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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
THE MULTICARE COMPANIES, INC.
(Name of Subject Company)
THE MULTICARE COMPANIES, INC.
(Name of Person Filing Statement)
COMMON STOCK ($.01 PAR VALUE)
(Title of Class of Securities)
62543V105
(CUSIP Number of Class of Securities)
BRADFORD C. BURKETT, ESQ.
SENIOR VICE PRESIDENT
AND GENERAL COUNSEL
THE MULTICARE COMPANIES, INC.
411 HACKENSACK AVENUE
HACKENSACK, NEW JERSEY 07601
(201) 488-8818
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) filing Statement)
COPY TO:
CARL L. REISNER, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is The Multicare Companies, Inc., a
Delaware corporation (the "Company"), and the address of its principal executive
office is 411 Hackensack Avenue, Hackensack, New Jersey 07601. The title of the
class of equity securities to which this statement relates is the Common Stock,
par value $0.01 per share, of the Company ("Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer (the "Offer"), disclosed in a
Schedule 14D-1 dated June 20, 1997 (the "Schedule 14D-1"), of Genesis ElderCare
Acquisition Corp., a Delaware corporation (the "Bidder"), which is a
wholly-owned subsidiary of Genesis ElderCare Corp., a Delaware corporation ("the
Parent"), to purchase all outstanding shares of Common Stock at $28.00 per share
net in cash. According to the Schedule 14D-1, the principal executive offices of
the Bidder and the Parent are located at 148 West State Street, Kennett Square,
Pennsylvania 19348.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) (1) Certain contracts, agreements, arrangements and understandings
between the Company and certain of its officers are described at pages 6, 14, 15
and 16 of the Company's Proxy Statement, dated April 8, 1997, for its 1997
Annual Meeting of Stockholders (the "Proxy Statement"). A copy of the Proxy
Statement is attached hereto as Exhibit 1, and the portions thereof referred to
above are incorporated herein by reference.
(2) EMPLOYMENT AGREEMENTS. The employment agreements of each of Moshael
J. Straus, Chairman of the Board of Directors and Co-Chief Executive Officer of
the Company, Daniel E. Straus, President and Co-Chief Executive Officer of the
Company, Stephen R. Baker, Executive Vice President and Chief Operating Officer
of the Company, Alan D. Solomont, Consultant to the Company, Susan S. Bailis,
Senior Vice President of the Company, and Andrew Horowitz, Senior Vice President
of the Company, provide for certain benefits upon a change of control of the
Company. Such agreements also provide them with certain rights to terminate
their employment upon a change of control. The consummation of the Offer would
constitute a change of control under all such employment agreements.
Such agreements are described at pages 6 and 16 of the Proxy Statement and
such portions are incorporated herein by reference. The provisions respecting a
change of control in the employment agreement of Andrew Horowitz are
substantially the same as those of employees other than the Co-Chief Executive
Officers.
Pursuant to the Merger Agreement, the Parent has agreed to cause the
Surviving Corporation to comply in all respects with the change of control
provisions of the employment agreements of each of above-named employees. The
Merger Agreement provides that, without limiting the foregoing, all amounts
payable upon such change in control shall be paid in cash immediately following
the purchase of shares of Common Stock in the Offer.
STOCK OPTIONS. The employment agreements for each of the above-named
employees provide that all stock options will become immediately exercisable in
full immediately prior to the consummation of the Merger. Pursuant to the Merger
Agreement, immediately prior to the consummation of the Merger, each such stock
option will be canceled, extinguished and converted into the right to receive an
amount in cash equal to the product of (A) the number of shares of Common Stock
subject to such stock option immediately prior to the consummation of the Merger
and (B) the excess, if any, of (1) the price paid for each share of Common Stock
in the Offer over (2) the per share exercise price of such stock option. See
description of the Merger Agreement below.
(3) MERGER AGREEMENT. The Company, the Bidder and the Parent have
entered into an Agreement and Plan of Merger, dated as of June 16, 1997 (the
"Merger Agreement"), which provides among other things that the Bidder will make
a cash tender offer of $28.00 per share for all shares of the issued and
outstanding Common Stock of the Company (the "Offer"). A copy of the Merger
Agreement is attached hereto as Exhibit 2 and is incorporated herein by
reference. The following is a summary of the Merger Agreement and is qualified
in its entirety by the terms of the Merger Agreement. Defined terms used in such
summary and not otherwise defined herein are used with the meanings set forth in
the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as soon as practicable after the date of the Merger Agreement, but in no event
later than five business days from and including the date of public announcement
of
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the execution of the Merger Agreement. The obligation of the Bidder to accept
for payment shares of Common Stock tendered pursuant to the Offer is subject
only to the satisfaction or waiver by the Bidder of the conditions described in
Exhibit A of the Merger Agreement ("Exhibit A"). Under the Merger Agreement, the
Bidder expressly reserves the right, in its sole discretion, to waive any such
condition (other than the Minimum Condition, which may only be waived with the
Company's consent) and make any other changes in the terms and conditions of the
Offer; provided, that, unless previously approved by the Company in writing, no
change may be made which (a) reduces the number of Shares subject to the Offer,
(b) reduces the price per Share payable in the Offer, (c) modifies or adds to
the conditions to the Offer set forth in Exhibit A, (d) extends the Offer other
than as described in the next sentence, (e) changes the form of consideration
payable in the Offer (other than by increasing the cash offer price) or (f)
amends or modifies any term of the Offer in any manner adverse to any of the
Company's stockholders. The Bidder may, without the consent of the Company, but
subject to the Company's right to terminate the Merger Agreement pursuant to
Section 8.1(b)(ii) thereof, (i) extend the Offer, if at the scheduled expiration
date of the Offer any of the conditions to the Bidder's obligation to purchase
Shares shall not be satisfied, until such time as such conditions are satisfied
or waived or (ii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Commission or the staff thereof
applicable to the Offer or in order to obtain any material regulatory approval
applicable to the Offer. The Bidder agrees that: (A) in the event it would
otherwise be entitled to terminate the Offer at any scheduled expiration thereof
due to the failure of one or more of the conditions to the Offer set forth in
the first sentence of the introductory paragraph or paragraphs (a), (f) or (g)
of Exhibit A to be satisfied or waived, it will give the Company notice thereof
and, at the request of the Company, extend the Offer until the earlier of (1)
such time as such condition is or conditions are satisfied or waived and (2) the
date chosen by the Company which shall not be later than (x) September 15, 1997,
or October 15, 1997 if the option to extend set forth in Section 8.1(b)(ii)(y)
of the Merger Agreement is exercised or (y) the date on which the Company
reasonably believes all such conditions will be satisfied; provided that if any
such condition is not satisfied by the date so chosen by the Company, the
Company may request and the Bidder will make further extensions of the Offer in
accordance with the terms of this paragraph; and (B) in the event that it would
otherwise be entitled to terminate the Offer at any scheduled expiration date
thereof due solely to the failure of the Minimum Condition to be satisfied, it
will, at the request of the Company (which request may be made by the Company
only on one occasion), extend the Offer for such period as may be requested by
the Company not to exceed ten days from such scheduled expiration date. The
Merger Agreement provides that, subject to the terms and conditions of the Offer
and the Merger Agreement, the Bidder will accept for payment and pay for Shares
promptly after the expiration of the Offer.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the DGCL, at the consummation
of the Merger, the Bidder will be merged with and into the Company. As a result
of the Merger, the separate corporate existence of the Bidder will cease and the
Company will continue as the Surviving Corporation. At the Parent's election,
any direct or indirect subsidiary of the Parent other than the Bidder may be
merged with and into the Company instead of the Bidder.
At the consummation of the Merger, each Share issued and outstanding
immediately prior to the consummation of the Merger (unless otherwise provided
for) will be canceled, extinguished and converted into the right to receive
$28.00 in cash or any higher price that may be paid pursuant to the Offer (the
"Merger Consideration"), payable to the holder thereof, without interest, upon
surrender of the certificate formerly representing such Share in the manner
described in the Merger Agreement. In addition, as of the consummation of the
Merger, each share of the capital stock of the Bidder issued and outstanding
immediately prior to the consummation of the Merger shall be converted into and
become one fully paid and nonassessable share of common stock, par value $0.01
per share, of the Surviving Corporation, and each share of Common Stock that is
owned by the Company or any subsidiary of the Company and each share of Common
Stock that is owned by the Parent, the Bidder or other subsidiaries of Parent
shall automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
Immediately prior to the consummation of the Merger, the unexercisable
portion of each outstanding option to purchase shares of Common Stock, will
become immediately exercisable in full, subject to all expiration, lapse and
other terms and conditions thereof. The Company shall take all action necessary
so that each stock option (and any rights thereunder) outstanding immediately
prior to the consummation of the Merger shall be canceled immediately prior to
the consummation of the Merger in exchange for the right to receive an amount in
cash equal to the product of (A) the number of shares of Common Stock subject to
such stock option immediately prior to the consummation of the Merger (after
giving effect to the first sentence of Section 3.1(d) of the Merger Agreement)
and (B) the excess, if any, of (1) the price paid for each share of Common Stock
in the Offer over (2) the per share exercise price of such stock option, to be
delivered by the Surviving Corporation immediately following the consummation of
the Merger.
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The Merger Agreement provides that Shares that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
have properly exercised and perfected appraisal rights under Section 262 of the
DGCL will not be converted into the right to receive the Merger Consideration,
but will be entitled to receive the consideration as determined pursuant to
Section 262 of the DGCL; PROVIDED, HOWEVER, that if such holder shall have
failed to perfect or shall have effectively withdrawn or lost his, her or its
right to appraisal and payment under the DGCL, such holder's Shares shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration as described above.
The Merger Agreement also provides that at the Effective Time and without
any further action on the part of the Company and the Bidder, the Restated
Certificate of Incorporation (the "Certificate of Incorporation") of the
Company, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation until thereafter and
further amended as provided therein and under the DGCL. At the Effective Time
and without any further action on the part of the Company and the Bidder, the
By-Laws of the Bidder will be the By-Laws of the Surviving Corporation and
thereafter may be amended or repealed in accordance with their terms and as
provided by law. The Merger Agreement provides that the directors of the Bidder
immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualify or their earlier resignation or removal.
AGREEMENTS OF THE PARENT, THE BIDDER AND THE COMPANY
STOCKHOLDERS MEETING. Pursuant to the Merger Agreement, following the
purchase of Shares pursuant to the Offer, the Company will take all action
necessary in accordance with applicable law to convene a meeting of its
stockholders (the "Stockholders Meeting") as promptly as practicable to consider
and vote upon the Merger Agreement and the transactions contemplated thereby.
The Company will, through the Board of Directors, recommend that the Company's
stockholders vote in favor of the adoption of the Merger Agreement and the
transactions contemplated thereby, subject to the Board of Director's fiduciary
duty under applicable law. At the meeting of the Company's stockholder's, the
Parent will cause all Shares owned by the Parent, the Bidder or any other
subsidiary of Parent to be voted in favor of the adoption of the Merger
Agreement and the transactions contemplated thereby.
PROXY STATEMENT. As soon as practicable, following the purchase of Shares
pursuant to the Offer, the Company will prepare and file with the Commission
under the Exchange Act the proxy statement (the "Proxy Statement") and shall use
its reasonable best efforts to cause the Proxy Statement to be mailed to the
stockholders of the Company as promptly as practicable after such filing.
COMPANY BOARD REPRESENTATION. The Merger Agreement provides that, promptly
upon the purchase by the Bidder of such number of Shares pursuant to the Offer
as satisfies the Minimum Condition (the "Majority Acquisition"), and from time
to time thereafter, the Bidder will be entitled to designate up to such number
of directors on the Board of Directors of the Company as will give the Bidder
representation on the Board of Directors as represents a percentage of the Board
of Directors equal to the percentage of the aggregate number of Shares owned by
the Bidder, provided that, from the Majority Acquisition until the Effective
Time, at least two persons who were directors of the Company on the date of the
Merger Agreement (the "Continuing Directors") will be directors of the Company
and that if the number of continuing Directors is reduced below two for any
reason, any remaining Continuing Director will be entitled to fill such vacancy
or, if no Continuing Directors remain, the other directors will fill such
vacancies with persons not affiliated with the Bidder, the Parent or the
Company. From the time of the Majority Acquisition to the Effective Time, the
Company will use its reasonable best efforts to cause persons designated by the
Bidder to constitute the same percentage as is on the board of (i) each
committee of the Board of Directors, (ii) each board of directors of each
subsidiary of the Company and (iii) each committee of each such board, in each
case only to the extent permitted by law. The Company's obligations to appoint
designees to its Board of Directors shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder.
ACCESS TO INFORMATION; CONFIDENTIALITY. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, the Company shall, and shall cause
its subsidiaries to, afford the Parent and its authorized representatives
reasonable access during normal business hours to all of the properties,
personnel, contracts, agreements and books and records of the Company and its
subsidiaries, and will promptly deliver or make available to the Parent all
filings by the Company pursuant to federal or state securities laws, and all
other information concerning the business, properties, assets and personnel of
the Company and its subsidiaries as the Parent may from time to time reasonably
request.
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The Merger Agreement also incorporates by reference the terms of a
Confidentiality Agreement between the Company and the Guarantor.
NO SOLICITATION OF TRANSACTIONS. The Merger Agreement provides that the
Company, its subsidiaries and their respective officers, directors, employees,
representatives and advisors will immediately cease any existing discussions or
negotiations, if any, with any parties conducted prior to the date of the Merger
Agreement with respect to any proposal (an "Acquisition Proposal") for an
acquisition of all or any substantial part of the business and properties or
capital stock of the Company and its subsidiaries taken as a whole, directly or
indirectly, whether by merger, consolidation, share exchange, tender offer,
purchase of assets or shares of capital stock or otherwise (an "Acquisition
Transaction") PROVIDED that following the cessation of any such discussions or
negotiations, future discussions will be governed by the remaining provisions of
this paragraph. Except as set forth in the Merger Agreement, neither the Company
or any of its affiliates, nor any of its or their respective officers,
directors, employees, representatives or agents, will, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any person or group (other than the Parent and
the Bidder, any affiliate or associate of the Parent and the Bidder or any
designees of the Parent or the Bidder) concerning any Acquisition Proposal.
Notwithstanding the foregoing, (a) the Board of Directors may take, and disclose
to the Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer for shares
of capital stock of the Company; PROVIDED, that the Board of Directors will not
recommend that the stockholders of the Company tender their shares in connection
with any such tender offer unless the Board of Directors shall have determined
in good faith, after consultation with outside counsel, that failing to take
such action would constitute a breach of the Board of Directors' fiduciary duty
under applicable law; (b) the Company may, directly or indirectly, furnish
information and access, in each case only in response to unsolicited requests
therefor, to any person or group pursuant to customary confidentiality
agreements, and may participate in discussions and negotiate with such person or
group concerning any Acquisition Proposal, if such person or group has submitted
a written Acquisition Proposal to the Board of Directors and the Board of
Directors determines in its good faith judgment, after consultation with outside
counsel, that failing to take such action would constitute a breach of the Board
of Directors' fiduciary duty under applicable law; and (c) the Company may
terminate the Merger Agreement if the Company receives an Acquisition Proposal
in writing (1) that the Board of Directors determines in its good faith judgment
is more favorable to the Company's stockholders than the Offer and the Merger
and (2) as a result of which, the Board of Directors determines in good faith,
after consultation with outside counsel, that it is obligated by its fiduciary
duty under applicable law to terminate the Merger Agreement; PROVIDED, that such
termination pursuant to this clause (c) will not be effective until the Company
has made payment of the full fee and expense reimbursement required by Section
8.2 of the Merger Agreement. The Board of Directors will notify the Parent
immediately if any such proposal is made and will in such notice, indicate in
reasonable detail the identity of the offeror and the terms and conditions of
any proposal and, subject to the fiduciary duties of the Board of Directors
under applicable law, will keep the Parent promptly advised of all developments
which could reasonably be expected to culminate in the Board of Directors
withdrawing, modifying or amending its recommendation of the Offer, the Merger
and the other transactions contemplated by the Merger Agreement. The Company has
also agreed not to release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party, unless
the Board of Directors shall have determined in good faith, that failing to
release such third party or waive such provisions would constitute a breach of
the fiduciary duties of the Board of Directors under applicable law.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that the Bidder agrees that all rights to indemnification
existing in favor of the present or former directors, officers, and employees of
the Company (as such) or any of its subsidiaries or present or former directors
of the Company or any of its subsidiaries serving or who served at the Company's
or any of its subsidiaries' request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise (collectively, the "Covered Persons"), as provided in the
Company's Certificate of Incorporation or By-laws, or the articles of
incorporation, by-laws or similar documents of any of the Company's subsidiaries
and the indemnification agreements with such present and former directors,
officers and employees as in effect as of the date of the Merger Agreement with
respect to matters occurring at or prior to the Effective Time will survive the
Merger and continue in full force and effect and without modification (other
than modifications following the Merger which would enlarge the indemnification
rights) for a period of not less than the statutes of limitations applicable to
such matters, and the Surviving Corporation shall comply fully with its
obligations thereunder. Without limiting the foregoing, the Company will, and
after the Effective Time, the Surviving Corporation will periodically advance
reasonably incurred expenses as so incurred with respect to the foregoing
(including with respect to any action to enforce rights to indemnification or
the advancement of expenses) to the fullest extent permitted under applicable
law; PROVIDED, HOWEVER, that the person to whom the expenses are advanced
provides an undertaking (without delivering a bond or other security) to repay
such advance if it is ultimately determined that such person is not entitled to
indemnification. In addition, for a period of six
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(6) years after the Effective Time, the Surviving Corporation will maintain
officers' and directors' liability insurance and fiduciary liability insurance
for the Covered Persons (whether or not they are entitled to indemnification
thereunder) who were covered at the time of the Merger Agreement by the
Company's existing officers' and directors' or fiduciary liability insurance
policies on terms no less advantageous to such Covered Persons than such
existing insurance.
The Surviving Corporation will indemnify and hold harmless (and advance
expenses to), to the fullest extent permitted under applicable law, each
director, officer, employee, fiduciary and agent of the Company or any
subsidiary of the Company serving as such on the date of the Merger Agreement
against any costs and expenses in connection with any claim, action, suit,
proceeding or investigation relating to any of the transactions contemplated
thereby, and in the event of any such claim, action, suit, proceeding or
investigation, (i) the Surviving Corporation will pay the reasonable fees and
expenses of counsel selected by such parties and (ii) the parties to the Merger
Agreement will cooperate in the defense of any such matter; PROVIDED, HOWEVER,
that the Surviving Corporation will not be liable for any settlement effected
without its prior written consent, which consent shall not unreasonably be
withheld. The Surviving Corporation shall pay all reasonable costs and expenses,
including attorneys' fees, that may be incurred by and indemnified parties in
enforcing the indemnity and other obligations provided for by Section 6.8 of the
Merger Agreement, and such obligations will survive the consummation of the
Merger and shall continue for the periods specified in the Merger Agreement. In
the event the Surviving Corporation or any of its respective successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, it is required to make proper provisions so that successors and
assignees of the surviving corporation assume the obligations set forth in
Section 6.8 of the Merger Agreement.
FURTHER ACTION; REASONABLE EFFORTS. The Merger Agreement provides that,
upon the terms and subject to the conditions thereof, each of the parties
thereto shall use all reasonable efforts to take, or cause to be taken, all
action, and to do or cause to be done, all things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by and in connection with the Merger Agreement as soon as
practicable to (i) obtain all consents, amendments to or waivers under the
Company's contractual arrangements (other than agreements relating to long term
debt or consent, amendments or waivers, the failure of which will not have a
Material Adverse Effect (as defined in the Merger Agreement)) with respect to
the Company, impair the ability of the Company to perform its obligations under
the Merger Agreement or delay the transactions contemplated by the Merger
Agreement, (ii) make all necessary or appropriate registrations and filings with
governmental entities, (iii) defend any lawsuits challenging the Merger
Agreement or the transactions contemplated thereby, (iv) fulfill or cause the
fulfillment of the conditions to closing set forth in Article 7 of the Merger
Agreement. In connection with and without limiting the foregoing, the Company
and its Board of Directors will (x) take all action necessary to ensure that no
state takeover statute or similar statute or regulation becomes applicable to
the Offer, the Merger, the Merger Agreement or the transaction contemplated
thereby or by the Tender Agreement and Irrevocable Proxy (the "Tender
Agreement") and (y) if any such statute or regulation becomes applicable to any
of the foregoing, take all action necessary to ensure that the Offer, the Merger
and the transactions contemplated by the Merger Agreement and the Tender
Agreement are consummated as promptly as practicable and to otherwise minimize
the effect of such statute or regulation on such transactions. The Company and
the Parent agreed to file as promptly as practicable, but not later than 10 days
following the announcement of the Offer, the notification and report required
pursuant to the HSR Act. The Parent agreed to cause to be filed as promptly as
practicable and in no event later than July 15, 1997, all other applications and
notices required to be filed with governmental authorities in order to
consummate the Offer and the Merger, and to pursue diligently the approval of
such applications.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has covenanted and agreed that, during the period from the date of
the Merger Agreement to the Effective Time, (1) the Company will, and will cause
each of its subsidiaries, subject to certain exceptions, to, conduct its
operations according to its ordinary course of business consistent with past
practice (although it will not be a breach of such covenant if a deviation from
past practice occurs as a result of the limitations set forth in clauses (e) or
(g) below), (2) the Company will, and will cause each of its subsidiaries to,
use all reasonable efforts to preserve intact its business organization and to
maintain satisfactory relationships with its customers, suppliers and others
having material business relationships with it (although it will not be a breach
of such covenant if a deviation from past practices occurs as a result of the
limitations set forth in clauses (e) or (g) below), and (3) the Company will not
and will not permit any of its subsidiaries to, without the prior written
consent of the Parent:
(a) amend or propose to amend its Certificate of Incorporation or
By-laws or equivalent governing instruments;
(b) authorize for issuance, issue, sell, pledge, deliver or agree or
commit to issue, sell, pledge or deliver (whether through the issuance or
granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or
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other agreements) or otherwise encumber any capital stock of any class or
any securities convertible into or exchangeable for shares of capital stock
of any class, other than the issuance of shares of Common Stock issuable
upon exercise of Company Stock Options or conversion of 7% Debentures
outstanding on the date of the Merger Agreement or pursuant to the Stock
Purchase Plan or the Directors Plan (in each such case, in accordance with
the present terms thereof);
(c) split, combine or reclassify any of its capital stock or declare,
pay or set aside for payment any dividend or other distribution in respect
of or substitution for its capital stock, or redeem, purchase or otherwise
acquire any shares of its capital stock;
(d) except as set forth in Schedule 4.9 of the Merger Agreement,
increase or establish any compensation or benefit plan, agreement, policy,
practice, program or arrangement that would be a Plan (had such plan,
agreement, policy, practice, program or arrangement been adopted prior to
the date of the Merger Agreement) or otherwise increase in any manner the
compensation payable or to become payable by the Company or any of its
subsidiaries to any of their respective directors, officers, former
employees, or employees, other than in the ordinary course of business
consistent with past practice or as required under any existing employment
agreement or Plan or the Merger Agreement;
(e) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets, outside of the ordinary course of
business that in the aggregate is in excess of $10 million (the foregoing
does not, however, restrict any construction project identified or
commenced by the Company prior to the Merger Agreement that is not
prohibited by clause (h) below);
(f) sell, lease, license, or otherwise dispose of, or enter into any
material contract, commitment, lease or agreement with respect to, any
properties or assets (i) that are material to the Company and its
subsidiaries taken as a whole and (ii) other than in the ordinary course of
business consistent with past practice;
(g) (x) incur any long-term indebtedness in excess of the aggregate
amount of the Company's consolidated long-term indebtedness outstanding as
of June 16, 1997 other than (i) indebtedness not to exceed $10 million at
any one time outstanding, the proceeds of which are used to make
acquisitions permitted by clause (e) above; PROVIDED, that the ratio of the
principal amount of the indebtedness incurred to finance such acquisitions
to the aggregate pro forma cash flow of the businesses so acquired during
the four fiscal quarters preceding such acquisition does not exceed 6:1,
and (ii) additional indebtedness not to exceed $10 million on the date
shares are purchased in the Offer, and except for intercompany indebtedness
between the Company and any of its subsidiaries or between such
subsidiaries, or (y) make any loans, advances or capital contributions to,
or investments in, any other person, other than to the Company or any
subsidiary or joint venture of the Company or to officers and employees of
the Company or any of its subsidiaries for travel, business or relocation
expenses in the ordinary course of business consistent with past practice;
(h) make or agree to make any new capital expenditure or capital
expenditures other than in accordance with the Company's 1997 budget which
was delivered to the Parent;
(i) make any tax election or settle or compromise any tax liability
that will have a Material Adverse Effect with respect to the Company;
(j) make any material change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(k) enter into any other agreements, commitments or contracts that are
material to the Company and its subsidiaries taken as a whole, other than
in the ordinary course of business consistent with past practice, or
otherwise make any material change that is adverse to the Company
(including by way of termination) in (i) any existing agreement, commitment
or arrangement that is material to the Company and its subsidiaries taken
as a whole or (ii) the conduct of the business or operations of the Company
and its subsidiaries; or
(l) agree, commit or arrange to do any of the foregoing.
EMPLOYEE MATTERS. The Merger Agreement provides that on and after the
Effective Time, the Parent will cause the Surviving Corporation to comply in all
respects with the change of control provisions in the employment agreements of
Moshael J. Straus, Daniel E. Straus, Steven R. Baker, Andrew Horowitz, Alan D.
Solomont and Susan S. Bailis. Without limiting the foregoing, all amounts
payable upon such change in control shall be paid in cash immediately following
the Majority Acquisition.
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In the Merger Agreement, the Parent agreed to pay or to cause the Surviving
Corporation to pay, to certain employees of the Company an amount (the "Accrued
Bonus Payment") equal to such employee's annual bonus multiplied by a fraction,
the numerator of which is the number of days that have elapsed from December 31,
1996 (or the date of hire of the affected employee, if later) until the
consummation of the Merger and the denominator of which is 365; provided, that
if any such employee terminates his or her employment other than for Good Reason
to Terminate (as defined below) prior to December 31, 1997, the numerator shall
be the lesser of 181 and the number of days that have elapsed from the date of
hire of the Affected Employee until June 30, 1997. Payment of each Accrued Bonus
Payment shall be payable upon the earlier to occur of (i) the termination
following the purchase of Shares pursuant to the Offer of the affected
employee's employment, (ii) the occurrence of an event that constitutes Good
Reason to Terminate and (iii) not later than February 15, 1998, if the affected
employee is employed by the Surviving Corporation or any of its subsidiaries on
December 31, 1997.
In the Merger Agreement, the Parent agreed that the Surviving Corporation
would make certain severance payments to each of the Company's corporate and
non-facility employees and certain non-ancillary employees (which does not
include any person identified in the first paragraph of this section), on the
date of termination of any such employee by the Surviving Corporation or its
subsidiary (other than a termination for Cause (as defined below)), as the case
may be, or by such employee following the occurrence of an event that
constitutes Good Reason to Terminate. Prior to the date that is eighteen months
after the Effective Time, the Parent has agreed that the Surviving Corporation
will not, and will not permit its subsidiaries to, terminate any such employees
on less than 90 days prior written notice of such termination. Notwithstanding
the foregoing, no employee shall be entitled to such severance payment if such
employee receives a notice of termination or is terminated by the Company or
voluntarily resigns at any time prior to the purchase of Shares pursuant to the
Offer or on a date that is after the date that is eighteen months after the
Effective Time. For purposes of the Merger Agreement, "Cause" means conviction
of a felony or a crime involving personal dishonesty or theft or
misappropriation of the property of the Surviving Corporation or its
subsidiaries and "Good Reason to Terminate" is deemed to occur if the Parent,
the Surviving Corporation or any of their subsidiaries or affiliates (i) takes
any action which substantially reduces an affected employee's title, duties,
responsibilities, salary, or, unless such change affects all employees of the
Surviving Corporation or its subsidiaries at a comparable level of seniority and
responsibility, benefits, or (ii) requires the affected employee to relocate
permanently in excess of 25 miles from his or her primary place of business.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by the Company as to the
Company's organization, capitalization, authorization for the agreement, the
absence of conflicts with governing instruments or other agreements,
governmental approvals, compliance with SEC filings, preparation of financial
statements, undisclosed liabilities, veracity of information supplied, absence
of certain changes or events, finders and investment bankers fees, voting
requirement for approval, absence of litigation, taxes, compliance with law,
title to properties, compliance with agreements, employee benefit plans,
insurance, and environmental matters.
In addition, the Merger Agreement contains representations and warranties
by the Parent and the Bidder concerning their organization, authorization for
the agreement, the absence of conflicts with governing instruments or other
agreements, governmental approvals, veracity of information supplied, financing,
finders and investment bankers fees, and regulatory approvals.
CONDITIONS OF THE MERGER. Under the Merger Agreement, the respective
obligations of the Parent, the Bidder and the Company to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions: (a) the Merger Agreement shall have been approved by the
affirmative vote of the stockholders of the Company by the requisite vote in
accordance with the Company's Certificate of Incorporation and the DGCL (which
the Company has represented shall be solely the affirmative vote of a majority
of the outstanding Shares); (b) no legal requirements shall have been enacted,
entered, promulgated or enforced by any court or governmental entity which
prohibits or prevents the consummation of the Merger; and (c) any applicable
waiting period under the HSR Act will have expired or been terminated.
TERMINATION, FEES AND EXPENSES. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after adoption by the stockholders of the Company, as follows:
(a) By the mutual written consent of the Parent, the Bidder and the
Company (but only by action of the Continuing Directors after the purchase
of Shares pursuant to the Offer);
(b) By the Parent, the Bidder or the Company (but only by action of
the Continuing Directors after the purchase of Shares pursuant to the
Offer):
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(i) if a court of competent jurisdiction or other governmental
entity of the United States shall have issued an order or taken any
other action permanently restraining, enjoining or otherwise prohibiting
the Merger and such order or other action shall have become final and
nonappealable; or
(ii) (x) as a result of the failure, occurrence or existence of any
of the conditions set forth in Exhibit A to the Merger Agreement (1) the
Bidder shall have failed to commence the Offer within five business days
following the date of the Merger Agreement or (2) the Offer shall have
terminated or expired in accordance with its terms without the Bidder
having accepted for payment any Shares pursuant to the Offer or (y) the
Bidder shall not have accepted for payment any Shares pursuant to the
Offer by September 15, 1997, provided, that such date may be extended at
the option of the Parent to October 15, 1997, but only if the Parent is
and has been diligently pursuing approval of the applications with the
relevant governmental authorities, PROVIDED, FURTHER, however, that the
passage of the period referred to in clause (y) shall be tolled for any
part thereof (but not exceeding 30 calendar days in the aggregate)
during which any party shall be subject to a non-final order, decree,
ruling or action restraining, enjoining or otherwise prohibiting the
purchase of Shares pursuant to the Offer or the consummation of the
Merger; and PROVIDED FURTHER that the right to terminate the Merger
Agreement pursuant to clause (b) (ii) will not be available to any party
whose willful breach of its representations and warranties contained in
the Merger Agreement or whose failure to perform any of its obligations
under the Merger Agreement results in the failure, occurrence or
existence of any such condition;
(c) By the Company if the Company receives an Acquisition Proposal in
writing from any person or group (i) that the Board of Directors determines
in its good faith judgment is more favorable to the Company's stockholders
than the Offer and the Merger and (ii) as a result of which, the Board of
Directors determines in good faith, after consultation with outside
counsel, that it is obligated by its fiduciary duty under applicable law to
terminate the Merger Agreement; provided, that such termination pursuant to
clause (c) will not be effective until the Company has made payment of the
full fee and expense reimbursement required by the Merger Agreement.
(d) By the Parent or the Bidder prior to the purchase of Shares
pursuant to the Offer in the event of a material breach by the Company of
any representation, warranty, covenant or other agreement contained in the
Merger Agreement which has not been cured within 15 days after giving of
written notice to the Company;
(e) By the Company, if the Parent or the Bidder shall have breached in
any material respect any of their respective representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
failure to perform has not been cured within 15 days after the giving of
written notice to the Parent or the Bidder;
(f) By the Parent, if, prior to the purchase of Shares in the Offer,
the Company shall have (1) withdrawn, modified or amended in any respect
adverse to the Parent or the Bidder its approval or recommendation of the
Merger Agreement or any of the transactions contemplated herein, (2) failed
to include in the Proxy Statement or Information Statement such
recommendation, (3) recommended any Acquisition Proposal or Acquisition
Transaction from or with a person other than the Parent or any of its
subsidiaries or (4) resolved to do any of the foregoing;
(g) By the Parent, if, prior to the purchase of Shares in the Offer
(i) an Acquisition Proposal that is publicly disclosed shall have been
commenced, publicly proposed or communicated to the Company which contains
a proposal as to price (without regard to the specificity of such price
proposal) and (ii) the Company shall not have rejected such proposal within
10 business days of its receipt or the date its existence first becomes
publicly disclosed, if sooner;
(h) By the Parent, if (i) any person or group (as defined in Section
13(d)(2) of the Exchange Act) (other than Genesis Health Ventures, Inc.
("Genesis"), the Parent, the Bidder or any of its or their affiliates)
shall have become, or shall have made a proposal seeking to become, after
the date hereof the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of at least 35% of the Shares, other than
acquisitions of securities for bona fide arbitrage purposes only, and other
than acquisition of beneficial ownership solely as a result of a person
having discretionary authority to vote or dispose of shares in an
investment advisory or similar capacity or shall have made a proposal to
acquire, directly or indirectly, all or substantially all of the
consolidated assets of the Company and its subsidiaries and (ii) following
public announcement of such person or group becoming such beneficial owner
or proposing such beneficial ownership or acquisition, at the next
scheduled expiration of the Offer all conditions to the Offer (other than
the Minimum Condition) shall have been satisfied or waived; and
(i) By the Company, if Parent shall not have delivered the Letter of
Credit (as defined below) by June 25, 1997.
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The Merger Agreement provides further that if: (1) the Company terminates
this Agreement pursuant to clause (c) above; (2) the Company terminates this
Agreement pursuant to clause (b) (ii) above and at such time the Parent would
have been permitted to terminate this Agreement under clause (f) or (g) above;
(3) the Parent terminates this Agreement pursuant to Clause (f) or (g) above; or
(4) the Parent terminates this Agreement pursuant to clause (d) or (h) above and
(in the case of clause (4) only) within one year of such termination the Company
shall have consummated, or have entered into a definitive agreement with respect
to, an Acquisition Transaction pursuant to which the holders of the Common Stock
have received or will receive consideration (including the value of any retained
equity) equal to or greater than the Merger Consideration, then the Company
shall pay to Parent, within one business day following (in the case of clauses
(1), (2) and (3)) such termination and, in the case of clause (4), such
consummation or entering into of a definitive agreement, a fee, in cash, of $25
million, provided, however, that the Company in no event shall be obligated to
pay more than one such fee and the amount of fees paid as provided in this
paragraph and the amount of expense reimbursement paid under the next paragraph
shall not exceed $25 million.
Upon the termination of the Merger Agreement under circumstances in which
the Company would be obligated to pay a fee as described in the previous
paragraph, then the Company shall reimburse the Parent and Genesis (not later
than one business day after submission of statements therefor) for all actual
documented out-of-pocket expenses incurred by or on behalf of any of them or
their affiliates in connection with the Offer and the Merger and the
consummation of all transactions contemplated by the Agreement (including,
without limitation, fees and disbursements payable to financing sources,
investment bankers, counsel to Bidder, Parent, the Guarantor or any of the
foregoing, and accountants) ("expenses"). In all cases, the total amount of fees
paid as described in the previous paragraph and reimbursement of expenses as
described in this paragraph shall not exceed $25 million. Upon termination of
the Merger Agreement pursuant to clause (d) above, the Company shall reimburse
the Parent (not later than one business day after submission of statements
therefor) for expenses, which reimbursement shall in no event exceed $12
million.
GUARANTY. The Merger contains a guaranty (the "Guaranty") by Genesis, as a
primary obligor and not as surety, to the Company, of the due and punctual
observance, performance and discharge of each obligation of the Parent and the
Bidder contained in the Merger Agreement and the Tender Agreement. Obligations
of the Parent and the Bidder so guaranteed are hereinafter referred to as the
"Obligations."
Genesis agreed that if either or both of the Parent and the Bidder fails to
observe, perform or discharge any Obligation, the Guarantor shall promptly
itself, observe, perform or discharge such Obligation, or cause either the
Parent or the Bidder to observe, perform or discharge such Obligation, in all
cases as if and to the extent that Genesis was the primary obligor with respect
to such Obligation, and shall pay any and all actual damages that may be
incurred or suffered by the Company in consequence thereof, and any and all
costs and expenses, including, without limitation, attorneys' fees and expenses,
that may be incurred by the Company in collecting such Obligation and/or
preserving or enforcing any rights under such Guaranty or under the Obligations.
The liability of Genesis under the Guaranty with respect to each and all of the
Obligations is absolute and unconditional, irrespective of any waiver of,
amendment to, modification of, consent or departure from, the guaranteed
agreements, including, without limitation, any waiver or consent involving a
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations. Notwithstanding anything to the contrary set forth
therein, in consideration of the substantial time and expense invested by the
Company in the transactions contemplated by the Merger Agreement and the loss of
opportunities otherwise available to the Company as a result thereof, if, at any
scheduled expiration of the Offer occurring after August 15, 1997 on which each
of the conditions set forth in clauses (a) through (g) on Exhibit A to the
Merger Agreement (as well as the HSR Act condition set forth in clause (ii) of
the first sentence of the introductory paragraph of such Exhibit A) has been
satisfied or waived, the Parent shall not have satisfied or waived the condition
set forth in clause (iii) of the first sentence of the introductory paragraph of
such Exhibit A and the Merger Agreement is thereafter terminated, then Genesis
shall pay to the Company $30,000,000, in cash in immediately available funds.
Subject to the next sentence, upon making such payment none of the Parent, the
Bidder, Genesis or any of their affiliates shall have any further liability with
respect to the failure to complete the transactions contemplated by the Merger
Agreement. Such limitation will not apply if the Parent or the Bidder breaches
the Merger Agreement (and the breach remains unremedied after 5 days notice to
the Parent or the Bidder) or if Genesis, the Parent or the Bidder fail to use
reasonable best efforts to obtain such financing.
In addition, Genesis has agreed to deliver to the Company a clean,
irrevocable letter of credit (the "Letter of Credit") for $30,000,000, drawn on
Mellon Bank, N.A., in form reasonably acceptable to the Company to secure its
obligation to pay the amount as set forth in the previous paragraph. Genesis
will use its reasonable best efforts to deliver the Letter of Credit prior to
commencement of the Offer, but in all events will deliver it not later than June
25, 1997.
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(4) TENDER AGREEMENTS AND IRREVOCABLE PROXIES. Simultaneously with the
execution of the Merger Agreement, the Parent and the Bidder entered into a
Tender Agreement with each of Daniel E. Straus and Moshael J. Straus (each, a
"Stockholder" and together, the "Stockholders") as a condition to the
willingness of the Parent and the Bidder to proceed with the Offer and the
Merger. Copies of the Tender Agreements are attached hereto as Exhibits 3 and 4,
and are incorporated herein by reference. The following is a summary of the
Tender Agreements and is qualified in its entirety by the terms of the Tender
Agreements. Defined terms used in such summary and not otherwise defined herein
are used with the meanings set forth in the Tender Agreements.
Pursuant to the Tender Agreements, each Stockholder agreed to validly
tender (or cause the record owner thereof) and not withdraw, pursuant to and in
accordance with the terms of the Offer, all of the Shares beneficially owned by
such Stockholder, together with any other Shares, or other securities of the
Company entitled, or which may be entitled, to vote generally in the election of
directors (the "Owned Shares"). The Tender Agreements provide that each
Stockholder will, for all Owned Shares tendered by such Stockholder in the Offer
and accepted for payment, receive a price per Owned Share equal to $28.00, or
such higher per share consideration paid to other stockholders who have tendered
into the Offer.
Pursuant to the Tender Agreements, each Stockholder agreed that during the
period commencing on the date thereof and continuing until the earlier of (x)
the consummation of the Offer and (y) the termination thereof, at any meeting
(whether annual or special, and whether or not an adjourned or postponed
meeting) of the Company's stockholders, however called, or in connection with
any written consent of the Company's stockholders, subject to the absence of a
preliminary or permanent injunction or other requirement under applicable law by
any United States federal, state or foreign court barring such action, such
Stockholder shall vote (or cause to be voted) all Owned Shares: (i) in favor of
the Merger, the execution and delivery by the Company of the Merger Agreement
and the approval and adoption of the Merger and the terms thereof and each of
the other actions contemplated by the Merger Agreement and the Tender Agreements
and any action required in furtherance thereof; (ii) against any action or
agreement that would impede, interfere with, or prevent the Offer or the Merger;
and (iii) except as otherwise agreed to in writing in advance by the Parent,
against the following actions (other than the Offer, the Merger and the
transactions contemplated by the Merger Agreement and the Tender Agreements):
(I) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(II) any sale, lease or transfer of a material amount of the assets or business
of the Company or its subsidiaries, or any reorganization, restructuring,
recapitalization, special dividend, dissolution, liquidation or winding up of
the Company or its subsidiaries; (III) any change in the present capitalization
of the Company including any proposal to sell any material equity interest in
the Company or any amendment of the certificate of incorporation of the Company
and (IV) against an election of new members of the Board of Directors of the
Company except where the vote is cast in favor of the nominees of a majority of
the existing directors of the Company. In addition, each Stockholder agreed not
to enter any agreement, arrangement or understanding with any person the effect
of which would be inconsistent or violative of the foregoing.
Pursuant to the Tender Agreements, each Stockholder granted to, and
appointed the Bidder and any designee of the Bidder, each of them individually,
such Stockholder's irrevocable (until the termination of the Tender Agreements)
Proxy and Attorney-In-Fact (with full power of substitution) to vote the Owned
Shares of such Stockholder as indicated in the preceding paragraph.
As of June 16, 1997, the Stockholders beneficially owned 14,013,966 shares
of Common Stock, or 36.1% of the outstanding shares of Common Stock on a
fully-diluted basis.
The Tender Agreements provide that the Stockholders entered into such
Agreements solely as the owner of Owned Shares and not as a director or officer,
and that the Agreements set forth therein shall in no way restrict the
Stockholders in the exercise of his fiduciary duties as a director and officer
of the company, which, in the case of the following paragraph, such duties will
be exercised only in accordance with the instructions of the Company's Board of
Directors acting in compliance with the requirements of the Merger Agreement.
The Tender Agreements provide that each Stockholder will immediately cease
any existing discussions or negotiations, if any, with any parties conducted
with respect to any Acquisition Proposal. The Tender Agreements further provide
that each Stockholder will not, directly or indirectly encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any person or group (other than the Parent and the Bidder or any
affiliate, associate or designee of the Parent or the Bidder) concerning any
Acquisition Proposal or Acquisition Transaction.
The Tender Agreements provide that each Stockholder will not, until the
termination thereof, directly or indirectly, (i) except as permitted thereby,
transfer to any person any or all Owned Shares; or (ii) except as permitted
thereby, grant any proxies or powers of attorney, deposit any Owned Shares into
a voting trust or enter into a voting agreement, understanding
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or arrangement with respect to such Owned Shares. The Tender Agreements provide
that notwithstanding anything to the contrary, each Stockholder shall have the
right to transfer Owned Shares (i) to any Family Member, (ii) to the trustee or
trustees of a trust solely (except for remote contingent interests) for the
benefit of such Stockholder and/or one or more Family Members, (iii) to a
foundation created or established by such Stockholder, (iv) to a corporation of
which such Stockholder and/or any Family Members owns all of the outstanding
capital stock, (v) to a partnership of which such Stockholder and/or any Family
Members owns all of the partnership interests, (vi) to the executor,
administrator or personal representative of the estate of such Stockholder,
(vii) to any guardian, trustee or conservator appointed with respect to the
assets of such Stockholder or (viii) by operation of law; provided, that in the
case of any transfer pursuant to clauses (i) through (vii), the transferee shall
execute an agreement to be bound by the terms of the Tender Agreements, or terms
substantially identical thereto. For purposes of the foregoing, "Family Member"
has the meaning ascribed to "Related Parties" under Section 672(c) of the
Internal Revenue Code of 1986, as amended.
Each Tender Agreement, and all rights and obligations of the Bidder parties
thereunder, terminates upon the earlier of (a) the date upon which the Parent
has purchased and paid for all of the Owned Shares of the applicable Stockholder
in accordance with the Offer, (b) the date on which the Merger Agreement is
terminated under such circumstances in which the Parent is not and will not be
entitled to a break-up fee pursuant to the Merger Agreement and (c) May 31,
1998.
The Tender Agreements contain customary representations and warranties by
the parties.
(5) NONCOMPETITION AND CONSULTING AGREEMENTS. Simultaneously with the
execution of the Merger Agreement, the Parent and the Bidder entered into
Noncompetition and Consulting Agreements (the "Noncompetition Agreements") with
each of Daniel E. Straus and Moshael J. Straus (each, a "Consultant" and
together the "Consultants"). Copies of the Noncompetition Agreements are
attached hereto as Exhibits 5 and 6, and are incorporated herein by reference.
The following is a summary of the Noncompetition Agreements and is qualified in
its entirety by the terms of the Noncompetition Agreements. Defined terms used
in such summary and not otherwise defined herein are used with the meanings set
forth in the Noncompetition Agreements.
Pursuant to the Noncompetition Agreements, the Parent irrevocably appointed
each Consultant, and each Consultant agreed to be a consultant, for a period of
12 months commencing on the date of the consummation of the Merger (the
"Closing") (the "Consulting Term"), to perform such reasonable consulting
services as the chief executive officer of the Parent requests, subject to
following paragraph. If the Merger Agreement is terminated, the Noncompetition
Agreements will be simultaneously terminated.
During the Consulting Term, each Consultant as an independent contractor
will make himself available upon reasonable notice for such time during regular
business hours as shall be reasonably necessary for the business of the Company.
Such consulting services will be rendered in Hackensack, New Jersey.
As compensation for each Consultant's services, the Parent agreed to pay
each Consultant a consulting fee of $1.5 million per annum payable in
immediately available funds at the Closing. In addition, each Consultant will be
reimbursed for all expenses actually incurred by such Consultant in the
performance of his duties.
As consideration for each Consultant's agreement to the restrictive
covenants described in the next four succeeding paragraphs (the "Restrictive
Covenants"), the Parent agreed to pay each Consultant, among other things, a
cash payment in the amount of $1.5 million payable in immediately available
funds at the Closing.
The Noncompetition Agreements provide that the Consultants will not for a
period of one year after the date thereof, in any capacity (including, but not
limited to, owner, partner, shareholder, consultant, agent, employee, officer,
director or otherwise), directly or indirectly, for his own account or for the
benefit of any person, establish, engage in or be connected with any Competitive
Business. The term "Competitive Business" means any Restricted Business
conducted in the Restricted Zone. Restricted Business means institutional
pharmacy, rehabilitation services, long-term care services, skilled nursing
facilities or assisted living facilities but does not include providing any
other goods or services to skilled nursing facilities, assisted living
facilities or other health care facilities. The Restricted Zone means any town
in Connecticut or Rhode Island in which the Company operates a long-term care
facility and an area of fifteen miles surrounding such facility; any county in
Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the Company
operates a long-term care facility and an area of fifteen miles surrounding such
facility; all portions of Massachusetts east of Worcester; all portions of
Pennsylvania east of Harrisburg and an area of fifteen miles around any facility
located in Virginia or Vermont; but in no event includes any portion of any
state other than Connecticut, Rhode Island, Illinois, New Jersey, Ohio, West
Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or Vermont. The
foregoing does not restrict either Consultant from owning interests in, or
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developing, real estate so long as such Consultant is not operating any
Restricted Business. In addition, the Consultants may not pursue certain
development projects.
For a period of three years commencing on the Closing Date, each Consultant
will not, except with the express prior written consent of the Parent, directly
or indirectly, disclose, communicate or divulge to any person, or use for the
benefit of any person, any secret, confidential or proprietary knowledge or
information with respect to the conduct or details of the Company or the
business engaged in by the Company, including, but not limited to, technical
know-how, processes, customers, prospects, costs, designs, marketing methods and
strategies, finances and suppliers. This provision does not apply to any
information which at the time of disclosure (i) is generally available to or
known to the public (other than as a result of unauthorized disclosure directly
or indirectly by such Consultant) or (ii) such Consultant discloses, at the
direction and authorization of the Parent, or as required by law. If either
Consultant is required in a judicial, administrative or governmental proceeding
to disclose any information which is the subject of the restrictions contained
in this paragraph, then such Consultant will notify the Parent as soon as
possible so that the Parent may either seek an appropriate protective order or
relief, or waive the provisions of this paragraph. If, in the absence of such an
order, relief or waiver, such Consultant is required, in the written opinion of
counsel, to disclose such information to any court, administrative agency or
governmental authority, then such Consultant may disclose such information
without liability.
The Noncompetition Agreement provides that neither Consultant will for a
period of two years after the date thereof, except with the express written
consent of the Parent (which shall not be unreasonably withheld or delayed in
the case of an employee of the Company or the Surviving Corporation who has
received a notice of termination from the Company or the surviving Corporation,
as the case may be) or as is otherwise contemplated by the Merger Agreement,
directly or indirectly, whether as an employee, owner, partner, agent, director,
officer, shareholder or in any other capacity, for his own account or for the
benefit of any person (i) solicit, divert or induce any of (1) the Company's
employees or (2) the Surviving Corporation's employees to leave or to work for
him or any person with which he is connected; or (ii) hire any of the Company's
or the Surviving Corporation's employees other than the other Consultant, the
Chief Operating Officer, such Consultant's personal secretary and the persons
who shall be acceptable to the Parent and identified on a schedule to be agreed
upon prior to the purchase of shares of Common Stock in the Offer.
In the event either Consultant is found by a nonappealable judgment of a
court of competent jurisdiction to have violated the Noncompetition Agreement
described in the preceding paragraph, in addition to the reasonable fees and
expenses of Parent's counsel incurred to enforce such provision, such Consultant
shall pay to parent, as liquidated damages, an amount equal to 200% of the
applicable employee's annual compensation (including, without limitation,
salary, bonus and benefits) at the time of the violation; provided, that in the
event such Consultant is found by such court to have not violated such
Agreement, the Parent shall pay to such Consultant the reasonable fees and
expenses of counsel incurred by such Consultant to defend such action and any
actual damages resulting from the Parent's interference with such Consultant's
commercial relationships.
Pursuant to the Noncompetition Agreements, each Consultant agreed to pay to
the Surviving Corporation, immediately following the Closing, the principal
amount of indebtedness, and accrued interest thereon, owed by such Consultant to
Health Resources of Cinnaminson, Inc., one of the Company's subsidiaries.
(6) NONCOMPETITION AGREEMENT. Simultaneously with the execution of the
Merger Agreement, the Parent and the Bidder entered into a Noncompetition
Agreement with Stephen R. Baker. The terms of such Agreement are identical in
all material respect to the terms of the Noncompetition Agreements described
above, except that the Noncompetition Agreement with Mr. Baker (i) contains no
provisions relating to the provision by Mr. Baker of, or the payment to Mr.
Baker for, consulting services, (ii) provides for a cash payment of $500,000 to
Mr. Baker as consideration for his Agreement to the Restrictive Covenants and
(iii) does not contain any provision relating to the payment by Mr. Baker of
amounts owed by Mr. Baker to Health Resources to Cinnaminson, Inc., to which Mr.
Baker owes no amount. A copy of this Noncompetition Agreement is attached hereto
as Exhibit 7, and is incorporated herein by reference.
(7) COLCHESTER AGREEMENT. Simultaneously with the execution of the Merger
Agreement, Genesis Health Ventures, Inc., an affiliate of the Parent ("Genesis")
entered into an agreement (the "Colchester Agreement") with Straus Associates, a
partnership controlled by the Co-Chief Executive Officers of the Company and of
which each owns a 25% beneficial interest (the "Partnership"). A copy of the
Colchester Agreement is attached hereto as Exhibit 8, and is incorporated herein
by reference. The following is a summary of the Colchester Agreement and is
qualified in its entirety by the terms of the Colchester Agreement. Defined
terms used in such summary and not otherwise defined herein are used with the
meanings set forth in the Colchester Agreement.
12
<PAGE>
Pursuant to the Colchester Agreement, Genesis agreed to acquire the land
and buildings owned by the Partnership located on Harrington Court, Colchester,
County of New London, Connecticut in an asset acquisition for consideration of
$8,400,000 which will be paid in cash at the Closing and the assumption of that
certain Lease, made as of November 14, 1986, by and between the Partnership and
Health Resources of Colchester, Inc., as amended, subject to certain
modifications to the Lease.
The Colchester Agreement provides that such acquisition will be conditioned
upon (i) execution by the parties of customary real estate transfer documents at
the closing, (ii) the parties receiving all necessary governmental and third
party licenses, permits, regulatory approvals and consents for the transaction,
(iii) the facility being transferred free and clear of all liens, encumbrances
and restrictions, except the Lease and except for other imperfections which do
not materially adversely affect the value of the facility as a skilled nursing
facility, (iv) compliance with all laws applicable to the proposed transaction;
and (v) consummation of the Merger.
The Colchester Agreement provides that (i) the transaction contemplated
thereby will be consummated simultaneously with the consummation of the Merger,
(ii) Genesis may assign its rights thereunder to any designee; provided, that
Genesis shall remain obligated thereunder regardless of any such assignment, and
(iii) the Colchester Agreement will terminate upon the earlier of (a) the date
of the closing of the transaction contemplated thereby and (b) the date the
Merger Agreement is terminated.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) The Board of Directors of the Company has determined that the terms of
the Offer and the Merger are fair to and in the best interests of the Company
and its stockholders and recommends that the stockholders accept the Offer and
tender their shares of Common Stock to the Bidder pursuant to the Offer.
The Company's predecessor was formed in 1984. As a result of its initial
public offering in August 1993, the Company became publicly-owned.
During the first quarter of 1997 the executive officers of the Company
determined that it would be appropriate to investigate opportunities to realize
the long-term value of the Company for the benefit of the stockholders of the
Company. The officers of the Company considered retaining a financial advisor to
assist the Company with the process of maximizing shareholder value.
In February 1997, the Company received an informal oral proposal from an
affiliate of a financial advisor that had been approached about possibly being
retained, in which this party expressed an interest in a possible acquisition of
the Company in a transaction in which management of the Company would
participate. Later in the process this party was provided, following its
execution of a confidentiality agreement, the opportunity to examine certain
non-public information regarding the Company. This party ultimately did not make
a formal acquisition proposal.
In March, 1997, the Company retained Smith Barney Inc. ("Smith Barney")
to assist the Company in evaluating the terms of a possible sale transaction.
The Company directed Smith Barney to begin a process in which indications of
interest would be solicited from third parties regarding the possible
acquisition of the Company and to assist the Company's Board of Directors in
determining whether a transaction in the best interests of the Company's
stockholders could be achieved. Thereafter, various parties were contacted
regarding their interest in exploring a possible transaction with the Company
and were informed that formal proposals would be due no later than June 10,
1997. Each interested party was given the opportunity to examine certain
non-public information regarding the Company following the execution of a
standard form of confidentiality agreement, which included certain limitations
on the ability of parties to pursue transactions involving the Company without
the Company's consent. As part of this process, affiliates of the Bidder were
contacted and executed confidentiality agreements.
Each interested party was asked to confirm its interest in continuing to
explore a possible transaction and to indicate on a preliminary and non-binding
basis, the price per share of Common Stock it was considering in connection with
a possible transaction. A number of parties, including the Bidder, provided
indications of interest. At a meeting of the Board of Directors on May 14, 1997,
management reviewed with the Board the status of the proceedings described
above. On May 30, 1997, the Company retained Schroder Wertheim & Co.
Incorporated ("Schroder Wertheim") to assist it in evaluating various proposals
and to assist the Company in the negotiation of proposals.
13
<PAGE>
At a meeting of the Board of Directors of the Company held on May 27, 1997,
management of the Company and Smith Barney updated the Board as to the status of
the process and Smith Barney reviewed with the Board the valuation methodologies
to be utilized by Smith Barney in connection with its financial analysis of a
transaction.
On June 1, 1997, the Bidder submitted a written proposal for the
acquisition of the Company for $29.00 per share in cash. While continuing to
pursue the proposals of other interested parties, management of the Company met
with representatives of the Bidder to discuss the terms of their proposal.
On June 2, 1997, during the negotiation process, representatives of the
Bidder informed the Company that it had withdrawn its offer. The Company was
subsequently informed that such offer had been withdrawn because the transaction
as then structured and negotiated was not acceptable to Genesis. On June 2,
1997, each of the remaining interested parties, including the Bidder, was
advised that the Company was continuing the exploration of possible transactions
and was encouraged to continue its participation in the process.
On June 4, 1997, a letter was sent on behalf of the Company to each of the
interested parties inviting them to formulate firm offers for the acquisition of
the Company and confirming June 10, 1997 as the date for the presentation of
offers to the Company. A draft acquisition agreement was provided to these
parties and they were requested to submit comments on the draft as part of their
offers. Following additional due diligence and discussions with each of the
parties that chose to continue to participate in the process, the Company
received proposals from two parties as well as a revised proposal from the
Bidder in which the Bidder advised the Company that its proposal was being
restructured because the Bidder's previous offer was based on a structure that
failed to satisfy certain objectives that were critical to the Bidder's
valuation.
The Board of Directors of the Company (other than Constance B.
Girard-diCarlo who had recused herself) met on June 15, 1997, in order to
consider the proposals which had been submitted. At this meeting,
representatives of Smith Barney reviewed the financial terms of the proposals.
The Board then considered the relative merits of the proposals. The Bidder
proposed a $28.00 all cash offer. A second proposal from a financial investor
was a combination of cash and stock in the surviving company and required
management participation. A third proposal was for a merger with a public
corporation in the long-term care industry in which holders of Common Stock
would receive debt and equity securities of the surviving company. The proposals
other than that of the Bidder, all of which specified values of less than $28
per share, were considered by the Board to be less favorable to the Company. The
Board considered the Bidder's proposal advantageous in part because it was an
all cash offer. Smith Barney then delivered the opinion referred to in Item 4(b)
below and reviewed with the Board the financial analyses performed by Smith
Barney in connection with its opinion. After a discussion that included a
detailed review by the Company's counsel of the Merger Agreement, the Tender
Agreements, the Noncompetition and Consulting Agreements, the Noncompetition
Agreement and the Colchester Agreement, the Board of Directors approved the
Merger Agreement and the Tender Agreements, determined that the Offer and the
Merger are fair to, and in the best interests of, stockholders of the Company,
and recommended that stockholders accept the Offer and tender their shares of
Common Stock to the Bidder pursuant to the Offer.
Following conclusion of the meeting of the Board of Directors, the Merger
Agreement, the Tender Agreements and the other agreements were finalized. On
June 16, 1997, the Company issued a press release announcing the execution of
the Merger Agreement. A copy of the press release is attached hereto as Exhibit
9 and is incorporated herein by reference.
(b) In approving the Merger Agreement and the transactions contemplated
thereby and recommending that stockholders of the Company tender their shares of
Common Stock pursuant to the Offer, the Board of Directors considered a number
of factors, including:
(i) the financial and other terms and conditions of the Offer and the
Merger Agreement;
(ii) the Merger Agreement was entered into following extensive
consultation with Smith Barney, Schroder Wertheim and counsel to the
Company and was a result of a process in which the Company solicited
acquisition proposals from numerous parties, provided confidential
information to various parties in order to facilitate the formulation of
acquisition proposals, and afforded each participant an opportunity to
submit its best proposal prior to the acceptance of any proposal by the
Company's Board of Directors, and, therefore, that the completion of this
process provides reasonable assurance that the Offer and the Merger
represent the most advantageous proposal and the highest immediate value
for holders of shares of Common Stock;
(iii) the historical market prices of, and recent trading activity in,
the shares of Common Stock, particularly the fact that the Offer and the
Merger will enable the stockholders of the Company to realize a premium of
approximately 9.3% over $25.625, the closing price of the shares of Common
Stock on June 13, 1997, the last trading day prior to the
14
<PAGE>
Board's approval of the Merger Agreement; and a premium of approximately
50.3% over $18.625, the closing price of the shares of Common Stock on
April 30, 1997, the date the Company first solicited expressions of
interest in the Company;
(iv) the possible alternatives to the Offer and the Merger, including,
without limitation, continuing to operate the Company as an independent
entity, and the risks associated therewith, including the ongoing need for
debt and equity financing for the Company's acquisition and development
programs;
(v) the oral opinion of Smith Barney rendered to the Company's Board
of Directors on June 15, 1997 (which opinion was subsequently confirmed by
delivery of a written opinion dated June 16, 1997) to the effect that, as
of such date and based upon and subject to certain matters stated in such
opinion, the $28.00 per share cash consideration to be received by holders
of Common Stock (other than the Parent and its affiliates) in the Offer and
the Merger was fair, from a financial point of view, to such holders. The
full text of Smith Barney's written opinion dated June 16, 1997, which sets
forth the assumptions made, matters considered and limitations on the
review undertaken by Smith Barney, is attached hereto as Exhibit 10, and is
incorporated herein by reference. Smith Barney's opinion is directed only
to the fairness, from a financial point of view, of the cash consideration
to be received in the Offer and the Merger by holders of Common Stock
(other than the Parent and its affiliates) and is not intended to
constitute, and does not constitute, a recommendation as to whether any
stockholder should tender shares of Common Stock pursuant to the Offer.
Holders of Common Stock are urged to read such opinion carefully in its
entirety;
(vi) the fact that the terms of the Merger Agreement should not unduly
discourage other third parties from making bona fide proposals subsequent
to signing the Merger Agreement and, if any such proposal were made, the
Company, in the exercise of its fiduciary duties, could determine to
provide information to, engage in negotiations with, and, subject to
payment of a termination fee and expenses to the Parent and the Bidder,
enter into a transaction with another party, the Board also recognized that
the terms of the Tender Agreements made it unlikely that another party
would make a tender offer;
(vii) although the conditions to the Offer include the condition that
the Bidder shall have received the proceeds of the financing pursuant to
its financing commitments, the Board of Directors considered the fact that
Genesis had guaranteed the obligations of the Parent and the Bidder and
would be obligated to pay $30 million upon the failure of the Parent to
meet the financing condition in certain circumstances, and the commitment
of the Bidder to accept shares of Common Stock for payment pursuant to the
Offer as soon as the conditions to the Offer are satisfied and as soon as
legally permissible under the federal securities laws; and
(viii) the fact that holders of approximately 36% of the outstanding
shares of Common Stock, on a fully diluted basis, were in favor of the
transaction and were prepared to tender their shares of Common Stock in the
Offer and enter into the Tender Agreements.
The Board of Directors did not assign relative weights to the factors
or determine that any factor was of particular importance. Rather, the
Board of Directors viewed their position and recommendation as being based
on the totality of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED, OR TO BE COMPENSATED
The Company has retained Smith Barney as its financial advisor in
connection with the Offer and the Merger. Pursuant to the terms of Smith
Barney's engagement, the Company has agreed to pay Smith Barney for its
services an aggregate financial advisory fee based on the total
consideration (including liabilities assumed) payable in connection with
the Offer and the Merger. The fee payable to Smith Barney is currently
estimated to be $5.4 million. The Company also has agreed to reimburse
Smith Barney for travel and other out-of-pocket expenses, including
reasonable legal fees and expenses, and to indemnify Smith Barney and
certain related parties against certain liabilities, including liabilities
under the federal securities laws, arising out of Smith Barney's
engagement. Smith Barney has in the past provided investment banking
services to the Company unrelated to the proposed Offer and Merger, for
which services Smith Barney has received compensation. In the ordinary
course of business, Smith Barney and its affiliates may actively trade or
hold the securities of the Company and certain affiliates of the Parent for
their own account or for the account of customers and, accordingly, may at
any time hold a long or short position in such securities.
In addition, the Company has retained Schroder Wertheim to provide
financial advice to the Company in connection with the valuation of various
proposals and to assist the Company in negotiating the terms of the Offer
and the Merger. The fee payable to Schroder Wertheim is $1 million. The
Company has also agreed to indemnify Schroder Wertheim and certain related
parties against certain liabilities, including liabilities under the
federal securities laws,
15
<PAGE>
arising out of Schroder Wertheim's engagement. Schroder Wertheim has in the
past provided investment banking services to the Company unrelated to the
proposed Offer and Merger, for which services Schroder Wertheim has
received compensation. In the ordinary course of business, Schroder
Wertheim and its affiliates may actively trade or hold securities of the
Company and certain affiliates of the Parent for their own account or for
the account of customers and, accordingly, may at any time hold a long or
short position in such securities.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders in connection with the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) There have been no transactions in the shares of Common Stock
during the past 60 days by the Company or, to the best of the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of
the Company other than the issuance and exercise of options, conversions of
outstanding 7% convertible notes or issuances of Common Stock pursuant to
the Company's Stock Purchase Plan or the Director's Retainer and Meeting
Fee Plan.
(b) To the best of the Company's knowledge, each of its executive
officers, directors, affiliates or subsidiaries currently intends to
tender, pursuant to the Offer, any shares of Common Stock beneficially
owned by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, the Company is not
currently engaged in any negotiation in response to the Offer which relates
to or would result in (i) an extraordinary transaction, such as a merger or
reorganization involving the Company or any subsidiary of the Company; (ii)
a purchase, sale or transfer of a material amount of assets by the Company
or any subsidiary of the Company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change
in the present capitalization or dividend policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions
of which are hereby incorporated by reference), there are no transactions,
board resolutions, agreements in principle or signed contracts in response
to the Offer which relate to or would result in one or more of the matters
referred to in paragraph (a) of this Item 7.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS*
Exhibit 1 -- Proxy Statement of The Multicare Companies, Inc. dated
April 8, 1997
Exhibit 2 -- Agreement and Plan of Merger, dated as of June 16, 1997,
among The Multicare Companies, Inc. and Genesis ElderCare
Corp. (f.k.a. Waltz Corp.) and Genesis ElderCare
Acquisition Corp. (f.k.a. Waltz Acquisition Corp.).
Exhibit 3 -- Tender Agreement and Irrevocable Proxy, dated as of June
16, 1997, among Genesis ElderCare Corp. (f.k.a. Waltz
Corp.), Genesis ElderCare Acquisition Corp. (f.k.a. Waltz
Acquisition Corp.) and Moshael J. Straus.
Exhibit 4 -- Tender Agreement and Irrevocable Proxy, dated as of June
16, 1997, among Genesis ElderCare Corp. (f.k.a. Waltz
Corp.), Genesis ElderCare Acquisition Corp. (f.k.a. Waltz
Acquisition Corp.) and Daniel E. Straus.
Exhibit 5 -- Noncompetition and Consulting Agreement, dated as of June
16, 1997, by and between Genesis ElderCare Corp. (f.k.a.
Waltz Corp.), Genesis ElderCare Acquisition Corp. (f.k.a.
Waltz Acquisition Corp.) and Moshael J. Straus.
Exhibit 6 -- Noncompetition and Consulting Agreement, dated as of June
16, 1997, by and between Genesis ElderCare Corp. (f.k.a.
Waltz Corp.), Genesis ElderCare Acquisition Corp. (f.k.a.
Waltz Acquisition Corp.) and Daniel E. Straus.
Exhibit 7 -- Noncompetition Agreement, dated as of June 16, 1997, by
and between Genesis ElderCare Corp. (f.k.a. Waltz Corp.),
Genesis ElderCare Acquisition Corp. (f.k.a. Waltz
Acquisition Corp.) and Stephen R. Baker.
Exhibit 8 -- Agreement regarding Harrington Court, Colchester,
Connecticut dated as of June 16, 1997, by and between
Genesis Health Ventures, Inc. and Straus Associates.
Exhibit 9 -- Press Release, dated June 16, 1997.
Exhibit 10 -- Opinion of Smith Barney Inc., dated June 16, 1997.
* Other than Exhibit 10, Exhibits are not being included in the materials
being mailed to stockholders.
16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: June 20, 1997
THE MULTICARE COMPANIES, INC.
By: /s/ Stephen R.
Baker
Name: Stephen R. Baker
Title: Executive Vice President
and Chief Operating
Officer
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
Exhibit 1 -- Proxy Statement of The Multicare Companies, Inc. dated April 8, 1997.
Exhibit 2 -- Agreement and Plan of Merger dated as of June 16, 1997, by and among
Genesis ElderCare Corp. (f.k.a. Waltz Corp.), Genesis ElderCare
Acquisition Corp. (f.k.a. Waltz Acquisition Corp.) and The Multicare
Companies, Inc.
Exhibit 3 -- Tender Agreement and Irrevocable Proxy, dated as of June 16, 1997, among
Genesis ElderCare Corp. (f.k.a. Waltz Corp.), Genesis ElderCare
Acquisition Corp. (f.k.a. Waltz Acquisition Corp.) and Moshael J.
Straus.
Exhibit 4 -- Tender Agreement and Irrevocable Proxy, dated as of June 16, 1997, among
Genesis ElderCare Corp. (f.k.a. Waltz Corp.), Genesis ElderCare
Acquisition Corp. (f.k.a. Waltz Acquisition Corp.) and Daniel E. Straus.
Exhibit 5 -- Noncompetition and Consulting Agreement, dated as of June 16, 1997,
among Genesis Health Ventures, Inc., Genesis ElderCare Corp. (f.k.a.
Waltz Corp.), Genesis ElderCare Acquisition Corp. (f.k.a. Waltz
Acquisition Corp.) and Moshael J. Straus.
Exhibit 6 -- Noncompetition and Consulting Agreement, dated as of June 16, 1997,
among Genesis Health Ventures, Inc., Genesis ElderCare Corp. (f.k.a.
Waltz Corp.), Genesis ElderCare Acquisition Corp. (f.k.a. Waltz
Acquisition Corp.) and Daniel E. Straus.
Exhibit 7 -- Noncompetition Agreement, dated as of June 16, 1997, among Genesis
Health Ventures, Inc., Genesis ElderCare Corp. (f.k.a. Waltz Corp.),
Genesis ElderCare Acquisition Corp. (f.k.a. Waltz Acquisition Corp.) and
Stephen R. Baker.
Exhibit 8 -- Agreement regarding Harrington Court, Colchester, Connecticut dated as
of June 16, 1997, by and between Genesis Health Ventures, Inc. and
Straus Associates.
Exhibit 9 -- Press Release, dated June 16, 1997.
Exhibit 10 -- Smith Barney opinion, dated as of June 16, 1997.
</TABLE>
EXHIBIT 1
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant |X|) Filed by a Party other than the Registrant |_|
Check the appropriate box: |_| Preliminary Proxy Statement |X|) Definitive Proxy
Statement |_| Definitive Additional Materials |_| Soliciting Material Pursuant
to ss.240.14a-11(c) or ss.240.14a-12
THE MULTICARE COMPANIES, INC.
-----------------------------
(Name of Registrant as Specified In Its Charter)
--------------------
(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:
2) Aggregate number of securities to which transaction applies:
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):
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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
and
PROXY STATEMENT
MEETING DATE
MAY 14, 1997
YOUR VOTE IS IMPORTANT!
Please mark, date and sign the enclosed proxy card and
promptly return it to the Company in the enclosed envelope.
<PAGE>
THE MULTICARE COMPANIES, INC.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of The Multicare Companies, Inc., which will be held at the Company's principal
executive offices at Continental Plaza, 411 Hackensack Avenue, Hackensack, New
Jersey 07601 (lower level conference facilities) on Wednesday, May 14, 1997, at
10:00 a.m. (local time).
At the Annual Meeting, stockholders will be asked to elect directors,
to approve amendments to the Company's Amended and Restated 1993 Stock Option
Plan and to ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the year ending December 31, 1997. Information about
these matters is contained in the attached Proxy Statement.
The Company's management would greatly appreciate your attendance at
the Annual Meeting. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, IT IS MOST IMPORTANT THAT YOUR SHARES BE REPRESENTED. Accordingly,
please sign, date and return the enclosed proxy card which will indicate your
vote upon the matters to be considered. If you do attend the meeting and desire
to vote in person, you may do so by withdrawing your proxy at that time.
I sincerely hope you will be able to attend the Annual Meeting and look
forward to seeing you on May 14, 1997.
Sincerely,
Moshael J. Straus
Chairman and Co-Chief Executive Officer
April 8, 1997
<PAGE>
THE MULTICARE COMPANIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 14, 1997
The Annual Meeting of Stockholders of The Multicare Companies, Inc.
(the "Company") will be held on Wednesday, May 14, 1997, at 10:00 a.m. at the
Company's principal executive offices at Continental Plaza, 411 Hackensack
Avenue, Hackensack, New Jersey 07601 (lower level conference facilities) for the
following purposes:
1. To elect three directors;
2. To consider and act upon a proposal to approve
amendments to the Company's Amended and Restated 1993
Stock Option Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP as
the Company's independent auditors for the year
ending December 31, 1997; and
4. To transact such other business as may properly come
before the meeting or
any adjournment thereof.
The Board of Directors has fixed the close of business on March 19,
1997 as the record date for the determination of stockholders entitled to notice
of, and to vote at, the Annual Meeting. Each stockholder, even though he or she
may presently intend to attend the Annual Meeting, is requested to execute and
date the enclosed proxy card and return it without delay in the enclosed
postage-paid envelope. Any stockholder present at the Annual Meeting may
withdraw his or her proxy card and vote in person on each matter brought
properly before the Annual Meeting.
Please sign, date and mail promptly the enclosed proxy in the enclosed
envelope, so that your shares of stock may be represented at the meeting.
By Order of the Board of Directors,
Bradford C. Burkett
Secretary
Hackensack, New Jersey
April 8, 1997
THE MULTICARE COMPANIES, INC.
411 Hackensack Avenue
Hackensack, New Jersey 07601
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of The Multicare
Companies, Inc., a Delaware corporation ("Multicare" or the "Company"), in
connection with the solicitation of proxies for use at the Company's Annual
Meeting of Stockholders (the "Annual Meeting"), to be held at the Company's
principal executive offices at Continental Plaza, 411 Hackensack Avenue,
Hackensack, New Jersey 07601 (lower level conference facilities) on Wednesday,
May 14, 1997, at 10:00 a.m., and at any and all adjournments thereof.
This solicitation is being made on behalf of the Board of Directors of
the Company, whose principal executive offices are located at 411 Hackensack
Avenue, Hackensack, New Jersey 07601, telephone (201) 488-8818. This Proxy
Statement, Notice of Annual Meeting of Stockholders, the enclosed proxy card and
the Company's 1996 Annual Report were first mailed to stockholders on or about
April 8, 1997.
The shares represented by a proxy in the enclosed form, if such proxy
is properly executed and is received by the Company prior to or at the Annual
Meeting, will be voted in accordance with the specifications made thereon.
Proxies on which no specification has been made by the stockholder will be
voted: (i)in favor of the election of three nominees to the Board of Directors
listed in this Proxy Statement; (ii)in favor of the approval of amendments to
the Company's Amended and Restated 1993 Stock Option Plan; and (iii)to ratify
the appointment of KPMG Peat Marwick LLP as the Company's independent auditors
for the year ending December 31, 1997.
Any proxy given by a stockholder may be revoked at any time before its
exercise by sending a subsequently dated proxy or by giving written notice of
revocation to the Company, in each case, to the Company's Secretary, at the
address set forth above. Stockholders who
<PAGE>
attend the Annual Meeting may withdraw their proxies at any time before their
shares are voted by voting their shares in person.
Stockholders of record at the close of business on March 19, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, the issued and outstanding voting securities of the Company
consisted of 30,781,459 shares of common stock, par value $.01 per share (the
"Common Stock"), each of which is entitled to one vote on all matters which may
properly come before the Annual Meeting or any adjournment thereof.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum. Each item presented herein to be voted on at the Annual
Meeting must be approved by the affirmative vote of a majority of the holders of
the number of shares present either in person or represented by proxy. The
inspector of elections appointed by the Company will count all votes cast, in
person or by submission of a properly executed proxy, before the closing of the
polls at the meeting. Abstentions and "broker non-votes" (nominees holding
shares for beneficial owners who have not voted on a specific matter) will be
treated as present for purposes of determining whether a quorum is present at
the Annual Meeting. However, abstentions and broker non-votes will have no
effect on the vote, because the vote required is a majority or plurality of the
votes actually cast (assuming the presence of a quorum).
ITEM 1
ELECTION OF DIRECTORS
The Board of Directors currently consists of eight directors divided
into three classes. Each class serves three years, with the terms of office of
the respective classes expiring in successive years. The term of Class III
directors expires at the Annual Meeting. Three directors are to be elected at
the Annual Meeting as Class III directors for a term of three years. The
nominees for Class III directors are Moshael J. Straus, Daniel E. Straus and
Constance B. Girard-diCarlo, each of whom is currently serving as a Director.
All nominees were recommended by the Nominating Committee of the Board
of Directors. If elected, the nominees are expected to serve until the
expiration of their terms and until their successors are elected and qualified.
The shares represented by proxies in the accompanying form will be voted for the
election of these three nominees unless authority to so vote is withheld. The
Board of Directors has no reason to believe that any of the nominees will not
serve if elected, but if any of them should become unavailable to serve as a
director, and if the Board designates a substitute nominee, the persons named as
proxies will vote for the substitute nominee designated by the Board. Directors
will be elected by a plurality of the votes cast at the Annual Meeting.
The following information, which has been provided by the individuals
named, sets forth for each of the nominees for election to the Board of
Directors and the continuing Class I and II directors, such person's name, age,
principal occupation or employment during at least the past five years, the name
of the corporation or other organization, if any, in which such occupation or
employment is carried on and the period during which such person has served as a
director of the Company.
DIRECTORS STANDING FOR ELECTION
Class III
Term Expiring at the 2000 Annual Meeting
Moshael J. Straus, age 44, the brother of Daniel E. Straus, was a
co-founder of the Company in 1984, and since 1978 was involved in the business
of the Company's predecessors. Mr. Straus has been co-principal owner of the
Company since its establishment. He assumed the positions of Chairman of the
Board of Directors and Co-Chief Executive Officer of the Company in September
1992.
Daniel E. Straus, age 40, the brother of Moshael J. Straus, was a
co-founder of the Company in 1984, and since 1978 was involved in the business
of the Company's predecessors. Mr. Straus has been co-principal owner of the
Company since its establishment. He assumed the positions of President, Co-Chief
Executive Officer and Director of the Company in September 1992.
Constance B. Girard-diCarlo, age 50, has served as President of the
Healthcare Support Services Division of ARAMARK Corporation since 1990. ARAMARK
is a $6 billion service management company headquartered in Philadelphia,
Pennsylvania. Mrs. Girard-diCarlo is responsible for the non-clinical support
services ARAMARK manages for more than 300 healthcare institutions nationwide.
Mrs. Girard-diCarlo previously served as President of ARAMARK School Support
Services; Vice President, Midlantic Region, ARAMARK Campus Services;
<PAGE>
and as an Assistant General Counsel of ARAMARK. Mrs. Girard-diCarlo is a member
of the Board of Directors of EnergyNorth, Inc., a public utility holding company
headquartered in Manchester, New Hampshire, and serves on the boards of Widener
University, The Franklin Institute and the Free Library of Philadelphia
Foundation. Mrs. Girard-diCarlo has served on the Board of Directors since 1996.
<PAGE>
DIRECTORS CONTINUING IN OFFICE
Class I
Term Expiring at the 1998 Annual Meeting
Menachem Rosenberg, age 46, has been a partner of the public accounting
firm of Margolin, Winer & Evens in Garden City, New York for the past 14 years.
Mr. Rosenberg is a Certified Public Accountant and a member of the American
Institute of Certified Public Accountants and the New York State Society of
Certified Public Accountants. Mr. Rosenberg is the author of numerous articles
on income tax, investments, finance, mergers and acquisitions and a lecturer on
similar topics to various professional and trade groups. Mr. Rosenberg has
served on the Board of Directors since 1994.
George R. Zoffinger, age 49, is the President and Chief Executive
Officer of Value Property Trust, a real estate investment trust traded on the
New York Stock Exchange. Mr. Zoffinger previously served as Chairman of
CoreStates New Jersey National Bank from April 1994 until its merger into
CoreStates Bank, N.A. in December 1996. He continues to serve on the Board of
Directors of CoreStates Bank, N.A. From December 1991 through 1994, Mr.
Zoffinger served as President and Chief Executive Officer of Constellation
Bankcorp. From March 1990 through December 1991, he served as the Commissioner
of the New Jersey State Department of Commerce and Economic Development and the
Chairman of the Board of the New Jersey Economic Development Authority. Mr.
Zoffinger also served as Chairman of New Jersey's Host Committee for the 1994
World Cup Soccer Games. Mr. Zoffinger has also been appointed to the New Jersey
Council of Economic Advisors and is Chairman of the New Brunswick Development
Corporation. He is also a member of the Board of Trustees of St. Peter's Medical
Center in New Brunswick, New Jersey, and a member of the Board of Directors of
New Jersey Resources, Inc., and the Public Affairs Research Institute of New
Jersey, Inc. Mr. Zoffinger has served on the Board of Directors since 1995.
Stuart H. Altman, age 59, has served as the Sol C. Chaikin Professor of
National Health Policy at The Heller School at Brandeis University since 1977.
Mr. Altman also served as Dean of The Heller School from September 1977 through
June 1993, and was Interim President of Brandeis University from 1990 through
September 1991. Mr. Altman has also served as Chairman of the Board, Institute
for Health Policy, at The Heller School since 1977. In addition, Mr. Altman has
served in several government positions including serving as the Chairman of the
Prospective Payment Assessment Commission from 1984 through 1996 and as a senior
member of the Clinton/Gore Health Advisory Group. Mr. Altman also served as
Deputy Assistant Secretary for Planning and Evaluation/Health in the Department
of Health, Education and Welfare from July 1971 through August 1976. Mr. Altman
currently serves as member of the Board of Directors of IDX Systems, Inc., a
healthcare information systems company and on several other charitable and
educational boards and foundations. Mr. Altman has served on the Board of
Directors since 1996.
Class II
Term Expiring at the 1999 Annual Meeting
Stephen R. Baker, age 41, has served as Executive Vice President
responsible for finance and operations of the Company since August 1994, and
served as its Senior Vice President and Chief Financial Officer beginning
December 1992. Prior to joining Multicare, Mr. Baker was a partner at the public
accounting firm of KPMG Peat Marwick LLP where he was employed for 16 years. Mr.
Baker is a Certified Public Accountant. Mr. Baker has served on the Board of
Directors since 1994.
Paul J. Klausner, age 39, has served as Special Consultant,
Acquisitions and Development of the Company since September 1996. Prior to
September 1996, Mr. Klausner served as Executive Vice President, Development of
the Company since May 1995, as its Executive Vice President, General Counsel
since August 1994 and as its Senior Vice President, General Counsel and
Secretary beginning October 1993. Prior to joining Multicare, Mr. Klausner had
been engaged in the private practice of law in New York City since 1981 and had
also been a principal of KMF Partners, a New York-based real estate investment
and development firm, from 1986 to 1990. Mr. Klausner has served on the Board of
Directors since 1994.
Meetings of the Board
The Board of Directors met nine times during the Company's 1996 fiscal
year. No director attended fewer than 75% of the aggregate number of meetings of
the Board and Committees on which such director served.
Committees of the Board
The Board of Directors has standing Audit, Compensation and Nominating
Committees.
<PAGE>
The Audit Committee makes recommendations to the Board of Directors as
to the engagement or discharge of the independent auditors, reviews the plan and
results of the auditing engagement with the independent auditors, reviews the
adequacy of the Company's system of internal accounting controls, monitors
compliance with the Company's business conduct policy and directs and supervises
investigations into matters within the scope of its duties. The Audit Committee
met twice during 1996. The Audit Committee is comprised of Messrs. Altman,
Rosenberg and Zoffinger, all of whom are non-employee directors.
The Compensation Committee approves, or in some cases recommends, to
the Board, remuneration and compensation arrangements involving the Company's
directors, executive officers and other key employees, reviews and in some cases
administers benefit plans in which such persons are eligible to participate and
periodically reviews the equity compensation plans of the Company as well as
grants under such plans as they may affect total compensation. The Compensation
Committee is comprised of Messrs. Rosenberg and Zoffinger, each of whom is a
non-employee director. The Compensation Committee met once in 1996.
The Nominating Committee was established to nominate persons for
election to the Board. The Nominating Committee will consider nominees
recommended by other stockholders but has not established any procedure
therefor. The Nominating Committee met in February 1997 to nominate the nominees
identified in this Proxy Statement. The Nominating Committee is currently
composed of Mrs. Girard-diCarlo (who did not participate with respect to her own
nomination in the February 1997 meeting) and Mr. Zoffinger.
Compensation of Directors
Each non-employee director receives a director's fee of $10,000 for
each year in which he or she serves as a director and a $1,000 stipend for each
Board of Directors meeting attended, as well as a $500 stipend for each
Committee meeting attended. Each non-employee director may elect to receive
payment of such fees in Multicare Common Stock in lieu of cash in accordance
with the terms and conditions of the Company's Non-Employee Director Retainer
and Meeting Fee Plan. Each person serving as a non-employee director on May 8,
1996 was issued non-qualified options to purchase 4,500 shares of Common Stock
at an exercise price of $18.67 per share pursuant to the Company's Stock Option
Plan for Non-Employee Directors. Directors who are employees of the Company or
any of its subsidiaries do not receive additional compensation for service on
the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth information regarding all cash and
non-cash compensation awarded to, earned by, or paid to the Company's two
Co-Chief Executive Officers, to each of the four other most highly compensated
executive officers of the Company serving in such capacity at December 31, 1996
and to a former executive officer not serving in such capacity at December 31,
1996, whose aggregate compensation from the Company and its subsidiaries for
that period exceeded $100,000.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Name and Principal Position Year Salary Bonus Number of All Other
- --------------------------- ---- ------ ----- Securities Compensation
Underlying ------------
Options(2)
------------
ANNUAL COMPENSATION LONG-TERM
------------------- COMPENSATION
AWARDS (1)
----------
<S> <C>
Moshael J. Straus.......................................... 1996 $600,000 $750,000 93,750 $100,808(3)
Chairman of the Board of Directors and 1995 600,000 600,000 170,900 149,433(3)
Co-Chief Executive Officer 1994 500,000 402,500 599,664
Daniel E. Straus........................................... 1996 600,000 750,000 93,750 $133,171(3)
President, Co-Chief Executive Officer 1995 600,000 600,000 170,900 174,396(3)
and Director 1994 500,000 402,500 599,664 -
Stephen R. Baker........................................... 1996 300,000 178,125 23,438 -
Executive Vice President, Chief 1995 250,000 125,000 42,162 -
Operating Officer and Director 1994 210,648 69,774 26,865 -
Paul J. Klausner........................................... 1996 225,000 - 23,438 -
Special Consultant, Acquisitions and 1995 250,000 50,000 42,162 -
Development and Director 1994 210,648 69,744 26,865 -
Andrew Horowitz (4)........................................ 1996 198,057 69,794 7,500 -
Senior Vice President, Ancillary 1995 180,740 52,500 22,500 -
Services 1994 - - - -
Mark R. Nesselroad (5)..................................... 1996 164,000 55,070 4,500 -
Senior Vice President, Acquisitions, 1995 12,500 - 22,500 -
Construction & Development 1994 - - - -
Bradford C. Burkett (6).................................... 1996 175,068 34,980 10,500 -
Senior Vice President, General Counsel 1995 144,886 46,400 9,554 -
& Secretary 1994 69,276 19,849 15,000 -
</TABLE>
- -----------
(1)The Company did not grant any long term incentive plan payouts ("LTIPs") to
any of the executive officers named in this table nor does the Company maintain
any LTIPs. Excludes perquisites and other personal benefits, securities or
property, the aggregate amount of which received by any named person did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus for
such officer as well as certain incidental personal benefits to executive
officers of the Company resulting from expenses incurred by the Company in
interacting with the financial community and identifying potential acquisition
targets. (2) Options adjusted for three-for-two stock split in May 1996.
(3)Amounts paid in connection with obtaining term life insurance to fund a stock
purchase right from the other Co-Chief Executive Officer in connection with an
agreement among the Company and each of the Co-Chief Executive Officers. (4)Mr.
Horowitz joined the Company in January 1995. (5)Mr. Nesselroad joined the
Company in December 1995. (6)Mr. Burkett joined the Company in June 1994.
Employment Agreements
In January 1995, the Company entered into an employment agreement with
each of Moshael J. Straus and Daniel E. Straus. Each agreement provides for an
initial term of five years, which will extend automatically at the end of the
initial five year term for additional one year periods unless, not less than 180
days prior to the end of the initial term or any such additional term, notice of
non-extension is given either by the Company or the respective Co-Chief
Executive Officer. Each employment agreement provides for an annual base salary
at an initial rate of $600,000, which may be increased at the discretion of the
Board of Directors, and a bonus, to be determined pursuant to the Company's Key
Employee Incentive Compensation Plan (the "KEICP"), ranging from 70%-150% of
base salary, based upon goals and targets set forth in a business plan
negotiated with the Compensation Committee. Each of these employment agreements
provides that if the Company terminates the Co-Chief Executive Officer without
Cause (as defined) or fails to renew his employment agreement, or if such
Co-Chief Executive Officer terminates his employment agreement for Good Reason
(as defined) or upon a Change of Control (as defined) then (1) the Company will
be obliged to pay the respective Co-Chief Executive Officer the greater of (x)
any remaining salary payable during the term or (y) an amount equal to two times
the annual salary for the then current employment year (or, with respect to a
Change of Control, three times annual salary plus an amount equal to the highest
bonus received during the prior three years); (2) all stock
<PAGE>
options, stock awards and similar equity rights will immediately vest and become
exercisable; and (3) the Company must maintain in effect the Co-Chief Executive
Officer's other benefits for a period equal to the greater of the remainder of
the term or two years. Each of the Co-Chief Executive Officers is also entitled
(i) to life insurance benefits in an amount equal to five times his then current
salary (to a maximum of $5 million); (ii) life insurance benefits in an amount
not exceeding $50 million in connection with a buy-sell arrangement between the
Co-Chief Executive Officers; and (iii) disability insurance in an amount equal
to 66.67% of his then current salary.
In January 1995, the Company entered into an employment agreement with
each of Stephen R. Baker and Paul J. Klausner. Each agreement provides for an
initial term of three years which will be renewed automatically at the end of
the initial three year term for additional one-year periods unless, not less
than 180 days prior to the end of the initial term or any such additional term,
notice of non-renewal is given either by the Company or the employee. The
agreements provide for an annual base salary at an initial rate of $250,000
which may be reviewed annually by the Board of Directors, and a bonus to be
determined pursuant to the Company's KEICP, ranging from 30%-75% of base salary,
based upon goals and targets set forth in a business plan prepared by the
Co-Chief Executive Officers. Each employment agreement provides that if the
Company terminates the employee without Cause (as defined) or fails to renew his
employment agreement, or if the employee terminates his employment agreement for
Good Reason (as defined) or upon a Change of Control (as defined) then (1) the
Company will be obliged to pay him the greater of (x) any remaining salary
payable during the term or (y) an amount equal to two times the annual salary
for the then current employment year (or, with respect to a Change of Control,
three times annual salary plus an amount equal to the highest bonus received
during the prior three years); (2) all stock options, stock awards and similar
equity rights will immediately vest and become exercisable; and (3) the Company
must maintain in effect the employee's other benefits for a period equal to the
longer of the remainder of the term or two years. Each of Messrs. Baker and
Klausner is also entitled to life insurance benefits in an amount equal to four
times his then current salary (to a maximum of $2 million) and disability
insurance in an amount equal to 66.67% of his salary.
In January 1995, in connection with the Company's acquisition of
Scotchwood Pharmacy ("Scotchwood") the Company entered into a three year
employment agreement with Andrew Horowitz, an executive vice president and one
of the principal owners of Scotchwood. Mr. Horowitz now serves as the Company's
Senior Vice President, Ancillary Services. The agreement provides for an annual
base salary at an initial rate of $175,000 and a bonus to be determined pursuant
to the Company's KEICP under which Mr. Horowitz may earn a maximum annual bonus
equal to 35% of base salary.
<PAGE>
In December 1995, in connection with the Company's acquisition of
Glenmark Associates, Inc. ("Glenmark") the Company entered into a three year
employment agreement with Mark R. Nesselroad, the chief executive officer and
co-founder of Glenmark. Mr. Nesselroad now serves as the Company's Senior Vice
President, Construction, Acquisitions and Development. The agreement provides
for an annual base salary at an initial rate of $150,000 and a bonus to be
determined pursuant to the Company's KEICP under which Mr. Nesselroad may earn a
maximum annual bonus equal to 35% of base salary.
Stock Option Grants
The following table sets forth as to each of the individuals named in
the Summary Compensation Table the following information with respect to stock
option grants during the calendar year 1996 ("Fiscal 1996") and the potential
realizable value of such option grants: (i) the number of shares of Common Stock
underlying options granted during Fiscal 1996, (ii) the percentage that such
options represent of all options granted to employees during Fiscal 1996, (iii)
the exercise price, (iv) the expiration date and (v) grant date present value.
OPTION(1) GRANTS DURING FISCAL 1996
AND ASSUMED POTENTIAL REALIZABLE VALUE
<TABLE>
<CAPTION>
Number of % of
Securities Total Grant
Underlying Options Date
Options Granted Exercise Expiration Present
Name Granted(3) in 1996 Price Date Value(2)
---- ---------- ------- ----- ---- --------
<S> <C>
Moshael J. Straus................................... 93,750 11% $16.00 2/1/2006 $936,572
Daniel E. Straus.................................... 93,750 11% 16.00 2/1/2006 936,572
Stephen R. Baker.................................... 23,438 3% 16.00 2/1/2006 234,148
Paul J. Klausner.................................... 23,438 3% 16.00 2/1/2006 234,148
Andrew Horowitz..................................... 7,500 1% 16.00 2/1/2006 74,926
Mark R. Nesselroad.................................. 4,500 1% 16.00 2/1/2006 44,955
Bradford C. Burkett................................. 10,500 1% 16.00 2/1/2006 104,986
</TABLE>
- -----------
(1)There were no SARs granted in 1996. (2)The Company uses the Black-Scholes
model of option valuation to determine grant date present value with the
following weighted average assumptions: dividend yield of 0%; expected
volatility of 38.4%; a risk-free interest rate of 6.5%; and expected option life
of 9.9 years. The actual value of the options will depend on the excess of the
stock price above the exercise price on the date of exercise. There is no
assurance that the value realized will approximate the value estimated under the
Black-Scholes model. (3)Options vest at a rate of 33 1/3% per year over a three
year period and expire ten years from the date of grant.
Ten Year Option Repricings
The following table sets forth the information noted for all repricings
of options held by any executive officer of the Company in the Company's last 10
complete fiscal years.
OPTION REPRICING TABLE (1)
<TABLE>
<CAPTION>
Securities Market Length of
Underlying Price of Exercise Original Option
Options Stock at Price at New Term Remaining
Repriced Time of Time of Exercise at Date of
Name Date or Amended Pricing Repricing Price Repricing
- ---- ---- ---------- ------- --------- ----- ---------
<S> <C>
August 17,
Stephen R. Baker.............. 1993(2) 90,000 $7.33(3) $7.39 $6.67 9 years 7 months
</TABLE>
- -----------
<PAGE>
(1)Options and per share amounts adjusted for three-for-two stock split in May
1996. (2)Stephen R. Baker was originally granted options to purchase 90,000
shares of Common Stock on April 1, 1993 at an exercise price of $7.39 per share.
Subsequently, coinciding with the Company's 1993 initial public offering of its
Common Stock at $6.67 per share, Mr. Baker's options were amended such that the
exercise price would equal that of the Company's 1993 initial public offering
price. (3)This represents the closing price of the Common Stock on August 19,
1993 which was the first day the Common Stock was traded on The Nasdaq Stock
Market. Prior to August 19, 1993, there was no public market for the Common
Stock.
Stock Option Values
The following table sets forth the number and aggregate dollar value of
unexercised options held at December 31, 1996 by the individuals named in the
Summary Compensation Table.
None of the named individuals exercised any options during 1996.
AGGREGATE OPTION VALUES
<TABLE>
<CAPTION>
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
Number of Value of Unexercised
Unexercised Options in the Money Options
at December 31, 1996 at December 31, 1996(1)
-------------------- -----------------------
<S> <C>
Moshael J. Straus................. 307,242 557,072 $2,644,466 $4,301,746
Daniel E. Straus.................. 307,242 557,072 2,644,466 4,301,746
Stephen R. Baker.................. 85,964 96,503 997,430 872,814
Paul J. Klausner.................. 85,964 96,503 997,430 872,814
Andrew Horowitz................... 4,500 25,500 31,860 159,315
Mark R. Nesselroad................ 7,500 19,500 41,850 102,825
Bradford C. Burkett............... 9,184 25,870 81,329 178,048
</TABLE>
- -----------
(1)The value of unexercisable in the money options was determined by reference
to the closing price of the Common Stock on December 31, 1996, reported by The
New York Stock Exchange, which was $20 1/4.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
is currently comprised of Messrs. Rosenberg and Zoffinger, each of whom is a
non-employee director. The Committee is responsible for approval or
recommendation to the Board of Directors of remuneration and compensation
arrangements involving the Company's directors, executive officers and other key
employees, review and in some cases administration of benefit plans in which
such persons are eligible to participate, and periodic review of the equity
compensation plans of the Company and grants under such plans as they may impact
total compensation.
Report of the Compensation Committee
The Committee believes that the total compensation of the Company's
executive officers should be based primarily on the subjective determination of
the Committee as to the Company's overall financial performance. At the
executive officer level, the Committee has a policy that a significant portion
of total compensation should consist of variable, performance-based components
such as stock option awards and bonuses, which it can increase or decrease to
reflect its assessment of changes in corporate and individual performance. These
incentive compensation programs are intended to reinforce management's
commitment to enhance profitability and stockholder value.
In general, the Committee also considers advice from independent
compensation consultants and also takes into account the recommendations of the
Co-Chief Executive Officers, who together beneficially own approximately 43.2%
of the Company's Common Stock. Based on a review of comparable companies in the
Company's industry, the Committee believes that the compensation of the
Company's executive officers for 1996 was in the median range of comparable
companies.
In determining base salaries of executive officers, the Committee makes
a subjective determination, taking into consideration the seniority of the
officer, his rank within the
<PAGE>
Company and prior performance. The base compensation in 1996 for each of Moshael
J. Straus and Daniel E. Straus, the Co-Chief Executive Officers of the Company,
was determined under an employment agreement entered into by each of them with
the Company in January 1995. See "Executive Compensation-Summary Compensation
Table-Employment Agreements."
In 1996, the Compensation Committee granted 93,750 options to purchase
shares of Common Stock to each of the Co-Chief Executive Officers as described
in the table captioned "Option Grants During Fiscal 1996 and Assumed Potential
Realizable Value." The grants were made under the Company's Amended and Restated
1993 Stock Option Plan (the "Stock Option Plan") as annual performance grants in
connection with a grant to executive officers and key employees of the Company.
These options were granted in recognition of such persons services to the
Company. In addition, in 1996 certain officers and key employees were granted
options as a method of recruiting their services. The five persons serving as
non-employee directors of the Company on May 8, 1996 were each granted options
on such date to purchase 4,500 shares of Common Stock under the Company's
Non-Employee Directors Stock Option Plan (the "Directors' Option Plan") in
recognition of their contributions to the Company in terms of their insights
into the operations of the Company. Each of the foregoing grants was evaluated
in the subjective discretion of the Compensation Committee in accordance with
the terms of the Stock Option Plan and the Directors' Option Plan which were
devised with the advice and consultation of independent compensation
consultants.
The Board of Directors adopted in early 1996 the Company's Key Employee
Incentive Compensation Plan (the "KEICP"), which was devised with the advice and
consultation of independent compensation consultants. Under the KEICP, the
Compensation Committee, after consideration of recommendations from the
executive management of the Company, establishes one or more target performance
goals for the Company's executive officers and other key employees and
determines the amount of the bonus award (as a percentage of total compensation)
payable to such participant based upon the achievement of such target
performance goal(s). The target performance goals may include pre-established
"threshold," "expected" and "outstanding" levels of performance that must be
achieved in order to result in the payout of an award to a participant. Awards
are payable under the KEICP only upon written certification by the Compensation
Committee that the target performance goals for the performance period have been
achieved.
In 1996, bonuses were determined by the Compensation Committee pursuant
to the KEICP based on the overall performance of the Company and the achievement
by the individual officer or employee in question of personal performance goals
and contribution standards established by the Compensation Committee after
consideration of recommendations from the executive management of the Company.
The bonuses for the Co-Chief Executive Officers were determined based on the
earnings and revenue levels attained by the Company in 1996.
To the extent readily determinable, and as one of the factors in its
consideration of compensation matters, the Compensation Committee considers the
anticipated tax treatment to the Company and to the executives of various
payments and benefits. Under Section 162(m) of the Internal Revenue Code, the
Company is subject to the loss of deduction for compensation in excess of
$1,000,000 paid to one or more of the executive officers named in this Proxy
Statement. The deduction may be preserved if the Company is able to comply with
certain conditions in the design and administration of its compensation
programs. However, interpretations of and changes in the tax laws and other
factors beyond the Committee's control also affect the deductibility of
compensation. For these and other reasons, the Committee will not necessarily
limit executive compensation to that deductible under Section 162(m). The
Committee will consider various alternatives to preserving the deductibility of
compensation payments and benefits to the extent consistent with its other
compensation objectives. The Committee believes all compensation paid in fiscal
year 1996 is deductible by the Company.
Menachem Rosenberg, George Zoffinger
Members of the Compensation Committee
<PAGE>
PERFORMANCE GRAPH
The following line graph displays the cumulative total return to
stockholders of the Company's Common Stock from August 19, 1993 (the date of the
Company's initial public offering of Common Stock) to December 31, 1996,
compared to the cumulative total return for the S&P 500 Composite Index and to
the S&P Long-Term Care Composite Index.
[Line Graph appears here???]
The graph assumes a $100 investment in Multicare Common Stock on August
19, 1993 at the initial offering price of $6.67 per share. The graph also
assumes investments in the S&P 500 Composite Index and the S&P Long-Term Care
Composite Index of $86 and $84, respectively, on December 31, 1991. The value of
these investments would have amounted to $100 on August 19, 1993.
Although the Common Stock has been publicly held only since August
1993, the graph shows the performance of the S&P 500 Composite Index and S&P
Long-Term Care Composite Index for the past five years. This information is
being provided as the Company believes that it enhances the reader's
understanding of the performance of the Common Stock. Depicting the two indices
only for the period that the Common Stock has been publicly held would deprive
the reader of the historical perspective of the indices.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock on the Record Date, with respect to (i)
each person known to the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock; (ii) each person who is currently a director or
nominee to be a director of the Company; (iii) all current directors and
executive officers of the Company as a group; and (iv) the Company's Co-Chief
Executive Officers and those persons named in the Summary Compensation Table. To
the best of the Company's knowledge, except as otherwise noted, the holders
listed below have sole voting power and investment power over the Common Stock
they beneficially own.
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares(1) Percent of Class
- ------------------------ ------------------- ----------------
<S> <C>
Moshael J. Straus.................................... 6,984,595(2) 21.6%
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Daniel E. Straus..................................... 6,984,595(2) 21.6%
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Pilgrim Baxter & Associates, Ltd. (3)................ 2,232,400 6.9%
1255 Drummers Lane, Suite 300
Wayne, Pennsylvania 19087-1590
Wellington Management Company, LLP (4)............... 1,963,000 6.1%
75 State Street
Boston, Massachusetts 02109
Stuart H. Altman..................................... 4,707 *
Constance B. Girard-diCarlo.......................... 4,890 *
Menachem Rosenberg................................... 14,800 *
Alan D. Solomont (5)................................. 343,137 *
George R. Zoffinger.................................. 13,500 *
Stephen R. Baker..................................... 127,167 *
Paul J. Klausner..................................... 108,679 *
Andrew Horowitz...................................... 12,965 *
Mark R. Nesselroad................................... 10,018 *
Bradford C. Burkett.................................. 16,591 *
All directors and executive officers as a group (22
persons).......................................... 14,923,010 46.2%
</TABLE>
- -----------
(1)Includes for all directors, nominees and executive officers options to
purchase an aggregate of 1,463,100 shares of common stock which are currently
exercisable or will be exercisable within the next 60 days. (2)Excludes shares
owned by the other Co-Chief Executive
<PAGE>
Officer that the named Co-Chief Executive Officer has the right to purchase upon
the death of such other Co-Chief Executive Officer. (3)The following information
was provided to the Company by Pilgrim Baxter & Associates, Ltd. ("Pilgrim
Baxter"): Consists of shares of common stock of the Company held by the PBHG
Growth Fund of The PBHG Funds, Inc. The PBHG Growth Fund is advised by Pilgrim
Baxter. As of December 31, 1996, Pilgrim Baxter had voting power and dispositive
power as follows: Sole voting power-0 shares; shared voting power-2,232,400
shares; sole dispositive power-2,232,400 shares; and shared dispositive power-0
shares. (4)The following information was provided to the Company by Wellington
Management Company, LLP ("WMC"): WMC is an investment adviser registered with
the Securities and Exchange Commission under the Investment Advisers Act of
1940, as amended. As of December 31, 1996, WMC, in its capacity as investment
adviser, may be deemed to have beneficial ownership of 1,963,000 shares of
common stock of the Company that are owned by numerous investment advisory
clients, none of which is known to have such interest with respect to more than
five percent of the class. As of December 31, 1996, WMC had voting power and
dispositive power as follows: Sole voting power-0 shares; shared voting
power-1,307,500 shares; sole dispositive power-0 shares; and shared dispositive
power-1,963,000 shares (5)Mr. Solomont resigned as an officer and a director of
the Company on March 28, 1997.
<PAGE>
ITEM 2
PROPOSAL TO APPROVE AMENDMENTS TO THE COMPANY'S STOCK OPTION PLAN
The Company's Amended and Restated 1993 Stock Option Plan (the "Stock
Option Plan") was adopted and approved by the Company's Board of Directors and
stockholders in July 1993, and subsequently amended by the Board of Directors in
March 1994 and April 1994, which amendments were approved by the Company's
stockholders in May 1994. The Board of Directors has adopted, subject to
approval by the stockholders of the Company, amendments to the Stock Option Plan
effective as of January 1, 1997 to (i) increase the number of shares of Common
Stock available under the Stock Option Plan from 3,750,000 to 5,300,000 and (ii)
limit to 500,000 the number of options that may be granted per year to any
individual under the Stock Option Plan. The Board of Directors has also adopted
certain conforming amendments to the Stock Option Plan in response to recent
changes to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. The Stock Option Plan, as amended, is set forth in Appendix 1 to this
Proxy Statement and should be referred to for a complete description of its
provisions. The following summary of the Stock Option Plan is qualified in its
entirety by reference to the Stock Option Plan.
Summary Description of Stock Option Plan
The purpose of the Stock Option Plan is to secure for the Company the
benefits of the additional incentive inherent in the ownership of the Company's
stock by selected employees, directors and consultants of the Company and its
subsidiaries who are important to the success and growth of the Company's
business and to secure and retain the services of such employees, directors and
consultants. The Stock Option Plan provides for the grant of both incentive
stock options intended to qualify as such under Section 422 of the Internal
Revenue Code of 1986, as amended, and non-qualified stock options. Subject to
stockholder approval of the amendments described above, options to purchase a
maximum of 5,300,000 shares of Common Stock may be granted under the Stock
Option Plan and a maximum of 500,000 options per year may be granted to any
individual under the Stock Option Plan. Currently, a maximum of 3,750,000
options may be granted under the Stock Option Plan and a maximum of 937,500
options may be granted to any individual over the term of the Stock Option Plan.
The Stock Option Plan is currently administered by the Compensation
Committee of the Board of Directors. Subject to the limitations set forth in the
Stock Option Plan, the Compensation Committee has the authority to determine to
whom options will be granted, the number of shares of Common Stock that may be
purchased under each option, the option price and the vesting schedule.
Incentive stock options may be granted only to key employees of the Company.
Non-qualified stock options may be granted to directors (provided they are not
current members of the Compensation Committee) or key employees or consultants
of the Company. Approximately 70 individuals are presently eligible to receive
options under the Stock Option Plan.
The exercise price of shares of Common Stock subject to options
qualifying as incentive stock options may not be less than the fair market value
of the Common Stock on the date of grant. The Compensation Committee has the
authority to determine the price at which any non-qualified stock options may be
granted. All options granted to date pursuant to the Stock Option Plan have been
non-qualified stock options.
Vested stock options granted under the Stock Option Plan must be
exercised by the optionee before the earlier of (i) ten years from the date such
options were granted, (ii) one year from the optionee's death or retirement due
to disability, (iii) the date of termination of the optionee's employment by
reason of "cause," (iv) three months after termination of the optionee's
employment other than by reason of death, disability, or termination for cause,
or (v) such earlier time or upon the occurrence of such earlier event as the
Compensation Committee shall determine.
The Board of Directors recommends a vote FOR the proposal to amend the
Stock Option Plan.
<PAGE>
ITEM 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP as the
Company's independent auditors for the year ending December 31, 1997. KPMG Peat
Marwick LLP has audited the Company's financial statements since 1989.
Ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors will require the affirmative vote of a majority of the
shares of Common Stock represented in person or by proxy and entitled to vote at
the Annual Meeting. In the event shareholders do not ratify the appointment of
KPMG Peat Marwick LLP as the Company's independent auditors, such appointment
will be reconsidered by the Audit Committee and the Board of Directors.
Representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting
to respond to appropriate questions and to make such statements as they may
desire.
The Board of Directors recommends a vote FOR ratification of KPMG Peat
Marwick LLP as the Company's independent auditors for the year ending December
31, 1997.
Certain Relationships and Related Transactions
As of December 31, 1996, each of the Co-Chief Executive Officers was
indebted to one of the Company's subsidiaries in the amount of $325,000. This
indebtedness is payable on demand and interest is payable on such indebtedness
at the rate of 9.5% per annum. Prior to the Company's reorganization in November
1992 (the "Reorganization"), the land and building of one of the Company's
facilities was owned by Gwendolyn Straus, the mother of the Co-Chief Executive
Officers. Mrs. Straus had taken a mortgage on that land to make a loan to four
of her children in the aggregate principal amount of $1,300,000, each child
being responsible for one-quarter of the principal indebtedness and interest.
Mrs. Straus then created a corporate entity and transferred her interest in the
land and building as well as the $1,300,000 indebtedness owed by her four
children into the corporate entity. Multicare eventually acquired the corporate
entity and with such acquisition the Co-Chief Executive Officers of the Company
became indebted to that subsidiary for their pro rata share of the aggregate
principal balance and interest. During 1996, each Co-Chief Executive Officer
paid interest to the subsidiary in the amount of $30,875.
As a result of regulatory constraints, interests owned by the Co-Chief
Executive Officers relating to a 140 licensed bed facility to be constructed
were not transferred to the Company pursuant to the Reorganization. Transfer of
this facility to the Company prior to the completion of construction and
licensure could have caused the Certificate of Need to be voided. Accordingly,
pursuant to an option agreement the Company was granted an option to acquire
this facility, subject to the debt incurred in the construction and licensure,
for a purchase price of $100 plus the assumption of such indebtedness. In 1995,
the Company and the Co-Chief Executive Officers restructured the agreement to
provide for a long term lease of the Facility to the Company. In connection with
the lease, the Co-Chief Executive Officers repaid the indebtedness of the
Facility to the Company. The lease is for an initial term of ten years, subject
to extension at the option of the Company for four additional five year periods.
The lease provides for an annual rental payment of $973,404 for the initial five
year period, subject to increase at stated amounts set forth in the lease. This
restructuring was approved by a committee of the Board composed entirely of
outside directors which was advised by outside financial and legal advisors.
The real property relating to one of the Company's facilities is owned
50% by a general partnership wholly owned by the Co-Chief Executive Officers and
50% by an unrelated party. Neither such real property nor the interests of the
Co-Chief Executive Officers in the general partnership were transferred to the
Company in the Reorganization. The facility's lease is a "net lease" for an
initial term of ten years, with optional extensions on the part of the tenant
aggregating an additional eleven years and seven months. The Company's operating
subsidiary that leases the facility pays an annual rent of $1,181,714.
As a result of potential adverse tax consequences to the Co-Chief
Executive Officers, the real property relating to one of the Company's
facilities was not transferred to the Company by the Co-Chief Executive Officers
in the Reorganization. In lieu of a transfer, one of the Company's operating
subsidiaries has leased the real property pursuant to a "net lease" for a term
of 10 years, expiring in December 2002. The Company's operating subsidiary that
leases the real property pays an annual rent of $725,000.
In December 1995, the Company acquired Glenmark Associates, Inc.
("Glenmark"), a long-term care provider that currently operates 21 facilities
primarily in West Virginia. Mark R. Nesselroad, a senior vice president of the
Company, was a co-founder and the chief executive officer of Glenmark. Under the
terms of the acquisition agreement, $1.5 million of the purchase price payable
to Mr. Nesselroad and the other principal owner of Glenmark was
<PAGE>
placed into an escrow account and scheduled to be paid out over a period of
three years upon Glenmark's achievement of certain financial targets. In July
1996, in connection with an amendment to the acquisition agreement, Mr.
Nesselroad and the other former owner each received $250,000 of the deferred
purchase price. Pursuant to the amendment, Mr. Nesselroad and the other former
owner are each entitled to receive (i) on December 1, 1997, 25% of the amount,
if any, remaining in the escrow account as of such date and (ii) on December 1,
1998, one-half of the amount, if any, remaining in the escrow account as of such
date. The foregoing payments are subject to indemnification obligations of
Glenmark which, under the terms of the acquisition agreement, are required to be
paid out of the escrow account.
The Company leases office space for its West Virginia divisional
offices from a limited liability company in which Mark R. Nesselroad, a senior
vice president of the Company, owns a 50% membership interest. The Company pays
under several leases an aggregate annual rent of approximately (i) $350,000
(plus additional amounts for utilities and maintenance costs) for an aggregate
18,279 square feet of space used by corporate personnel and (ii) $66,000
(including utilities and maintenance costs) for an aggregate 7,790 square feet
of space used for pharmacy and ancillary services personnel. In addition, the
Company leases 5,159 square feet of warehouse space for an annual rent of
approximately $15,500 (plus additional amounts for utilities and maintenance
costs) from a corporation in which Mr. Nesselroad owns a one-third interest.
Each lease has an initial term which ranges from one year to 16 months and
renews automatically for successive one-year periods unless a termination notice
is delivered by either party not less than 120 days prior to the end of the
initial term or any extended term. The rental payments are subject to
re-negotiation prior to each one-year renewal term based upon the fair market
rental value of each premises.
In December 1996, the Company acquired The AoDoS Group ("AoDoS"), a
group of companies of which Alan D. Solomont, a member of the Company's Board of
Directors from 1994 until March 1997, was the founder and a principal owner.
AoDoS owns, operates or manages 22 long-term care facilities with 2,930 beds, 20
hospital based subacute units with 514 beds and eight assisted living facilities
with 821 beds, all but one of which are located in Massachusetts. AoDoS also
provides consulting services to an additional 14 facilities with 1,668 beds,
operates several ancillary businesses including home health, both
Medicare-certified and private. In addition, Mr. Solomont is also transferring
to the Company his interests in three assisted living development projects,
subject to the rights of third parties. Under the terms of the acquisition
agreement, Multicare paid approximately $10 million in cash, financed
approximately $51 million through a lease facility, assumed or repaid
approximately $29.8 million in debt and issued 554,973 shares of its common
stock for AoDoS. Schroder Wertheim & Co. acted as the financial advisor to the
Board of Directors in this transaction and delivered a fairness opinion
confirming the fairness of the transaction from a financial point of view to the
Company's stockholders.
Mr. Solomont became Vice Chairman of the Company and received
approximately $12.2 million in cash and 326,637 shares of Multicare common stock
in the transaction. In addition, the President of AoDoS, Susan S. Bailis, who
joined the Company upon consummation of the transaction as a Senior Vice
President and as President and Chief Executive Officer of AoDoS/Multicare, the
Company's New England division, received in the transaction approximately $2.3
million in cash and 123,588 shares of Multicare common stock. In connection with
the transaction, Mr. Solomont was relieved of certain guarantees of indebtedness
of AoDoS. Mr. Solomont and Ms. Bailis each have certain indemnification
obligations to the Company which extend post closing. In addition, Mr. Solomont
and Ms. Bailis received 300,000 and 97,500 options, respectively, to purchase
Multicare common stock at an exercise price equal to the closing price of
Multcare's common stock on the closing date of the transaction.
In connection with the transaction, each of Mr. Solomont and Ms. Bailis
entered into an employment agreement with the Company. Each employment agreement
provides for an initial term of three years that automatically renews for
successive one-year periods unless notice of non-renewal is provided by either
party. The employment agreements provide for an annual base salary at an initial
rate of $300,000 in the case of Mr. Solomont and $200,000 in the case of Ms.
Bailis, and a bonus to be determined pursuant to the Company's KEICP. Each
employment agreement provides that if the Company terminates the employee
without Cause (as defined) or if the employee terminates the employment
agreement for Good Reason (as defined) or upon a Change of Control (as defined)
then (1) the Company will be obliged to pay the employee the greater of (x) any
remaining salary payable during the term or (y) an amount equal to the annual
salary for the then current employment year (or, with respect to the Change of
Control, three times annual salary plus an amount equal to the highest bonus
received during the prior three years); (2) all stock options, stock awards and
similar equity rights will immediately vest and become exercisable; and (3) the
Company must maintain in effect the employee's other benefits for a period of
one year (or, with respect to a Change of Control, two years).
<PAGE>
Mr. Solomont resigned as the Company's Vice Chairman, as a member of
its Board of Directors and from all other positions held with the Company's
subsidiaries in March 1997 and became a consultant to the Company. As a
consultant, Mr. Solomont is to be paid a fee of $25,000 per month and is
eligible for payments to be made under his employment agreement upon a Change of
Control as described above. In addition, at any time prior to December 31, 1998,
Mr. Solomont may, in accordance with the terms of the consulting arrangement,
rejoin the Company as its Vice Chairman under the employment agreement for a
period expiring December 31, 1999.
Mr. Solomont has ownership interests in and is an officer of certain
unaffiliated entities which own five assisted living facilities to which a
subsidiary of the Company provides management services at market rates. The term
of the management agreements are subject to termination by the owner only for
material breach, non-performance or upon sale. Upon termination upon sale, the
management agreement provides that a payment of up to 160% of the management
fees realized for the prior four quarters (subject to a minimum) for a sale
occurring in 1997 declining ratably to 100% of such fees for a sale occurring
after 1999 will be made to the Company. In addition, the Company has the right
of first opportunity to acquire Mr. Solomont's ownership interests.
Mr. Solomont, members of his family and Ms. Bailis also own a 51%
interest in and Mr. Solomont is an officer and director of two long term care
facilities which are owned 49% and managed by affiliates of the Company at
market rates. The Company has an option to acquire all of such interests. In
addition, the Company has an option to acquire a third facility owned by Mr.
Solomont and members of his family.
GENERAL INFORMATION
Voting Procedures
All matters specified in this Proxy Statement that are to be voted on
at the Annual Meeting will be by written ballot. One or more inspectors of
election will be appointed, among other things, to determine the number of
shares outstanding and the voting power of each, the shares represented at the
Annual Meeting, the existence of a quorum and the authenticity, validity and
effect of proxies, to receive votes or ballots, to hear and determine all
challenges and questions in any way arising in connection with the right to
vote, to count and tabulate all votes and to determine the results.
Solicitation Costs
The Company will pay the cost of preparing and mailing this Proxy
Statement and other costs of the proxy solicitation made by the Board of
Directors. Certain of the Company's officers and employees may solicit the
submission of proxies authorizing the voting of shares in accordance with the
Board of Directors' recommendations, but no additional remuneration will be paid
by the Company for the solicitation of those proxies. Such solicitations may be
made by personal interview or telephone. Arrangements have also been made with
brokerage firms and others for the forwarding of proxy solicitation materials to
the beneficial owners of Common Stock, and the Company will reimburse such
persons for reasonable out-of-pocket expenses incurred in connection therewith.
Stockholder Proposals and Nominations for the 1998 Annual Meeting
A stockholder desiring to submit an otherwise eligible proposal for
inclusion in the Company's proxy statement for the 1998 annual meeting of
stockholders of the Company must deliver the proposal so that it is received by
the Company no later than December 1, 1997. The Company requests that all such
proposals be addressed to the Company's Secretary at the Company's offices, 411
Hackensack Avenue, Hackensack, New Jersey 07601, and mailed by certified mail,
return-receipt requested. In addition, the Company's By-Laws require that notice
of stockholder nominations for directors and related information with respect to
the 1998 annual meeting to be received by the Secretary of the Company not less
than 60 nor more than 90 days prior to May 14, 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors to file initial reports of ownership
and reports of changes of ownership of the Company's Common Stock with the
Securities and Exchange Commission. Executive officers and directors are
required to furnish the Company with copies of all Section 16(a) forms that they
file. Based upon a review of these filings and written representations from
certain of the Company's directors and executive officers that no other reports
were required, the Company notes that Mr. Rosenberg inadvertently failed to file
a
<PAGE>
Statement of Changes in Beneficial Ownership on Form 4 to report one transaction
which was subsequently reported on Mr. Rosenberg's Annual Statement of Changes
in Beneficial Ownership on Form 5.
Financial and Other Information
The Company's Annual Report for the year ended December 31, 1996,
including financial statements, is being sent to stockholders of record as of
the Record Date together with this Proxy Statement. The Annual Report is not a
part of the proxy solicitation materials. The Company will furnish, without
charge, a copy of its Annual Report on Form 10-K for the year ended December 31,
1996 as filed with the Securities and Exchange Commission to any stockholder who
submits a written request to the Company's Secretary, at the Company's offices,
411 Hackensack Avenue, Hackensack, New Jersey 07601.
<PAGE>
OTHER MATTERS
The Board of Directors knows of no matters other than those described
in this Proxy Statement which are likely to come before the Annual Meeting. If
any other matters properly come before the Annual Meeting, or any adjournment
thereof, the persons named in the accompanying form of proxy intend to vote the
proxies in accordance with their best judgment.
By Order of the Board of Directors,
Bradford C. Burkett
Secretary
Hackensack, New Jersey
April 8, 1997
Appendix 1
THE MULTICARE COMPANIES, INC.
SECOND AMENDED AND RESTATED 1993 STOCK OPTION PLAN
THE MULTICARE COMPANIES, INC
SECOND AMENDED AND RESTATED 1993 STOCK OPTION PLAN
(As Amended and Restated Effective January 1, 1997,
and approved by the Board of Directors of the Company in April 1997)
The Multicare Companies, Inc., a Delaware corporation (the "Company"),
previously adopted The Multicare Companies, Inc. Amended and Restated 1993 Stock
Option Plan (the "Plan") for directors and employees of the Company and its
Subsidiaries (as defined in Paragraph 4), effective as of July 14, 1993. The
Plan was subsequently amended by Amendment No. 1, approved by the Board of
Directors on March 15, 1994, and Amendment No. 2, approved by the Board of
Directors on April 4, 1994. The Plan is hereby amended and restated effective as
of January 1, 1997.
1. Purpose. The purpose of the Plan is to secure for the Company the
benefits of the additional incentive inherent in the ownership of common stock,
par value one cent ($0.01) per share, of the Company ("Common Stock") by
selected employees, directors and consultants of the Company and its
Subsidiaries who, in the judgment of the Committee (as defined in Paragraph 2),
are important to the success and growth of the business of the Company and its
Subsidiaries, and to secure and retain the services of such employees, directors
and consultants.
2. Administration. The Plan shall be administered by a committee (the
"Committee") of the Board of Directors of the Company (the "Board"), which
Committee shall consist of two or more directors. It is intended that the
directors appointed to serve on the Committee shall be "outside directors"
(within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code")) and "Non-Employee Directors" (within the meaning of Rule
16b- 3(b)(3)(i) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act")). However, the mere fact that a Committee member shall fail to
qualify under either of these requirements shall not invalidate any award made
by the Committee which award is otherwise validly made under the Plan. The
Committee shall select one of its members as Chairman and shall make such rules
and regulations as it shall deem appropriate concerning the holding of its
meetings and transaction of its business. A majority of the whole Committee
shall constitute a quorum, and the act of a majority of the members of the
Committee present at a meeting at which a quorum is present shall be the act of
the Committee. Any member of the Committee may be removed at any time either
with or without cause by resolution adopted by the Board of Directors, and any
vacancy on the Committee may at any time be filled by resolution adopted by the
Board of Directors.
Subject to the express provisions of the Plan, the Committee shall have
plenary authority to interpret the Plan, to prescribe, amend and rescind the
rules and regulations relating to it and to make all other determinations deemed
necessary and advisable for the administration of the Plan. The determinations
of the Committee shall be conclusive.
<PAGE>
3. Common Stock Subject to Options. Subject to the adjustment
provisions of Paragraph 12 below, a maximum of 5,300,000 shares may be made
subject to options granted under the Plan. If, and to the extent that, options
granted under the Plan shall terminate, expire or be canceled for any reason
without having been exercised, new options may be granted in respect of the
shares covered by such terminated, expired or canceled options. The granting and
terms of such new options shall comply in all respects with the provisions of
the Plan.
Shares sold upon the exercise of any option granted under the Plan may
be shares of authorized and unissued Common Stock, shares of issued Common Stock
held in the Company's treasury, or both.
There shall be reserved at all times for sale under the Plan a number
of shares, of either authorized and unissued shares of Common Stock, shares of
Common Stock held in the Company's treasury, or both, equal to the maximum
number of shares which may be purchased pursuant to the options granted or that
may be granted under the Plan. No person eligible to receive options under the
Plan may be granted options covering a total of more than 500,000 shares of
Common Stock per year under the Plan.
4. Eligibility. Incentive Options (as defined in Paragraph 5 below) may
be granted to any key employee of the Company or any of its Subsidiaries (an
"Employee"), and Nonqualified Options (as defined in Paragraph 5 below) may be
granted to any director, employee or consultant to the Company. Options may be
granted to the directors and employees who hold or have held options under this
Plan or any similar or other awards under any other plan of the Company or any
of its Subsidiaries. Employees who are also officers and directors of the
Company or any of its Subsidiaries shall not by reason of such offices be
ineligible to receive grants of options; provided that no person who is then a
member of the Committee shall be eligible to receive any grant of options under
the Plan and any grant made to such a member of the Committee shall be null and
void.
For purposes of the Plan, a "Subsidiary" of the Company shall mean any
"subsidiary corporation" as such term is defined in Section 424(f) of the Code.
An entity shall be deemed a Subsidiary of the Company only for such periods as
the requisite ownership relationship is maintained.
No person who would own, directly or indirectly, immediately after the
granting of an option to such person, more than 10% of the total combined voting
power of all classes of stock of the Company or any of its Subsidiaries, except
as permitted by Section 422(c)(5) of the Code, shall be eligible to receive an
Incentive Option under the Plan.
A director, employee or consultant receiving an option pursuant to the
Plan is hereinafter referred to as an "Optionee".
5. Grant of Options. The Committee shall have the authority and
responsibility, within the limitations of the Plan, to determine the directors
and employees to whom options are to be granted, whether the options granted
shall be "incentive stock options" ("Incentive Options"), within the meaning of
Section 422(b) of the Code, or options which are not Incentive Options
("Nonqualified Options"), the number of shares that may be purchased under each
option and the option price.
In determining the directors and employees to whom options shall be
granted and the number of shares to be covered by each such option, the
Committee shall take into consideration such person's present and potential
contribution to the success of the Company and its Subsidiaries and such other
factors as the Committee may deem proper and relevant.
6. Price. The option price of each share of Common Stock purchasable
under any Incentive Option granted pursuant to the Plan shall not be less than
the Fair Market Value (as defined below) thereof at the time the option is
granted. The Committee is hereby given the authority to determine the price at
which any Nonqualified Option may be exercised.
For the purposes of the Plan, "Fair Market Value" of a share of Common
Stock means the average of the high and low sales prices of a share of Common
Stock on the New York Stock Exchange Composite Tape on the date in question. If
the shares of Common Stock are not traded on the New York Stock Exchange on such
date, "Fair Market Value" of a share of Common Stock shall be determined by the
Committee in its sole discretion.
7. Duration of Options. Each option granted hereunder shall become
exercisable, in whole or in part, at the time or times provided by the
Committee; provided, however, that if an Optionee's employment with or service
as a director for the Company or any Subsidiary shall terminate by reason of
death or "permanent and total disability", within the meaning of Section
22(e)(3) of the Code ("Disability"), each outstanding option granted to such
<PAGE>
Optionee shall become exercisable in full in respect of the aggregate number of
shares covered thereby.
Notwithstanding any provision of the Plan to the contrary, the
unexercised portion of any option granted under the Plan shall automatically and
without notice terminate and become null and void at the time of the earliest to
occur of the following: (a)The expiration of 10 years from the date on which
such option was granted; (b)The expiration of one year from the date the
Optionee's employment with or service as a director for the Company or any of
its Subsidiaries shall terminate by reason of Disability; provided, however,
that if the Optionee shall die during such one-year period, the provisions of
Subparagraph (c) below shall apply; (c)The expiration of one year from the date
of the Optionee's death, if such death occurs either during employment with or
service as a director for the Company or any of its Subsidiaries or during the
one-year period described in Subparagraph (b) above; (d)The date of the
Optionee's employment with or service as a director of the Company or any of its
Subsidiaries shall terminate by reason of "cause" (as hereafter defined).
Termination by reason of "cause" shall mean, unless some other definition shall
be applicable under any employment agreement to which such employee is subject,
termination by reason of participation and conduct during employment or service
as a director consisting of fraud, felony, willful misconduct or commission of
any act which causes or may reasonably be expected to cause substantial damage
to the Company or any of its Subsidiaries; (e)The expiration of three months
from the date the Optionee's employment with or service as a director of the
Company or any of its Subsidiaries shall terminate other than by reason of
death, Disability or termination for cause; and (f)In whole or in part, at such
earlier time or upon the occurrence of such earlier event as the Committee in
its discretion may provide upon the granting of such option.
The Committee may determine whether any given leave of absence
constitutes a termination of employment. The options granted under the Plan
shall not be affected by any change of employment or service as a director so
long as the Optionee continues to be an employee or director of the Company or
any of its Subsidiaries.
8. Exercise of Options. An option granted under this Plan shall be
deemed exercised when the person entitled to exercise the option (a) delivers
written notice to the Company at its principal business office, directed to the
attention of its Secretary, of the decision to exercise, (b) concurrently
tenders to the Company full payment for the shares to be purchased pursuant to
such exercise, and (c) complies with such other reasonable requirements as the
Committee establishes pursuant to Paragraph 2 of the Plan. Payment for shares
with respect to which an option is exercised may be made in cash, check or money
order and, subject to the Committee's consent, by Common Stock.
9. Transferability of Options.
(a) No option or any right evidenced thereby may be transferred,
pledged, assigned or hypothecated, except as provided in Paragraph 9(b)
hereof, by will or the laws of descent and distribution, or pursuant to
a qualified domestic relations order (within the meaning of Section
414(p) of the Code), nor subjected to execution, attachment or similar
process. Any attempted transfer, pledge, assignment, hypothecation or
other disposition of an option or any right evidenced thereby not
specifically permitted herein shall be null and void and without
effect.
(b) An Optionee may transfer Nonqualified Options granted to the
Optionee hereunder to (i) members of the Optionee's immediate family,
(ii) trusts for the benefit of such immediate family members and (iii)
partnerships in which such immediate family members are the only
partners; provided, however, the Nonqualified Options so transferred
shall continue to be subject to the same terms and conditions as were
applicable to such Nonqualified Options immediately prior to their
transfer; and, provided further, that the transferee of such
Nonqualified Options may not subsequently transfer such Nonqualified
Options to any person other than a person to whom the Optionee is
permitted to transfer Nonqualified Options hereunder. For purposes of
this Paragraph 9, "immediate family members" shall mean the children,
grandchildren and spouse of the Optionee.
10. Rights of Optionee. Neither the Optionee nor the Optionee's
executor or administrator nor any transferee hereunder shall have any of the
rights of a stockholder of the Company with respect to the shares subject to an
option until certificates for such shares shall actually have been issued upon
the due exercise of such option. No adjustment shall be made for any regular
cash dividend for which the record date is prior to the date of such due
exercise and full payment for such shares has been made therefor.
<PAGE>
11. Right to Terminate Employment or Service as a Director Nothing in
the Plan or in any option shall confer upon any Optionee the right to continue
in the employment of or service as a director for the Company or any of its
Subsidiaries or affect the right of the Company or any of its Subsidiaries to
terminate Optionee's employment or service as a director at any time subject,
however, to the provisions of any employment agreement between the Company or
any of its Subsidiaries and the Optionee.
12. Adjustment Upon Changes in Capitalization. In the event of any
stock split, stock dividend, stock change, reclassification, recapitalization or
combination of shares which changes the character or amount of Common Stock
prior to exercise of any portion of an option theretofore granted under the
Plan, such option, to the extent that it shall not have been exercised, shall
entitle the Optionee (or the Optionee's executor or administrator) upon its
exercise to receive in substitution therefor such number and kind of shares as
the Optionee would have been entitled to receive if the Optionee had actually
owned the stock subject to such option at the time of the occurrence of such
change; provided, however, that if the change is of such a nature that the
Optionee, upon the exercise of the option, would receive property other than
shares of stock the Committee shall make an appropriate adjustment in the option
to provide that the Optionee (or the Optionee's executor or administrator) shall
acquire upon exercise only shares of stock of such number and kind as the
Committee, in its sole judgment, shall deem equitable; and, provided further,
that any such adjustment shall be made so as to conform to the requirements of
Section 424(a) of the Code.
In the event that any transaction (other than a change specified in the
preceding paragraph) described in Section 424(a) of the Code affects the Common
Stock subject to any unexercised option, the Board of Directors of the surviving
or acquiring corporation shall make such similar adjustment as is permissible
and appropriate.
If any such change or transaction shall occur, the number and kind of
shares for which options may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
13. Purchase for Investment. Whether or not the options, and shares
covered by the Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an option under the Plan may be required by the
Company to give a representation in writing that such person is acquiring such
shares for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof. The Company will endorse any necessary
legend referring to the foregoing restriction upon the certificate or
certificates representing any shares issued or transferred to the Optionee upon
the exercise of any option granted under the Plan.
14. Form of Agreements with Optionees. Each option granted pursuant to
the Plan shall be in writing and shall have such form, terms and provisions, not
inconsistent with the provisions of the Plan, as the Committee shall provide for
such option. Unless otherwise set forth in such writing, the effective date of
the granting of an option shall be the date on which the Committee approves such
grant. Each Optionee shall be notified promptly of such grant, and a written
agreement shall be promptly executed and delivered by the Company and the
Optionee.
15. Termination and Amendment of Plan and Options. Unless the Plan
shall theretofore have been terminated as hereinafter provided, options may be
granted under the Plan at any time, and from time to time, prior to the tenth
anniversary of the Effective Date (as defined below), on which date the Plan
will expire, except as to options then outstanding under the Plan. Such options
shall remain in effect until they have been exercised, have expired or have been
canceled.
The Plan may be terminated or amended at any time by the Board of
Directors; provided, however, that any such amendment shall comply with all
applicable laws (including Sections 162(m) and 422(b)(1) of the Code),
applicable stock exchange listing requirements, and applicable requirements for
exemption (to the extent necessary) under Rule 16b-3 under the Exchange Act.
No termination, modification or amendment of the Plan, without the
consent of the Optionee, may adversely affect the rights of such person with
respect to such option. With the consent of the Optionee and subject to the
terms and conditions of the Plan, the Committee may amend the outstanding option
agreements with any Optionee.
16. Government and Other Regulations. The obligation of the Company
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental
agency as may be required, including, without limitation, the effectiveness of
any registration statement required under the Securities Act
<PAGE>
of 1933, as amended, and the rules and regulations of any securities exchange on
which the Common Stock may be listed.
17. Withholding. The Company's obligation to deliver shares of Common
Stock in respect of any option granted under the Plan shall be subject to all
applicable federal, state, and local tax withholding requirements. Federal,
state and local withholding tax due upon the exercise of any option (or upon any
disqualifying disposition of shares of Common Stock subject to an incentive
option), in the Committee's sole discretion, may be paid in shares of Common
Stock (including the withholding of shares subject to an option) upon such terms
and conditions as the Committee may determine.
18. Separability. If any of the terms or provisions of the Plan
conflict with the requirements of Rule 16b-3 under the Exchange Act and/or
Sections 162(m) and 422 of the Code, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of Rule
16b-3 under the Exchange Act and/or Sections 162(m) and 422 of the Code. With
respect to Incentive Options, if the Plan does not contain any provision to be
included herein under Section 422 of the Code, such provision shall be deemed to
be incorporated herein with the same force and effect as if such provision had
been set out at length herein; provided, further, that to the extent any option
which is intended to qualify as an Incentive Option cannot so qualify, such
option, to that extent, shall be deemed to be Nonqualified Option for all
purposes of the Plan.
19. Non-Exclusivity of the Plan. Neither the adoption of the Plan by
the Board of Directors nor the submission of the Plan to the shareholders of the
Company for approval shall be construed as creating any limitation on the power
of the Board of Directors to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options and
the awarding of stock and cash otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
20. Exclusion from Pension and Profit-Sharing Computation. By
acceptance of an option, each Optionee shall be deemed to have agreed that such
grant is special incentive compensation that will not be taken into account, in
any manner, as salary, compensation or bonus in determining the amount of any
payment under any pension, retirement or other benefit plan of the Company or
any of its Subsidiaries. In addition, such option will not affect the amount of
any life insurance coverage, if any, provided by the Company on the life of the
Optionee which is payable to such beneficiary under life insurance plan covering
directors or employees of the Company or any of its Subsidiaries.
21. Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
Exhibit 2
AGREEMENT AND PLAN OF MERGER
by and among
WALTZ CORP.,
WALTZ ACQUISITION CORP.
and
THE MULTICARE COMPANIES, INC.
__________________
JUNE 16, 1997
__________________
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE OFFER.........................................................2
Section 1.1 The Offer.......................................................2
Section 1.2 Company Actions.................................................4
ARTICLE 2 THE MERGER........................................................5
Section 2.1 The Merger......................................................5
Section 2.2 Closing; Effective Time.........................................6
Section 2.3 Certificate of Incorporation....................................6
Section 2.4 By-laws.........................................................6
Section 2.5 Directors and Officers..........................................6
ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATION;
EXCHANGE OF CERTIFICATES..........................................7
Section 3.1 Effect on Capital Stock.........................................7
Section 3.2 Exchange of Common Stock........................................8
Section 3.3 No Liability...................................................10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
Section 4.1 Organization.................................................10
Section 4.2 Capitalization...............................................10
Section 4.3 Subsidiaries.................................................11
Section 4.4 Authorization; Binding Agreement.............................12
Section 4.5 Noncontravention.............................................12
Section 4.6 Governmental Approvals.......................................13
Section 4.7 SEC Filings; Financial Statements; Undisclosed Liabilities...13
Section 4.8 Information Supplied.........................................14
Section 4.9 Absence of Certain Changes or Events.........................15
Section 4.10 Finders and Investment Bankers...............................15
Section 4.11 Voting Requirement...........................................15
Section 4.12 Litigation...................................................16
Section 4.13 Taxes........................................................16
Section 4.14 Compliance with Laws.........................................17
Section 4.15 Title to Properties..........................................17
Section 4.16 Other Agreements.............................................17
Section 4.17 Employee Benefit Plans.......................................17
Section 4.18 Insurance....................................................19
Section 4.19 Environmental Matters........................................19
i
<PAGE>
Page
----
ARTICLE 5 REPRESENTATIONS AND WARRANTIESOF PARENT AND MERGER SUB...........20
Section 5.1 Organization...................................................20
Section 5.2 Authorization; Binding Agreement...............................20
Section 5.3 Noncontravention...............................................21
Section 5.4 Governmental Approvals.........................................21
Section 5.5 Information Supplied...........................................22
Section 5.6 Financing......................................................22
Section 5.7 Fraudulent Transfer Laws.......................................22
Section 5.8 Finders and Investment Bankers.................................23
Section 5.9 Regulatory Approval............................................23
ARTICLE 6 COVENANTS........................................................23
Section 6.1 Conduct of Business of the Company.............................23
Section 6.2 Stockholder Approval; Proxy Statement..........................25
Section 6.3 Access and Information.........................................26
Section 6.4 No Solicitation................................................26
Section 6.5 Reasonable Efforts; Additional Actions.........................27
Section 6.6 Notification of Certain Matters................................29
Section 6.7 Public Announcements...........................................29
Section 6.8 Indemnification and Insurance..................................29
Section 6.9 Indemnification of Brokerage...................................31
Section 6.10Directors......................................................31
Section 6.11Company Debt...................................................32
Section 6.12Employee Matters...............................................32
ARTICLE 7 CONDITIONS.......................................................34
Section 7.1 Conditions to Each Party's Obligations.........................34
ARTICLE 8 TERMINATION......................................................35
Section 8.1 Termination....................................................35
Section 8.2 Fees and Expenses..............................................37
Section 8.3 Procedure for and Effect of Termination........................38
ARTICLE 9 GUARANTY.........................................................38
Section 9.1 Guaranty.......................................................38
Section 9.2 Absolute Guaranty..............................................39
Section 9.3 Continuing Guaranty............................................39
Section 9.4 Limitation.....................................................39
Section 9.5 Representations and Warranties.................................40
ii
<PAGE>
Page
----
ARTICLE 10 MISCELLANEOUS....................................................40
Section 10.1 Certain Definitions..........................................40
Section 10.2 Amendment and Modification...................................41
Section 10.3 Waiver of Compliance; Consents...............................41
Section 10.4 Survival.....................................................42
Section 10.5 Notices......................................................42
Section 10.6 Assignment...................................................43
Section 10.7 Expenses.....................................................43
Section 10.8 GOVERNING LAW................................................43
Section 10.9 Counterparts.................................................44
Section 10.10 Interpretation...............................................44
Section 10.11 Entire Agreement.............................................44
Section 10.12 No Third Party Beneficiaries.................................44
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 16, 1997
(the "Agreement") by and among WALTZ CORP., a Delaware corporation ("Parent"),
WALTZ ACQUISITION CORP. a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub") and THE MULTICARE COMPANIES, INC., a Delaware corporation
(the "Company"). Merger Sub and the Company are sometimes collectively referred
to herein as the "Constituent Corporations."
WHEREAS, the respective Boards of Directors (or comparable
body or entity) of the Guarantor, Parent, Merger Sub and the Company have
approved the acquisition of the Company by Parent and the merger of Merger Sub
with and into the Company on the terms and subject to the conditions set forth
in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent
proposes to cause Merger Sub to make a tender offer (as it may be amended from
time to time as permitted under this Agreement, the "Offer") to purchase all the
issued and outstanding shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock"), at a price per share of Common Stock of $28.00 net
to the seller in cash, upon the terms and subject to the conditions set forth in
this Agreement; and the Board of Directors of the Company has approved the Offer
and the Merger (as hereinafter defined) and is recommending that the Company's
stockholders accept the Offer;
WHEREAS, as a condition of the willingness of Parent and
Merger Sub to enter into this Agreement, those individuals (the "Principal
Stockholders") who are today executing a Tender and Voting Agreement (as defined
below), have entered into the Tender and Voting Agreement dated as of the date
hereof (each, a "Voting Agreement") with Parent, pursuant to which, among other
things, each Principal Stockholder will agree to tender his shares of Common
Stock pursuant to the Offer and vote, subject to the terms and conditions
thereof, such Principal Stockholder's shares of the Common Stock, in favor of
the Merger and the approval and adoption of this Agreement;
WHEREAS, the Board of Directors of the Company has
approved the terms of the Voting Agreements; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
<PAGE>
2
NOW THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1.
THE OFFER
Section 1.1 The Offer.
(a) Subject to the provisions of this Agreement, as
promptly as practicable but in no event later than the fifth business day from
and including the date of the public announcement of this Agreement, Merger Sub
shall, and Parent shall cause Merger Sub to, commence the Offer. The obligation
of Merger Sub to, and of Parent to cause Merger Sub to, commence the Offer and
accept for payment, and pay for, any shares of Common Stock tendered pursuant to
the Offer shall be subject only to the conditions set forth in Exhibit A (any of
which may be waived by Merger Sub in its sole discretion, provided that, without
the consent of the Company, Merger Sub shall not waive the Minimum Condition (as
defined in Exhibit A)) and to the terms and conditions of this Agreement. Merger
Sub expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Merger Sub shall not (i) reduce the number
of shares of Common Stock subject to the Offer, (ii) reduce the price per share
of Common Stock to be paid pursuant to the Offer, (iii) modify or add to the
conditions set forth in Exhibit A, (iv) except as provided in the next sentence,
extend the Offer, (v) change the form of consideration payable in the Offer
(other than by increasing the cash offer price) or (vi) amend or modify any term
of the Offer in any manner adverse to any of the Company's stockholders. The
initial expiration date shall be twenty business days from and including the
commencement of the Offer. Notwithstanding the foregoing, Merger Sub may,
without the consent of the Company, but subject to the Company's right to
terminate this Agreement pursuant to Section 8.1(b)(ii), (i) extend the Offer,
if at the scheduled expiration date of the Offer any of the conditions to Merger
Sub's obligation to purchase shares of Common Stock shall not be satisfied,
until such time as such conditions are satisfied or waived or (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or in order to obtain any material regulatory
approval applicable to the Offer. Merger Sub agrees that: (A) in the event it
would otherwise be entitled to terminate the Offer at any scheduled expiration
thereof due to the failure of one or more of the conditions set forth in the
first sentence of the introductory paragraph or paragraphs (a), (f), or (g) of
Exhibit A to be satisfied or waived, it shall give the Company notice thereof
and, at the request of the Company, extend the Offer until the earlier of
(1) such time as such condition is, or conditions are, satisfied or waived and
(2) the date chosen by
<PAGE>
3
the Company which shall not be later than (x) September 15, 1997, or October 15,
1997 if the option to extend set forth in Section 8.1(b)(ii)(y) is exercised or
(y) the date on which the Company reasonably believes all such conditions will
be satisfied; provided that if any such condition is not satisfied by the date
so chosen by the Company, the Company may request and Merger Sub shall make
further extensions of the Offer in accordance with the terms of this Section
1.1(a); and (B) in the event that Merger Sub would otherwise be entitled to
terminate the Offer at any scheduled expiration date thereof due solely to the
failure of the Minimum Condition to be satisfied, it shall, at the request of
the Company (which request may be made by the Company only on one occasion),
extend the Offer for such period as may be requested by the Company not to
exceed ten days from such scheduled expiration date. Subject to the terms and
conditions of the Offer and this Agreement, Merger Sub shall, and Parent shall
cause Merger Sub to, pay for all shares of Common Stock validly tendered and not
withdrawn pursuant to the Offer that Merger Sub becomes obligated to purchase
pursuant to the Offer promptly after the expiration of the Offer.
(b) On the date of commencement of the Offer, the
Parent and Merger Sub shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents and exhibits included therein pursuant to which
the Offer will be made, together with any supplements or amendments thereto, the
"Offer Documents"). The Offer Documents shall comply as to form in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder and the Offer Documents on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by Parent or Merger Sub with respect to information supplied by the Company
in writing for inclusion in the Offer Documents. Each of Parent, Merger Sub and
the Company agrees promptly to correct any information provided by it for use in
the Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and each of Parent and Merger Sub
further agrees to take all steps necessary to amend or supplement the Offer
Documents and to cause the Offer Documents as so amended or supplemented to be
filed with the SEC and to be disseminated to the Company's stockholders, in each
case as and to the extent required by applicable Federal securities laws. The
Company and its counsel shall be given a reasonable opportunity to review the
Offer Documents and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. Parent and Merger
Sub agree to provide the Company and its counsel any comments Parent, Merger Sub
or their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly upon the receipt of such comments.
<PAGE>
4
(c) Parent shall contribute to Merger Sub on a timely
basis the funds necessary to purchase any shares of Common Stock that Merger Sub
becomes obligated to purchase pursuant to the Offer and to perform any of its
other obligations pursuant to this Agreement.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to
the Offer and represents that the Board of Directors of the Company, at a
meeting duly called and held on June 15, 1997, unanimously adopted resolutions
approving this Agreement and the transactions contemplated hereby, including,
the Offer, the Merger and the Voting Agreement, determining that the terms of
the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that the Company's stockholders accept
the Offer and tender their shares pursuant to the Offer and approve and adopt
this Agreement. The Company further represents that Smith Barney Inc. ("Smith
Barney") has delivered to the Board of Directors of the Company its opinion to
the effect that, as of the date hereof, the consideration to be received by the
holders of Common Stock (other than Parent and its affiliates) in the Offer and
the Merger is fair to such holders from a financial point of view. The Company
hereby consents to the inclusion in the Offer Documents of the recommendations
of the Company's Board of Directors described in this Section 1.2(a). The
Company has been advised by each of its directors and by each executive officer
who as of the date hereof is aware of the transactions contemplated hereby, that
such person intends to tender pursuant to the offer all Common Stock owned, of
record or beneficially, by such person which such person may sell without
liability under Section 16(b) of the Exchange Act.
(b) Promptly following the filing of the Offer
Documents with the SEC, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9")
containing the recommendation described in Section 1.2(a) and shall mail the
Schedule 14D-9 to the stockholders of the Company; provided that the Company
shall not be required to include such recommendation in the Schedule 14D-9 if
the Company receives an Acquisition Proposal (as defined in Section 6.4) from
any person or group (i) that the Board of Directors of the Company determines in
its good faith judgment is more favorable to the Company's stockholders than the
Offer and the Merger and (ii) as a result of which, the Board determines in good
faith, after consultation with outside counsel, that it would constitute a
breach of the Board's fiduciary duty under applicable law to so include such
recommendation. The Schedule 14D-9 shall comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to
<PAGE>
5
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Merger Sub in writing for inclusion in the Schedule 14D-9. Each of the
Company, Parent and Merger Sub agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to amend or supplement
the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented
to be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by applicable Federal securities laws. The
Parent and its counsel shall be given a reasonable opportunity to review the
Schedule 14D-9 and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. The Company agrees
to provide the Parent and its counsel in writing with any comments the Company
or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly upon the receipt of such comments.
(c) In connection with the Offer, the Company shall
cause its transfer agent to furnish Merger Sub promptly with mailing labels
containing the names and addresses of the record holders of Common Stock as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Common Stock, and shall
furnish to Merger Sub such information and assistance (including updated lists
of stockholders, security position listings and computer files) as the Parent
may reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Merger Sub shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, will, upon request, deliver to the Company all
copies (in all forms) of such information then in their possession or control.
ARTICLE 2
THE MERGER
Section 2.1 The Merger.
(a) Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 2.2) and in
accordance with
<PAGE>
6
the General Corporation Law of the State of Delaware (the "DGCL"), Merger Sub
shall be merged with and into the Company, which shall be the surviving
corporation in the Merger (the "Surviving Corporation"). At the Effective Time,
the separate existence of Merger Sub shall cease and the other effects of the
Merger shall be as set forth in Section 259 of the DGCL.
(b) At the election of the Parent, any direct or
indirect wholly owned Delaware subsidiary (as defined in Section 9.1(e)) of the
Parent may be substituted for Merger Sub as a Constituent Corporation in the
Merger. In such event, the parties agree to execute an appropriate amendment to
this Agreement in order to reflect such substitution.
Section 2.2 Closing; Effective Time . Subject to the
provisions of Article 7, the closing of the Merger (the "Closing") shall take
place in New York City at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, as soon as practicable but in no event later than 10:00 a.m. New York
City time on the first business day after the date on which each of the
conditions set forth in Article 7 have been satisfied or waived by the party or
parties entitled to the benefit of such conditions, or at such other place, at
such other time or on such other date as the Parent, Merger Sub and the Company
may mutually agree. The date on which the Closing actually occurs is hereinafter
referred to as the "Closing Date." At the Closing, Parent, Merger Sub and the
Company shall cause a certificate of merger (the "Certificate of Merger") to be
executed and filed with the Secretary of State of the State of Delaware in
accordance with the DGCL. The Merger shall become effective as of the date and
time of such filing, or such other time within twenty-four hours of such filing
as Merger Sub and the Company shall agree to be set forth in the Certificate of
Merger (the "Effective Time").
Section 2.3 Certificate of Incorporation. The
certificate of incorporation of the Company, as in effect immediately prior to
the Effective Time, shall become, from and after the Effective Time, the
certificate of incorporation of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
Section 2.4 By-laws. The by-laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall become, from and after the
Effective Time, the by-laws of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
Section 2.5 Directors and Officers. The directors of
Merger Sub and officers of the Company immediately prior to the Effective Time
shall become, from and after the Effective Time, the directors and officers of
the Surviving Corporation, until their respective successors are duly elected or
appointed and qualify or their earlier resignation or removal.
<PAGE>
7
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATION; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Common Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each share of the
capital stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(b) Treasury Stock and Parent-Owned Stock. Each share
of Common Stock that is owned by the Company or any subsidiary of the Company
("Treasury Shares") and each share of Common Stock that is owned by Parent,
Merger Sub or any other subsidiary of Parent ("Parent Shares") shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Common Stock. Subject to
Section 3.1(e), each issued and outstanding share of Common Stock (other than
shares to be canceled in accordance with Section 3.1(b)) shall be converted into
the right to receive in cash, without interest, the price paid for each share of
Common Stock in the Offer (the "Merger Consideration"). As of the Effective
Time, all shares of Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Options. Immediately prior to the Effective Time,
the unexercisable portion of each outstanding option (a "Company Stock Option")
to purchase shares of Common Stock, shall become immediately exercisable in
full, subject to all expiration, lapse and other terms and conditions thereof.
The Company shall take all action necessary so that each Company Stock Option
(and any rights thereunder) outstanding immediately prior to the Effective Time
shall be canceled immediately prior to the Effective Time in exchange for the
right to receive an amount in cash equal to the product of (A) the number of
shares of Common Stock subject to such Company Stock Option immediately prior to
the Effective Time (after giving effect to the first sentence of this
Section 3.1(d)) and (B) the excess, if any, of (1) the Merger Consideration over
(2) the per share exercise price of such Company
<PAGE>
8
Stock Option, to be delivered by the Surviving Corporation immediately following
the Effective Time.
(e) Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, each share of Common Stock that is issued and
outstanding immediately prior to the Effective Time and that is held by a
stockholder who has properly exercised and perfected appraisal rights under
Section 262 of the DGCL (the "Dissenting Shares"), shall not be converted into
or exchangeable for the right to receive the Merger Consideration, but shall be
entitled to receive such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if such holder shall have
failed to perfect or shall have effectively withdrawn or lost the right to
appraisal and payment under the DGCL, each share of Common Stock of such holder
shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, in accordance with Section 3.1(a),
and such shares shall no longer be Dissenting Shares. The Company shall give
prompt notice to Parent of any demands received by the Company for appraisal of
shares of Common Stock, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
Section 3.2 Exchange of Common Stock.
(a) On or before the Effective Time, Parent shall
cause to be deposited in trust with a bank or trust company designated by the
Parent and reasonably satisfactory to the Company (the "Paying Agent") cash,
cash equivalents or a combination thereof in an aggregate amount equal to the
product of (a) the number of shares of Common Stock issued and outstanding at
the Effective Time (other than Dissenting Shares, Treasury Shares and Parent
Shares), multiplied by (b) the Merger Consideration (such product being
hereinafter referred to as the "Payment Fund"). Parent shall cause the Paying
Agent to make the payments provided for in Section 3.1 out of the Payment Fund
(other than Section 3.1(d) which shall be paid by the Surviving Corporation
immediately following the Effective Time and other than Section 3.1(e)). The
Paying Agent shall invest undistributed portions of the Payment Fund as Parent
directs in obligations of or guaranteed by the United States of America, in
commercial paper obligations receiving the highest investment grade rating from
both Moody's Investor Services, Inc. and Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1,000,000,000 (collectively, "Permitted
Investments"); provided, however, that the maturities of Permitted Investments
shall be such as to permit the Paying Agent to make prompt payment to former
holders of shares of Common Stock entitled thereto as contemplated by this
Section. Parent shall cause the Payment Fund to be promptly replenished to the
<PAGE>
9
extent of any losses incurred as a result of Permitted Investments. All net
earnings of Permitted Investments shall be paid to Parent as and when requested
by Parent. If for any reason (including losses) the Payment Fund is inadequate
to pay the amounts to which holders of Common Stock shall be entitled under
Section 3.1 or this Section 3.2, Parent shall in any event be liable for payment
thereof. The Payment Fund shall not be used for any purpose except as expressly
provided in this Agreement. If any cash or cash equivalents deposited with the
Paying Agent for purposes of paying the Merger Consideration for the Common
Stock pursuant to this Article 3 remain unclaimed following the expiration of
one year after the Effective Time, such cash or cash equivalents (together with
accrued interest) shall be delivered to the Surviving Corporation by the Paying
Agent and, thereafter, holders of certificates that immediately prior to the
Effective Time represented shares of Common Stock shall be entitled to look only
to the Surviving Corporation (subject to abandoned property, escheat or similar
laws) as general creditors thereof.
(b) Promptly after the Effective Time, the Paying
Agent shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares of Common
Stock that were converted into the right to receive the Merger Consideration
pursuant to Section 3.1 (the "Certificates") a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender by such holder to the Paying
Agent of a Certificate, together with such letter of transmittal duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor, cash in an amount equal to the product of the number of shares of
Common Stock represented by such Certificate multiplied by the Merger
Consideration, and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. If the payment is to be made to a person other than the person in
whose name a Certificate surrendered is registered, it shall be a condition of
payment that (a) the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and (b) the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.2, each Certificate shall represent for all
purposes whatsoever only the right to receive the Merger Consideration in cash
multiplied by the number of shares evidenced by such Certificate, without any
interest thereon.
(c) After the Effective Time there shall be no
transfers on the stock transfer books of the Surviving Corporation of the shares
of Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer or for any
<PAGE>
10
other reason, they shall be canceled and exchanged for cash as provided in this
Article 3, except as otherwise provided by law.
Section 3.3 No Liability. None of Parent, Merger Sub,
the Company or the Paying Agent shall be liable to any person in respect of any
cash from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate shall
not have been surrendered prior to seven years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration payable
to the holder of such Certificate pursuant to this Article 3 would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 4.6)), any such Merger Consideration shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as disclosed to Parent and Merger Sub in a letter
delivered at or prior to the execution hereof (the "Disclosure Letter") the
Company represents and warrants to Parent and Merger Sub as follows:
Section 4.1 Organization. The Company and each of its
subsidiaries is duly organized and validly existing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company and each of its subsidiaries is
duly qualified to do business and in good standing in its jurisdiction of
organization and in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except for such failures to be so duly qualified and in
good standing that, individually or in the aggregate, will not have a Material
Adverse Effect (as defined in Section 10.1(c)) with respect to the Company. The
Company has previously delivered (or, in the case of subsidiaries, delivered or
made available) to Parent correct and complete copies of the certificates of
incorporation and by-laws (or equivalent governing instruments), as currently in
effect, of the Company and each of its subsidiaries.
Section 4.2 Capitalization. The authorized capital stock
of the Company is 7,000,000 shares of Preferred Stock and 70,000,000 shares of
Common Stock. At the close of business on June 13, 1997, (a) 30,817,069 shares
of Common Stock were issued and outstanding, (b) 4,341,346 shares of Common
Stock were
<PAGE>
11
reserved for issuance upon conversion of the Company's 7% Convertible
Subordinated Debentures due 2003 (the "7% Debentures"), (c) 3,690,686 shares of
Common Stock were reserved for issuance upon conversion of Company Stock
Options, (d) approximately 15,000 shares of Common Stock were reserved for
issuance pursuant to the Company's Employee Stock Purchase Program, and (e) no
shares of Common Stock were held by the Company in its treasury. Section 4.2 of
the Disclosure Letter sets forth a complete and correct list, as of the date of
this Agreement, of the holders of all Company Stock Options, the number of
shares of Common Stock subject to each such option and the exercise prices
thereof. Except as set forth above, at the close of business on June 13, 1997,
no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. All issued and outstanding shares
of Common Stock have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights. All shares of Common Stock which
may be issued upon conversion of the 7% Debentures or the Company Stock Options
have been duly authorized and will be, when issued in accordance with the terms
thereof, validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in this Section 4.2 or in Section 4.3 of the
Disclosure Letter and except with respect to purchases required to be made under
the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan") and the
Directors Retainer and Meeting Fee Plan (the "Directors Plan"), as of the date
of this Agreement, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its subsidiaries is a party or by which any of
them is bound (i) obligating the Company or any of its subsidiaries to issue,
deliver, sell, transfer, repurchase, redeem or otherwise acquire or vote, or
cause to be issued, delivered, sold, transferred, repurchased, redeemed or
otherwise acquired or voted, any shares of capital stock or other voting
securities of the Company or of any of its subsidiaries, (ii) restricting the
transfer of Common Stock or (iii) obligating the Company or any of its
subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking.
Section 4.3 Subsidiaries. All of the outstanding shares
of capital stock of each of the Company's subsidiaries that are owned by the
Company or any other subsidiary of the Company (collectively, the "Subsidiary
Shares") have been duly authorized and are validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth in Section 4.3
of the Disclosure Letter, each of the Company's subsidiaries is a wholly owned
subsidiary. Except for the security interests listed in Section 4.3 of the
Disclosure Letter, all of the Subsidiary Shares are owned by the Company free
and clear of all liens, claims, charges, encumbrances or security interests
(collectively, "Liens") with respect thereto. Except for the capital stock of
its subsidiaries and, except as set forth in Section 4.3 of the Disclosure
Letter, the Company does not own, directly or indirectly, any capital stock or
other
<PAGE>
12
ownership interest in any corporation, limited liability company, partnership,
joint venture or other entity.
Section 4.4 Authorization; Binding Agreement. The
Company has the full corporate power and authority to execute and deliver this
Agreement and, subject to adoption of this Agreement by the stockholders of the
Company in accordance with the DGCL, the certificate of incorporation and
by-laws of the Company, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company, subject to the adoption
of this Agreement by the stockholders of the Company in accordance with the DGCL
and the certificate of incorporation and by-laws of the Company. This Agreement
has been duly and validly executed and delivered by the Company and, subject, in
the case of the Merger, to the adoption of this Agreement by the stockholders of
the Company in accordance with the DGCL and the certificate of incorporation and
by-laws of the Company, constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms except as
may be limited by (a) bankruptcy, insolvency, reorganization or other laws now
or hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
Section 4.5 Noncontravention. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a) conflict with or result in any violation of any provision of the
certificate of incorporation or by-laws (or equivalent governing instruments) of
the Company or any of its subsidiaries, (b) except as set forth in Section 4.5
of the Disclosure Letter, require any consent, approval or notice under, or
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation, acceleration or loss of benefit or result in the
creation of any Lien upon the property or assets of the Company or any of its
subsidiaries) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, agreement or other instrument or obligation
(collectively, "Contracts and Other Agreements") to which the Company or any of
its subsidiaries is a party or by which any of them or any portion of their
properties or assets may be bound or (c) subject to the approvals, filings and
consents referred to in Section 4.6, violate any order, judgment, writ,
injunction, determination, award, decree, law, statute, rule or regulation
(collectively, "Legal Requirements") applicable to the Company or any of its
subsidiaries or any portion of their properties or assets; provided that no
representation or warranty is made in the foregoing clauses (b) and (c) with
respect to matters that, individually or in the aggregate, will not (x) have a
Material Adverse Effect with respect to the Company, (y) impair the ability of
the Company to perform its obligations under this Agreement in any material
respect or
<PAGE>
13
(z) delay in any material respect or prevent the consummation of any of the
transactions contemplated by this Agreement.
Section 4.6 Governmental Approvals. No consent, approval
or authorization of or declaration or filing with any foreign, federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality (each, a "Governmental Entity") on the part of the Company or
any of its subsidiaries that has not been obtained or made is required in
connection with the execution or delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, other
than (a) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, (b) (1) filings and other applicable requirements under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (2) the filing with the SEC of (A) the Proxy Statement (as defined in
Section 4.8), and (B) such reports under Sections 13(a), 13(d), 14(d), 14(e) or
15(d) of the Exchange Act, as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (c) the filing of
appropriate documents with the relevant authorities of states other than
Delaware in which the Company or any of its subsidiaries is authorized to do
business, (d) such filings as may be required in connection with any state or
local tax which is attributable to the beneficial ownership of the Company's or
its subsidiaries', real property, if any, (e) such filings as may be required by
any applicable state securities or "blue sky" laws or state takeover laws,
(f) such filings and consents as may be required under any environmental, health
or safety law or regulation, or any health care licensure laws, reimbursement
authorities and their agents, certificate of need laws and other health care
laws and regulations, pertaining to any notification, disclosure or required
approval required by the Merger or the transactions contemplated by this
Agreement and (g) consents, approvals, authorizations, declarations or filings
that, if not obtained or made, will not, individually or in the aggregate, (x)
result in a Material Adverse Effect with respect to the Company, (y) impair the
ability of the Company to perform its obligations under this Agreement in any
material respect or (z) delay in any material respect or prevent the
consummation of any of the transactions contemplated by this Agreement.
Section 4.7 SEC Filings; Financial Statements;
Undisclosed Liabilities . The Company has made all filings required to be made
under the Exchange Act with the SEC since December 31, 1996 (the "SEC Filings").
As of their respective dates, the SEC Filings complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Filings, and the SEC Filings 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 light of the circumstances under which they
were made, not misleading. The financial statements set forth in the SEC Filings
comply as to form in all material respects with
<PAGE>
14
applicable accounting requirements and the published rules and regulations of
the SEC promulgated under the Securities Act or the Exchange Act, as the case
may be, and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes to such financial statements) and fairly present
in all material respects the consolidated financial position of the Company and
its subsidiaries at the respective dates thereof and the consolidated results of
operations and cash flows for the respective periods then ended (subject, in the
case of unaudited interim financial statements, to exceptions permitted by Form
10-Q under the Exchange Act and to normal year-end adjustments). As of March 31,
1997, neither the Company nor any of its subsidiaries had, and since such date
neither the Company nor any of its subsidiaries has incurred, any liabilities of
any nature, whether accrued, absolute, contingent or otherwise, whether due or
to become due that are required to be recorded or reflected on a consolidated
balance sheet of the Company under generally accepted accounting principles,
except as reflected or reserved against or disclosed in the financial statements
of the Company included in the Filed SEC Filings (as defined in Section 4.9) or
as otherwise disclosed to Parent on or prior to the date hereof.
Section 4.8 Information Supplied. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the proxy statement relating to the adoption of this agreement by the
Company's stockholders (the "Proxy Statement") or (iv) the information to be
filed by the Company in connection with the Offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the "Information Statement"), will, in the
case of the Offer Documents and the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the holders, or, in the case of the Proxy Statement, at the date the
Proxy Statement is first mailed to the Company's stockholders and at the time of
the meeting of the Company's stockholders held to vote on approval and adoption
of this Agreement, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Merger Sub in writing specifically
for inclusion or incorporation by reference therein. The Schedule 14D-9, the
Proxy Statement and the Information Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Merger Sub in writing specifically
for inclusion or incorporation by reference therein or as set forth in any of
Guarantor's (as defined in Section 9.1) SEC publicly available filings with the
SEC.
<PAGE>
15
Section 4.9 Absence of Certain Changes or Events. Except
as disclosed in the SEC Filings filed and publicly available prior to the date
hereof (the "Filed SEC Filings") since December 31, 1996, the Company and its
subsidiaries have conducted their respective businesses in the ordinary course
consistent with past practice and as of the date hereof there has not been (i)
any condition, event or occurrence that, individually or in the aggregate, has
resulted in a Material Adverse Effect with respect to the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) except as reflected in Section 4.2 of the Disclosure Letter
and except as disclosed in this Agreement or as set forth in Section 4.9 of the
Disclosure Letter, (x) any granting by the Company or any of its subsidiaries to
any executive officer or other key employee of the Company or any of its
subsidiaries of any increase in compensation, except for normal increases in the
ordinary course of business consistent with past practice or as required under
employment agreements in effect as of December 31, 1996, (y) any granting by the
Company or any of its subsidiaries to any such executive officer of any increase
in severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of December 31, 1996 or (z) any
entry by the Company or any of its subsidiaries into any employment, severance
or termination agreement with any such executive officer except in the ordinary
course of business consistent with past practice, (v) any damage, destruction or
loss, whether or not covered by insurance, that has had or will have a Material
Adverse Effect with respect to the Company or (vi) except insofar as may have
been disclosed in the Filed SEC Filings or required by a change in generally
accepted accounting principles, any change in accounting methods, principles or
practices except as required by generally accepted accounting principles.
Section 4.10 Finders and Investment Bankers. Neither the
Company nor any of its officers or directors has employed any investment banker,
business consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Schroder Wertheim & Co.
Incorporated ("Schroder") and Smith Barney (the fees of which, in each case,
will be paid by the Company), or incurred any liability for any investment
banking, business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the transactions contemplated hereby, except for
fees payable to Schroder and Smith Barney. The Company has provided Parent with
a true and correct copy of the fee letter between the Company and each of Smith
Barney and Schroder.
Section 4.11 Voting Requirement. The affirmative vote of
the holders of a majority of the outstanding shares of Common Stock in favor of
adoption of this Agreement and the Merger is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement and the transactions
<PAGE>
16
contemplated hereby under any applicable law, rule or regulation or pursuant to
the requirements of the Company's certificate of incorporation or by-laws.
Section 4.12 Litigation. Except as disclosed in the
Filed SEC Filings or in Section 4.12 of the Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries that, individually or in the
aggregate, will have a Material Adverse Effect with respect to the Company (it
being understood that this representation shall not include any litigation which
might result in an order, injunction or decree of the nature described in
paragraph (a) of Exhibit A), nor is there any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding against the
Company or any of its subsidiaries having any such effect.
Section 4.13 Taxes. The Company and any consolidated,
combined, unitary or aggregate group for tax purposes of which the Company is or
has been a member has timely filed all material Tax Returns required to be filed
by it and has paid, or has set up an adequate reserve for the payment of, all
Taxes required to be paid as shown on such returns, and the most recent
financial statements contained in the SEC Filings reflect an adequate reserve
for all Taxes payable by the Company and each of its subsidiaries accrued
through the date of such financial statements whether or not shown as being due
on any returns. All material Taxes that the Company and its subsidiaries are
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued. The unpaid Taxes, including any
contingent tax liabilities and net deferred tax liabilities, of the Company and
each of its subsidiaries which have accrued as of the date of the most recent
financial statements contained in the SEC Filings do not materially exceed the
reserve for accrued tax liability set forth or included in such financial
statements. Neither the Company nor any of its subsidiaries has been notified
that any Tax Returns of the Company or its subsidiaries are currently under
audit by the Internal Revenue Service (the "IRS") or any state or local tax
agency and no action, suit, investigation, claim or assessment is pending or
proposed with respect to any material amount of Taxes of the Company or any of
its subsidiaries. No agreements have been made by the Company or its
subsidiaries for the extension of time or the waiver of the statute of
limitations for the assessment or payment of any federal, state or local Taxes.
No material claim for unpaid Taxes has become a lien or encumbrance of any kind
against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries. As used herein, "Taxes"
shall mean any taxes of any kind, including but not limited to those on or
measured by or referred to as income, gross receipts, capital, sale, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
As used herein, "Tax Return" shall
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17
mean any return, report or statement required to be filed with any governmental
authority with respect to Taxes.
Section 4.14 Compliance with Laws. Except as set forth
in Section 4.14 of the Disclosure Letter or in the SEC filings, neither the
Company nor any of its subsidiaries is in conflict with, or in default or
violation of, any law, rule, regulation, order, judgment or decree applicable to
the Company or any subsidiary or by which any property or asset of the Company
or any subsidiary is bound or affected, except for any such conflicts, defaults
or violations that would not in the aggregate have a Material Adverse Effect
with respect to the Company. Except as set forth in Schedule 4.14 of the
Disclosure Letter or in the SEC filings, the Company and its subsidiaries have
all permits, licenses, authorizations, consents, approvals and franchises from
governmental agencies required to conduct their businesses as now being
conducted (the "Company Permits"), except for such permits, licenses,
authorizations, consents, approvals and franchises the absence of which would
not in the aggregate have a Material Adverse Effect with respect to the Company.
Except as set forth in Section 4.14 of the Disclosure Letter or in the SEC
filings, the Company and its subsidiaries are in compliance with the terms of
the Company Permits, except where the failure so to comply would not in the
aggregate have a Material Adverse Effect with respect to the Company.
Section 4.15 Title to Properties. The Company and its
subsidiaries have good, valid and marketable title to the properties and assets
reflected on the most recent consolidated balance sheet included in the SEC
Filings (the "Balance Sheet") (other than properties and assets disposed of in
the ordinary course of business since the date of the Balance Sheet), and all
such properties and assets are free and clear of any Liens, except as described
in the Filed SEC Filings and the financial statements included therein or in
Section 4.3 or 4.15 of the Disclosure Letter, liens for current taxes not yet
due and other than Liens or title imperfections that will not have a Material
Adverse Effect with respect to the Company.
Section 4.16 Other Agreements. Except as set forth in
Section 4.16 of the Disclosure Letter , neither the Company nor any of its
subsidiaries is in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party where such default will have a
Material Adverse Effect with respect to the Company.
Section 4.17 Employee Benefit Plans. (a) The Company and
each of its subsidiaries have complied, and currently are in compliance, in all
material respects with the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code and all other
applicable laws with respect to each material compensation or benefit plan,
agreement, policy, practice, program or arrangement (whether or not subject to
ERISA) maintained by the
<PAGE>
18
Company or any of its subsidiaries for the benefit of any employee, former
employee, independent contractor or director of the Company and its subsidiaries
(including, without limitation, any employment agreements or any pension,
savings, profit-sharing, bonus, medical, insurance, disability, severance,
equity-based or deferred compensation plans) (collectively, the "Plans"). (b)
The Company has provided or made available a current, accurate and complete copy
of each Plan to Parent and, to the extent applicable to the Plans, (i) copies of
any funding instruments, (ii) summary plan descriptions and (iii) Forms 5500 for
the last three years.
(c) Each of the Plans that is intended to qualify
under Section 401(a) of the Code has received, or has filed for, a favorable
determination letter from the IRS ruling that the Plan, does so qualify and that
the trust is exempt from taxation pursuant to Section 501(a) of the Code.
(d) Except as set forth in Section 4.17(d) of the
Disclosure Letter, neither the Company nor any of its subsidiaries has within
the past 5 years maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or arrangement
subject to Title IV of ERISA (including, without limitation, a "multi-employer
plan" (as defined in Section 3(37) of ERISA) and a defined benefit plan (as
defined in Section 3(35) of ERISA)).
(e) No Plan, other than a Plan which is an employee
pension benefit plan (within the meaning of Section 3(2)(A) of ERISA), provides
any material amount of health or medical benefits (whether or not insured), with
respect to current or former employees of the Company beyond their retirement or
other termination of service with the Company (other than (i) coverage mandated
by applicable law, (ii) benefits the full cost of which is borne by the current
or former employee (or his or her beneficiary) or (iii) benefits pursuant to
employment agreements or other arrangements disclosed pursuant to this
Agreement).
(f) Except as set forth in Section 4.17(f) of the
Disclosure Letter, neither the Company nor its subsidiaries has incurred any
withdrawal liability with respect to any Plan that is a multiemployer plan
(within the meaning of Section 3(37) of ERISA) which would have a Material
Adverse Effect with respect to the Company.
(g) No reportable event (within the meaning of
Section 4043 of ERISA) (other than an event for which the 30-day notice period
is waived) or prohibited transaction (within the meaning of Section 4975 of the
Code or Section 406 of ERISA) has occurred with respect to any Plan that will
have a Material Adverse Effect with respect to the Company.
(h) There are no pending or, to the knowledge of the
Company, threatened actions, claims or lawsuits by any individuals or entities
with respect to
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19
any Plan (other than for routine benefit claims) that will have a Material
Adverse Effect with respect to the Company.
(i) Except as set forth in Section 4.17(i) of the
Disclosure Letter, no payments or benefits under any Plan are triggered (in
whole or in part) solely as a result of the transactions contemplated by this
Agreement that will have a Material Adverse Effect with respect to the Company.
(j) No Plan provides for any stock option that is
exercisable into the stock of any of the subsidiaries of the Company.
Section 4.18 Insurance. The Company maintains, and has
maintained, without interruption, during the past three years, policies or
binders of insurance covering such risks, and events, including personal injury,
property damage and general liability, in amounts the Company reasonably
believes adequate for its business and operations.
Section 4.19 Environmental Matters.
(a) Except as set forth in the Filed SEC Filings,
(i) the assets, properties, businesses and operations of the Company and its
subsidiaries are and have been in compliance with applicable Environmental Laws
(as defined below), except for such non-compliance which has not had and will
not have a Material Adverse Effect with respect to the Company); (ii) the
Company and its subsidiaries have obtained and, as currently operating, are in
compliance with all Company Permits necessary under any Environmental Law for
the conduct of the business and operations of the Company and its subsidiaries
in the manner now conducted except for such non-compliance which has not had and
will not have a Material Adverse Effect with respect to the Company; (iii) all
Hazardous Substances generated at or in connection with the real properties and
operation of the Company have been transported and otherwise handled, treated
and disposed of in compliance with all applicable Environmental Laws and in a
manner that does not result in liability under Environmental Laws, except for
noncompliance or liability which has not had and will not have a Material
Adverse Effect with respect to the Company, (iv) no Hazardous Substances have
been disposed of or otherwise released, handled or stored by the Company on the
real properties on which the Company's business is conducted or elsewhere in
violation of applicable Environmental Laws or in a manner that would result in
liability under applicable Environmental Laws which will have a Material Adverse
Effect with respect to the Company and (v) neither the Company nor any of its
subsidiaries nor any of their respective assets, properties, businesses or
operations has received or is subject to any outstanding order, decree,
judgment, complaint, agreement, claim, citation, notice, or to the knowledge of
the Company, any investigation, inquiry or proceeding indicating that the
Company or any of its subsidiaries is or may be (a) liable for a violation of
any Environmental Law or
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20
(b) liable for any Environmental Liabilities and Costs (including, without
limitation, any such Environmental Liabilities or Costs incurred in connection
with being designated as a "potentially responsible party" pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act or any
analogous state law), where in each case such liability would have a Material
Adverse Effect with respect to the Company.
(b) For purposes of this Agreement, the terms below
shall have the following meanings:
"Environmental Law" means any law (including, without
limitation, common law), regulation, ordinance, guideline, code, decree,
judgment, order, permit or authorization or other legally enforceable
requirement of any Governmental Authority relating to worker or public safety
and the indoor and outdoor environment, including, without limitation,
pollution, contamination, Hazardous Substances, cleanup, regulation and
protection of the air, water or soils in the indoor or outdoor environment; and
"Environmental Liabilities and Costs" means all damages,
penalties, obligations or clean-up costs assessed or levied pursuant to any
Environmental Law;
"Hazardous Substances" means petroleum products, asbestos,
radioactive material, or hazardous or toxic substances or wastes as defined or
regulated under any Environmental Law.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company
as follows:
Section 5.1 Organization. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Merger Sub is a newly formed,
wholly owned subsidiary of the Parent and, except for activities incident to the
acquisition of the Company, Merger Sub has not engaged in any business
activities of any type or kind whatsoever.
Section 5.2 Authorization; Binding Agreement. Each of
Parent and Merger Sub has the full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution
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21
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of each of Parent and Merger Sub. This Agreement
has been duly and validly executed and delivered by each of Parent and Merger
Sub and constitutes a legal, valid and binding agreement of each of Parent and
Merger Sub, enforceable against each of them in accordance with its terms except
as may be limited by (a) bankruptcy, insolvency, reorganization or other laws
now or hereafter in effect relating to creditors' rights generally and
(b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 5.3 Noncontravention. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a) conflict with or result in any violation of any provision of the
certificate of incorporation or by-laws of Parent or Merger Sub, (b) require any
consent, approval or notice under, or conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any Contracts and Other
Agreements to which Parent or Merger Sub is a party or by which either of them
or any portion of their properties or assets may be bound or (c) subject to the
matters referred to in clauses (a), (b) and (c) of Section 5.4 below, violate
any Legal Requirements applicable to Parent or Merger Sub or any material
portion of their properties or assets; provided that no representation or
warranty is made in the foregoing clauses (b) and (c) with respect to matters
that, individually or in the aggregate, will not have a Material Adverse Effect
with respect to Parent.
Section 5.4 Governmental Approvals. No consent, approval
or authorization of, or declaration or filing with, any Governmental Entity on
the part of either Parent or Merger Sub that has not been obtained or made is
required in connection with the execution or delivery by Parent or Merger Sub of
this Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, other than (a) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (b) (1) filings under the HSR
Act, (2) the filing with the SEC of such reports under Sections 13(a), 13(d),
14(d), 14(e) or 15(d) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, and (3) as
set forth on Schedule 5.4 and (c) the filing of appropriate documents with the
relevant authorities of states other than Delaware in which Parent or any of its
subsidiaries is authorized to do business, (d) such filings as may be required
in connection with any state or local tax which is attributable to the
beneficial ownership of Parent's or its subsidiaries', real property, if any,
(e) such filings as may be required by any applicable state securities or "blue
sky" laws or state takeover laws, (f) such filings and consents as may be
required under any environmental, health or safety law or regulation, or any
health care licensure laws, reimbursement authorities and their agents,
certificate of need laws
<PAGE>
22
and other health care laws and regulations, pertaining to any notification,
disclosure or required approval required by the Merger or the transactions
contemplated by this Agreement and (g) consents, approvals, authorizations,
declarations or filings that, if not obtained or made, will not, individually or
in the aggregate, result in a Material Adverse Effect on the Parent or prevent
or significantly delay Parent or Merger Sub from consummating the transactions
contemplated hereby.
Section 5.5 Information Supplied. None of the
information supplied or to be supplied in writing by Parent or Merger Sub
specifically for inclusion or incorporation by reference in the Proxy Statement
will, in the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the holders, or, in the case of the Proxy Statement, at the date the
Proxy Statement is first mailed to the Company's stockholders or at the time of
the meeting of the Company's stockholders held to vote on approval and adoption
of this Agreement, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by
Parent or Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied in writing by the Company
specifically for inclusion or incorporation by reference therein.
Section 5.6 Financing. After giving effect to borrowings
under Parent's debt financing commitments (the "Debt Financing Commitments"),
true and complete copies of which have been provided to the Company, Merger Sub
will have sufficient funds available to purchase all the outstanding shares on a
fully diluted basis of Common Stock pursuant to the Offer and the Merger, to
refinance all indebtedness that will or may become due as a result of the
consummation of the Offer or the Merger and to pay all fees and expenses
incurred by it or disclosed pursuant to Section 4.10 related to the transactions
contemplated by this Agreement.
Section 5.7 Fraudulent Transfer Laws. Assuming the
Company is not Insolvent (as defined below) prior to the Effective Time,
immediately after the Effective Time and after giving effect to any change in
the Surviving Corporation's assets and liabilities as a result of the Merger,
the Surviving Corporation will not be Insolvent. For purposes hereof, an entity
will be deemed to be "Insolvent" if (i) such entity's financial condition is
such that either the sum of its debts is greater than the fair value of its
assets or the fair saleable value of its assets is less than the amount required
to pay its probable liability on existing debts as they mature, (ii) such entity
has unreasonably small capital with which to engage in its business or (iii)
such entity has incurred liabilities beyond its ability to pay as they become
due. The
<PAGE>
23
representation and warranty set forth in this Section 5.7 shall be deemed to be
made only upon the purchase of shares of Common Stock in the Offer.
Section 5.8 Finders and Investment Bankers. Neither
Parent or Merger Sub nor any of their respective officers or directors has
employed any investment banker, business consultant, financial advisor, broker
or finder in connection with the transactions contemplated by this Agreement,
except that Guarantor (as defined in Section 9.1) has employed Montgomery
Securities, Incorporated ("Montgomery"), or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the transactions contemplated
hereby, except for fees payable to Montgomery, all of which fees have been or
will be paid by the Guarantor.
Section 5.9 Regulatory Approval. Parent is not aware of
any existing impediment to the approval of the transactions contemplated hereby
by any Governmental Authority whose approval is required to consummate the
transactions contemplated hereby.
ARTICLE 6
COVENANTS
Section 6.1 Conduct of Business of the Company. Except
as set forth in Section 6.1 of the Disclosure Letter or contemplated by this
Agreement, during the period commencing on the date hereof and ending at the
Effective Time, the Company shall, and shall cause each of its subsidiaries to,
conduct its operations according to its ordinary course of business consistent
with past practice, and the Company shall, and shall cause each of its
subsidiaries to, use all reasonable efforts to preserve intact its business
organization and to maintain satisfactory relationships with its customers,
suppliers and others having material business relationships with it; provided,
that it shall not be a breach of this covenant if the Company fails to conduct
its operations according to its ordinary course of business consistent with past
practice if such deviation results from the limitations set forth in clauses (e)
or (g) below. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time, the
Company will not and will not permit any or its subsidiaries to, without the
prior written consent of the Parent:
(a) amend or propose to amend its certificate of
incorporation or by-laws (or equivalent governing instruments);
(b) authorize for issuance, issue, sell, pledge,
deliver or agree or commit to issue, sell, pledge or deliver (whether through
the issuance or
<PAGE>
24
granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or other agreements) or otherwise encumber any capital
stock of any class or any securities convertible into or exchangeable for shares
of capital stock of any class, other than the issuance of shares of Common Stock
issuable upon exercise of Company Stock Options or conversion of 7% Debentures
outstanding on the date of this Agreement or pursuant to the Stock Purchase Plan
or the Directors Plan (in each of such case, in accordance with the present
terms thereof);
(c) split, combine or reclassify any of its capital
stock or declare, pay or set aside for payment any dividend or other
distribution in respect of or substitution for its capital stock, or redeem,
purchase or otherwise acquire any shares of its capital stock;
(d) except as set forth in Schedule 4.9, increase or
establish any compensation or benefit plan, agreement, policy, practice, program
or arrangement that would be a Plan (had such plan, agreement, policy, practice,
program or arrangement been adopted prior to the date of this Agreement) or
otherwise increase in any manner the compensation payable or to become payable
by the Company or any of its subsidiaries to any of their respective directors,
officers, former employees, or employees, other than in the ordinary course of
business consistent with past practice or as required under any existing
employment agreement or Plan or this Agreement;
(e) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets, outside of the ordinary course of business
that in the aggregate is in excess of $10 million; it being understood that the
foregoing does not restrict any construction project heretofore identified or
commenced by the Company that is not prohibited by Section 6.1(h) below;
(f) sell, lease, license, or otherwise dispose of, or
enter into any material contract, commitment, lease or agreement with respect
to, any properties or assets (i) that are material to the Company and its
subsidiaries taken as a whole and (ii) other than in the ordinary course of
business consistent with past practice;
(g) (x) incur any long-term indebtedness in excess of
the aggregate amount of the Company's consolidated long-term indebtedness
outstanding as of June 16, 1997 other than (i) indebtedness not to exceed $10
million at any one time outstanding, the proceeds of which are used to make
acquisitions permitted by clause (e) above; provided, that the ratio of the
principal amount of the indebtedness incurred to finance such acquisitions to
the aggregate pro forma cash flow of the businesses so acquired during the four
fiscal quarters preceding such acquisition does
<PAGE>
25
not exceed 6:1, and (ii) additional indebtedness not to exceed $10 million on
the date shares are purchased in the Offer, and except for intercompany
indebtedness between the Company and any of its subsidiaries or between such
subsidiaries, or (y) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect subsidiary or joint venture of the Company or to officers and employees
of the Company or any of its subsidiaries for travel, business or relocation
expenses in the ordinary course of business consistent with past practice;
(h) make or agree to make any new capital expenditure
or capital expenditures other than in accordance with the Company's 1997 budget
previously delivered to Parent;
(i) make any tax election or settle or compromise any
tax liability that will have a Material Adverse effect with respect to the
Company;
(j) make any material change to its accounting
methods, principles or practices, except as may be required by generally
accepted accounting principles;
(k) enter into any other agreements, commitments or
contracts that are material to the Company and its subsidiaries taken as a
whole, other than in the ordinary course of business consistent with past
practice, or otherwise make any material change that is adverse to the Company
(including by way of termination) in (i) any existing agreement, commitment or
arrangement that is material to the Company and its subsidiaries taken as a
whole or (ii) the conduct of the business or operations of the Company and its
subsidiaries; or
(l) agree, commit or arrange to do any of the
foregoing.
Section 6.2 Stockholder Approval; Proxy Statement.
Following the purchase of shares of Common Stock pursuant to the Offer, the
Company shall take all action necessary in accordance with applicable law to
convene a meeting of its stockholders as promptly as practicable to consider and
vote upon this Agreement and the transactions contemplated hereby. The Company
shall, through its Board of Directors (the "Board"), recommend that the
Company's stockholders vote in favor of the adoption of this Agreement and the
transactions contemplated hereby, subject to the Board's fiduciary duty under
applicable law. As soon as practicable, following the purchase of shares of
Common Stock pursuant to the Offer, the Company shall prepare and file with the
SEC under the Exchange Act the Proxy Statement and shall use its reasonable best
efforts to cause the Proxy Statement to be mailed to stockholders of the Company
as promptly as practicable after such filing. At the meeting of the Company's
stockholders, the Parent shall cause all Parent Shares to be
<PAGE>
26
voted in favor of the adoption of this Agreement and the transactions
contemplated hereby.
Section 6.3 Access and Information. Between the date of
this Agreement and the Effective Time, the Company shall, and shall cause its
subsidiaries to, afford the Parent and its authorized representatives (including
its accountants, financial advisors and legal counsel) reasonable access during
normal business hours to all of the properties, personnel, Contracts and Other
Agreements, books and records of the Company and its subsidiaries and shall
promptly deliver or make available to the Parent (a) a copy of each report,
schedule and other document filed by the Company pursuant to the requirements of
federal or state securities laws and (b) all other information concerning the
business, properties, assets and personnel of the Company and its subsidiaries
as the Parent may from time to time reasonably request. The terms of the
Confidentiality Agreements (the "Confidentiality Agreements") between the
Company and Parent are incorporated herein by reference and shall remain in full
force and effect.
Section 6.4 No Solicitation. The Company, its subsidiaries
and their respective officers, directors, employees, representatives and
advisors shall immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any Acquisition
Proposal; provided that following the cessation of any such discussions or
negotiations, future discussions or negotiations with any such parties shall be
governed solely by the provision of this Section 6.4 other than this sentence.
Except pursuant to this Agreement, neither the Company or any of its
subsidiaries, nor any of their respective officers, directors, employees or
representatives or advisors, shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any person or group (other than Parent and Merger Sub or any
affiliate, associate or designee of Parent or Merger Sub) concerning any
proposal (an "Acquisition Proposal") for an acquisition of all or any
substantial part of the business and properties or capital stock of the Company
and its subsidiaries taken as a whole, directly or indirectly, whether by
merger, consolidation, share exchange, tender offer, purchase of assets or
shares of capital stock or otherwise (an "Acquisition Transaction").
Notwithstanding the foregoing, (a) the Board may take, and disclose to the
Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer for shares
of capital stock of the Company; provided, that the Board shall not recommend
that the stockholders of the Company tender their shares in connection with any
such tender offer unless the Board shall have determined in good faith, after
consultation with outside counsel that failing to take such action would
constitute a breach of the Board's fiduciary duty under applicable law; (b) the
Company may, directly or indirectly, furnish information and access, in each
case only in response to unsolicited requests therefor, to any person or group
pursuant to customary confidentiality agreements, and may participate in
discussions and negotiate with such person or
<PAGE>
27
group concerning any Acquisition Proposal, if such person or group has submitted
a written Acquisition Proposal to the Board and the Board determines in its good
faith judgment, after consultation with outside counsel that failing to take
such action would constitute a breach of the Board's fiduciary duty under
applicable law; and (c) the Company may take the actions described in Section
8.1(c). The Board shall notify Parent immediately if any such Acquisition
Proposal is made and shall in such notice, indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal and,
subject to the fiduciary duties of the Board of Directors under applicable law,
shall keep Parent promptly advised of all developments which could reasonably be
expected to culminate in the Board of Directors withdrawing, modifying or
amending its recommendation of the Merger and the other transactions
contemplated by this Agreement. The Company agrees not to release any third
party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company is a party, unless the Board shall have
determined in good faith, that failing to release such third party or waive such
provisions would constitute a breach of the fiduciary duties of the Board of
Directors under applicable law.
Section 6.5 Reasonable Efforts; Additional Actions.
(a) Upon the terms and subject to the conditions of
this Agreement, each of the parties hereto shall use all reasonable efforts to
take, or cause to be taken, all action, and to do or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by, and in connection with, this Agreement,
including using all reasonable efforts to (i) obtain all consents, amendments to
or waivers under the terms of any of the Company's contractual arrangements
required by the transactions contemplated by this Agreement (other than
Agreements relating to its long term debt, consents, amendments or waivers the
failure of which to obtain will not, individually or in the aggregate, (x) have
a Material Adverse Effect with respect to the Company, (y) impair the ability of
the Company to perform its obligations under this Agreement in any material
respect or (z) delay in any material respect or prevent the consummation of any
of the transactions contemplated by this Agreement), (ii) effect promptly all
necessary or appropriate registrations and filings with Governmental Entities,
including, without limitation, filings and submissions pursuant to the HSR Act,
the Exchange Act, the DGCL and state and federal licensing authorities,
(iii) defend any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby and (iv) fulfill or cause the fulfillment of
the conditions to Closing set forth in Article 7. In connection with and without
limiting the foregoing, the Company and its Board of Directors shall (x) take
all action necessary to ensure that no state takeover statute or similar statute
or regulation (including, without limitation, Section 203 of the DGCL) is or
becomes applicable to the Offer, the Merger, this Agreement or any of the other
transactions
<PAGE>
28
contemplated by this Agreement or the Voting Agreement and (y) if any state
takeover statute or similar statute or regulation becomes applicable to the
Offer, the Merger, this Agreement or any other transaction contemplated by this
Agreement or the Voting Agreement, take all action necessary to ensure that the
Offer, the Merger and the other transactions contemplated by this Agreement and
the Voting Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Offer, the Merger, this Agreement and the other
transactions contemplated by this Agreement and the Voting Agreement.
Notwithstanding the foregoing, the Board of Directors of the Company shall not
be prohibited from taking any action permitted by the terms of this Agreement.
(b) If, at any time after the Effective Time, the
Surviving Corporation shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation the right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
(c) In furtherance and without limiting the above
provisions, each of the Company and Parent shall as promptly as practicable
following the execution and delivery of this Agreement, but not later than
10 days following the commencement of the Offer, file with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
("DOJ") the notification and report form, if any, required for the transactions
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act. Any such notification and report form and
supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Each of the Company and Parent shall furnish to the
other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. The Company and Parent shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, the FTC and the DOJ and shall comply promptly
with any such inquiry or request. Each of Parent and the Company shall use all
reasonable efforts to obtain any clearance required under the HSR Act for, and
<PAGE>
29
to provide assistance to the other in any antitrust proceedings related to, the
consummation of the transactions contemplated by this Agreement.
(d) Parent agrees to cause to be filed as promptly as
practicable and in no event later than July 15, 1997, all other applications and
notices ("Applications") required to be filed with Governmental Authorities in
order to consummate the Offer and the Merger, and to pursue diligently the
approval of such Applications.
Section 6.6. Notification of Certain Matters. The Company
shall give notice to Parent, and Parent and Merger Sub shall give notice to the
Company, promptly upon becoming aware of (a) any occurrence, or failure to
occur, of any event, which occurrence or failure to occur has caused or will
cause any representation or warranty in this Agreement to be untrue or
inaccurate in any material respect at any time after the date hereof and prior
to the Effective Time and (b) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided that the delivery of any notice pursuant to this Section
6.6 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 6.7. Public Announcements. The initial press
release or releases with respect to the transactions contemplated by this
Agreement shall be in the form agreed to by Parent and the Company. Thereafter,
for as long as this Agreement is in effect, Parent and Merger Sub, on the one
hand, and the Company, on the other hand, shall not, and shall cause their
subsidiaries and affiliates not to, issue or cause the publication of any press
release or any other announcement with respect to the Offer, the Merger, this
Agreement or the other transactions contemplated hereby without the consent of
the other (which shall not be unreasonably withheld or delayed), except where
such release or announcement is required by applicable law or pursuant to any
listing agreement with, or the rules or regulations of, any securities exchange
or any other regulatory requirement. Parent and Merger Sub acknowledge and
accept that, promptly after the execution and delivery of this Agreement, the
Company will file with the SEC a Current Report on Form 8-K, reporting such
event and including a copy of this Agreement as an exhibit thereto.
Section 6.8 Indemnification and Insurance. (a) Merger Sub
agrees that all rights to indemnification existing in favor of the present or
former directors, officers, and employees of the Company (as such) or any of its
subsidiaries or present or former directors of the Company or any of its
subsidiaries serving or who served at the Company's or any of its subsidiaries'
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, as
provided in the Company's certificate of incorporation or by-laws, or the
articles of incorporation, by-laws or similar documents of any of the Company's
subsidiaries and the indemnification agreements with such present and
<PAGE>
30
former directors, officers and employees as in effect as of the date hereof
with respect to matters occurring at or prior to the Effective Time shall
survive the Merger and shall continue in full force and effect and without
modification (other than modifications following the Merger which would enlarge
the indemnification rights) for a period of not less than the statutes of
limitations applicable to such matters, and the Surviving Corporation shall
comply fully with its obligations hereunder and thereunder. Without limiting the
foregoing, the Company shall, and after the Effective Time, the Surviving
Corporation shall periodically advance reasonably incurred expenses as so
incurred with respect to the foregoing (including with respect to any action to
enforce rights to indemnification or the advancement of expenses) to the fullest
extent permitted under applicable law; provided, however, that the person to
whom the expenses are advanced provides an undertaking (without delivering a
bond or other security) to repay such advance if it is ultimately determined
that such person is not entitled to indemnification.
(b) For a period of six (6) years after the Effective
Time, the Surviving Corporation shall maintain officers' and directors'
liability insurance and fiduciary liability insurance covering the persons
described in paragraph (a) of this Section 6.8 (whether or not they are entitled
to indemnification thereunder) who are currently covered by the Company's
existing officers' and directors' or fiduciary liability insurance policies on
terms no less advantageous to such indemnified parties than such existing
insurance.
(c) The Surviving Corporation shall indemnify and
hold harmless (and shall advance expenses to), to the fullest extent permitted
under applicable law, each director, officer, employee, fiduciary and agent of
the Company or any subsidiary of the Company including, without limitation,
officers and directors, serving as such on the date hereof against any costs and
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation relating to any of the
transactions contemplated hereby, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall pay the reasonable fees and expenses
of counsel selected by the indemnified parties, promptly as statements therefor
are received and (ii) the parties hereto will cooperate in the defense of any
such matter; provided, however, that the Surviving Corporation shall not be
liable for any settlement effected without its prior written consent, which
consent shall not unreasonably be withheld.
(d) The Surviving Corporation shall pay all
reasonable costs and expenses, including attorneys' fees, that may be incurred
by and indemnified parties in enforcing the indemnity and other obligations
provided for in this Section 6.8.
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31
(e) In the event the Surviving Corporation or any of
its respective successors or assigns (i) consolidates with or merges into any
other person and is not the continuing ro surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation assumes the obligations set
forth in this Section 6.8.
(f) This Section 6.8, which shall survive the
consummation of the Merger at the Effective Time and shall continue for the
periods specified herein, is intended to benefit the Company, the Surviving
Corporation, and any person or entity referenced in this Section 6.8 or
indemnified hereunder each of whom may enforce the provisions of this Section
6.8 (whether or not parties to this Agreement).
Section 6.9 Indemnification of Brokerage. Parent and
Merger Sub, on the one hand, and the Company, on the other hand, each agree to
indemnify and save the other harmless from any claim or demand for commission or
other compensation by any broker, finder, agent or similar intermediary claiming
to have been employed by or on behalf on Parent or Merger Sub or any of their
affiliates, on the one hand, or by the Company or any of its affiliates, on the
other hand, and to bear the cost of legal expenses incurred in defending any
such claim or demand.
Section 6.10 Directors. Promptly upon the acceptance for
payment of, and payment for, such number of shares of Common Stock by Merger Sub
pursuant to the Offer as satisfies the Minimum Condition (the "Majority
Acquisition"), and from time to time thereafter, Merger Sub shall be entitled to
designate such number of directors on the Board of Directors of the Company,
subject to compliance with Section 14(f) of the Exchange Act, as shall represent
a percentage of the Board of Directors equal to the percentage of the
outstanding shares of Common Stock owned by Merger Sub; provided that, from the
Majority Acquisition until the Effective Time, at least two persons who are
directors of the Company on the date hereof shall be directors of the Company
(the "Continuing Directors"); and provided further that, if the number of
Continuing Directors shall be reduced below two for any reason whatsoever, any
remaining Continuing Directors shall be entitled to designate a person to fill
such vacancy as a Continuing Director for purposes of this Agreement or, if no
Continuing Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers, directors,
stockholders or affiliates of Parent, Merger Sub or the Company, and such
persons shall be deemed to be Continuing Directors for purposes of this
Agreement. The Company and its Board of Directors shall, at such time, take all
such action needed to cause Merger Sub's designees to be appointed to the
Company's Board of Directors, including either increasing the size of the Board
of Directors or securing the resignations of incumbent directors or both. At
such times, the Company will use its reasonable best efforts to cause persons
designated by Merger Sub to constitute the
<PAGE>
32
same percentages as is on the board of (i) each committee of the Board of
Directors; (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board, in each case only to the extent
permitted by law. Subject to applicable law, the Company shall promptly take all
action requested by Parent necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder not later than ten days prior to the scheduled Expiration Date of the
Offer, and the Company agrees to make such mailing with the mailing of the
Schedule 14D-9 (provided that Merger Sub shall have provided to the Company on a
timely basis all information required to be included in the Information
Statement with respect to Merger Sub's designees).
Section 6.11 Company Debt. Parent acknowledges that
following the Effective Time the Surviving Corporation will be required to
comply with (i) the terms of all debt of the Company and its subsidiaries which,
as a result of the transactions contemplated by this Agreement, are terminated,
accelerated or otherwise become due or become subject to termination or
acceleration, and (ii) the provisions of agreements governing debt of the
Company which is not subject to termination or acceleration as a result of the
transactions contemplated hereby, including, without limitation:
(a) the Indenture between the Company and United
Jersey Bank, as Trustee (the "Indenture"), dated as of November 18, 1992,
including without limitation, Section 3.15 of the Indenture, and shall not
permit the Surviving Corporation to take any action that would violate or
conflict with the terms of the Indenture. Parent shall cause the Surviving
Corporation to provide such notices to holders of the Company's 12.50% Senior
Subordinated Notes due 2002 (the "12.50% Notes") as required by Section 3.15 of
the Indenture and to enter into such supplemental indentures and deliver such
certificates and opinions as may be required under the Indenture; and
(b) the Fiscal Agency Agreement between the Company
and The Chase Manhattan Bank, N.A. as fiscal agent (the "Fiscal Agency
Agreement"), dated March 16, 1995, and the 7% Debentures. Parent shall cause the
Surviving Corporation to take all such actions as are required by Section 15 of
the Fiscal Agency Agreement and Section 6 of the 7% Debentures including
providing such notice to the Fiscal Agent as is required therein and to enter
into such supplemental indentures and deliver such certificates and opinions as
may be required under the Indenture.
Section 6.12 Employee Matters. (a) Parent agrees to cause
the Surviving Corporation to comply in all respects with the change of control
provisions of the employment agreements of each of Moshael J. Straus, Daniel E.
Straus, Stephen R. Baker, Andrew Horowitz, Alan D. Solomont and Susan S. Bailis.
<PAGE>
33
Without limiting the foregoing, all amounts payable upon such change in control
shall be paid in cash immediately following the Majority Acquisition.
(b) (A) Parent agrees to pay or to cause the
Surviving Corporation to pay, in either case upon the terms and subject to the
conditions set forth in this Section 6.12(b), to each of the employees of the
Company identified in Section 6.12(b) of the Disclosure Letter (the "Affected
Employees") an amount (the "Accrued Bonus Payment") equal to such Affected
Employee's annual bonus (which amount is set forth opposite such Affected
Employee's name in Section 6.12(b) under the heading "Annual Bonus" of the
Disclosure Letter; provided, that such amounts may be changed by the Company
after the date hereof upon notice to Parent if the aggregate Accrued Bonus
Payment (as reduced by the Accrued Bonus Payment of any Affected Employee whose
employment is terminated prior to the Effective Time) would not increase as a
result of such change) multiplied by a fraction, the numerator of which is the
number of days that have elapsed from December 31, 1996 (or the date of hire of
the Affected Employee, if later) until the Effective Time and the denominator of
which is 365; provided, that if any such Employee (other than the persons
referred to in Section 6.12(a)) terminates his or her employment other than for
Good Reason to Terminate (as defined below) prior to December 31, 1997, the
numerator shall be the lesser of 181 and the number of days that have elapsed
from the date of hire of the Affected Employee until June 30, 1997.
(B) Payment of each Affected Employee's Accrued Bonus
Payment shall be payable upon the earlier to occur of (i) the termination
following the purchase of shares of Common Stock pursuant to the Offer of such
Affected Employee's employment, (ii) the occurrence of an event that constitutes
Good Reason to Terminate and (iii) not later than February 15, 1998, if the
Affected Employee is employed by the Surviving Corporation or any of its
subsidiaries on December 31, 1997.
(C) Parent agrees that at or prior to the Effective
Time, it will deposit, or cause to be deposited, in a segregated bank account an
amount equal to the aggregate Accrued Bonus Payment as of the Effective Time.
(c) Parent agrees that the Surviving Corporation
shall make severance payments to each of the Company's corporate and
non-facility employees and non-ancillary employees identified in Section 6.12(c)
of the Disclosure Letter (which does not include any person identified in
Section 6.12(a) above), on the date of termination of any such employee by the
Surviving Corporation or its subsidiary (other than a termination for Cause (as
defined below)), as the case may be, or by such employee following the
occurrence of an event that constitutes Good Reason to Terminate, in an amount
equal to the amount set forth opposite such person's name in Section 6.12(c) of
the Disclosure Letter. Prior to the date that is eighteen months after the
Effective Time, Parent agrees that the Surviving Corporation shall not, and
<PAGE>
34
shall not permit its subsidiaries to, terminate any such employees on less than
90 days prior written notice (a "Notice of Termination") of such termination.
Notwithstanding the foregoing, no employee shall be entitled to the severance
payment described in this Section 6.12(c) if such employee receives a Notice of
Termination or is terminated by the Company or voluntarily resigns at any time
prior to the purchase of Common Stock pursuant to the Offer or on a date that is
after the date that is eighteen months after the Effective Time. For purposes of
this Agreement, "Cause" means conviction of a felony or a crime involving
personal dishonesty or theft or misappropriation of the property of the
Surviving Corporation or its subsidiaries.
(d) For purposes hereof, "Good Reason to Terminate"
shall be deemed to occur if Parent, the Surviving Corporation or any of their
subsidiaries or affiliates shall (i) take any action which substantially reduces
an Affected Employee's title, duties, responsibilities, salary, or, unless such
change affects all employees of the Surviving Corporation or its subsidiaries at
a comparable level of seniority and responsibility, benefits, or (ii) require
the Affected Employee to relocate permanently in excess of 25 miles from the
Affected Employees' primary place of business.
(e) Notwithstanding anything to the contrary
contained herein or in any other document, agreement or instrument, if any
person is terminated by the Company (other than for Cause) following the
purchase of shares of Common Stock pursuant to the Offer but prior to the
Effective Time, all Company Stock Options held by any such person shall be
treated as provided in Section 3.1(d) hereof.
ARTICLE 7
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company by the requisite vote in
accordance with applicable law;
(b) No Legal Requirements (including, without
limitation, any temporary restraining order or preliminary injunction) shall
have been enacted, entered, promulgated, issued or enforced by any court or
Governmental Entity, and no other legal restraint or prohibition shall be in
effect, that prohibits or prevents the consummation of the Merger; provided,
that the party or parties invoking this condition shall use reasonable efforts
to have any such Legal Requirement vacated or removed; and
<PAGE>
35
(c) Any waiting period applicable to the Merger under
the HSR Act shall have expired or been terminated.
ARTICLE 8
TERMINATION
Section 8.1 Termination. This Agreement may be
terminated and the Merger contemplated hereby may be abandoned at any time prior
to the Effective Time, whether before or after adoption by the stockholders of
the Company:
(a) By the mutual written consent of Parent, Merger
Sub and the Company (but only by action of the Continuing Directors after the
purchase of Common Stock pursuant to the Offer);
(b) By Parent, Merger Sub or the Company (but only by
action of the Continuing Directors after the purchase of Common Stock pursuant
to the Offer):
(i) if a court of competent jurisdiction or
other Governmental Entity of the United States shall have issued an order
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such Order or other action shall have become
final and nonappealable; or
(ii) (x) as a result of the failure,
occurrence or existence of any of the conditions set forth in Exhibit A
(1) Merger Sub shall have failed to commence the Offer within five
business days following the date of this Agreement or (2) the Offer shall
have terminated or expired in accordance with its terms without Merger Sub
having accepted for payment any shares of Common Stock pursuant to the
Offer or (y) Merger Sub shall not have accepted for payment any shares of
Common Stock pursuant to the Offer by September 15, 1997 provided, that
such date may be extended at the option of Parent to October 15, 1997, but
only if Parent is and has been diligently pursuing approval of the
Applications with the relevant Governmental Authorities; provided,
further, however, that the passage of the period referred to in clause (y)
shall be tolled for any part thereof (but not exceeding 30 calendar days
in the aggregate) during which any party shall be subject to a non-final
order, decree, ruling or action restraining, enjoining or otherwise
prohibiting the purchase of shares of Common Stock pursuant to the Offer
or the consummation of the Merger; and provided further that the right to
terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be
available to any party whose willful breach of its representations and
<PAGE>
36
warranties contained herein or whose failure to perform any of its
obligations under this Agreement results in the failure, occurrence or
existence of any such condition;
(c) By the Company if the Company receives an
Acquisition Proposal in writing from any person or group (i) that the Board
determines in its good faith judgment is more favorable to the Company's
stockholders than the Offer and the Merger and (ii) as a result of which, the
Board determines in good faith, after consultation with outside counsel, that it
is obligated by its fiduciary duty under applicable law to terminate this
Agreement; provided, that such termination pursuant to this clause (c) shall not
be effective until the Company has made payment of the full fee and expense
reimbursement required by Section 8.2;
(d) By Parent or Merger Sub prior to the purchase of
shares of Common Stock pursuant to the Offer in the event of a material breach
by the Company of any representation, warranty, covenant or other agreement
contained in this Agreement which has not been cured within 15 days after the
giving of written notice to the Company;
(e) By the Company, if Parent or Merger Sub shall
have breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement, which
failure to perform has not been cured within 15 days after the giving of written
notice to Parent or Merger Sub;
(f) By Parent, if, prior to the purchase of Common
Stock in the Offer, the Company shall have (1) withdrawn, modified or amended in
any respect adverse to Parent or Merger Sub its approval or recommendation of
this Agreement or any of the transactions contemplated herein (2) failed to
include in the Proxy Statement or Information Statement such recommendation, (3)
recommended any Acquisition Proposal or Acquisition Transaction from or with a
person other than Parent or any of its subsidiaries or (4) resolved to do any of
the foregoing;
(g) By Parent, if, prior to the purchase of Common
Stock in the Offer (i) an Acquisition Proposal that is publicly disclosed shall
have been commenced, publicly proposed or communicated to the Company which
contains a proposal as to price (without regard to the specificity of such price
proposal) and (ii) the Company shall not have rejected such proposal within 10
business days of its receipt or the date its existence first becomes publicly
disclosed, if sooner;
(h) By Parent, if (i) any person or group (as defined
in Section 13(d)(2) of the Exchange Act) (other than Guarantor, Parent, Merger
Sub or any of its or their affiliates) shall have become, or shall have made a
proposal seeking to become, after the date hereof the beneficial owner (as
defined in Rule 13d-3
<PAGE>
37
promulgated under the Exchange Act) of at least 35% of outstanding Common Stock,
other than acquisitions of securities for bona fide arbitrage purposes only, and
other than acquisition of beneficial ownership solely as a result of a person
having discretionary authority to vote or dispose of shares in an investment
advisory or similar capacity or shall have made a proposal to acquire, directly
or indirectly, all or substantially all of the consolidated assets of the
Company and its subsidiaries and (ii) following public announcement of such
person or group becoming such beneficial owner or proposing such beneficial
ownership or acquisition, at the next scheduled expiration of the Offer all
conditions to the Offer (other than the Minimum Condition) shall have been
satisfied or waived; and
(i) By the Company, if Parent shall not have
delivered the letter of credit referred to in Section 9.4 by June 25, 1997.
Section 8.2 Fees and Expenses.
(a) If: (1) the Company terminates this Agreement
pursuant to 8.1(c); (2) the Company terminates this Agreement pursuant to
Section 8.1(b)(ii) hereof and at such time Parent would have been permitted to
terminate this Agreement under Section 8.1(f) or (g) hereof; (3) Parent
terminates this Agreement pursuant to Section 8.1(f) or (g) hereof; or
(4) Parent terminates this Agreement pursuant to Section 8.1(d) or (h) and (in
the case of clause (4) only) within one year of such termination the Company
shall have consummated, or have entered into a definitive agreement with respect
to, an Acquisition Transaction pursuant to which the holders of the Common Stock
have received or will receive consideration (including the value of any retained
equity) equal to or greater than the Merger Consideration, then the Company
shall pay to Parent, within one business day following (in the case of
clauses (1), (2) and (3)) such termination and, in the case of clause (4), such
consummation or entering into of a definitive agreement, a fee, in cash, of
$25 million, provided, however, that the Company in no event shall be obligated
to pay more than one such fee and the amount of fees paid under Section 8.2(a)
and the amount of expense reimbursement paid under Section 8.2(b) shall not
exceed $25 million.
(b) Upon the termination of this Agreement under
circumstances in which the Company shall be obligated to pay a fee pursuant to
Section 8.2(a), then the Company shall reimburse Parent and Guarantor (not later
than one business day after submission of statements therefor) for all actual
documented out-of-pocket expenses incurred by or on behalf of any of them or
their affiliates in connection with the Offer and the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, fees and disbursements payable to financing sources,
investment bankers, counsel to Purchaser, Parent, the Guarantor or any of the
foregoing, and accountants) ("expenses"). In all cases, the total amount of fees
paid under Section 8.2(a) and reimbursement of expenses under
<PAGE>
38
this Section 8.2(b) shall not exceed $25 million. Upon termination of this
Agreement pursuant to Section 8.1(d), the Company shall reimburse Parent (not
later than one business day after submission of statements therefor) for
expenses, which reimbursement shall in no event exceed $12 million.
Section 8.3. Procedure for and Effect of Termination . In
the event that this Agreement is terminated and the Merger is abandoned by the
Parent or the Merger Sub, on the one hand, or by the Company, on the other hand,
pursuant to Section 8.1, written notice of such termination and abandonment
shall forthwith be given to the other parties and this Agreement shall terminate
and the Merger shall be abandoned without any further action. If this Agreement
is terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party under the terms of this Agreement except
with respect to the willful breach by any party hereto and except that the
provisions of this Section 8.3, Section 8.2, Section 6.9, Article 9 and the
final sentence of Section 6.3 shall survive the termination of this Agreement.
ARTICLE 9
GUARANTY
Section 9.1 Guaranty. Genesis Health Ventures, Inc., a
Pennsylvania corporation (the "Guarantor"), hereby unconditionally and
irrevocably guarantees, as a primary obligor and not as surety, to the Company,
the due and punctual observance, performance and discharge of each obligation of
Parent and Merger Sub contained in this Agreement and the Voting Agreement.
Parent and Merger Sub are hereinafter referred to as an "Obligor" with respect
to this Agreement and the Voting Agreement, respectively, and, collectively, as
"Obligors." This Agreement and the Voting Agreement are hereinafter each
referred to as a "Guaranteed Agreement" and, collectively, as the "Guaranteed
Agreements." Obligations of the Obligors guaranteed in this Section 9.1 are
hereinafter referred to as the "Obligations."
The Guarantor agrees that if either or both its Obligors
shall fail to observe, perform or discharge any Obligation, in accordance with
the terms of a Guaranteed Agreement, the Guarantor shall promptly itself,
observe, perform or discharge such Obligation, or cause the respective Obligor
to observe, perform or discharge such Obligation, in all cases as if and to the
extent that Guarantor was the primary obligor with respect to such Obligation,
and shall pay any and all actual damages that may be incurred or suffered by the
Company in consequence thereof, and any and all costs and expenses, including,
without limitation, attorneys' fees and
39
<PAGE>
expenses, that may be incurred by the Company in collecting such Obligation
and/or in preserving or enforcing any rights under this Guaranty or under the
Obligations.
In all events, the obligations of Guarantor under this
Guaranty shall be subject to the limitation set forth in Section 9.4.
Section 9.2 Absolute Guaranty. The liability of the
Guarantor under this Guaranty with respect to each and all of the Obligations
shall be absolute and unconditional, irrespective of any waiver of, amendment
to, modification of, consent or departure from, the Guaranteed Agreements,
including, without limitation, any waiver or consent involving a change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations.
Section 9.3. Continuing Guaranty. This Guaranty is a
guaranty of payment, performance and compliance and not of collection. This
Guaranty is a continuing guaranty and shall (a) remain in full force and effect
until all of the Obligations, including, without limitation, all amounts payable
under this Guaranty, have been indefeasibly paid, observed, performed or
discharged in full, (b) be binding upon the Guarantor and its successors, (c)
inure to the benefit of and be enforceable by the Guaranteed Parties and their
successors, (d) be binding upon and against the Guarantor without regard to the
validity or enforceability of the Guaranteed Agreements or any insolvency,
bankruptcy or reorganization of the Obligors or otherwise, and (e) continue to
be effective or be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned by the Company
upon the insolvency, bankruptcy or reorganization of any of the Obligors or
otherwise, all as though such payment had not been made.
Section 9.4 Limitation. Notwithstanding anything to the
contrary set forth herein, in consideration of the substantial time and expense
invested by the Company in the transactions contemplated by this Agreement and
the loss of opportunities otherwise available to the Company as a result
thereof, if, at any scheduled expiration of the Offer occurring after August 15,
1997 on which each of the conditions set forth in clauses (a) through (g) on
Exhibit A (as well as the HSR Act condition set forth in clause (ii) of the
first sentence of the introductory paragraph of Exhibit A) has been satisfied or
waived, Parent shall not have satisfied or waived the condition set forth in
clause (iii) of the first sentence of the introductory paragraph of Exhibit A
and this Agreement is thereafter terminated, then the Guarantor shall pay to the
Company $30,000,000, in cash in immediately available funds. Subject to the next
sentence, upon making such payment none of Parent, Merger Sub, the Guarantor or
any of their affiliates shall have any further liability with respect to the
failure to complete the transactions contemplated by this Agreement. The
limitation set forth in this Section 9.4 shall not apply if Parent or Merger Sub
shall breach this Agreement (which breach remains unremedied after 5 days notice
thereof to Parent or Merger
<PAGE>
40
Sub) or if the Guarantor, Parent or Merger Sub fail to use reasonable best
efforts to obtain such financing.
(b) Guarantor shall deliver to the Company a clean,
irrevocable letter of credit for $30,000,000, drawn on Mellon Bank, N.A., in
form reasonably acceptable the Company to secure its obligation to pay the
amount as set forth in Section 9.4(a). Guarantor will use its reasonable best
efforts to deliver such letter of credit prior to commencement of the Offer, but
in all events shall deliver the same not later than June 25, 1997. The Company
agrees that a letter of credit that provides for a draw only against a
certificate of an executive officer of the Company to the effect that the
requirements of Section 9.4(a) have been met will be satisfactory to the
Company.
(c) Parent, Merger Sub and the Guarantor shall keep
the Company reasonably informed respecting the financing arrangements referred
to in Section 5.6 and will promptly notify the Company if their financing
sources indicate that they do not wish to proceed with such financing.
Section 9.5 Representations and Warranties. The
Guarantor represents and warrants to the Company that (a) it is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Pennsylvania, and has the full right and power to execute and deliver
this Guaranty and to perform fully its obligations hereunder, (b) the execution
and delivery by it of this Guaranty and the consummation of the transactions
contemplated hereby and by the Guaranteed Agreements have been duly authorized
by all necessary action on behalf of the Guarantor and (c) this Guaranty has
been duly executed and delivered by the Guarantor and is the valid and binding
obligation of the Guarantor enforceable in accordance with its terms.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Certain Definitions. For purposes of this
Agreement, the following terms shall have the meanings ascribed to them in this
Section 10.1:
(a) "affiliate," with respect to any person, shall
mean any person controlling, controlled by or under common control with such
person;
(b) "knowledge," with respect to the Company, shall
mean the actual knowledge of any executive officer or director of the Company;
<PAGE>
41
(c) "Material Adverse Effect," with respect to any
person, shall mean a material adverse effect on the business, assets,
properties, financial condition or results of operations of such person and its
subsidiaries taken as a whole;
(d) "person" shall mean and include an individual, a
partnership, a joint venture, a limited liability company, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof; and
(e) "subsidiary," with respect to any person, shall
mean any corporation 50% or more of the outstanding voting power of which, or
any partnership, joint venture, limited liability company or other entity 50% or
more of the total equity interest of which, is directly or indirectly owned by
such person. For purposes of this Agreement, all references to "subsidiaries" of
a person shall be deemed to mean "subsidiary" if such person has only one
subsidiary.
Section 10.2. Amendment and Modification . Subject to
applicable law, this Agreement may be amended, modified or supplemented only by
a written agreement signed by each of the parties hereto at any time prior to
the Effective Time with respect to any of the terms contained herein; provided,
however, that after this Agreement is adopted by the Company's stockholders
pursuant to Section 6.2, no such amendment or modification shall (a) alter or
change the amount or kind of the consideration to be delivered to the
stockholders of the Company, (b) alter or change any term of the certificate of
incorporation of the Surviving Corporation or (c) alter or change any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the stockholders of the Company. If Merger Sub's designees are
appointed or elected to the Board of Directors of the Company as provided in
Section 6.10, after the acceptance for payment of shares of the Common Stock
pursuant to the Offer and prior to the Effective Time, the affirmative vote of a
majority of the Continuing Directors of the Company shall be required by the
Company to (i) amend or terminate this Agreement by the Company, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement, (iii)
extend the time for performance of Parent's and Merger Sub's respective
obligations under this Agreement, (iv) take any action to amend or otherwise
modify the Company's certificate of incorporation or by-laws or (v) take any
action that would adversely affect the rights of the holders of Common Stock or
the holders of Company Stock Options with respect to the transactions
contemplated hereby.
Section 10.3. Waiver of Compliance; Consents . Any failure
of Parent or Merger Sub, on the one hand, or the Company, on the other hand, to
comply with any obligation, covenant, agreement or condition herein may, subject
to Section 10.2, be waived by Parent, Merger Sub or the Company, respectively,
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition
<PAGE>
42
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 10.3 and in Section 10.2.
Section 10.4 Survival. The respective representations
and warranties of Parent, Merger Sub and the Company contained herein shall not
survive the Closing hereunder.
Section 10.5 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 the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
(b) if to Guarantor, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
<PAGE>
43
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(c) if to the Company, to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07061
Attention: Daniel E. Straus
Telecopier: (201) 488-8734
with a copy to:
Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner
Telecopier: (212) 757-3990
Section 10.6 Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties.
Section 10.7 Expenses. Except as otherwise provided
herein, whether or not the Merger is consummated, all fees, charges and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees, charges or expenses.
Section 10.8 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF.
<PAGE>
44
Section 10.9 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 10.10 Interpretation. 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 10.11 Entire Agreement. This Agreement (including
the schedules, exhibits, documents or instruments referred to herein) and the
Confidentiality Agreement 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 10.12 No Third Party Beneficiaries. Except as
expressly provided in Sections 6.8 and 6.12, this Agreement is not intended to,
and does not, create any rights or benefits of any party other than the parties
hereto.
<PAGE>
IN WITNESS WHEREOF, the Parent, the Merger Sub and the
Company have caused this Agreement to be signed by their respective duly
authorized officers as of the date first above written.
WALTZ CORP.
By /S/ Karl I. Peterson
--------------------------------------
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
WALTZ ACQUISITION CORP.
By /S/ Karl I. Peterson
--------------------------------------
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
THE MULTICARE COMPANIES, INC.
By /S/ Daniel E. Straus
--------------------------------------
Name: Daniel E. Straus
Title: President and Co-Chief Executive
Officer
Solely for Purposes of Article 9:
GENESIS HEALTH VENTURES, INC.
By /S/ Michael R. Walker
--------------------------------------
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, Merger
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Merger Sub's obligation to pay for or return tendered shares of
Common Stock after the termination or withdrawal of the Offer), to pay for any
shares of Common Stock tendered pursuant to the Offer unless, (i) there shall
have been validly tendered and not properly withdrawn prior to the expiration of
the Offer such number of shares of Common Stock which would constitute, on a
fully diluted basis, a majority of the Company's voting power on the date of
purchase of all securities of the Company entitled to vote generally in the
election of directors or in a merger (the "Minimum Condition"), (ii) any waiting
period under the HSR Act applicable to the purchase of shares of Common Stock
pursuant to the Offer shall have expired or been terminated and (iii) Merger Sub
shall have received the proceeds of the financing pursuant to the Debt Financing
Commitments. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Merger Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any shares of Common Stock not theretofore accepted for
payment or paid for, and (subject to Section 1.1(a) and Section 6.5(a) of this
Agreement) may terminate the Offer if, at any time on or after the date of this
Agreement and before the acceptance of such shares for payment or the payment
therefor, any of the following conditions exists (other than as a result of any
action or inaction of Parent or any of its subsidiaries which constitutes a
breach of this Agreement):
(a) there shall have been any action or proceeding brought by any
Governmental Authority before any federal or state court, or any other or
preliminary or permanent injunction entered in any action or proceeding before
any federal or state court or governmental, administrative or regulatory
authority or agency, located or having jurisdiction within the United States, or
any statute, rule, regulation, or legislation, enacted, promulgated or issued by
any Governmental Authority located or having jurisdiction within the United
States, which has or would reasonably be expected to have the effect of:
(i) making illegal, or otherwise restraining or prohibiting or making materially
more costly the making of the Offer, the acceptance for payment of, payment for,
or ownership, directly or indirectly, of some of or all of the shares of Common
Stock by Parent or Merger Sub, the consummation of any of the transactions
contemplated by the Merger Agreement or materially delaying the Merger;
(ii) prohibiting or materially limiting the ownership or operation by the
Company or any of its subsidiaries, or by Parent, Merger Sub or any of Parent's
subsidiaries or Guarantor or any of its subsidiaries of all or any material
portion of the business or assets of the Company or any of its material
subsidiaries or Parent or any of its material subsidiaries, or compelling
Merger Sub, Parent or any of Parent's subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the
Company or any of its material subsidiaries or Parent or any of its
<PAGE>
material subsidiaries, as a result of the transactions contemplated by the Offer
or the Merger Agreement; (iii) imposing or confirming limitations on the ability
of Merger Sub, Parent or any of Parent's subsidiaries effectively to acquire or
hold or to exercise full rights of ownership of shares of Common Stock,
including, without limitation, the right to vote any shares of Common Stock
acquired or owned by Parent or Merger Sub or any of Parent's subsidiaries on
all matters properly presented to the stockholders of the Company, including,
without limitation, the adoption and approval of the Merger Agreement and the
Merger or the right to vote any shares of capital stock of any subsidiary
(other than immaterial subsidiaries) directly or indirectly owned by the
Company; or (iv) requiring divestiture by Parent or Merger Sub, directly or
indirectly, of any shares of Common Stock;
(b) after the date of this Agreement, there shall have occurred any
event, or Merger Sub shall have become aware of any fact, in either case, that
will have a Material Adverse Effect with respect to the Company, except for
changes resulting from or arising out of the Offer;
(c) any of the representation and warranties of the Company set forth
in this Agreement (without giving effect to any qualification regarding
materiality) shall not be true and correct in any material respect, in each case
as if such representations and warranties were made at the time of
determination;
(d) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(e) this Agreement shall have been terminated in accordance with its
terms or the Offer shall have been terminated with the consent of the Company;
(f) there shall have occurred (i) any general suspension of, or
limitation of prices for, trading on the NYSE, AMEX, Nasdaq National Market,
(ii) any declaration of banking moratorium or suspension or payment in respect
of banks in the United States, (iii) any material limitation whether or not
mandatory by a Government Entity on, or any other event that would limit, the
extension of credit by banks or other lending institutions, (iv) any
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States having a significant
adverse effect on the functionality of financial markets in the United States or
(v) in the case of any of the foregoing, existing at time of the commencement of
the Offer, a material acceleration or worsening thereof;
(g) any material approval, permit, authorization, consent or waiting
period of any Governmental Authority applicable to the purchase of shares of
Common Stock pursuant to the Offer or the Merger or the ownership or operation
by the Company or any of its subsidiaries, or by Parent or any of its
subsidiaries or by the Guarantor or
<PAGE>
any of its subsidiaries of all or any material portion of the business or assets
of the Company or any of its subsidiaries shall not have been obtained or
satisfied on terms satisfactory to the Parent in its reasonable discretion;
which, in the reasonable judgment of Merger Sub in any case and regardless of
circumstances, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Common Stock or to proceed with the
Merger.
Notwithstanding anything contained herein, no condition involving
(i) performance of agreements by the Company or (ii) the accuracy of
representations and warranties made by the Company, shall be deemed not
fulfilled, and Parent and Merger Sub shall not be entitled to fail to accept
shares of Common Stock for payment or terminate the Offer on such basis, if the
respects in which such agreements have not been performed or the representations
and warranties are inaccurate (without giving effect to any qualification
regarding materiality), in the aggregate, are not materially adverse to the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
The foregoing conditions are for the sole benefit of Merger Sub and
Parent and may, subject to the terms of this Agreement, be waived by Merger Sub
and Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent, or Merger Sub at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
EXHIBIT 3
TENDER AGREEMENT AND IRREVOCABLE PROXY
AGREEMENT, dated as of June 16, 1997, among WALTZ CORP., a
Delaware corporation ("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), and Moshael J. Straus
(the "Stockholder").
Parent, Merger Sub and The Multicare Companies, Inc., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger").
WHEREAS, as of the date hereof, Stockholder is the record and
beneficial owner of, and has the right to vote and dispose of, the number of
shares of Common Stock set forth on the signature page hereto;
WHEREAS, as an inducement and a condition to its entering into
the Merger Agreement and incurring the obligations set forth therein, including
the Offer and the Merger, Parent has required that Stockholder enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined
herein have the respectively meanings ascribed to them in the Merger Agreement.
In addition, for purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to Stockholder,
"AFFILIATE" shall not include the Company and the Persons that directly, or
indirectly through one or more intermediaries, are controlled by the Company.
"BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" with respect to
any securities means having "BENEFICIAL OWNERSHIP" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all Affiliates of such Person and all other persons with whom such Person would
<PAGE>
2
constitute a "GROUP" within the meaning of Section 13(d) of the Exchange Act and
the rules promulgated thereunder.
"OWNED SHARES" means the shares of Common Stock Beneficially
Owned by Stockholder on the date hereof, together with any other shares of
Common Stock, or any other securities of the Company entitled, or which may be
entitled, to vote generally in the election of directors and any other shares of
Common Stock or such other securities which may hereafter be Beneficially Owned
by Stockholder (including upon exercises of options or otherwise).
"PERSON" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"REPRESENTATIVE" means, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including
any investment banker, financial advisor, agent, representative or expert
retained by or acting on behalf of such Person or its subsidiaries).
"TRANSFER" means, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of such
security or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing. As a
verb, "TRANSFER" shall have a correlative meaning.
2. Tender of Shares. Stockholder hereby agrees to validly
tender (or cause the record owner thereof) and not withdraw, pursuant to and in
accordance with the terms of the Offer, all Owned Shares. Stockholder hereby
acknowledges and agrees that Merger Sub's obligation to accept for payment and
pay for shares of Common Stock in the Offer, including any Owned Shares tendered
by Stockholder, is subject to the terms and conditions of the Offer. The parties
agree that Stockholder will, for all Owned Shares tendered by Stockholder in the
Offer and accepted for payment by Merger Sub, receive a price per Owned Share
equal to $28.00, or such higher per share consideration paid to other
stockholders who have tendered into the Offer.
3. Voting of Owned Shares; Proxy; Other Covenants. (a)
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the earlier of (x) the consummation of the Offer and (y)
the termination of this Agreement (such period being referred to as the "VOTING
PERIOD"), at any meeting (whether annual or special, and whether or not an
adjourned or postponed meeting) of the Company's stockholders, however called,
or in connection with any written consent of the Company's stockholders, subject
to the absence of a preliminary or permanent injunction or other requirement
under applicable law by any United States federal, state or foreign court
barring such action, Stockholder shall vote (or cause to be voted) all Owned
Shares: (i) in favor of the
<PAGE>
3
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval and adoption of the Merger and the terms thereof and each of the
other actions contemplated by the Merger Agreement and this agreement and any
actions required in furtherance thereof and hereof; (ii) against any action or
agreement that would impede, interfere with, or prevent the Offer or the Merger;
and (iii) except as otherwise agreed to in writing in advance by the Parent,
against the following actions (other than the Offer, the Merger and the
transactions contemplated by the Merger Agreement and this Agreement): (I) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or any of its subsidiaries (including
any transaction contemplated by an Acquisition Proposal); (II) any sale, lease
or transfer of a material amount of the assets or business of the Company or its
subsidiaries, or any reorganization, restructuring, recapitalization, special
dividend, dissolution, liquidation or winding up of the Company or its
subsidiaries; (III) any change in the present capitalization of the Company
including any proposal to sell any material equity interest in the Company or
any amendment of the certificate of incorporation of the Company and (IV)
against an election of new members of the Board of Directors of the Company
except where the vote is cast in favor of the nominees of a majority of the
existing directors of the Company. Stockholder shall not enter into any
agreement, arrangement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Section 3(a).
(b) IRREVOCABLE PROXY. STOCKHOLDER HEREBY GRANTS TO,
AND APPOINTS MERGER SUB AND ANY DESIGNEE OF MERGER SUB, EACH OF THEM
INDIVIDUALLY, STOCKHOLDER'S IRREVOCABLE (UNTIL THE TERMINATION OF THIS
AGREEMENT) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE
THE OWNED SHARES OF STOCKHOLDER AS INDICATED IN SECTION 3(a) ABOVE. STOCKHOLDER
INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION OF THIS AGREEMENT)
AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND HEREBY
REVOKES ANY PROXY PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO
STOCKHOLDER'S OWNED SHARES.
(c) Stockholder Capacity. Stockholder is making this
Agreement solely in his capacity as the owner of the Owned Shares and not in his
capacity as a director or officer, and the agreements set forth in this Section
2 or 3 shall in no way restrict Stockholder in the exercise of his fiduciary
duties as a director and officer of the Company, which, in the case of Section
3(d), such duties will be exercised only in accordance with the instructions of
the Company's Board of Directors acting in compliance with the requirements of
Section 6.4 of the Merger Agreement. Stockholder signs solely in his or her
capacity as the record and Beneficial Owner of the Owned Shares.
(d) Stockholder shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect
<PAGE>
4
to any Acquisition Proposal. The Stockholder shall not, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any person or group (other than Parent and Merger
Sub or any affiliate, associate or designee of Parent or Merger Sub) concerning
any proposal (an "Acquisition Proposal") for an acquisition of all or any
substantial part of the business and properties or capital stock of the Company
and its subsidiaries taken as a whole, directly or indirectly, whether by
merger, consolidation, share exchange, tender offer, purchase of assets or
shares of capital stock or otherwise (an "Acquisition Transaction").
4. Restrictions on Transfer, Other Proxies.
Stockholder shall not, until the termination of this
Agreement, directly or indirectly; (i) expect as provided in Section 2 hereof,
Transfer to any Person any or all Owned Shares; or (ii) except as provided in
Section 3(b), grant any proxies or powers of attorney, deposit any Owned Shares
into a voting trust or enter into a voting agreement, understanding or
arrangement with respect to such Owned Shares. Notwithstanding anything to the
contrary provided in this Agreement, Stockholder shall have the right to
Transfer Owned Shares (i) to any Family Member, (ii) to the trustee or trustees
of a trust solely (except for remote contingent interests) for the benefit of
Stockholder and/or one or more Family Members, (iii) to a foundation created or
established by Stockholder, (iv) to a corporation of which Stockholder and/or
any Family Members owns all of the outstanding capital stock, (v) to a
partnership of which Stockholder and/or any Family Members owns all of the
partnership interests, (vi) to the executor, administrator or personal
representative of the estate of Stockholder, (vii) to any guardian, trustee or
conservator appointed with respect to the assets of Stockholder or (viii) by
operation of law; provided, that in the case of any Transfer pursuant to clauses
(i) through (vii), the transferee shall execute an agreement to be bound by the
terms of this Agreement, or terms substantially identical thereto. "Family
Member" shall have the meaning ascribed to "Related Parties" under Section
672(c) of the Internal Revenue Code of 1986, as amended.
5. Representations and Warranties of Stockholder.
Stockholder hereby represents and warrants to the Parent and Merger Sub as
follows:
(a) Stockholder has all necessary power and authority
and legal capacity to execute and deliver this Agreement and perform his
obligations hereunder. No other proceedings or actions on the part of
Stockholder are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Stockholder and constitutes the valid and binding agreement of
Stockholder, enforceable against Stockholder in accordance with its terms except
(i) to the extent limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights and (ii) the remedy of specified performance and
injunctive and other
<PAGE>
5
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) Stockholder is the record holder and Beneficial
Owner of the Owned Shares which, as of the date hereof, are set forth on the
signature page hereto. Stockholder has good and marketable title to all of the
Owned Shares, free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. The Owned Shares
constitute all of the capital stock of the Company Beneficially Owned by
Stockholder, and except for not more than 150,000 shares of Common Stock owned
by a foundation referred to in clause (iii) of Section 4, the Owned Shares and
shares of Common Stock issuable upon exercise of options held by Stockholder,
neither Stockholder nor any of his Affiliates Beneficially Owns or has any right
to acquire (whether currently, upon lapse of time, following the satisfaction of
any conditions, upon the occurrence of any event or any combination of the
foregoing) any shares of Common Stock or any securities convertible into Common
Stock. Except as provided in Section 3(b) hereof and the up to 150,000 shares of
Common Stock referred to in this Section 5(c), Stockholder has sole power to
vote and to dispose of the Owned Shares.
(d) Stockholder understands and acknowledges that
Parent is entering into, and causing the Merger Sub to enter into, the Merger
Agreement, and is incurring the obligations set forth therein, in reliance upon
Stockholder's execution and delivery of this Agreement.
(e) None of the execution and delivery of this
Agreement by Stockholder the consummation by Stockholder of the transactions
contemplated hereby or compliance by Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach of the certificate of
incorporation or by-laws of the Company, or (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, or violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets.
6. Representations and Warranties of Parent and
Merger Sub. Parent and Merger Sub hereby represent, warrant and covenant to
Stockholder as follows:
(a) Parent and Merger Sub each is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, and each of them is in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and Merger Sub have all necessary
corporate power and authority to
<PAGE>
6
execute and deliver this Agreement and perform their respective obligations
hereunder. The execution and delivery by Parent and Merger Sub of this Agreement
and the performance by Parent and Merger Sub of their respective obligations
hereunder have been duly and validly authorized by the Board of Directors of
Parent and Merger Sub and no other corporate proceedings on the part of Parent
or Merger Sub are necessary to authorize the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Parent and Merger Sub and constitutes a valid and binding
agreement of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms except (i) to the extent limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) None of the execution and delivery of this
Agreement by Parent or Merger Sub, the consummation by Parent or Merger Sub of
the transactions contemplated hereby or compliance by Parent or Merger Sub with
any of the provisions hereof shall (A) conflict with or result in any breach of
the certificate of incorporation or by-laws of Parent or Merger Sub, or (B)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or any of their respective properties or
assets may be bound, or violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to Parent or Merger Sub or any of their
respective properties or assets.
7. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
8. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Parent shall have purchased and paid for all of the Owned Shares of
Stockholder in accordance with the Offer, (b) the date on which the Merger
Agreement is terminated under such circumstances in which Parent is not and will
not be entitled to a payment pursuant to Section 8.2 of the Merger Agreement and
(c) May 31, 1998.
<PAGE>
7
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) Stockholder agrees that this Agreement and the
respective rights and obligations of Stockholder hereunder shall attach to any
shares of Common Stock, and any securities convertible into such shares, that
may become Beneficially Owned by Stockholder.
(c) Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(d) This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties and their
respective successors, personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall (except as required by the proviso to Section 4) be assigned by
either party (whether by operation of law or otherwise) without the prior
written consent of the other party; provided, that Parent and Merger Sub may
assign their rights and obligations hereunder to any assignee of such parties'
rights and obligations under the Merger Agreement. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
(e) This Agreement may not be amended, changed,
supplemented, or otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by each of the parties hereto. The
parties may waive compliance by the other parties hereto with any
representation, agreement or condition otherwise required to be complied with by
such other party hereunder, but any such waiver shall be effective only if in
writing executed by the waiving party.
(f) All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the address for such party set forth in Section
10.5 of the Merger Agreement and at the following address if to the Stockholder.
If to Stockholder, to Stockholder's address or
facsimile number set forth on the signature page hereto;
<PAGE>
8
Copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attn: Carl L. Reisner, Esq.
or to such other address or facsimile number as the Person to whom notice is
given shall have previously furnished to the others in writing in the manner set
forth above.
(g) Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
affecting the validity or enforceability of the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
(h) Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement, each non-breaching
party would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement.
(i) All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
(j) THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
<PAGE>
9
DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR
OF ANY OTHER JURISDICTION.
(k) The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. "Include," "includes,"
and "including" shall be deemed to be followed by "without limitation" whether
or not they are in fact followed by such words or words of like import.
(l) This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, Parent, Merger Sub and
Stockholder have caused this Agreement to be duly executed as of the day and
year first above written.
WALTZ CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
WALTZ ACQUISITION CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
/s/ Moshael J. Straus
Stockholder
Address: 411 Hackensack Avenue
Hackensack, New Jersey 07601
Owned Shares: 7,006,983
<PAGE>
Exhibit 4
TENDER AGREEMENT AND IRREVOCABLE PROXY
AGREEMENT, dated as of June 16, 1997, among WALTZ CORP., a
Delaware corporation ("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), and Daniel E. Straus
(the "Stockholder").
Parent, Merger Sub and The Multicare Companies, Inc., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger").
WHEREAS, as of the date hereof, Stockholder is the record and
beneficial owner of, and has the right to vote and dispose of, the number of
shares of Common Stock set forth on the signature page hereto;
WHEREAS, as an inducement and a condition to its entering into
the Merger Agreement and incurring the obligations set forth therein, including
the Offer and the Merger, Parent has required that Stockholder enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined
herein have the respectively meanings ascribed to them in the Merger Agreement.
In addition, for purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to Stockholder,
"AFFILIATE" shall not include the Company and the Persons that directly, or
indirectly through one or more intermediaries, are controlled by the Company.
"BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" with respect to
any securities means having "BENEFICIAL OWNERSHIP" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all Affiliates of such Person and all other persons with whom such Person would
<PAGE>
2
constitute a "GROUP" within the meaning of Section 13(d) of the Exchange Act and
the rules promulgated thereunder.
"OWNED SHARES" means the shares of Common Stock Beneficially
Owned by Stockholder on the date hereof, together with any other shares of
Common Stock, or any other securities of the Company entitled, or which may be
entitled, to vote generally in the election of directors and any other shares of
Common Stock or such other securities which may hereafter be Beneficially Owned
by Stockholder (including upon exercises of options or otherwise).
"PERSON" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"REPRESENTATIVE" means, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including
any investment banker, financial advisor, agent, representative or expert
retained by or acting on behalf of such Person or its subsidiaries).
"TRANSFER" means, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of such
security or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing. As a
verb, "TRANSFER" shall have a correlative meaning.
2. Tender of Shares. Stockholder hereby agrees to validly
tender (or cause the record owner thereof) and not withdraw, pursuant to and in
accordance with the terms of the Offer, all Owned Shares. Stockholder hereby
acknowledges and agrees that Merger Sub's obligation to accept for payment and
pay for shares of Common Stock in the Offer, including any Owned Shares tendered
by Stockholder, is subject to the terms and conditions of the Offer. The parties
agree that Stockholder will, for all Owned Shares tendered by Stockholder in the
Offer and accepted for payment by Merger Sub, receive a price per Owned Share
equal to $28.00, or such higher per share consideration paid to other
stockholders who have tendered into the Offer.
3. Voting of Owned Shares; Proxy; Other Covenants. (a)
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the earlier of (x) the consummation of the Offer and (y)
the termination of this Agreement (such period being referred to as the "VOTING
PERIOD"), at any meeting (whether annual or special, and whether or not an
adjourned or postponed meeting) of the Company's stockholders, however called,
or in connection with any written consent of the Company's stockholders, subject
to the absence of a preliminary or permanent injunction or other requirement
under applicable law by any United States federal, state or foreign court
barring such action, Stockholder shall vote (or cause to be voted) all Owned
Shares: (i) in favor of the
<PAGE>
3
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval and adoption of the Merger and the terms thereof and each of the
other actions contemplated by the Merger Agreement and this agreement and any
actions required in furtherance thereof and hereof; (ii) against any action or
agreement that would impede, interfere with, or prevent the Offer or the Merger;
and (iii) except as otherwise agreed to in writing in advance by the Parent,
against the following actions (other than the Offer, the Merger and the
transactions contemplated by the Merger Agreement and this Agreement): (I) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or any of its subsidiaries (including
any transaction contemplated by an Acquisition Proposal); (II) any sale, lease
or transfer of a material amount of the assets or business of the Company or its
subsidiaries, or any reorganization, restructuring, recapitalization, special
dividend, dissolution, liquidation or winding up of the Company or its
subsidiaries; (III) any change in the present capitalization of the Company
including any proposal to sell any material equity interest in the Company or
any amendment of the certificate of incorporation of the Company and (IV)
against an election of new members of the Board of Directors of the Company
except where the vote is cast in favor of the nominees of a majority of the
existing directors of the Company. Stockholder shall not enter into any
agreement, arrangement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Section 3(a).
(b) IRREVOCABLE PROXY. STOCKHOLDER HEREBY
GRANTS TO, AND APPOINTS MERGER SUB AND ANY DESIGNEE OF MERGER SUB, EACH OF THEM
INDIVIDUALLY, STOCKHOLDER'S IRREVOCABLE (UNTIL THE TERMINATION OF THIS
AGREEMENT) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE
THE OWNED SHARES OF STOCKHOLDER AS INDICATED IN SECTION 3(a) ABOVE. STOCKHOLDER
INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION OF THIS AGREEMENT)
AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND HEREBY
REVOKES ANY PROXY PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO
STOCKHOLDER'S OWNED SHARES.
(c) Stockholder Capacity. Stockholder is making this
Agreement solely in his capacity as the owner of the Owned Shares and not in his
capacity as a director or officer, and the agreements set forth in this Section
2 or 3 shall in no way restrict Stockholder in the exercise of his fiduciary
duties as a director and officer of the Company, which, in the case of Section
3(d), such duties will be exercised only in accordance with the instructions of
the Company's Board of Directors acting in compliance with the requirements of
Section 6.4 of the Merger Agreement. Stockholder signs solely in his or her
capacity as the record and Beneficial Owner of the Owned Shares.
(d) Stockholder shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect
<PAGE>
4
to any Acquisition Proposal. The Stockholder shall not, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any person or group (other than Parent and Merger
Sub or any affiliate, associate or designee of Parent or Merger Sub) concerning
any proposal (an "Acquisition Proposal") for an acquisition of all or any
substantial part of the business and properties or capital stock of the Company
and its subsidiaries taken as a whole, directly or indirectly, whether by
merger, consolidation, share exchange, tender offer, purchase of assets or
shares of capital stock or otherwise (an "Acquisition Transaction").
4. Restrictions on Transfer, Other Proxies.
Stockholder shall not, until the termination of this
Agreement, directly or indirectly; (i) expect as provided in Section 2 hereof,
Transfer to any Person any or all Owned Shares; or (ii) except as provided in
Section 3(b), grant any proxies or powers of attorney, deposit any Owned Shares
into a voting trust or enter into a voting agreement, understanding or
arrangement with respect to such Owned Shares. Notwithstanding anything to the
contrary provided in this Agreement, Stockholder shall have the right to
Transfer Owned Shares (i) to any Family Member, (ii) to the trustee or trustees
of a trust solely (except for remote contingent interests) for the benefit of
Stockholder and/or one or more Family Members, (iii) to a foundation created or
established by Stockholder, (iv) to a corporation of which Stockholder and/or
any Family Members owns all of the outstanding capital stock, (v) to a
partnership of which Stockholder and/or any Family Members owns all of the
partnership interests, (vi) to the executor, administrator or personal
representative of the estate of Stockholder, (vii) to any guardian, trustee or
conservator appointed with respect to the assets of Stockholder or (viii) by
operation of law; provided, that in the case of any Transfer pursuant to clauses
(i) through (vii), the transferee shall execute an agreement to be bound by the
terms of this Agreement, or terms substantially identical thereto. "Family
Member" shall have the meaning ascribed to "Related Parties" under Section
672(c) of the Internal Revenue Code of 1986, as amended.
5. Representations and Warranties of Stockholder.
Stockholder hereby represents and warrants to the Parent and Merger Sub as
follows:
(a) Stockholder has all necessary power and authority
and legal capacity to execute and deliver this Agreement and perform his
obligations hereunder. No other proceedings or actions on the part of
Stockholder are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Stockholder and constitutes the valid and binding agreement of
Stockholder, enforceable against Stockholder in accordance with its terms except
(i) to the extent limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights and (ii) the remedy of specified performance and
injunctive and other
<PAGE>
5
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) Stockholder is the record holder and Beneficial
Owner of the Owned Shares which, as of the date hereof, are set forth on the
signature page hereto. Stockholder has good and marketable title to all of the
Owned Shares, free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. The Owned Shares
constitute all of the capital stock of the Company Beneficially Owned by
Stockholder, and except for not more than 150,000 shares of Common Stock owned
by a foundation referred to in clause (iii) of Section 4, the Owned Shares and
shares of Common Stock issuable upon exercise of options held by Stockholder,
neither Stockholder nor any of his Affiliates Beneficially Owns or has any right
to acquire (whether currently, upon lapse of time, following the satisfaction of
any conditions, upon the occurrence of any event or any combination of the
foregoing) any shares of Common Stock or any securities convertible into Common
Stock. Except as provided in Section 3(b) hereof and the up to 150,000 shares of
Common Stock referred to in this Section 5(c), Stockholder has sole power to
vote and to dispose of the Owned Shares.
(d) Stockholder understands and acknowledges that
Parent is entering into, and causing the Merger Sub to enter into, the Merger
Agreement, and is incurring the obligations set forth therein, in reliance upon
Stockholder's execution and delivery of this Agreement.
(e) None of the execution and delivery of this
Agreement by Stockholder the consummation by Stockholder of the transactions
contemplated hereby or compliance by Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach of the certificate of
incorporation or by-laws of the Company, or (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, or violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets.
6. Representations and Warranties of Parent and
Merger Sub. Parent and Merger Sub hereby represent, warrant and covenant to
Stockholder as follows:
(a) Parent and Merger Sub each is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, and each of them is in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and Merger Sub have all necessary
corporate power and authority to
<PAGE>
6
execute and deliver this Agreement and perform their respective obligations
hereunder. The execution and delivery by Parent and Merger Sub of this Agreement
and the performance by Parent and Merger Sub of their respective obligations
hereunder have been duly and validly authorized by the Board of Directors of
Parent and Merger Sub and no other corporate proceedings on the part of Parent
or Merger Sub are necessary to authorize the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Parent and Merger Sub and constitutes a valid and binding
agreement of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms except (i) to the extent limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) None of the execution and delivery of this
Agreement by Parent or Merger Sub, the consummation by Parent or Merger Sub of
the transactions contemplated hereby or compliance by Parent or Merger Sub with
any of the provisions hereof shall (A) conflict with or result in any breach of
the certificate of incorporation or by-laws of Parent or Merger Sub, or (B)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or any of their respective properties or
assets may be bound, or violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to Parent or Merger Sub or any of their
respective properties or assets.
7. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
8. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Parent shall have purchased and paid for all of the Owned Shares of
Stockholder in accordance with the Offer, (b) the date on which the Merger
Agreement is terminated under such circumstances in which Parent is not and will
not be entitled to a payment pursuant to Section 8.2 of the Merger Agreement and
(c) May 31, 1998.
<PAGE>
7
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) Stockholder agrees that this Agreement and the
respective rights and obligations of Stockholder hereunder shall attach to any
shares of Common Stock, and any securities convertible into such shares, that
may become Beneficially Owned by Stockholder.
(c) Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(d) This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties and their
respective successors, personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall (except as required by the proviso to Section 4) be assigned by
either party (whether by operation of law or otherwise) without the prior
written consent of the other party; provided, that Parent and Merger Sub may
assign their rights and obligations hereunder to any assignee of such parties'
rights and obligations under the Merger Agreement. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
(e) This Agreement may not be amended, changed,
supplemented, or otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by each of the parties hereto. The
parties may waive compliance by the other parties hereto with any
representation, agreement or condition otherwise required to be complied with by
such other party hereunder, but any such waiver shall be effective only if in
writing executed by the waiving party.
(f) All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the address for such party set forth in Section
10.5 of the Merger Agreement and at the following address if to the Stockholder.
If to Stockholder, to Stockholder's address or
facsimile number set forth on the signature page hereto;
<PAGE>
8
Copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attn: Carl L. Reisner, Esq.
or to such other address or facsimile number as the Person to whom notice is
given shall have previously furnished to the others in writing in the manner set
forth above.
(g) Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
affecting the validity or enforceability of the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
(h) Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement, each non-breaching
party would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement.
(i) All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
(j) THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
<PAGE>
9
DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR
OF ANY OTHER JURISDICTION.
(k) The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. "Include," "includes,"
and "including" shall be deemed to be followed by "without limitation" whether
or not they are in fact followed by such words or words of like import.
(l) This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, Parent, Merger Sub and Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
WALTZ CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
WALTZ ACQUISITION CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary
and Assistant Treasurer
/s/ Daniel E. Straus
Stockholder
Address: 411 Hackensack Avenue
Hackensack, New Jersey 07601
Owned Shares: 7,006,983
Doc#:DS4:73830.1 25-060
<PAGE>
Exhibit 5
1
NONCOMPETITION AND CONSULTING AGREEMENT
AGREEMENT, dated as of June 16, 1997, among GENESIS HEALTH
VENTURES, INC., a Pennsylvania corporation, ("G"), WALTZ CORP., a Delaware
("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub") and Moshael J. Straus (the "Consultant").
Parent, Merger Sub, G and THE MULTICARE COMPANIES, INC., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to them
in the Merger Agreement.
The Consultant is a co-founder of, and is employed as Co-Chief
Executive Officer by the Company, and has confidential knowledge of its business
and affairs and is considered by Parent to be a key employee of the Company.
Parent wishes to secure for itself and the Company following the Merger the
services of the Consultant, and to assure itself that the Consultant agrees to
certain restrictions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Engagement.
Parent hereby irrevocably appoints the Consultant, and the
Consultant hereby agrees to be a consultant, for a period of 12 months
commencing on the date of the Closing (as defined below) (the "Consulting
Term"), to perform such reasonable consulting services as the chief executive
officer of Parent shall request, subject to Section 3 below.
2. Effectiveness.
This Agreement shall become effective simultaneously with, and
subject to, the consummation of the Merger (the "Closing"). The parties
acknowledge that until this Agreement becomes effective, the Consultant may
remain an officer and director of the Company and will be under no obligation
under, and will not be subject to the restrictions of this Agreement. If the
Merger Agreement is terminated, this Agreement shall be simultaneously
terminated.
<PAGE>
3. Duties.
During the Consulting Term, the Consultant as an independent
contractor shall make himself available upon reasonable notice for such time
during regular business hours as shall be reasonably necessary for the business
of the Company. Such consulting services shall be rendered in Hackensack, New
Jersey.
4. Consideration.
(a) As compensation for the Consultant's services hereunder,
Parent hereby agrees to pay the Consultant, and the Consultant agrees to accept
as full compensation for his services, a consulting fee of $1.5 million per
annum payable in immediately available funds at the Closing. In addition, the
Consultant shall be reimbursed for all expenses actually incurred by the
Consultant in the performance of his duties upon presentation to Parent of
expense statements or vouchers or such other supporting information as Parent
requires for its senior executives.
(b) As consideration for the Consultant's agreement to the
restrictive covenants in Section 6 herein (the "Restrictive Covenants"), Parent
hereby agrees to pay the Consultant, and the Consultant agrees to accept as full
consideration for his agreement to the Restrictive Covenants, (i) the benefits
set forth in Section 5 hereof, and (ii) a cash payment in the amount of $1.5
million payable in immediately available funds at the Closing.
5. Benefits; Office Facilities.
Parent agrees that for a period of six months following the
Effective Time the Consultant may continue the exclusive use of his and his
secretary's office space and office equipment; provided, that the foregoing
obligation will be excused if and when the Company ceases to maintain office
facilities in Hackensack, New Jersey. Such office space shall include a separate
conference room to be shared with the other current Co-Chief Executive Officer
of the Company. Parent agrees that the equipment and office furnishings located
in the Consultant's office shall be the property of the Consultant.
6. Restrictive Covenants.
6.1 Noncompetition and Consulting Agreement. The
Consultant shall not, for a period of one year after the date hereof, in any
capacity (including, but not limited to, owner, partner, shareholder,
consultant, agent, employee, officer, director or otherwise), directly or
indirectly, for his own account or for the benefit of any person, establish,
engage in or be connected with any Competitive Business. As used herein, the
term "Competitive Business" means any Restricted Business conducted in the
Restricted Zone. Restricted Business means institutional pharmacy,
rehabilitation services, long-term care services, skilled nursing
<PAGE>
facilities or assisted living facilities but does not include providing any
other goods or services to skilled nursing facilities, assisted living
facilities and other health care facilities. The Restricted Zone means any town
in Connecticut or Rhode Island in which the Company operates a long term care
facility and an area of fifteen miles surrounding such facility; any county in
Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the Company
operates a long term care facility and an area of fifteen miles surrounding such
facility; all portions of Massachusetts east of Worcester; all portions of
Pennsylvania east of Harrisburg and an area of fifteen miles around any facility
located in Virginia or Vermont; but in no event includes any portion of any
state other than Connecticut, Rhode Island, Illinois, New Jersey, Ohio, West
Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or Wisconsin. In no
event shall this Section 6.1 restrict the Consultant from owning interests in,
or developing, real estate so long as the Consultant is not operating any
Restricted Business. In addition, the Consultant shall not pursue any of the
development projects listed on Schedule 6.1 hereto.
6.2 Confidentiality. For a period of three years commencing
on the Closing Date, the Consultant shall not, except with the express prior
written consent of Parent, directly or indirectly, disclose, communicate or
divulge to any Person, or use for the benefit of any Person, any secret,
confidential or proprietary knowledge or information with respect to the conduct
or details of the Company or the business engaged in by the Company including,
but not limited to, technical know-how, processes, customers, prospects, costs,
designs, marketing methods and strategies, finances and suppliers. The provision
of this Section 6.1 shall not apply to any information which at the time of
disclosure (i) is generally available to or known to the public (other than as a
result of unauthorized disclosure directly or indirectly by the Consultant) or
(ii) the Consultant discloses, at the direction and authorization of Parent, or,
subject to the remainder of this Section 6.2 as required by law. If the
Consultant is required in a judicial, administrative or governmental proceeding
to disclose any information which is the subject of the restrictions contained
in this Section 6.2, then the Consultant will notify Parent as soon as possible
so that Parent may either seek an appropriate protective order or relief, or
waive the provisions of this Section 6.2. If, in the absence of such an order,
relief or waiver, the Consultant is required, in the written opinion of counsel,
to disclose such information to any court, administrative agency or governmental
authority, then the Consultant may disclose such information without liability
under this Agreement.
6.3 Nonsolicitation of Employees. The Consultant shall not
for a period of two years after the date hereof, except with the express written
consent of Parent (which shall not be unreasonably withheld or delayed in the
case of an employee of the Company or the Surviving Corporation who has received
a notice of termination from the Company or the Surviving Corporation, as the
case may be) or as is otherwise contemplated by the Merger Agreement, directly
or indirectly, whether as an employee, owner, partner, agent, director, officer,
shareholder or in any other capacity, for his own account or for the benefit of
any Person; (i) solicit,
<PAGE>
divert or induce any of (1) the Company's employees or (2) the Surviving
Corporation's employees to leave or to work for him or any Person with which he
is connected; or (ii) hire any of the Company's or the Surviving Corporation's
employees and other than the other Co-Chief Executive Officer, the Chief
Operating Officer and the Consultant's personal secretary and the other persons
who shall be acceptable to Parent and identified on a schedule to be agreed upon
prior to the purchase of shares in the Offer.
6.4 Remedies. (a)The parties to this Agreement agree that
any breach by the Consultant of the covenants and agreements contained in
Sections 6.1 and 6.2 will result in irreparable injury to Merger Sub for which
money damages could not adequately compensate Merger Sub. Therefore, in the
event of any breach of such Sections, Merger Sub shall be entitled (in addition
to any other rights and remedies which it may have at law or in equity) to have
an injunction issued by any competent court of equity enjoining and restraining
the Consultant and/or any other Person involved therein from continuing such
breach. In any action to enforce the provisions of Sections 6.1 or 6.2, the
Consultant and/or any other Person involved therein shall expressly waive the
defense that any remedy at law is adequate.
(b)In the event the Consultant is found by a
nonappealable judgment of a court of competent jurisdiction to have violated
Section 6.3, in addition to the reasonable fees and expenses of Parent's counsel
incurred to enforce such provision, the Consultant shall pay to Parent, as
liquidated damages, an amount equal to 200% of the applicable employee's annual
compensation (including, without limitation, salary, bonus and benefits) at the
time of the violation (the "Liquidated Damages"); provided, that in the event
the Consultant is found by such court to have not violated Section 6.3, Parent
shall pay to the Consultant the reasonable fees and expenses of counsel incurred
by the Consultant to defend such action and any actual damages resulting from
Parent's interference with the Consultant's commercial relationships.
6.5 Enforceability. If any portion of the covenants or
agreements contained herein, or the application thereof, is construed to be
invalid or unenforceable, then the other portions of such covenants(s) or
agreement(s) or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be unenforceable because of the
area covered, the duration thereof, or the scope thereof, then the court making
such determination shall have, for purposes of enforcement in equity, the power
to reduce the area and/or duration and/or limit the scope thereof, and the
covenant or agreement shall then be enforceable in its reduced form.
6.6 Intent of Parties. Each of the parties hereto
recognize and agree that this Agreement is necessary and essential to enable
Parent to realize
<PAGE>
and derive substantial benefits, rights and expectations of the Merger
Agreement, that the area and duration of the covenants herein are in all things,
under the circumstances of the Merger Agreement, reasonable; and that good and
valuable consideration exists for the Consultant's agreeing to be bound by such
covenants.
6.7 Definition. As used herein, the term "Person" means
any individual, sole proprietorship, joint venture, partnership, corporation,
association, joint-stock company, unincorporated organization, cooperative,
trust, estate, government (or any branch, subdivision or agency thereof),
governmental, administrative or regulatory authority, or any other entity of any
kind or nature whatsoever.
7. Additional Agreement. The Consultant agrees to pay to the
Surviving Corporation, immediately following the Effective Time, the principal
amount of indebtedness, and accrued interest thereon, owed by the Consultant or
Health Resources of Cinnaminson, Inc., one of the Company's subsidiaries.
8. Other Provisions.
8.1 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 Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
<PAGE>
(ii) if to G, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(iii) if to the Consultant, to
Moshael J. Straus
140 S. Woodland Street
Englewood, N.J. 0763
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner
Telecopy No. (212) 757-3990
8.2 Entire Agreement. This Noncompetition and Consulting
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto.
8.3 Waivers and Amendments. This Noncompetition and
Consulting Agreement may be amended, superseded, canceled, renewed or extended,
and the terms hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other such right, power or privilege.
<PAGE>
8.4 Governing Law. This Noncompetition and Consulting
Agreement shall be governed by and construed in accordance with the laws of the
State of New Jersey without regard to choice of law principles.
8.5 Successors and Assigns; Assignment. This
Noncompetition and Consulting Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective successors. This
Noncompetition and Consulting Agreement, and the Consultant's rights and
obligations hereunder, may not be assigned by the Consultant. Parent may assign
this Noncompetition and Consulting Agreement and its rights, together with its
obligations, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its assets or business, whether by
merger, consolidation or otherwise.
8.6 No Third Party Beneficiaries. This Noncompetition
and Consulting Agreement is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
8.7 Counterparts. This Noncompetition and Consulting
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two copies hereof each signed by one of the parties
hereto.
8.8 Headings. The headings in this Noncompetition and
Consulting Agreement are for reference only and shall not affect the
interpretation of this Noncompetition and Consulting Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition and Consulting Agreement as of the date first above written.
WALTZ CORP.
By: /s/ James L. Singleton
Name: James L. Singleton
Title: President ans Assistant Secretary
<PAGE>
WALTZ ACQUISITION CORP.
By: /s/Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer
/s/ Moshael J. Straus
Moshael J. Straus
<PAGE>
EXHIBIT 6
NONCOMPETITION AND CONSULTING AGREEMENT
AGREEMENT, dated as of June 16, 1997, among GENESIS HEALTH
VENTURES, INC., a Pennsylvania corporation, ("G"), WALTZ CORP., a Delaware
("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub") and Daniel E. Straus (the "Consultant").
Parent, Merger Sub, G and THE MULTICARE COMPANIES, INC., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to them
in the Merger Agreement.
The Consultant is a co-founder of, and is employed as Co-Chief
Executive Officer by the Company, and has confidential knowledge of its business
and affairs and is considered by Parent to be a key employee of the Company.
Parent wishes to secure for itself and the Company following the Merger the
services of the Consultant, and to assure itself that the Consultant agrees to
certain restrictions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Engagement.
Parent hereby irrevocably appoints the Consultant, and the
Consultant hereby agrees to be a consultant, for a period of 12 months
commencing on the date of the Closing (as defined below) (the "Consulting
Term"), to perform such reasonable consulting services as the chief executive
officer of Parent shall request, subject to Section 3 below.
2. Effectiveness.
This Agreement shall become effective simultaneously with,
and subject to, the consummation of the Merger (the "Closing"). The parties
acknowledge that until this Agreement becomes effective, the Consultant may
remain an officer and director of the Company and will be under no obligation
under, and will not be subject to the restrictions of this Agreement. If the
Merger Agreement is terminated, this Agreement shall be simultaneously
terminated.
<PAGE>
2
3. Duties.
During the Consulting Term, the Consultant as an independent
contractor shall make himself available upon reasonable notice for such time
during regular business hours as shall be reasonably necessary for the business
of the Company. Such consulting services shall be rendered in Hackensack, New
Jersey.
4. Consideration.
(a) As compensation for the Consultant's services hereunder,
Parent hereby agrees to pay the Consultant, and the Consultant agrees to accept
as full compensation for his services, a consulting fee of $1.5 million per
annum payable in immediately available funds at the Closing. In addition, the
Consultant shall be reimbursed for all expenses actually incurred by the
Consultant in the performance of his duties upon presentation to Parent of
expense statements or vouchers or such other supporting information as Parent
requires for its senior executives.
(b) As consideration for the Consultant's agreement to the
restrictive covenants in Section 6 herein (the "Restrictive Covenants"), Parent
hereby agrees to pay the Consultant, and the Consultant agrees to accept as full
consideration for his agreement to the Restrictive Covenants, (i) the benefits
set forth in Section 5 hereof, and (ii) a cash payment in the amount of $1.5
million payable in immediately available funds at the Closing.
5. Benefits; Office Facilities.
Parent agrees that for a period of six months following the
Effective Time the Consultant may continue the exclusive use of his and his
secretary's office space and office equipment; provided, that the foregoing
obligation will be excused if and when the Company ceases to maintain office
facilities in Hackensack, New Jersey. Such office space shall include a separate
conference room to be shared with the other current Co-Chief Executive Officer
of the Company. Parent agrees that the equipment and office furnishings located
in the Consultant's office shall be the property of the Consultant.
6. Restrictive Covenants.
6.1 Noncompetition and Consulting Agreement. The
Consultant shall not, for a period of one year after the date hereof, in any
capacity (including, but not limited to, owner, partner, shareholder,
consultant, agent, employee, officer, director or otherwise), directly or
indirectly, for his own account or for the benefit of any person, establish,
engage in or be connected with any Competitive Business. As used herein, the
term "Competitive Business" means any Restricted Business conducted in the
Restricted Zone. Restricted Business means institutional pharmacy,
rehabilitation services, long-term care services, skilled nursing
<PAGE>
3
facilities or assisted living facilities but does not include providing any
other goods or services to skilled nursing facilities, assisted living
facilities and other health care facilities. The Restricted Zone means any town
in Connecticut or Rhode Island in which the Company operates a long term care
facility and an area of fifteen miles surrounding such facility; any county in
Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the Company
operates a long term care facility and an area of fifteen miles surrounding such
facility; all portions of Massachusetts east of Worcester; all portions of
Pennsylvania east of Harrisburg and an area of fifteen miles around any facility
located in Virginia or Vermont; but in no event includes any portion of any
state other than Connecticut, Rhode Island, Illinois, New Jersey, Ohio, West
Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or Wisconsin. In no
event shall this Section 6.1 restrict the Consultant from owning interests in,
or developing, real estate so long as the Consultant is not operating any
Restricted Business. In addition, the Consultant shall not pursue any of the
development projects listed on Schedule 6.1 hereto.
6.2 Confidentiality. For a period of three years commencing
on the Closing Date, the Consultant shall not, except with the express prior
written consent of Parent, directly or indirectly, disclose, communicate or
divulge to any Person, or use for the benefit of any Person, any secret,
confidential or proprietary knowledge or information with respect to the conduct
or details of the Company or the business engaged in by the Company including,
but not limited to, technical know-how, processes, customers, prospects, costs,
designs, marketing methods and strategies, finances and suppliers. The provision
of this Section 6.1 shall not apply to any information which at the time of
disclosure (i) is generally available to or known to the public (other than as a
result of unauthorized disclosure directly or indirectly by the Consultant) or
(ii) the Consultant discloses, at the direction and authorization of Parent, or,
subject to the remainder of this Section 6.2 as required by law. If the
Consultant is required in a judicial, administrative or governmental proceeding
to disclose any information which is the subject of the restrictions contained
in this Section 6.2, then the Consultant will notify Parent as soon as possible
so that Parent may either seek an appropriate protective order or relief, or
waive the provisions of this Section 6.2. If, in the absence of such an order,
relief or waiver, the Consultant is required, in the written opinion of counsel,
to disclose such information to any court, administrative agency or governmental
authority, then the Consultant may disclose such information without liability
under this Agreement.
6.3 Nonsolicitation of Employees. The Consultant shall not
for a period of two years after the date hereof, except with the express written
consent of Parent (which shall not be unreasonably withheld or delayed in the
case of an employee of the Company or the Surviving Corporation who has received
a notice of termination from the Company or the Surviving Corporation, as the
case may be) or as is otherwise contemplated by the Merger Agreement, directly
or indirectly, whether as an employee, owner, partner, agent, director, officer,
shareholder or in any other capacity, for his own account or for the benefit of
any Person; (i) solicit,
<PAGE>
4
divert or induce any of (1) the Company's employees or (2) the Surviving
Corporation's employees to leave or to work for him or any Person with which he
is connected; or (ii) hire any of the Company's or the Surviving Corporation's
employees and other than the other Co-Chief Executive Officer, the Chief
Operating Officer and the Consultant's personal secretary and the other persons
who shall be acceptable to Parent and identified on a schedule to be agreed upon
prior to the purchase of shares in the Offer.
6.4 Remedies. (a) The parties to this Agreement agree that
any breach by the Consultant of the covenants and agreements contained in
Sections 6.1 and 6.2 will result in irreparable injury to Merger Sub for which
money damages could not adequately compensate Merger Sub. Therefore, in the
event of any breach of such Sections, Merger Sub shall be entitled (in addition
to any other rights and remedies which it may have at law or in equity) to have
an injunction issued by any competent court of equity enjoining and restraining
the Consultant and/or any other Person involved therein from continuing such
breach. In any action to enforce the provisions of Sections 6.1 or 6.2, the
Consultant and/or any other Person involved therein shall expressly waive the
defense that any remedy at law is adequate.
(b) In the event the Consultant is found by a nonappealable
judgment of a court of competent jurisdiction to have violated Section 6.3, in
addition to the reasonable fees and expenses of Parent's counsel incurred to
enforce such provision, the Consultant shall pay to Parent, as liquidated
damages, an amount equal to 200% of the applicable employee's annual
compensation (including, without limitation, salary, bonus and benefits) at the
time of the violation (the "Liquidated Damages"); provided, that in the event
the Consultant is found by such court to have not violated Section 6.3, Parent
shall pay to the Consultant the reasonable fees and expenses of counsel incurred
by the Consultant to defend such action and any actual damages resulting from
Parent's interference with the Consultant's commercial relationships.
6.5 Enforceability. If any portion of the covenants or
agreements contained herein, or the application thereof, is construed to be
invalid or unenforceable, then the other portions of such covenants(s) or
agreement(s) or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be unenforceable because of the
area covered, the duration thereof, or the scope thereof, then the court making
such determination shall have, for purposes of enforcement in equity, the power
to reduce the area and/or duration and/or limit the scope thereof, and the
covenant or agreement shall then be enforceable in its reduced form.
6.6 Intent of Parties. Each of the parties hereto recognize
and agree that this Agreement is necessary and essential to enable Parent to
realize
<PAGE>
5
and derive substantial benefits, rights and expectations of the Merger
Agreement, that the area and duration of the covenants herein are in all things,
under the circumstances of the Merger Agreement, reasonable; and that good and
valuable consideration exists for the Consultant's agreeing to be bound by such
covenants.
6.7 Definition. As used herein, the term "Person" means any
individual, sole proprietorship, joint venture, partnership, corporation,
association, joint-stock company, unincorporated organization, cooperative,
trust, estate, government (or any branch, subdivision or agency thereof),
governmental, administrative or regulatory authority, or any other entity of any
kind or nature whatsoever.
7. Additional Agreement. The Consultant agrees to pay to the
Surviving Corporation, immediately following the Effective Time, the principal
amount of indebtedness, and accrued interest thereon, owed by the Consultant or
Health Resources of Cinnaminson, Inc., one of the Company's subsidiaries.
8. Other Provisions.
8.1 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 Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
<PAGE>
6
(ii) if to G, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(iii) if to the Consultant, to
Moshael J. Straus
140 S. Woodland Street
Englewood, N.J. 07631
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner
Telecopy No. (212) 757-3990
8.2 Entire Agreement. This Noncompetition and Consulting
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto.
8.3 Waivers and Amendments. This Noncompetition and
Consulting Agreement may be amended, superseded, canceled, renewed or extended,
and the terms hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other such right, power or privilege.
<PAGE>
7
8.4 Governing Law. This Noncompetition and Consulting
Agreement shall be governed by and construed in accordance with the laws of the
State of New Jersey without regard to choice of law principles.
8.5 Successors and Assigns; Assignment. This Noncompetition
and Consulting Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective successors. This Noncompetition and
Consulting Agreement, and the Consultant's rights and obligations hereunder, may
not be assigned by the Consultant. Parent may assign this Noncompetition and
Consulting Agreement and its rights, together with its obligations, hereunder in
connection with any sale, transfer or other disposition of all or substantially
all of its assets or business, whether by merger, consolidation or otherwise.
8.6 No Third Party Beneficiaries. This Noncompetition and
Consulting Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
8.7 Counterparts. This Noncompetition and Consulting
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two copies hereof each signed by one of the parties
hereto.
8.8 Headings. The headings in this Noncompetition and
Consulting Agreement are for reference only and shall not affect the
interpretation of this Noncompetition and Consulting Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition and Consulting Agreement as of the date first above written.
WALTZ CORP.
By: /s/ James L. Singleton
Name: James L. Singleton
Title: President and
Assistant Secretary
<PAGE>
8
WALTZ ACQUISITION CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President,
Secretary and
Assistant Treasurer
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
Name: Michael R. Walker
Title: Chairman and
Chief Executive
Officer
/s/ Moshael J. Straus
Moshael J. Straus
<PAGE>
EXHIBIT 7
NONCOMPETITION AGREEMENT
AGREEMENT, dated as of June 16, 1997, among GENESIS HEALTH
VENTURES, INC., a Pennsylvania corporation, ("G"), WALTZ CORP., a Delaware
Corporation ("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub") and Stephen R. Baker (the
"Covenantor").
Parent, Merger Sub, G and THE MULTICARE COMPANIES, INC., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to them
in the Merger Agreement.
The Covenantor is employed as the Chief Operating Officer and
an Executive Vice President by the Company, and has confidential knowledge of
its business and affairs and is considered by Parent to be a key employee of the
Company. Parent wishes to assure itself that the Covenantor agrees to certain
restrictions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Effectiveness.
This Agreement shall become effective simultaneously
with, and subject to, the consummation of the Merger (the "Closing"). The
parties acknowledge that until this Agreement becomes effective, the Covenantor
may remain an officer and director of the Company and will not be subject to the
restrictions of this Agreement. If the Merger Agreement is terminated, this
Agreement shall be simultaneously terminated.
2. Consideration.
(a) As consideration for the Covenantor's agreement
to the restrictive covenants in Section 4 herein (the "Restrictive Covenants"),
Parent hereby agrees to pay the Covenantor, and the Covenantor agrees to accept
as full consideration for his agreement to the Restrictive Covenants, (i) the
benefits set forth in Section 3 hereof, and (ii) a cash payment in the amount of
$500,000, payable in immediately available funds at the Closing.
<PAGE>
2
3. Benefits; Office Facilities.
Parent agrees that for a period of six months
following the Effective Time the Covenantor may continue the exclusive use of
his and his secretary's office space and office equipment; provided, that the
foregoing obligation will be excused if and when the Company ceases to maintain
office facilities in Hackensack, New Jersey. Parent agrees that the equipment
and office furnishings located in the Covenantor's office shall be the property
of the Covenantor.
4. Restrictive Covenants.
4.1 Noncompetition Agreement. Covenantor shall not,
for a period of one year after the date hereof, in any capacity (including, but
not limited to, owner, partner, shareholder, consultant, agent, employee,
officer, director or otherwise), directly or indirectly, for his own account or
for the benefit of any person, establish, engage in or be connected with any
Competitive Business. As used herein, the term "Competitive Business" means any
Restricted Business conducted in the Restricted Zone. Restricted Business means
institutional pharmacy, rehabilitation services, long term care services,
skilled nursing facilities or assisted living facilities but does not include
providing any other goods or services to skilled nursing facilities, assisted
living facilities and other health care facilities. The Restricted Zone means
any town in Connecticut or Rhode Island in which the Company operates a long
term care facility and an area of fifteen miles surrounding such facility; any
county in Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the
Company operates a long term care facility and an area of fifteen miles
surrounding such facility; all portions of Massachusetts east of Worcester; all
portions of Pennsylvania east of Harrisburg and an area of fifteen miles around
any facility located in Virginia or Vermont; but in no event includes any
portion of any state other than Connecticut, Rhode Island, Illinois, New Jersey,
Ohio, West Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or
Wisconsin. In no event shall this Section 4.1 restrict the Covenantor from
owning interests in, or developing, real estate so long as the Covenantor is not
operating any Restricted Business. In addition, Covenantor shall not pursue any
of the development projects listed on Schedule 4.1 hereto.
4.2 Confidentiality. For a period of three years
commencing on the Closing Date, the Covenantor shall not, except with the
express prior written consent of Parent, directly or indirectly, disclose,
communicate or divulge to any Person, or use for the benefit of any Person, any
secret, confidential or proprietary knowledge or information with respect to the
conduct or details of the Company or the business engaged in by the Company
including, but not limited to, technical know-how, processes, customers,
prospects, costs, designs, marketing methods and strategies, finances and
suppliers. The provision of this Section 4.1 shall not apply to any information
which at the time of disclosure (i) is generally available to or known to the
public (other than as a result of unauthorized disclosure directly or indirectly
by Covenantor) or (ii) Covenantor discloses, at the direction and authorization
of Parent,
<PAGE>
3
or, subject to the remainder of this Section 4.1 as required by law. If
Covenantor is required in a judicial, administrative or governmental proceeding
to disclose any information which is the subject of the restrictions contained
in this Section 4.2, then Covenantor will notify Parent as soon as possible so
that Parent may either seek an appropriate protective order or relief, or waive
the provisions of this Section 4.2. If, in the absence of such an order, relief
or waiver, Covenantor is required, in the written opinion of counsel, to
disclose such information to any court, administrative agency or governmental
authority, then Covenantor may disclose such information without liability under
this Agreement.
4.3 Nonsolicitation of Employees. The Covenantor
shall not for a period of two years after the date hereof, except with the
express written consent of Parent (which shall not be unreasonably withheld or
delayed in the case of an employee of the Company or the Surviving Corporation
who has received a notice of termination from the Company or the Surviving
Corporation, as the case may be) or as is otherwise contemplated by the Merger
Agreement, directly or indirectly, whether as an employee, owner, partner,
agent, director, officer, shareholder or in any other capacity, for his own
account or for the benefit of any Person; (i) solicit, divert or induce any of
(1) the Company's employees or (2) the Surviving Corporation's employees to
leave or to work for him or any Person with which he is connected; or (ii) hire
any of the Company's or the Surviving Corporation's employees and other than the
Co-Chief Executive Officers and the Covenantor's personal secretary and other
persons who shall be acceptable to Parent and identified on a schedule to be
agreed upon prior to the purchase of shares in the Offer.
4.4 Remedies. (a) The parties to this Agreement agree
that any breach by Covenantor of the covenants and agreements contained in
Sections 4.1 and 4.2 will result in irreparable injury to Merger Sub for which
money damages could not adequately compensate Merger Sub. Therefore, in the
event of any breach of such Sections, Merger Sub shall be entitled (in addition
to any other rights and remedies which it may have at law or in equity) to have
an injunction issued by any competent court of equity enjoining and restraining
Covenantor and/or any other Person involved therein from continuing such breach.
In any action to enforce the provisions of Sections 4.1 or 4.2, Covenantor
and/or any other Person involved therein shall expressly waive the defense that
any remedy at law is adequate.
(b) In the event Covenantor is found by a
nonappealable judgment of a court of competent jurisdiction to have violated
Section 4.3, in addition to the reasonable fees and expenses of Parent's counsel
incurred to enforce such provision, Covenantor shall pay to Parent, as
liquidated damages, an amount equal to 200% of the applicable employee's annual
compensation (including, without limitation, salary, bonus and benefits) at the
time of the violation (the "Liquidated Damages"); provided, that in the event
Covenantor is found by such court to have not violated Section 4.3, Parent shall
pay to Covenantor the reasonable fees and expenses
<PAGE>
4
of counsel incurred by Covenantor to defend such action and any actual damages
resulting from Parent's interference with Covenantor's commercial relationships.
4.5 Enforceability. If any portion of the covenants
or agreements contained herein, or the application thereof, is construed to be
invalid or unenforceable, then the other portions of such covenants(s) or
agreement(s) or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be unenforceable because of the
area covered, the duration thereof, or the scope thereof, then the court making
such determination shall have, for purposes of enforcement in equity, the power
to reduce the area and/or duration and/or limit the scope thereof, and the
covenant or agreement shall then be enforceable in its reduced form.
4.6 Intent of Parties. Each of the parties hereto
recognize and agree that this Agreement is necessary and essential to enable
Parent to realize and derive substantial benefits, rights and expectations of
the Merger Agreement, that the area and duration of the covenants herein are in
all things, under the circumstances of the Merger Agreement, reasonable; and
that good and valuable consideration exists for Covenantor's agreeing to be
bound by such covenants.
4.7 Definition. As used herein, the term "Person"
means any individual, sole proprietorship, joint venture, partnership,
corporation, association, joint-stock company, unincorporated organization,
cooperative, trust, estate, government (or any branch, subdivision or agency
thereof), governmental, administrative or regulatory authority, or any other
entity of any kind or nature whatsoever.
5. Other Provisions.
5.1 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 Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
<PAGE>
5
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
(ii) if to G, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(iii) if to the Covenantor, to
Stephen R. Baker
3508 Belmar Boulevard
Neptune, N.J. 07753
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6065
Attention: Carl L. Reisner
Telecopy No. (212) 757-3990
5.2 Entire Agreement. This Noncompetition Agreement
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, with respect
thereto.
5.3 Waivers and Amendments. This Noncompetition
Agreement may be amended, superseded, canceled, renewed or extended, and the
<PAGE>
6
terms hereof may be waived, only by a written instrument signed by the parties
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other such right, power or privilege.
5.4 Governing Law. This Noncompetition Agreement
shall be governed by and construed in accordance with the laws of the State of
New Jersey without regard to choice of law principles.
5.5 Successors and Assigns; Assignment. This
Noncompetition Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective successors. This Noncompetition Agreement,
and the Covenantor's rights and obligations hereunder, may not be assigned by
the Covenantor. Parent may assign this Noncompetition Agreement and its rights,
together with its obligations, hereunder in connection with any sale, transfer
or other disposition of all or substantially all of its assets or business,
whether by merger, consolidation or otherwise.
5.6 No Third Party Beneficiaries. This Noncompetition
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
5.7 Counterparts. This Noncompetition Agreement may
be executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original but all such counterparts
together shall constitute one and the same instrument. Each counterpart may
consist of two copies hereof each signed by one of the parties hereto.
<PAGE>
7
5.8 Headings. The headings in this Noncompetition
Agreement are for reference only and shall not affect the interpretation of this
Noncompetition Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition Agreement as of the date first above written.
WALTZ CORP.
By:/s/Karl I. Peterson
____________________
Name: Karl I. Peterson
Title: Vice President,
Secretary and
Assistant Treasurer
WALTZ ACQUISITION CORP.
By:/s/ Karl I. Peterson
_____________________
Name: Karl I. Peterson
Title: Vice President,
Secretary and
Assistant Treasurer
GENESIS HEALTH VENTURES, INC.
By:/s/ Michael R. Walker
_____________________
Name: Michael R. Walker
Title: Chairman and
Chief Executive Officer
/s/ Stephen R. Baker
_____________________
Stephen R. Baker
<PAGE>
Exhibit 8
GENESIS HEALTH VENTURES, INC.
148 West State Street
Kennett Square, Pennsylvania 19348
June 16, 1997
CONFIDENTIAL
Straus Associates
c/o Daniel Straus
411 Hackensack Avenue
Hackensack, NJ 07601
Re: Harrington Court, Colchester, Connecticut
Gentlemen:
The following confirms an agreement between Genesis Health
Ventures, Inc., a Pennsylvania corporation located in Kennett Square,
Pennsylvania, or its designee (hereinafter referred to as "Buyer") and Straus
Associates, a New York partnership with its principal place of business in
Hackensack, New Jersey ( the "Partnership") for Buyer to acquire the land and
buildings owned by the Partnership located on Harrington Court, Colchester,
County of New London, Connecticut, as more particularly described on Schedule A
attached hereto and made a part hereof (collectively, the land, building,
fixtures and personalty, being the "Facility").
1. Structure of Transaction. Buyer will purchase the Facility
through an asset purchase.
2. Consideration. In consideration for the Facility, on the
Closing Date, Buyer agrees to pay the Partnership Eight
Million Four Hundred Thousand Dollars ($8,400,000) (the
"Purchase Price") which shall be paid in cash on the Closing
Date.
3. Facility Lease. The Facility is subject to that certain Lease,
made as of November 14th, 1986, by and between the Partnership
and Health Resources of Colchester, Inc., a Connecticut
corporation, as amended by those certain Amendments of Lease,
made as of November 18, 1992 and December 17, 1993
(collectively, the "Lease"). Buyer agrees that the Lease will
be assumed by Buyer on the Closing Date on the same economic
<PAGE>
Straus Associates
June 16, 1997
Page 2
terms existing on the Closing Date; provided, that the amount
of annual rent payable to Buyer pursuant to Section 2.1 of the
Lease will be fixed to equal the annual debt service payments
under the indebtedness described in such section.
4. Access. The Partnership will provide Buyer, its accountants,
counsel, and other representatives reasonable access to all
the properties, books, contracts and other records of the
Facility.
5. Conduct of Business. From the date of this letter until
definitive agreements are executed and the transactions
described herein are consummated, the Partnership will
continue to operate the Facility in the usual, regular and
ordinary manner consistent with past practices, and to comply
with all applicable laws, rules and regulations.
6. Limited Representations and Warranties. The Partnership hereby
represents and warrants to Buyer (i) attached as Exhibit A
hereto is a complete and correct copy of the Lease as in
effect on the date hereof, (ii) no person has an option to
acquire the Facility and (iii) attached as Exhibit B hereto is
a summary presentation of the operating results of the
Facility for the fiscal years ended December 31, 1995, 1996
and for the fiscal quarter ended March 31, 1997.
7. Conditions. The parties agree that this agreement is subject
to the following conditions:
(a) Execution by the parties of customary real estate
transfer documents at the closing.
(b) The parties receiving all necessary governmental and
third party licenses, permits, regulatory approvals
and consents for the Transaction;
(c) The Facility being transferred free and clear of all
liens, encumbrances and restrictions, except the
Lease and except for other imperfections which do not
materially adversely affect the value of the Facility
as a skilled nursing facility;
(d) Compliance with all laws applicable to the proposed
transaction; and
(e) Consummation of the Merger (as defined in the
Agreement and Plan of Merger (the "Merger Agreement")
by and among The Multicare Companies, Inc., Waltz
Acquisition Corp. and the other parties who are
signatories thereto).
<PAGE>
Straus Associates
June 16, 1997
Page 3
8. Closing. Buyer and the Partnership shall close the
transactions described herein contemporaneously with the
Effective Time (as defined in the Merger Agreement) (such
date, the "Closing Date").
9. Assignment. Buyer may assign its rights under this agreement
to any designee; provided that Buyer shall remain obligated
hereunder regardless of any such assignment.
10. Termination. This agreement shall terminate upon the earlier
of (a) the Closing Date and (b) the date the Merger Agreement
is terminated.
Please indicate your acceptance of the terms and conditions of
this agreement by executing it in the space provided below, and returning one
executed copy to Genesis. Once executed and returned to Genesis, this letter
will constitute a binding agreement between the parties. Upon our receipt
thereof, Genesis will undertake the preparation of the proposed definitive
agreements covering the transactions described herein.
Very truly yours,
GENESIS HEALTH VENTURES, INC.
By: /S/ Michael R. Walker
--------------------------------
The foregoing is agreed to by the undersigned.
STRAUS ASSOCIATES
By: Daniel E. Straus , its general partner
----------------------------------------
------------------------------------
Name:
<PAGE>
1
EXHIBIT 9
[MULTICARE LOGO]
FOR IMMEDIATE RELEASE Contact: Robert P. Borchert
Director
Corporate Communications
(201) 525-5932
MULTICARE TO BE ACQUIRED FOR $28 PER SHARE OR $1.41 BILLION
HACKENSACK, NJ, June 16, 1997 - The Multicare Companies, Inc. (NYSE: MUL) today
announced that it has entered into a definitive agreement under which a company
formed by Genesis Health Ventures, Inc., The Cypress Group and TPG Partners,
will acquire Multicare for $28.00 per share in cash, resulting in a transaction
value of $1.4 billion, including the assumption or repayment of approximately
$360 million in debt.
Daniel E. Straus, President and Co-Chief Executive Officer, said: "We have
clearly maximized shareholder value through this transaction and are very proud
to have delivered exceptional returns to our stockholders. The very strong
valuation paid in this transaction clearly confirms the quality of our assets
and validates the success of our core operating and growth strategy."
Under the merger agreement, the acquirer will promptly commence a cash tender
offer for all Multicare shares at $28.00 per share. The offer is subject to,
among other things, the tender of a majority of the outstanding shares on a
fully diluted basis, the acquirer's receipt of financing pursuant to its debt
financing commitments, the expiration or termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and all other
regulatory approvals. Each party has also agreed to pay the other a "break-up"
fee under certain circumstances. The cash offer to shareholders is to be
followed by a merger in which each remaining share will be converted into the
right to receive the cash price per share paid in the offer. The offer will be
made only pursuant to definitive offering documents.
Founded in 1984, The Multicare Companies, Inc. is a leading provider of high
quality, cost-effective long-term care and specialty medical services. Multicare
owns, leases or manages 155 facilities with more than 16,000 beds in 11 states,
and is the market share leader in New Jersey, Massachusetts and West Virginia.
Multicare also owns and operates a number of ancillary health care businesses,
including a significant institutional pharmacy operation servicing over 28,000
beds in eight locations. The Company's long-term care services include skilled
nursing care, subacute care, assisted living, home
<PAGE>
2
health care and related support activities traditionally provided in long-term
care facilities.
CERTAIN OF THE MATTERS DISCUSSED IN THIS NEWS RELEASE CONTAIN FORWARD LOOKING
STATEMENTS THAT INVOLVE VARIOUS RISKS AND UNCERTAINTIES. ALTHOUGH MULTICARE
BELIEVES THE ASSUMPTIONS ACCOMPANYING SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, THERE CAN BE NO ASSURANCE THAT EXPECTED RESULTS WILL OCCUR. FOR MORE
SPECIFIC INFORMATION CONCERNING SUCH RISKS AND UNCERTAINTIES, REFER TO
MULTICARE'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND OTHER PUBLIC
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Exhibit 10
June 16, 1997
The Board of Directors
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, NJ 07601
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of The Multicare Companies, Inc.
("Multicare") of the consideration to be received by such holders pursuant to
the terms and subject to the conditions set forth in the Agreement and Plan of
Merger, dated as of June 16, 1997 (the "Merger Agreement"), by and among Genesis
ElderCare Corp. ("GEC"), Genesis ElderCare Acquisition Corp., a wholly owned
subsidiary of GEC ("Merger Sub"), and Multicare. As more fully described in the
Merger Agreement, (i) GEC will cause Merger Sub to commence a tender offer to
purchase all outstanding shares of the common stock, par value $0.01 per share,
of Multicare (the "Multicare Common Stock") at a purchase price of $28.00 per
share, net to the seller in cash (the "Tender Offer") and (ii) subsequent to the
Tender Offer, Merger Sub will be merged with and into Multicare (the "Merger"
and, together with the Tender Offer, the "Transaction") and each outstanding
share of Multicare Common Stock not previously tendered will be converted into
the right to receive $28.00 in cash.
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Multicare and certain senior officers and other representatives
of GEC concerning the business, operations and prospects of Multicare. We
examined certain publicly available business and financial information relating
to Multicare as well as certain financial forecasts and other information and
data for Multicare which were provided to or otherwise discussed with us by the
management of Multicare. We reviewed the financial terms of the Transaction as
set forth in the Merger Agreement in relation to, among other things: current
and historical market prices and trading volumes of Multicare Common Stock; the
historical and projected earnings and other operating data of Multicare; and the
capitalization and financial condition of Multicare. We considered, to the
extent publicly available, the financial terms of similar transactions recently
effected which we considered relevant in evaluating the Transaction and analyzed
certain financial, stock market and other publicly available information
relating to the businesses of other companies whose operations we considered
relevant in evaluating those of Multicare. In connection with our engagement, we
were requested to approach, and held discussions with, third parties to solicit
indications of interest in a possible acquisition of Multicare. In addition to
the foregoing, we conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we deemed appropriate in
arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the management of Multicare that such forecasts and other information
and data were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of Multicare as to the
future financial performance of Multicare. We have not made or
<PAGE>
The Board of Directors
The Multicare Companies, Inc.
June 16, 1997
Page 2
been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Multicare nor have we made any physical
inspection of the properties or assets of Multicare. Our opinion is necessarily
based upon information available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of the date
hereof.
Smith Barney has been engaged to render financial advisory services to Multicare
in connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We also will receive a fee upon the delivery of this opinion.
In the ordinary course of our business, we and our affiliates may actively trade
or hold the securities of Multicare and certain affiliates of GEC for our own
account or for the account of our customers and, accordingly, may at any time
hold a long or short position in such securities. We have in the past provided
investment banking services to Multicare unrelated to the proposed Transaction,
for which services we have received compensation. In addition, we and our
affiliates (including Travelers Group Inc. and its affiliates) may maintain
relationships with Multicare, GEC and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Multicare in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether or not such
stockholder should tender shares of Multicare Common Stock in the Tender Offer
or how such stockholder should vote on the proposed Merger. Our opinion may not
be published or otherwise used or referred to, nor shall any public reference to
Smith Barney be made, without our prior written consent; provided that this
opinion letter may be included in its entirety in the
Solicitation/Recommendation Statement of Multicare relating to the proposed
Transaction.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the cash consideration to be received by
the holders of Multicare Common Stock (other than GEC and its affiliates) in the
Transaction is fair, from a financial point of view, to such holders.
Very truly yours,
SMITH BARNEY INC.
