Person
outstanding at the time of issuance of such Capital Stock or is redeemable at
the option of the holder thereof at any time prior to any such stated maturity,
or is convertible into or exchangeable for debt securities at any time prior to
any such stated maturity at the option of the holder thereof.
"Redemption Agent" means a bank or trust company in good standing,
organized under the laws of the United States of America or any jurisdiction
thereof, having capital, surplus and undivided profits aggregating at least One
Hundred Million Dollars, appointed by the Company to act as agent to redeem the
Series I Preferred Stock.
"Voting Common Stock" means the Company's common stock, par value $.02 per
share and shall also include (i) capital stock of the Company of any other class
(regardless of how denominated) issued to the holders of shares of Voting Common
Stock upon any reclassification thereof in which the shares of Voting Common
Stock are converted into a new class of capital stock and (ii) shares of common
stock of any successor or acquiring corporation received by or distributed to
the holders of Voting Common Stock.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency).
and
That the issuance of [_____] shares of Series I Senior Convertible
Exchangeable Participating Cumulative Preferred Stock has been initially
authorized by the Board of Directors of said Company.
19
<PAGE>
Series I Preferred Stock
In Witness Whereof, the Company has caused this Certificate of Designation
to be signed and acknowledged by , and its corporate seal to be hereunto
affixed and attested by , this the day of [ ], 1999.
Genesis Health Ventures, Inc.
By:________________________________
Name:
Title:
[CORPORATE SEAL]
Attest:
By:______________________________
Name:
Title:
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Exhibit D
Series A Warrant Certificate
NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS.
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS
AS SET FORTH IN THE RESTRUCTURING AGREEMENT DATED AS OF ____________, 1999,
AMONG THE CYPRESS GROUP L.L.C., TPG PARTNERS II, L.P., NAZEM, INC. AND GENESIS
HEALTH VENTURES, INC. (THE "COMPANY"), THE TERMS OF WHICH ARE INCORPORATED
HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICE OF THE COMPANY.
<PAGE>
No. W-_____ ____________ Warrants
SERIES A WARRANTS
Exercisable commencing ___________, 1999
Void after Expiration Time (as defined herein)
GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation (the "Company"),
hereby certifies that, for value received, ______________, or registered assigns
(the "Warrantholder"), is the owner of _______________ Warrants (as defined
below), each of which entitles the Warrantholder to purchase from the Company
one fully paid, duly authorized and nonassessable share of Voting Common Stock,
at any time from and after ____________, 1999 (the "Issue Date") and continuing
up to the Expiration Time (as defined herein) at a per share exercise price
determined according to the terms and subject to the conditions set forth in
this certificate (the "Warrant Certificate"). The number of shares of Voting
Common Stock issuable upon exercise of each such Warrant and the exercise price
per share of Voting Common Stock are subject to adjustment from time to time
pursuant to the provisions of Section 9 of this Warrant Certificate. The
Warrants evidenced by this Warrant Certificate are part of a series of warrants
to purchase up to 2,000,000 shares of Voting Common Stock (collectively, the
"Warrants"), issued pursuant to a Restructuring Agreement, dated as of
___________, 1999 (as it may be amended, supplemented or otherwise modified from
time to time, the "Restructuring Agreement"), among The Cypress Group L.L.C., a
Delaware limited liability company, TPG Partners II, L.P., a Delaware limited
partnership, Nazem, Inc., a Delaware corporation, and the Company, and are
entitled to certain rights and privileges set forth therein.
Section 1. Definitions. As used in this Warrant Certificate, the following
terms shall have the meanings set forth below:
1.1 "Articles of Incorporation" means the Amended and Restated
Articles of Incorporation of the Company, as amended from time to time.
1.2 "Board of Directors" means the board of directors of the Company.
1.3 "Business Day" means any day, other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
1.4 "Capital Stock" means any and all shares, interests,
participations, rights in or other equivalents (however designated and
whether voting or non-voting) or corporate stock, and any and all rights
(other any evidence of indebtedness), warrants or options exchangeable for
or convertible into such corporate stock.
1.5 "Closing Price" means, with respect to any security, the average
of the daily closing prices of such security for the 30 Trading Day period
ending on the relevant date of determination. The closing price for each
day shall be the last reported sale price regular way or, in case no such
reported sale takes place on such day, the average of the
<PAGE>
reported closing bid and asked prices regular way, in either case, on
The New York Stock Exchange (the "NYSE"), or, if such security is not
listed or admitted to trading on the NYSE, on the American Stock Exchange,
or if such security is not listed or admitted to trading on the American
Stock Exchange, the average of the closing bid and asked prices of such
security in the over-the-counter market as reported on the NASDAQ system of
the National Association of Securities Dealers, Inc., or if such security
is not so quoted, the average of the closing bid and asked prices of such
security in the over-the-counter market as furnished by any nationally
recognized New York Stock Exchange member firm selected by the Company for
such purposes. If such security is not so listed, quoted or traded, the
closing price shall mean the amount which a willing buyer would pay to a
willing seller in an arm's length transaction as determined by an
independent investment banking or appraisal firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors of the issuer of such security.
1.6 "Common Stock" means the Non-Voting Common Stock or the Voting
Common Stock.
1.7 "Company" has the meaning set forth in the preamble hereto.
1.8 "Constituent Person" has the meaning set forth in Section 9.3(a)
hereof.
1.9 "Equity Securities" of any Person means any and all common stock,
preferred stock, any other class of capital stock and partnership or
limited liability company interests of such Person or any other similar
interests of any Person that is not a corporation, partnership or limited
liability company.
1.10 "Excluded Stock" means shares of Common Stock issued or reserved
for issuance by the Company (a) as a stock dividend payable in shares of
Common Stock, (b) upon any subdivision or split-up of the outstanding
shares of Common Stock, (c) upon conversion of shares of Series H Preferred
Stock or Series I Preferred Stock of the Company or (d) pursuant to bona
fide employee benefit plans, provided, that such shares are issued for
consideration equal to or greater than the fair value thereof on the date
of the award.
1.11 "Excluded Transaction" means (i) any underwritten public offering
of Common Stock or (ii) any issuance of Common Stock solely in exchange for
assets or all of the stock of another Person (whether by merger, exchange
or otherwise) in a transaction in which a nationally recognized investment
banking firm has advised the Company that the transaction is fair and
reasonable to the Company from a financial point of view.
1.12 "Exercise Price" has the meaning set forth in Section 8 hereof.
1.13 "Expiration Date" means ____________, 2009.
1.14 "Expiration Time" means 5:00 P.M., New York City time, on the
Expiration Date.
2
<PAGE>
1.15 "Fair Market Value" of any securities shall mean the Closing
Price thereof and of any consideration, other than cash or securities,
shall mean the amount which a willing buyer would pay to a willing seller
in an arm's length transaction as determined by an independent investment
banking or appraisal firm experienced in the valuation of such property
selected in good faith by the Board of Directors.
1.16 "Fractional Warrant Share" means any fraction of a whole share of
Voting Common Stock issued, or issuable upon, exercise of the Warrants.
1.17 "Issue Date" has the meaning set forth in the preamble hereto.
1.18 "Non-Electing Shares" has the meaning set forth in Section 9.3(a)
hereof.
1.19 "Non-Voting Common Stock" means the non-voting common stock, par
value $.02 per share, of the Company.
1.20 "NYSE" has the meaning set forth in Section 1.5 hereof.
1.21 "Organic Change" means, with respect to any Person, any
transaction (including without limitation any recapitalization, capital
reorganization or reclassification of any class or series of Equity
Securities, any consolidation of such Person with, or merger of such Person
into, any other Person, any merger of another Person into such Person
(other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of capital stock
of such Person), and any sale or transfer or lease of all or substantially
all of the assets of such Person, but not including any stock split,
combination or subdivision which is the subject of Section 9.1(c)) pursuant
to which any class or series of Equity Securities of such Person is
converted into the right to receive other securities, cash or other
property.
1.22 "Person" means any individual, firm, corporation, company,
limited liability company, association, partnership, joint venture, trust
or unincorporated organization, or a government or any agency or political
subdivision thereof.
1.23 "Restructuring Agreement" has the meaning set forth in the
preamble hereto.
1.24 "Securities Act" means the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
1.25 "Trading Day" means, with respect to any security, any day on
which the NYSE is open for trading, or if the shares of such security are
not listed or admitted to trading on the NYSE, any day on which the
principal national securities exchange or national quotation system on
which the shares of such security are listed, admitted to trading or quoted
is open for trading, or if the shares of such security are not so listed,
admitted to trading or quoted, any Business Day.
1.26 "Trigger Event" has the meaning set forth in Section 9.1(a)
hereof.
3
<PAGE>
1.27 "Voting Common Stock" means the voting common stock, par value
$.02 per share, of the Company.
1.28 "Warrant Certificate" has the meaning in the preamble hereto.
1.29 "Warrant Register" has the meaning set forth in Section 2.2
hereof.
1.30 "Warrant Shares" means the shares of Voting Common Stock issued,
or issuable upon, exercise of the Warrants.
1.31 "Warrantholder" has the meaning set forth in the preamble hereto.
1.32 "Warrants" has the meaning set forth in the preamble hereto.
Section 2. Transferability.
2.1. Registration. The Warrants shall be issued only in registered
form.
2.2. Transfer. The Warrants evidenced by this Warrant Certificate may
be sold or otherwise transferred at any time (except as such sale or
transfer may be restricted pursuant to the Securities Act or any applicable
state securities laws) and any such sale or transfer shall be effected on
the books of the Company (the "Warrant Register") maintained at its
principal executive offices upon surrender of this Warrant Certificate for
registration of transfer duly endorsed by the Warrantholder or by its duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Warrant certificate
or certificates in appropriate denominations to the Person or Persons
entitled thereto.
Section 3. Exchange of Warrant Certificate. Any Warrant certificate may be
exchanged for another certificate or certificates of like tenor entitling the
Warrantholder to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered then entitles such Warrantholder to
purchase. Any Warrantholder desiring to exchange a Warrant certificate shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver to the Person entitled thereto
a new Warrant certificate or certificates as so requested.
Section 4. Term of Warrants; Exercise of Warrants.
4.1. Duration of Warrants. On the terms and subject to the conditions
set forth in this Warrant Certificate, the Warrantholder may exercise the
Warrants evidenced hereby, in whole or in part, at any time and from time
to time after the Issue Date and before the Expiration Time. If the
Warrants evidenced hereby are not exercised by the Expiration Time, they
shall become void, and all rights hereunder shall thereupon cease.
4
<PAGE>
4.2. Exercise of Warrant.
(a) On the terms and subject to the conditions set forth in this
Warrant Certificate, the Warrantholder may exercise the Warrants
evidenced hereby, in whole or in part, by presentation and surrender
to the Company of this Warrant Certificate together with the attached
Election to Exercise duly filled in and signed, and accompanied by
payment to the Company of the Exercise Price for the number of Warrant
Shares specified in such Election to Exercise. Payment of the
aggregate Exercise Price shall be made in cash in an amount equal to
the aggregate Exercise Price.
(b) On the terms and subject to the conditions set forth in this
Warrant Certificate, upon such presentation and surrender of this
Warrant Certificate and payment of such aggregate Exercise Price as
set forth in paragraph (a) of this Section 4.2, the Company shall
promptly issue and cause to be delivered to the Warrantholder, or to
such Persons as the Warrantholder may designate in writing, a
certificate or certificates (in such name or names as the
Warrantholder may designate in writing) for the specified number of
duly authorized, fully paid and nonassessable Warrant Shares issuable
upon exercise, and shall deliver to the Warrantholder cash, as
provided in Section 10 hereof, with respect to any Fractional Warrant
Shares otherwise issuable upon such surrender. In the event that the
Warrants evidenced by this Warrant Certificate are exercised in part
prior to the Expiration Time, the Company shall issue and cause to be
delivered to the Warrantholder, or to such Persons as the
Warrantholder may designate in writing, a certificate or certificates
(in such name or names as the Warrantholder may designate in writing)
evidencing any remaining unexercised Warrants.
(c) Each Person in whose name any certificate for Warrant Shares
is issued shall for all purposes be deemed to have become the holder
of record of the Warrant Shares represented thereby on the first date
on which both the Warrant certificate evidencing the respective
Warrants was surrendered and payment of the Exercise Price and any
applicable taxes was made, irrespective of date of issue or delivery
of such certificate.
Section 5. Payment of Taxes. The Company shall pay any and all documentary,
stamp or similar issue or transfer taxes and other governmental charges that may
be imposed under the laws of the United States of America or any political
subdivision or taxing authority thereof or therein in respect of any issue or
delivery of Warrant Shares or of other securities or property deliverable upon
exercise of the Warrants evidenced by this Warrant Certificate or certificates
representing such shares or securities (other than income taxes imposed on the
Warrantholder); provided that the Company shall not be required to pay any such
tax or other charge that may be imposed in connection with any transfer involved
in the issuance of any certificate for Warrant Shares or other securities or
property, or payment of cash, to any Person other than the holder of the Warrant
certificate surrendered upon exercise, and in case of any such tax or charge,
the Company shall not be required to issue any security or property or pay any
cash until such tax or charge has been paid or it has been established to the
Company's satisfaction that no such tax or charge is payable.
5
<PAGE>
Section 6. Mutilated or Missing Warrant. If any Warrant certificate is
lost, stolen, mutilated or destroyed, the Company shall issue in exchange and
substitution for any mutilated Warrant certificate upon surrender and
cancellation of such mutilated Warrant certificate, or in lieu of and
substitution for any Warrant certificate lost, stolen or destroyed upon receipt
of a proper affidavit or other evidence reasonably satisfactory to the Company
and bond of indemnity in form and amount and with corporate surety reasonably
satisfactory to the Company protecting the Company, a new Warrant certificate of
like tenor and representing an equivalent number of Warrants as the Warrant
certificate so lost, stolen, mutilated or destroyed. Any such new Warrant
certificate shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
certificate shall be at any time enforceable by anyone. An applicant for such
substitute Warrant certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
All Warrant certificates shall be held and owned upon the express condition that
the foregoing provisions are exclusive with respect to the replacement of lost,
stolen, mutilated or destroyed Warrant certificates, and shall preclude any and
all other rights or remedies notwithstanding any law or statute existing or
hereafter enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without their surrender.
Section 7. Reservation of Shares. The Company hereby agrees that there
shall be reserved for issuance and delivery upon exercise of the Warrants
evidenced by this Warrant Certificate, free from preemptive rights, the number
of shares of authorized but unissued shares of Voting Common Stock as shall be
required for issuance or delivery upon exercise of all of the Warrants evidenced
by this Warrant Certificate. The Company further agrees that it will not, by
amendment of the Articles of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company. Without limiting the generality of the foregoing, the Company
agrees that before taking any action which would cause an adjustment reducing
the Exercise Price below the then-par value of Warrant Shares issuable upon
exercise hereof, the Company shall from time to time take all such action that
may be necessary in order that the Company may validly and legally issue fully
paid and nonassessable shares of Voting Common Stock at the Exercise Price as so
adjusted.
Section 8. Exercise Price. The price per share (the "Exercise Price") at
which Warrant Shares shall be purchasable upon the exercise of the Warrants
evidenced by this Warrant Certificate shall be $5.00, subject to adjustment
pursuant to Section 9 hereof.
Section 9. Adjustment of Exercise Price and Number of Shares. The number
and kind of securities purchasable upon the exercise of the Warrants evidenced
by this Warrant Certificate and the Exercise Price thereof shall be subject to
adjustment from time to time after the date hereof upon the happening of certain
events, as follows:
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<PAGE>
9.1. Adjustments to Exercise Price. The Exercise Price shall be
subject to adjustment from time to time as follows:
(a) Common Stock Issued at Less Than the Closing Price. If the
Company shall issue any Common Stock, other than Excluded Stock or
Common Stock issued in an Excluded Transaction, without consideration
or for a consideration per share less than the Closing Price
immediately prior to such issuance, the Exercise Price in effect
immediately prior to each such issuance shall immediately (except as
provided below) be reduced to the price determined by multiplying the
Exercise Price in effect immediately prior to such issuance by a
fraction (1) the numerator of which shall be the sum of (A) the number
of shares of Voting Common Stock and Non-Voting Common Stock
outstanding immediately prior to such issuance and (B) the number of
shares of Voting Common Stock and Non-Voting Common Stock that the
aggregate consideration, if any, received by the Company upon such
issuance, would purchase at such Closing Price and (2) the denominator
of which shall be the total number of shares of Voting Common Stock
and Non-Voting Common Stock outstanding immediately after such
issuance.
For purposes of any adjustment of the Exercise Price pursuant to
this subsection (a), the following provisions shall be applicable.
(i) Cash. In the case of the issuance of Common Stock for
cash, the amount of the consideration received by the Company
shall be deemed to be the amount of the cash proceeds received by
the Company for such shares before deducting therefrom any
discounts, commissions, taxes or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(ii) Consideration Other Than Cash. In the case of the
issuance of shares of any class of Common Stock (otherwise than
upon conversion of shares of Capital Stock of the Company) for a
consideration in whole or in part other than cash, including
securities acquired in exchange therefor (other than securities
by their terms so exchangeable), the consideration other than
cash shall be deemed to be the Fair Market Value thereof,
irrespective of any accounting treatment.
(iii) Options and Convertible Securities. In the case of the
issuance of (x) options, warrants or rights to purchase or
acquire Common Stock (whether or not at the time exercisable)
(but any adjustment pursuant to this provision shall be made only
to the extent any adjustment shall not have been made pursuant to
Section 9(d)(iv) hereof), (y) securities by their terms
convertible into or exchangeable for Common Stock (whether or not
at the time so convertible or exchangeable) or (z) options,
warrants or rights to purchase such convertible or exchangeable
securities (whether or not at the time exercisable),
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options, warrants or
rights to
7
<PAGE>
purchase or acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or rights were issued
and for a consideration equal to the price (determined in the
manner provided in the immediately preceding subclauses (i) and
(ii) of this Section 9.1(a)), if any, received by the Company
upon the issuance of such options, warrants or rights plus the
minimum purchase price provided in such options, warrants or
rights for the shares of Common Stock covered thereby,
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or acquire such
convertible or exchangeable securities and the subsequent
conversion or exchange thereof, shall be deemed to have been
issued at the time such convertible or exchangeable securities
were issued or such options, warrants or rights were issued and
for a consideration equal to the consideration, if any, received
by the Company for any such convertible or exchangeable
securities or options, warrants or rights (excluding any cash
received on account of accrued interest or dividends), plus the
additional consideration (determined in the manner provided in
the immediately preceding subclauses (i) and (ii) of this Section
9.1(a)), if any, to be received by the Company upon the
conversion or exchange of such securities, or upon the exercise
of any related options, warrants or rights to purchase or acquire
such convertible or exchangeable securities and the subsequent
conversion or exchange thereof,
(C) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options, warrants or
rights or conversion or exchange of such convertible or
exchangeable securities or any change in the consideration to be
received by the Company upon such exercise, conversion or
exchange (but excluding any change resulting solely from the
operation of the anti-dilution provisions thereof if, and only
if, such anti-dilution provisions would not require an adjustment
to the exercise price or conversion price thereof in the event of
any change to the Exercise Price pursuant to the provisions of
this Section 9.1), the Exercise Price as then in effect shall
forthwith be readjusted to such Exercise Price as would have been
obtained had an adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to such change,
or of such convertible or exchangeable securities not converted
or exchanged prior to such change, upon the basis of such change,
(D) on the expiration or cancellation of any such
options, warrants or rights that are unexercised, or the
termination of the right to convert or exchange such convertible
or exchangeable securities, if the Exercise Price shall have been
adjusted upon the issuance thereof, the Exercise Price shall
forthwith be readjusted to such Exercise Price as would have been
obtained had an adjustment been made upon the issuance of such
options, warrants or rights or such convertible or exchangeable
securities on the basis of the issuance of only
8
<PAGE>
the number of shares of Common Stock actually issued upon the
exercise of such options, warrants or rights, or upon the
conversion or exchange of such convertible or exchangeable
securities and
(E) if the Exercise Price shall have been adjusted upon
the issuance of any such options, warrants or rights or
convertible or exchangeable securities, no further adjustment of
the Exercise Price shall be made for the actual issuance of
Common Stock upon the exercise, conversion or exchange thereof.
(b) Excluded Stock. All shares of Excluded Stock which the
Company has reserved for issuance shall be deemed to be
outstanding for all purposes of computations under Section 9.1(a)
hereof.
(c) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Company shall declare a dividend or make a
distribution on the Common Stock in shares of Common Stock, then
the Exercise Price in effect at the time of the record date for
such dividend shall immediately be reduced to a price determined
by multiplying such Exercise Price by a fraction (i) the
numerator of which shall be the number of shares of Voting Common
Stock and Non-Voting Common Stock outstanding at the close of
business on such record date and (ii) the denominator of which
shall be the sum of such number of shares of Voting Common Stock
and Non-Voting Common Stock outstanding and the total number of
shares of Voting Common Stock and Non-Voting Common Stock
constituting such dividend or distribution. If the Company shall
split, subdivide or reclassify (including by way of merger,
consolidation or otherwise) the outstanding shares of Common
Stock into a greater number of shares of Common Stock, the
Exercise Price in effect at the opening of business on the day
following the day upon which such split, subdivision or
reclassification becomes effective shall immediately be
proportionately reduced, and, conversely, if the Company shall
combine or reclassify (including by way of merger, consolidation
or otherwise) the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the Exercise Price in
effect at the opening of business on the day following the day
upon which such combination or reclassification becomes effective
shall immediately be proportionately increased. Successive
adjustments in the Exercise Price shall be made whenever any
event specified above shall occur.
(d) Other Distributions. In case the Company shall fix a
record date for the making of a distribution to all holders of
shares of its Common Stock of (i) shares of any class other than
the Common Stock, (ii) evidences of indebtedness of the Company
or any subsidiary, (iii) assets or other property, including but
not limited to, securities issued by subsidiaries or others
(excluding regular cash dividends, and dividends or distributions
referred to in Section 9.1(c) hereof), or (iv) options, warrants
or other rights, in each such case the Exercise Price in effect
immediately prior thereto shall be reduced immediately thereafter
to the price determined by dividing (x) an amount equal to the
difference resulting from (1) the number of shares of Voting
Common Stock and Non-Voting Common Stock outstanding on such
record date multiplied by the Exercise Price per
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<PAGE>
share of Voting Common Stock on such record date, less (2) the
Fair Market Value of such shares or evidences of indebtedness,
assets, property, options, warrants or rights to be so
distributed, by (y) the number of shares of Voting Common Stock
and NonVoting Common Stock outstanding on such record date. Such
adjustment shall be made successively whenever such a record date
is fixed. Rights (including, without limitation, those to be
issued pursuant to, and in accordance with, the Rights Agreement,
dated as of April 20, 1995, between the Company and Mellon
Securities Trust Company, as Rights Agent) issued by the Company
to all holders of Common Stock entitling the holders thereof to
subscribe for or purchase Equity Securities, which rights (A) are
deemed to be transferred with such shares of Common Stock, (B)
are not exercisable and (C) are also issued in respect of future
issuances of Common Stock, including shares of Common Stock
issued upon exercise of the Warrants evidenced by this Warrant
Certificate, in each case in clauses (A) through (C) until the
occurrence of a specified event or events (a "Trigger Event"),
shall for purposes of this paragraph not be deemed issued until
the occurrence of the earliest Trigger Event.
(e) Minimum Adjustment Requirement. No adjustment shall be
required unless such adjustment would result in an increase or
decrease of at least $0.01 in the Exercise Price then subject to
adjustment; provided, however, that any adjustments that are not
made by reason of this subsection (e) shall be carried forward
and taken into account in any subsequent adjustment. In case the
Company shall at any time issue shares of Common Stock by way of
dividend on any stock of the Company or split, subdivide or
reclassify the outstanding shares of any class of Common Stock,
or combine the outstanding shares of Common Stock, said amount of
$0.01 specified in the preceding sentence (as theretofore
increased or decreased, if said amount shall have been adjusted
in accordance with the provisions of this subsection (g)) shall
forthwith be proportionately increased in the case of such a
combination or decreased in the case of such a split, subdivision
or reclassification or stock dividend so as appropriately to
reflect the same.
(f) Calculations. All calculations under this Section 9.1
shall be made to the nearest $0.01 or to the nearest one ten
thousandth of a share, as the case may be.
(g) Certificate. Whenever an adjustment in the Exercise
Price is made as required or permitted by the provisions of this
Section 9.1, the Company shall promptly prepare a certificate of
an authorized officer of the Company setting forth (i) the
adjusted Exercise Price as provided in this Section 9.1 and a
brief statement of the facts requiring such adjustment and the
computation thereof and (ii) the number of shares of Voting
Common Stock (or portions thereof) purchasable upon exercise of a
Warrant after such adjustment in the Exercise Price in accordance
with Section 9.2 hereof and the record date therefor, and
promptly after preparing such certificate shall mail or cause to
be mailed a notice of such adjustment to each Warrantholder at
his or her last address as the same appears on the Warrant
Register.
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<PAGE>
(h) Notice. In case:
(i) the Company shall declare any dividend or any
distribution of any kind or character (whether in cash,
securities or other property) on or in respect of shares of
any class of Common Stock or to the shareholders of the
Company (in their capacity as such), excluding any regular
periodic cash dividend paid out of current or retained
earnings (as such terms are used in generally accepted
accounting principles); or
(ii) the Company shall authorize the granting to the
holders of shares of Common Stock of rights to subscribe
for or purchase any shares of capital stock or of any other
right; or
(iii) of any reclassification of shares of any class of
Common Stock (other than a split, subdivision or combination
of outstanding shares of any class of Common Stock), or of
any consolidation or merger to which the Company is a party
and for which approval of any shareholders of the Company is
required, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the Warrantholders,
at their last addresses as they shall appear upon the Warrant
Register, at least ten days prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend,
distribution or rights or, if a record is not to be taken, the
date as of which the holders of shares of Common Stock of record
to be entitled to such dividend, distribution or rights are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding up is expected to become effective, and, if
applicable, the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange shares of
any class of Common Stock for securities or other property
(including cash) deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding up. Failure to give any such notice, or any defect
therein, shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(i) Section 305. Anything in this Section 9.1 to the
contrary notwithstanding, the Company shall be entitled, but not
required, to make such reductions in the Exercise Price, in
addition to those required by this Section 9.1, as it in its
discretion shall determine to be advisable, including, without
limitation, in order that any dividend in or distribution of
shares of Common Stock or shares of capital stock of any class
other than Common Stock, subdivision, reclassification or
combination of shares of Common Stock, issuance of rights or
warrants, or any other transaction having a similar effect, shall
not be treated as a distribution of property by the Company to
its shareholders under Section 305 of the Internal Revenue Code
of 1986, as amended, or any successor provision and shall not be
taxable to them.
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<PAGE>
(j) When Adjustment Not Required. If the Company shall take
a record of the holders of any class of Common Stock for purposes
of taking any action that requires an adjustment of the Exercise
Price under this Section 9, and shall, thereafter and before the
effective date of such action, legally abandon its plan to take
such action, then thereafter no adjustment shall be required by
reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and
annulled.
9.2. Adjustment to Number of Warrant Shares. Upon each adjustment of
the Exercise Price pursuant to Section 9.1 hereof, the number of Warrant
Shares purchasable upon exercise of a Warrant outstanding prior to the
effectiveness of such adjustment shall be adjusted to the number,
calculated to the nearest one-hundredth of a share, obtained by (a)
multiplying the number of Warrant Shares purchasable immediately prior to
such adjustment upon the exercise of a Warrant by the Exercise Price in
effect prior to such adjustment and (b) dividing the product so obtained by
the Exercise Price in effect after such adjustment of the Exercise Price.
9.3. Organic Change.
(a) Company Survives. Upon the consummation of an Organic Change
(other than a transaction in which the Company is not the surviving
entity), lawful provision shall be made as part of the terms of such
transaction whereby the terms of the Warrant Certificates shall be
modified, without payment of any additional consideration therefor, so
as to provide that upon exercise of Warrants following the
consummation of such Organic Change, the Warrantholders of such
Warrants shall have the right to purchase only the kind and amount of
securities, cash and other property receivable upon such Organic
Change by a holder of the number of Warrant Shares into which such
Warrants might have been exercised immediately prior to such Organic
Change, assuming such holder of Warrant Shares (i) is not a Person
with which the Company consolidated or into which the Company merged
or which merged into the Company or to which a sale, transfer or lease
of all or substantially all of the assets of the Company was made, as
the case may be (a "Constituent Person"), or an affiliate of a
Constituent Person, and (ii) failed to exercise his rights of
election, if any, as to the kind and amount of securities, cash and
other property receivable upon such Organic Change (provided that if
the kind and amount of securities, cash and other property receivable
upon such Organic Change is not the same for each share of Common
Stock held immediately prior to such Organic Change by Persons others
than a Constituent Person or an affiliate thereof and in respect of
which such rights of election shall not have been exercised
("Non-Electing Shares"), then for the purpose of this subsection (a)
the kind and amount of securities, cash and other property receivable
upon such Organic Change by each Non-Electing Share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
NonElecting Shares); provided, however, that no adjustment shall be
made as a result of such Organic Change to the Exercise Price or the
number of Warrant Shares notwithstanding any provision of Section 9
hereof unless any event requiring any such adjustment shall have
occurred or shall occur prior to, upon or after such Organic Change.
Lawful provision also shall be made as part of the terms of the
Organic Change so that all other terms of the Warrant Certificates
shall remain in full force and effect following such an
12
<PAGE>
Organic Change. The provisions of this Section 9.3(a) shall
similarly apply to successive Organic Changes.
(b) Company Does Not Survive. The Company shall not enter into an
Organic Change that is a transaction in which the Company is not the
surviving entity unless lawful provision shall be made as part of the
terms of such transaction whereby the surviving entity shall issue new
securities to each Warrantholder, without payment of any additional
consideration therefor, with terms that provide that upon the exercise
of the Warrants, the Warrantholders of such Warrants shall have the
right to purchase only the kind and amount of securities, cash and
other property receivable upon such Organic Change by a holder of the
number of Warrant Shares into which such Warrants might have been
exercised immediately prior to such Organic Change, assuming such
holder of Warrant Shares (i) is not a Constituent Person or an
affiliate of a Constituent Person and (ii) failed to exercise his
rights of election, if any, as to the kind and amount of securities,
cash and other property receivable upon such Organic Change (provided
that if the kind and amount of securities, cash and other property
receivable upon such Organic Change is not the same for each
Non-Electing Share, then for the purpose of this subsection (b) the
kind and amount of securities, cash and other property receivable upon
such Organic Change by each Non-Electing Share shall be deemed to be
the kind and amount so receivable per share by a plurality of the
Non-Electing Shares); provided, however, that no adjustment shall be
made as a result of such Organic Change to the Exercise Price or the
number of Warrant Shares notwithstanding any provision of Section 9
hereof unless any event requiring any such adjustment shall have
occurred or shall occur prior to, upon or after such Organic Change.
The certificate or articles of incorporation or other constituent
document of the surviving entity shall provide for such adjustments
which, for events subsequent to the effective date of such certificate
or articles of incorporation or other constituent document, shall be
equivalent to the adjustments provided for in Section 9.1 hereof.
9.4. Statement on Warrants. The form of Warrant Certificate need not
be changed because of any adjustment made pursuant to Section 9.1 or
Section 9.2 hereof, and Warrants issued after such adjustment may state the
same Exercise Price and the same number of Warrant Shares as are stated in
this Warrant Certificate.
Section 10. Fractional Interests. The Company shall not be required to
issue Fractional Warrant Shares on the exercise of the Warrants evidenced by
this Warrant Certificate. If any Fractional Warrant Share would, but for the
provisions of this Section 10, be issuable on the exercise of the Warrants
evidenced by this Warrant Certificate (or specified portions thereof), the
Company shall pay an amount in cash equal to the fraction of a Warrant Share
represented by such Fractional Warrant Share multiplied by the Closing Price on
the day of such exercise.
Section 11. No Rights as Shareholder. Nothing in this Warrant Certificate
shall be construed as conferring upon the Warrantholder or its transferees any
rights as a shareholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a shareholder with respect to any
meeting of shareholders for the election of directors of the Company or any
other matter.
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<PAGE>
Section 12. Successors. All the covenants and provisions of this Warrant
Certificate by or for the benefit of the Company or the Warrantholder shall bind
and inure to the benefit of their respective successors and permitted assigns
hereunder.
Section 13. Governing Law; Etc. The validity, construction and performance
of this Warrant Certificate shall be governed by, and interpreted in accordance
with, the laws of New York without reference to its conflict of laws rules. Each
of the parties hereto irrevocably consents to the service of process in any
action or proceeding hereunder by the mailing of copies thereof by registered or
certified airmail, postage prepaid, if to (i) the Company, at 148 West State
Street, Kennett Square, Pennsylvania 19348, Attention: General Counsel, or at
such other address specified by the Company in writing to the Warrantholder, and
(ii) any Warrantholder, at the address of such Warrantholder specified in the
Warrant Register. The foregoing shall not limit the rights of any party hereto
to serve process in any other manner permitted by the law or to obtain execution
of judgment in any other jurisdiction. The parties agree to waive any and all
rights that they may have to a jury trial with respect to disputes arising out
of this Agreement.
Section 14. Benefits of this Agreement. Nothing in this Warrant Certificate
shall be construed to give to any Person other than the Company and the
Warrantholder any legal or equitable right, remedy or claim under this Warrant
Certificate, and this Warrant Certificate shall be for the sole and exclusive
benefit of the Company and the Warrantholder.
[remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed, as of this ____th day of ______________, 1999.
GENESIS HEALTH VENTURES, INC.
By: ________________________________
Name:
Title:
Attest:
_______________________________
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<PAGE>
ELECTION TO EXERCISE
(To be executed upon exercise of Warrants)
To GENESIS HEALTH VENTURES, INC.:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
____________ Warrant Shares, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of cash in the amount of
$_____________.
Please issue a certificate or certificates for such Warrant Shares in the
name of, and pay any cash for any Fractional Warrant Shares to (please print
name address and social security or other identifying number)(1)*:
Name: _____________________________________
Address: _____________________________________
_____________________________________
_____________________________________
Soc. Sec.: _____________________________________
AND, if said number of Warrant Shares shall not be all the shares purchasable
under the within Warrant Certificate, a new Warrant Certificate is to be issued
in the name of the undersigned for the balance remaining of the Warrant Shares
purchasable thereunder rounded up to the next higher whole number of Warrant
Shares.
Signature:** ________________________________
- -------------------
* The Warrant Certificate contains restrictions on the sale and other transfer
of the Warrants evidenced by such Warrant Certificate.
** The above signature should correspond exactly with the name on the face of
this Warrant Certificate or with the name of the assignee appearing in the
assignment form below.
<PAGE>
ASSIGNMENT FORM
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________________________________________________________
(Name and Address of Assignee must be Printed or Typewritten)
Warrants to purchase ___________________ Warrant Shares of the Company,
evidenced by the within Warrant Certificate hereby irrevocably constituting and
appointing __________________ Attorney to transfer said Warrants on the books of
the Company, with full power of substitution in the premises.
Dated: ____________________,_____
____________________________________
Signature of Registered Holder*
____________________________________
Signature Guaranteed: Signature of Guarantor
- --------------------
* The above signature should correspond exactly with the name on the face of
this Warrant Certificate.
<PAGE>
EXHIBIT E
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
-2-
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS...........................................................1
Section 1.1 Certain Defined Terms....................................1
ARTICLE II
BOARD OF DIRECTORS AND OFFICERS.......................................4
Section 2.1 Board of Directors.......................................4
Section 2.2 Officers.................................................4
Section 2.3 Bylaws...................................................4
ARTICLE III
RESTRICTIONS ON TRANSFERS OF STOCK....................................4
Section 3.1 Restrictions on Transfer.................................4
Section 3.2 Offer....................................................5
Section 3.3 Option to Genesis Stockholders...........................5
Section 3.4 Delivery after Exercise..................................6
Section 3.5 Right to Transfer........................................6
ARTICLE IV
OTHER ARRANGEMENTS....................................................6
Section 4.1...........................................................6
Irrevocable Proxy.....................................................6
ARTICLE V
SUBORDINATION.........................................................6
Section 5.1 General Subordination....................................6
Section 5.2 Payment Blockage.........................................7
Section 5.3 Distributions............................................7
Section 5.4 Distributions to be Held in Trust........................8
Section 5.5 Continuing Subordination.................................8
Section 5.6 Subrogation..............................................9
Section 5.7 Relative Rights of Creditors.............................9
Section 5.8 Subordinated Obligations; Rights of Senior
Creditors as to Security................................10
Section 5.9 Undertakings in Insolvency Proceedings .................10
Section 5.10 Further Assurances......................................10
Section 5.11 Specific Enforcement; Remedies..........................10
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ARTICLE VI
MISCELLANEOUS.........................................................11
Section 6.1 Legend...................................................11
Section 6.2 Notices..................................................11
Section 6.3 Severability.............................................14
Section 6.4 Entire Agreement.........................................14
Section 6.5 Amendment and Waiver.....................................14
Section 6.6 Consent to Specific Performance..........................14
Section 6.7 Assignment; Responsibility for Affiliates................14
Section 6.8 Variations in Pronouns...................................14
Section 6.9 Term.....................................................15
Section 6.10 Governing Law............................................15
Section 6.11 Further Assurances.......................................15
Section 6.12 Headings.................................................15
Section 6.13 Counterparts.............................................15
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<PAGE>
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This Amended and Restated Stockholders Agreement ("Agreement") is made and
dated this [ ] day of [ ], 1999 by and among Genesis ElderCare Corp.(formerly
known as Waltz Corp.), a Delaware corporation ("Corporation"), The Cypress Group
L.L.C., a Delaware limited liability company ("Cypress"), TPG Partners II, L.P.,
a Delaware limited partnership ("TPG"), Genesis Health Ventures, Inc. a
Pennsylvania corporation ("Genesis"), Nazem, Inc., a Delaware corporation
("Nazem") and the other signatories hereto .
WITNESSETH
Cypress, TPG, Genesis and Nazem and/or their Affiliates own in the
aggregate 745,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of the Corporation, which Common Stock constitutes all of the issued
and outstanding capital stock of the Corporation.
Pursuant to the Agreement and Plan of Merger, dated as of June 16, 1997
(the "Merger Agreement"), by and among the Corporation, Genesis ElderCare
Acquisition Corp. (formerly known as Waltz Acquisition Corp.), a Delaware
corporation, and a wholly owned subsidiary of the Corporation ("Acquisition
Corp."), Genesis and The Multicare Companies, Inc., a Delaware corporation
("Multicare"), Acquisition Corp. was merged with and into Multicare with
Multicare being the surviving corporation and a wholly owned subsidiary of the
Corporation (the "Merger").
On October 9, 1997, the Cypress, TPG, Genesis and Nazem entered into a
Stockholders Agreement (the "Stockholders Agreement") which imposed certain
restrictions and obligations on themselves and/or their Affiliates, as
applicable, and on the shares of capital stock of the Corporation. The parties
now desire to restructure their joint investment in the Corporation. In
connection therewith, the parties desire to amend and restate such Stockholders
Agreement to read in full as set forth below.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and intending to be legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. Capitalized terms used herein and not
otherwise defined herein shall have the following meanings:
"Affiliate" of any Person means any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"Board of Directors" means the Board of Directors of the Corporation.
<PAGE>
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in the City of New York are required or permitted by law
to close.
"Credit Agreement" means the Fourth Amended and Restated Credit Agreement,
dated August 20, 1999, by and among Genesis and certain of its subsidiaries as
borrowers, Mellon Bank, N.A. as issuer of letters of credit, Mellon Bank, N.A.
as administrative agent, Citicorp USA, Inc. as syndication agent, First Union
National Bank, as documentation agent, Bank of America, N.A. as syndication
agent and certain other financial institutions identified therein as lenders.
"Genesis Stockholders" means, as of any date, the collective reference to
Genesis and its Affiliates then owning one or more shares of Stock.
"Insolvency Proceeding" means any bankruptcy, reorganization, arrangement,
composition, insolvency, liquidation or other proceeding for relief by or
against Genesis or any Affiliate of Genesis under any Federal or state
bankruptcy or similar law relating to the relief of debtors or the readjustment
of indebtedness.
"Non-Genesis Stockholders" means, as of any date, the collective reference
to Persons, other than Genesis Stockholders, then owning one or more shares of
Stock.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or other entity or a
country or government or any agency or political subdivision or instrumentality
thereof or of such subdivision.
"Put/Call Agreement" means the "Put/Call Agreement" dated October 9, 1997,
as amended and restated as of the date hereof, by and among the Stockholders.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Loan" means, collectively, all obligations of the Corporation,
Acquisition Corp. or any of their respective affiliates or co-borrowers under or
in respect of any or all of (in each case, as amended, modified, restated or
supplemented) (1) the Credit Agreement, dated as of October 9, 1997, as amended,
by and among Acquisition Corp., as Borrower, the financial institutions
identified therein as Lenders, Mellon Bank, N.A., as Administrative Agent, and
the other Agents identified therein, (2) the Credit Agreement, dated as of
October 9, 1997, as amended, by and among The Multicare Companies, Inc. and
certain of its direct and indirect Subsidiaries, as Borrowers, the financial
institutions identified therein as Lenders, Mellon Bank, N.A., as Administrative
Agent, Citicorp U.S.A., Inc. and NationsBank, N.A., each as a Syndication Agent,
and First Union National Bank, as Documentation Agent; (3) the Credit Agreement,
dated as of October 9, 1997, as amended, by and among The Multicare Companies,
Inc., certain Subsidiaries of Multicare, the Lenders referred to therein, Mellon
Bank, N.A. as Issuer of Letters of Credit, Mellon Bank, N.A. as Administrative
Agent, Citibank, N.A. as Syndication Agent, First Union National Bank as
Documentation Agent and Nationsbank N.A. as Syndication Agent; or (4) any other
loan or other agreement in respect of indebtedness issued to replace any of the
foregoing.
2
<PAGE>
"Senior Creditor" means each Person entitled to the benefits of any of the
Senior Obligations as described in clauses (1) through (4) of the definition of
Senior Obligations below.
"Senior Obligations" means all liabilities or obligations of any type or
nature, whether for principal, interest and fees (including, without limitation,
interest accruing after the initiation of any Insolvency Proceeding) charges and
expenses, and without limitation as to amount or terms thereof, presently owing
or hereafter created or due from Genesis and/or any of its Affiliates, and their
respective successors and assigns, (1) to the Lenders (as defined in the Credit
Agreement), and their respective successors, assigns and participants, arising
under or incidental to the Credit Agreement, (2) to the participants under the
Synthetic Lease Facility, and their respective successors, assigns and
participants, arising under or incidental to the Synthetic Lease Facility, (3)
to any other lender or lenders or other creditors and its or their respective
successors, assigns and participants, under any credit arrangement that replaces
all or any part of the indebtedness or other obligations of Genesis or its
Affiliates under the Credit Agreement or the Synthetic Lease Facility, or (4) to
any counterparty in connection with any interest rate swap, hedging or similar
obligation in respect of all or any portion of the liabilities described in
clauses (1), (2) or (3).
"Stock" means all shares of all classes of the capital stock of the
Corporation now or hereafter owned or held by the Stockholders or any other
Person including, without limitation, the Common Stock.
"Stockholders" means the collective reference to Non-Genesis Stockholders
and Genesis Stockholders.
"Subordinated Notes" means the 9% Senior Subordinated Notes due 2007 issued
pursuant to the Indenture dated August 11, 1997 by and between Acquisition
Corp., PNC Bank, National Association, as trustee, and Banque Internationale a
Luxembourg S.A., as paying agent.
"Subordinated Obligations" means any obligations of Genesis, whether
liquidated or unliquidated, and without limitation as to amount, whether payable
in cash or other property (other than Genesis common stock), to the Subordinated
Creditors arising out of or in respect of the Call Option (as defined in the
Put/Call Agreement).
"Synthetic Lease Facility: means the Amended and Restated Lease and
Agreement dated as of October 7, 1996, and any sublease thereunder, between
Lessor and Lessee, as the same may be amended, modified or supplemented from
time to time.
"Transfer" means to sell, give, transfer, assign, pledge, hypothecate or
otherwise dispose of all or a portion of an interest (legal or equitable) by any
means, direct or indirect, absolute or conditional, voluntary or involuntary,
including, but not limited to, by court order, operation of law, settlement,
exchange, waiver, abandonment, gift, alienation, bequest or disposal, or to
contract or agree to do any of the foregoing.
3
<PAGE>
ARTICLE II
BOARD OF DIRECTORS AND OFFICERS
Section 2.1 Board of Directors. The Board of Directors shall consist of six
directors. During the term of this Agreement, Genesis shall be entitled to
nominate four directors to the Corporation's board of directors and Genesis
agrees to vote the proxies granted pursuant to Section 4.1 hereof to elect such
nominees. During the term of this Agreement and for so long as Cypress or any of
its Affiliates owns Stock, Cypress will be entitled to nominate one director to
the Corporation's board of directors and Genesis agrees to vote the proxies
granted pursuant to Section 4.1 hereof to elect such nominee. During the term of
this Agreement and for so long as TPG or any of its Affiliates owns Stock, TPG
will be entitled to nominate one director to the Corporation's board of
directors and Genesis agrees to vote the proxies granted pursuant to Section 4.1
hereof to elect such nominee. In the event of any vacancy on the Board of
Directors, Genesis agrees to vote the proxies granted pursuant to Section 4.1
hereof for the person nominated by the Person who was entitled to nominate the
director for whom the vacancy exists.
Section 2.2 Officers. The officers of the Corporation shall consist of a
President and Chief Executive Officer, two Vice Presidents, a Treasurer and a
Secretary and such other officers as the President of the Corporation may from
time to time establish.
ARTICLE III
RESTRICTIONS ON TRANSFERS OF STOCK
Section 3.1 Restrictions on Transfer. No Non-Genesis Stockholder may
Transfer Stock except as provided in the Put/Call Agreement and except a
Non-Genesis Stockholder may Transfer its Stock in strict accordance with the
terms and conditions of this Article III. Notwithstanding any of the provisions
of this Agreement to the contrary:
(a) Cypress, TPG and Nazem and their Affiliates may Transfer any
shares of Stock to any Person who agrees to be bound to this
Agreement and to the Put/Call Agreement by executing and
delivering to Genesis a Joinder hereto in the form of Exhibit "A"
hereto and a Joinder to the Put/Call Agreement in the form of
Exhibit "A" thereto, provided that such Transfer (either by itself
or when taken together with other Transfers under this Article
III) if consummated would not constitute a "change in control" of
the Corporation as such term is defined in the Indenture governing
the Subordinated Notes, the credit agreements governing the Senior
Loan, and any other agreements to which the Corporation is bound
(the parties acknowledge that there are no such agreements as of
the date hereof);
4
<PAGE>
(b) a Genesis Stockholder may Transfer any shares of Stock to any
Person who agrees to be bound to this Agreement by executing a
Joinder hereto in the form of Exhibit "A" hereto, provided that
such Transfer (either by itself or when taken together with other
Transfers under this Article III) if consummated would not
constitute a "change in control" of the Corporation as such term
is defined in the Indenture governing the Subordinated Notes, the
credit agreements governing the Senior Loan and any other
agreements to which the Corporation is bound (the parties
acknowledge that there are no such agreements as of the date
hereof);
(c) the limited partners of TPG and Cypress (or their Affiliates
owning Common Stock) may transfer their limited partnership or
other ownership interests in TPG and Cypress (or their Affiliates
owning Common Stock); and
(d) the parties hereto consent to the pledge existing on the date
hereof by the limited partner of the Affiliate of Nazem owning
Common Stock of its limited partnership interest in such Affiliate
and agree that such limited partner may transfer such limited
partnership interest to such pledgee or any assignee of such
pledgee.
Any Transfer of Stock in violation of this Agreement shall be void ab initio. No
Stockholder may do indirectly, through a sale of its Stock or other equity
interest or otherwise, that which is not
permitted by this Section 3.1.
Section 3.2 Offer. If a Non-Genesis Stockholder, other than Cypress, TPG,
Nazem or any of their Affiliates ("Selling Stockholder"), determines to sell all
or any part of its Stock ("Offered Stock"), the Selling Stockholder must first
offer (the "Offer") to sell the Offered Stock to the Genesis Stockholders, in
accordance with Section 3.3 herein, by giving written notice ("Notice") to the
Corporation and to the Genesis Stockholders setting forth the proposed terms of
such sale (the "Offer Terms").
Section 3.3 Option to Genesis Stockholders. The Genesis Stockholders shall
have the option to purchase all, or any part, of the Offered Stock on the Offer
Terms and may exercise their options by giving written notice of exercise to the
Selling Stockholder and the other Genesis Stockholders, within thirty (30) days
after the date of the Notice of the Offer. The notice given by each Genesis
Stockholder shall state the maximum number of shares of the Offered Stock which
it is willing to purchase. Each Genesis Stockholder shall have the option to
purchase that proportion, rounded to the nearest whole number to eliminate
fractional shares, of the Offered Stock which the number of shares of Stock held
by such Genesis Stockholder bear to the number of shares of Stock then held by
all Genesis Stockholders. If a Genesis Stockholder does not exercise its option
to purchase its full proportionate share of the Offered Stock, the Genesis
Stockholders who have exercised their options may purchase the Stock not
purchased by such Genesis Stockholder in such proportions as they shall agree
upon or, failing such agreement, pro rata as provided above, by giving written
notice of the exercise of their options to the Selling Stockholder within forty
(40) days after the date of the Notice of the Offer.
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Section 3.4 Delivery after Exercise. If the Genesis Stockholders shall have
exercised their option to purchase all or any part of the Offered Stock, closing
on the sale of such Offered Stock shall occur, and all certificates for such
Offered Stock (or, if such Offered Stock is subject to pledge, hypothecation or
other encumbrance, evidence of the Selling Stockholder's rights therein) shall
be delivered to the purchaser(s) thereof, duly endorsed for transfer, at the
earlier of fifty (50) days after the date of the Notice of the Offer or ten (10)
days after the exercise of the option to purchase the Offered Stock (the
"Transfer Date") at the then principal office of the Corporation.
Section 3.5 Right to Transfer. If all the Offered Stock is not purchased,
the Selling Stockholder may, for a period of forty-five (45) days following the
final date for acceptance under Section 3.3 herein, enter into a binding
agreement (subject to customary conditions) to sell any balance of the Offered
Stock to a third party ("Third Party Purchaser"); provided, however, that (a)
the proposed sale to the Third Party Purchaser must be approved by Genesis prior
to any offer of the Offered Stock to a Third Party Purchaser (with such approval
not to be unreasonably withheld or delayed, provided, that it shall not be
unreasonable for Genesis to withhold its consent to any Transfer which, either
by itself or taken together with other Transfers under this Article III, would
result in a "change in control" (or similar concept) under the Indenture
governing the Subordinated Notes, the Credit Agreement or any other agreement to
which the Corporation is a party), (b) such Stock is sold to the Third Party
Purchaser upon terms not more favorable to the Third Party Purchaser than the
Offer Terms and (c) the Third Party Purchaser agrees to be bound to this
Agreement and to the Put/Call Agreement by executing and delivering to Genesis a
Joinder hereto in the form of Exhibit "A" hereto and a Joinder to the Put/Call
Agreement in the form of Exhibit "A" thereto. If the Selling Stockholder wishes
to sell its Stock on other than the Offer Terms or has not sold such Stock on
the Offer Terms within that thirty (30) day period, it shall be obligated to
make new offers and re-offers to the Genesis Stockholders, in accordance with
subsections 3.3 and 3.4 herein, before it shall be permitted to offer to
Transfer its Stock, or any part thereof, to any Person.
ARTICLE IV
OTHER ARRANGEMENTS
Section 4.1 Irrevocable Proxy. Each Non-Genesis Stockholder hereby agrees
to grant to Genesis an irrevocable proxy and power of attorney substantially in
the form of Exhibit "B"attached hereto.
ARTICLE V
SUBORDINATION
Section 5.1 General Subordination. Genesis and each of the Non-Genesis
Stockholders acknowledge and agree that the Subordinated Obligations are and
shall be subordinate and subject in right of payment to the prior indefeasible
payment in full in cash of the Senior Obligations to the extent, and in the
manner, set forth in this Article V. Genesis agrees that it shall not, and shall
not cause, permit or suffer any Affiliate of Genesis to, impair in any manner
the rights of the Senior Creditors to enforce or otherwise receive the benefits
of the subordination set forth in this Article V.
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Section 5.2 Payment Blockage.
(a) Unless the Senior Obligations shall have been indefeasibly paid in
full in cash, and except as otherwise provided in subsection (b) below, no
payment or distribution of any of the assets of Genesis or any Affiliate of
Genesis shall be made by Genesis or any Affiliate of Genesis, or received or
accepted by any Subordinated Creditor, in respect of the Subordinated
Obligations:
(1) at any time there shall have occurred and be continuing any
default (a "Payment Default") in the payment when due (at maturity, upon
acceleration, upon mandatory prepayment or otherwise) of any amount owing in
respect of any of the Senior Obligations, unless such default shall have been
cured or waived in writing by or on behalf of the Senior Creditors; or
(2) at any time there shall have occurred, and Genesis and the
Subordinated Creditors shall have received notice (a "Deferral Notice") of such
occurrence, and be continuing any default or event of default in respect of the
Senior Obligations other than a Payment Default (a "Non-Payment Default");
provided, however, that the prohibition on any payment or distribution in
respect of the Subordinated Obligations in the event of any Non-Payment Default
shall apply only for a period (the "Payment Blockage Period") commencing upon
the receipt by Genesis and the Subordinated Creditors of a Deferral Notice and
continuing until the earlier of (i) the date on which such Non-Payment Default
shall have been cured, waived in writing, by or on behalf of the Senior
Creditors, or otherwise cease to exist, or (ii) 179 days after the Deferral
Notice, or (iii) the date such Payment Blockage Period and any other Payment
Blockage Period initiated during such period have been terminated by written
notice to Genesis and the Subordinated Creditors from or on behalf of the Senior
Creditors. Notwithstanding any other provision of this Agreement, in no event
shall a Payment Blockage Period extend beyond 179 days from the date of receipt
by Genesis or the Subordinated Creditors of a Deferral Notice (the "Initial
Blockage Period"). Any number of Deferral Notices may be given during the
Initial Blockage Period; provided that during any 365-day consecutive period
only one such period may commence and the duration of such period may not exceed
179 days. No Non-Payment Default which existed and was continuing on the date of
the commencement of any Payment Blockage Period shall be made the basis for the
commencement of a second Payment Blockage Period, whether or not within a period
of 365 consecutive days, unless such default shall have been cured or waived for
period of not less than 90 consecutive days.
Section 5.3 Distributions. In the event of any distribution, division or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets or property of Genesis or any
Affiliate of Genesis or the proceeds thereof, to creditors of Genesis or any
Affiliate of Genesis, or upon any repayment of indebtedness of Genesis or any
Affiliate of Genesis, by reason of (1) the liquidation, dissolution or other
winding up, partial or complete, of Genesis or any Affiliate of Genesis or its
or their respective business, or (2) any Insolvency Proceeding, then, and in any
such event, any payment or distribution of any kind or character, whether in
cash, securities or other property which but for this Article V would be payable
7
<PAGE>
or deliverable to any Subordinated Creditor on account of the Subordinated
Obligations (whether or not such payment or distribution shall have been made in
accordance with any plan approved in an Insolvency Proceeding), shall instead be
paid or delivered directly to the Senior Creditors for application to the Senior
Obligations, whether then due or not due, until the Senior Obligations shall
have been indefeasibly paid in full in cash; provided that, for purposes of
determining whether the Senior Obligations have been indefeasibly paid in full
in cash, the Senior Creditors shall be required to use reasonable efforts to
sell all securities and other property received by virtue of this provision for
cash at fair market value.
Section 5.4 Distributions to be Held in Trust. Unless and until the Senior
Obligations shall have been indefeasibly paid in full in cash, if any payment,
distribution of security or proceeds of any security are received by any
Subordinated Creditor upon or in respect of the Subordinated Obligations which
are not permitted to be paid in accordance with the provisions of this Article
V, such Subordinated Creditor will forthwith deliver the same to the Senior
Creditors in precisely the form received (except for the endorsement or
assignment of such Subordinated Creditor where necessary), for application to
the Senior Obligations, whether then due or not due, and, until so delivered,
the same shall be held in trust by such Subordinated Creditor as property of the
Senior Creditors. In the event of the failure of any Subordinated Creditor to
make any such endorsement or assignment, the Senior Creditors or their agent, or
any of its or their officers or employees, are hereby irrevocably authorized to
make the same.
Section 5.5 Continuing Subordination. The subordination effected by this
Article V is a continuing subordination, and each Subordinated Creditor hereby
agrees that at any time and from time to time, without notice to it:
(a) the time, place or manner for payment or performance by Genesis or
any Affiliate of Genesis of, or compliance with any of its agreements or
instruments evidencing, the Senior Obligations may be extended or waived by the
Senior Creditors;
(b) any act permitted to be taken by Genesis, any Affiliate of Genesis
or any Senior Creditor under agreements or instruments evidencing the Senior
Obligations may be so taken;
(c) any of the agreements or instruments evidencing the Senior
Obligations may be amended, or modified in any manner, including for the purpose
of adding any provisions thereto, increasing the amount of, or changing the
terms of, the Senior Obligations, adding or releasing any security or collateral
therefor, or changing in any manner the covenants or rights of the Senior
Creditors or Genesis or any Affiliate of Genesis or any other Person thereunder;
(d) the maturity of any of the Senior Obligations may be accelerated;
(e) any or all collateral security for the Senior Obligations may be
exchanged, sold, surrendered, released or otherwise dealt with;
8
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(f) Genesis or any Affiliate of Genesis, any co-borrower with Genesis
or any Affiliate of Genesis, any guarantor or any other Person may be released
of its obligations in respect of the Senior Obligations, whether or not in
connection with any Insolvency Proceeding;
(g) payments received by any Senior Creditor from any source which
could lawfully be applied to payment, in full or in part, of the Senior
Obligations, but which could also lawfully be used for some other purpose may be
used for such other purpose with or without the consent of the Senior Creditors;
and
(h) any other event which could, but for this provision, be used as a
defense to the obligations of the Subordinated Creditor hereunder may occur; all
without impairing or affecting the obligations of the Subordinated Creditors or
the rights of the Senior Creditors hereunder. The rights and remedies of the
Senior Creditors hereunder shall be irrevocable and shall remain in full force
and effect notwithstanding (i) any lack of validity or enforceability of the
Senior Obligations, (ii) any circumstance which might constitute a defense
available to, or the discharge of, Genesis in respect of the Senior Obligations,
or (iii) the occurrence of any of the circumstances described in clauses (a)
through (h) of the preceding sentence. The provisions of this Article V shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment in respect of the Senior Obligations is rescinded or must otherwise
be returned by any Senior Creditor in any Insolvency Proceeding, all as though
such payment had not been made.
Section 5.6 Subrogation. No payment or distribution to the Senior Creditors
pursuant to the provisions of this Article V shall entitle the Subordinated
Creditors to exercise any rights of subrogation in respect thereof (and any such
rights existing under law are hereby waived) until such time as the Senior
Obligations have been indefeasibly paid in full in cash. After the Senior
Obligations have \been indefeasibly paid in full in cash and until the
Subordinated Obligations are paid in full, the Subordinated Creditors shall be
subrogated to the rights of the Senior Creditors to receive distributions
applicable to the Senior Obligations to the extent that distributions otherwise
payable to the Subordinated Creditors have been applied to the payment of Senior
Obligations. A distribution made under Section 5.3 of this Agreement to the
Senior Creditors which otherwise would have been made to the Subordinated
Creditors is not, as between Genesis and the Subordinated Creditors, a payment
by Genesis on the Senior Obligations.
Section 5.7 Relative Rights of Creditors. The provisions of this Article V
are intended only for the purpose of defining the relative rights of the Senior
Creditors, on the one hand, and the Subordinated Creditors, on the other hand.
Nothing herein is intended to, nor shall the subordination provisions of this
Article V, impair, as between Genesis, its creditors other than the Senior
Creditors and the Subordinated Creditors, the obligation of Genesis to pay to
the Subordinated Creditors the Subordinated Obligations or any other amounts due
to Subordinated Creditors under the Put/Call Agreement as and when the same
shall become due and payable, or to affect the relative rights of the
Subordinated Creditors and creditors of the Company other than the Senior
Creditors nor shall the foregoing or provisions to implement the foregoing
prevent the Subordinated Creditors from exercising all remedies otherwise
permitted by applicable law upon any breach of the Put/Call Agreement, subject
to the rights contemplated herein of the Senior Creditors.
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<PAGE>
Section 5.8 Subordinated Obligations; Rights of Senior Creditors as to
Security.
(a) The Subordinated Creditors and Genesis acknowledge and agree that
the Put/Call Agreement evidences the full and complete obligations of Genesis
comprising the Subordinated Obligations, and Genesis shall not issue any further
instrument or agreement in respect of the Subordinated Obligations. The Put/Call
Agreement shall expressly state that, and all certificates evidencing the stock
of Genesis ElderCare Corporation to which are attached or associated any rights
of the Subordinated Creditors under the Put/Call Agreement shall contain a
legend to the effect that, the payment obligations of Genesis thereunder are
expressly subordinated and junior in right of payment to the Senior Obligations
as provided in this Agreement. The Subordinated Creditors and Genesis shall not
amend, or modify or supplement the Put/Call Agreement without the written
consent of the Senior Creditors, except for such amendments, modifications or
supplements which could not reasonably be expected to have a material adverse
effect on any Senior Creditor.
Section 5.9 Undertakings in Insolvency Proceedings. In furtherance of the
subordination provided herein, each of the Subordinated Creditors, for itself,
its successors and assigns, agrees that in any Insolvency Proceeding, it shall
not vote is claim(s) or take any other consensual actions in a manner
inconsistent with the terms of this Agreement.
Section 5.10 Further Assurances. The Subordinated Creditors agree that (a)
promptly upon the written request of the Senior Creditors, such Subordinated
Creditor shall take such other action, at Genesis' expense, as may be reasonably
requested by the Senior Creditors for the protection of the rights of the Senior
Creditors under this Agreement or to effectuate the subordination provided
herein, and (b) payment of the Subordinated Obligations shall not at any time be
secured by any lien or security interest on property of Genesis or any Affiliate
of Genesis.
Section 5.11 Specific Enforcement; Remedies. The Senior Creditors are
hereby authorized to demand the specific performance of this Article V, whether
or not Genesis shall have complied with any provisions hereof applicable to it,
at any time when the Subordinated Creditors (or any of them) shall have failed
to comply with the terms hereof, and the Subordinated Creditors hereby waive any
objection or defense in any action for the specific performance hereof based
upon the adequacy of any remedy at law; but nothing herein shall limit the right
of the Senior Creditors to seek damages at law for any failure by the
Subordinated Creditors or Genesis to perform their respective obligations
hereunder. In any action or suit for the enforcement of any right or remedy
under this Agreement, the parties acknowledge and agree that a court may assess
reasonable costs, including reasonable attorneys fees, against any party
litigant in such action, having due regard for the merits and good faith of the
claims or defenses made by such party.
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ARTICLE VI
MISCELLANEOUS
Section 6.1 Legend. Each certificate representing shares of Common Stock
hereafter acquired shall bear the following legend (until such time as
subsequent transfers thereof are no longer restricted in accordance with the
Securities Act or this Agreement):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN AMENDED
AND RESTATED STOCKHOLDERS AGREEMENT DATED AS OF [ ], 1999 (THE
"STOCKHOLDERS AGREEMENT") AND AN AMENDED AND RESTATED PUT/CALL AGREEMENT
DATED AS OF [ ], 1999 (THE "PUT/CALL AGREEMENT") AMONG, INTER ALIA, GENESIS
ELDERCARE CORP. (THE "COMPANY"), THE CYPRESS GROUP L.L.C., TPG PARTNERS II,
L.P., NAZEM, INC. AND GENESIS HEALTH VENTURES, INC. A COPY OF THE
SHAREHOLDERS AGREEMENT AND THE PUT/CALL AGREEMENT ARE ON FILE WITH THE
SECRETARY OF THE COMPANY.
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE GIVEN, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF
UNLESS SUCH GIFT, SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE STOCKHOLDERS
AGREEMENT AND THE PUT/CALL AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
ANY STATE, AND NO SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES OR "BLUE SKY"
LAWS OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
WHICH SHALL BE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
IS NOT IN VIOLATION OF THE ACT OR APPLICABLE STATE SECURITIES LAWS."
Section 6.2 Notices. Notices hereunder shall be given only by personal
delivery, registered or certified mail, return receipt requested, overnight
courier service, or by telecopy (and subsequently confirmed by any other
permitted means hereunder) and shall be deemed transmitted when personally
delivered or deposited in the mail or delivered to a courier service or sent by
telecopy (as the case may be), postage or charges prepaid, and addressed to the
particular party to whom the notice is to be sent as follows:
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(a) in the case of the Corporation:
Genesis ElderCare Corp.
101 East State Street
Kennett Square, PA 19348
Telecopier No.: 610-444-3365
Attention: Ira C. Gubernick, Esquire
----------
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Telecopier No.: (215) 569-5555
Attention: Stephen E. Luongo, Esquire
----------
(b) in the case of Cypress:
The Cypress Group L.L.C.
65 East 55th Street, 19th Floor
New York, NY 10022
Telecopier No.: (212) 705-0199
Attention: William L. Spiegel
----------
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: William E. Curbow, Esquire
----------
(c) in the case of TPG:
TPG Partners II, L.P. 201 Main Street, Suite 2420
Fort Worth, Texas 76102
Telecopier No.: (817) 871-4010
Attention: Karl I. Peterson
----------
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with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Telecopier No.: (212) 225-3999
Attention: Paul J. Shim, Esquire
----------
(d) in the case of Genesis:
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Telecopier No.: 610-444-3365
Attention: Ira C. Gubernick, Esquire
----------
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103
Telecopier No.: (215) 569-5555
Attention: Stephen E. Luongo, Esquire
----------
(e) in the case of Nazem:
Nazem, Inc.
645 Madison Avenue
New York, NY 10022
Telecopier: (212) 371-2150
Attention: Fred Nazem
----------
with a copy to:
Bartoma Corporation, N.V.
Fokkerweg 26
Suite 12
Curacao, Netherlands Antilles
Telecopier: 5999-465-39-07
Attention: Marleen Janssen
----------
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(f) in the case of the Senior Creditors:
Mellon Bank, N.A., as Administrative Agent and Synthetic Lease
Agent
[ ]
(g) in the case of any other Person, to the address of such Person set
forth on the Joinder hereto executed by such Person.
or to such address as a party may instruct by notice hereunder.
Section 6.3 Severability. In the event any provision hereof is held void or
unenforceable by any court, then such provision shall be severable and shall not
affect the remaining provisions hereof.
Section 6.4 Entire Agreement. This Agreement, together with the other
agreements referred to herein, is the entire Agreement among the parties, and,
when executed by the parties hereto, supersedes all prior agreements and
communications, either verbal or in writing between the parties hereto with
respect to the subject matter contained herein.
Section 6.5 Amendment and Waiver. This Agreement may not be amended,
modified or supplemented unless consented to in writing by the Genesis
Stockholders and a majority (by voting power) of the Non-Genesis Stockholders.
Any amendment, modification or supplement so consented to shall be binding upon
and inure to the benefit of any subsequent Stockholder. Any waiver or failure to
insist upon strict compliance with any obligation, agreement or condition herein
shall not operate as a waiver of, or estoppel with respect to, any such
subsequent or other failure.
Section 6.6 Consent to Specific Performance. The parties hereto declare
that it is impossible to measure in money the damages which would accrue to a
party by reason of failure to perform any of the obligations hereunder.
Therefore, if any party shall institute any action or proceeding to enforce the
provisions hereof, any party against whom such action or proceeding is brought
hereby waives any claim or defense therein that the other party has an adequate
remedy at law.
Section 6.7 Assignment; Responsibility for Affiliates. The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors. No party may assign to any Person any of
its rights or obligations hereunder.
Section 6.8 Variations in Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the antecedent person or persons or entity or
entities may require.
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<PAGE>
Section 6.9 Term. This Agreement shall terminate upon the earlier to occur
of (i) the mutual written agreement of the Stockholders; or (ii) consummation of
the exercise of the Call Option pursuant to the Put/Call Agreement, without any
default in connection therewith.
Section 6.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
Section 6.11 Further Assurances. Each of the parties shall execute such
documents and other papers and take such further actions as may be reasonably
required or desirable to carry out the provisions hereof and the transactions
contemplated hereby.
Section 6.12 Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the interpretation
of this Agreement.
Section 6.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[Remainder of page intentionally left blank]
15
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first above written.
GENESIS ELDERCARE CORP.
By:_______________________________________
THE CYPRESS GROUP L.L.C.
By:_______________________________________
TPG PARTNERS II, L.P.
BY: TPG GENPAR II, L.P.
BY: TPG ADVISORS II, INC.
By:_______________________________________
GENESIS HEALTH VENTURES, INC.
By:_______________________________________
NAZEM, INC.
By:_______________________________________
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The foregoing provisions of this Agreement applicable to Affiliates of
Stockholders owning Common Stock shall be binding upon and inure to the benefit
of the undersigned.
Affiliates of The Cypress Group L.L.C.
CYPRESS MERCHANT BANKING
PARTNERS, L.P.
By: Cypress Associates L.P.
By: The Cypress Group L.L.C.
By:_______________________________________
Name:
Title:
CYPRESS OFFSHORE PARTNERS, L.P.
By: Cypress Associates L.P.
By: The Cypress Group L.L.C.
By:_______________________________________
Name:
Title:
Affiliates of TPG PARTNERS II, L.P.
TPG PARALLEL II, L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:_______________________________________
Name:
Title:
TPG INVESTORS II, L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:_______________________________________
Name:
Title:
[Signatures continued on following page]
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<PAGE>
TPG MC COINVESTMENT, L.P.
By: TPG GenPar II, L.P.
By: TPG Advisors II, Inc.
By:_______________________________________
Name:
Title:
Affiliate of NAZEM
GENESIS ELDERCARE PORTFOLIO K. LP
By: Healthworth Associates I, L.L.C.
By:_______________________________________
Name:
Title:
Acknowledged and accepted with respect to Article V:
MELLON BANK, N.A., as Administrative
Agent under the Credit Agreement and Agent
under the Synthetic Lease Facility
By:_______________________________________
Name:
Title:
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<PAGE>
EXHIBIT A
Joinder
The undersigned hereby agrees to be bound to the attached Amended and
Restated Stockholders Agreement as a Non-Genesis Stockholder in accordance with
the terms thereof.
The address for notices or other communications to the undersigned under
the Amended and Restated Stockholders Agreement is:
[ ]
[ ]
[ ]
Attention:
Telecopier:
[ ]
---------------------------------
Title:
<PAGE>
EXHIBIT B
Irrevocable Proxy
[ ] (collectively, "Stockholder") hereby grant to and appoint Genesis
Health Ventures, Inc. ("Genesis"), Stockholder's irrevocable proxy and
attorney-in-fact (with full power of substitution) to vote in their sole
discretion all the shares of common stock, par value $.01 per share (the "Common
Stock"), of Genesis ElderCare Corp. now or hereafter owned by Stockholder with
all powers Stockholder would possess if acting personally. Stockholder intends
this proxy to be irrevocable and coupled with an interest and hereby revokes any
proxy previously granted by Stockholder with respect to the Common Stock owned
by Stockholder.
Stockholder agrees to take or cause to be taken all action and to do or
cause to be done all things necessary or advisable to make this irrevocable
proxy effective.
No action taken pursuant to this proxy shall be nullified or otherwise
affected by any interest that Genesis or any of its affiliates may have in the
matter acted upon, notwithstanding any interest that Stockholder may have in any
such matter. Genesis shall not have any fiduciary or other duty to Stockholder.
This proxy shall be valid and in effect for so long as Stockholder shall
own any shares of Common Stock (which may be longer than three years),
notwithstanding any earlier termination of the Amended and Restated Stockholders
Agreement, dated ____, 1999, by and among Genesis ElderCare Corp., The Cypress
Group L.L.C., TPG Partners II, L.P., Genesis, Nazem, Inc. and the other
signatories thereto.
THIS PROXY SHALL BE GOVERNED BY THE LAW OF THE STATE OF DELAWARE.
By:____________________________________
Name:
Title:
By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT F
IRREVOCABLE PROXY
This Irrevocable Proxy is given pursuant to the Restructuring
Agreement, dated as of _______, 1999 (the "Restructuring Agreement"), among The
Cypress Group L.L.C., TPG Partners II, L.P., Nazem, Inc. and Genesis Health
Ventures, Inc. ("Genesis"). All capitalized terms used in this Irrevocable Proxy
without definition shall have the meanings specified in the Restructuring
Agreement.
___________ ("Security Holder") hereby grants to and appoints Genesis
as Security Holder's irrevocable proxy and attorney-in-fact (with full power of
substitution) to vote in the manner specified below in connection with any vote
in which the holders of Genesis Class A Common Stock are entitled to vote
generally, other than a vote relating to an amendment to Genesis' articles of
incorporation to amend, modify or change the terms of any class or series of
preferred stock, the Proxy Securities owned by Security Holder as of the
application record date.
For purposes of this Irrevocable Proxy,
(a) "Proxy Securities" shall mean, as of any date, the number of
Transaction Voting Securities representing a number of votes
equal to the product of (i) the Total Proxy Voting Power as
of such date and (ii) a fraction, the numerator of which
shall be the Security Holder Voting Power as of such date
and the denominator of which shall be the Sponsor Voting
Power as of such date;
(b) "Security Holder Voting Power" shall mean, as of any date,
the number of votes entitled to be cast by Security Holder
as of such date by virtue of its ownership of Transaction
Voting Securities as of such date;
(c) "Sponsor Non-Proxy Voting Power" shall mean, as of any date,
the number of votes equal to the product of (i) the excess
of (A) the Total Voting Power as of such date over (B) the
Sponsor Voting Power as of such date and (ii) 0.5385;
provided, however, that in no event shall the "Sponsor
Non-Proxy Voting Power" determined in accordance with the
foregoing as of any date exceed 35% of the sum of (i) the
excess of (A) the Total Voting Power as of such date over
(B) the Sponsor Voting Power as of such date and (ii) the
Sponsor Non-Proxy Voting Power as so determined;
(d) "Sponsor Voting Power" shall mean, as of any date, the
aggregate number of votes entitled to be cast by the
Sponsors and the Sponsor Affiliates as of such date by
virtue of their ownership of Transaction Voting Securities
as of such date;
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(e) "Total Proxy Voting Power" shall mean, as of any date, the
number of votes equal to the excess, if any, of (i) the
Sponsor voting Power as of such date over (ii) the Sponsor
Non-Proxy Voting Power as of such date; and
(f) "Total Voting Power" shall mean, as of any date, the total
number of votes entitled to be cast by all holders of voting
securities of Genesis as of such date.
In making the foregoing calculations, each calculation (other than for
Proxy Securities) shall be rounded to four decimal places, and the calculation
of Proxy Securities shall be rounded to the nearest whole number.
Genesis shall cast the votes represented by the Proxy Securities, which
it is entitled to cast hereby, on any matter to be voted upon "for", "against"
or as an abstention in the same proportion as are cast all the voting securities
of Genesis which are actually cast on such matter, excluding only the votes
representing the Total Proxy Voting Power cast pursuant to Irrevocable Proxies
granted by the Sponsors or Sponsor Affiliates pursuant to the Restructuring
Agreement.
Security Holder intends this proxy to be irrevocable and coupled with
an interest.
Security Holder agrees to take or cause to be taken all action and to
do or cause to be done all things necessary or advisable to make this
Irrevocable Proxy effective.
No action taken pursuant to this Irrevocable Proxy shall be nullified
or otherwise affected by any interest that Genesis or any of its affiliates may
have in the matter acted upon, notwithstanding any interest that Security Holder
may have in any such matter. Genesis shall have no fiduciary or other duty to
Security Holder arising out of this Irrevocable Proxy.
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This Irrevocable Proxy shall be valid and in effect for so long as
Security Holder shall own any Transaction Voting Securities (which may be longer
than three years); provided, that this Irrevocable Proxy shall terminate upon
any termination of the standstill provisions contained in Section 5.5 of the
Restructuring Agreement.
THIS PROXY SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
[Security Holder]
By:
------------------------------------
Name:
Title:
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[Form of Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated]
September 15, 1999
Board of Directors
Genesis Health Ventures, Inc.
101 East State Street
Kennett Square, PA 19348
Members of the Board of Directors:
Genesis Health Ventures, Inc., a Pennsylvania corporation (the
"Company"), The Cypress Group L.L.C., a Delaware limited liability company
("Cypress"), TPG Partners II, L.P., a Delaware limited partnership ("TPG"), and
Nazem, Inc., a Delaware corporation ("Nazem" and, together with Cypress and TPG,
the "Joint Venture Partners") propose to enter into a restructuring transaction
pursuant to the terms contained in the September 15, 1999 draft of the
Restructuring Agreement to be entered into by the Company and the Joint Venture
Partners (the "Draft Agreement"). Pursuant to the terms of the Draft Agreement,
(i) in exchange for amending the Put/Call Agreement, dated October 9, 1997,
among Cypress, TPG, Nazem and the Company, including the termination of the Put
Option (as defined in the Put/Call Agreement), the Company has agreed to issue
to the Joint Venture Partners an aggregate of 24,369 shares of Series H Senior
Convertible Participating Cumulative Preferred Stock of the Company (the "Series
H Preferred Stock") and an aggregate of 17,631 shares of Series I Senior
Convertible Exchangeable Participating Cumulative Preferred Stock of the Company
(the "Series I Preferred Stock"), with the number of shares being issued to each
Joint Venture Partner in proportion to that Joint Venture Partner's investment
in Genesis Eldercare Corp., a Delaware corporation (the "Joint Venture"), and
(ii) the Company has agreed to issue to each of Cypress and TPG 6.25 million
shares of common stock of the Company (the "Common Stock") and warrants to
purchase one million shares of Common Stock for a consideration of $25 million
($50 million in the aggregate) (the "Transaction").
You have asked us whether, in our opinion, the Transaction is fair from
a financial point of view to the Company.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and business and financial
information concerning the Joint Venture that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company and the Joint Venture
furnished to us by the Company;
(3) Conducted discussions with members of senior management and
representatives of the Company concerning the matters
described in clauses 1 and 2 above, as well as the prospects
of the Company and the Joint Venture before and after giving
effect to the Transaction;
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(4) Reviewed the market prices and valuation multiples for the
shares of the Company's Common Stock, and compared them with
those of certain publicly traded companies that we deemed to
be relevant;
(5) Participated in certain discussions and negotiations among
representatives of the Company and certain of the Joint
Venture Partners and their respective financial and legal
advisors;
(6) Reviewed the potential pro forma impact of the Transaction;
(7) Reviewed the Draft Agreement and a draft dated September 15,
1999 of each of the amended and restated Put/Call Agreement,
the certificates of designation of the Series H Preferred
Stock and the Series I Preferred Stock, the warrant and the
amended and restated stockholders agreement (collectively with
the Draft Agreement, the "Draft Transaction Documents"); and
(8) Reviewed such other financial studies and analyses and took
into account such other matters as we deemed necessary,
including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Joint Venture or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct, nor have we conducted, any physical inspection of the properties or
facilities of the Company or the Joint Venture. With respect to the financial
forecast information furnished to or discussed with us by the Company, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management as to the expected
future financial performance of the Company or the Joint Venture, as the case
may be. We have also assumed that the final forms of the Restructuring Agreement
and the other Transaction documents will be substantially similar to the Draft
Transaction Documents reviewed by us.
We are not expressing any opinion herein as to the prices at which the
shares of Common Stock and the warrants to be purchased by Cypress and TPG in
the Transaction, or the shares of Series H Preferred Stock and Series I
Preferred Stock to be issued to the Joint Venture Partners in the Transaction,
may trade following the completion of the Transaction.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the information made
available to us as of, the date hereof. We have assumed that in the course of
obtaining the necessary regulatory or other consents or approvals (contractual
or otherwise) for the Transaction, no restrictions will be imposed that will
have a material adverse effect on the contemplated benefits of the Transaction.
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We are acting as financial advisor to the Company in connection with
the Transaction and will receive a fee from the Company for our services, a
significant portion of which is contingent upon the consummation of the
Transaction. In addition, the Company has agreed to indemnify us for certain
liabilities arising out of our engagement. We currently provide, and have in the
past provided, financial advisory and financing services to the Company and the
Joint Venture Partners, including having acted as financial advisor to the
Company in connection with its acquisition of Vitalink Pharmacy Services, Inc.
in 1998, and we may continue to provide such services to such parties, and we
have received, and may receive, fees for the rendering of those services. In
addition, in the ordinary course of our business, we may actively trade
securities of the Company for our own account and for the accounts of customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of
the Company. Our opinion does not address the merits of the underlying decision
by the Company to engage in the Transaction and does not constitute a
recommendation to any shareholder as to how such shareholder should vote on any
matter relating to the proposed Transaction.
On the basis of and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Transaction is fair from a financial point of
view to the Company.
Very truly yours,
