UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
Commission File Number 34-22090
THE MULTICARE COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3152527
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification no.)
411 Hackensack Avenue 07601
Hackensack, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (201) 488-8818
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.01 share
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
The aggregate market value of the voting stock held by non-affiliates of the
Registrant: At March 27, 1997 (based on the closing price of such stock as
reported by The New York Stock Exchange): $338,222,553.
Class Outstanding at March 27, 1997
Common Stock $.01 Par Value 30,781,459 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for its Annual
Meeting of Stockholders to be held May 14, 1997 are incorporated by reference
into Part III of this report and portions of the Registrant's 1996 Annual
Report to stockholders are incorporated by reference into Part II of this
report.
<PAGE> 1
Part I
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-K, including information set forth under
"Item 1. Business", "Item 3. Legal Proceedings", and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations",
constitute "Forward-Looking Statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). The Multicare
Companies, Inc. ("Multicare" or the "Company") desires to take advantage of
certain "safe harbor" provisions of the Reform Act and is including this
special note to enable the Company to do so. Forward-looking statements
included in this Form 10-K, or hereafter included in other publicly available
documents filed with the Securities and Exchange Commission, reports to the
Company's stockholders and other publicly available statements issued or
released by the Company involve known and unknown risks, uncertainties, and
other factors which could cause the Company's actual results, performance
(financial or operating) or achievements to differ materially from the future
results, performance (financial or operating) achievements expressed or
implied by such forward-looking statement. The Company believes the
following important factors could cause such a material difference to occur:
(1) The Company's ability to grow through the acquisition and development of
long-term care facilities or the acquisition of ancillary businesses.
(2) The Company's ability to identify suitable acquisition candidates, to
consummate or complete construction projects, or to profitably operate or
successfully integrate enterprises into the Company's other operations.
(3) The occurrence of changes in the mix of payment sources utilized by the
Company's patients to pay for the Company's services.
(4) The adoption of cost containment measures by private pay sources such as
commercial insurers and managed care organizations, as well as efforts by
governmental reimbursement sources to impose cost containment measures.
(5) Changes in the United States healthcare system, including changes in
reimbursement levels under Medicaid and Medicare, and other changes in
applicable government regulations that might affect the profitability of the
Company.
(6) The Company's continued ability to operate in a heavily regulated
environment and to satisfy regulatory authorities, thereby avoiding a number
of potentially adverse consequences, such as the imposition of fines,
temporary suspension of admission of patients, restrictions on the ability to
acquire new facilities, suspension or decertification from Medicaid or
Medicare programs, and, in extreme cases, revocation of a facility's license
or the closure of a facility, including as a result of unauthorized
activities by employees.
(7) The Company's ability to secure the capital and the related cost of such
capital necessary to fund its future growth through acquisition and
development, as well as internal growth.
(8) Changes in certificate of need laws that might increase competition in
the Company's industry, including, particularly, in the states in which the
Company currently operates or anticipates operating in the future.
(9) The Company's ability to staff its facilities appropriately with
qualified healthcare personnel, including in times of shortages of such
personnel and to maintain a satisfactory relationship with labor unions.
(10) The continued active involvement of the Company's key management
personnel, including particularly, Moshael J. Straus and Daniel E. Straus, co-
chief executive officers of the Company.
(11) The level of competition in the Company's industry, including without
limitation, increased competition from acute care hospitals, providers of
assisted and independent living and providers of home health care and changes
<PAGE> 2
in the regulatory system in the state in which the Company operates that
facilitate such competition.
(12) The continued availability of insurance for the inherent risks of
liability in the healthcare industry.
(13) Price increases in pharmaceuticals, durable medical equipment and other
items.
(14) The Company's reputation for delivering high-quality care and its
ability to attract and retain patients, including private pay patients and
patients with relatively high acuity levels.
(15) Changes in general economic conditions, including changes that pressure
governmental reimbursement sources to reduce the amount and scope of
healthcare coverage.
Item 1. Business
GENERAL
INTRODUCTION
Multicare is a leading provider of high quality long-term care, specialty
medical services and assisted living residences in selected geographic
regions. The Company's long-term care services include skilled nursing care,
Alzheimer's care and related support activities traditionally provided in
long-term care facilities. Multicare's specialty medical services consist of
(i) rehabilitation therapies such as occupational, physical and speech
therapy and stroke and orthopedic rehabilitation, (ii) subacute care such as
ventilator care, intravenous therapy, and various forms of coma, pain and
wound management, and (iii) institutional pharmacy services through which the
Company provides prescription drugs, infusion therapies and certain medical
supplies to the Company's patients and to patients at unaffiliated long-term
care facilities. The Company was organized as a Delaware corporation in March
1992.
As of December 31, 1996, the Company operated 151 long-term care facilities
(including 11 assisted living facilities) and two outpatient rehabilitation
centers (82 owned, 28 leased and 43 managed) in Connecticut, Illinois, New
Jersey, Ohio, Massachusetts, Pennsylvania, Rhode Island, Vermont, Virginia,
West Virginia and Wisconsin with 15,673 beds. In addition, the Company
provided consulting services to an additional 14 facilities with 1,688 beds.
The Company's institutional pharmacies serve over 24,000 beds at March 31,
1997.
Multicare has established a strong competitive position in the markets it
serves by providing high quality long-term care and specialty medical
services. As a result, the Company has achieved high occupancy rates, a
favorable payor mix and sustained growth in revenue and operating profits.
Multicare's overall occupancy rate was 91% for the year ended December 31,
1996. The Company achieved a quality mix (defined as revenues derived from
non-Medicaid patient sources) of 65% of net patient revenues for the year
ended December 31, 1996, as compared to 66% for the year ended December 31,
1995.
Multicare has maintained its strong operating performance through effective
managerial and financial control systems and geographic market concentration
of its facilities in selected markets. These factors permit the Company to
achieve operating efficiencies through economies of scale and reduced
corporate overhead. The Company's margins before interest, taxes,
depreciation, amortization and rent (EBITDAR) were 20% in 1996, 1995, and
1994.
SIGNIFICANT TRANSACTIONS
In December 1996, the Company acquired The A.D.S Group (A.D.S), an affiliated
group of long-term care companies operating 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. A.D.S also provides consulting services to an additional 14
facilities with 1,668 beds and operates several ancillary businesses. In
<PAGE> 3
December 1996, the Company completed the acquisition of the assets and
operations of three long-term care facilities in Rhode Island with 373 beds
which the Company had been managing since December 1995 when the Company
acquired the assets and operations of two related long-term care facilities
with 356 beds in Connecticut. In February 1996, the Company acquired the
outstanding capital stock of Concord Health Group, Inc., which operates 11
long term care facilities with approximately 1,600 beds, including assisted
living facilities, and several ancillary businesses in Pennsylvania. In
December 1995, the Company acquired the outstanding capital stock of Glenmark
Associates, Inc., a long-term care provider that operates 21 facilities and
several ancillary businesses with approximately 1,700 beds located
principally in West Virginia. In 1996, the Company completed the construction
of two new skilled nursing facilities which are currently managed by the
Company. Three additional facilities under construction are scheduled to open
in 1997. In addition, the Company opened its first newly constructed
assisted living facility during the fourth quarter of 1996 and has two
assisted living facilities under construction.
INDUSTRY BACKGROUND
The long-term care industry encompasses a broad range of healthcare services
provided to the elderly and to other patients with medically complex needs
who can be cared for outside of the acute care hospital environment. Long-
term care facilities offer skilled nursing care, routine rehabilitation
therapy and other support services, primarily to elderly patients. In
addition, long-term care facilities may provide a broad range of specialty
medical services. The Company believes that demand for the services provided
by long-term care facilities will increase substantially during the next
decade due primarily to demographic trends, advances in medical technology
and emphasis on healthcare cost containment. At the same time, government
restrictions and high construction and start-up costs are expected to limit
the supply of long-term care facilities. In addition, a trend toward
consolidation in the industry is expected to provide the Company with
opportunities for future growth.
COMPANY STRATEGY
Multicare has implemented an operating strategy and growth strategy designed
to sustain and enhance the Company's competitive position and to foster its
expansion into targeted geographic areas. The Company's operating strategy
focuses on providing high quality long-term care and specialty medical
services on a cost-effective basis. The Company seeks to maximize revenue and
operating profit by seeking to position itself as a premier provider in its
markets thereby achieving high occupancy rates and a favorable payor mix. The
Company employs rigorous managerial and financial controls which seek to
contain costs without compromising the quality of care provided. The Company
also attempts to acquire or develop facilities that are concentrated in
selected geographic regions to enable it to achieve operating efficiencies
through economies of scale and reduced corporate overhead.
The Company's growth strategy emphasizes (i) the expansion and
diversification of its operations by selectively acquiring and developing
long-term care facilities, assisted-living residences, pharmacies and
specialty medical service providers in targeted geographic areas and (ii)
further development of post-acute or non-acute services in selected
geographic areas to create a continuum of services through the expansion of
assisted living, home health care, hospital-based subacute care and other
related care. The Company has grown substantially through acquisitions and
through its ability to integrate newly acquired operations into its existing
operations and to increase their profitability by implementing revenue
enhancement and cost control programs. There can be no assurance, however,
that future suitable acquisition candidates will be located, that
acquisitions can be consummated or that added facilities can be operated
profitably or integrated successfully into the Company's operations. As a
result of acquisitions recently consummated and the Company's continued
expansion of its specialty medical services, the Company is now able to offer
directly to many of its patients, rather than relying on third party
providers, pharmacy, rehabilitation, therapy, subacute care and other
specialized services, which has enabled the Company to better respond to the
needs of its patients and to control the costs related to such services.
The following summarizes the key elements of the Company's strategy:
Provide High Quality Care. In order to provide quality care to its residents,
the Company seeks to employ highly qualified administrators and nurses, and
to retain the services of qualified medical directors. Regional quality
<PAGE> 4
assurance professionals and committees at the facility level (composed of the
facility administrator and the facility's senior medical professionals)
continually monitor the quality of care provided to ensure compliance with
Company and governmental standards. The Company believes that its commitment
to providing high quality care and services has enhanced the reputation and
the competitive position of its facilities in the markets they serve.
Achieve Operating Efficiencies. Multicare has maintained its strong operating
performance through effective managerial and financial control systems and
geographic concentration. The Company believes that concentrating its long-
term care facilities within selected geographic regions enables the Company
to achieve operating efficiencies through economies of scale, reduced
corporate overhead and more effective management supervision and financial
controls. Geographic concentration also allows the Company to establish more
effective working relationships with referral sources and regulatory
authorities in the states in which it operates. The Company's management
philosophy stresses close oversight of facility operations by individuals in
three levels of management (facility, divisional and corporate). The
Company's centralized, automated financial reporting system enables corporate
financial personnel to monitor key operating and financial data and budget
variances on a timely basis.
Maintain High Occupancy Rates and Quality Mix. An important strategy in
expanding the revenues and profitability of the Company's facilities is to
maintain high occupancy and achieve a favorable payor mix. The Company seeks
to achieve this by: (i) expanding the breadth and quality of services
offered, including the addition of pharmacy and other specialty medical
services and (ii) maintaining marketing programs designed to increase
occupancy, improve quality mix and develop additional referral sources.
Expand Specialty Medical Services. Specialty medical services include
subacute care for medically complex patients, intensive rehabilitation
therapies and in-house pharmacy services. These services are usually provided
at higher profit margins than routine services and compete with significantly
higher cost hospital care. The Company operates units dedicated to subacute
care within certain of its long-term care facilities, in addition to
providing subacute services throughout the majority of its facilities. The
Company also operates two outpatient rehabilitation centers. The Company
provides therapies including physical, occupational and speech services at
all its skilled nursing facilities and respiratory services at selected
facilities. Multicare currently owns and operates institutional pharmacies
that service in excess of 24,000 patients.
Acquire Additional Facilities. In its existing regions, the Company seeks to
strengthen its operations base through acquiring or constructing individual
facilities. The Company believes that expansion into new geographic regions
can be achieved most economically through the acquisition of multi-facility
operations. In identifying and selecting acquisition candidates, the Company
takes into consideration opportunities for revenue expansion, either through
quality improvements or changes in the mix of services offered, and cost
control, as well as community demographics, historical occupancy rates,
existing payor mix, reputation, regulatory compliance history, state
reimbursement policies and the physical condition and appearance. The Company
believes it has been successful to date in improving the operating
performance of acquired facilities through increased occupancy rates,
expansion of the scope of specialty medical services offered, improved payor
mix, modernization and renovation and introduction of its buying power and
management and financial control systems.
Construct and Expand Facilities. The Company maintains a construction
division that is responsible for the supervision of new construction,
renovation and additions. The Company's construction capabilities enable it
to capitalize on new development opportunities in its markets and to
effectively expand and renovate its existing facilities when permitted by
law. The Company completed and is currently managing two newly constructed
skilled nursing facilities during 1996 and has three additional facilities
under construction scheduled to open in 1997. In addition, the Company opened
its first newly constructed assisted living facility during the fourth
quarter of 1996 and has two assisted living facilities under construction.
The Company does not act as a general contractor, but has in-house architects
and has developed a facility prototype for use at its new facilities. In
selecting development sites, the Company takes into account community
demographics, historical occupancy rates of facilities in the same area,
state reimbursement policies and site conditions.
<PAGE> 5
PATIENT SERVICES
Basic Patient Services
Basic patient services are those traditionally provided to elderly patients
in long-term care facilities and assisted-living residences with respect to
daily living activities and general medical needs. The Company provides 24-
hour skilled nursing care by registered nurses, licensed practical nurses and
certified nursing aides in all of its skilled nursing facilities. Each long-
term care facility is managed by an on-site licensed administrator who is
responsible for the overall operations of the facility, including quality of
care. The medical needs of patients are supervised by a medical director who
is a licensed physician. While treatment of patients is the responsibility of
patients' attending physicians who are not employed by the Company, the
medical director monitors all aspects of patient treatment. The Company also
provides a broad range of support services including dietary services,
therapeutic recreational activities, social services, housekeeping and
laundry services, pharmaceutical and medical supplies, and routine
rehabilitation therapy. Each long-term care facility offers a number of
activities designed to enhance the quality of life for patients. These
activities include entertainment events, musical productions, arts and crafts
and programs encouraging community interaction with patients and visits to
the facility. The Company provides housing, personal care and support
services as well as certain routine nursing services in its assisted-living
residences.
The Company currently provides specialized care for Alzheimer's patients
under the supervision of specially trained skilled nursing, therapeutic
recreation and social services personnel. The Company's Alzheimer's programs
include music therapy, gross and fine motor activity, reality orientation and
cognitive stimulation designed to counter the hyperactivity, memory loss,
confusion and reduced learning ability experienced by Alzheimer's patients.
Specialty Medical Services
Specialty medical services are provided to patients with medically complex
needs who generally require more intensive treatment and a higher level of
skilled nursing care. These services typically generate higher profit margins
than basic patient services because the higher complexity of the patients'
medical conditions results in a need for increased levels of care and
ancillary services.
Institutional Pharmacy Services. The Company operates seven institutional
pharmacies which currently serve a total of approximately 24,000 patients.
The pharmacies provide long-term healthcare facilities and other institutions
a variety of products and services including prescription drugs, pharmacy
consulting, and enteral, urological and intravenous therapies. The Company's
concentration of facilities in certain targeted geographic regions enables it
to provide these services to its facilities in those regions as well as to
facilities not operated by the Company.
Subacute Care. Subacute care includes services provided to patients with
medically complex conditions who require ongoing nursing and medical
supervision and access to specialized equipment and services, but do not
require many of the other services provided by an acute care hospital.
Services in this category include ventilator care, intravenous therapy, wound
care management, traumatic brain injury care, post-stroke CVA (cardiovascular
accident) care, CAPD (continuous ambulatory peritoneal dialysis), pain
management, hospice care, and tracheotomy and other ostomy care. The Company
provides a range of subacute care services to patients at its facilities. The
Company plans to continue to expand its subacute care capabilities by
supplementing and expanding currently available services and by developing
expertise in additional services.
Rehabilitation Therapies. The Company provides rehabilitation therapy
programs at substantially all of its facilities. To complement the routine
rehabilitation therapy services provided to its long-term care patients, the
Company has developed specialized rehabilitation therapy programs to serve
patients with complex care needs, such as motor vehicle and other accident
victims, persons suffering from job-related injuries and disabilities, and
joint-replacement patients. The Company employs full time physical,
occupational, and speech therapists at a majority of its facilities. The
Company also offers respiratory services at selected facilities. In
addition, the Company operates two outpatient rehabilitation facilities in
New Jersey and Illinois.
<PAGE> 6
OPERATIONS
General. The day-to-day operations of each long-term care facility are
managed by an on-site state licensed administrator who is responsible for the
overall operation of the facility, including quality of care, marketing, and
financial performance. The administrator is assisted by an array of
professional and non-professional personnel (some of whom may be independent
providers), including a medical director, nurses and nursing assistants,
social workers, therapists, dietary personnel, therapeutic recreation staff,
and housekeeping, laundry and maintenance personnel. The business office
staff at each facility manage the day-to-day administrative functions,
including data processing, accounts payable, accounts receivable, billing and
payroll.
The facilities operated by the Company are currently divided into five
divisions, each of which is supervised by a team including a divisional
director, a divisional controller, a marketing director, an operations
performance director, and a clinical services director. The divisional and
facility personnel are supported by a corporate staff based at the Company's
New Jersey headquarters. Corporate personnel are responsible for the
establishment of policies and procedures, training, goals, and strategies;
quality assessment and assurance oversight; reimbursement, accounting,
information technology, cash management, and treasury functions; the
development of monitoring systems and operational procedures; construction
and development programs; human resources management; and the development and
implementation of new programs.
Management and Financial Controls. Consistent with its strategy of
maintaining strict control over costs, the Company has developed an
integrated structure of management and financial systems and controls
intended to maximize operating efficiency. The Company stresses frequent
communication among facility, divisional and corporate personnel and active
involvement by management in the day-to-day operations of the facilities. The
Company's integrated management and financial information systems enable
management to monitor key operations and financial data on a timely basis.
Key operating data, such as payables and billing data, cash collections and
admissions/discharge data, are entered into the system daily from
workstations located at each facility. This information forms the basis for a
variety of management and financial reports, including monthly financial
statements.
Quality Assurance. The Company has developed a comprehensive quality
assurance program involving personnel at all levels and designed to maintain
standards of care at each of the Company's facilities. Each facility
maintains a quality assurance committee comprised of facility management and
senior medical professionals. The committee is responsible for monitoring and
evaluating all aspects of the facility's operations, including patient care,
physical environment, staff appearance, patient rights, patient activities,
and dietary regimen. Facility administrators and divisional directors are
encouraged to play an active role in quality assurance by maintaining a high-
profile presence and closely monitoring all aspects of operations. The
Company believes its quality assurance process is unique in that the scored
internal assessment tools that measure quality and quantify standards are
used by both facility staff and corporate evaluators. The tools incorporate
federal guidelines, standards of practice, and corporate policies and
procedures. State guidelines are included as applicable during the evaluation
process. All medical and other consulting personnel are required to prepare
and submit reports at the end of each scheduled visit identifying any patient
care or other quality related issues. Patient satisfaction surveys are
conducted periodically and provide a confidential method for patients and
their families to comment on the Company's patient care services. Discharge
interviews allow the Company to assess patient satisfaction and to isolate
potential patient care issues.
Marketing. The Company engages in local and divisional marketing efforts to
promote and maintain occupancy rates, to improve its quality mix and to enter
into and maintain arrangements with managed care providers. The Company's
marketing activities are overseen by a corporate vice president of marketing
who oversees the marketing efforts of the Company's marketing directors and
facility admissions directors and administrators, who together seek to
establish relationships with referring physicians, hospital discharge
planners, managed care companies, social workers, community organizations,
local attorneys, bank trust officers, and senior citizens', Alzheimer's and
other support groups. The Company believes that many of the services and
programs provided by its facilities supplement formal marketing efforts by
promoting a facility's reputation in the community as the provider of choice
in the local markets. For example, the availability of specialty medical
services can be a key factor in the selection of a long-term care facility.
In addition, each facility offers a variety of community programs and
activities which are designed primarily as a service to the community and as
a means to enhance the quality of patient life. The Company believes these
<PAGE> 7
programs also contribute to increased occupancy by making the facility a more
attractive choice to prospective residents.
SOURCES OF REVENUES
The Company derives its revenues principally by providing skilled nursing
services and specialty medical services which include institutional pharmacy
services, rehabilitation therapies, subacute care, sales of medical supplies,
home health care and other specialized services. The sources of the Company's
revenues are a combination of private payment sources, state Medicaid
programs for indigent patients and the Federal Medicare program for certain
elderly and disabled patients. The Company's skilled nursing revenues are
determined by a number of factors, including the licensed bed capacity of its
facilities; the occupancy rates at its facilities; the mix of patients and
the rates of reimbursement among payor categories (private, Medicaid and
Medicare); and the extent to which certain ancillary services the Company
provides to patients in its facilities are utilized by the patients and paid
for by the respective payment sources. The Company employs reimbursement
specialists to monitor applicable cost ceilings and other regulatory
developments, to comply with all reporting requirements and to assist the
Company in recovering reimbursement payments. While the Company believes that
it has been successful in meeting applicable cost ceilings and in obtaining
reimbursement, there can be no assurance that reimbursement rates will remain
at present levels. In particular, cost containment proposals at both the
Federal and state levels may have an adverse effect on the Company's ability
to recover its costs of providing services to Medicaid and Medicare patients.
See "--Governmental Regulation."
The following table identifies the Company's net revenues attributable to
each of its revenue sources for the periods indicated below.
<TABLE>
<CAPTION>
Net Revenues
Year ended December 31,
1994 1995 1996
<S> <C> <C> <C>
Private and other 39% 41% 40%
Medicaid 38% 34% 35%
Medicare 23% 25% 25%
Total 100% 100% 100%
</TABLE>
Private Pay and Other. Private pay revenues include payments from individuals
who pay directly for services without governmental assistance and include
payments from commercial insurers, Blue Cross organizations, health
maintenance organizations, preferred provider organizations, workers'
compensation programs and other similar payment sources. The Company's rates
for private pay patients are typically higher than rates for patients
eligible for assistance under state-administered reimbursement programs. The
private pay rates charged by the Company are influenced primarily by the
rates charged by other providers in the local market and by Medicaid and
Medicare reimbursement rates. Competitor analyses are undertaken periodically
to discern local market pricing. Specialty medical services are usually
reimbursed under casualty and health insurance coverages. The acuity levels
for these insurance patients are generally higher and require additional
staff and increased utilization of facility resources, resulting in higher
payment rates. Individual cases are either negotiated on a case by case basis
with the insurer or the rates are prescribed through managed care contract
provisions. Also included are revenues derived from pharmacy services,
management fees, and certain other ancillary businesses.
Medicaid. Substantially all of the facilities operated by the Company
participate in the Medicaid program. Under the Federal Medicaid statute and
related regulations, state Medicaid programs must provide facility rates that
are reasonable and adequate to cover the costs of efficiently and
economically operated facilities providing services in conformity with state
and Federal standards. Furthermore, payments must be sufficient to enlist
enough providers so that service under the state's Medicaid plan are
available to recipients at least to the extent that those services are
available to the general population. The Medicaid programs in the states
within which the Company operates pay a per diem rate for providing services
to Medicaid patients based upon historical costs adjusted for inflation and
subject to restrictive limitations. The reimbursement methodologies upon
which reimbursement is based may be either prospective or retrospective in
nature. Reimbursement rates are determined by the state, while the Federal
government retains the right to approve or disapprove individual state plans.
Medicaid programs in certain states in which the Company operates currently
<PAGE> 8
include incentive allowances for providers whose costs are less than certain
ceilings and who meet other requirements. See "--Governmental Regulation."
Medicare. Substantially all of the Company's facilities are certified
Medicare providers. Medicare is a federally funded and administered health
insurance program primarily designed for individuals who are age 65 or over
and are entitled to receive Social Security benefits. The Medicare program
consists of two parts. The first part (Part A) covers inpatient hospital
services and services furnished by other institutional healthcare providers,
such as long-term care facilities. The second part (Part B) covers the
services of doctors, suppliers of medical items and services, and various
types of outpatient services. Part B services include physical, speech and
occupational therapy, medical supplies, certain intensive rehabilitation and
psychiatric services, ancillary diagnostic services, and other services of
the type provided by long-term care or acute care facilities. Part A coverage
is limited to a specified term (generally 100 days in a long-term care
facility) and requires beneficiaries to share some of the cost of covered
services through the payment of a deductible and a co-insurance payment.
There are no limits on duration of coverage for Part B services, but there is
an annual deductible and a co-insurance requirement for most services covered
by Part B.
The Medicare program is a retrospective program. An interim rate based upon
historical cost factors is paid by Medicare during the cost reporting period
and a cost settlement is made based on actual costs for the period. Final
settlements are subject to an audit of the filed cost report whereby
adjustments may result in additional payments being made to the Company or in
recoupments from the Company. Under the Medicare program, the Company is
reimbursed for its direct costs plus an allocation of indirect costs up to a
regional limit. As the Company expands its specialty medical services, the
costs of care for these patients are expected to exceed the regional
reimbursement limits. As a result, the Company has submitted and will be
required to submit further exception requests to recover the excess costs
from Medicare. There is no assurance the Company will be able to recover
such excess costs under pending or any future requests. The failure to
recover these excess costs in the future would adversely affect the Company's
financial position and results of operations.
To date, adjustments from Medicare and Medicaid audits have not had a
material adverse effect on the Company. There can be no assurance that
future adjustments will not have a material adverse effect on the Company.
COMPETITION
The Company competes with other long-term care and assisted-living providers
on the basis of the breadth and quality of services, the quality, appearance
and reputation of its facilities and price. The Company also competes in the
recruitment of qualified healthcare personnel and the acquisition and
development of additional facilities or residences. The Company's current and
potential competitors include national, regional and local long-term care and
assisted-living providers as well as acute care hospitals and rehabilitation
hospitals, some of whom have significantly greater financial and other
resources than the Company. The Company also faces competition from other
local pharmaceutical distributors and providers of home healthcare. In
addition, certain competitors are operated by not-for-profit organizations
and similar businesses which can finance capital expenditures on a tax-exempt
basis or receive charitable contributions unavailable to the Company. There
can be no assurance that the Company will not encounter increased competition
in the future which could adversely affect the Company's operating results,
particularly if existing restrictive policies relating to the issuance of
Certificates of Need are relaxed.
The Company expects competition for the acquisition and development of long-
term care facilities to increase in the future as the demand for long-term
care increases. Construction of new (or the expansion of existing) long-term
care facilities near the Company's facilities could adversely affect the
Company's business. State regulations generally require a Certificate of Need
before a new long-term care facility can be constructed or additional
licensed beds can be added to existing facilities. Certificate of Need
legislation is currently in place in all states in which the Company operates
except in Pennsylvania where the existing certificate of need legislation
expired on December 18, 1996. A bill has been introduced in the Pennsylvania
legislature to re-establish Certificate of Need requirements; however, the
Company has been advised that there is little likelihood such bill will be
passed. In Ohio, the current Certificate of Need legislation for the long-
<PAGE> 9
term care industry has a "sunset provision" which will result in the
legislation expiring as of July 1, 1997. A bill which would extend the
Certificate of Need legislation for two years until June 30, 1999 has been
passed by the Ohio House of Representatives and, as of the date of this
filing, is still under discussion in the Ohio Senate. The Company believes
that Certificate of Need regulations reduce the possibility of overbuilding
and promote higher utilization of existing facilities. However, a relaxation,
expiration or elimination of Certificate of Need requirements could lead to
an increase in competition. In addition, as cost containment measures have
reduced occupancy rates at acute care hospitals, a number of these hospitals
have converted portions of their facilities into subacute units. Competition
from acute care hospitals could adversely affect the Company and certain
states in which the Company operates have considered or are considering
action that could facilitate such competition.
GOVERNMENTAL REGULATION
The Federal government and all states in which the Company operates regulate
various aspects of the Company's business. In addition to the regulation of
rates by governmental payor sources, the development and operation of long-
term care facilities and the provision of long-term care services are subject
to Federal, state and local licensure and certification laws which regulate
with respect to a facility, among other matters, the number of beds, the
services provided, the distribution of pharmaceuticals, equipment, staffing
requirements, operating policies and procedures, fire prevention measures,
and compliance with building and safety codes and environmental laws. There
can be no assurance that Federal, state or local governments will not impose
additional restrictions which might adversely affect the Company's ability to
provide its services and receive reimbursement of its expenses.
All of the facilities operated by the Company are licensed under applicable
state laws and have the required Certificates of Need from responsible state
authorities.
Substantially all of the Company's facilities are certified or approved as
providers under the Medicaid and Medicare programs. Further, the Company has
no reason to believe that any individual providers of healthcare services at
the Company's facilities do not meet applicable licensing requirements. Both
initial and continuing qualification of a long-term care facility to
participate in such programs depend upon many factors, including
accommodations, equipment, services, non-discrimination policies against
indigent patients, patient care, quality of life, residents' rights, safety,
personnel, physical environment, and adequacy of policies, procedures and
controls. Licensing, certification and other applicable standards vary from
jurisdiction to jurisdiction and are revised periodically. State and/or
Federal agencies survey or inspect all long-term care facilities on a regular
basis to determine whether such facilities are in compliance with the
requirements for participation in government sponsored third party payor
programs. Failure to comply with these standards could result in the denial
of reimbursement, the imposition of fines, temporary suspension of admission
of new patients, the issuance of a provisional license for a facility,
suspension or decertification from the Medicaid or Medicare program,
restrictions on the ability to acquire new facilities or expand existing
facilities and, in extreme cases, the imposition of limitations on a
facility's license, the appointment of third-party temporary management for a
facility, revocation of the facility's license or closure of a facility.
There can be no assurance that the facilities owned, leased or managed by the
Company, or the provision of services and supplies by the Company, will
initially meet or continue to meet the requirements for participation in the
Medicaid or Medicare programs or state licensing authorities. Changes in the
Federal survey regulations which became effective July 1, 1995 allow for the
exercise of broad discretion by the Federal and state governments in the
survey process.
The Company believes that its facilities are in substantial compliance with
all statutes, regulations, standards and requirements applicable to its
business. However, the compliance history of a prior operator may be used by
state or Federal regulators in determining possible actions against a
successor operator, and in the ordinary course of business, the Company's
facilities receive notices of deficiencies following surveys for failure to
comply with various regulatory requirements. In most cases, the Company and
the reviewing agency will agree upon corrective measures to be taken to bring
the facility into compliance. From time to time, survey deficiencies have
resulted in various penalties against certain facilities and the Company.
These penalties have included monetary fines, temporary bans on the admission
of new patients and the placement of restrictions on the Company's ability to
obtain or transfer certificates of need in certain states. To date, no survey
deficiencies or any resulting penalties have had any material adverse affect
on the Company's operations, however, there can be no assurance that future
surveys will not result in penalties or sanctions which could have a material
adverse affect on the Company.
<PAGE> 10
The Company is also subject to Federal and state laws which govern financial
and referral arrangements between healthcare providers. Federal laws, as well
as the law of certain states, prohibit direct or indirect payments, or fee-
splitting arrangements between healthcare providers, that are designed to
induce or encourage the referral of patients to, or the recommendation of, a
particular provider for medical products or services or the purchase, sale,
or lease of any service or product for which payment may be made under the
Medicare or Medicaid programs. These laws include the Federal "anti-kickback
law" which prohibits, among other things, the offer, payment, solicitation or
receipt of any form of remuneration in return for the referral of Medicare
and Medicaid patients. A wide array of relationships and arrangements,
including ownership interests in a company by persons who are in a position
to refer patients and personal service agreements have, under certain
circumstances, been alleged to violate these provisions. Certain discount
arrangements may also violate the law. A violation of the Federal anti-
kickback law could result in the loss of eligibility to participate in
Medicare or Medicaid, or in criminal and civil penalties.
In addition, the Federal government and some states restrict certain business
relationships between physicians and other providers of healthcare services.
Effective January 1, 1995, the Stark law prohibits any physician with a
financial relationship (defined as a direct or indirect ownership or
investment interest or compensation arrangement) with an entity from making a
referral for a "designated health service" to that entity, and prohibits that
entity from billing for such services. "Designated health services" do not
include skilled nursing services, but do include many services which nursing
facilities provide to their patients including clinical laboratory services,
therapy and enteral and parenteral nutrition.
All but one of the states in which the Company operates have adopted
Certificate of Need or similar laws which generally require that a state
agency approve certain acquisitions and changes in ownership and determine
that a need exists prior to the addition or reduction of beds or services,
the implementation of other changes, the incurrence of certain capital
expenditures or, in certain states, the closure of a facility. State
approvals are generally issued for a specified maximum expenditure and
require implementation of the proposal within a specified period of time.
Failure to obtain the necessary state approval can result in the inability of
the facility to provide the service, operate the facility, or complete the
acquisition, addition or other change, and may also result in the imposition
of sanctions or other adverse action on the facility's license and
reimbursement. See "_Competition" for a discussion of the status of
Certificate of Need legislation in certain states in which the Company
operates.
On August 21, 1996, President Clinton signed the Health Insurance Portability
and Accountability Act ("HR 3103"). HR 3103 contains a variety of significant
healthcare fraud and abuse provisions, including creation of a coordinated
federal healthcare fraud and abuse program; establishment of a Medicare
integrity program; expansion of current healthcare fraud and abuse sanctions;
creation of a healthcare fraud criminal sanction; creation of a criminal
penalty for fraudulent disposition of assets in order to obtain Medicaid
benefits; and expansion of the authority to impose, and increasing the amount
of, civil monetary penalties.
There are numerous legislative and executive initiatives at the Federal and
state levels for healthcare reform with a view toward, among other things,
slowing the overall rate of growth in healthcare expenditures. The Company is
unable to predict the impact of healthcare reforms on the Company; however it
is possible that such proposals could have a material adverse effect on the
Company.
The Company is also subject to a wide variety of Federal, state and local
environmental and occupational health and safety laws and regulations. Among
the types of regulatory requirements faced by health care providers are: air
and water quality control requirements; waste management requirements;
specific regulatory requirements applicable to asbestos, polychlorinated
biphenyls, and radioactive substances; requirements for providing notice to
employees and members of the public about hazardous materials and wastes; and
certain other requirements.
In its role as owner and/or operator of properties or facilities, the Company
may be subject to liability for investigating and remedying any hazardous
substances that have come to be located on the property, including such
substances that may have migrated off, or emitted, discharged, leaked,
escaped or been transported from, the property. Ancillary to the Company's
operations are, in various combinations, the handling, use, storage,
transportation, disposal and/or discharge of hazardous, infectious, toxic,
radioactive, flammable and other hazardous materials, wastes, pollutants or
contaminants. Such activities may result in damage to individuals, property
<PAGE> 11
or the environment; may interrupt operations and/or increase their costs;
may result in legal liability, damages, injunctions or fines; may result in
investigations, administrative proceedings, penalties or other governmental
agency actions; and may not be covered by insurance. There can be no
assurance that the Company will not encounter such risks in the future, and
such risks may have a material adverse effect on the operations or financial
condition of the Company.
EMPLOYEES
As of December 31, 1996, the Company employed approximately 14,800 persons.
Approximately 2,100 employees at 28 of the Company's facilities are covered
by collective bargaining agreements. The Company believes that it has had
good relationships with its employees and with the unions that represent its
employees, but it cannot predict the effect of continued union representation
or organizational activities on its future operations.
The healthcare industry has at times experienced a shortage of qualified
healthcare personnel. While the Company has been able to retain the services
of an adequate number of qualified personnel to staff its facilities
appropriately and maintain its standards of quality care, there can be no
assurance that continued shortages will not in the future affect the ability
of the Company to attract and maintain an adequate staff of qualified
healthcare personnel. A lack of qualified personnel at a facility could
result in significant increases in labor costs at such facility or otherwise
adversely affect operations at such facility. Any of these developments could
adversely affect the Company's operating results or expansion plans. The
Company competes with other healthcare providers and with non-healthcare
providers for both professional and non-professional employees.
INSURANCE
The provision of healthcare services entails an inherent risk of liability.
The Company maintains liability insurance providing coverage which it
believes to be adequate. In addition, the Company maintains property,
business interruption, and workers' compensation insurance covering all
facilities in amounts deemed adequate by the Company. There can be no
assurance that any future claims will not exceed applicable insurance
coverage or that the Company will be able to continue its present insurance
coverage on satisfactory terms, if at all.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Name Age Position
Moshael J. Straus 44 Chairman of the Board of Directors,
Co-Chief Executive Officer
Daniel E. Straus 40 President, Co-Chief Executive Officer and Director
Stephen R. Baker 41 Executive Vice President, Chief Operating Officer
and Director
Susan S. Bailis 51 Senior Vice President, A.D.S /Multicare
Bradford C. Burkett 36 Senior Vice President, General Counsel
and Secretary
Thomas P. Foy 46 Senior Vice President, Government Relations
and Business Development
Andrew Horowitz 35 Senior Vice President, Ancillary Services
Joel Jaffe 50 Senior Vice President, Treasurer
Mark R. Nesselroad 41 Senior Vice President, Acquisitions, Construction
and Development
Robert S. Anderson 35 Vice President, Finance
Kevin P. Breslin 30 Vice President, Acquisitions
Ronald G. Clarendon 53 Vice President, Employee Relations
Janice M. Greer 57 Vice President, Professional Services
Keith F. Helmer 41 Vice President, Operations
Kent R. Hugill 44 Vice President, Marketing
Barbara A. Marte 57 Vice President, Product Development
and Enhancement
<PAGE> 12
Certain additional information concerning the above persons is set forth
below:
Moshael J. Straus, 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.
Mr. Straus has been a member of the Board of Directors since 1992.
Daniel E. Straus, 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 and
Co-Chief Executive Officer of Multicare in September 1992. Mr. Straus has
served on the Board of Directors since 1992.
Stephen R. Baker 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 of the Company since
December 1992. Prior to joining Multicare, he 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 been a member of
the Board of Directors since May 1994.
Susan S. Bailis has served as Senior Vice President, A.D.S/Multicare and as
President of the Company's subsidiaries that operate or manage the Company's
business in Massachusetts, Rhode Island, Vermont and Connecticut since
December 1996. Prior to joining Multicare, Ms. Bailis was since 1986 the
President of The A.D.S Group, a privately held long-term care company
headquartered in Newton, Massachusetts which was acquired by the Company in
December 1996.
Bradford C. Burkett was named a Senior Vice President in 1996, has served as
Vice President, General Counsel and Secretary of the Company since May 1995
and joined the Company as its Vice President and Deputy General Counsel in
June 1994. Mr. Burkett became Secretary of the Company in August 1994.
Prior to June 1994, Mr. Burkett was engaged in the private practice of law
with the New York City firm of Kaye Scholer Fierman Hays & Handler since
1985.
Thomas P. Foy joined the Company in July 1994 as Senior Vice President,
Government Relations and Business Development. Prior to such time, Mr. Foy
served as Senior Vice President at Hill International, a construction
consulting company since January 1990. Mr. Foy served as a New Jersey State
Senator from 1990 to 1992 and a New Jersey Assemblyman from 1984 to 1990.
Andrew Horowitz has served as Senior Vice President, Ancillary Services of
the Company since February 1997 and joined the Company as its Director of
Pharmacy Operations in January 1995. Prior to joining Multicare, Mr.
Horowitz was since 1988 the Executive Vice President and a principal owner of
Scotchwood Pharmacy, a New Jersey based institutional pharmacy business which
was acquired by the Company in January 1995.
Joel Jaffe has served as Senior Vice President, Treasurer of the Company
since May 1995. Prior to joining Multicare, he was a partner at the public
accounting firm of KPMG Peat Marwick LLP where he was employed for 27 years.
He is a Certified Public Accountant.
Mark R. Nesselroad has served as Senior Vice President, Acquisitions,
Construction and Development of the Company since February 1997 and as chief
executive officer of the Company's subsidiary that operates the Company's
business in West Virginia since joining the Company in December 1995. Prior
to joining Multicare, Mr. Nesselroad was a co-founder and since 1984 had been
the chief executive officer of Glenmark Associates, Inc., a privately held
long-term care operator in West Virginia which was acquired by the Company in
December 1995.
<PAGE> 13
Robert S. Anderson served as Vice President, Finance of a predecessor of the
Company since October 1988 and assumed the same position of Vice President,
Finance of the Company in September 1992. He joined Multicare Management in
October 1986 as Corporate Controller. He is a Certified Public Accountant.
Kevin P. Breslin has served as Vice President, Acquisitions of the Company
since May 1995 and joined the Company as its Director of Financial Accounting
in April 1993. Prior to joining the Company, he was employed at KPMG Peat
Marwick LLP for 4 years. He is a Certified Public Accountant.
Ronald G. Clarendon served as Vice President, Employee Relations of a
predecessor of the Company since August 1991 and assumed the same position
with Multicare in September 1992. Prior to 1991, Mr. Clarendon specialized
in all facets of labor relations with Western Union Corporation.
Janice M. Greer has served as Vice President, Professional Services of the
Company since February 1997 and joined the Company as its Director of
Professional Services in September 1994. Prior to joining Multicare she was
the Corporate Director of Quality Assurance for Aaron Enterprises, a long-
term care assisted living and retirement living company in North Carolina,
from February 1993 through 1994. Previously she was employed at Beverly
Enterprises from 1982 until 1993 where she served in a variety of positions
relating to quality assurance.
Keith F. Helmer joined the Company in January 1997 as its Vice President,
Operations. Prior to joining Multicare, Mr. Helmer was employed at Arbor
Health Care Company where he served as Vice President of Operations from
September 1995 until December 1996, and as Regional Vice President of
Operations from September 1994 through September 1995. Previously, he was
the Vice President of Operations at Connecticut Subacute Corporation, a
subacute, rehabilitation and extended care management corporation, from
January 1993 until April 1994.
Kent R. Hugill has served as Vice President, Marketing of the Company since
February 1997 and joined the Company as its Corporate Director of Marketing
in December 1995. Prior to joining Multicare, Mr. Hugill was since 1995 the
Vice President, Sales and Marketing, at Assurqual, Inc., a Baltimore-based
information, technology and consulting company. From 1988 until 1995 he was
employed at Health Care and Retirement Corporation in Toledo, Ohio where he
served in a variety of positions including Director of Marketing and Regional
Operations Manager.
Barbara A. Marte has served as Vice President, Product Development and
Enhancement of the Company since January 1995. Prior to such time, she
served as Director of Subacute Services of the Company since January 1994.
Ms. Marte was previously a Director of Subacute Development for Beverly
Enterprises, Inc. from 1991 through 1993. Prior to 1991, for more than five
years, Ms. Marte served in various corporate and marketing positions with
Genesis Health Ventures, Inc.
ITEM 2. PROPERTIES
As of December 31, 1996, the Company operated 151 long-term care facilities
and two outpatient rehabilitation centers (82 owned, 28 leased and 43
managed). The Company has sought to retain ownership of a significant portion
of its real estate and it believes this provides the Company with substantial
financing flexibility.
The Company has granted security interests in substantially all of its
assets to secure its credit facilities. Twenty-five of the Company's
facilities are leased by the respective operating entities from third
parties. One of the Company's Connecticut facilities and one of the Company's
New Jersey facilities are leased from related parties owned by the principal
stockholders of the Company and one of the Company's New Jersey facilities is
leased from a related party 50% owned by certain principal stockholders of
the Company. The inability of the Company to make rental payments under
these leases could result in loss of the leased property through eviction or
other proceedings. Certain facility leases do not provide for non-disturbance
from the mortgagee of the fee interest in the property and consequently each
such lease is subject to termination in the event that the mortgage is
foreclosed following a default by the owner.
<PAGE> 14
The Company considers its properties to be in good operating condition
and suitable for the purposes for which they are being used.
The following table summarizes by state certain information regarding
the Company's facilities and outpatient rehabilitation centers at December
31, 1996 (excluding 14 facilities with 1,668 beds at which the Company
provides quality assurance consulting services):
<TABLE>
<CAPTION>
Owned (1) Leased Managed Total
Facilities Beds Facilities Beds Facilities Beds Facilities Beds
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Massachusetts 6 876 5 742 38 2,557 49 4,175
New Jersey 13 1,425 8 1,294 --- --- 21 2,719
Pennsylvania 13 1,520 --- --- 3 654 16 2,174
West Virginia 16 1,464 4 331 1 62 21 1,857
Ohio 10 896 4 250 --- --- 14 1,146
Connecticut 5 766 2 250 1 90 8 1,106
Illinois 10 857 1 92 --- --- 11 949
Wisconsin 5 710 2 231 --- --- 7 941
Rhode Island 3 373 --- --- --- --- 3 373
Virginia --- --- 2 175 --- --- 2 175
Vermont 1 58 --- --- --- --- 1 58
82 8,945 28 3,365 43 3,363 153 15,673
</TABLE>
(1) Includes 7 facilities with 889 beds which are not wholly owned.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to claims and legal actions arising in the ordinary
course of business. Management does not believe that any litigation to which
the Company is currently a party will have a material adverse effect on the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEMS 5 THROUGH 8.
Information required by Items 5 through 8 of Form 10-K is included in the
Company's 1996 Annual Report to stockholders and is incorporated herein by
reference as indicated below:
Item No. Page
5 Market for Registrant's Common Equity
and Related Stockholder Matters 29, 31
6 Selected Financial Data 13
7 Management's Discussion and Analysis
of Financial Condition and
Results of Operations 14-17
8 Financial Statements and
Supplementary Data 18-30
<PAGE> 15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOUSRE
None.
PART III
ITEMS 10 THROUGH 13.
Information required by Items 10 through 13 of Form 10-K, is included in
the definitive Proxy Statement to be filed on or before April 30, 1997, for
the Company's 1997 Annual Meeting of Stockholders and is incorporated herein
by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page
(a) 1.Financial Statements
All financial statements as set forth under
Item 8 are incorporated by reference from the
1996 Annual Report to stockholders.
2.Financial Statement Schedule
Independent Auditors' Report on Financial
Statement Schedule F-1
Schedule II - Valuation and Qualifying Accounts F-2
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are not applicable and, therefore, omitted.
3.Exhibits
Exhibit
No. Description
(1) 2 Reorganization and Subscription Agreement, dated as of
August 21, 1992, among The Multicare Companies, Inc.,
Daniel E. Straus, Moshael J. Straus, Adina S. Rubin
and Bethia S. Quintas
(2) 3.1 Restated Certificate of Incorporation of The Multicare
Companies, Inc.
3.2 Certificate of Amendment of Restated Certificate of
Incorporation of The Multicare Companies, Inc.
(2) 3.3 By-laws of The Multicare Companies, Inc.
(1) 4.1 Indenture for Senior Subordinated Notes
(5) 4.2 Fiscal Agency Agreement for Subordinated Convertible
Debentures
(1) 10.1 Lease, dated July 29, 1986, between Jackson Health Care
Associates and Health Resources of Jackson, Inc.
(2) 10.2 Amended and Restated Amendment of Lease, dated as of
November 18, 1992 between Straus Associates and Health
Resources of Colchester, Inc.
(2) 10.3 Amended and Restated 1993 Stock Option Plan
(3) 10.4 Amendments dated March 15 and April 4, 1994 to the
Amended and Restated 1993 Stock Option Plan
(3) 10.5 Non-Employee Directors' Stock Option Plan
(4) 10.6 First Amendment Agreement dated as of October 19, 1995
among The Multicare Companies, Inc., Subsidiary Co-
Borrowers, Subsidiary Guarantors, and The Chase
Manhattan Bank, N.A.
(5) 10.7 The Multicare Companies, Inc. Employee Stock Purchase Plan
(5) 10.8 The Multicare Companies, Inc. Directors Retainer and
Meeting Fee Plan
<PAGE> 16
(5) 10.9 The Multicare Companies, Inc. Key Employee Incentive
Compensation Plan
(5) 10.10 Amended and Restated Credit Agreement dated as of March
31, 1995 among The Multicare Companies, Inc.,
Subsidiary Co-Borrowers, Subsidiary Guarantors and The
Chase Manhattan Bank, N.A.
(5) 10.11 Loan Agreement dated October 13, 1992 between Meditrust
Mortgage Investments, Inc. and various Glenmark entities
(5) 10.12 First Amendment to Loan Agreement dated as of November 30,
1995
(5) 10.13 Intercreditor Agreement dated December 1, 1995 between
The Chase Manhattan Bank, N.A. , Meditrust Mortgage
Investments, Inc. and Meditrust of West Virginia, Inc.
(5) 10.14 Second Amendment to Loan Agreement entered into
effective as of November 30, 1995
(5) 10.15 Agreement and Plan of Merger Among HRWV, Inc., Glenmark
Associates, Inc., Glenmark Holding Company Limited
Partnership, Mark R. Nesselroad and Glenn T. Adrian
(5) 10.16 Facility Lease Agreement dated as November 30, 1995
between Meditrust of West Virginia, Inc. and Glenmark
Limited Liability Company
(5) 10.17 Second Amendment Agreement dated as of February 22,
1996 among The Multicare Companies, Inc. Subsidiary Co-
Borrowers, Subsidiary Guarantors, The Banks Signatory
hereto, and The Chase Manhattan Bank, N.A., as Agent
(6) 10.18 Agreement and Plan of Merger, dated as of January 15,
1996, among The Multicare Companies, Inc., CHG
Acquisition Corp., and Concord Health Group, Inc.
(7) 10.19 Second Amended and Restated Credit Agreement, dated as
of May 22, 1996,among The Multicare Companies, Inc.,
the Subsidiary Co-Borrowers, the Subsidiary Guarantors,
the Banks Signatory thereto and The Chase Manhattan
Bank, N.A., as Agent
(7) 10.20 Acquisition Agreement, dated as of June 17, 1996, by
and among A.D.S/Multicare, Inc. and Alan D. Solomont,
David Solomont, Ahron M. Solomont, Jay H. Solomont,
David Solomont, Susan S. Bailis and the Seller Entities
signatory thereto (the "A.D.S Acquisition Agreement")
(7) 10.21 Amendment No. 1, dated August 12, 1996, to the A.D.S
Acquisition Agreement.
(8) 10.22 Amendment No. 2, dated as of September 25, 1996 to the
A.D.S Acquisition Agreement.
(8) 10.23 Amendment No. 3, dated as of October 29, 1996 to the
A.D.S Acquisition Agreement.
(8) 10.24 Amendment No. 4, dated as of December 11, 1996 to the
A.D.S Acquisition Agreement.
(8) 10.25 Third Amended and Restated Credit Agreement dated as of
December 11, 1996 among The Multicare Companies, Inc.
and certain of its Subsidiaries, and Nationsbank, N.A.
as Administrative Agent.
(8) 10.26 Master Lease, Open End Mortgage and Purchase Option
dated as of December 11, 1996 among Academy Nursing
Home, Inc., Nursing and Retirement Center of the
Andovers, Inc., Prescott Nursing Home, Inc., Willow
Manor Nursing Home, Inc., and A.D.S/Multicare, Inc.
(8) 10.27 Appendix A to Participation Agreement, Master Lease,
Supplements, LoanAgreement, and Lease Facility
Mortgages.
(8) 10.28 Participation Agreement, dated as of December 11, 1996
among The Multicare Companies, Inc., as Guarantor,
Various Subsidiaries of The Multicare Companies, Inc.
as Lessees, Selco Service Corporation, as Lessor,
Various Financial Institutions as Tranche B Lenders,
Nationsbank, N.A., as Lease Agent for the Lenders, and
Nationsbank, N.A., as Collateral Agent for the Secured
Parties.
10.29 The Multicare Companies, Inc. Non-qualified Stock
Purchase Plan.
<PAGE> 17
10.30 Employment Agreement, dated as of January 1, 1995,
between The Multicare Companies, Inc. and Daniel E.
Straus.
10.31 Employment Agreement, dated as of January 1, 1995,
between The Multicare Companies, Inc. and Moshael J.
Straus.
10.32 Employment Agreement, dated as of January 1, 1995,
between The Multicare Companies, Inc. and Stephen R.
Baker.
10.33 Employment Agreement, dated as of January 1, 1995,
between The Multicare Companies, Inc. and Paul J.
Klausner.
10.34 Employment Agreement, dated as of January 1995, between
Care 4, L.P., and Andrew Horowitz.
10.35 Employment Agreement, dated as of December 1995,
between Glenmark Associates, Inc. and Mark R.
Nesselroad.
10.36 Amendment, dated July 19, 1996, to Agreement and
Plan of Merger among HRWV, Inc., Glenmark Associates,
Inc., Glenmark Holding Company Limited Partnership,
Mark R. Nesselroad and Glenn T. Adrian.
11 Computation of Earnings Per Share
13 1996 Annual Report to stockholders
21 Subsidiaries of the Registrant
23 Consent of KPMG Peat Marwick LLP, Independent Certified
Public Accountants
27 Financial Data Schedule
(1) Incorporated by reference from Registration Statement No. 33-51176 on
Form S-1 effective November 18, 1992.
(2) Incorporated by reference from Registration Statement No. 33-65444 on
Form S-1 effective August 18, 1993.
(3) Incorporated by reference from Registration Statement No. 33-79298
effective June 22, 1994.
(4) Incorporated by reference from Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1995.
(5) Incorporated by reference from Annual Report on Form 10-K for the year
ended December 31, 1995.
(6) Incorporated by reference from the Tender Offer Statement on Schedule 14D-
1 of CHG Acquisition Corp., and The Multicare Companies, Inc., dated January
22, 1996.
(7) Incorporated by Reference from Registration Statement No. 333-12819 on
Form S-3 effective October 24, 1996.
(8) Incorporated by reference from Current Report on Form 8-K, dated December
26, 1996.
(b) Reports on Form 8-K.
On October 22, 1996 the Company filed a current report on Form 8-K reporting
the Company announced in a press release its 1996 third quarter earnings.
On December 26, 1996, the Company filed a current report on Form 8-K
reporting that the Company (i) announced in a press release the Company had
completed the acquisition of The A.D.S Group; (ii) completed the acquisition
of three facilities in Rhode Island; and (iii)amended and restructured its
$350 credit facility and entered into a new lease facility
with Nationsbank, N.A., as agent.
<PAGE> 18
Independent Auditors' Report
The Board of Directors
The Multicare Companies, Inc.:
Under date of February 4, 1997, we reported on the consolidated balance
sheets of The Multicare Companies, Inc. and subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996, as contained in the 1996 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the annual report on Form 10-K for the year
1996. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedule as listed in the accompanying index. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
February 4, 1997
SCHEDULE II
<TABLE>
THE MULTICARE COMPANIES, INC.
AND SUBSIDIARIES
.
Valuation and Qualifying Accounts
Years ended December 31, 1994, 1995, 1996
(In thousands)
<CAPTION>
Classifications Balance Charged Charged Balance
at to costs to other at end
beginning of and accounts Deductions at
period expenses (1) (2) Period
<S> <C> <C> <C> <C> <C>
Year ended December
31, 1996: Allowance
or doubtful accounts $ 5,241 4,760 2,502 97 11,531
Year ended December
31, 1995: Allowance
for doubtful accounts $ 2,726 3,483 --- 968 5,241
Year ended December
31, 1994: Allowance
for doubtful accounts $ 1,642 1,712 --- 628 2,726
</TABLE>
(1) Represents amounts related to acquisitions
(2) Represents amounts written-off as uncollectible.
<PAGE> F-2
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
The Multicare Companies, Inc.
By: /S/ DANIEL E. STRAUS
Daniel E. Straus
President and Co-Chief Executive Officer
March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
MOSHAEL J. STRAUS Chairman of the Board, March 27, 1997
Moshael J. Straus Co-Chief Executive Officer
and Director
(Principal Executive Officer)
DANIEL E. STRAUS President, Co-Chief Executive March 27, 1997
Daniel E. Straus Officer and Director
(Principal Executive Officer)
STEPHEN R. BAKER Executive Vice President, March 27, 1997
Stephen R. Baker Chief Financial Officer and
Director (Principal Accounting
Officer)
PAUL J. KLAUSNER Director March 27, 1997
Paul J. Klausner
STUART H. ALTMAN Director March 27, 1997
Stuart H. Altman
CONSTANCE B.
GIRARD-DICARLO Director March 27, 1997
Constance B.
Girard-diCarlo
MENACHEM ROSENBERG Director March 27, 1997
Menachem Rosenberg
GEORGE R. ZOFFINGER Director March 27, 1997
George R. Zoffinger
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
THE MULTICARE COMPANIES, INC.
(a Delaware Corporation)
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is The Multicare Companies, Inc.
2. The Restated Certificate of Incorporation of the Corporation
is hereby amended by striking out Article IV thereof by substituting in
lieu of said Article the following new Article IV:
"The total number of shares which the Corporation shall have
authority to issue is Seventy-seven Million (77,000,000) shares,
consisting of Seven Million (7,000,000) shares of Preferred Stock, of
the par value of One Cent ($.01) per share (hereinafter called
"Preferred Stock"), and Seventy Million (70,000,000) shares of Common
Stock, of the par value of One Cent ($.01) per share (hereinafter called
"Common Stock")."
3. The amendment of the Restated Certificate of Incorporation
herein certified has been duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
Signed on May 8, 1996.
By: /S/ DANIEL E. STRAUS
________________________________________
Daniel E. Straus
President and Co-Chief Executive Officer
ATTEST:
By: /S/ BRADFORD C. BURKETT
_______________________________________________
Bradford C. Burkett
Vice President, General Counsel and Secretary
EXHIBIT 10.29
THE MULTICARE COMPANIES, INC.
NONQUALIFIED STOCK PURCHASE PLAN
Table of Contents
Page
SECTION 1 - PURPOSE 1
SECTION 2 - DEFINITIONS 1
2.1 "Board of Directors" 1
2.2 "Code" 1
2.3 "Committee" 1
2.4 "Common Stock" 1
2.5 "Common Stock Account" 1
2.6 "Company" 1
2.7 "Custodian" 1
2.8 "Eligible Compensation" 1
2.9 "Eligible Employee" 1
2.10 "Employer" 2
2.11 "Entry Date" 2
2.12 "Fair Market Value" 2
2.13 "Participant" 2
2.14 "Payroll Deduction Account" 2
2.15 "Plan" 2
2.16 "Plan Year" 2
2.17 "Purchase Period" 2
SECTION 3 - ELIGIBILITY 2
3.1 General Rule 2
3.2 Leave of Absence 2
3.3 Common Stock Account 2
SECTION 4 - PARTICIPATION AND PAYROLL DEDUCTIONS 3
4.1 Enrollment 3
4.2 Amount of Deduction Accounts 3
4.3 Subsequent Plan Years 3
4.4 Changes in Participation 3
SECTION 5 - OFFERINGS 3
5.1 Maximum Number of Shares 4
5.2 Exercise of Options 4
5.3 Oversubscription of Shares 5
5.4 Limitations on Grant and Exercise of Options 5
SECTION 6 - DISTRIBUTIONS OF COMMON STOCK ACCOUNTS 5
5.1 Termination of Employment 5
5.2 In-Service Withdrawals 5
SECTION 7 - DIVIDENDS ON SHARES 5
SECTION 8 - RIGHTS AS A STOCKHOLDER 6
SECTION 9 - OPTIONS NOT TRANSFERABLE 6
SECTION 10 - COMMON STOCK 6
10.1 Reserved Shares 6
10.2 Restrictions on Exercise 6
10.3 Restrictions on Sale 6
10.4 Additional Restrictions of Rule 16b-3 7
SECTION 11 - ADJUSTMENT UPON CHANGES IN CAPITALIZATION 7
SECTION 12 - ADMINISTRATION 7
12.1 Appointment 7
12.2 Authority 7
12.3 Committee Procedures 7
12.4 Duties of Committee 8
12.5 Plan Expenses 8
12.6 Indemnification 8
SECTION 13 - AMENDMENT AN TERMINATION 8
13.1 Amendment 8
13.2 Termination 8
SECTION 14 - EFFECTIVE DATE 9
SECTION 15 - GOVERNMENTAL AND OTHER REGULATIONS 9
SECTION 16 - NO EMPLOYMENT RIGHTS 9
SECTION 17 - WITHHOLDING 9
SECTION 18 - OFFSETS 10
SECTION 19 - NOTICES, ETC. 10
SECTION 20 - CAPTIONS, ETC. 10
SECTION 21 - EFFECT OF PLAN 10
SECTION 22 - GOVERNING LAW 11
SECTION 23 - TRANSFERABILITY 11
SECTION 1
PURPOSE
The purpose of the Plan is to secure for the Company and its
stockholders the benefits of the incentive inherent in the ownership of
Common Stock by current and future Eligible Employees.
SECTION 2
DEFINITIONS
When used herein, the following terms shall have the following meanings:
2.1 "Board of Directors" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute thereto.
2.3 "Committee" means the committee appointed by the Board of Directors
to administer the Plan pursuant to Section 12.
2.4 "Common Stock" means common stock, par value $0.01 per share, of
the Company.
2.5 "Common Stock Account" means the account established with, and
maintained by, the Custodian, for the purpose of holding Common Stock
purchased pursuant to this Plan.
2.6 "Company" means The Multicare Companies, Inc., a Delaware
corporation, and its successors and assigns.
2.7 "Custodian" means the agent selected by the Company to hold Common
Stock purchased under the Plan.
2.8 "Eligible Compensation" means the sum of: (i) the total
compensation paid to an Eligible Employee by the Employer which is subject to
tax under Code section 3402, or any successor provision thereto (or which
would be subject to tax thereunder if the employee were fully subject to
Federal income tax with respect to such compensation), plus (ii) amounts
deferred under a plan of the Employer intended to qualify under Code section
401(k) (a "401(k) Plan") by such Eligible Employee, plus (iii) amounts
deferred under a plan of the Employer intended to qualify under Code section
125.
<PAGE> 1
2.9 "Eligible Employee" means each employee of the Employer who has
completed at least six months of employment.
2.10 "Employer" means any non-corporate entity that, directly or
indirectly, controls or is controlled by, or is under common control with,
the Company, and that has been designated by the Board of Directors as a
participating employer under the Plan.
2.11 "Entry Date" means the first day of each Purchase Period.
2.12 "Fair Market Value" means the mean of the high and low sales prices
of a share of Common Stock as reported on the New York Stock Exchange or such
other exchange on which the shares of Common Stock are principally traded on
the date in question or, if the Common Stock shall not have been traded on
such date, the mean of the high and low sales prices on the first day prior
thereto on which the Common Stock was so traded, or, if the Common Stock was
not so traded, such other amount as may be determined by Committee in its
sole discretion.
2.13 "Participant" means an Eligible Employee who has met the
requirements of Section 3 and has elected to participate in the Plan pursuant
to Section 4.1.
2.14 "Payroll Deduction Account" means the bookkeeping entry established
by the Employer for each Participant pursuant to Section 4.3.
2.15 "Plan" means The Multicare Companies, Inc. Nonqualified Stock
Purchase Plan as set forth herein and as amended from time to time.
2.16 "Plan Year" means the 1996 calendar year and each calendar year
thereafter.
2.17 "Purchase Period" means each calendar quarter commencing on and
after the effective date of the Plan. Each such Purchase Period shall begin
on the first day of the calendar quarter and end on the last day of that
calendar quarter.
SECTION 3
ELIGIBILITY
3.1 General Rule. Subject to Section 3.3, an Eligible Employee shall be
eligible to become a Participant in the Plan beginning on the Entry Date
coincident with or next following the date he becomes an Eligible Employee.
3.2 Leave of Absence. Unless the Committee otherwise determines, a
Participant on a paid leave of absence shall continue to be a Participant in
the Plan so long as Participant is on such paid leave of absence. Unless
otherwise determined by the Committee, a Participant on an unpaid leave of
absence shall not be entitled to participate in any offering commencing after
such unpaid leave has begun but shall not be deemed to have terminated
<PAGE> 2
employment for purposes of the Plan. A Participant who, upon failing to
return to work following a leave of absence, is deemed not to be an employee,
shall not be entitled to participate in any offering commencing after such
termination of employment and such Participants Payroll Deduction Account
shall be paid out in accordance with Section 6.1
3.3 Common Stock Account. As a condition to participation in this Plan,
each Eligible Employee shall be required to hold shares purchased hereunder
in a Common Stock Account and such employees decision to participate in the
Plan shall constitute the appointment of the Custodian as custodial agent for
the purpose of holding such shares. Such Common Stock Account will be
governed by, and subject to, the terms and conditions of a written agreement
with the Custodian.
SECTION 4
PARTICIPATION AND PAYROLL DEDUCTIONS
4.1 Enrollment. Each Eligible Employee may elect to participate in the
Plan for a Plan Year by completing an enrollment form prescribed by the
Committee and returning it to the Employer on or before the date specified by
the Committee.
4.2 Amount of Deduction. The enrollment form shall specify an amount
(in whole dollars) or percentage (in whole numbers) of Eligible Compensation
which shall be withheld from the Participants regular paychecks, including
bonus paychecks, if any, for the Plan Year. No amount shall be withheld in
excess of the amount described in Section 5.4. The Committee, in its sole
discretion, may authorize payment in respect of any option exercised
hereunder by personal check.
4.3 Payroll Deduction Accounts. Each Participants payroll deduction
shall be credited, as soon as practicable following the relevant pay date, to
a Payroll Deduction Account, pending the purchase of Common Stock in
accordance with the provisions of the Plan. All such amounts shall be assets
of the Employer and may be used by the Employer for any purpose. The
Employer shall not be obligated to segregate the payroll deductions in any
way. No interest shall accrue or be paid on amounts credited to a Payroll
Deduction Account.
4.4 Subsequent Plan Years. Unless otherwise specified prior to the
beginning of any Plan Year on an enrollment form prescribed by the Committee,
a Participant shall be deemed to have elected to participate in each
subsequent Plan Year for which he is eligible to the same extent and in the
same manner as at the end of the prior Plan Year.
4.5 Changes in Participation.
(a) At any time during a Plan Year, a Participant may cease
participation in the Plan by completing and filing the form prescribed by the
Committee with the Employer. Such cessation will become effective as soon as
<PAGE> 3
practicable following receipt of such form by the Employer, whereupon no
further payroll deductions will be made and the Employer shall pay to such
Participant an amount equal to the balance in the Participants Payroll
Deduction Account as soon as practicable thereafter. To the extent then
eligible, any Participant who ceases to participate may elect to participate
again on any subsequent Entry Date in any calendar quarter after the quarter
in which such Participant ceased to participate.
(b) At any time during the Plan Year (but not more than once in any
calendar quarter), a Participant may increase or decrease the percentage of
Eligible Compensation subject to payroll deductions within the limits
provided in Section 4.2 by filing the form prescribed by the Committee with
the Employer. Such increase or decrease shall become effective with the
first pay period following receipt of such form to which it may be
practicably applied.
(c) Any Participant who receives a distribution under a 401(k) Plan on
account of hardship, as determined under such plan, shall be suspended from
participation in the Plan for the same period as such Participants
participation in the 401(k) Plan shall be suspended.
SECTION 5
OFFERINGS
5.1 Maximum Number of Shares. The Plan will be implemented by making
offerings of Common Stock during each Purchase Period until the maximum
number of shares of Common Stock available under the Plan have been issued
pursuant to the exercise of options.
5.2 Exercise of Options.
(a) Subject to Section 5.3, on the first day of each Purchase Period,
each Participant shall be deemed, subject to Section 5.4, to have been
granted an option to purchase on the last day of the Purchase Period, without
any further action, the number of whole shares of Common Stock determined by
dividing the amounts credited to the Participants Payroll Deduction Account
on the last day of the Purchase Period by the Purchase Price (as determined
in paragraph (b) below). All such shares shall be credited to the
Participants Common Stock Account. The balance of any amount credited to the
Participants Payroll Deduction Account which is not sufficient to purchase a
whole share of Common Stock shall remain in the Payroll Deduction Account and
shall be applied to the next offering under this Plan.
(b) The Purchase Price for each share of Common Stock shall be equal to
the lesser of (i) eighty-five percent (85%) of the Fair Market Value of each
share on the first day of the Purchase Period or (ii) eighty-five percent
<PAGE> 4
(85%) of the Fair Market Value of each share on the last day of such Purchase
Period.
5.3 Oversubscription of Shares. the total number of shares of which
options are exercised on the last day of any Purchase Period exceeds the
maximum number of shares available for the applicable offering, the Company
shall make an allocation of the shares available for delivery and
distribution among the Participants in as nearly a uniform manner as shall be
practicable, and the balance of all amounts credited to Participants Payroll
Deduction Accounts shall be applied to the next offering.
5.4 Limitations on Grant and Exercise of Options.
No option granted under this Plan shall permit a Participant to purchase
stock under all employee stock purchase plans of the Employer at a rate
which, in the aggregate, exceeds $25,000 of the Fair Market Value (payroll
deductions not in excess of $21,250) of such stock (determined at the time
the option is granted) for each calendar year in which the option is
outstanding at any time.
SECTION 6
DISTRIBUTIONS OF COMMON STOCK ACCOUNT
6.1 Termination of Employment If a Participants employment with the
Employer terminates for any reason during a Plan Year, all shares credited to
the Participants Common Stock Account shall be distributed, and any amount
credited to the Participants Payroll Deduction Account shall be refunded, to
the Participant or, in the event of the Participant=s death, to the
Participants estate, as soon as practicable.
6.2 In-Service Withdrawals. Prior to Participants termination of
employment with the Employer, the Participant may withdraw some or all of the
whole shares credited to the Participants Common Stock Account, as long as
such shares have been held in the Participants Common Stock Account for a
period of at least six (6) months.
SECTION 7
DIVIDENDS ON SHARES
All cash dividends paid with respect to shares of Common Stock held in a
Participants Common Stock Account shall be invested automatically in whole
shares of Common Stock purchased at 100% of Fair Market Value on the last day
of the next Purchase Period. Notwithstanding the foregoing, the amount of
any cash dividend which is not sufficient to purchase a whole share of Common
Stock also shall be credited to the Participants Payroll Deduction Account as
soon as practicable after the payment date of each dividend. All non-cash
distributions paid on Common Stock held in a Participants Common Stock
<PAGE> 5
Account shall be paid to the Participant as soon as practicable.
SECTION 8
RIGHTS AS A STOCKHOLDER
When the Participant purchases Common Stock pursuant to the Plan or when
Common Stock is credited to the Participants Common Stock Account, the
Participant shall have all of the rights and privileges of a stockholder of
the Company with respect to the shares so purchased or credited, whether or
not certificates representing full shares have been issued.
SECTION 9
OPTIONS NOT TRANSFERABLE
Options granted under the Plan are not transferable by the Participant
other than by will or the laws of descent and distribution and are
exercisable during the Participants lifetime only by the Participant.
SECTION 10
COMMON STOCK
10.1 Reserved Shares. There shall be reserved for issuance and purchase
under the Plan and The Multicare Companies, Inc. Employee Stock Purchase Plan
previously adopted by the Company an aggregate of 1,200,000 shares of Common
Stock, subject to adjustment as provided in Section 11. Shares subject to
the Plan may be shares now or hereafter authorized but unissued, treasury
shares, or both.
10.2 Restrictions on Exercise. In its sole discretion, the Board of
Directors may require as conditions to the exercise of any option that shares
of Common Stock reserved for issuance upon the exercise of an option shall
have been duly listed on any recognized national securities exchange, and
that either a registration statement under the Securities Act of 1933, as
amended, with respect to said shares shall be effective, or the Participant
shall have represented at the time of purchase, in form and substance
satisfactory to the Company, that it is the Participants intention to
purchase the shares for investment only and not for resale or distribution.
10.3 Restriction on Sale Notwithstanding any other provision of the Plan
to the contrary, shares of Common Stock purchased hereunder shall not be
transferable by a Participant for a period of six (6) months immediately
following the last day of the Purchase Period in which the shares were
purchased.
<PAGE> 6
10.4 Additional Restrictions of Rule 16b-3 The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject
to Section 16 of the Securities Exchange Act of 1934 shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed to contain,
and such options shall contain, and the shares issued upon exercise thereof
shall be subject to, such additional conditions and restrictions as may be
required by Rule 16b-3 to qualify for the maximum exemption from Section 16
of the Securities Exchange Act of 1934 with respect to Plan transactions.
SECTION 11
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event of a subdivision or consolidation of the outstanding shares
of Common Stock, or the payment of a stock dividend thereon, the number of
shares reserved or authorized to be reserved under this Plan shall be
increased or decreased, as the case may be, proportionately, and such other
adjustments shall be made as may be deemed necessary or equitable by the
Board of Directors. In the event of any other change affecting the Common
Stock, such adjustments shall be made as may be deemed equitable by the Board
of Directors, in its sole discretion, to give proper effect to such event,
subject to the limitations of Code section 424.
SECTION 12
ADMINISTRATION
12.1 Appointment The Plan shall be administered by the Committee. The
Committee shall consist of two or more members who shall serve at the
pleasure of the Board of Directors. The Board of Directors may from time to
time appoint members of the Committee in substitution for, or in addition to,
members previously appointed and may fill vacancies, however caused, in the
Committee.
12.2 Authority Subject to the express provisions of the Plan, the
Committee shall have authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, and to make all other
determinations necessary or advisable in administering the Plan, all of which
determinations shall be final and binding upon all persons. If and to the
extent required by Rule 16b-3 or any successor exemption which the Committee
believes it is appropriate for the Plan to qualify, the Committee may
restrict a Participants ability to participate in the Plan or sell any Common
Stock received under the Plan for such period as the Committee deems
appropriate or may impose such other conditions in connection with
participation or distribution under the Plan as the Committee deems
appropriate.
12.3 Committee Procedures. The Committee may select one of its members
<PAGE> 7
as it Chairman and shall hold its meetings at such times and places as it
shall deem advisable and may hold telephonic meetings. A majority of its
members shall constitute a quorum. All determinations of the Committee shall
be made by a majority of its members. Any decision or determination reduced
to writing and signed by a majority of the members of the Committee shall be
as fully effective as if it had been made by a majority vote at a meeting
duly called and held. The Committee may request advice or assistance or
employ such other persons as are necessary for the proper administration of
the Plan.
12.4 Duties of Committee The Committee shall establish and maintain
records of the Plan and of each Payroll Deduction Account and Common Stock
Account established for any Participant hereunder.
12.5 Plan Expenses The Company shall pay the fees and expenses of
accountants, counsel, agents and other personnel and other costs and
administration of the Plans.
12.6 Indemnification To the maximum extent permitted by law, no member
of the Committee shall be personally liable by reason of any contract or
other instrument executed by such member or on such members behalf in such
members capacity as a member of the Committee or for any mistake of judgment
made in good faith, and the Company shall indemnify and hold harmless,
directly from its own assets (including the proceeds of any insurance policy
the premiums of which are paid from the Companys own assets), each member of
the Committee and each other officer, employee or director of the Company to
whom any duty or power relating to the administration or interpretation of
the Plan or to the management or control of the assets of the Plan may be
delegated or allocated, against any cost or expense (including fees,
disbursements and other charges of legal counsel) or liability (including any
sum paid in settlement of a claim with the approval of the Company) arising
out of any act or omission to act in connection with the Plan unless arising
out of such persons own fraud, willful misconduct or bad faith. The
foregoing shall not be deemed to limit the Companys obligation to indemnify
any member of the Committee under the Companys Certificate of Incorporation
or By-laws, or any other agreement between the Company and such member.
SECTION 13
AMENDMENT AND TERMINATION
13.1 Amendment The Board of Directors may amend the Plan in any respect;
provided, however, that the Plan may not be amended in any manner that will
retroactively impair or otherwise adversely affect the rights of any person
to benefits under the Plan which have accrued prior to the date of such
action.
13.2 Termination The Plan will terminate on the date that Participants
become entitled to purchase a number of shares greater than the number of
<PAGE> 8
reserved shares available for purchase. In addition, the Plan may be
terminated at any time, in the sole discretion of the Board of Directors.
SECTION 14
EFFECTIVE DATE
The Plan shall become effective on January 1, 1996, subject to approval
by the Board of Directors.
SECTION 15
GOVERNMENTAL AND OTHER REGULATIONS
The Plan and the grant and exercise of options to purchase shares
hereunder, and the Companys obligation to sell and deliver shares upon the
exercise of options to purchase shares, shall be subject to all applicable
Federal, state and foreign laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as, in the opinion of counsel to the
Company, may be required.
SECTION 16
NO EMPLOYMENT RIGHTS
The Plan does not create, directly or indirectly, any right for the
benefit of any employee or class of employees to purchase any shares under
the Plan, or create in any employee or class of employees any right with
respect to continuation of employment by the Employer and it shall not be
deemed to interfere in any way with the Employers right to terminate, or
otherwise modify, an employees employment at any time.
SECTION 17
WITHHOLDING
As a condition to receiving shares hereunder, the Company may require
the Participant to make a cash payment to the Employer of, or the Employer
may withhold from any shares distributable under the Plan, an amount
necessary to satisfy all Federal, state, city or other taxes as may be
required to be withheld in respect of such payments pursuant to any law or
governmental regulation or ruling.
<PAGE> 9
SECTION 18
OFFSETS
To the extent permitted by law, the Company shall have the absolute
right to withhold any amounts payable to any Participant under the terms of
the Plan to the extent of any amount owed for any reason by such Participant
to the Employer and to set off and apply the amounts so withheld to payment
of any such amount owed to the Employer, whether or not such amount shall
then be immediately due and payable and in such order or priority as among
such amounts owed as the Committee, in its sole discretion, shall determine.
SECTION 19
NOTICES, ETC.
All elections, designations, requests, notices, instructions and other
communications from a Participant to the Committee, the Company of the
Employer required or permitted under the Plan shall be in such form as is
prescribed from time to time by the Committee, shall be mailed by first-class
mail or delivered to such location as shall be specified by the Committee,
and shall be deemed to have been given and delivered only upon actual receipt
thereof at such location.
SECTION 20
CAPTIONS, ETC.
The captions of the sections and paragraphs of this Plan have been
inserted solely as a matter of convenience and in no way define or limit the
scope or intent of any provision of the Plan. References to sections herein
are to the specified sections of this Plan unless another reference is
specifically stated. Wherever used herein, a singular number shall be deemed
to include the plural unless a different meaning is required by the context.
SECTION 21
EFFECT OF PLAN
The provisions of the Plan shall be binding upon, and inure to the
benefit of, all successors of the Company and each Participant, including,
without limitation, such Participants estate and the executors,
administrators or trustees thereof, heirs, and legatees, and any receiver
trustee in bankruptcy or representative of creditors of such Participant.
<PAGE> 10
SECTION 22
GOVERNING LAW
The law of the State of Delaware shall govern all matters relating to
this Plan except to the extent it is superseded by the laws of the United
States.
SECTION 23
TRANSFERABILITY
Neither payroll deductions credited to a Participants Payroll Deduction
Account nor any rights with regard to the exercise of an option or to receive
shares under the plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution) by the Participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be without effect, except that the
Committee may treat such act as an election to withdraw funds in accordance
with Section 4.5.
<PAGE> 11
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1995, between The Multicare Companies, Inc., a Delaware corporation (the
"Company"), and Daniel E. Straus (the "Executive").
The Company desires to employ the Executive, and the Executive
desires to accept such employment, on the term and conditions of this
Agreement.
Certain terms used herein are defined in Section 11.1.
NOW, THEREFORE, in consideration of the agreements and obligations
herein contained, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 Employment by the Company. The Company agrees to employ
the Executive for the Term (as defined in Section 2), to render full-time
services to the Company as its President and Co-Chief Executive
Officer and to perform such duties commensurate with such office as the Board
of Directors of the Company (the "Board of Directors") shall reasonably
direct.
1.2 Acceptance of Employment by the Executive. The Executive
hereby accepts such employment and agrees to render the services described
above. The Executive further agrees to accept election and to serve during
all or any part of the Term as a director of the Company and as an officer or
director of any subsidiary of the Company, without any compensation therefor
other than as specified in this Agreement, if elected to any such position.
<PAGE> 1
The Company will use its best efforts to cause the Executive to be elected as
a member of the Board of Directors and shall include him, during the Term, in
the management slate for election as a director at every stockholders meeting
at which his term as a director would otherwise expire.
2. TERM OF EMPLOYMENT.
2.1 The term of the Executive's employment under this
Agreement (the "Term") shall commence on the date hereof and shall end on
December 31, 1999, unless earlier terminated pursuant to Section 4 hereof;
provided, that the Term shall automatically be extended for successive one-
year periods on each January 1, commencing January 1, 2000 unless timely
written notice of termination of the Term is provided in accordance with
Section 2.2. Each one-year period commencing each January 1 during the Term
is referred to herein as an "Employment Year".
2.2 The Company or the Executive may choose not to extend or
renew the Term of Executive's employment hereunder without cause or reason,
upon written notice to the other at least one hundred eighty (180) days prior
to any January 1 occurring after January 1, 1998.
3. COMPENSATION AND OTHER BENEFITS.
3.1 Salary. As compensation for services to be rendered
pursuant to this Agreement, the Company agrees to pay the Executive, for
each Employment Year during the Term, an annual direct salary of $600,000 per
year (the "Annual Direct Salary"). The Annual Direct Salary shall be
reviewed by the Board of Directors on each anniversary of this Agreement and
<PAGE> 2
shall be adjusted upwards as of each such anniversary. In no event shall
the Annual Direct Salary be decreased from the Annual Direct Salary payable
for the immediately preceding year without the express written consent of the
Executive.
3.2 Incentive Compensation. The Executive shall prepare a
business plan establishing the financial and business goals of the Company
prior to the start of each fiscal year during the Term (the "Business Plan").
The Business Plan prepared by the Executive shall be reviewed promptly by the
Board of Directors, which may negotiate goals and performance expectations
with the Executive prior to adoption. Upon adoption of the Business Plan,
the Board of Directors shall establish an incentive compensation opportunity
for the Executive under the Company's Key Employee Incentive Compensation
Plan (the "KEICP"). The Executive's KEICP opportunity shall provide an
incentive pay opportunity consistent with the practices of similar
organizations in rewarding their senior executives and shall be consistent
with past practice. For 1995, the Executive's incentive for achieving
Expected Performance under the KEICP shall be 100% of the Executive's Annual
Direct Salary in effect on January 1, 1995; Threshold Performance shall be
70% of such Annual Direct Salary; and Outstanding Performance shall be 150%
of such Annual Direct Salary. Any incentive award earned by the Executive
pursuant to the KEICP shall be paid to the Executive during the month of
December in the applicable fiscal year.
3.3 Employee Benefit Plans. The Executive shall be entitled
to participate in or receive benefits under all Company employment benefit
plans including, but not limited to, any pension, profit-sharing plan, stock
option or other equity award or participation plans, savings plan,
supplemental retirement income, medical or health-and-accident plan or
<PAGE> 3
arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. The
Company shall also provide the Executive with the following minimum benefits:
(i) Life Insurance: the Company shall acquire
and maintain for the Executive a supplemental term life insurance policy with
a death benefit equal to at least five (5) times the Executive's then current
Annual Direct Salary to a maximum death benefit of $5,000,000. The
Executive, or a valid trust established by the Executive, shall own such
policy and the Executive shall be liable for any income taxes due annually on
the reported income resulting from the Company's payment of annual premiums
during the Term. In addition, the Company shall acquire and maintain for
Executive a term life insurance policy with a death benefit equal to $50
million to fund Executive's obligations under the Buy-Sell Agreement between
the Executive and Moshael J. Straus. Both of these policies shall be, and
shall provide that they are, assumable by Executive at the termination or
expiration of the Term. The Executive is permitted to be, and has the right
to name, the beneficiary under any of the foregoing policies. The Company
shall indemnify and hold the Executive harmless from and against any federal,
state or local income tax imposed on the Executive as a result of the
provision by the Company of the policies set forth in this Section. For the
purpose of determining the amount of any payment under the preceding
sentence, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to individuals in
the calendar year in which such indemnity payment is to be made, and state
<PAGE> 4
and local income taxes at the highest marginal rates of taxation applicable
to individuals as are in effect in the jurisdiction in which the Executive is
resident, net of the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes.
(ii) Disability Insurance: In the event that
the Company's group long-term disability insurance policy benefit limit, if
any, does not permit the Executive to receive the 66.67% of income
replacement at the time of disability, or the Company does not at any time
during the Term maintain a group long-term disability insurance policy, the
Company shall make available a long-term disability insurance policy for the
Executive, which policy shall provide that in the event the Executive is
unable to perform his duties hereunder as a result of incapacity due to
physical or mental illness, he shall be entitled to receive benefits from all
sources (Social Security, group long-term disability and supplemental long-
term disability) equal to 66.67% of his then current Annual Direct Salary
until the Executive reaches the age of 65 or dies. The Company shall
continue to pay to the Executive his Annual Direct Salary during any
applicable elimination or waiting period not in excess of one hundred eighty
(180) days.
(iii) 401(k) Wrap Plan/Deferred Compensation
Plan Participation: The Executive shall have the option to participate in a
401(k) Wrap Plan to be established by the Company to enable the Executive to
defer portions of current income from income tax liability until a later
time, provided such election to defer income is made in compliance with the
Code.
3.4 Vacation. During the Term, the Executive shall be
<PAGE> 5
entitled to the number of paid vacation days in each calendar year determined
by the Company from time to time for its senior executive officers, but not
less than six (6) weeks in any calendar year. The Executive shall also be
entitled to all paid holidays given by the Company to its senior executive
officers and all holidays observed in the Jewish religion.
3.5 Reimbursement of Expenses. During the Term, the Company
shall reimburse the Executive promptly for all reasonable expenses incurred
by him (in accordance with the policies and procedures established by the
Board of Directors for the Company's senior executive officers) in performing
services hereunder.
3.6 Automobile Allowance. During the Term, the Executive
shall be entitled to use for business and personal reasons an automobile of
his choice leased by the Company. The Company shall pay all amounts in
respect of premiums for liability insurance (in amounts determined by the
Executive) and will reimburse the Executive for all operating, maintenance
and repair expenses.
3.7 Agreement Signing Incentive. The Executive shall receive
as of the date hereof a special one-time grant pursuant to the Company's
Stock Option Plan of 37,500 nonqualified options to purchase shares of the
Company's common stock (the "Options"). The Options shall have an exercise
price equal to the closing bid price of the Company's common stock on the
date of hereof as reported by The NASDAQ Stock Market and shall vest ratably
over five years.
3.8 Other Benefits. The Executive shall be entitled to
receive such other requisites, e.g. club memberships and fringe benefits as
the Board of Directors deems appropriate.
<PAGE> 6
4. TERMINATION.
4.1 Termination Upon Death. If the Executive dies during the
Term, this Agreement shall terminate as of the date of death, and the
Executive's legal representatives, successors, heirs or assigns shall be
entitled to receive the amounts set forth in Section 6.1.
4.2 Termination Upon Disability. If during the Term, the
Executive becomes subject to a Disability (as defined in the following
sentence), the Company may at any time thereafter, by notice to the
Executive, terminate the Term of Executive's employment hereunder, except
that the Executive shall be entitled to receive the amounts specified in
Section 6.1. For purposes of this Agreement, the term "Disability" shall
mean incapacity due to physical or mental illness which has caused the
Executive to be unable to substantially perform his duties with the Company
on a full time basis for (i) a period of one hundred eighty (180) consecutive
days or (ii) for shorter periods aggregating two hundred seventy (270) days
in any three hundred sixty-five (365) day period. During any period of
Disability, the Executive agrees to submit to reasonable medical examinations
upon the request, and at the expense, of the Company. Nothing in this
Section 4.2 shall be deemed to extend the Term.
4.3 Termination for Cause. During the Term, the Company
shall have the right to terminate the Term of Executive's employment with the
Company for Cause. For purpose hereof, a termination by the Corporation for
"Cause" shall mean termination by action of at least a majority of the
members of the Board of Directors of the Corporation (excluding Executive) at
a meeting duly called and held upon at least 15 days' prior written notice to
Executive specifying the particulars of the action or inaction alleged to
<PAGE> 7
constitute "Cause" (and at which meeting Executive and his counsel were
entitled to be present and given reasonable opportunity to be heard) because
of (i) Executive's conviction of any felony (whether or not involving the
Company or any of its subsidiaries) involving moral turpitude which subjects,
or if generally known, would subject, the Company or any of its subsidiaries
to public ridicule or embarrassment, (ii) fraud or other willful misconduct
by Executive in respect of his obligations under this Agreement, or (iii)
willful refusal or continuing failure to attempt, without proper cause and,
other than by reason of illness, to follow the lawful directions of the Board
of Directors, following thirty days' prior written notice to Executive of his
refusal to perform, or failure to attempt to perform such duties, and which
during such thirty day period such refusal or failure to attempt is not cured
by the Executive. "Cause" shall not include a bona fide disagreement over a
corporate policy, so long as Executive does not willfully violate on a
continuing basis specific written directions from the Board of Directors,
which directions are consistent with the provisions of this Agreement.
Action or inaction by Executive shall not be considered "willful" unless done
or omitted by him intentionally or not in good faith and without his
reasonable belief that his action or inaction was in the best interests of
the Company, and shall not include failure to act by reason of total or
partial incapacity due to physical or mental illness.
5. TERMINATION BY THE EXECUTIVE.
The Executive may terminate the Term on written notice to the
Company upon the continuation of any of the following events for more than
ten (10) days after Executive delivers notice to the Company thereof (other
than with respect to paragraph (vi), which shall be governed by Section 7
<PAGE> 8
hereof) and the occurrence of any one or more of the following (each "Good
Reason"):
(i) Executive shall fail to be re-elected as
the Company's Chairman of the Board and Co-Chief Executive Officer or shall
be removed from such position at any time during the Term;
(ii) Executive shall fail to be vested with the
powers and authority of Chairman of the Board and Co-Chief Executive Officer
of the Company; or the powers and authority of such position or the
Executive's authority and responsibilities hereunder shall be diminished in
any material respect;
(iii)Executive's principal place of employment
is changed without Executive's prior written consent;
(iv) any material failure by the Company to
comply with any of the provisions of this Agreement including, without
limitation, failure to make any payment required to be made by the Company
pursuant to this Agreement within five (5) business days after the date such
payment is required to be made;
(v) any purported termination by the Company
of Executive's employment otherwise than as expressly permitted by this
Agreement;
(vi) upon a Change of Control (as defined in
Section 7); or
(vii)the commencement of a proceeding or case,
with or without the application or consent of the Company or any of its
<PAGE> 9
subsidiaries, in any court or competent jurisdiction, seeking (A) the
liquidation, reorganization, dissolution or winding-up of the Company or its
subsidiaries, or the composition or readjustment of the debts of the Company
or its subsidiaries, (B) the appointment of a trustee, receiver, custodian,
liquidator or the like for the Company or its subsidiaries or of all or any
substantial part of their respective assets, or (C) any similar relief in
respect of the Company or its subsidiaries under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts.
6. PAYMENTS UPON TERMINATION.
6.1 Termination Due to Death or Disability. Upon the death
or Disability of the Executive (A) the Company shall pay to the Executive or
his estate (i) the Annual Direct Salary and other accrued benefits earned up
to the last day of the month of the Executive's death or Disability (subject
to the last sentence of Section 3.3(ii)), (ii) all deferred amounts earned
under the KEICP or similar bonus plan, and (iii) if any bonus, under the
KEICP or otherwise, shall be payable in respect of the year in which the
Executive's death or Disability occurs, such bonus(es) prorated up to the
last day of the month of the Executive's death or Disability and (B) all
restricted stock, stock option and performance share awards made to the
Executive shall automatically become fully vested as of the date of death or
Disability.
6.2 Termination for Cause. Upon termination of the Term by
the Company for Cause, the Company's obligations to the Executive under this
Agreement shall be limited to the payment of unpaid Annual Direct Salary and
benefits accrued up to the effective date of termination specified in the
Company's notice of termination.
<PAGE> 10
6.3 Termination by Executive for Good Reason or by the
Company other than for Certain Reasons.
a) In the event (i) the Company terminates the
Term for a reason other than for (A) Cause or (B) due to death or Disability
or (C) upon a Change of Control or (D) gives notice of non-renewal pursuant
to Section 2 or (ii) the Executive terminates the Term for Good Reason, then:
(1) the Company shall pay the Executive (A) (i) the Annual Direct Salary and
other accrued benefits earned up to the last day of the month of the
Executive's employment, (ii) all deferred amounts earned under the KEICP or
similar bonus plan and (iii) if any bonus, under the KEICP or otherwise,
shall be payable in respect of the year in which the Term is terminated, such
bonus(es) prorated up to the last day of the month of such termination and
(B) a lump sum cash payment within thirty (30) days following the date of
termination (except for termination by notice of non-renewal, in which case
such payment shall be made within thirty (30) days following the expiration
of the Term) equal to the greater of (x) all remaining Annual Direct Salary
payable during the Term and (y) an amount equal to two times the Annual
Direct Salary for the then current Employment Year and (2) all stock options,
stock awards and similar equity rights, if any, shall vest and become
exercisable immediately prior to the termination of the Term and remain
exercisable through their original terms with all rights.
(b) Following termination of the Term for any
reason, other than for Cause or upon the death of the Executive, the Company
shall also maintain in full force and effect, for the continued benefit of
the Executive for a period equal to the greater of (x) the period of the Term
<PAGE> 11
otherwise remaining or (y) two (2) years without giving effect to such
termination, all employee benefit plans and programs to which the Executive
was entitled prior to the date of termination (including, without limitation,
the benefit plans and programs provided for herein) if the Executive's
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's participation in
any such plan or program is barred by the terms thereof, the Company shall
pay to the Executive an amount equal to the annual contribution, payments,
credits or allocations made by the Company to him, to his account or on his
behalf under such plans and programs from which his continued participation
is barred except that if the Executive's participation in any health,
medical, life insurance or disability plan or program is barred, the Company
shall obtain and pay for, on the Executive's behalf, individual insurance
plans, policies or programs which provide to the Executive health, medical,
life and disability insurance coverage which is equivalent to the insurance
coverage to which the Executive was entitled prior to the date of
termination.
6.5 Termination Due to a Change of Control. Upon the
termination of the Term due to a Change of Control, the Company shall pay the
amounts to and provide the benefits for the Executive as set forth in Section
7.1 and 7.4 hereof.
7. CHANGE OF CONTROL.
7.1 (a) Upon a Change of Control, the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice (i) for any reason or for no reason during the initial ninety (90) day
period following the date of such Change of Control or (ii) at any time, in
the event that within twenty-four (24) months following the date of a Change
<PAGE> 12
of Control, the continuation of any event constituting Good Reason hereunder
for more than ten (10) days after the Executive delivers notice thereof to
the Company (other than as contemplated by Section 5(vi)) occurs. In the
event that the Executive terminates the Term pursuant to this Section 7.1,
the Company shall make a lump-sum payment to the Executive equal to three
times the sum of (i) his then current Annual Direct Salary and (iii) an
amount equal to the highest annual bonus (KEICP and other amounts being
aggregated) award received within the three (3) years immediately preceding
the Employment Year in which such termination occurs; provided, that in no
event shall such amount be less than the bonus payable at an Expected Level
of performance under the KEICP for 1995. The Company shall also maintain the
benefit coverages for the Executive specified in Section 6.3 above for a
period of twenty-four (24) months following the date of termination of the
term by the Executive.
(b) Upon (i) the execution of a definitive
agreement (including, without limitation, any "lock-up" agreement with any of
the Company's principal stockholders) which contemplates a transaction, or
(ii) the commencement of any tender or exchange offer or similar transaction
for or involving the Company's securities, which, in the case of any
transaction of the type described by clause (i) or (ii), if consummated,
could result in a Change in Control, all restricted stock, stock option and
performance share awards made to the Executive shall become automatically
fully vested in order to provide the Executive with a reasonable time period
to enable the Executive to obtain the economic benefit of the contemplated
transaction with respect to all restricted stock, stock option and
performance share awards then held by him. In the event the Executive does
<PAGE> 13
not exercise any such accelerated restricted stock, stock options or awards
in the transaction resulting in a Change of Control, the Executive will have
a six month period from the date of a Change of Control in which to exercise
such restricted stock, stock options and awards. In the event the
transaction contemplated by the definitive agreement referred to above is not
consummated and such definitive agreement is terminated, all accelerated
restricted stock, stock options and awards shall be deemed restored to the
vesting schedules in effect at the time of execution of such definitive
agreement.
(c) Upon the termination of the Term upon a Change
of Control, the Company shall provide to the Executive outplacement and
career counseling services as may be requested by the Executive; such service
costs not to exceed 15% of the Executive's then-current Annual Direct Salary.
7.2 For purposes of this Agreement, the term "Change of
Control" shall mean:
(a) the acquisition (after the date hereof) of the
beneficial ownership of a majority of the Company's voting securities and/or
substantially all of the assets of the Company by a single person or entity
or a group of affiliated persons or entities, or
(b) the merger, consolidation or combination or
similar transaction of the Company with an unaffiliated corporation in which
the Board of Directors immediately prior to such merger, consolidation or
combination constitute less than a majority of the board of directors of the
surviving, new or combined entity.
7.3 For purposes of this Agreement the term a "date of a
<PAGE> 14
Change of Control" shall mean:
(a) the first date (after the date hereof) on which
a single person and/or entity, or group of affiliated persons and/or
entities, acquire the beneficial ownership of majority of the Company's
voting securities; or
(b) the date of the transfer of all or
substantially all of the Company's voting securities; or
(c) the date on which a merger, consolidation or
combination of the type specified in Section 7.2(b) is consummated.
7.4 Certain Taxes. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the
"Excise Tax") under Section 4999 of the Code, on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to
this paragraph. The Executive shall not take the position on any tax return
or other filing that any payment made under this Agreement is subject to the
Excise Tax, unless, in the opinion of independent tax counsel reasonably
acceptable to the Company, there is not reasonable basis for taking the
position that any such payment is not subject to the Excise Tax under U.S.
tax law then in effect. If the Internal Revenue Service makes a claim that
any payment or portion thereof is subject to the Excise Tax, at the Company's
election, and the Company's direction and expense, the Executive shall
contest such claim; provided, however, that the Company shall advance to the
Executive the costs and expenses of such contest, as incurred. For the
<PAGE> 15
purpose of determining the amount of any payment under clause (ii) of the
first sentence of this paragraph, the Executive shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation
applicable to individuals in the calendar year in which such indemnity
payment is to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in effect in the
jurisdiction in which the Executive is resident, net of the maximum reduction
in federal income taxes that could be obtained from deduction of such state
and local taxes.
7.5 Severance Letter of Credit. The Company shall, at all
times during the Term and any extensions and renewals thereof and for thirty
(30) days thereafter, at such time the Executive may direct, and cause to be
maintained in effect a letter of credit for the benefit of the Executive,
from a bank reasonably satisfactory to the Executive in a face amount that is
equal to or greater than the amounts payable to the Executive at such time
under Section 7.1 and 7.4. Not later than thirty (30) days prior to the
expiration of any letter of credit furnished pursuant to this Section 7.5,
the Company shall furnish to the Executive a replacement or substitute letter
of credit effective from and after such expiration and expiring not earlier
than one hundred eighty (180) days thereafter or such shorter period as a
letter of credit is required to be maintained under the immediately preceding
sentence.
8. RESTRICTIVE COVENANTS.
8.1 Confidentiality. During the Term and for two (2) years
thereafter, the Executive shall not, without the written consent of the Board
of Directors or a person authorized thereby, knowingly disclose to any
person, other than an employee of the Company or a person to whom disclosure
<PAGE> 16
is reasonably necessary or appropriate in connection with the performance by
the Executive of his duties as an executive of the Company, any material
confidential information obtained by him while in the employ of the Company
with respect to any of the Company's services, products, improvements,
processes, customers, methods of distribution or any business practices the
disclosure of which he knows will be materially damaging to the Company;
provided, however, that confidential information shall not include any
information publicly available at the time of the alleged disclosure (other
than as a result of unauthorized disclosure by the Executive) or any
information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company. Upon termination of the Term upon the request of the Company, the
Executive shall promptly deliver to the Corporation all correspondence,
manuals, letters, notes, notebooks, reports and any other documents or
tangible items containing or constituting confidential information about the
business of the Company.
8.2 Injunctive Relief. The Executive agrees that any breach
of the restrictions set forth in this Section 8 will result in irreparable
injury to the Company for which it shall have no meaningful remedy in law and
the Company shall be entitled to injunctive relief in order to enforce the
provisions thereof. In the event that any provision of this Section 8 shall
be determined by any court of competent jurisdiction to be unenforceable in
part by reason of it being too great a period of time or covering too great a
geographical area, it shall be in full force and effect as to that period of
time or geographical area determined to be reasonable by the court.
<PAGE> 17
9. INDEMNIFICATION.
(a) The Executive shall be provided with directors'
and officers' insurance in connection with his employment hereunder and
service as a director as contemplated hereby with such coverage (including
with respect to unpaid wages and taxes not remitted when due) and in such
amounts as shall be reasonably satisfactory to the Executive, and the Company
shall maintain such insurance in effect for the period of the Executive's
employment hereunder and for not less than five years thereafter; provided,
however, than in the event that the Company shall not obtain such insurance,
it shall provide or cause the Executive to be provided with indemnity (or a
combination of indemnity and directors' and officers' insurance) in
connection with his employment hereunder with such coverage, in such amounts
and from such person or persons as shall be reasonably satisfactory to the
Executive, and the Company shall maintain such indemnity (or combination of
indemnity and directors' and officers' insurance) or cause such indemnity (or
such combination) to be maintained for the period of the Executive's
employment hereunder and not less than five (5) years thereafter.
(b) To the fullest extent permitted or required by
the laws of the State of Delaware, the Company shall indemnify and provide
reasonable advances for expenses to the Executive, in accordance with the
terms of such laws, if the Executive is made a party, or threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that the Executive is or was an officer or director of the
Company or any subsidiary or the Company, in which capacity the Executive is
or was serving at the Company's request and in furtherance of the Company's
<PAGE> 18
best interests, against expenses (including reasonable attorneys fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding.
10. NO DUTY TO MITIGATE. The Executive shall have no duty to
mitigate any severance amount or any other amounts payable to him hereunder
and such amounts shall not be subject to reduction for any compensation
received by the Executive from employment in any capacity or other source
following the termination of the Executive's employment with the Company and
its subsidiaries.
11. OTHER PROVISIONS.
11.1 Certain Definitions. As used herein, the following terms
shall be defined as follows:
"affiliate" of any person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. For the purpose of this definition, "control" when
used with respect to any person means the power to direct the management and
policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the term
"controlling" and "controlled" have meanings correlative to the foregoing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"person" means individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a governmental entity or any department or agency thereof.
11.2 Notices. Any notice or other communication required or
<PAGE> 19
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by express mail, or if sent by certified or registered
mail, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: General Counsel
telephone: (201)488-8818
Telecopy: (201)525-5952
with a copy to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Carl L. Reisner, Esq.
Telephone: (212)373-3000
Telecopy: (212)373-2038
(ii) if to the Executive, to him at his address
then reflected in the personnel records of the Company.
Either party may change its or his address for notice hereunder by
notice to the other party in accordance with this Section 11.2.
11.3 Waivers and Amendments. This Agreement may be amended,
modified, superseded or cancelled, and the terms and conditions 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 or remedy hereunder shall operate as a waiver
<PAGE> 20
thereof, nor shall any waiver on the part of any party of any such right or
remedy, nor any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.
11.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey applicable
to agreements made and to be performed entirely within such State.
11.5 Assignability and Binding Effect. This Agreement shall
inure to the benefit of and shall be binding upon the Company and its
successors and permitted assigns and upon Executive and his heirs, executors,
legal representatives, successors and permitted assigns. However, neither
party may assign, transfer, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any of its or his rights hereunder without prior
written consent of the other party, and any such attempted assignment,
transfer, pledge, encumbrance, hypothecation or other disposition without
such consent shall be null and void and without effect.
11.6 Enforcement of Separate Provisions. Should any provision
or provisions of this Agreement be determined to be unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
11.7 Arbitration. In the event that any disagreement or
dispute shall arise between the parties concerning this Agreement, the
issue(s) will be submitted to JAMS/Endispute, Inc. for binding arbitration.
Any award entered shall be final and binding upon the parties hereto and
judgment upon the award may be entered in any court having jurisdiction
<PAGE> 21
thereof. All fees of attorneys, accountants, advisors or other experts or
witnesses, together with all administrative costs incurred in connection with
such actions, shall be paid by the Company.
11.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed or caused the
execution of this Agreement as of the date first above written.
THE MULTICARE COMPANIES, INC.
By: /S/ MOSHAEL J. STRAUS
_____________________________
Name: MOSHAEL J. STRAUS
Title: CHAIRMAN OF THE BOARD OF DIRECTORS
AND CO-CHIEF EXECUTIVE OFFICER
/S/ DANIEL E. STRAUS
_____________________________
Daniel E. Straus
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EXHIBIT 10.31
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1995, between The Multicare Companies, Inc., a Delaware corporation (the
"Company"), and Moshael J. Straus (the "Executive").
The Company desires to employ the Executive, and the Executive
desires to accept such employm ent, on the term and conditions of this
Agreement.
Certain terms used herein are defined in Section 11.1.
NOW, THEREFORE, in consideration of the agreements and obligations
herein contained, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 Employment by the Company. The Company agrees to employ
the Executive for the Term (as defined in Section 2), to render full-time
services to the Company as its Chairman of the Board and Co-Chief Executive
Officer and to perform such duties commensurate with such office as the Board
of Directors of the Company (the "Board of Directors") shall reasonably
direct.
1.2 Acceptance of Employment by the Executive. The Executive
hereby accepts such employment and agrees to render the services described
above. The Executive further agrees to accept election and to serve during
all or any part of the Term as a director of the Company and as an officer or
director of any subsidiary of the Company, without any compensation therefor
other than as specified in this Agreement, if elected to any such position.
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The Company will use its best efforts to cause the Executive to be elected as
a member of the Board of Directors and shall include him, during the Term, in
the management slate for election as a director at every stockholders meeting
at which his term as a director would otherwise expire.
2. TERM OF EMPLOYMENT.
2.1 The term of the Executive's employment under this
Agreement (the "Term") shall commence on the date hereof and shall end on
December 31, 1999, unless earlier terminated pursuant to Section 4 hereof;
provided, that the Term shall automatically be extended for successive one-
year periods on each January 1, commencing January 1, 2000 unless timely
written notice of termination of the Term is provided in accordance with
Section 2.2. Each one-year period commencing each January 1 during the Term
is referred to herein as an "Employment Year".
2.2 The Company or the Executive may choose not to extend or
renew the Term of Executive's employment hereunder without cause or reason,
upon written notice to the other at least one hundred eighty (180) days prior
to any January 1 occurring after January 1, 1998.
3. COMPENSATION AND OTHER BENEFITS.
3.1 Salary. As compensation for services to be rendered
pursuant to this Agreement, the Company agrees to pay the Executive, for
each Employment Year during the Term, an annual direct salary of $600,000 per
year (the "Annual Direct Salary"). The Annual Direct Salary shall be
reviewed by the Board of Directors on each anniversary of this Agreement and
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shall be adjusted upwards as of each such anniversary. In no event shall
the Annual Direct Salary be decreased from the Annual Direct Salary payable
for the immediately preceding year without the express written consent of the
Executive.
3.2 Incentive Compensation. The Executive shall prepare a
business plan establishing the financial and business goals of the Company
prior to the start of each fiscal year during the Term (the "Business Plan").
The Business Plan prepared by the Executive shall be reviewed promptly by the
Board of Directors, which may negotiate goals and performance expectations
with the Executive prior to adoption. Upon adoption of the Business Plan,
the Board of Directors shall establish an incentive compensation opportunity
for the Executive under the Company's Key Employee Incentive Compensation
Plan (the "KEICP"). The Executive's KEICP opportunity shall provide an
incentive pay opportunity consistent with the practices of similar
organizations in rewarding their senior executives and shall be consistent
with past practice. For 1995, the Executive's incentive for achieving
Expected Performance under the KEICP shall be 100% of the Executive's Annual
Direct Salary in effect on January 1, 1995; Threshold Performance shall be
70% of such Annual Direct Salary; and Outstanding Performance shall be 150%
of such Annual Direct Salary. Any incentive award earned by the Executive
pursuant to the KEICP shall be paid to the Executive during the month of
December in the applicable fiscal year.
3.3 Employee Benefit Plans. The Executive shall be entitled
to participate in or receive benefits under all Company employment benefit
plans including, but not limited to, any pension, profit-sharing plan, stock
option or other equity award or participation plans, savings plan,
supplemental retirement income, medical or health-and-accident plan or
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arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. The
Company shall also provide the Executive with the following minimum benefits:
(i) Life Insurance: the Company shall acquire
and maintain for the Executive a supplemental term life insurance policy with
a death benefit equal to at least five (5) times the Executive's then current
Annual Direct Salary to a maximum death benefit of $5,000,000. The
Executive, or a valid trust established by the Executive, shall own such
policy and the Executive shall be liable for any income taxes due annually on
the reported income resulting from the Company's payment of annual premiums
during the Term. In addition, the Company shall acquire and maintain for
Executive a term life insurance policy with a death benefit equal to $50
million to fund Executive's obligations under the Buy-Sell Agreement between
the Executive and Daniel E. Straus. Both of these policies shall be, and
shall provide that they are, assumable by Executive at the termination or
expiration of the Term. The Executive is permitted to be, and has the right
to name, the beneficiary under any of the foregoing policies. The Company
shall indemnify and hold the Executive harmless from and against any federal,
state or local income tax imposed on the Executive as a result of the
provision by the Company of the policies set forth in this Section. For the
purpose of determining the amount of any payment under the preceding
sentence, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to individuals in
the calendar year in which such indemnity payment is to be made, and state
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and local income taxes at the highest marginal rates of taxation applicable
to individuals as are in effect in the jurisdiction in which the Executive is
resident, net of the maximum reduction in federal income taxes that can be
obtained from deduction of such state and local taxes.
(ii) Disability Insurance: In the event that
the Company's group long-term disability insurance policy benefit limit, if
any, does not permit the Executive to receive the 66.67% of income
replacement at the time of disability, or the Company does not at any time
during the Term maintain a group long-term disability insurance policy, the
Company shall make available a long-term disability insurance policy for the
Executive, which policy shall provide that in the event the Executive is
unable to perform his duties hereunder as a result of incapacity due to
physical or mental illness, he shall be entitled to receive benefits from all
sources (Social Security, group long-term disability and supplemental long-
term disability) equal to 66.67% of his then current Annual Direct Salary
until the Executive reaches the age of 65 or dies. The Company shall
continue to pay to the Executive his Annual Direct Salary during any
applicable elimination or waiting period not in excess of one hundred eighty
(180) days.
(iii) 401(k) Wrap Plan/Deferred Compensation
Plan Participation: The Executive shall have the option to participate in a
401(k) Wrap Plan to be established by the Company to enable the Executive to
defer portions of current income from income tax liability until a later
time, provided such election to defer income is made in compliance with the
Code.
3.4 Vacation. During the Term, the Executive shall be
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entitled to the number of paid vacation days in each calendar year determined
by the Company from time to time for its senior executive officers, but not
less than six (6) weeks in any calendar year. The Executive shall also be
entitled to all paid holidays given by the Company to its senior executive
officers and all holidays observed in the Jewish religion.
3.5 Reimbursement of Expenses. During the Term, the Company
shall reimburse the Executive promptly for all reasonable expenses incurred
by him (in accordance with the policies and procedures established by the
Board of Directors for the Company's senior executive officers) in performing
services hereunder.
3.6 Automobile Allowance. During the Term, the Executive
shall be entitled to use for business and personal reasons an automobile of
his choice leased by the Company. The Company shall pay all amounts in
respect of premiums for liability insurance (in amounts determined by the
Executive) and will reimburse the Executive for all operating, maintenance
and repair expenses.
3.7 Agreement Signing Incentive. The Executive shall receive
as of the date hereof a special one-time grant pursuant to the Company's
Stock Option Plan of 37,500 nonqualified options to purchase shares of the
Company's common stock (the "Options"). The Options shall have an exercise
price equal to the closing bid price of the Company's common stock on the
date of hereof as reported by The NASDAQ Stock Market and shall vest ratably
over five years.
3.8 Other Benefits. The Executive shall be entitled to
receive such other requisites, e.g. club memberships and fringe benefits as
the Board of Directors deems appropriate.
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4. TERMINATION.
4.1 Termination Upon Death. If the Executive dies during the
Term, this Agreement shall terminate as of the date of death, and the
Executive's legal representatives, successors, heirs or assigns shall be
entitled to receive the amounts set forth in Section 6.1.
4.2 Termination Upon Disability. If during the Term, the
Executive becomes subject to a Disability (as defined in the following
sentence), the Company may at any time thereafter, by notice to the
Executive, terminate the Term of Executive's employment hereunder, except
that the Executive shall be entitled to receive the amounts specified in
Section 6.1. For purposes of this Agreement, the term "Disability" shall
mean incapacity due to physical or mental illness which has caused the
Executive to be unable to substantially perform his duties with the Company
on a full time basis for (i) a period of one hundred eighty (180) consecutive
days or (ii) for shorter periods aggregating two hundred seventy (270) days
in any three hundred sixty-five (365) day period. During any period of
Disability, the Executive agrees to submit to reasonable medical examinations
upon the request, and at the expense, of the Company. Nothing in this
Section 4.2 shall be deemed to extend the Term.
4.3 Termination for Cause. During the Term, the Company
shall have the right to terminate the Term of Executive's employment with the
Company for Cause. For purpose hereof, a termination by the Corporation for
"Cause" shall mean termination by action of at least a majority of the
members of the Board of Directors of the Corporation (excluding Executive) at
a meeting duly called and held upon at least 15 days' prior written notice to
Executive specifying the particulars of the action or inaction alleged to
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constitute "Cause" (and at which meeting Executive and his counsel were
entitled to be present and given reasonable opportunity to be heard) because
of (i) Executive's conviction of any felony (whether or not involving the
Company or any of its subsidiaries) involving moral turpitude which subjects,
or if generally known, would subject, the Company or any of its subsidiaries
to public ridicule or embarrassment, (ii) fraud or other willful misconduct
by Executive in respect of his obligations under this Agreement, or (iii)
willful refusal or continuing failure to attempt, without proper cause and,
other than by reason of illness, to follow the lawful directions of the Board
of Directors, following thirty days' prior written notice to Executive of his
refusal to perform, or failure to attempt to perform such duties, and which
during such thirty day period such refusal or failure to attempt is not cured
by the Executive. "Cause" shall not include a bona fide disagreement over a
corporate policy, so long as Executive does not willfully violate on a
continuing basis specific written directions from the Board of Directors,
which directions are consistent with the provisions of this Agreement.
Action or inaction by Executive shall not be considered "willful" unless done
or omitted by him intentionally or not in good faith and without his
reasonable belief that his action or inaction was in the best interests of
the Company, and shall not include failure to act by reason of total or
partial incapacity due to physical or mental illness.
5. TERMINATION BY THE EXECUTIVE.
The Executive may terminate the Term on written notice to the
Company upon the continuation of any of the following events for more than
ten (10) days after Executive delivers notice to the Company thereof (other
than with respect to paragraph (vi), which shall be governed by Section 7
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hereof) and the occurrence of any one or more of the following (each "Good
Reason"):
(i) Executive shall fail to be re-elected as
the Company's Chairman of the Board and Co-Chief Executive Officer or shall
be removed from such position at any time during the Term;
(ii) Executive shall fail to be vested with the
powers and authority of Chairman of the Board and Co-Chief Executive Officer
of the Company; or the powers and authority of such position or the
Executive's authority and responsibilities hereunder shall be diminished in
any material respect;
(iii)Executive's principal place of employment
is changed without Executive's prior written consent;
(iv) any material failure by the Company to
comply with any of the provisions of this Agreement including, without
limitation, failure to make any payment required to be made by the Company
pursuant to this Agreement within five (5) business days after the date such
payment is required to be made;
(v) any purported termination by the Company
of Executive's employment otherwise than as expressly permitted by this
Agreement;
(vi) upon a Change of Control (as defined in
Section 7); or
(vii)the commencement of a proceeding or case,
with or without the application or consent of the Company or any of its
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subsidiaries, in any court or competent jurisdiction, seeking (A) the
liquidation, reorganization, dissolution or winding-up of the Company or its
subsidiaries, or the composition or readjustment of the debts of the Company
or its subsidiaries, (B) the appointment of a trustee, receiver, custodian,
liquidator or the like for the Company or its subsidiaries or of all or any
substantial part of their respective assets, or (C) any similar relief in
respect of the Company or its subsidiaries under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts.
6. PAYMENTS UPON TERMINATION.
6.1 Termination Due to Death or Disability. Upon the death
or Disability of the Executive (A) the Company shall pay to the Executive or
his estate (i) the Annual Direct Salary and other accrued benefits earned up
to the last day of the month of the Executive's death or Disability (subject
to the last sentence of Section 3.3(ii)), (ii) all deferred amounts earned
under the KEICP or similar bonus plan, and (iii) if any bonus, under the
KEICP or otherwise, shall be payable in respect of the year in which the
Executive's death or Disability occurs, such bonus(es) prorated up to the
last day of the month of the Executive's death or Disability and (B) all
restricted stock, stock option and performance share awards made to the
Executive shall automatically become fully vested as of the date of death or
Disability.
6.2 Termination for Cause. Upon termination of the Term by
the Company for Cause, the Company's obligations to the Executive under this
Agreement shall be limited to the payment of unpaid Annual Direct Salary and
benefits accrued up to the effective date of termination specified in the
Company's notice of termination.
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6.3 Termination by Executive for Good Reason or by the
Company other than for Certain Reasons.
a) In the event (i) the Company terminates the
Term for a reason other than for (A) Cause or (B) due to death or Disability
or (C) upon a Change of Control or (D) gives notice of non-renewal pursuant
to Section 2 or (ii) the Executive terminates the Term for Good Reason, then:
(1) the Company shall pay the Executive (A) (i) the Annual Direct Salary and
other accrued benefits earned up to the last day of the month of the
Executive's employment, (ii) all deferred amounts earned under the KEICP or
similar bonus plan and (iii) if any bonus, under the KEICP or otherwise,
shall be payable in respect of the year in which the Term is terminated, such
bonus(es) prorated up to the last day of the month of such termination and
(B) a lump sum cash payment within thirty (30) days following the date of
termination (except for termination by notice of non-renewal, in which case
such payment shall be made within thirty (30) days following the expiration
of the Term) equal to the greater of (x) all remaining Annual Direct Salary
payable during the Term and (y) an amount equal to two times the Annual
Direct Salary for the then current Employment Year and (2) all stock options,
stock awards and similar equity rights, if any, shall vest and become
exercisable immediately prior to the termination of the Term and remain
exercisable through their original terms with all rights.
(b) Following termination of the Term for any
reason, other than for Cause or upon the death of the Executive, the Company
shall also maintain in full force and effect, for the continued benefit of
the Executive for a period equal to the greater of (x) the period of the Term
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otherwise remaining or (y) two (2) years without giving effect to such
termination, all employee benefit plans and programs to which the Executive
was entitled prior to the date of termination (including, without limitation,
the benefit plans and programs provided for herein) if the Executive's
continued participation is possible under the general terms and provisions of
such plans and programs. In the event that the Executive's participation in
any such plan or program is barred by the terms thereof, the Company shall
pay to the Executive an amount equal to the annual contribution, payments,
credits or allocations made by the Company to him, to his account or on his
behalf under such plans and programs from which his continued participation
is barred except that if the Executive's participation in any health,
medical, life insurance or disability plan or program is barred, the Company
shall obtain and pay for, on the Executive's behalf, individual insurance
plans, policies or programs which provide to the Executive health, medical,
life and disability insurance coverage which is equivalent to the insurance
coverage to which the Executive was entitled prior to the date of
termination.
6.5 Termination Due to a Change of Control. Upon the
termination of the Term due to a Change of Control, the Company shall pay the
amounts to and provide the benefits for the Executive as set forth in Section
7.1 and 7.4 hereof.
7. CHANGE OF CONTROL.
7.1 (a) Upon a Change of Control, the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice (i) for any reason or for no reason during the initial ninety (90) day
period following the date of such Change of Control or (ii) at any time, in
the event that within twenty-four (24) months following the date of a Change
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of Control, the continuation of any event constituting Good Reason hereunder
for more than ten (10) days after the Executive delivers notice thereof to
the Company (other than as contemplated by Section 5(vi)) occurs. In the
event that the Executive terminates the Term pursuant to this Section 7.1,
the Company shall make a lump-sum payment to the Executive equal to three
times the sum of (i) his then current Annual Direct Salary and (iii) an
amount equal to the highest annual bonus (KEICP and other amounts being
aggregated) award received within the three (3) years immediately preceding
the Employment Year in which such termination occurs; provided, that in no
event shall such amount be less than the bonus payable at an Expected Level
of performance under the KEICP for 1995. The Company shall also maintain the
benefit coverages for the Executive specified in Section 6.3 above for a
period of twenty-four (24) months following the date of termination of the
term by the Executive.
(b) Upon (i) the execution of a definitive
agreement (including, without limitation, any "lock-up" agreement with any of
the Company's principal stockholders) which contemplates a transaction, or
(ii) the commencement of any tender or exchange offer or similar transaction
for or involving the Company's securities, which, in the case of any
transaction of the type described by clause (i) or (ii), if consummated,
could result in a Change in Control, all restricted stock, stock option and
performance share awards made to the Executive shall become automatically
fully vested in order to provide the Executive with a reasonable time period
to enable the Executive to obtain the economic benefit of the contemplated
transaction with respect to all restricted stock, stock option and
performance share awards then held by him. In the event the Executive does
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not exercise any such accelerated restricted stock, stock options or awards
in the transaction resulting in a Change of Control, the Executive will have
a six month period from the date of a Change of Control in which to exercise
such restricted stock, stock options and awards. In the event the
transaction contemplated by the definitive agreement referred to above is not
consummated and such definitive agreement is terminated, all accelerated
restricted stock, stock options and awards shall be deemed restored to the
vesting schedules in effect at the time of execution of such definitive
agreement.
(c) Upon the termination of the Term upon a Change
of Control, the Company shall provide to the Executive outplacement and
career counseling services as may be requested by the Executive; such service
costs not to exceed 15% of the Executive's then-current Annual Direct Salary.
7.2 For purposes of this Agreement, the term "Change of
Control" shall mean:
(a) the acquisition (after the date hereof) of the
beneficial ownership of a majority of the Company's voting securities and/or
substantially all of the assets of the Company by a single person or entity
or a group of affiliated persons or entities, or
(b) the merger, consolidation or combination or
similar transaction of the Company with an unaffiliated corporation in which
the Board of Directors immediately prior to such merger, consolidation or
combination constitute less than a majority of the board of directors of the
surviving, new or combined entity.
7.3 For purposes of this Agreement the term a "date of a
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Change of Control" shall mean:
(a) the first date (after the date hereof) on which
a single person and/or entity, or group of affiliated persons and/or
entities, acquire the beneficial ownership of majority of the Company's
voting securities; or
(b) the date of the transfer of all or
substantially all of the Company's voting securities; or
(c) the date on which a merger, consolidation or
combination of the type specified in Section 7.2(b) is consummated.
7.4 Certain Taxes. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the
"Excise Tax") under Section 4999 of the Code, on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to
this paragraph. The Executive shall not take the position on any tax return
or other filing that any payment made under this Agreement is subject to the
Excise Tax, unless, in the opinion of independent tax counsel reasonably
acceptable to the Company, there is not reasonable basis for taking the
position that any such payment is not subject to the Excise Tax under U.S.
tax law then in effect. If the Internal Revenue Service makes a claim that
any payment or portion thereof is subject to the Excise Tax, at the Company's
election, and the Company's direction and expense, the Executive shall
contest such claim; provided, however, that the Company shall advance to the
Executive the costs and expenses of such contest, as incurred. For the
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purpose of determining the amount of any payment under clause (ii) of the
first sentence of this paragraph, the Executive shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation
applicable to individuals in the calendar year in which such indemnity
payment is to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in effect in the
jurisdiction in which the Executive is resident, net of the maximum reduction
in federal income taxes that could be obtained from deduction of such state
and local taxes.
7.5 Severance Letter of Credit. The Company shall, at all
times during the Term and any extensions and renewals thereof and for thirty
(30) days thereafter, at such time the Executive may direct, and cause to be
maintained in effect a letter of credit for the benefit of the Executive,
from a bank reasonably satisfactory to the Executive in a face amount that is
equal to or greater than the amounts payable to the Executive at such time
under Section 7.1 and 7.4. Not later than thirty (30) days prior to the
expiration of any letter of credit furnished pursuant to this Section 7.5,
the Company shall furnish to the Executive a replacement or substitute letter
of credit effective from and after such expiration and expiring not earlier
than one hundred eighty (180) days thereafter or such shorter period as a
letter of credit is required to be maintained under the immediately preceding
sentence.
8. RESTRICTIVE COVENANTS.
8.1 Confidentiality. During the Term and for two (2) years
thereafter, the Executive shall not, without the written consent of the Board
of Directors or a person authorized thereby, knowingly disclose to any
person, other than an employee of the Company or a person to whom disclosure
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is reasonably necessary or appropriate in connection with the performance by
the Executive of his duties as an executive of the Company, any material
confidential information obtained by him while in the employ of the Company
with respect to any of the Company's services, products, improvements,
processes, customers, methods of distribution or any business practices the
disclosure of which he knows will be materially damaging to the Company;
provided, however, that confidential information shall not include any
information publicly available at the time of the alleged disclosure (other
than as a result of unauthorized disclosure by the Executive) or any
information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company. Upon termination of the Term upon the request of the Company, the
Executive shall promptly deliver to the Corporation all correspondence,
manuals, letters, notes, notebooks, reports and any other documents or
tangible items containing or constituting confidential information about the
business of the Company.
8.2 Injunctive Relief. The Executive agrees that any breach
of the restrictions set forth in this Section 8 will result in irreparable
injury to the Company for which it shall have no meaningful remedy in law and
the Company shall be entitled to injunctive relief in order to enforce the
provisions thereof. In the event that any provision of this Section 8 shall
be determined by any court of competent jurisdiction to be unenforceable in
part by reason of it being too great a period of time or covering too great a
geographical area, it shall be in full force and effect as to that period of
time or geographical area determined to be reasonable by the court.
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9. INDEMNIFICATION.
(a) The Executive shall be provided with directors'
and officers' insurance in connection with his employment hereunder and
service as a director as contemplated hereby with such coverage (including
with respect to unpaid wages and taxes not remitted when due) and in such
amounts as shall be reasonably satisfactory to the Executive, and the Company
shall maintain such insurance in effect for the period of the Executive's
employment hereunder and for not less than five years thereafter; provided,
however, than in the event that the Company shall not obtain such insurance,
it shall provide or cause the Executive to be provided with indemnity (or a
combination of indemnity and directors' and officers' insurance) in
connection with his employment hereunder with such coverage, in such amounts
and from such person or persons as shall be reasonably satisfactory to the
Executive, and the Company shall maintain such indemnity (or combination of
indemnity and directors' and officers' insurance) or cause such indemnity (or
such combination) to be maintained for the period of the Executive's
employment hereunder and not less than five (5) years thereafter.
(b) To the fullest extent permitted or required by
the laws of the State of Delaware, the Company shall indemnify and provide
reasonable advances for expenses to the Executive, in accordance with the
terms of such laws, if the Executive is made a party, or threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that the Executive is or was an officer or director of the
Company or any subsidiary or the Company, in which capacity the Executive is
or was serving at the Company's request and in furtherance of the Company's
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best interests, against expenses (including reasonable attorneys fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding.
10. NO DUTY TO MITIGATE. The Executive shall have no duty to
mitigate any severance amount or any other amounts payable to him hereunder
and such amounts shall not be subject to reduction for any compensation
received by the Executive from employment in any capacity or other source
following the termination of the Executive's employment with the Company and
its subsidiaries.
11. OTHER PROVISIONS.
11.1 Certain Definitions. As used herein, the following terms
shall be defined as follows:
"affiliate" of any person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. For the purpose of this definition, "control" when
used with respect to any person means the power to direct the management and
policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the term
"controlling" and "controlled" have meanings correlative to the foregoing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"person" means individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a governmental entity or any department or agency thereof.
11.2 Notices. Any notice or other communication required or
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permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by express mail, or if sent by certified or registered
mail, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: General Counsel
telephone: (201)488-8818
Telecopy: (201)525-5952
with a copy to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Carl L. Reisner, Esq.
Telephone: (212)373-3000
Telecopy: (212)373-2038
(ii) if to the Executive, to him at his address
then reflected in the personnel records of the Company.
Either party may change its or his address for notice hereunder by
notice to the other party in accordance with this Section 11.2.
11.3 Waivers and Amendments. This Agreement may be amended,
modified, superseded or cancelled, and the terms and conditions 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 or remedy hereunder shall operate as a waiver
<PAGE> 20
thereof, nor shall any waiver on the part of any party of any such right or
remedy, nor any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.
11.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey applicable
to agreements made and to be performed entirely within such State.
11.5 Assignability and Binding Effect. This Agreement shall
inure to the benefit of and shall be binding upon the Company and its
successors and permitted assigns and upon Executive and his heirs, executors,
legal representatives, successors and permitted assigns. However, neither
party may assign, transfer, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any of its or his rights hereunder without prior
written consent of the other party, and any such attempted assignment,
transfer, pledge, encumbrance, hypothecation or other disposition without
such consent shall be null and void and without effect.
11.6 Enforcement of Separate Provisions. Should any provision
or provisions of this Agreement be determined to be unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
11.7 Arbitration. In the event that any disagreement or
dispute shall arise between the parties concerning this Agreement, the
issue(s) will be submitted to JAMS/Endispute, Inc. for binding arbitration.
Any award entered shall be final and binding upon the parties hereto and
judgment upon the award may be entered in any court having jurisdiction
<PAGE> 21
thereof. All fees of attorneys, accountants, advisors or other experts or
witnesses, together with all administrative costs incurred in connection with
such actions, shall be paid by the Company.
11.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed or caused the
execution of this Agreement as of the date first above written.
THE MULTICARE COMPANIES, INC.
By: /S/ DANIEL E. STRAUS
_____________________________
Name: DANIEL E. STRAUS
Title: PRESIDENT AND CO-CHIEF EXECUTIVE OFFICER
/S/ MOSHAEL J. STRAUS
_____________________________
Moshael J. Straus
<PAGE> 22
EXHIBIT 10.32
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1,
1995, between The Multicare Companies, Inc., a Delaware corporation (the
"Company"), and Stephen R. Baker (the "Executive").
The Company desires to employ the Executive, and the Executive
desires to accept such employment, on the term and conditions of this
Agreement.
Certain terms used herein are defined in Section 11.1.
NOW, THEREFORE, in consideration of the agreements and obligations
herein contained, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 Employment by the Company. The Company agrees to employ
the Executive for the Term (as defined in Section 2), to render full-time
services to the Company as its Executive Vice President and Chief Operating
Officer to perform such duties commensurate with such office as the Board of
Directors of the Company (the "Board of Directors") and/or the Co-Chief
Executive Officers of the Company shall reasonably direct. The Executive
shall report directly to the Co-Chief Executive Officers of the Company. The
Executive shall devote his full business time to the business of the Company
during the term.
1.2 Acceptance of Employment by the Executive. The Executive
hereby accepts such employment and agrees to render the services described
above. The Executive further agrees to accept election and to serve during
all or any part of the Term as a director of the Company and as an officer or
<PAGE> 1
director of any subsidiary of the Company, without any compensation therefor
other than as specified in this Agreement, if elected to any such position.
2. TERM OF EMPLOYMENT.
2.1 The term of the Executive's employment under this
Agreement (the "Term") shall commence on the date hereof and shall end on
December 31, 1997, unless earlier terminated pursuant to Section 4 hereof;
provided, that the Term shall automatically be extended for successive one-
year periods on each January 1, commencing January 1, 1998 unless timely
written notice of termination of the Term is provided in accordance with
Section 2.2. Each one-year period commencing each January 1 during the Term
is referred to herein as an "Employment Year".
2.2 The Company or the Executive may choose not to extend or
renew the Term of Executive's employment hereunder without cause or reason,
upon written notice to the other at least one hundred eighty (180) days prior
to any January 1 occurring after January 1, 1997.
3. COMPENSATION AND OTHER BENEFITS.
3.1 Salary. As compensation for services to be rendered
pursuant to this Agreement, the Company agrees to pay the Executive, for
each Employment Year during the Term, an annual direct salary of $250,000 per
year (the "Annual Direct Salary"). The Annual Direct Salary shall be
reviewed by the Board of Directors on each anniversary of this Agreement and
may be adjusted upwards as of each such anniversary. In no event shall the
Annual Direct Salary be decreased from the Annual Direct Salary payable for
the immediately preceding year without the express written consent of the
Executive.
<PAGE> 2
3.2 Incentive Compensation. The Co-Chief Executive Officers
shall prepare a business plan establishing the financial and business goals
of the Company prior to the start of each fiscal year during the Term (the
"Business Plan"). The Business Plan shall set forth the goals of, and
performance expectations for, the Executive for such year. The Board of
Directors shall establish an incentive compensation opportunity for the
Executive under the Company's Key Employee Incentive Compensation Plan (the
"KEICP") based on such Business Plan. For 1995, the Executive's incentive
for achieving Expected Performance under the KEICP shall be 50% of the
Executive's Annual Direct Salary in effect on January 1, 1995; Threshold
Performance shall be 30% of such Annual Direct Salary; and Outstanding
Performance shall be 75% of such Annual Direct Salary.
3.3 Employee Benefit Plans. The Executive shall be entitled
to participate in or receive benefits under all Company employment benefit
plans including, but not limited to, any pension, profit-sharing plan, stock
option or other equity award or participation plans, savings plan,
supplemental retirement income, medical or health-and-accident plan or
arrangement made available by the Company to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. The
Company shall also provide the Executive with the following minimum benefits:
(i) Life Insurance: the Company shall
acquire, promptly following the execution of this Agreement, and maintain for
the Executive a supplemental term life insurance policy with a death benefit
equal to at least four (4) times the Executive's then current Annual Direct
Salary to a maximum death benefit of $2,000,000, provided, that such policy
is obtainable on standard underwriting terms. The Executive agrees to
<PAGE> 3
cooperate with the Company in obtaining such policy, including undertaking
such physical examinations and completing such applications as may be
required. The Executive, or a valid trust established by the Executive,
shall own such policy and the Executive shall be liable for any income taxes
due annually on the reported income resulting from the Company's payment of
annual premiums during the Term. This policy shall be, and shall provide
that it is, assumable by the Executive at the termination or expiration of
the Term.
(ii) Disability Insurance: In the event that
the Company's group long-term disability insurance policy benefit limit, if
any, does not provide for the Executive to receive the 66.67% of income
replacement at the time of disability, or the Company does not at any time
during the Term maintain a group long-term disability insurance policy, the
Company shall make available a long-term disability insurance policy for the
Executive, which policy shall provide that in the event the Executive is
unable to perform his duties hereunder as a result of incapacity due to
physical or mental illness, he shall be entitled to receive benefits from all
sources (Social Security, group long-term disability and supplemental long-
term disability) equal to 66.67% of his then current Annual Direct Salary
until the Executive reaches the age of 65 or dies. The Company shall
continue to pay to the Executive his Annual Direct Salary during any
applicable elimination or waiting period not in excess of one hundred eighty
(180) days.
(iii) 401(k) Wrap Plan/Deferred Compensation
Plan Participation: The Executive shall have the option to participate in a
401(k) Wrap Plan to be established by the Company to enable the Executive to
defer portions of current income from income tax liability until a later
time, provided such election to defer income is made in compliance with the
<PAGE> 4
Code and such plan has been established to benefit other key officers of the
Company.
(iv) Health and Medical Insurance: The Company
shall pay all premiums otherwise due from the Executive for family coverage
in the medical and dental insurance programs offered by the Company to its
executives from time to time.
3.4 Vacation. During the Term, the Executive shall be
entitled to four (4) weeks of paid vacation in each calendar year. The
Executive shall also be entitled to all paid holidays given by the Company to
its senior executive officers.
3.5 Reimbursement of Expenses. During the Term, the Company
shall reimburse the Executive promptly for all reasonable expenses incurred
by him (in accordance with the policies and procedures established by the Co-
Chief Executive Officers or the Board of Directors for the Company's senior
executive officers) in performing services hereunder.
3.6 Automobile Allowance. During the Term, the Executive
shall be entitled to use for business and personal reasons an automobile of
his choice leased by the Company, subject to the approval of the Co-Chief
Executive Officers, in an amount up to $600 per month. The Company shall pay
all amounts in respect of premiums for collision and liability insurance (in
amounts determined by the Executive) and will reimburse the Executive for all
operating, maintenance and repair expenses.
3.7 Agreement Signing Incentive. The Executive shall receive
as of the date hereof a special one-time grant pursuant to the Company's
Stock Option Plan of 9,000 nonqualified options to purchase shares of the
Company's common stock (the "Options"). The Options shall have an exercise
<PAGE> 5
price equal to the closing bid price of the Company's common stock on the
date hereof as reported by The NASDAQ Stock Market and shall vest ratably
over three years.
3.8 Other Benefits. The Executive shall be entitled to
receive such other requisites, e.g. club memberships and fringe benefits as
the Co-Chief Executive Officers or the Board of Directors deems appropriate.
4. TERMINATION.
4.1 Termination Upon Death. If the Executive dies during the
Term, this Agreement shall terminate as of the date of death, and the
Executive's legal representatives, successors, heirs or assigns shall be
entitled to receive the amounts set forth in Section 6.1.
4.2 Termination Upon Disability. If during the Term, the
Executive becomes subject to a Disability (as defined in the following
sentence), the Company may at any time thereafter, by notice to the
Executive, terminate the Term of Executive's employment hereunder, except
that the Executive shall be entitled to receive the amounts specified in
Section 6.1. For purposes of this Agreement, the term "Disability" shall
mean incapacity due to physical or mental illness which has caused the
Executive to be unable to substantially perform his duties with the Company
on a full time basis for (i) a period of one hundred eighty (180) consecutive
days or (ii) for shorter periods aggregating two hundred seventy (270) days
in any three hundred sixty-five (365) day period. During any period of
Disability, the Executive agrees to submit to reasonable medical examinations
upon the request, and at the expense, of the Company. Nothing in this
Section 4.2 shall be deemed to extend the Term.
4.3 Termination for Cause. During the Term, the Company
<PAGE> 6
shall have the right to terminate the Term of Executive's employment with the
Company for Cause. For purpose hereof, a termination by the Corporation for
"Cause" shall mean termination because of (i) Executive's conviction of any
felony (whether or not involving the Company or any of its subsidiaries)
involving moral turpitude which subjects, or if generally known, would
subject, the Company or any of its subsidiaries to public ridicule or
embarrassment, (ii) fraud or other willful misconduct by Executive in respect
of his obligations under this Agreement, or (iii) willful refusal or
continuing failure to attempt, without proper cause and, other than by reason
of illness, to follow the lawful directions of either of the Co-Chief
Executive Officers or the Board of Directors.
5. TERMINATION BY THE EXECUTIVE.
The Executive may terminate this Agreement, if any one or more
of the following shall occur (any such event "Good Reason"):
(a) a material breach of the terms of this
Agreement by the Company and such breach continues for 30 days after the
Executive gives the Company written notice of such breach;
(b) the Company shall make a general assignment for
benefit of creditors; or any proceeding shall be instituted by the Company
seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking entry of an order for
relief or the appointment of a receiver, trustee or other similar official
for it or for any substantial part of its property or the Company shall take
any corporate action to authorize any of the actions set forth above in this
<PAGE> 7
Section 5(b);
(c) an involuntary petition shall be filed or an
action or proceeding otherwise commenced against the Company seeking
reorganization, arrangement or readjustment of the Company's debts or for any
other relief under the Federal Bankruptcy Code, as amended, or under any
other bankruptcy or insolvency act or law, state or federal, now or hereafter
existing and remain undismissed or unstayed for a period of 30 days; or
(d) a receiver, assignee, liquidator, trustee or
similar officer for the Company or for all or any part of its property shall
be appointed involuntarily.
6. PAYMENTS UPON TERMINATION.
6.1 Termination Due to Death or Disability. Upon the death
or Disability of the Executive the Company shall pay to the Executive or his
estate (i) the Annual Direct Salary and other accrued benefits earned up to
the last day of the month of the Executive's death or Disability (subject to
the last sentence of 3.3(ii)), (ii) all deferred amounts earned under the
KEICP or similar bonus plan and (iii) if any bonus, under the KEICP or
otherwise, shall be payable in respect of the year in which the Executive's
death or Disability occurs, such bonus(es) prorated up to the last day of the
month of the Executive's death or Disability.
6.2 Termination for Cause. Upon termination of the Term by
the Company for Cause, the Company's obligations to the Executive under this
Agreement shall be limited to the payment of unpaid Annual Direct Salary and
benefits accrued up to the effective date of termination specified in the
Company's notice of termination.
6.3 Termination by Executive for Good Reason or by the
Company other than for Certain Reasons.
<PAGE> 8
In the event (i) the Company terminates the Term for
a reason other than for Cause or due to death or Disability or (ii) the
Executive terminates the Term for Good Reason, then: (1) the Company shall
pay the Executive (i) the Annual Direct Salary and other accrued benefits
earned up to the last day of the month of the Executive's employment, (ii)
all deferred amounts earned under the KEICP or similar bonus plan, and (iii)
a lump sum cash payment within thirty (30) days following the date of
termination equal to the greater of (x) all remaining Annual Direct Salary
payable during the Term and (y) an amount equal to the Annual Direct Salary
for the then current Employment Year and (2) all stock options, stock awards
and similar equity rights, if any, shall vest and become exercisable
immediately prior to the termination of the Term and remain exercisable
through their original terms with all rights, and (3) the Company shall
continue to provide all employee benefit plans and programs to which the
Executive was entitled prior to the date of termination, subject to COBRA, at
the Company's expense for one year.
6.4 Termination Due to a Change of Control. Upon the
termination of the Term due to a Change of Control, the Company shall pay the
amounts to and provide the benefits for the Executive as set forth in Section
7.1 and 7.4 hereof.
<PAGE> 9
7. CHANGE OF CONTROL.
7.1 (a) Upon a Change of Control, the Executive may
terminate the Term upon notice to the Company, effective as set forth in such
notice for any reason or for no reason during the initial ninety (90) day
period following the date of such Change of Control. In the event that the
Executive terminates the Term pursuant to this Section 7.1, the Company shall
make a lump-sum payment to the Executive equal to three times the sum of (i)
his then current Annual Direct Salary and (ii) an amount equal to the highest
annual bonus (KEICP and other amounts being aggregated) award received within
the three (3) years immediately preceding the Employment Year in which such
termination occurs; provided, that in no event shall such amount be less than
the bonus payable at an Expected Level of performance under the KEICP for
1995. The Company shall also maintain all employee benefit plans and
programs to which the Executive have entitled on or prior to the date of a
Change of Control for a period of twenty-four (24) months following such date
of a Change of Control.
(b) Immediately prior to the consummation of any
transaction which, if consummated, could result in a Change in Control, all
restricted stock, stock option and performance share awards made to the
Executive shall become automatically fully vested in order to provide the
Executive with a reasonable time period to enable the Executive to obtain the
economic benefit of the contemplated transaction with respect to all
restricted stock, stock option and performance share awards then held by him.
In the event the Executive does not exercise any such accelerated restricted
stock, stock options or awards in the transaction resulting in a Change of
Control, the Executive will have a six month period from the date of a Change
of Control in which to exercise such restricted stock, stock options and
<PAGE> 10
awards. In the event the subject transaction is not consummated and no
Change of Control occurs, all accelerated restricted stock, stock options and
awards shall be deemed restored to the vesting schedules in effect at the
time of such acceleration.
7.2 For purposes of this Agreement, the term "Change of
Control" shall mean:
(a) the acquisition (after the date hereof) of the
beneficial ownership of a majority of the Company's voting securities and/or
substantially all of the assets of the Company by a single person or entity
or a group of affiliated persons or entities (other than any such person
involving or including either or both of the Company's Co-Chief Executive
Officers); or
(b) the merger, consolidation or combination or
similar transaction of the Company with an unaffiliated corporation in which
the Board of Directors immediately prior to such merger, consolidation or
combination constitute less than a majority of the board of directors of the
surviving, new or combined entity.
7.3 For purposes of this Agreement the term a "date of a
Change of Control" shall mean:
(a) the first date (after the date hereof) on which
a single person and/or entity, or group of affiliated persons and/or entities
(other than either or both of the Co-Chief Executive Officers or their
Affiliates), acquire the beneficial ownership of majority of the Company's
voting securities; or
(b) the date of the transfer of all or
substantially all of the Company's voting securities other than to either or
<PAGE> 11
both of the Co-Chief Executive Officers or their Affiliates; or
(c) the date on which a merger, consolidation or
combination of the type specified in Section 7.2(b) is consummated.
7.4 Certain Taxes. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the
"Excise Tax") under Section 4999 of the Code, on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to
this paragraph. The Executive shall not take the position on any tax return
or other filing that any payment made under this Agreement is subject to the
Excise Tax, unless, in the opinion of independent tax counsel reasonably
acceptable to the Company, there is not reasonable basis for taking the
position that any such payment is not subject to the Excise Tax under U.S.
tax law then in effect. If the Internal Revenue Service makes a claim that
any payment or portion thereof is subject to the Excise Tax, at the Company's
election, and the Company's direction and expense, the Executive shall
contest such claim; provided, however, that the Company shall pay the costs
and expenses of such contest as incurred. For the purpose of determining the
amount of any payment under clause (ii) of the first sentence of this
paragraph, the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation applicable to individuals in
the calendar year in which such indemnity payment is to be made and state and
local income taxes at the highest marginal rates of taxation applicable to
individuals as are in effect in the jurisdiction in which the Executive is
resident, net of the maximum reduction in federal income taxes that could be
obtained from deduction of such state and local taxes.
<PAGE> 12
8. RESTRICTIVE COVENANTS.
8.1 Noncompetition Agreement. In the event that (i) the Term
is terminated by the Company for Cause, (ii) the Term is terminated by the
Executive for other than Good Reason or (iii) the Executive does not accept
the Company's offer to extend or renew the Term, the Executive shall not
directly or indirectly enter into or engage generally in direct or indirect
competition with the Company in the business of nursing care in any state in
which the Company is then doing business either as an individual on his own
or as a partner or joint venturer, or as a director, officer, shareholder
(except as an incidental shareholder), employee or agent for any person, for
a period of one year after the date of such termination of the Term.
8.2 Confidentiality. During the Term and for two (2) years
thereafter, the Executive shall not, without the written consent of the Board
of Directors or a person authorized thereby, knowingly disclose to any
person, other than an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by
the Executive of his duties as an executive of the Company, any material
confidential information obtained by him while in the employ of the Company
with respect to any of the Company's services, products, improvements,
processes, customers, methods of distribution or any business practices the
disclosure of which he knows will be materially damaging to the Company;
provided, however, that confidential information shall not include any
information publicly available at the time of the alleged disclosure (other
than as a result of unauthorized disclosure by the Executive) or any
information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
<PAGE> 13
Company. Upon termination of the Term upon the request of the Company, the
Executive shall promptly deliver to the Corporation all correspondence,
manuals, letters, notes, notebooks, reports and any other documents or
tangible items containing or constituting confidential information about the
business of the Company.
8.3 Nonsolicitation of Employees. The Executive agrees not
to entice or solicit, directly or indirectly, any employee of the Company to
leave the employ of the Company to work with the Executive or the entity with
which the Executive was affiliated for a period of two years following the
Executive's termination of employment with the Company.
8.4 Injunctive Relief. The Executive agrees that any breach
of the restrictions set forth in this Section 8 will result in irreparable
injury to the Company for which it shall have no meaningful remedy in law and
the Company shall be entitled to injunctive relief in order to enforce the
provisions thereof. In the event that any provision of this Section 8 shall
be determined by any court of competent jurisdiction to be unenforceable in
part by reason of it being too great a period of time or covering too great a
geographical area, it shall be in full force and effect as to that period of
time or geographical area determined to be reasonable by the court.
9. INDEMNIFICATION.
(a) The Executive shall be provided with directors' and
officers' insurance in connection with his employment hereunder and service
as a director as contemplated hereby with such coverage and in amounts
determined by the Board from time to time to be reasonable.
(b) To the fullest extent permitted or required by the laws
of the State of Delaware, the Company shall indemnify and provide reasonable
advances for expenses to the Executive, in accordance with the terms of such
<PAGE> 14
laws, if the Executive is made a party, or threatened to be made a party, to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
the Executive is or was an officer or director of the Company or any
subsidiary or the Company, in which capacity the Executive is or was serving
at the Company's request and in furtherance of the Company's best interests,
against expenses (including reasonable attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
10. NO DUTY TO MITIGATE. The Executive shall have no duty to
mitigate any severance amount or any other amounts payable to him hereunder
and such amounts shall not be subject to reduction for any compensation
received by the Executive from employment in any capacity or other source
following the termination of the Executive's employment with the Company and
its subsidiaries.
11. OTHER PROVISIONS.
11.1 Certain Definitions. As used herein, the following terms
shall be defined as follows:
"affiliate" of any person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. For the purpose of this definition, "control" when
used with respect to any person means the power to direct the management and
policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the term
"controlling" and "controlled" have meanings correlative to the foregoing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
<PAGE> 15
"person" means individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a governmental entity or any department or agency thereof.
11.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telecopied or sent by certified, registered or express mail, postage prepaid.
Any such notice shall be deemed given when so delivered personally,
telecopied or sent by express mail, or if sent by certified or registered
mail, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: General Counsel
telephone: (201)488-8818
Telecopy: (201)525-5952
with a copy to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Carl L. Reisner, Esq.
Telephone: (212)373-3000
Telecopy: (212)373-2038
(ii) if to the Executive, to him at his address
then reflected in the personnel records of the Company.
Either party may change its or his address for notice hereunder by
notice to the other party in accordance with this Section 11.2.
11.3 Waivers and Amendments. This Agreement may be amended,
<PAGE> 16
modified, superseded or cancelled, and the terms and conditions 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 or remedy hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right or
remedy, nor any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.
11.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey applicable
to agreements made and to be performed entirely within such State.
11.5 Assignability and Binding Effect. This Agreement shall
inure to the benefit of and shall be binding upon the Company and its
successors and permitted assigns and upon Executive and his heirs, executors,
legal representatives, successors and permitted assigns. However, neither
party may assign, transfer, pledge, encumber, hypothecate or otherwise
dispose of this Agreement or any of its or his rights hereunder without prior
written consent of the other party, and any such attempted assignment,
transfer, pledge, encumbrance, hypothecation or other disposition without
such consent shall be null and void and without effect.
11.6 Enforcement of Separate Provisions. Should any provision
or provisions of this Agreement be determined to be unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
11.7 Arbitration. In the event that any disagreement or
<PAGE> 17
dispute shall arise between the parties concerning this Agreement, the
issue(s) will be submitted to JAMS/Endispute, Inc. for binding arbitration.
Any award entered shall be final and binding upon the parties hereto and
judgment upon the award may be entered in any court having jurisdiction
thereof. All fees of attorneys, accountants, advisors or other experts or
witnesses, together with all administrative costs incurred in connection with
such actions, shall be paid by the Company.
11.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed or caused the
execution of this Agreement as of the date first above written.
THE MULTICARE COMPANIES, INC.
/S/ DANIEL E. STRAUS
By: ___________________________
Name: DANIEL E. STAUS
Title: PRESIDENT AND CO-CHIEF EXECUTIVE OFFICER
/S/ STEPHEN R. BAKER
____________________________
Stephen R. Baker
<PAGE> 18
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of January 1, 1995,
between The Multicare Companies, Inc., a Delaware corporation (the
"Company"), and Paul J. Klausner (the "Executive").
The Company desires to employ the Executive, and the Executive desires
to accept such employment, on the term and conditions of this Agreement.
Certain terms used herein are defined in Section 11.1.
NOW, THEREFORE, in consideration of the agreements and obligations
herein contained, the Company and the Executive hereby agree as follows:
1.. EMPLOYMENT, DUTIES AND ACCEPTANCE.
1.1 Employment by the Company. The Company agrees to employ the
Executive for the Term (as defined in Section 2), to render full-time
services to the Company as its Executive Vice President to perform such
duties commensurate with such office as the Board of Directors of the Company
(the "Board of Directors") and/or the Co-Chief Executive Officers of the
Company shall reasonably direct. The Executive shall report directly to the
Co-Chief Executive Officers of the Company. The Executive shall devote his
full business time to the business of the Company during the term.
1.2 Acceptance of Employment by the Executive. The Executive hereby
accepts such employment and agrees to render the services described above.
The Executive further agrees to accept election and to serve during all or
any part of the Term as a director of the Company and as an officer or
director of any subsidiary of the Company, without any compensation therefor
other than as specified in this Agreement, if elected to any such position.
2.TERM OF EMPLOYMENT.
2.1 The term of the Executive's employment under this Agreement (the
"Term") shall commence on the date hereof and shall end on December 31, 1997,
unless earlier terminated pursuant to Section 4 hereof; provided, that the
Term shall automatically be extended for successive one-year periods on each
January 1, commencing January 1, 1998 unless timely written notice of
termination of the Term is provided in accordance with Section 2.2. Each one-
year period commencing each January 1 during the Term is referred to herein
as an "Employment Year".
2.2 The Company or the Executive may choose not to extend or renew
the Term of Executive's employment hereunder without cause or reason, upon
written notice to the other at least one hundred eighty (180) days prior to
any January 1 occurring after January 1, 1997.
3.COMPENSATION AND OTHER BENEFITS.
3.1 Salary. As compensation for services to be rendered pursuant to
this Agreement, the Company agrees to pay the Executive, for each Employment
Year during the Term, an annual direct salary of $250,000 per year (the
"Annual Direct Salary"). The Annual Direct Salary shall be reviewed by the
Board of Directors on each anniversary of this Agreement and shall be
adjusted upwards as of each such anniversary. In no event shall the Annual
Direct Salary be decreased from the Annual Direct Salary payable for the
immediately preceding year without the express written consent of the
Executive.
3.2 Incentive Compensation. The Co-Chief Executive Officers shall
prepare a business plan establishing the financial and business goals of the
Company prior to the start of each fiscal year during the Term (the "Business
Plan"). The Business Plan shall set forth the goals of, and performance
expectations for, the Executive for such year. The Board of Directors shall
establish an incentive compensation opportunity for the Executive under the
Company's Key Employee Incentive Compensation Plan (the "KEICP") based on
such Business Plan. The Executive's KEICP opportunity shall provide an
incentive pay opportunity consistent with the practices of similar organiza
tions in rewarding their senior executives and shall be consistent with past
practice. For 1995, the Executive's incentive for achieving Expected
Performance under the KEICP shall be 50% of the Executive's Annual Direct
Salary in effect on January 1, 1995; Threshold Performance shall be 30% of
such Annual Direct Salary; and Outstanding Performance shall be 75% of such
Annual Direct Salary. Any incentive award earned by the Executive pursuant
to the KEICP shall be paid to the Executive during the month of December in
the applicable fiscal year.
3.3 Employee Benefit Plans. The Executive shall be entitled to
participate in or receive benefits under all Company employment benefit plans
including, but not limited to, any pension, profit-sharing plan, stock option
or other equity award or participation plans, savings plan, supplemental
retirement income, medical or health-and-accident plan or arrangement made
available by the Company to its executives and key management employees,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. The Company shall also
provide the Executive with the following minimum benefits:
(i) Life Insurance: the Company shall acquire and maintain
for the Executive a supplemental term life insurance policy with a death
benefit equal to at least four (4) times the Executive's then current Annual
Direct Salary to a maximum death benefit of $2,000,000. The Executive, or a
valid trust established by the Executive, shall own such policy and the
Executive shall be liable for any income taxes due annually on the reported
income resulting from the Company's payment of annual premiums during the
Term. This policy shall be, and shall provide that it is, assumable by the
Executive at the termination or expiration of the Term.
(ii) Disability Insurance: In the event that the Company's
group long-term disability insurance policy benefit limit, if any, does not
provide for the Executive to receive the 66.67% of income replacement at the
time of disability, or the Company does not at any time during the Term
maintain a group long-term disability insurance policy, the Company shall
make available a long-term disability insurance policy for the Executive,
which policy shall provide that in the event the Executive is unable to
perform his duties hereunder as a result of incapacity due to physical or
mental illness, he shall be entitled to receive benefits from all sources
(Social Security, group long-term disability and supplemental long-term
disability) equal to 66.67% of his then current Annual Direct Salary until
the Executive reaches the age of 65 or dies. The Company shall continue to
pay to the Executive his Annual Direct Salary during any applicable
elimination or waiting period not in excess of one hundred eighty (180) days.
(iii) 401(k) Wrap Plan/Deferred Compensation Plan
Participation: The Executive shall have the option to participate in a
401(k) Wrap Plan to be established by the Company to enable the Executive to
defer portions of current income from income tax liability until a later
time, provided such election to defer income is made in compliance with the
Code.
(iv) Health and Medical Insurance: The Company shall pay all
premiums otherwise due from the Executive for family coverage in the medical
and dental insurance programs offered by the Company to its executives from
time to time.
3.4 Vacation. During the Term, the Executive shall be entitled to
the number of paid vacation days in each calendar year determined by the
Company from time to time for its senior executive officers, but not less
than four (4) weeks in any calendar year. The Executive shall also be
entitled to all paid holidays given by the Company to its senior executive
officers.
3.5 Reimbursement of Expenses. During the Term, the Company shall
reimburse the Executive promptly for all reasonable expenses incurred by him
(in accordance with the policies and procedures established by the Board of
Directors for the Company's senior executive officers) in performing services
hereunder.
3.6 Automobile Allowance. During the Term, the Executive shall be
entitled to use for business and personal reasons an automobile of his choice
leased by the Company, subject to the approval of the Co-Chief Executive
Officers, in an amount up to $600 per month. The Company shall pay all
amounts in respect of premiums for collision and liability insurance (in
amounts determined by the Executive) and will reimburse the Executive for all
operating, maintenance and repair expenses.
3.7 Agreement Signing Incentive. The Executive shall receive as of
the date hereof a special one-time grant pursuant to the Company's Stock
Option Plan of 9,000 nonqualified options to purchase shares of the Company's
common stock (the "Options"). The Options shall have an exercise price equal
to the closing bid price of the Company's common stock on the date hereof as
reported by The NASDAQ Stock Market and shall vest ratably over three years.
3.8 Other Benefits. The Executive shall be entitled to receive such
other requisites, e.g. club memberships and fringe benefits as the Board of
Directors deems appropriate.
4.TERMINATION.
4.1 Termination Upon Death. If the Executive dies during the Term,
this Agreement shall terminate as of the date of death, and the Executive's
legal representatives, successors, heirs or assigns shall be entitled to
receive the amounts set forth in Section 6.1.
4.2 Termination Upon Disability. If during the Term, the Executive
becomes subject to a Disability (as defined in the following sentence), the
Company may at any time thereafter, by notice to the Executive, terminate the
Term of Executive's employment hereunder, except that the Executive shall be
entitled to receive the amounts specified in Section 6.1. For purposes of
this Agreement, the term "Disability" shall mean incapacity due to physical
or mental illness which has caused the Executive to be unable to
substantially perform his duties with the Company on a full time basis for
(i) a period of one hundred eighty (180) consecutive days or (ii) for shorter
periods aggregating two hundred seventy (270) days in any three hundred sixty-
five (365) day period. During any period of Disability, the Executive agrees
to submit to reasonable medical examinations upon the request, and at the
expense, of the Company. Nothing in this Section 4.2 shall be deemed to
extend the Term.
4.3 Termination for Cause. During the Term, the Company shall have
the right to terminate the Term of Executive's employment with the Company
for Cause. For purpose hereof, a termination by the Corporation for "Cause"
shall mean termination by action of at least a majority of the members of the
Board of Directors of the Corporation (excluding Executive) at a meeting duly
called and held upon at least 15 days' prior written notice to Executive
specifying the particulars of the action or inaction alleged to constitute
"Cause" (and at which meeting Executive and his counsel were entitled to be
present and given reasonable opportunity to be heard) because of (i)
Executive's conviction of any felony (whether or not involving the Company or
any of its subsidiaries) involving moral turpitude which subjects, or if
generally known, would subject, the Company or any of its subsidiaries to
public ridicule or embarrassment, (ii) fraud or other willful misconduct by
Executive in respect of his obligations under this Agreement, or (iii)
willful refusal or continuing failure to attempt, without proper cause and,
other than by reason of illness, to follow the lawful directions of the Board
of Directors, following thirty days' prior written notice to Executive of his
refusal to perform or failure to attempt to perform such duties, and which
during such thirty day period such refusal or failure to attempt is not cured
by the Executive. "Cause" shall not include a bona fide disagreement over a
corporate policy, so long as Executive does not willfully violate on a
continuing basis specific written directions from the Board of Directors,
which directions are consistent with the provisions of this Agreement.
Action or inaction by Executive shall not be considered "willful" unless done
or omitted by him intentionally or not in good faith and without his
reasonable belief that his action or inaction was in the best interests of
the Company, and shall not include failure to act by reason of total or
partial incapacity due to physical or mental illness.
5.TERMINATION BY THE EXECUTIVE.
The Executive may terminate the Term on written notice to the Company
upon the continuation of any of the following events for more than ten (10)
days after Executive delivers notice to the Company thereof (other than with
respect to paragraph (vi), which shall be governed by Section 7 hereof) and
the occurrence of any one or more of the following (each "Good Reason"):
(i) Executive shall fail to be re-elected as the Company's
Executive Vice President or shall be removed from such position at any time
during the Term;
(ii) Executive shall fail to be vested with the powers and
authority of Executive Vice President of the Company; or the powers and
authority of such position or the Executive's authority and responsibilities
hereunder shall be diminished in any material respect;
(iii) Executive's principal place of employment is moved more
than 20 miles without Executive's prior written consent;
(iv) any material failure by the Company to comply with any of
the provisions of this Agreement including, without limitation, failure to
make any payment required to be made by the Company pursuant to this
Agreement within five (5) business days after the date such payment is
required to be made;
(v) any purported termination by the Company of Executive's
employment otherwise than as expressly permitted by this Agreement;
(vi) upon a Change of Control (as defined in Section 7); or
(vii) the commencement of a proceeding or case, with or
without the application or consent of the Company or any of its subsidiaries,
in any court or competent jurisdiction, seeking (A) the liquidation,
reorganization, dissolution or winding-up of the Company or its subsidiaries,
or the composition or readjustment of the debts of the Company or its
subsidiaries, (B) the appointment of a trustee, receiver, custodian,
liquidator or the like for the Company or its subsidiaries or of all or any
substantial part of their respective assets, or (C) any similar relief in
respect of the Company or its subsidiaries under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts.
6.PAYMENTS UPON TERMINATION.
6.1 Termination Due to Death or Disability. Upon the death or
Disability of the Executive (A) the Company shall pay to the Executive or his
estate (i) the Annual Direct Salary and other accrued benefits earned up to
the last day of the month of the Executive's death or Disability (subject to
the last sentence of 3.3(ii)), (ii) all deferred amounts earned under the
KEICP or similar bonus plan, and (iii) if any bonus, under the KEICP or
otherwise, shall be payable in respect of the year in which the Executive's
death or Disability occurs, such bonus(es) prorated up to the last day of the
month of the Executive's death or Disability and (B) all restricted stock,
stock option and performance share awards made to the Executive shall
automatically become fully vested as of the date of death or Disability.
6.2 Termination for Cause. Upon termination of the Term by the
Company for Cause, the Company's obligations to the Executive under this
Agreement shall be limited to the payment of unpaid Annual Direct Salary and
benefits accrued up to the effective date of termination specified in the
Company's notice of termination.
6.3 Termination by Executive for Good Reason or by the Company other
than for Certain Reasons.
(a) In the event (i) the Company terminates the Term for a
reason other than for (A) Cause or (B) due to death or Disability or (ii) the
Executive terminates the Term for Good Reason, then: (1) the Company shall
pay the Executive (A) (i) the Annual Direct Salary and other accrued benefits
earned up to the last day of the month of the Executive's employment, (ii)
all deferred amounts earned under the KEICP or similar bonus plan and (iii)
if any bonus, under the KEICP or otherwise, shall be payable in respect of
the year in which the Term is terminated, such bonus(es) prorated up to the
last day of the month of such termination and (B) a lump sum cash payment
within thirty (30) days following the date of termination equal to the
greater of (x) all remaining Annual Direct Salary payable during the Term and
(y) an amount equal to two times the Annual Direct Salary for the then
current Employment Year and (2) all stock options, stock awards and similar
equity rights, if any, shall vest and become exercisable immediately prior to
the termination of the Term and remain exercisable through their original
terms with all rights.
(b) Following termination of the Term for any reason, other than
for Cause or upon the death of Executive, the Company shall also maintain in
full force and effect, for the continued benefit of the Executive for a
period equal to the greater of (x) the period of the Term otherwise remaining
or (y) two (2) years without giving effect to such termination, all employee
benefit plans and programs to which the Executive was entitled prior to the
date of termination (including, without limitation, the benefit plans and
programs provided for herein) if the Executive's continued participation is
possible under the general terms and provisions of such plans and programs.
In the event that the Executive's participation in any such plan or program
is barred by the terms thereof, the Company shall pay to the Executive an
amount equal to the annual contribution, payments, credits or allocations
made by the Company to him, to his account or on his behalf under such plans
and programs from which his continued participation is barred except that if
Executive's participation in any health, medical, life insurance or
disability plan or program is barred, the Company shall obtain and pay for,
on Executive's behalf, individual insurance plans, policies or programs which
provide to Executive health, medical, life and disability insurance coverage
which is equivalent to the insurance coverage to which Executive was entitled
prior to the date of termination.
6.4 Termination Due to a Change of Control. Upon the termination of
the Term due to a Change of Control, the Company shall pay the amounts to and
provide the benefits for the Executive as set forth in Section 7.1 and 7.4
hereof.
7.CHANGE OF CONTROL.
7.1 (a) Upon a Change of Control, the Executive may terminate the
Term upon notice to the Company, effective as set forth in such notice (i)
for any reason or for no reason during the initial ninety (90) day period
following the date of such Change of Control or (ii) at any time, in the
event that within twenty-four (24) months following the date of a Change of
Control, the continuation of any event constituting Good Reason hereunder for
more than ten (10) days after the Executive delivers notice thereof to the
Company (other than as contemplated by Section 5(vi)) occurs. In the event
that the Executive terminates the Term pursuant to this Section 7.1, the
Company shall make a lump-sum payment to the Executive equal to three times
the sum of (i) his then current Annual Direct Salary and (ii) an amount equal
to the highest annual bonus (KEICP and other amounts being aggregated) award
received within the three (3) years immediately preceding the Employment Year
in which such termination occurs; provided, that in no event shall such
amount be less than the bonus payable at an Expected Level of performance
under the KEICP for 1995. The Company shall also maintain the benefit
coverages for the Executive specified in Section 6.3 above for a period of
twenty-four (24) months.
(b) Upon (i) the execution of a definitive agreement (including,
without limitation, any "lock-up" agreement with any of the Company's
principal stockholders) which contemplates a transaction, or (ii) the
commencement of any tender or exchange offer or similar transaction for or
involving the Company's securities, which, in the case of any transaction of
the type described by clause (i) or (ii), if consummated, could result in a
Change in Control, all restricted stock, stock option and performance share
awards made to the Executive shall become automatically fully vested in order
to provide the Executive with a reasonable time period to enable the
Executive to obtain the economic benefit of the contemplated transaction with
respect to all restricted stock, stock option and performance share awards
then held by him. In the event the Executive does not exercise any such
accelerated restricted stock, stock options or awards in the transaction
resulting in a Change of Control, the Executive will have a six month period
from the date of a Change of Control in which to exercise such restricted
stock, stock options and awards. In the event the transaction contemplated
by the definitive agreement referred to above is not consummated and such
definitive agreement is terminated, all accelerated restricted stock, stock
options and awards shall be deemed restored to the vesting schedules in
effect at the time of execution of such definitive agreement.
(c) Upon the termination of the Term upon a Change of Control,
the Company shall provide to the Executive outplacement and career counseling
services as may be requested by the Executive; such service costs not to
exceed 15% of the Executive's then-current Annual Direct Salary.
0.1 For purposes of this Agreement, the term "Change of Control"
shall mean:
(a) the acquisition (after the date hereof) of the beneficial
ownership of a majority of the Company's voting securities and/or
substantially all of the assets of the Company by a single person or entity
or a group of affiliated persons or entities, or
(b) the merger, consolidation or combination or similar
transaction of the Company with an unaffiliated corporation in which the
Board of Directors immediately prior to such merger, consolidation or
combination constitute less than a majority of the board of directors of the
surviving, new or combined entity.
7.3 For purposes of this Agreement the term a "date of a Change of
Control" shall mean:
(a) the first date (after the date hereof) on which a single
person and/or entity, or group of affiliated persons and/or entities, acquire
the beneficial ownership of majority of the Company's voting securities; or
(b) the date of the transfer of all or substantially all of the
Company's voting securities; or
(c) the date on which a merger, consolidation or combination of
the type specified in Section 7.2(b) is consummated.
7.4 Certain Taxes. The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the
"Excise Tax") under Section 4999 of the Code, on any payment made under this
Agreement (including any payment made under this paragraph) and any interest,
penalties and additions to tax imposed in connection therewith, and (ii) any
federal, state or local income tax imposed on any payment made pursuant to
this paragraph. The Executive shall not take the position on any tax return
or other filing that any payment made under this Agreement is subject to the
Excise Tax, unless, in the opinion of independent tax counsel reasonably
acceptable to the Company, there is not reasonable basis for taking the
position that any such payment is not subject to the Excise Tax under U.S.
tax law then in effect. If the Internal Revenue Service makes a claim that
any payment or portion thereof is subject to the Excise Tax, at the Company's
election, and the Company's direction and expense, the Executive shall
contest such claim; provided, however, that the Company shall advance to the
Executive the costs and expenses of such contest, as incurred. For the
purpose of determining the amount of any payment under clause (ii) of the
first sentence of this paragraph, the Executive shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation
applicable to individuals in the calendar year in which such indemnity
payment is to be made and state and local income taxes at the highest
marginal rates of taxation applicable to individuals as are in effect in the
jurisdiction in which the Executive is resident, net of the maximum reduction
in federal income taxes that could be obtained from deduction of such state
and local taxes.
8.RESTRICTIVE COVENANTS.
8.1 Noncompetition Agreement. In the event that (i) the Term is
terminated by the Company for Cause, (ii) the Term is terminated by the
Executive for other than Good Reason, or (iii) the Executive does not accept
the Company's offer to extend or renew the Term. The Executive shall not
directly or indirectly enter into or engage generally in direct or indirect
competition with the Company in the business of nursing care, in any state in
which the Company is then doing business, either as an individual on his own
or as a partner or joint venturer, or as a director, officer, shareholder
(except as an incidental shareholder), employee or agent for any person, for
a period of one year after the date of such termination of the Term.
8.2 Confidentiality. During the Term and for two (2) years
thereafter, the Executive shall not, without the written consent of the Board
of Directors or a person authorized thereby, knowingly disclose to any
person, other than an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by
the Executive of his duties as an executive of the Company, any material
confidential information obtained by him while in the employ of the Company
with respect to any of the Company's services, products, improvements,
processes, customers, methods of distribution or any business practices the
disclosure of which he knows will be materially damaging to the Company;
provided, however, that confidential information shall not include any
information publicly available at the time of the alleged disclosure (other
than as a result of unauthorized disclosure by the Executive) or any
information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company. Upon termination of the Term upon the request of the Company, the
Executive shall promptly deliver to the Corporation all correspondence,
manuals, letters, notes, notebooks, reports and any other documents or
tangible items containing or constituting confidential information about the
business of the Company.
8.3 Nonsolicitation of Employees. The Executive agrees not to entice
or solicit, directly or indirectly, any employee of the Company to leave the
employ of the Company to work with the Executive or the entity with which the
Executive was affiliated for a period of one year following the Executive's
termination of employment with the Company.
8.4 Injunctive Relief. The Executive agrees that any breach of the
restrictions set forth in this Section 8 will result in irreparable injury to
the Company for which it shall have no meaningful remedy in law and the
Company shall be entitled to injunctive relief in order to enforce the
provisions thereof. In the event that any provision of this Section 8 shall
be determined by any court of competent jurisdiction to be unenforceable in
part by reason of it being too great a period of time or covering too great a
geographical area, it shall be in full force and effect as to that period of
time or geographical area determined to be reasonable by the court.
9.INDEMNIFICATION.
(a) The Executive shall be provided with directors' and
officers' insurance in connection with his employment hereunder and service
as a director as contemplated hereby with such coverage (including with
respect to unpaid wages and taxes not remitted when due) and in such amounts
as shall be reasonably satisfactory to the Executive, and the Company shall
maintain such insurance in effect for the period of the Executive's
employment hereunder and for not less than five years thereafter; provided,
however, than in the event that the Company shall not obtain such insurance,
it shall provide or cause the Executive to be provided with indemnity (or a
combination of indemnity and directors' and officers' insurance) in
connection with his employment hereunder with such coverage, in such amounts
and from such person or persons as shall be reasonably satisfactory to the
Executive, and the Company shall maintain such indemnity (or combination of
indemnity and directors' and officers' insurance) or cause such indemnity (or
such combination) to be maintained for the period of the Executive's
employment hereunder and not less than five (5) years thereafter.
(b) To the fullest extent permitted or required by the laws of
the State of Delaware, the Company shall indemnify and provide reasonable
advances for expenses to the Executive, in accordance with the terms of such
laws, if the Executive is made a party, or threatened to be made a party, to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
the Executive is or was an officer or director of the Company or any
subsidiary or the Company, in which capacity the Executive is or was serving
at the Company's request and in furtherance of the Company's best interests,
against expenses (including reasonable attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding.
10. NO DUTY TO MITIGATE. The Executive shall have no duty to
mitigate any severance amount or any other amounts payable to him hereunder
and such amounts shall not be subject to reduction for any compensation
received by the Executive from employment in any capacity or other source
following the termination of the Executive's employment with the Company and
its subsidiaries.
11. OTHER PROVISIONS.
11.1 Certain Definitions. As used herein, the following terms shall
be defined as follows:
"affiliate" of any person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such person. For the purpose of this definition, "control" when
used with respect to any person means the power to direct the management and
policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the term
"controlling" and "controlled" have meanings correlative to the foregoing.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"person" means individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a governmental entity or any department or agency thereof.
11.2 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telecopied
or sent by certified, registered or express mail, postage prepaid. Any such
notice shall be deemed given when so delivered personally, telecopied or sent
by express mail, or if sent by certified or registered mail, five days after
the date of deposit in the United States mail, as follows:
(i) if to the Company, to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: General Counsel
telephone: (201)488-8818
Telecopy: (201)525-5952
with a copy to:
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Attention: Carl L. Reisner, Esq.
Telephone: (212)373-3000
Telecopy: (212)373-2038
(ii) if to the Executive, to him at his address then reflected
in the personnel records of the Company.
Either party may change its or his address for notice hereunder by
notice to the other party in accordance with this Section 11.2.
11.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded or cancelled, and the terms and conditions 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 or remedy hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right or
remedy, nor any single or partial exercise of any such right or remedy
preclude any other or further exercise thereof or the exercise of any other
right or remedy.
11.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey applicable
to agreements made and to be performed entirely within such State.
11.5 Assignability and Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon the Company and its successors and
permitted assigns and upon Executive and his heirs, executors, legal
representatives, successors and permitted assigns. However, neither party
may assign, transfer, pledge, encumber, hypothecate or otherwise dispose of
this Agreement or any of its or his rights hereunder without prior written
consent of the other party, and any such attempted assignment, transfer,
pledge, encumbrance, hypothecation or other disposition without such consent
shall be null and void and without effect.
11.6 Enforcement of Separate Provisions. Should any provision or
provisions of this Agreement be determined to be unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
11.7 Arbitration. In the event that any disagreement or dispute shall
arise between the parties concerning this Agreement, the issue(s) will be
submitted to JAMS/Endispute, Inc. for binding arbitration. Any award entered
shall be final and binding upon the parties hereto and judgment upon the
award may be entered in any court having jurisdiction thereof. All fees of
attorneys, accountants, advisors or other experts or witnesses, together with
all administrative costs incurred in connection with such actions, shall be
paid by the Company.
11.8 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed or caused the execution of
this Agreement as of the date first above written.
THE MULTICARE COMPANIES, INC.
By: /S/ DANIEL E. STRAUS
Name: Daniel E. Straus
Title: President and Co Chief Executive Officer
/s/ PAUL J. KLAUSNER
Paul J. Klausner
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 1, 1995 between Care4,
L.P., a Delaware limited partnership (the "Company"), and Andrew Horowitz
(the "Executive").
The parties acknowledge that they are entering into this Agreement
as an inducement to the Company and Executive to consummate the transactions
contemplated by the Asset Purchase Agreement, dated as of November 23, 1994,
among the Company, Executive, Robert Horowitz, Scotchwood Pharmacy, a New
Jersey corporation, Shared Pharmacy Limited Partnership, a New Jersey limited
partnership, and Driving, Incorporated, a New Jersey corporation (the
"Purchase Agreement") and that the execution and delivery of this Agreement
by the Company and Executive is a condition precedent to the consummation of
the transactions contemplated by the Purchase Agreement.
1. Employment, Duties and Acceptance.
1.1 The Company hereby employs Executive, for the Term (as
hereinafter defined), to render full-time services to the Company, and to
perform such duties consistent with Executive's title and position as he
shall reasonably be directed by the Co-Chief Executive Officers of
Institutional Health Care Services, Inc., the general partner of the Company,
in connection with managing and developing the Company's institutional
pharmacy business, including the business being acquired by the Company
pursuant to the Purchase Agreement, and establishing additional institutional
pharmacy operations. Executive's title shall be designated by such Co-Chief
Executive Officers and initially shall be Director of Pharmacy Operations.
Executive shall be primarily responsible for managing the day-
to-day affairs and operations of the Company's business, inclusive of all
sales, marketing, purchasing and personnel decisions, and shall have
authority, within monthly budgetary constraints approved by the Co-Chief
Executive Officers, to make any single expenditure (or aggregate related
expenditures) not in excess of $5,000 without the prior approval of the Co-
Chief Executive Officers.
1.2 Executive shall devote his full business time to the
business of the Company during the Term and shall not, during the Term, be
engaged in any other business activity, whether or not such business activity
<PAGE> 1
is pursued for gain, profit or other pecuniary advantage, without the prior
written consent of the Company, except for activities or investments not
requiring Executive's services.
1.3 Executive hereby accepts such employment and agrees to
render the services described above. Executive further agrees to serve
during all or any part of the Term as an officer or director of any affiliate
of the Company or The Multicare Companies, Inc. ("Multicare"), without
additional compensation therefor, if elected or appointed to any such
position by the Board of Directors or Co-Chief Executive Officers of the
Company or Multicare or of any affiliate, as the case may be. In such event,
Executive shall be entitled to coverage under such directors' and officers'
insurance or other insurance, and such indemnifications from Multicare and
its affiliates, as are generally available to officers and directors of
Multicare.
1.4 The duties to be performed by Executive hereunder shall
be performed primarily at the offices of the Company in Edison, New Jersey,
subject to reasonable travel requirements on behalf of the Company.
1.5 Executive shall be entitled to a paid vacation period or
periods of twenty (20) business days during each year of the Term.
2. Term of Employment.
The term of Executive's employment under this Agreement (the
"Term") shall commence on the Closing Date (as defined in the Purchase
Agreement) and shall end on the third anniversary of the Closing Date, unless
sooner terminated pursuant to Article 4 of this Agreement.
3. Compensation.
3.1 As full compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay Executive, during the
Term, a base salary at an initial rate of $175,000 per annum during the first
twelve-month period following the Closing Date (each twelve-month period, a
"Salary Period"), payable in equal semi-monthly installments, less such
deductions or amounts to be withheld as shall be required by applicable law
and regulations. In no event shall Executive's base salary for any Salary
Period be less than $175,000.
3.2 Executive shall be eligible to participate in Multicare's
Key Employee Incentive Plan (the "Bonus Plan") under which Executive may earn
a maximum annual bonus equal to 30% of Executive's annual base salary
provided for under Section 3.1. Such bonus shall be comuputed and paid in
accordance with the terms of the Bonus Plan, a copy of which has been
furnished to Executive.
<PAGE> 2
3.3 Executive shall be eligible to participate in the annual
grant program under Multicare's Amended and Restated 1993 Stock Option Plan
(the "Option Plan"). In addition, concurrent herewith, Executive and
Multicare are entering into a stock option agreement (the "Option Agreement")
pursuant to which Executive has been granted options to purchase 15,000
shares of common stock of Multicare (the "Options"). The Options shall vest
ratably over five years and shall be exercisable at a price equal to the
closing price of Multicare common stock as reported by NASDAQ NMS on the
Closing Date.
3.4 The Company shall pay or reimburse Executive for all
reasonable expenses actually incurred or paid by him during the Term in the
performance of his services under this Agreement, upon presentation of
expense statements or vouchers or such other supporting information as it may
require in accordance with the Company's policies in effect from time to
time.
3.5 The Company shall provide to Executive medical benefits
and medical and life insurance and disability benefits and disability
insurance comparable to the medical benefits and medical and life insurance
and disability benefits and disability insurance provided generally to senior
executives of Multicare. Copies of all such policies and benefits have been
furnished to Executive.
4. Termination.
4.1 If Executive shall die during the Term, the Term shall
terminate as of the date of Executive's death, and Executive's legal
representative shall be entitled to receive Executive's full salary and
benefits under Section 3, including a pro rata amount of the bonus for which
Executive is eligible under Section 3.2 (which bonus, if any, shall be paid
at such time and in the manner provided under the Bonus Plan) for the period
through and including the last day of the month in which Executive's death
occurs.
4.2 If during the Term, Executive shall become physically or
mentally disabled, whether totally or partially, so that he is unable
substantially to perform his services hereunder for (i) a period of 90
consecutive days, or (ii) for shorter periods aggregating 120 days during any
twelve-month period, the Company may at any time after the last day of the 90
consecutive days of disability or the day on which the shorter periods of
disability shall have called an aggregate of 120 days, by written notice to
Executive, terminate the Term of Executive's employment hereunder as of the
date of such notice. Notwithstanding such disability, Executive shall be
entitled to receive his full salary and benefits under Section 3, including a
pro rata amount of the bonus for which Executive is eligible under Section
3.2 (which bonus, if any, shall be paid at such time and in the manner
provided under the Bonus Plan) for the period through and including the date
of such termination.
<PAGE> 3
4.3 If Executive acts, or fails to act, in a manner that
provides Cause for termination, the Company may by written notice to
Executive, terminate the Term of Executive's employment hereunder any time as
of the date of any such notice. For purposes of this Agreement, the term
"Cause" means (i) the failure by Executive to perform, or gross negligence or
willful misconduct in connection with the performance of, any of his material
duties hereunder, unless such failure, gross negligence or willful misconduct
is cured within 30 days after the Company has provided Executive written
notice thereof (if such failure, gross negligence or willful misconduct is
subject to being cured), (ii) the conviction of Executive of any felony,
(iii) any acts of fraud or embezzlement by or involving Executive involving
the Company or any of its affiliates or their respective businesses or
assets, (iv) Executive's failure to comply in any material respect with the
policies of the Company after delivery to Executive of such written policies,
unless such failure is cured (to the extent such failure is curable) within
30 days after the Company has provided Executive with written notice thereof
or (v) a material breach of the terms of this Agreement by the Executive,
unless such breach is cured (if such breach is curable) within 30 days after
the Company has provided Executive written notice thereof. Executive shall
be entitled to no compensation under this Agreement from and after the date
of termination for Cause.
4.4 Upon any termination of Executive's employment hereunder
for a reason other than (i) Cause, (ii) Executive's death or disability or
(iii) Executive's voluntary termination of his employment hereunder,
Executive shall be entitled to continue to receive his then current base
salary hereunder through the end of the Term, as and when otherwise due and
payable; provided, however, that if Executive shall accept other employment
at any time during the Term, the Company's obligation to continue such
payment under this Section 4.4 shall terminate as of the date of Executive's
acceptance.
5. Covenants.
Executive acknowledges that, during the course of performing
his services hereunder, the Company and its affiliates shall be disclosing to
Executive and Executive shall become aware of or learn Confidential
Information (as defined below). Executive acknowledges that the business of
the Company and its affiliates is extremely competitive, dependent in part
upon the maintenance of secrecy, and that any disclosure of the Confidential
Information would result in serious harm to the Company and its affiliates.
Accordingly, Executive agrees as follows:
5.1 Executive shall keep confidential and shall not, during
the Term or at any time thereafter, directly or indirectly, publish or
disclose to any person, firm or corporation or other entity, whether or not a
competitor of the Company, any affairs of the Company or its affiliates,
including, without limitation, business plans, budgets and projections, other
proprietary information, any trade secrets, sources of supply, costs, pricing
<PAGE> 4
practices, customer lists, financial data, employee information, or
information as to organizational structure (collectively, "Confidential
Information"). In no event shall Confidential Information include
information publicly available or otherwise in the public domain. Executive
shall use Confidential Information solely in connection with his activities
hereunder as an Executive of the Company, and shall not (except as may be
required by court order, subpoena or other governmental process and confirmed
by a written opinion of legal counsel to Executive after prompt notice to the
Company) use any Confidential Information in any way that may be detrimental
to the Company or its affiliates. Upon the expiration or termination of the
term of his employment, or at any time the Company may request, Executive
shall surrender to the Company all documents and copies of documents in his
possession comprising Confidential Information including, but not limited to,
internal and external business forms, manuals, correspondence, notes,
customer lists and computer programs, and Executive shall not make or retain
any copy or extract of any of the foregoing.
5.2 During the Term of his employment and for two years
thereafter, or if later, for two years after the date Executive stops
receiving compensation under this Agreement, Executive shall not in the
United States or in any country in which the Company shall then be doing
business, directly or indirectly, engage in or be interested in (as owner,
partner, shareholder, employee, director, officer, agent, consultant or
otherwise), with or without compensation, any business which is competitive
with the business being conducted by the Company at any time during the Term,
including, without limitation, any line of business or economic endeavor,
whether for profit or otherwise, which activities shall include, but not be
limited to, the sale or furnishing, or the offering for sale or furnishing,
of prescription and/or over-the-counter medications, controlled substances,
dangerous drugs, biologicals, durable medical equipment, medical supplies,
comfort care supplies, therapy supplies and/or services, pharmaceutical
management and recordkeeping services, and the sale or furnishing, or the
offering for sale foregoing types of activities, to any person or entity,
including but not limited to a pharmacy, physician or physician practice,
hospital, nursing home or other health care provider. The provisions of this
Section 5.2 shall not apply to Executive's ownership of up to 1.0% of the
outstanding securities of a competitive business whose shares are listed for
trading on any national securities exchange or through NASDAQ NMS. The
Company and Executive acknowledge and agree that the provisions of this
Section 5.2 shall have no force and effect if (a) Executive's employment
hereunder is terminated for a reason other than (i) Cause, (ii) Executive's
death or disability, or (iii) Executive's voluntary termination of his
employment hereunder or (b) the Company fails to offer to employ Executive
following the expiration of the Term on terms not less favorable than those
existing upon expiration of the Term.
5.3 During the Term of his employment and for two years
thereafter, of if later, for two years after the date Executive stops receiving
compensation under this Agreement, Executive shall not, directly or indirectly,
solicit any employee of the Company or any affiliate of the Company or any
person who was employed by the Company or any affiliate of the Company within
<PAGE> 5
three years prior to the time of such solicitation, to leave his employment or
join the employ of another, then or at a later time, or solicit the employment
of, or permit any business of which Executive or any affiliate of Executive is
an owner, partner, executive or holder of more than 5% of the shares, to solicit
the employment of any person who was employed by the Company or any affiliate of
the Company within three years prior to the time of such solicitation, or
canvass or solicit orders for any pharmaceutical products from or otherwise do
business with any person, company or firm which is at the time of such
solicitation or has been at any time within three years prior to such time a
customer of the Company or any affiliate of the Company.
5.4 Executive acknowledges that the provisions of this Section 5
are reasonable and necessary for the protection of the Company and that the
Company will be irrevocably damaged if such covenants are not specifically
enforced. Accordingly, Executive agrees that, in addition to any other relief
to which the Company may be entitled in the form of actual or punitive damages,
the Company shall be entitled to seek and obtain injunctive relief from a court
of competent jurisdiction for the purposes of restraining Executive from any
actual or threatened breach of such covenants. Notwithstanding the foregoing,
if any one or more of the provisions of this Section 5 shall be found by a court
of competent jurisdiction to be unreasonably restrictive under the
circumstances, then such provisions shall be modified by such court so as to
apply such provisions to the maximum extent allowed by law, and any such
modification shall not affect the validity of any other provision contained in
this Agreement.
5.5 In the event Executive commits or threatens to commit a
breach of any of the provisions of Sections 5.1, 5.2 or 5.3 hereof, the Company
shall have the following rights and remedies:
5.5.1 The right and remedy to have the provisions of this
Agreement specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that any such breach will cause irreparable injury to
the Company and that money damages will not provide an adequate remedy to the
Company; and
5.5.2 The right and remedy to require Executive to account
for and pay over to the Company all compensation, profits, monies, accruals,
increments or other benefits (collectively "Benefits") derived or received by
Executive as the result of any transactions constituting a breach or threatened
breach of any of the provisions of Sections 5.1, 5.2 or 5.3 and Executive hereby
agrees to account for and pay over such Benefits to the Company.
5.5.3 Each of the rights and remedies enumerated above
shall be independent of the other, and shall be severally enforceable, and all
of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity.
<PAGE> 6
5.6 The parties hereto intend to and hereby confer jurisdiction
to enforce the covenants contained in Section 5.1, 5.2 and 5.3 upon the courts
of the State of New Jersey and any other state in the United States in which a
substantial breach of such covenants occurs. In the event that any courts
having jurisdiction over an action or event constituting a breach of Section
5.1, 5.2 or 5.3 shall hold such covenants are not wholly enforceable by reason
of the breadth of such scope or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect the Company's right
to the relief provided above in the courts of any other states within the
geographical scope of such covenants, as to breaches of such covenants in such
other respective jurisdiction, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent covenants.
5.7 In the event that any action, suit or other proceeding in
law or in equity is brought to enforce the covenants contained in Sections 5.1,
5.2 and 5.3 or to obtain money damages for the breach thereof, and such action
results in the award of a judgment for money damages or in the granting of any
preliminary injunction following a hearing in favor of the Company, all court
costs and reasonable attorneys' fees of the Company in such action, suit or
other proceeding shall (on demand of the Company) be paid by Executive. If such
action does not result in the award of a judgment for money damages or in the
granting of any preliminary injunction following a hearing in favor of the
Company, all court costs and reasonable attorneys' fees of Executive in such
action, suit or other proceeding shall (on demand of Executive) be paid by
Company.
6. Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) when transmitted by telecopy (receipt confirmed) provided that a
copy is sent concurrently by the means prescribed by clause (a) or (c) of this
Section 6, (c) on the fifth business day following mailing by registered or
certified mail (return receipt requested), or (d) on the next business day
following deposit with an overnight delivery service of national reputation, to
the parties at the following addresses and telecopy numbers (or at such other
address or telecopy number for a party as may be specified by like notice):
If to the Company at:
Care4, L.P.
c/o The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: Daniel E. Straus
Telephone: 201-488-8818
Telecopier: 201-488-4348
<PAGE> 7
With a copy to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: General Counsel
Telephone: 201-525-5942
Telecopier:201-525-5952
If to Executive at:
Andrew Horowitz
302 Wychwood Road
Westfield, New Jersey 07090
Telephone: 908-654-1083
With a copy to:
Wolff & Samson
5 Becker Farm Road
Roseland, New Jersey 07068-1776
Attention: Joel Wolff, Esq.
Telephone: (201) 533-6500
Telecopier: (201) 740-1407
7. General.
7.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey
applicable to agreements made and to be performed entirely in New Jersey.
7.2 Headings. The article and section headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
7.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, relating to the subject matter hereof. No representation,
promise or inducement prior to the date hereof has been made by either party
that is not embodied in this Agreement, and neither party shall be bound by or
liable for any alleged representation, promise or inducement prior to the date
hereof not so set forth.
<PAGE> 8
7.4 Assignment. This Agreement, and Executive's rights other
than the right to receive payments hereunder and obligations hereunder, may not
be assigned by Executive. The Company may assign its rights, together with its
obligations, hereunder to any affiliate (provided that, at the time of the
assignment, such affiliate has a net worth equal to or greater than the
Company's net worth) or in connection with any sale, transfer or other
disposition of all or substantially all of its business or assets; in any event
the obligations of the Company hereunder shall be binding on its successors or
assigns, whether by assignment, merger, consolidation or acquisition of all or
substantially all of its business or assets.
7.5 Validity. The invalidity or unenforceability of any
provision of this Agreement in any respect shall not affect the validity or
enforceability of such provision in any other respect or of any other provision
of this Agreement, all of which shall remain in full force and effect.
7.6 Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance. The failure of
either party at the time or times to require performance of any provision hereof
shall in no manner affect the right at a later time to enforce the same. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
7.7 Affiliates. As used herein the term "affiliate" shall mean
and include any person or business entity controlling, controlled by or under
common control with the corporation in question. The term "controlled",
"controlling", "controlled by" and "under common control with", as used with
respect to any person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
person, whether through the ownership of voting securities or by contract or
otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Very truly yours,
CARE4, L.P.
By: Institutional Health Care
Services, Inc., its general partner
By: /S/ PAUL J. KLAUSNER
____________________________
Name: PAUL J. KLAUSNER
Title: VICE-PRESIDENT
<PAGE> 9
/S/ ANDREW HOROWITZ
________________________________
Andrew Horowitz
EXHIBIT 10.35
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of December 1, 1995 between
Glenmark Associates, Inc., a West Virginia corporation (the "Company"), and
Mark R. Nesselroad ("Executive").
The parties acknowledge that they are entering into this Agreement
as an inducement to the Company and Executive to consummate the transactions
contemplated by the Agreement and Plan of Merger, dated as of October 18,
1995, among HRWV, Inc., an affiliate of The Multicare Companies, Inc.,
("Multicare") the Company, Glenmark Holding Company Limited Partnership,
Executive and Glenn T. Adrian (the "Merger Agreement") and that the execution
and delivery of this Agreement by the Company and Executive is a condition
precedent to the consummation of the transactions contemplated by the Merger
Agreement.
1. Employment, Duties and Acceptance.
1.1 The Company hereby employs Executive, for the Term (as
hereinafter defined), to render full-time services to the Company, and to
perform such duties consistent with Executive's title and position as he
shall reasonably be directed by the Co-Chief Executive Officers of the
Company, in connection with managing the day-to-day affairs and operations of
the facilities owned by the Company. Executive shall also develop and assist
in the development of the Company's business and the business of Multicare in
the southeastern United States.
1.2 Executive shall devote his full business time to the
business of the Company and its affiliates during the Term and shall not,
during the Term, be engaged in any other business activity, whether or not
such business activity is pursued for gain, profit or other pecuniary
advantage, without the prior written consent of the Company, except for
activities or investments not requiring Executive's services.
1.3 Executive hereby accepts such employment and agrees to
render the services described above. Executive further agrees to serve
during all or any part of the Term as an officer or director of any affiliate
of the Company or Multicare, without additional compensation therefor, if
elected or appointed to any such position by the Board of Directors or Co-
Chief Executive Officers of the Company or Multicare or of any affiliate, as
the case may be. Executive shall be provided with directors and officers
insurance in connection with his employment hereunder commensurate with that
insurance being provided from time to time to senior management of Multicare
and copies of Multicare's current policies have been delivered to Executive.
<PAGE> 1
In addition, Executive shall be indemnified by the Company pursuant to the
Company's bylaws, a copy of which has been provided to Executive.
1.4 The duties to be performed by Executive hereunder shall
be performed primarily at the offices of the Company in Morgantown, West
Virginia, subject to reasonable travel requirements on behalf of the Company.
1.5 Executive shall be entitled to a paid vacation period or
periods of twenty (20) business days during each year of the Term and shall
be entitled to observe all holidays observed by the Company.
2. Term of Employment.
The term of Executive's employment under this Agreement (the
"Term") shall commence on the Closing Date (as defined in the Merger
Agreement) and shall end on the third anniversary of the Closing Date, unless
sooner terminated pursuant to Article 4 of this Agreement.
3. Compensation.
3.1 As full compensation for all services to be rendered
pursuant to this Agreement, the Company agrees to pay Executive, during the
Term, a base salary at an initial rate of $150,000 per annum during each
twelve-month period following the Closing Date, payable in equal semi-monthly
installments, less such deductions or amounts to be withheld as shall be
required by applicable law and regulations.
3.2 Executive shall be eligible to participate in Multicare's
Key Employee Incentive Compensation Plan (the "Bonus Plan") under which
Executive may earn a maximum annual bonus equal to 30% of Executive's annual
base salary. Such bonus shall be computed and paid in accordance with the
terms of the Bonus Plan.
3.3 Executive shall be eligible to participate in the annual
grant program under Multicare's Amended and Restated 1993 Stock Option Plan.
In addition, concurrently herewith, Executive and Multicare are entering into
a stock option agreement pursuant to which Executive has been granted options
to purchase 15,000 shares of common stock of Multicare (the "Options"). The
Options shall be exercisable at a price equal to the closing price of
Multicare common stock as reported by The New York Stock Exchange on the
Closing Date and shall vest ratably over the three year period following the
date hereof, commencing on the first anniversary of the date hereof (e.g. 33
1/3 shall vest on each such anniversary).
3.4 The Company shall pay or reimburse Executive for all
<PAGE> 2
reasonable expenses actually incurred or paid by him during the Term in the
performance of his services under this Agreement, upon presentation of
expense statements or vouchers or such other supporting information as it may
require in accordance with the Company's policies in effect from time to
time.
3.5 The Company shall provide to Executive medical benefits
and medical and life insurance and disability benefits and disability
insurance comparable to the medical benefits and medical and life insurance
and disability benefits and disability insurance provided generally to its
executives.
3.6 Executive shall be entitled to receive an automobile
allowance in an amount up to $750.00 per month.
4. Termination.
4.1 If Executive shall die during the Term, the Term shall
terminate as of the date of Executive's death, and Executive's legal
representative shall be entitled to receive Executive's salary and benefits
under Section 3, for the period through and including the last day of the
month in which Executive's death occurs.
4.2 If during the Term, Executive shall become physically or
mentally disabled, whether totally or partially, so that he is unable
substantially to perform his services hereunder for (i) a period of 60
consecutive days, or (ii) for shorter periods aggregating 90 days during any
twelve-month period, the Company may at any time after the last day of the 60
consecutive days of disability or the day on which the shorter periods of
disability shall have called an aggregate of 90 days, by written notice to
Executive, terminate the Term of Executive's employment hereunder as of the
date of such notice. Executive shall be entitled to receive Executive's
salary and benefits under Section 3 for the period through and including the
date of termination of Executive's employment due to disability.
4.3 If Executive acts, or fails to act, in a manner that
provides Cause for termination, the Company may by written notice to
Executive, terminate the Term of Executive's employment hereunder at any time
as of the date of any such notice. For purposes of this Agreement, the term
"Cause" shall mean (i) the failure by Executive to perform, or gross
negligence or willful misconduct in connection with the performance of, any
of his material duties hereunder, (ii) the charging of Executive in
connection with the commission of any felony, (iii) any acts of fraud or
embezzlement by or involving Executive involving the Company or any of its
affiliates or their respective businesses or assets, (iv) Executive's failure
to comply in any material respect with the policies of the Company or (v) a
material breach of the terms of this Agreement by the Executive. Executive
shall be entitled to no compensation under this Agreement from and after the
date of termination for Cause.
<PAGE> 3
5. Covenants.
Executive acknowledges that, during the course of performing
his services hereunder, the Company and its affiliates shall be disclosing to
Executive and Executive shall become aware of or learn Confidential
Information (as defined below). Executive acknowledges that the business of
the Company and its affiliates is extremely competitive, dependent in part
upon the maintenance of secrecy, and that any disclosure of the Confidential
Information would result in serious harm to the Company and its affiliates.
Accordingly, Executive agrees as follows:
5.1 Executive shall keep confidential and shall not, during
the Term or at any time thereafter, directly or indirectly, publish or
disclose to any person, firm or corporation or other entity, whether or not a
competitor of the Company, any affairs of the Company or its affiliates,
including, without limitation, business plans, budgets and projections, other
proprietary information, any trade secrets, sources of supply, costs, pricing
practices, customer lists, financial data, employee information, or
information as to organizational structure (collectively, "Confidential
Information"). Executive shall use Confidential Information solely in
connection with his activities hereunder as an Executive of the Company, and
shall not use any Confidential Information in any way that may be detrimental
to the Company or its affiliates. Upon the expiration or termination of the
term of his employment, or at any time the Company may request, Executive
shall surrender to the Company all documents and copies of documents in his
possession comprising Confidential Information including, but not limited to,
internal and external business forms, manuals, correspondence, notes,
customer lists and computer programs, and Executive shall not make or retain
any copy or extract of any of the foregoing.
5.2 During the Term of his employment and for three years
thereafter, or if later, for three years after the date Executive stops
receiving compensation under this Agreement, Executive shall not in any state
in which the Company or any of its affiliates shall then be doing business,
directly or indirectly, engage in or be interested in (as owner, partner,
shareholder, employee, director, officer, agent, consultant or otherwise),
with or without compensation, any business which is competitive with the
business being conducted by the Company or any of its affiliates at any time
during the Term. The provisions of this Section 5.2 shall not apply to
Executive's ownership of up to 1.0% of the outstanding securities of a
competitive business whose shares are listed for trading on any national
securities exchange or through The NASDAQ Stock Market.
5.3 During the Term of his employment and for three years
thereafter, of if later, for three years after the date Executive stops
receiving compensation under this Agreement, Executive shall not, directly or
indirectly, solicit any employee of the Company (other than Fred Bierer) or
any affiliate of the Company or any person who was employed by the Company or
<PAGE> 4
any affiliate of the Company within three years prior to the time of such
solicitation to leave his employment or join the employ of another, then or
at a later time, or solicit the employment of, or permit any business of
which Executive or any affiliate of Executive is an owner, partner, executive
or holder of more than 5% of the shares, to solicit the employment of any
person who was employed by the Company or any affiliate of the Company within
three years prior to the time of such solicitation, or canvass or solicit
orders for any products from or otherwise do business with any person,
company or firm which is at the time of such solicitation or has been at any
time within three years prior to such time a customer of the Company or any
affiliate of the Company.
5.4 Executive acknowledges that the provisions of this
Section 5 are reasonable and necessary for the protection of the Company and
that the Company will be irrevocably damaged if such covenants are not
specifically enforced and that money damages will not provide an adequate
remedy to the Company. Accordingly, Executive agrees that, in addition to
any other relief to which the Company may be entitled in the form of actual
or punitive damages, the Company shall be entitled to seek and obtain
injunctive relief from a court of competent jurisdiction for the purposes of
restraining Executive from any actual or threatened breach of such covenants.
Notwithstanding the foregoing, if any one or more of the provisions of this
Section 5 shall be found by a court of competent jurisdiction to be
unreasonably restrictive under the circumstances, then such provisions shall
be modified by such court so as to apply such provisions to the maximum
extent allowed by law, and any such modification shall not affect the
validity of any other provision contained in this Agreement.
5.5 In the event Executive commits or threatens to commit a
breach of any of the provisions of Sections 5.1, 5.2 or 5.3 hereof, the
Company shall have the right and remedy to have the provisions of this
Agreement specifically enforced by any court having jurisdiction or to
require Executive to account for and pay over to the Company all
compensation, profits, monies, accruals, increments or other benefits
(collectively "Benefits") derived or received by Executive as the result of
any transactions constituting a breach or threatened breach of any of the
provisions of Sections 5.1, 5.2 or 5.3 and Executive hereby agrees to account
for and pay over such Benefits to the Company. Each of the rights and
remedies enumerated above shall be independent of the other, and shall be
severally enforceable, and all of such rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to
the Company under law or in equity.
5.6 The parties hereto intend to and hereby confer
jurisdiction to enforce the covenants contained in Section 5.1, 5.2 and 5.3
upon the courts of the State of New Jersey and any other state in the United
States in which a substantial breach of such covenants occurs. In the event
that any courts having jurisdiction over an action or event constituting a
breach of Section 5.1, 5.2 or 5.3 shall hold such covenants are not wholly
<PAGE> 5
enforceable by reason of the breadth of such scope or otherwise, it is the
intention of the parties hereto that such determination not bar or in any way
affect the Company's right to the relief provided above in the courts of any
other states within the geographical scope of such covenants, as to breaches
of such covenants in such other respective jurisdiction, the above covenants
as they relate to each state being, for this purpose, severable into diverse
and independent covenants.
5.7 In the event that any action, suit or other proceeding in
law or in equity is brought to enforce the covenants contained in Sections
5.1, 5.2 and 5.3 or to obtain money damages for the breach thereof, and such
action results in the award of a judgment for money damages or in the
granting of any preliminary injunction following a hearing in favor of the
Company, all court costs and reasonable attorneys' fees of the Company in
such action, suit or other proceeding shall be paid by Executive.
6. Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) when transmitted by telecopy (receipt confirmed) provided
that a copy is sent concurrently by the means prescribed by clause (a) or (c)
of this Section 6, (c) on the fifth business day following mailing by
registered or certified mail (return receipt requested), or (d) on the next
business day following deposit with an overnight delivery service of national
reputation, to the parties at the following addresses and telecopy numbers
(or at such other address or telecopy number for a party as may be specified
by like notice):
If to the Company at:
Glenmark Associates, Inc.
c/o The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07601
Attention: Daniel E. Straus and General Counsel
Telephone: (201) 488-8818
Telecopier: (201) 525-5959
If to Executive at:
Route 8 Box 63A
Morgantown, West Virginia 26505
Telephone: (304) 599-8311
<PAGE> 6
With a copy to:
Houston Harbaugh
Two Chatham Center, 12th Floor
Pittsburgh, PA 15219
Attention: Michael Dempster, Esq.
Telephone: (412) 288-1841
Telecopy: (412) 281-4499
7. General.
7.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey
applicable to agreements made and to be performed entirely in New Jersey.
7.2 Headings. The article and section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
7.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, relating to the subject matter hereof.
7.4 Validity. The invalidity or unenforceability of any
provision of this Agreement in any respect shall not affect the validity or
enforceability of such provision in any other respect or of any other provi
sion of this Agreement, all of which shall remain in full force and effect.
7.5 Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended and the terms or covenants hereof
may be waived, only by a written instrument executed by both of the parties
hereto, or in the case of a waiver, by the party waiving compliance. The
failure of either party at the time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to
enforce the same. No waiver by either party of the breach of any term or
covenant contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.
7.6 Affiliates. As used herein the term "affiliate" shall
mean and include any person or business entity controlling, controlled by or
under common control with the corporation in question. The term
"controlled", "controlling", "controlled by" and "under common control with",
as used with respect to any person, means the possession, directly or
<PAGE> 7
indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting
securities or by contract or otherwise.
7.7 Multicare Covenant. Multicate hereby covenants and
agrees that in the event the assets of the Business (as defined in the Merger
Agreement) are transferred from the Company to another wholly-owned
subsidiary of Multicare, the transferee thereunder shall assume all of the
obligations of the Company under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
GLENMARK ASSOCIATES, INC.
/S/ MARK R. NESSELROAD
By:____________________________________
Name: MARK R. NESSELROAD
Title: CHAIRMAN
/S/ MARK R. NESSELROAD
_______________________________________
Mark R. Nesselroad
SOLELY FOR THE PURPOSES OF
SECTION 7.7 HEREOF:
THE MULTICARE COMPANIES, INC.
/S/ BRADFORD C. BURKETT
By:____________________________________
Name: BRADFORD C. BURKETT
Title: VICE-PRESIDENT
<PAGE> 8
EXHIBIT 10.36
July 19, 1996
Mr. Mark R. Nesselroad
Mr. Glenn T. Adrian
Glenmark Associates, Inc.
Glenmark Holding Company Limited Partnership
1369 Stewartstown Road
Morgantown, West Virginia 26505
Gentleman:
Reference is made to the Agreement and Plan of Merger among HRWV,
Inc., Glenmark Associates, Inc., Glenmark Holding Company Limited
Partnership, Mark R. Nesselroad and Glenn T. Adrian, dated October 18, 1995,
as amended on December 1, 1995 (the "Agreement"). Pursuant to the Agreement,
HRWV, Inc., a wholly-owned subsidiary of The Multicare Companies, Inc.
("Multicare") merged with and into Glenmark Associates, Inc. ("Glenmark")
with surviving the merger. Accordingly, Glenmark is now a wholly-owned
subsidiary of Multicare. All capitalized terms used but not defined herein
shall have the respective meanings ascribed to them in the Agreement.
Section 2.4 of the Agreement is hereby amended as follows:
Section 2.4.1 is hereby deleted.
Section 2.4.2 remains as set forth in the Agreement.
Section 2.4.3 is hereby amended to read as follows:
"The Earnout/Indemnification Escrow Payment shall be disbursed
as follows: (i) an amount equal to $500,000 of the
Earnout/Indemnification Escrow Payment shall be paid to Glenmark
Holding upon its execution of this letter; (ii) an amount equal to
one-half of the monies then remaining in the
Earnout/Indemnification Escrow Payment shall be disbursed to
Glenmark Holding on December 1, 1997; and (iii) all remaining
monies shall be disbursed on December 1, 1998, subject in each case
to the indemnification obligations of Glenmark Holding, MN and/or
GA pursuant to Section 10.2 of the Agreement as specified in
Sections 2.4.2 and 2.4.5."
Section 2.4.4 is hereby deleted.
Section 2.4.5 is hereby amended to read as follows:
"Notwithstanding any other provision of this Section 2.4, in
the event that Health Resources shall have made a good faith claim
for indemnification pursuant to Section 10 which is pending on the
date that any payments would otherwise be disbursed out of the
Earnout/Indemnification Escrow Payment in accordance with Section
2.4.3 hereof, the amount of such claim shall be subtracted from the
payment and such amounts shall be disbursed to Glenmark Holding
upon the resolution of such claim.
If the foregoing accurately sets forth our agreement, please sign a
copy of this letter below where indicated and return it to the undersigned.
Very truly yours,
/S/ BRADFORD C. BURKETT
Bradford C. Burkett
BCB/jt
AGREED & ACCEPTED AS OF THIS 19TH DAY OF JULY, 1996:
GLENMARK HOLDING COMPANY LIMITED PARTNERSHIP
/S/ MARK R. NESSELROAD
By: _______________________________________
Mark R. Nesselroad, General Partner
/S/ GLENN T. ADRIAN
By: _______________________________________
Glenn T. Adrian, General Partner
EXHIBIT 11
<TABLE>
The Multicare Companies, Inc.
Computation of earnings per share
(Unaudited)
(In thousands, except per share data)
<CAPTION>
Year ended
December 31, 1996
<S> <C>
Income per common and common equivalent share:
Income before extraordinary item $ 28,737
Net Income 25,910
Weighted average number of common and common
equivalent shares outstanding 28,062
Income before extraordinary item per common
and common equivalent share $ 1.02
Net income per common and common equivalent share $ .92
Income per common and common equivalent share assuming
full dilution:
Income before extraordinary item $ 28,737
Net income $ 25,910
Adjustments to income:
Interest expense and amortization of debt
issuance costs relating to convertible
debt, net of tax $ 4,022
Adjusted net income $ 29,932
Weighted average number of common and common
equivalent shares outstanding 28,196
Convertible debt shares 4,976
Adjusted shares 33,172
Income before extraordinary item per common share
assuming full dilution $ .99
Net income per common share assuming full dilution $ .90
</TABLE>
EXHIBIT 13
The Multicare Companies, Inc. and Subsidiaries
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
Years ended December 31
1992 1993 1994 1995 1996
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net revenues $ 126,007 162,384 262,416 353,048 532,230
Expenses:
Operating expenses 93,649 124,681 201,250 270,224 413,007
Corporate, general
and administrative 14,044 6,338 11,446 17,643 25,408
Depreciation and
amortization 5,734 6,292 9,358 13,171 22,344
Total expenses 113,427 137,311 222,054 301,038 460,759
Income from operations 12,580 25,073 40,362 52,010 71,471
Other income (expense):
Investment income 480 1,861 296 2,713 425
Interest expense (9,890) (15,090) (13,162) (18,778) (25,589)
Total other
income (expense) (9,410) (13,229) (12,866) (16,065) (25,164)
Income before income
taxes and
extraordinary item 3,170 11,844 27,496 35,945 46,307
Income tax expense 1,420 4,727 10,454 13,798 17,570
Income before
extraordinary item 1,750 7,117 17,042 22,147 28,737
Extraordinary item,
net of tax benefit,(1) - 3,863 1,620 3,722 2,827
Net income $ 1,750 3,254 15,422 18,425 25,910
Income per common share
assuming full dilution:
Income before
extraordinary item
per share $ .12 .42 .71 .84 .99
Net income per share $ .12 .19 .64 .69 .90
Weighted average number
of shares outstanding 14,646 16,962 23,967 26,513 33,172
OTHER DATA:
Capital expenditures $ 2,838 18,730 31,785 39,917 64,215
Average number of
licensed beds 3,271 4,241 6,006 6,861 11,620
Percentage of
net revenues:
Quality Mix (2) 55.5% 56.0% 62.5% 66.3% 64.5%
Medicaid 44.5% 44.0% 37.5% 33.7% 35.5%
BALANCE SHEET DATA:
Total assets $ 155,485 162,255 308,755 470,958 761,667
Long-term debt,
including current
portion 146,906 106,137 156,878 283,082 429,168
Stockholders' equity $ (11,276) 32,591 100,105 113,895 207,935
</TABLE>
(1) The Company incurred extraordinary charges relating to early
extinguishment of debt.
(2) Quality mix is defined as non-Medicaid patient revenues.
<PAGE>
The Multicare Companies, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
GENERAL
Multicare has experienced revenue growth in excess of 43 % per year in the
five-year period ended December 31, 1996, primarily through acquisitions of
long-term care facilities, and increased utilization of specialty medical
services. It is the Company's strategy to expand through selective
acquisitions, development of new facilities with geographically
concentrated operations, and growth of specialty medical services.
ACQUISITIONS AND DEVELOPMENT
The Company has grown through acquisition, construction, lease and
management agreements. Summarized below are the recent acquisitions and
development projects:
In 1994, the Company acquired the outstanding capital stock of Providence
Health Care, Inc., an Ohio-based provider of long-term nursing care and
specialized healthcare services through 15 facilities with over 1,200 beds,
located principally in Ohio.
In January 1995, the Company acquired the assets and operations of an
institutional pharmacy business located in New Jersey.
In December 1995, the Company acquired the outstanding capital stock of
Glenmark Associates, Inc., a long-term care provider through 21 facilities
and several ancillary businesses with approximately 1,700 beds, located
principally in West Virginia.
In February 1996, the Company acquired the outstanding capital stock of the
Concord Health Group, Inc., a provider of long-term care, assisted-living,
and specialty medical services through 11 facilities with over 1,600
licensed beds and several ancillary businesses in Pennsylvania.
In December 1996, the Company acquired The A.D.S Group, which owns,
operates or manages over 50 long-term care and assisted-living facilities
with over 4,200 licensed beds, principally in Massachusetts.
Between 1994 and 1996, the Company further expanded its regional bases by
adding over 2,500 licensed beds through smaller acquisitions, construction
of new facilities, expansion of existing facilities, leasing arrangements,
and management agreements.
The Company is continually evaluating acquisition and development
opportunities.
SPECIALTY MEDICAL SERVICES
Specialty medical services include subacute care to medically complex
patients, intensive rehabilitation therapies, pharmaceuticals, medical
supplies, and home healthcare. These services are usually provided at
higher profit margins than routine services and compete with
significantly higher cost hospital care. The Company operates dedicated
subacute units within certain of its long-term care facilities and offers
certain subacute services throughout the majority of its facilities.
Therapies, which include physical, occupational, speech and respiratory
services, are provided to patients at all long-term care facilities, as
well as at the outpatient rehabilitation centers. In addition, Multicare
owns and operates an institutional pharmacy that serves over 23,000 beds.
Specialty medical service revenues accounted for 39% of net revenues in
1996, increasing to $208 million from $142 million or 40% of revenues in
1995.
<PAGE>
RESULTS OF OPERATIONS
Net Revenues. Net revenues increased 51% or $179.2 million to $532.2
million in 1996 and 35% or $90.6 million to $353.0 million in 1995.
Of the 1996 revenues increase, 37% is primarily attributable to the
inclusion of results for the recent acquisitions described previously. The
internal growth rate of revenues amounted to 14% in 1996, resulting mainly
from increases in payor rates and changes in census mix, development and
opening of additional beds, and growth in specialty medical service
revenues. The revenue increase in 1995 was predominantly due to results
from recent acquisitions of 20% and internal growth of 15%.
The Company's quality mix of non-Medicaid patient revenues was 65%, 66% and
63%, respectively, in 1996, 1995, and 1994. The 1996 percentages reflect
the impact of certain of the Company's recent acquisitions which
historically have generated lower revenues in these areas. Occupancy rates
were 91%, 92%, and 92%, respectively, for 1996, 1995, and 1994.
Operating Expenses and Margins. Operating expenses increased 53% or $142.8
million to $413.0 million in 1996 and 34% or $68.9 million to $270.2
million in 1995. Operating margins were 13% in 1996 and 15% in 1994 and
1995. The decrease in operating margin in 1996 is due primarily to an
increase in rent expense of $7.5 million relating to new operating leases.
Margins before interest, taxes, depreciation, amortization and rent
(EBITDAR) were 20% in 1996, 1995, and 1994.
The increases in operating expenses in 1996 and 1995 reflect the inclusion
of results for the recent acquisitions of $100.2 million and $37.6 million,
respectively. The remaining increases resulted primarily from higher
salaries, wages, and benefits ($23.4 million in 1996 and $17.7 million in
1995) for cost of living increases and the expanded utilization of salaried
therapists and staffing levels to support higher patient acuities and more
complex product lines.
Corporate, General and Administrative Expenses. Corporate, general and
administrative expenses remained consistent at 5% of net revenues in 1996
and 1995. The expenses include resources devoted to operations, finance,
legal, risk management, and information systems to support the Company's
operations.
Depreciation and Amortization. Depreciation and amortization increased by
$9.2 million in 1996 and $3.8 million in 1995. The increases related
primarily to inclusion of depreciation and amortization for the recently
acquired entities and to a lesser extent, amortization of debt issuance
costs and other assets.
Other Income (expense). Net other expense increased 57% or $9.1 million in
1996 to $25.2 million, primarily as a result of interest expense from
increased borrowings under the Company's various credit agreements in
connection with the financing of recent acquisitions. 1995 net other
expense increased 25% or $3.2 million as a result of interest expense from
higher borrowing levels on the Company's credit agreements and interest
associated with the Company's Convertible Debentures.
Extraordinary item. The Company incurred extraordinary charges of $2.8
million, $3.7 million, and $1.6 million in 1996, 1995 and 1994,
respectively, relating to the restructuring of its bank credit facilities
and the purchase of the Company's Senior Subordinated Notes.
<PAGE>
INFLATION
The healthcare industry is labor intensive. Wages and other labor related
costs are especially sensitive to inflation. In addition, suppliers pass
along rising costs to the Company in the form of higher prices. When faced
with increases in operating costs, the Company has increased its charges
for services. The Company's operations could be adversely affected if it
is unable to recover future cost increases or experiences significant
delays in increasing rates of reimbursement of its labor and other costs
from Medicaid and Medicare revenue sources.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains working capital from operating cash flows and lines
of credit that are adequate for continuing operations, debt payments, and
anticipated capital expenditures. At December 31, 1996, the Company had
working capital of $39.3 million, compared to $55.5 million at December 31,
1995.
In October 1996, the Company completed a public offering of 3 million
shares of its common stock, resulting in net proceeds of $52 million. The
proceeds of the offering were used to repay a portion of outstanding bank
indebtedness under the Company's credit agreement.
In December 1996, the Company entered into a new $350 million credit
facility and a $60 million lease facility with NationsBank N.A., as agent.
At December 31, 1996, the amount available under the line of credit was
$73.6 million.
In March 1995, the Company completed an offshore offering and a concurrent
private placement in the United States of $86.3 million of its 7%
Convertible Debentures, resulting in net proceeds of $83.3 million. The
proceeds were used to repay amounts outstanding on the Company's credit
agreement as well as for general corporate purposes. In January 1997, $11
million of Convertible Debentures were converted into common stock.
Since 1994, the Company purchased or retired an aggregate of approximately
$38.2 million of its 12.5% Senior Subordinated Notes (Notes), resulting in
a substantial interest savings based on the Company's incremental borrowing
rate under its existing credit lines. In January 1997, the Company
purchased an additional $6.5 million of Notes.
The Company will make payments on its debt of $.8 million, $1.3 million,
$.8 million, $277.1 million, and $.8 million, in each of the five years
subsequent to 1996, respectively.
Cash flow from operations was $50 million in 1996 compared to $11 million
in 1995. The increase is due, in part, to improved collection of
receivables. Net accounts receivable were $102.2 million at December 31,
1996 compared to $86.2 million at December 31, 1995. This increase is
primarily attributable to the recent acquisitions, the utilization of
specialty medical services for higher acuity level patients, and the timing
of third-party interim and settlement payments. The allowance for doubtful
accounts represents approximately 10% and 6% of gross accounts receivable
at December 31, 1996, and 1995, respectively. Legislative and regulatory
action and government budgetary constraints could change the timing of
payments and reimbursement rates of the Medicare and Medicaid programs in
the future. These changes could have a material adverse effect on the
Company's future operating results and cash flows.
<PAGE>
There are numerous legislative and executive initiatives at the federal and
state levels for comprehensive reforms affecting the payment for and
availability of healthcare services. The Company is unable to predict the
impact of healthcare reform proposals on the Company; however, it is
possible that such proposals could have a material adverse effect on the
Company. Any changes in reimbursement levels under Medicaid and Medicare
and any changes in applicable government regulations could significantly
affect the profitability of the Company. Various cost containment measures
adopted by governmental pay sources have begun to limit the scope and
amount of reimbursable healthcare expenses. Additional measures, including
measures that have already been proposed in states in which the Company
operates, may be adopted in the future as federal and state governments
attempt to control escalating healthcare costs. There can be no assurance
that currently proposed or future healthcare legislation or other changes
in the administration or interpretation of governmental healthcare programs
will not have a material adverse effect on the Company. In particular,
changes to the Medicare reimbursement program that have been proposed could
materially adversely affect the Company's revenues derived from ancillary
services.
During 1996, the Company expended $257 million through acquisitions, new
construction, existing facility expansion, further development of specialty
medical services and capital improvements. Capital expenditures were $64
million in 1996, including $41 million for new facility construction and
$23 million for routine capital improvements. The Company anticipates its
capital requirements for routine capital improvements including expansion
of existing facilities and construction of new facilities to be
approximately $65 million for 1997.
The Company plans to continue its growth oriented strategy for the
foreseeable future. The Company anticipates using operating cash flows,
bank credit facilities, leasing arrangements, and the sale of additional
debt or equity securities to finance its growth.
<PAGE>
<TABLE>
The Multicare Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31
<CAPTION>
(In thousands, except share data)
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,921 $ 1,150
Accounts receivable, net of allowance
for doubtful accounts of $5,241 and
$11,531 in 1995 and 1996, respectively 86,168 102,234
Prepaid expenses and other current assets 8,181 14,586
Deferred taxes 3,353 3,833
Total current assets 101,623 121,803
Property, plant and equipment:
Land, buildings and improvements 260,952 386,870
Equipment, furniture and fixtures 39,048 58,963
Construction in progress 24,979 43,373
324,979 489,206
Less accumulated
depreciation and amortization 38,212 46,187
286,767 443,019
Goodwill, net 59,610 157,298
Debt issuance costs, net 4,738 4,017
Other assets 18,220 35,530
$ 470,958 $ 761,667
<PAGE>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable $ 13,619 $ 26,948
Accrued liabilities 30,850 54,707
Current portion of long-term debt 1,612 821
Total current liabilities 46,081 82,476
Long-term debt 281,470 428,347
Deferred taxes 24,200 42,909
Contingent stock purchase commitment 5,312 -
Stockholders' equity:
Preferred stock, par value $.01,
7,000,000 shares authorized,
none issued
Common stock, par value $.01,
70,000,000 shares authorized,
17,680,932 and 30,133,535 issued and
outstanding in 1995 and 1996,
respectively 177 301
Additional paid-in-capital 75,419 143,513
Retained earnings 38,299 64,121
Total stockholders' equity 113,895 207,935
$ 470,958 $ 761,667
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
The Multicare Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31
<CAPTION>
1994 1995 1996
(In thousands, except per share data)
<S> <C> <C> <C>
Net revenues $ 262,416 $ 353,048 $ 532,230
Expenses:
Operating expenses:
Salaries, wages and benefits 127,407 171,471 258,404
Other operating expenses 73,843 98,753 154,603
Corporate, general and administrative 11,446 17,643 25,408
Depreciation and amortization 9,358 13,171 22,344
Total expenses 222,054 301,038 460,759
Income from operations 40,362 52,010 71,471
Other income (expense):
Investment income 296 2,713 425
Interest expense (13,162) (18,778) (25,589)
Total other income (expense) (12,866) (16,065) (25,164)
Income before income taxes
and extraordinary item 27,496 35,945 46,307
Income tax expense 10,454 13,798 17,570
Income before extraordinary item 17,042 22,147 28,737
Extraordinary item-loss on extinguishment
of debt, net of tax benefit of $1,057,
$2,379 and $1,884 in 1994, 1995, and
1996, respectively 1,620 3,722 2,827
Net income $ 15,422 $ 18,425 $ 25,910
Income per common and common
equivalent share data:
Income before extraordinary item $ .71 $ .84 $ 1.02
Net income $ .64 $ .69 $ .92
Weighted average number of common
and common equivalent shares
outstanding 23,967 26,513 28,062
Income per common share assuming
full dilution:
Income before extraordinary item $ .71 $ .84 $ .99
Net income $ .64 $ .69 $ .90
Weighted average number of common
shares outstanding assuming full
dilution 23,967 26,513 33,172
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
The Multicare Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31
<CAPTION>
Total
Additional stock-
Common Stock paid-in Retained holders'
Shares Amount Capital earnings equity
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1993 14,230 $ 142 $ 27,997 $ 4,452 $ 32,591
Issuance of common stock in
connection with public
offering 3,450 35 52,000 52,035
Effect of restricted stock (18) 57 57
Net income 15,422 15,422
Balances, December 31, 1994 17,662 177 80,054 19,874 100,105
Exercise of stock options
(including tax benefit) 19 304 304
Proceeds from issuance of put
options 373 373
Contingent stock purchase
commitment (5,312) (5,312)
Net income 18,425 18,425
Balances, December 31, 1995 17,681 177 75,419 38,299 113,895
Exercise of stock options
(including tax benefit) 21 347 347
Shares issued under stock
purchase plan 30 442 442
Contingent stock purchase
commitment 5,312 5,312
Stock split 8,847 88 (88) ---
Issuance of common stock in
connection with public offering 3,000 30 51,982 52,012
Issuance of stock in
acquisition 555 6 10,011 10,017
Net income 25,910 25,910
Balances, December 31, 1996 30,134 $ 301 $ 143,513 $ 64,121 $ 207,935
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
The Multicare Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31
<CAPTION>
1994 1995 1996
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 15,422 $ 18,425 $ 25,910
Adjustments to reconcile net income
to net cash provided by operating
activities:
Extraordinary item 2,677 6,101 4,711
Depreciation and amortization 9,583 13,204 22,029
Provision for doubtful accounts 1,712 3,483 4,760
Changes in assets and liabilities:
Deferred taxes 1,162 (445) (1,208)
Accounts receivable (28,479) (25,104) (13,967)
Prepaid expenses and other
current assets (8,270) (1,479) (2,528)
Accounts payable and accrued
liabilities 8,419 (3,174) 10,566
Net cash provided by operating
activities 2,226 11,011 50,273
Cash flows from investing activities:
Net marketable securities
(acquired) sold 5,195 (200) 202
Assets and operations acquired (40,435) (63,415) (193,067)
Capital expenditures (31,785) (39,917) (64,215)
Proceeds from sale-leaseback ___ 12,522 ___
Proceeds from repayment of
construction advances --- 11,000 ---
Other assets (2,351) (1,072) (5,531)
Net cash used in investing
activities (69,376) (81,082) (262,611)
Cash flows from financing activities:
Proceeds from issuance of common stock 52,035 --- 52,012
Proceeds from exercise of stock options
and stock purchase plan --- 245 717
Proceeds from issuance of put options --- 373 ---
Proceeds from long-term debt 221,465 278,154 562,981
Payments of long-term debt (203,574) (208,358) (402,848)
Debt issuance costs (1,750) (4,431) (3,295)
Net cash provided by financing
activities 68,176 65,983 209,567
Increase (decrease) in cash and
cash equivalents 1,026 (4,088) (2,771)
Cash and cash equivalents at beginning
of year 6,983 8,009 3,921
Cash and cash equivalents at end of year $ 8,009 $ 3,921 $ 1,150
Supplemental disclosure of non-cash
investing and financing activities:
Fair value of assets and operations
acquired $ 90,560 $ 134,323 $ 213,873
Debt and liabilities assumed in
connection with assets and
operations acquired 50,125 70,908 10,789
Stock issued in connection with
assets and operations acquired --- --- 10,017
$ 40,435 $ 63,415 $ 193,067
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
The Multicare Companies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1995 and 1996
(In thousands, except share and per share data)
The Multicare Companies, Inc. and Subsidiaries (Multicare or the Company)
own, operate and manage skilled nursing facilities which provide long-term
care and specialty medical services in selected geographic regions within the
eastern and Midwestern United States. In addition, the Company operates
assisted-living facilities, institutional pharmacies, medical supply
companies, outpatient rehabilitation centers and other ancillary healthcare
businesses.
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The Multicare Companies, Inc. was organized in March 1992. The consolidated
financial statements include the accounts of the Company and its majority
owned and controlled subsidiaries. Investments in affiliates that are not
majority owned are reported using the equity method.
All significant intercompany transactions and accounts of the Company have
been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Cash Equivalents
Cash equivalents consist of highly liquid instruments with original
maturities of three months or less.
(b) Financial Instruments
The carrying amounts of cash, marketable securities, and other current assets
and current liabilities approximate fair value due to the short term maturity
of these instruments. The fair value of the Company's long term debt is
estimated based on quoted market prices or current rates offered to the
Company for similar instruments with the same remaining maturities.
(c) Debt Issuance Costs
Debt issuance costs are amortized on a straight-line basis over periods of
four to ten years.
(d) Goodwill
Goodwill resulting from acquisitions accounted for as purchases is amortized
on a straight-line basis over periods of fifteen to forty years. At December
31, 1995 and 1996, accumulated amortization of goodwill was $1,832 and
$4,636, respectively.
(e) Other Assets
At December 31, 1995 and 1996, other assets include $1,300 and $1,331,
representing amounts due from stockholders.
Direct costs incurred to develop and implement new specialty medical services
at certain facilities are deferred during the start-up period and amortized
on a straight-line basis over five years.
At December 31, 1995 and 1996, investments in non-consolidated affiliates
included in other assets amounted to $5,054 and $19,913, respectively.
Results of operations relating to the non-consolidated affiliates were
insignificant to the Company's financial statements in 1995 and 1996.
(f) Net Revenues
Net revenues primarily consist of services paid for by patients and amounts
for services provided that are reimbursable by certain third-party payors.
Medicare and Medicaid revenues are determined by various rate setting
formulas and regulations. Final determinations of amounts paid by Medicaid
and Medicare are subject to review or audit. In the opinion of management,
adequate provision has been made for any adjustment that may result from
these reviews or audits. To the extent that final determination may result
in amounts which vary from management estimates, future earnings will be
charged or credited.
(g) Property, Plant and Equipment
Land, buildings and improvements, equipment, furniture and fixtures are
stated at cost. Depreciation of buildings and improvements is calculated
using the straight-line method over
<PAGE>
their estimated useful lives that range from twenty to forty years.
Depreciation of equipment and furniture and fixtures is calculated using the
straight-line method over their estimated useful lives that range from five
to ten years. Depreciation expense for the years ended December 31, 1994,
1995, and 1996 was $8,146, $10,875, and $17,724, respectively.
(h) Income Taxes
The Company follows the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases.
(i) Net Income Per Share
The computation of primary earnings per share is based on the weighted
average number of outstanding shares during the period and includes, when
their effect is dilutive, common stock equivalents consisting of certain
shares subject to stock options. Fully diluted earnings per share
additionally assumes the conversion of the Company's Convertible Subordinated
Debentures. Net income used in the computation of fully diluted earnings per
share was determined on the assumption that the convertible debentures were
converted and net income was adjusted for the amounts representing interest
and amortization of debt issuance costs, net of tax effect.
(j) Stock Split
In May 1996, the Company effected a three-for-two stock split in the form of
a 50% stock dividend. In 1996, stockholders' equity has been adjusted to
give recognition to the stock split by reclassifying from retained earnings
to common stock the par value of the additional shares arising from the stock
split. All references to average number of shares outstanding, stock
options, and per share amounts have been restated to reflect the stock split.
(k) SFAS 121
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
on January 1, 1996. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not
be recoverable. If the sum of the expected future undiscounted cash flows is
less than the carrying amount of the asset, a loss is recognized for the
difference between the fair value and carrying value of the asset. Adoption
of this Statement did not have any impact on the Company's financial
position, results of operations, or liquidity.
NOTE 3 - ACQUISITIONS
In March 1994, the Company acquired the outstanding capital stock of
Providence Health Care, Inc. (Providence), an Ohio-based provider of long-
term nursing care through 15 long-term care facilities for a cash purchase
price of approximately $29,000 and the assumption and refinancing of
approximately $27,000 of indebtedness. Total goodwill approximated $16,900.
In January 1995, the Company acquired the assets and operations of an
institutional pharmacy business for a purchase price of approximately
$12,000. Total goodwill approximated $11,000.
In December 1995, the Company completed the acquisition of Glenmark
Associates, Inc. (Glenmark). The Company acquired the outstanding capital
stock of Glenmark for approximately $32,000 including transaction costs,
repaid approximately $24,200 of debt, and assumed historical debt of
approximately $24,700. Total goodwill approximated $30,000.
In February 1996, the Company completed the acquisition of Concord Health
Group, Inc. (Concord). The Company acquired the outstanding capital stock
and warrants of Concord for approximately $75,000 including transaction
costs, repaid approximately $41,000 of debt, and assumed historical debt of
approximately $4,000. Total goodwill approximated $61,000.
In December 1996, the Company completed the acquisition of The A.D.S Group
(A.D.S). The Company paid approximately $10,000, repaid or assumed
approximately $29,800 in debt, financed $51,000 through a lease facility, and
issued 554,973 shares of its common stock for A.D.S. Total goodwill
approximated $29,900.
<PAGE>
All acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the consolidated financial statements reflect
the results of operations of each facility from the date of acquisition.
The following unaudited pro forma financial information has been prepared as
if the Glenmark, Concord and A.D.S acquisitions had been consummated on
January 1, 1995. The pro forma financial information does not necessarily
reflect the results of operations that would have occurred had the
acquisitions occurred on January 1, 1995:
<TABLE>
<CAPTION>
1995 1996
(Unaudited)
<S> <C> <C>
Net revenues $ 512,995 $ 599,022
Income before extraordinary item 20,006 29,095
Net income 16,284 26,267
Income per common share assuming full dilution:
Income before extraordinary item .74 .98
Net income $ .60 $ .90
</TABLE>
NOTE 4 - INCOME TAXES
The provision for income taxes, exclusive of income taxes related to the
extraordinary items, consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Federal
Current $ 8,810 $ 11,092 $ 13,554
Deferred (594) (35) 1,275
State
Current 2,343 2,876 2,695
Deferred (105) (135) 46
$ 10,454 $ 13,798 $ 17,570
</TABLE>
The difference between the Company's effective tax rate and the Federal
statutory tax rate of 35% is primarily attributable to state taxes.
The tax effects of temporary differences giving rise to deferred tax assets
and liabilities at December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred tax assets:
Accounts receivable $ 1,620 $ 1,642
Employee benefits and compensated absences 1,429 2,191
Other 829 -
$ 3,878 $ 3,833
Deferred tax liabilities:
Property, plant and equipment $ 24,408 $ 42,033
Other 317 876
$ 24,725 $ 42,909
</TABLE>
Cash paid for income taxes was $9,504, $12,910 and $14,555 in 1994, 1995 and
1996, respectively.
NOTE 5 - FINANCING OBLIGATIONS
Long-term debt at December 31, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Bank credit facility, with interest at
approximately 6% in 1995 and 7% in 1996 $ 105,629 $ 276,429
Convertible debentures, due 2003, with
interest at 7%, convertible at $17.33 per share 86,250 86,250
Senior Subordinated Notes, due 2002, net of
unamortized original issue discount of $911
and $682 in 1995 and 1996, respectively, with
interest at 12.5% 36,990 29,719
Mortgages and other debt, including unamortized
premium of $3,819 and $3,412, in 1995 and 1996,
respectively, payable on varying monthly or
quarterly installments with interest at rates
between 6% and 12%. These loans mature between
1999 and 2033 43,202 26,135
Revenue bonds, rates ranging from 7% to 10%,
with maturities between 2004 and 2015, net of
unamortized discount of $465 and $431 in 1995
and 1996, respectively 11,011 10,635
$ 283,082 $ 429,168
Less current portion 1,612 821
$ 281,470 $ 428,347
</TABLE>
<PAGE>
In 1995, the Company restructured its credit agreement with The Chase
Manhattan Bank, N.A. to extend the amount of available credit to $200,000.
In addition, several terms, including the interest rate were revised. The
Company recorded an extraordinary charge of $1,206, net of tax, for the write-
off of debt issuance costs and prepayment penalties relating to the
restructuring of the credit facility and extinguishment of certain mortgage
debt.
In March 1995, the Company completed an offshore offering and a concurrent
private placement in the United States of $86,250 of its 7% Convertible
Subordinated Debentures (Convertible Debentures) due 2003. The Convertible
Debentures are convertible at a price of $17.33 per share. The net proceeds
approximated $83,300 of which $23,000 was used to repay amounts outstanding
under the Company's credit agreement, with the remainder utilized for general
corporate purposes. In January 1997, $11,000 of Convertible Debentures were
converted into common stock.
The Company purchased or retired an aggregate amount of $38,177 of its
$100,000 Senior Subordinated Notes (Notes) in 1994, 1995 and 1996, resulting
in extraordinary charges after tax of $1,620, $2,516 and $957, respectively,
for premiums paid above the recorded values and the write-off of debt
issuance costs and original issue discounts. In January 1997, the Company
purchased $6,500 principal amount of Notes.
In 1996, the Company restructured its credit agreement with The Chase
Manhattan Bank, N.A. to extend the amount of credit available from $200,000
to $350,000 and to revise other terms. In December 1996, the Company entered
into a new $350,000 credit facility which expires in 2000 and added a $60,000
lease facility with NationsBank, N.A., as agent. The Company recorded
extraordinary charges of $1,870, net of tax, for the write-off of unamortized
debt issuance costs related to the restructurings.
The fair value of the Company's debt, based on quoted market prices or
current rates for similar instruments with the same maturities was
approximately $288,767 and $432,398 at December 31, 1995 and 1996,
respectively.
The Company is subject to various financial and restrictive covenants under
its credit facility and other indebtedness and is in compliance with such
covenants at December 31, 1996.
At December 1996, the aggregate maturities of long-term debt for the five
years ending December 31, 2001 and thereafter are as follows:
<TABLE>
<S> <C>
1997 $ 821
1998 1,335
1999 804
2000 277,146
2001 759
Thereafter 146,004
426,869
Discount (1,113)
Premium 3,412
$ 429,168
</TABLE>
Interest expense of $1,225, $1,605 and $2,773 was capitalized in 1994, 1995
and 1996, respectively, in connection with new construction and facility
renovations and expansions.
Cash paid for interest was $13,565, $17,704 and $25,762 in 1994, 1995, and
1996, respectively.
<PAGE>
NOTE 6 - ACCRUED LIABILITIES
At December 31, 1995 and 1996, accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Salaries and wages $ 11,428 $ 19,469
Deposits from patients 2,437 3,386
Interest 4,739 4,742
Insurance 2,492 7,079
Other 9,754 20,031
$ 30,850 $ 54,707
</TABLE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has operating leases on certain of its facilities and offices.
Three of such leases are with entities that are owned wholly or in part by
certain of the stockholders of the Company. In 1996, the Company
renegotiated and amended the terms of certain of its capital lease
agreements, resulting in their treatment as operating leases which did not
have a material impact on the financial statements. Minimum rental
commitments under all noncancelable leases at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Operating
<S> <C>
1997 $ 17,145
1998 17,170
1999 16,193
2000 15,870
2001 15,612
Thereafter 65,070
$ 147,060
</TABLE>
Rent expense was $3,052, $5,375 and $12,915 for the years ended December 31,
1994, 1995 and 1996, respectively.
Letters of credit ensure the Company's performance or payment to third
parties in accordance with specified terms and conditions. At December 31,
1996, letters of credit outstanding amounted to $1,709.
Included in the accompanying consolidated financial statements are management
fees and interest income from related parties of $1,501, $1,689 and $123 for
the years ended December 31, 1994, 1995, and 1996, respectively.
There are numerous legislative and executive initiatives at the federal and
state levels for comprehensive reforms affecting the payment for and
availability of healthcare services. The Company is unable to predict the
impact of healthcare reform proposals on the Company; however, it is possible
that such proposals could have a material adverse effect on the Company. Any
changes in reimbursement levels under Medicaid and Medicare and any changes
in applicable government regulations could significantly affect the
profitability of the Company. Various cost containment measures adopted by
governmental pay sources have begun to limit the scope and amount of
reimbursable healthcare expenses. Additional measures, including measures
that have already been proposed in states in which the Company operates, may
be adopted in the future as federal and state governments attempt to control
escalating healthcare costs. There can be no assurance that currently
proposed or future healthcare legislation or other changes in the
administration or interpretation of governmental healthcare programs will not
have a material adverse effect on the Company. In particular, changes to the
Medicare reimbursement program that have been proposed could materially
adversely affect the Company's revenues derived from ancillary services.
The healthcare industry is labor intensive. Wages and other labor related
costs are especially sensitive to inflation. In addition, suppliers pass
along rising costs to the Company in the form of higher prices. When faced
with increases in operating costs, the Company has increased its charges for
services. The Company's operations could be adversely affected if it is
unable to recover future cost increases or experiences significant delays in
increasing rates of reimbursement of its labor and other costs from Medicaid
and Medicare revenue sources.
The Company is from time to time subject to claims and suits arising in the
ordinary course of business. In the opinion of management, the ultimate
resolution of pending legal proceedings will not have a material effect on
the Company's consolidated financial statements.
<PAGE>
NOTE 8 - CAPITAL STOCK AND STOCK PLANS
In May 1996, the Company increased the number of authorized shares of
preferred and common stock for the purpose of affecting a three for two stock
split in the form of a 50% stock dividend. In October 1996, the Company
completed a public offering of 3,000,000 shares of its common stock,
resulting in net proceeds of $52,000. The proceeds from the offering were
used to repay a portion of outstanding bank indebtedness under the Company's
credit agreement which was incurred to finance certain of the Company's
acquisitions.
The Company's 1993 Stock Option Plan and Non-Employee Director Stock Option
Plan (Plans) provide for the issuance of options to directors, officers, key
employees and consultants of the Company. The aggregate number of shares
authorized for issuance under the plans is 3,840,000. Options are issued at
market value on the date of the grant, vest ratably over maximum periods of
five years, and expire ten years from the date of the grant.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, and applies APB Opinion No. 25 in
accounting for its plans and, accordingly, has not recognized compensation
cost for stock option plans and stock purchase plans in its financial
statements. Had the Company determined compensation cost based on the fair
value at the grant date consistent with the provisions of SFAS 123, the
Company's net income would have been changed to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Net income-as reported $ 18,425 $ 25,910
Net income-pro forma 17,530 24,181
Net income per share-as reported .69 .90
Net income per share-pro forma .66 .85
</TABLE>
The fair value of the stock options granted in 1995 and 1996 is estimated at
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1995 and 1996; dividend yield of 0%;
expected volatility of 38.4%; a risk-free interest rate of 6.5%; and expected
lives of 9.9 years.
Presented below is a summary of the stock option plans for the years ended
December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of
year 395,250 $7.09 1,772,778 $10.74 2,441,364 $11.46
Granted 1,585,893 10.94 750,828 13.10 828,746 17.60
Exercised --- --- (27,969) 8.73 (24,789) 11.05
Forfeited/expired (208,365) 8.33 (54,273) 12.15 (78,084) 13.10
Options outstanding
at end of year 1,772,778 $10.74 2,441,364 $11.46 3,167,237 $13.03
Weighted-average
grant-date fair
value of options
granted $7.08 $8.23 $11.06
</TABLE>
The following table summarizes information for stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Weighted Avg.
Range of Remaining Weighted Avg. Weighted Avg.
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C>
6.67-10.83 $311,251 6.8 $8.06 165,749 $7.71
11.17-14.67 2,051,610 7.6 11.97 826,881 11.81
16.00-20.59 804,376 9.5 17.66 22,500 18.67
$3,167,237 8.0 $13.03 1,015,130 $11.29
</TABLE>
<PAGE>
The Company's Employee Stock Purchase Plan (ESPP) was adopted by the
Company's Board of Directors in 1995 and approved by shareholders in 1996.
The ESPP permits employees of the Company to purchase the Company's common
stock at a price equal to the lesser of 85% of the fair market value of the
common stock on the first or last day of each quarter. There are 1,200,000
shares authorized for issuance under the ESPP.
In 1996, the Company adopted the Directors Retainer and Meeting Fee Plan
(Directors Plan) under which a director who is not an employee of the Company
may elect to receive payment of all or any portion of his or her annual cash
retainer and meeting fees either in cash or shares of the Company's common
stock. The number of shares payable is determined by the fair market value
of a share on the date payment is due. The aggregate number of shares
authorized for issuance under the Directors Plan is 75,000.
In 1995, the Company issued put options on 500,000 shares of its common stock
which expired unexercised in 1996. As of December 31, 1995 the balance in
Contingent stock purchase commitment is the amount the Company would have
been obligated to pay if all of the remaining put options were exercised.
At December 31, 1996, the Company has 4,976,000 shares of its common stock
reserved for the conversion of its Convertible Debentures.
NOTE 9 - SUBSEQUENT EVENTS (UNAUDITED)
In February 1997, options to purchase 556,000 shares of common stock were
granted at exercise prices representing fair market value as of the date of
the grants.
NOTE 10 - QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31, 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter(1)
<S> <C> <C> <C> <C>
Net revenues $ 81,700 $ 85,605 $ 90,948 $ 94,795
Income from operations 12,350 12,652 13,443 13,565
Income before extra-
ordinary item 5,094 5,264 5,780 6,009
Net Income 5,094 5,264 5,780 2,287
Income per common
share assuming full
dilution(2):
Income before extra-
ordinary item .19 .20 .22 .23
Net income $ .19 $ .20 $ .22 $ .09
Price range of
stock (2)(3)(4)
High $ 15 1/2 $ 15 1/8 $ 15 5/8 $ 16 1/8
Low $ 11 5/8 $ 11 1/4 $ 11 1/4 $ 11 3/4
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1996
First Second Third Fourth
Quarter(1) Quarter Quarter Quarter(1)
<S> <C> <C> <C> <C>
Net revenues $ 120,057 $ 131,889 $ 134,944 $ 145,340
Income from operations 15,478 17,610 18,759 19,624
Income before extra-
ordinary item 6,197 6,780 7,418 8,342
Net Income 4,716 6,780 7,418 6,996
Income per common
share assuming full
dilution(2):
Income before extra-
ordinary item .23 .24 .26 .27
Net income $ .18 $ .24 $ .26 $ .23
Price range of
stock (2)(3)(4)
High $ 19 1/4 $ 20 7/8 $ 21 3/4 $ 22 3/8
Low $ 14 7/8 $ 17 1/2 $ 18 $ 17 3/4
</TABLE>
(1) The Company incurred extraordinary charges of $3,722, $1,481 and $1,346,
net of taxes, in the fourth quarter of 1995, first quarter of 1996, and
fourth quarter of 1996, respectively, relating to extinguishment of debt.
(2) Income per share and prices have been adjusted for a 50% stock dividend
in May 1996.
(3) The Company has not paid cash dividends and does not anticipate paying
cash dividends in the foreseeable future.
(4) Stock prices are from official data released by the NASDAQ stock market
and The New York Stock Exchange.
As of February 21, 1997, there were approximately 88 record holders of the
Company's common stock.
<PAGE>
The Board of Directors
The Multicare Companies, Inc.
We have audited the accompanying consolidated balance sheets of The Multicare
Companies, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Multicare Companies, Inc. and subsidiaries as of December 31, 1995 and 1996,
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996 in conformity with
generally accepted accounting principles.
/S/ KPMG PEAT MARWICK LLP
Short Hills, New Jersey
February 4, 1997
<PAGE>
CORPORATE DATA
BOARD OF DIRECTORS
MOSHAEL J. STRAUS STUART H. ALTMAN
The Multicare Companies, Inc. Brandeis University
Hackensack, New Jersey Waltham, Massachusetts
DANIEL E. STRAUS CONSTANCE B. GIRARD-DICARLO
The Multicare Companies, Inc. ARAMARK Corporation
Hackensack, New Jersey Philadelphia, Pennsylvania
STEPHEN R. BAKER MENACHEM ROSENBERG
The Multicare Companies, Inc. Margolin, Winer and Evens
Hackensack, New Jersey Garden City, New York
PAUL J. KLAUSNER GEORGE ZOFFINGER
The Multicare Companies, Inc. Value Property Trust
Hackensack, New Jersey New Brunswick, New Jersey
CORPORATE OFFICERS
MOSHAEL J. STRAUS ANDREW HOROWITZ
Chairman and Co-Chief Executive Officer Senior Vice President, Ancillary
Services
DANIEL E. STRAUS MARK R. NESSELROAD
President and Co-Chief Executive Officer Senior Vice President, Acquistions,
Construction and Development
STEPHEN R. BAKER
Executive Vice President and Chief ROBERT S. ANDERSON
Operating Officer Vice President, Finance
SUSAN S. BAILIS KEVIN P. BRESLIN
Senior Vice President, ADS/Multicare Vice President, Acquisitions
BRADFORD C. BURKETT RONALD G. CLARENDON
Senior Vice President, General Counsel Vice President, Employee Relations
and Secretary
JANICE M. GREER
THOMAS P. FOY Vice President, Professional Serivces
Senior Vice President, Government
Relations and Business Development KEITH F. HELMER
Vice President, Operations
JOEL JAFFE
Senior Vice President, Treasurer KENT R. HUGILL
Vice President, Marketing
BARBARA A. MARTE
Vice President, Product Development
and Enhancement
TRANSFER AGENT ANNUAL MEETING DATE
American Stock & Transfer Trust Multicare will hold its Annual Meeting
40 Wall Street of stockholders on Wednesday, May 14,
New York, NY 10005 1997 at 10:00 a.m. EST at its corporate
headquarters.
INDEPENDENT AUDITORS
KPMG Peat Marwick, LLP STOCK LISTING
Short Hills, NJ Multicare's common stock trades on The
New York Stock Exchange under the
CORPORATE COUNSEL symbol "MUL".
Paul, Weiss, Rifkind,
Wharton & Garrison CORPORATE HEADQUARTERS
New York, NY 411 Hackensack Avenue
Hackensack, NJ 07601
FORM 10-K (201) 488-8818
A stockholder may receive without
charge a copy of the Form 10-K Annual
Report filed by the Securities and
Exchange Commission by written request
addressed to Investor Relations at the
corporate headquarters address.
EXHIBIT 21
PERCENT
JURISDICTION OF
SUBSIDIARIES OF THE MULTICARE COMPANIES,INC. OF INCORPORATION OWNERSHIP
Academy Nursing Home, Inc. MA 100%
ADS Apple Valley, Inc. MA 100%
ADS Apple Valley Limited Partnership NJ 100%
ADS Consulting, Inc. MA 100%
ADS Danvers ALF, Inc. DE 100%
ADS Hingham Nursing Facility, Inc. MA 100%
ADS Hingham Limited Partnership NJ 100%
ADS Home Health, Inc. DE 100%
ADS Management, Inc. MA 100%
ADS/Multicare, Inc. DE 100%
ADS Palm Chelmsford Inc. MA 49%
ADS Recuperative Center, Inc. MA 100%
ADS Recuperative Center Limited Partnership NJ 100%
ADS Reservoir Waltham, Inc. MA 49%
ADS Senior Housing, Inc. MA 100%
ANR, Inc. DE 100%
Applewood Health Resources, Inc. DE 100%
Assisted Living Associates of Wall, Inc. NJ 100%
Automated Professional Accounts, Inc. WV 100%
Berkeley Haven Limited Partnership WV 50%
Berks Nursing Homes, Inc. PA 100%
Bethel Health Resources, Inc. DE 100%
Breyut Convalescent Center NJ 100%
Breyut Convalescent Center, L.L.C. NJ 100%
Brightwood Property, Inc. WV 100%
Canterbury of Sheperdstown Limited Partnership WV 50%
Care 4, L.P. NJ 100%
Care Haven Associates NJ 100%
Care Haven Associated Limited Partnership WV 68.69%
Century Care Management, Inc. DE 100%
Charlton Nursing Care Center MA 20%
Chateau Village Health Resources, Inc. DE 100%
CHG Investment Corp., Inc. DE 100%
CHNR-I, Inc. DE 100%
Colonial Hall Health Resources, Inc. DE 100%
Colonial House Health Resources, Inc. DE 100%
Compass Health Services, Inc. WV 100%
Concord Companion Care, Inc. PA 100%
Concord Health Group, Inc. DE 100%
Concord Healthcare Services, Inc. PA 100%
Concord Home Health, Inc. PA 100%
Concord Pharmacy Services, Inc. PA 100%
Concord Rehab, Inc. PA 100%
Concord Service Corporation PA 100%
Courtyard Nursing Care Center Partnerhsip MA 33.33%
Cumberland Associates of Rhode Island, L.P. NJ 100%
CVNR, Inc. DE 100%
Dawn View Manor, Inc. WV 100%
Delm Nursing, Inc. PA 100%
Elmwood Health Resources, Inc. DE 100%
Encare of Massachusetts, Inc. DE 100%
Encare of Mendham, Inc. NJ 100%
Encare of Mendham, L.L.C. NJ 100%
Encare of Pennsylvania, Inc. PA 100%
Encare of Pennypack, Inc PA 100%
Encare of Quakertown, Inc. PA 100%
Encare of Wyncote, Inc. PA 100%
ENR, Inc. DE 100%
Glenmark Associates, Inc. WV 100%
Glenmark Associates - Dawnview Manor, Inc. WV 100%
Glenmark Limited Liability Company I NJ 100%
Glenmark Properties, Inc. WV 100%
Glenmark Properties I, Limited Partnership NJ 100%
GMA - Brightwood, Inc. WV 100%
GMA - Construction, Inc. WV 100%
GMA - Madison, Inc. WV 100%
GMA Partnership Holding Company, Inc. WV 100%
GMA - Uniontown, Inc. PA 100%
Groton Associates of Connecticut, L.P. NJ 100%
Health Resources of Broadman, Inc. DE 100%
Health Resources of Bridgeton, Inc. NJ 100%
Health Resources of Bridgeton, L.L.C. NJ 100%
Health Resources of Cedar Grove, Inc. NJ 100%
Health Resources of Cinnaminson, Inc. NJ 100%
Health Resources of Cinnaminson, L.L.C. NJ 100%
Health Resources of Colchester, Inc. CT 100%
Health Resources of Columbus, Inc. DE 100%
Health Resources of Cranbury, Inc. NJ 100%
Health Resources of Cranbury, L.L.C. NJ 100%
Health Resources of Cumberland, Inc. DE 100%
Health Resources of Eatontown, Inc. NJ 100%
Health Resources of Emery, Inc. DE 100%
Health Resources of Emery, L.L.C. DE 100%
Health Resources of Englewood, Inc. NJ 100%
Health Resources of Englewood, L.L.C. NJ 100%
Health Resources of Ewing, Inc. NJ 100%
Health Resources of Ewing, L.L.C. NJ 100%
Health Resources of Fair Lawn, Inc. DE 100%
Health Resources of Fair Lawn, L.L.C. DE 100%
Health Resources of Farmington, Inc. DE 100%
Health Resources of Gardner, Inc. DE 100%
Health Resources of Glastonbury, Inc. CT 100%
Health Resources of Groton, Inc. DE 100%
Health Resources of Jackson, Inc. NJ 100%
Health Resources of Jackson, L.L.C. NJ 100%
Health Resources of Lakeview, Inc. NJ 100%
Health Resources of Lemont, Inc. DE 100%
Health Resources of Karmenta and Madison, Inc. DE 100%
Health Resources of Marcella, Inc. DE 100%
Health Resources of Middletown (RI), Inc. DE 100%
Health Resources of Montclair, Inc. NJ 100%
Health Resources of Morristown, Inc. NJ 100%
Health Resources of Norfolk, Inc. DE 100%
Health Resources of Norwalk, Inc. CT 100%
Health Resources of Ridgewood, Inc. NJ 100%
Health Resources of Rockville, Inc. DE 100%
Health Resources of South Brunswick, Inc. NJ 100%
Health Resources of Wallingford, Inc. DE 100%
Health Resources of Warwick, Inc. DE 100%
Health Resources of West Orange, Inc. DE 100%
Health Resources of West Orange, L.L.C. DE 100%
Health Resources of Westwood, Inc. DE 100%
Helstat, Inc. WV 100%
Hingham Healthcare Limited Partnership MA 50%
HMNH Realty, Inc. DE 100%
HNCA, Inc. PA 100%
Holly Manor Associates of New Jersey, L.P. NJ 100%
Horizon Associates, Inc. WV 100%
Horizon Medical Equipment and Supply, Inc. WV 100%
Horizon Mobile, Inc. WV 100%
Horizon Rehabilitation, Inc. WV 100%
HR of Charleston, Inc. WV 100%
HRWV Huntington, Inc. WV 100%
Institutional Health Care Services, Inc. NJ 100%
Lakewood Health Resources, Inc. DE 100%
Laurel Health Resources, Inc. DE 100%
Lehigh Nursing Homes, Inc. PA 100%
LRC Holding Company, Inc. DE 100%
LWNR, Inc. DE 100%
Mabri Convalescent Center, Inc. CT 100%
Markglen, Inc. WV 100%
Marlington Associates Limited Partnership WV 44.06%
Marshfield Health Resources, Inc. DE 100%
Mercerville Associates of New Jersey, L.P. NJ 100%
Merry Heart Health Resources, Inc. DE 100%
MHNR, Inc. DE 100%
Middletown (RI) Associates of Rhode Island, L.P. NJ 100%
Montgomery Nursing Homes, Inc. PA 100%
Multicare Home Health of Illinois, Inc. DE 100%
National Pharmacy Service, Inc. PA 100%
Nursing and Retirement Center of the
Andovers, Inc. MA 100%
PHC Operating Corp. DE 100%
Pocahontas Continuous Care Center, Inc. WV 100%
Point Pleasant Haven Limited Partnership NJ 100%
Pomton Associates, L.P. NJ 100%
Pomptom Care, Inc. NJ 100%
Pomptom Care, L.L.C. NJ 100%
Prescott Nursing Home, Inc. MA 100%
Progressive Rehabilitation Centers, Inc. DE 100%
Providence Funding Corporation DE 100%
Providence Health Care, Inc. DE 100%
Providence Medical, Inc. DE 100%
Raleigh Manor Limited Partnership NJ 100%
Rest Haven Nursing Home, Inc. WV 100%
Ridgeland Health Resources, Inc. DE 100%
River Pines Health Resources, Inc. DE 100%
Rivershores Health Resources, Inc. DE 100%
RLNR, Inc. DE 100%
Roephel Convalescent Center, Inc. NJ 100%
Roephel Convalescent Center, L.L.C. NJ 100%
Romney Health Care Center Limited Partnership NJ 100%
Rose Healthcare, Inc. NJ 100%
Rose View Manor, Inc. PA 100%
Roxborough Nursing Homes, Inc. PA 100%
RSNR, Inc. DE 100%
RVNR, Inc. DE 100%
Senior Living Ventures, Inc. PA 100%
Schuylkill Nursing Homes, Inc. PA 100%
Schuylkill Partnership Acquisition Corp. PA 100%
Senior Source, Inc. MA 100%
Sisterville Haven Limited Partnership NJ 100%
Snow Valley Health Resources, Inc. DE 100%
Solomont Family Fall River Venture, Inc. MA 100%
Solomont Family Medford Venture, Inc. MA 100%
Stafford Convalescent Center, Inc. DE 100%
S.T.B. Investors, LTD. NY 100%
SVNR, Inc. DE 100%
Teays Valley Haven Limited Partnership NJ 100%
The ADS Group, Inc. MA 100%
The Apple Valley Center Limited Partnership MA 50%
The House of Campbell, Inc. WV 100%
The Recuperative Center Limited Partnership MA 47.55%
The Straus Group - Hopkins House, L.P. NJ 100%
The Straus Group - Old Bridge, L.P. NJ 100%
The Straus Group - Quakertown Manor, L.P. NJ 100%
The Straus Group - Ridgewood, L.P. NJ 100%
Total Rehabilitation Center, Inc. DE 100%
Total Rehabilitation Center, L.L.C. NJ 100%
Tri-State Mobile Medical Services, Inc. WV 100%
Wallingford Associates of Connecticut, L.P. NJ 100%
Warwick Associates of Rhode Island, L.P. NJ 100%
Westford Nurisng and Retirement Center, Inc. MA 100%
Westford Nursing and Retirement Center Limited
Partnership NJ 100%
Willow Manor Nursing Home, Inc. MA 100%
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
The Multicare Companies, Inc.
We consent to incorporation by reference in the Registration Statements
(No's. 33-86764, 33-94516, 33-80977, 333-04545) on Form S-8 and Registration
Statement (No. 33-96992) on Form S-3 of The Multicare Companies, Inc. of our
reports dated February 4, 1997, relating to the consolidated balance sheets
of The Multicare Companies, Inc. and subsidiaries as of December 31, 1995 and
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 1996, and the related schedule, which reports appear in or are
incorporated by reference in the December 31, 1996 annual report on Form 10-K
of The Multicare Companies, Inc.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MULTICARE
COMPANIES, INC. ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,150
<SECURITIES> 0
<RECEIVABLES> 102,234
<ALLOWANCES> 11,531
<INVENTORY> 0
<CURRENT-ASSETS> 121,803
<PP&E> 489,206
<DEPRECIATION> 46,187
<TOTAL-ASSETS> 761,667
<CURRENT-LIABILITIES> 82,476
<BONDS> 429,168
0
0
<COMMON> 301
<OTHER-SE> 207,634
<TOTAL-LIABILITY-AND-EQUITY> 761,667
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<TOTAL-REVENUES> 532,230
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<TOTAL-COSTS> 413,007
<OTHER-EXPENSES> 22,344
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<INTEREST-EXPENSE> 25,589
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