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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
and
STATEMENT ON
SCHEDULE 13D
Under the Securities Exchange Act of 1934
THE MULTICARE COMPANIES, INC.
(Name of Subject Company)
GENESIS ELDERCARE ACQUISITION CORP.
AND
GENESIS ELDERCARE CORP.
(Bidder)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
62543 V1 0
(CUSIP Number of Class of Securities)
MICHAEL R. WALKER
GENESIS ELDERCARE CORP.
148 WEST STATE STREET
KENNETT SQUARE, PA 19348
TELEPHONE: (610) 444-6350
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
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WILLIAM E. CURBOW, ESQ. RICHARD J. MCMAHON, ESQ. PAUL J. SHIM, ESQ.
SIMPSON THACHER & BARTLETT BLANK ROME COMISKY & MCCAULEY CLEARY, GOTTLIEB, STEEN & HAMILTON
425 LEXINGTON AVENUE 1200 FOUR PENN CENTER PLAZA ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10017 PHILADELPHIA, PENNSYLVANIA 19103 NEW YORK, NEW YORK 10006
TELEPHONE: (212) 455-2000 TELEPHONE: (215) 569-5500 TELEPHONE: (212) 225-2000
</TABLE>
CALCULATION OF FILING FEE
[CAPTION]
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$1,088,194,828 $217,639
</TABLE>
* Based on the offer to purchase all of the outstanding shares of Common Stock
of the Subject Company at $28.00 cash per share, 30,817,069 shares
outstanding, 4,341,346 shares reserved for issuance upon conversion of the
Subject Company's convertible debentures, 3,690,686 options outstanding and a
maximum of 15,000 shares that may be issued pursuant to certain of the
Subject Company's agreements or plans as of June 13, 1997.
** 1/50 of 1% of Transaction Valuation.
h CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2) AND
IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM OR
SCHEDULE AND THE DATE OF ITS FILING.
Amount Previously Paid:
Form or Registration No.:
Filing Party:
Date Filed:
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CUSIP NO. 62543 V1 0
<S> <C>
1 NAMES OF REPORTING PERSONS:
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
GENESIS ELDERCARE ACQUISITION CORP.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF and BK
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,013,966
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
45.5% (based on 30,817,069 shares outstanding)
10 TYPE OF REPORTING PERSON
CO
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2
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<TABLE>
<CAPTION>
CUSIP NO. 62543 V1 0
<S> <C>
1 NAMES OF REPORTING PERSONS:
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
GENESIS ELDERCARE CORP.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF and BK
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,013,966
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7)
EXCLUDES CERTAIN SHARES [ ]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
45.5% (based on 30,817,069 shares oustanding)
10 TYPE OF REPORTING PERSON
HC
</TABLE>
3
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This Tender Offer Statement on Schedule 14D-1 relates to the offer by
Genesis ElderCare Acquisition Corp., a Delaware corporation (the "Purchaser"),
to purchase all of the outstanding shares of Common Stock, $0.01 par value per
share (the "Shares"), of The Multicare Companies, Inc., a Delaware corporation
(the "Company"), at a purchase price of $28.00 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated June 20, 1997 (the "Offer to Purchase"), a
copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of
Transmittal (which, together with the Offer to Purchase, constitute the
"Offer"), a copy of which is attached hereto as Exhibit (a)(2). The Purchaser is
a wholly owned subsidiary of Genesis ElderCare Corp., a Delaware corporation
(the "Parent").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is The Multicare Companies, Inc. The
information set forth in Section 7 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is Common Stock, $.01 par value per share, of the Company. The information
set forth in the Introduction (the "Introduction") of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares; No Cash
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by the Parent and the Purchaser.
The information set forth in Section 8 ("Certain Information Concerning the
Parent, the Purchaser, Genesis, Cypress and TPG") of the Offer to Purchase and
in Schedule I thereto is incorporated herein by reference.
(e) and (f) During the last five years, neither the Parent nor the
Purchaser, nor, to the best knowledge of the Parent or the Purchaser, any of the
persons listed in Schedule I to the Offer to Purchase (i) has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
the Parent, the Purchaser, Genesis, Cypress and TPG") of the Offer to Purchase
is incorporated herein by reference. Except as set forth in Section 8 of the
Offer to Purchase, since January 1, 1994, there have been no transactions which
would be required to be disclosed under this Item 3(a) between any of the Parent
or the Purchaser, or, to the best knowledge of the Parent and the Purchaser, any
of the persons listed in Schedule I to the Offer to Purchase and the Company or
any of its executive officers, directors or affiliates.
(b) The information set forth in Section 8 ("Certain Information Concerning
the Parent, the Purchaser, Genesis, Cypress and TPG") and Section 10
("Background of the Offer; Contacts with the Company") of the Offer to Purchase
is incorporated herein by reference. Except as set forth in Section 8 and
Section 10 of the Offer to Purchase, since January 1, 1994, there have been no
contacts, negotiations or transactions which would be required to be disclosed
under Item 3(b) between any of the Parent, the Purchaser or any of their
respective subsidiaries or, to the best knowledge of the Parent and the
Purchaser, any of those persons listed in Schedule I to the Offer to Purchase
and the Company or its affiliates concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 9 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
4
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ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Introduction, Section 6 ("Price
Range of Shares; No Cash Dividends"), Section 10 ("Background of the Offer;
Contacts with the Company"), Section 11 ("The Merger Agreement; Certain Other
Agreements"), Section 12 ("Purpose of the Offer; the Merger; Plans for the
Company") and Section 14 ("Effect of the Offer on the Market for the Shares,
NYSE Listing and Exchange Act Registration") of the Offer to Purchase is
incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 8 ("Certain
Information Concerning the Parent, the Purchaser, Genesis, Cypress and TPG") of
the Offer to Purchase is incorporated herein by reference. Except as set forth
in the Introduction and Section 8 of the Offer to Purchase, neither the Parent
nor the Purchaser nor, to the best knowledge of the Parent and the Purchaser,
any of the persons listed in Schedule I to the Offer to Purchase or any
associate or majority-owned subsidiary of the Parent or the Purchaser or any of
the persons so listed beneficially owns or has any right to acquire, directly or
indirectly, any Shares.
(b) The information set forth in the Introduction and Section 11 ("The
Merger Agreement; Certain Other Agreements") of the Offer to Purchase is
incorporated herein by reference. Except as set forth in the Introduction and
Section 11 of the Offer to Purchase, neither the Parent nor the Purchaser nor,
to the best knowledge of the Parent and the Purchaser, any of the persons or
entities referred to above or any executive officer, director or subsidiary of
any of the foregoing has effected any transactions in the Shares during the past
sixty days.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in Section 9 ("Source and Amount of Funds"),
Section 10 ("Background of the Offer; Contacts with the Company"), and Section
17 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by
reference. Except as set forth in Sections 9, 10 and 17 of the Offer to
Purchase, none of the Parent nor the Purchaser nor, to the best knowledge of the
Parent and the Purchaser, any of the persons listed in Schedule I to the Offer
to Purchase, has any contract, arrangement, understanding or relationship with
any other person with respect to any securities of the Company (including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loans or option arrangements, puts or calls, guarantees of loans, guarantee
agreements or any giving or withholding of proxies).
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Parent, the Purchaser, Genesis, Cypress and TPG") of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("The Merger Agreement; Certain
Other Agreements") of the Offer to Purchase is incorporated herein by reference.
(b) and (c) The information set forth in Section 16 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 9 ("Source and Amount of Funds")
and Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer
to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a) (1) Offer to Purchase dated June 20, 1997.
5
<PAGE>
(a) (2) Letter of Transmittal.
(a) (3) Notice of Guaranteed Delivery.
(a) (4) Letter from the Dealer Manager to Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a) (5) Letter to clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a) (6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a) (7) Summary Advertisement as published on June 20, 1997.
(a) (8) Press Release issued by the Parent on June 16, 1997.
(b) (1) Amended and Restated Commitment Letter, dated June 14, 1997 to the
Purchaser from Mellon Bank, N.A., Citicorp Securities, Inc., Citibank N.A.,
First Union Capital Markets Corp., First Union National Bank and NationsBank,
N.A.
(b) (2) Amended and Restated Commitment Letter, dated June 14, 1997 to
Genesis Health Ventures, Inc. from Mellon Bank, N.A., Citicorp Securities, Inc.,
Citibank, N.A., First Union Capital Markets Corp., First Union National Bank and
NationsBank, N.A.
(b) (3) Commitment Letter dated June 15, 1997 to Genesis Health Ventures,
Inc. and Purchaser from Morgan Stanley Bridge Fund, L.L.C. and Montgomery
Securities, L.P.
(c) (1) Agreement and Plan of Merger dated June 16, 1997 by and among
Genesis ElderCare Corp., Genesis ElderCare Acquisition Corp. and The Multicare
Companies, Inc.
(c) (2) Tender Agreement and Irrevocable Proxy dated June 16, 1997 among
Genesis ElderCare Corp., Genesis ElderCare Acquisition Corp. and Daniel E.
Straus.
(c) (3) Tender Agreement and Irrevocable Proxy dated June 16, 1997 among
Genesis ElderCare Corp., Genesis ElderCare Acquisition Corp. and Moshael J.
Straus.
(c) (4) Noncompetition and Consulting Agreement dated June 16, 1997 among
Genesis Health Ventures, Inc., Genesis ElderCare Corp., Genesis ElderCare
Acquisition Corp. and Daniel E. Straus.
(c) (5) Noncompetition and Consulting Agreement dated June 16, 1997 among
Genesis Health Ventures, Inc., Genesis ElderCare Corp., Genesis ElderCare
Acquisition Corp. and Moshael J. Straus.
(c) (6) Noncompetition and Consulting Agreement dated June 16, 1997 among
Genesis Health Ventures, Inc., Genesis ElderCare Corp., Genesis ElderCare
Acquisition Corp. and Stephen R. Baker.
(c) (7) Letter Agreement dated June 16, 1997 between Genesis Health
Ventures, Inc. and Straus Associates.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
GENESIS ELDERCARE CORP.
By: /s/ George V. Hager, Jr.
NAME: GEORGE V. HAGER, JR.
TITLE: SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
GENESIS ELDERCARE ACQUISITION CORP.
By: /s/ George V. Hager, Jr.
NAME: GEORGE V. HAGER, JR.
TITLE: SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Date: June 20, 1997
7
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EXHIBIT INDEX
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<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
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11(a)(1) Offer to Purchase, dated June 20, 1997..................................
11(a)(2) Letter of Transmittal...................................................
11(a)(3) Notice of Guaranteed Delivery...........................................
11(a)(4) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees............................................
11(a)(5) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees..................................................
11(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.....................................................
11(a)(7) Summary Advertisement as published on June 20, 1997.....................
11(a)(8) Press Release issued by the Parent on June 20, 1997.....................
11(b)(1) Amended and Restated Commitment Letter dated June 14, 1997 to the
Purchaser from Mellon Bank, N.A., Citicorp Securities, Inc., Citibank
N.A., First Union Capital Markets Corp., First Union National Bank and
NationsBank, N.A........................................................
11(b)(2) Amended and Restated Commitment Letter, dated June 14, 1997 to Genesis
Health Ventures, Inc. from Mellon Bank, N.A., Citicorp Securities, Inc.,
Citibank N.A., First Union Capital Markets Corp., First Union National
Bank and NationsBank, N.A.
11(b)(3) Commitment Letter dated June 15, 1997 to Genesis Health Ventures, Inc.
and Purchaser from Morgan Stanley Bridge Fund, L.L.C. and Montgomery
Securities, L.P.
11(c)(1) Agreement and Plan of Merger dated June 16, 1997 by and among Genesis
ElderCare Corp., Genesis ElderCare Acquisition Corp. and The Multicare
Companies, Inc.
11(c)(2) Tender Agreement and Irrevocable Proxy dated June 16, 1997 among Genesis
ElderCare Corp., Genesis ElderCare Acquisition Corp. and Daniel E.
Straus.
11(c)(3) Tender Agreement and Irrevocable Proxy dated June 16, 1997 among Genesis
ElderCare Corp., Genesis ElderCare Acquisition Corp. and Moshael J.
Straus.
11(c)(4) Noncompetition and Consulting Agreement dated June 16, 1997 among
Genesis Health Ventures, Inc., Genesis ElderCare Corp., Genesis
ElderCare Acquisition Corp. and Daniel E. Straus.
11(c)(5) Noncompetition and Consulting Agreement dated June 16, 1997 among
Genesis Health Ventures, Inc., Genesis ElderCare Corp., Genesis
ElderCare Acquisition Corp. and Moshael J. Straus.
11(c)(6) Noncompetition and Consulting Agreement dated June 16, 1997 among
Genesis Health Ventures, Inc., Genesis ElderCare Corp., Genesis
ElderCare Acquisition Corp. and Stephen R. Baker.
11(c)(7) Letter Agreement dated June 16, 1997 between Genesis Health Ventures,
Inc. and Straus Associates.
</TABLE>
8
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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
THE MULTICARE COMPANIES, INC.
AT
$28.00 NET PER SHARE
BY
GENESIS ELDERCARE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
GENESIS ELDERCARE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JULY 18, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH
NUMBER OF SHARES OF COMMON STOCK WHICH CONSTITUTES, ON A FULLY-DILUTED BASIS, A
MAJORITY OF THE VOTING POWER ON THE DATE OF PURCHASE OF ALL SECURITIES OF THE
MULTICARE COMPANIES, INC. (THE "COMPANY") ENTITLED TO VOTE GENERALLY IN THE
ELECTION OF DIRECTORS OR IN A MERGER, (II) THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED, AND (III) THE RECEIPT BY GENESIS ELDERCARE ACQUISITION
CORP. (THE "PURCHASER") OF THE PROCEEDS PURSUANT TO THE DEBT FINANCING
COMMITMENTS ENTERED INTO IN CONNECTION WITH THE MERGER AGREEMENT IN ORDER TO
PURCHASE THE SHARES PURSUANT TO THE OFFER AND THE MERGER, REFINANCE ALL
INDEBTEDNESS OF THE COMPANY DUE AS A RESULT OF THE CONSUMMATION OF THE OFFER OR
THE MERGER AND PAY RELATED FEES AND EXPENSES. THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1, 9 AND 15.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES OF THE COMMON STOCK OF THE COMPANY AND
RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR
SHARES TO THE PURCHASER.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares (as defined herein) of the Company should either (1) complete and sign
the Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to the
Depositary (as defined herein), and either deliver the certificates representing
the tendered Shares and any other required documents to the Depositary or tender
such Shares pursuant to the procedure for book-entry transfer set forth in
Section 3 or (2) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to tender
Shares so registered.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedure for book-entry transfer on a timely basis, may tender such Shares
by following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance may be directed to Montgomery
Securities or Morgan Stanley & Co. Incorporated (each, a "Dealer Manager") or to
D.F. King & Co., Inc. (the "Information Agent") at their respective addresses
and telephone numbers set forth on the back cover of this Offer to Purchase.
Additional copies of this Offer to Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may also be obtained from the Information Agent or
the Dealer Managers, or from brokers, dealers, commercial banks or trust
companies.
THE DEALER MANAGERS FOR THE OFFER ARE:
MONTGOMERY SECURITIES MORGAN STANLEY DEAN WITTER
JUNE 20, 1997
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TABLE OF CONTENTS
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PAGE
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INTRODUCTION........................................................................................................... 1
THE TENDER OFFER....................................................................................................... 4
1. Term of the Offer; Expiration Date................................................................................ 4
2. Acceptance for Payment and Payment for Shares..................................................................... 5
3. Procedure for Tendering Shares.................................................................................... 6
4. Withdrawal Rights................................................................................................. 8
5. Certain Federal Income Tax Consequences........................................................................... 8
6. Price Range of Shares; No Cash Dividends.......................................................................... 9
7. Certain Information Concerning the Company........................................................................ 9
8. Certain Information Concerning the Parent, the Purchaser, Genesis, Cypress and TPG................................ 11
9. Source and Amount of Funds........................................................................................ 13
10. Background of the Offer; Contacts with the Company................................................................ 23
11. The Merger Agreement; Certain Other Agreements.................................................................... 23
12. Purpose of the Offer; the Merger; Plans for the Company........................................................... 36
13. Dividends and Distributions....................................................................................... 37
14. Effect of the Offer on the Market for the Shares, NYSE Listing
and Exchange Act Registration..................................................................................... 38
15. Certain Conditions of the Offer................................................................................... 38
16. Certain Legal Matters and Regulatory Approvals.................................................................... 39
17. Fees and Expenses................................................................................................. 44
18. Miscellaneous..................................................................................................... 44
SCHEDULE I -- DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT,
THE PURCHASER AND GENESIS, MEMBERS OF CYPRESS L.L.C. AND DIRECTORS AND EXECUTIVE OFFICERS OF ONWIST
AND TPG ADVISORS....................................................................................................... I-1
</TABLE>
i
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To: The Stockholders of
THE MULTICARE COMPANIES, INC.
INTRODUCTION
Genesis ElderCare Acquisition Corp., a Delaware corporation formerly known
as Waltz Acquisition Corp. (the "Purchaser") and a wholly owned subsidiary of
Genesis ElderCare Corp., a Delaware corporation formerly known as Waltz Corp.
(the "Parent"), hereby offers to purchase all of the outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of The Multicare
Companies, Inc., a Delaware corporation (the "Company"), at a purchase price of
$28.00 per Share, net to the seller in cash without interest thereon, upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letter of Transmittal (which, as amended from time to time, together
constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Montgomery Securities and Morgan
Stanley & Co. Incorporated ("Morgan Stanley"), each of which is acting as a
Dealer Manager for the Offer (in such capacity, the "Dealer Manager"),
ChaseMellon Shareholder Services, L.L.C., which is acting as the Depositary (in
such capacity, the "Depositary") and D.F. King & Co., Inc., which is acting as
the Information Agent (in such capacity, the "Information Agent"), incurred in
connection with the Offer. See Section 17.
The Board of Directors of the Company (the "Board of Directors") has
approved the Merger Agreement (as defined below) and the transactions
contemplated thereby, including the Offer and the Merger (as defined below), and
determined that the terms of the Offer and the Merger are fair to, and in the
best interests of, the holders of the Shares and recommends that the holders of
the Shares accept the Offer and tender their Shares to the Purchaser.
The Board of Directors has received the written opinion dated June 16, 1997
of Smith Barney Inc. ("Smith Barney"), financial advisor to the Company, to the
effect that, as of such date and based upon and subject to certain matters
stated therein, the $28.00 cash consideration to be received in the Offer and
the Merger by holders of Shares (other than Parent and its affiliates) was fair,
from a financial point of view, to such holders. A copy of the opinion of Smith
Barney is attached to the Company's Solicitation/Recommendation Statement on
Form 14D-9 which is being distributed to the stockholders of the Company, and
stockholders are urged to read the opinion carefully in its entirety for the
assumptions made, matters considered and limitations on the review undertaken by
Smith Barney.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
SECTION 1) SUCH NUMBER OF SHARES WHICH CONSTITUTES, ON A FULLY-DILUTED BASIS, A
MAJORITY OF THE VOTING POWER ON THE DATE OF PURCHASE OF ALL SECURITIES OF THE
COMPANY ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS OR IN A MERGER
(THE "MINIMUM CONDITION"), (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE
WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED (THE "HSR ACT") (THE "HSR ACT CONDITION"), AND (III) THE RECEIPT BY
THE PURCHASER OF THE PROCEEDS OF THE FINANCING PURSUANT TO THE COMMITMENT LETTER
AND THE BRIDGE FINANCING COMMITMENT LETTER (EACH AS DEFINED IN SECTION 9)
ENTERED INTO IN CONNECTION WITH THE MERGER AGREEMENT IN ORDER TO PURCHASE THE
SHARES PURSUANT TO THE OFFER AND THE MERGER, REFINANCE ALL INDEBTEDNESS OF THE
COMPANY DUE AS A RESULT OF THE CONSUMMATION OF THE OFFER OR THE MERGER AND PAY
RELATED FEES AND EXPENSES (THE "FINANCING CONDITION"). SEE SECTIONS 1, 9 AND 15.
IF THE PURCHASER PURCHASES NOT LESS THAN THAT NUMBER OF SHARES NEEDED TO SATISFY
THE MINIMUM CONDITION, IT WILL BE ABLE TO EFFECT THE MERGER WITHOUT THE
AFFIRMATIVE VOTE OF ANY OTHER STOCKHOLDER OF THE COMPANY. SEE SECTION 12.
The Parent estimates that approximately $1.483 billion of financing will be
required in connection with the transactions pursuant to the Merger Agreement
and that, in addition, approximately $37 million of existing indebtedness of the
Company and its subsidiaries will remain outstanding after the Merger. The
Purchaser has received from a group of lenders for which Mellon Bank, N.A. is
acting as administrative agent, a commitment letter indicating their willingness
to lend to the Purchaser up to $625 million in the aggregate and has received
from Morgan Stanley Bridge Fund, L.L.C. and Montgomery Group Holdings, L.L.C. a
commitment letter indicating their willingness to purchase up to $133 million
and $67 million, respectively, of subordinated debt securities of the Purchaser.
The remainder of the funds necessary to finance the Offer and the Merger will
consist of $720 million from the issuance and sale of common stock of the Parent
("Parent Common Stock") to Genesis Health Ventures, Inc. ("Genesis"), The
Cypress Group L.L.C. (together with its affiliates, "Cypress") and TPG Partners
II, L.P. (together with its affiliates, "TPG"). For more information concerning
the financing of the Offer and the Merger and related transactions, see Section
9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 16, 1997 (the "Merger Agreement"), by and among the Parent, the
Purchaser and the Company. The Merger Agreement provides, among other things,
for the making of the Offer by the Purchaser, and further provides that,
following the completion of the Offer, upon the terms and
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subject to the conditions of the Merger Agreement, and in accordance with the
Delaware General Corporation Law (the "DGCL"), the Purchaser will be merged with
and into the Company (the "Merger"). Following the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and become a
wholly owned subsidiary of the Parent, and the separate corporate existence of
the Purchaser will cease. See Section 11.
At the effective time of the Merger (the "Effective Time"), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by the Company or any subsidiary of the Company and each Share
owned by the Parent, the Purchaser or any other subsidiary of the Parent, which
shall be cancelled, and other than Shares, if any (collectively, "Dissenting
Shares"), held by stockholders who have properly exercised appraisal rights
under Section 262 of the DGCL) will, by virtue of the Merger and without any
action on the part of the holders of the Shares be converted into the right to
receive $28.00 in cash (the "Merger Consideration"), payable to the holder
thereof, without interest, upon surrender of the certificate formerly
representing such Share, less any required withholding taxes.
The Merger Agreement is more fully described in Section 11. Certain federal
income tax consequences of the sale of the Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
The Company has represented to the Parent that as of the close of business
on June 13, 1997, there were 30,817,069 Shares issued and outstanding, 4,341,346
Shares reserved for issuance upon conversion of the Company's 7% Convertible
Subordinated Debentures due 2003 (the "7% Debentures"), 3,690,686 Shares
reserved for issuance upon the exercise of outstanding stock options and
approximately 15,000 Shares reserved for issuance pursuant to the Company's
Employee Stock Purchase Program. Based upon the foregoing, the Purchaser
believes that approximately 19,432,051 Shares constitute a majority of the
outstanding Shares on a fully-diluted basis.
Simultaneously with the execution of the Merger Agreement, the Parent and
the Purchaser entered into a Tender Agreement and Irrevocable Proxy (the "Tender
Agreements") with each of Daniel E. Straus and Moshael J. Straus (each, a
"Stockholder" and together, the "Stockholders") as a condition to the
willingness of the Parent and the Purchaser to proceed with the Offer and the
Merger.
Pursuant to the Tender Agreements, each Stockholder agreed to validly
tender (or cause the record owner thereof to tender) and not withdraw, pursuant
to and in accordance with the terms of the Offer, all of the Shares and any
other securities entitled to vote generally in the election of directors
beneficially owned by such Stockholder (the "Owned Shares").
Pursuant to the Tender Agreements, each Stockholder also agreed that during
the period commencing on the date thereof and continuing until the earlier of
(x) the consummation of the Offer and (y) the termination of the Tender
Agreements, at any meeting of the Company's stockholders or in connection with
any written consent of the Company's stockholders, subject to the absence of a
preliminary or permanent injunction or other requirement under applicable law,
such Stockholder shall vote (or cause to be voted) all Owned Shares: (i) in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval and adoption of the Merger and the terms thereof and
each of the other actions contemplated by the Merger Agreement and the Tender
Agreements and any actions required in furtherance thereof; (ii) against any
action or agreement that would impede, interfere with, or prevent the Offer or
the Merger; and (iii) except as otherwise agreed to in writing in advance by the
Parent, against the following actions (other than the Offer, the Merger and the
transactions contemplated by the Merger Agreement and the Tender Agreements):
(I) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries;
(II) any sale, lease or transfer of a material amount of the assets or business
of the Company or its subsidiaries, or any reorganization, restructuring,
recapitalization, special dividend, dissolution, liquidation or winding up of
the Company or its subsidiaries; (III) any change in the present capitalization
of the Company including any proposal to sell any material equity interest in
the Company or any amendment of the certificate of incorporation of the Company;
and (IV) against an election of new members of the Board of Directors of the
Company except where the vote is cast in favor of the nominees of a majority of
the existing directors of the Company. In addition, each Stockholder agreed not
to enter into any agreement, arrangement or understanding with any person the
effect of which would be inconsistent or violative of the foregoing. Further,
each Stockholder granted to, and appointed the Purchaser and any designee of the
Purchaser such Stockholder's irrevocable (until the termination of the Tender
Agreements) proxy and attorney-in-fact (with full power of substitution) to vote
the Owned Shares of such Stockholder as indicated in this paragraph.
As of June 16, 1997, the Stockholders beneficially owned 14,013,966 Shares,
or 36.1% of the outstanding Shares on a fully-diluted basis.
For a more detailed description of the Tender Agreements, see Section 11.
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The Company has advised the Purchaser that, to the knowledge of the
Company, all the directors of the Company intend to tender their Shares pursuant
to the Offer.
In connection with the Merger Agreement, the Parent and the Purchaser also
entered into Noncompetition and Consulting Agreements (the "Noncompetition
Agreements") with each of Daniel E. Straus and Moshael J. Straus (each, a
"Consultant" and together the "Consultants").
Pursuant to the Noncompetition Agreements, the Parent irrevocably appointed
each Consultant, and each Consultant agreed to act as, a consultant, for a
period of 12 months (the "Consulting Term") commencing on the date of the
consummation of the Merger (the "Closing"), to perform such reasonable
consulting services as the chief executive officer of the Parent requests.
As compensation for each Consultant's services, the Parent agreed to pay
each Consultant a consulting fee of $1.5 million payable in immediately
available funds at the Closing. In addition, each Consultant will be reimbursed
for all expenses actually incurred by such Consultant in the performance of his
duties.
As consideration for each Consultant's agreement to the restrictive
covenants described in the second following paragraph (the "Restrictive
Covenants"), the Parent agreed, among other things, to pay each Consultant a
cash payment in the amount of $1.5 million payable in immediately available
funds at the Closing.
The Noncompetition Agreements also provide that the Consultants will not,
for a period of one year after the date thereof, in any capacity, directly or
indirectly, for his own account or for the benefit of any person, establish,
engage in or be connected with any Competitive Business. The term "Competitive
Business" means any Restricted Business conducted in the Restricted Zone.
Restricted Business means institutional pharmacy, rehabilitation services,
long-term care services, skilled nursing facilities or assisted living
facilities but does not include providing any other goods or services to skilled
nursing facilities, assisted living facilities and other health care facilities.
The Restricted Zone means any town in Connecticut or Rhode Island in which the
Company operates a long term care facility and an area of 15 miles surrounding
such facility; any county in Illinois, New Jersey, Ohio, West Virginia or
Wisconsin in which the Company operates a long term care facility and an area of
15 miles surrounding such facility; all portions of Massachusetts east of
Worcester; all portions of Pennsylvania east of Harrisburg and an area of 15
miles around any facility located in Virginia or Vermont; but in no event
includes any portion of any state other than Connecticut, Rhode Island,
Illinois, New Jersey, Ohio, West Virginia, Wisconsin, Massachusetts,
Pennsylvania, Virginia or Wisconsin. The foregoing does not restrict either
Consultant from owning interests in, or developing, real estate so long as such
Consultant is not operating any Restricted Business. In addition, the
Consultants may not pursue certain development projects.
Simultaneously with the execution of the Merger Agreement, the Parent and
the Purchaser also entered into a Noncompetition Agreement with Stephen R.
Baker. The terms of such agreement are identical in all material respects to the
terms of the Noncompetition Agreements described above, except that the
Noncompetition Agreement with Mr. Baker (i) does not contain any provisions
relating to the rendering of, or payment for, consulting services by Mr. Baker
and (ii) provides for a cash payment of $500,000 to Mr. Baker as consideration
for his agreement to the Restrictive Covenants.
For a more detailed discussion of the Noncompetition Agreements, see
Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERM OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Purchaser will accept
for payment and pay for all Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Friday, July 18,
1997, unless and until the Purchaser, in its sole discretion (but subject to the
terms and conditions of the Merger Agreement), shall have extended the period
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION, THE HSR ACT CONDITION AND THE FINANCING CONDITION AND CERTAIN
OTHER CONDITIONS. SEE SECTION 15, WHICH SETS FORTH IN FULL THE CONDITIONS TO THE
OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER AGREEMENT AND THE APPLICABLE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION"), THE PURCHASER RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO
WAIVE ANY OR ALL CONDITIONS TO THE OFFER (OTHER THAN THE MINIMUM CONDITION) AND
TO MODIFY THE TERMS OF THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER
AGREEMENT, INCLUDING THE PROVISIONS OF THE MERGER AGREEMENT SET FORTH IN THE
NEXT PARAGRAPH, AND THE APPLICABLE RULES AND REGULATIONS OF THE COMMISSION, IF
BY THE EXPIRATION DATE ANY OR ALL OF SUCH CONDITIONS TO THE OFFER HAVE NOT BEEN
SATISFIED, THE PURCHASER RESERVES THE RIGHT (BUT SHALL NOT BE OBLIGATED) TO (I)
TERMINATE THE OFFER AND RETURN ALL TENDERED SHARES TO TENDERING STOCKHOLDERS,
(II) WAIVE SUCH UNSATISFIED CONDITIONS AND PURCHASE ALL SHARES VALIDLY TENDERED
OR (III) EXTEND THE OFFER AND, SUBJECT TO THE TERMS OF THE OFFER (INCLUDING THE
RIGHTS OF STOCKHOLDERS TO WITHDRAW THEIR SHARES), RETAIN THE SHARES WHICH HAVE
BEEN TENDERED, UNTIL THE TERMINATION OF THE OFFER, AS EXTENDED.
Subject to the applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 15 shall have occurred, to
(i) extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by giving oral or
written notice of such extension to the Depositary and (ii) amend the Offer in
any respect by giving oral or written notice of such amendment to the
Depositary. During any such extension, all Shares previously tendered and not
properly withdrawn will remain subject to the Offer, subject to the right of a
tendering stockholder to withdraw such stockholder's Shares. Under the terms of
the Merger Agreement, however, without the consent of the Company, the Purchaser
will not reduce the number of Shares subject to the Offer, reduce the price per
Share payable in the Offer, modify or add to the conditions to the Offer, except
as provided in the next sentence, extend the Offer, change the form of
consideration payable in the Offer (other than by increasing the cash offer
price) or amend or modify any term of the Offer in any manner adverse to any of
the Company's stockholders. The Purchaser may, without the consent of the
Company, but subject to the Company's right to terminate the Merger Agreement
after September 15, 1997 (which date may be extended by the Parent to October
15, 1997 if the Parent is and has been diligently pursuing approval of the
applications and notices filed with governmental authorities in order to
consummate the Offer and the Merger), if the Purchaser has not accepted Shares
for payment pursuant to the Offer by such date (i) extend the Offer if at the
scheduled expiration date of the Offer any conditions to the Purchaser's
obligation to purchase Shares has not been satisfied, until such time as such
conditions are satisfied or waived, or (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Commission
applicable to the Offer or in order to obtain any material regulatory approval
applicable to the Offer. The Purchaser shall have no obligation to pay interest
on the purchase price of tendered Shares. The rights reserved by the Purchaser
in this paragraph are in addition to the Purchaser's rights to terminate the
Offer pursuant to Section 15.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement thereof, and such announcement in
the case of an extension will be made in accordance with Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), no later than
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Purchaser
may choose to make any public announcement, except as provided by applicable law
(including Rules 14d-4(c) and 14(d)-6(d), under the Exchange Act which require
that material changes be promptly disseminated to holders of Shares), the
Purchaser shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to the
Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, the Purchaser will disseminate
additional tender offer material and extend the Offer to the extent required by
Rules 14d-4(c),
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14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an
offer must remain open following material changes in the terms of the offer,
other than a change in price or a change in the percentage of securities sought,
will depend upon the facts and circumstances, including the materiality, of the
changes. With respect to a change in price or, subject to certain limitations, a
change in the percentage of securities sought, a minimum ten business day period
from the day of such change is generally required to allow for adequate
dissemination to stockholders. For purposes of the Offer, a "business day" means
any day other than a Saturday, Sunday, or a federal holiday and consists of the
time period from 12:01 A.M. through 12:00 Midnight, New York City time.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment and will pay for all Shares validly tendered
and not properly withdrawn on or prior to the Expiration Date as soon as
practicable after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions of the Offer set forth in Section 15,
including without limitation the Minimum Condition, the HSR Act Condition and
the Financing Condition. In addition, subject to applicable rules of the
Commission, the Purchaser expressly reserves the right to delay acceptance for
payment of or payment for Shares pending receipt of any other regulatory
approvals specified in Section 16. Any such delays will be effected in
compliance with Rule 14e-1(c) under the Exchange Act.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see Section 16.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Certificates for such Shares ("Share Certificates") or timely confirmation (a
"Book-Entry Confirmation") of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility" and,
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message (as defined below) in connection with a book-entry transfer,
and (iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT. If, for any reason whatsoever, acceptance for
payment of or payment for any Shares tendered pursuant to the Offer is delayed
or the Purchaser is unable to accept for payment or pay for Shares tendered
pursuant to the Offer, then without prejudice to the Purchaser's rights set
forth herein, the Depositary may nevertheless, on behalf of the Purchaser and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered Shares and such
Shares may not be withdrawn except to the extent that the tendering stockholder
is entitled to and duly exercises withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason or if
Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned
without expense to the tendering stockholder (or, in the case of Shares tendered
by book-entry transfer into the Depositary's account at a
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Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained at such Book-Entry
Transfer Facility), as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase all
or any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDERS. Except as set forth below, in order for Shares to be validly
tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Shares, and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase on or prior to the Expiration
Date and either (i) Share Certificates evidencing tendered Shares must be
received by the Depositary at such address or such Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary, in each case on or
prior to the Expiration Date or (ii) the guaranteed delivery procedures
described below must be complied with.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish
accounts with respect to the Shares at the Book-Entry Transfer Facilities for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of any
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
such Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at a Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, must in any case be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF
BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. Signatures on Letters of Transmittal must be
guaranteed by a firm which is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (each of the foregoing being referred to as an
"Eligible Institution"), except in cases where Shares are tendered (i) by a
registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or Share
Certificates not accepted for payment or not tendered are to be returned, to a
person other than the registered holder, the Share Certificates must be endorsed
or accompanied by appropriate stock powers, in either case, signed exactly as
the name of the registered holder appears on such certificates, with the
signatures on such certificates or stock powers guaranteed as aforesaid. See
Instructions 1 and 5 of the Letter of Transmittal.
If Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) must accompany each such delivery.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available, or such stockholder cannot deliver the Share Certificates and all
other required documents to reach the Depositary on or prior to the Expiration
Date, or such stockholder cannot complete the procedure for
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delivery by book-entry transfer on a timely basis, such Shares may nevertheless
be tendered, provided that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form made available by the Purchaser is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation),
representing all tendered Shares in proper form for transfer, together with
the Letter of Transmittal (or a facsimile thereof) properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal are received by the Depositary within three
New York Stock Exchange ("NYSE") trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution and a representation that the
stockholder owns the Shares tendered within the meaning of, and that the tender
of the Shares effected thereby complies with, Rule 14e-4 under the Exchange Act,
each in the form set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time and will depend upon when Share Certificates or Book-Entry Confirmations of
such Shares are received into the Depositary's account at a Book-Entry Transfer
Facility.
APPOINTMENT AS PROXY. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser and each of them as
such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and with respect to any
and all other Shares or other securities issued or issuable in respect of such
Shares on or after the date hereof). All such powers of attorney and proxies
shall be considered irrevocable and coupled with an interest in the tendered
Shares. Such appointment will be effective when, and only to the extent that,
the Purchaser accepts such Shares for payment. Upon such acceptance for payment,
all prior powers of attorney and proxies given by such stockholder with respect
to such Shares (and such other Shares and securities) will be revoked without
further action, and no subsequent powers of attorney and proxies may be given
nor any subsequent written consents executed (and, if given or executed, will
not be deemed effective). The designees of the Purchaser will, with respect to
the Shares (and such other Shares and securities) for which such appointment is
effective, be empowered to exercise all voting and other rights of such
stockholder as they in their sole discretion may deem proper at any annual or
special meeting of the Company's stockholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise. The
Purchaser reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Purchaser's payment for such Shares, the
Purchaser must be able to exercise full voting rights with respect to such
Shares and other securities, including voting at any meeting of stockholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may in the opinion of its
counsel be unlawful. The Purchaser also reserves the absolute right to waive any
of the conditions of the Offer or any defect or irregularity in any tender of
Shares of any particular stockholder whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
have been cured or waived. None of the Purchaser, the Parent, any of their
affiliates or assigns, either Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9. Under the
"backup withholding" provisions of federal income tax law, the Depositary may be
required to withhold 31% of the amount of any payments of cash pursuant to the
Offer. In order to avoid backup withholding, each stockholder surrendering
Shares in the Offer must, unless an exemption
7
<PAGE>
applies, provide the payor of such cash with such stockholder's correct taxpayer
identification number ("TIN") on a substitute Form W-9 and certify, under
penalties of perjury, that such TIN is correct and that such stockholder is not
subject to backup withholding. If a stockholder does not provide its correct TIN
or fails to provide the certifications described above, the Internal Revenue
Service ("IRS") may impose a penalty on such stockholder and payment of cash to
such stockholder pursuant to the Offer may be subject to backup withholding of
31%. All stockholders surrendering Shares pursuant to the Offer should complete
and sign the substitute Form W-9 included in the Letter of Transmittal to
provide the information and certification necessary to avoid backup withholding
(unless an applicable exemption exists and is proved in a manner satisfactory to
the Depositary). Certain stockholders (including among others all corporations
and certain foreign individuals and entities) are not subject to backup
withholding. Noncorporate foreign stockholders should complete and sign a Form
W-8, Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
OTHER REQUIREMENTS. The Purchaser's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that the stockholder is the holder of
the Shares within the meaning of, and that the tender of the Shares complies
with, Rule 14e-4 under the Exchange Act.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore accepted
for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after August 18, 1997. If the Purchaser extends the Offer, is delayed in
its acceptance for payment of Shares or is unable to purchase Shares validly
tendered pursuant to the Offer for any reason, then without prejudice to the
Purchaser's rights under the Offer, the Depositary may nevertheless, on behalf
of the Purchaser, retain tendered Shares and such Shares may not be withdrawn
except to the extent that tendering stockholders are entitled to withdrawal
rights as described in this Section 4. Any such delay in acceptance for payment
will be accompanied by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If Share Certificates to be withdrawn have been delivered
or otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signatures on the notice of withdrawal must
be guaranteed by an Eligible Institution unless such Shares have been tendered
for the account of an Eligible Institution. If Shares have been tendered
pursuant to the procedure for book-entry transfer as set forth in Section 3, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Parent, any of their affiliates or assigns, either Dealer
Manager, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax consequences
set forth below is for general information only and is based on the law as
currently in effect. The tax treatment of each stockholder will depend in part
upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States, stockholders who acquired their Shares through
the exercise of an employee stock option or otherwise as compensation, and
persons who received payments in respect of options to acquire Shares. ALL
STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICABILITY
AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR FOREIGN INCOME
AND OTHER TAX LAWS AND CHANGES IN SUCH TAX LAWS.
8
<PAGE>
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for Federal income tax purposes under the Internal Revenue Code of
1986, as amended, and may also be a taxable transaction under applicable state,
local, foreign income or other tax laws. Generally, for Federal income tax
purposes, a stockholder will recognize gain or loss in an amount equal to the
difference between the cash received by the stockholder pursuant to the Offer or
the Merger and the stockholder's adjusted tax basis in the Shares tendered by
the stockholder and purchased pursuant to the Offer or the Merger. For Federal
income tax purposes, such gain or loss will be a capital gain or loss if the
Shares are a capital asset in the hands of the stockholder, and a long-term
capital gain or loss if the stockholder's holding period is more than one year
as of the date the Purchaser accepts such Shares for payment pursuant to the
Offer or the effective date of the Merger, as the case may be. There are
limitations on the deductibility of capital losses.
6. PRICE RANGE OF SHARES; NO CASH DIVIDENDS. The Shares are listed and
traded on the NYSE under the symbol "MUL". The following table sets forth, for
the quarters indicated, the high and low sales prices per Share on the NYSE as
reported in the Company's Annual Reports on Form 10-K for the years ended
December 31, 1996 and December 31, 1995 (the "1996 Annual Report" and the "1995
Annual Report," respectively) with respect to periods occurring in 1995 and 1996
and as reported by the Dow Jones News Service thereafter. The Company has not
paid cash dividends on the Shares and has no plans to do so.
<TABLE>
<CAPTION>
High
<S> <C>
Year Ended December 31, 1995:
First Quarter.............................................................................................. $ 15 1/2
Second Quarter............................................................................................. $ 15 1/8
Third Quarter.............................................................................................. $ 15 5/8
Fourth Quarter............................................................................................. $ 16 1/8
Year Ended December 31, 1996:
First Quarter.............................................................................................. $ 19 1/4
Second Quarter............................................................................................. $ 20 7/8
Third Quarter.............................................................................................. $ 21 3/4
Fourth Quarter............................................................................................. $ 22 3/8
Year Ended December 31, 1997:
First Quarter.............................................................................................. $ 20 1/4
Second Quarter (through June 19, 1997)..................................................................... $ 27 1/4
<CAPTION>
Low
<S> <C>
Year Ended December 31, 1995:
First Quarter.............................................................................................. $ 11 5/8
Second Quarter............................................................................................. $ 11 1/4
Third Quarter.............................................................................................. $ 11 1/4
Fourth Quarter............................................................................................. $ 11 3/4
Year Ended December 31, 1996:
First Quarter.............................................................................................. $ 14 7/8
Second Quarter............................................................................................. $ 17 1/2
Third Quarter.............................................................................................. $ 18
Fourth Quarter............................................................................................. $ 17 3/4
Year Ended December 31, 1997:
First Quarter.............................................................................................. $ 17 1/4
Second Quarter (through June 19, 1997)..................................................................... $ 17 1/4
</TABLE>
On March 28, 1997, the last full trading day prior to the Company's
engagement of Smith Barney, the closing sale price per Share reported on the
NYSE was $19.00. On June 13, 1997, the last full trading day prior to
announcement of the Offer, the closing sale price per Share reported on the NYSE
was $25 5/8. On June 19, 1997, the last full trading day before commencement of
the Offer, the closing sale price per Share reported on the NYSE was $26 7/8.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The summary information
concerning the Company in this Section 7 and elsewhere in this Offer to Purchase
is derived from the 1996 Annual Report, the 1995 Annual Report, the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and other
publicly available information. The summary information set forth below is
qualified in its entirety by reference to such reports (which may be obtained
and inspected as described below) and should be considered in conjunction with
the more comprehensive financial and other information in such reports and other
publicly available reports and documents filed by the Company with the
Commission and other publicly available information. Although the Purchaser does
not have any knowledge that would indicate that any statements contained herein
based upon such reports are untrue, the Purchaser does not assume any
responsibility for the accuracy or completeness of the information contained
therein, or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
which are unknown to the Parent and the Purchaser.
GENERAL. The Company, through a predecessor, started business in 1984 under
the laws of Delaware. The Company's principal executive offices are located at
411 Hackensack Avenue, Hackensack, New Jersey 07601. The telephone number of the
Company at such offices is (201) 488-8818.
The Company is a leading provider of high quality long-term care, specialty
medical services and assisted living residences in selected geographic regions.
9
<PAGE>
FINANCIAL INFORMATION. Set forth below are certain selected consolidated
financial data for the Company's last three fiscal years and the fiscal quarters
ended March 31, 1996 and March 31, 1997 which were derived from the 1996 Annual
Report, the 1995 Annual Report and the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997. More comprehensive financial information
is included in the reports (including management's discussion and analysis of
financial condition and results of operations) and other documents filed by the
Company with the Commission, and the following financial data is qualified in
its entirety by reference to such reports and other documents including the
financial information and related notes contained therein. Such reports and
other documents may be examined and copies thereof may be obtained from the
offices of the Commission and the NYSE in the manner set forth below.
THE MULTICARE COMPANIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR THREE MONTHS
ENDED DECEMBER 31, ENDED MARCH 31,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net revenues..................................................... $262,416 $353,048 $532,230 $120,057 $168,792
Earnings before income taxes & extraordinary item................ 27,496 35,945 46,307 10,015 13,910
Income taxes..................................................... 10,454 13,798 17,570 3,818 5,150
Extraordinary items, net of tax.................................. 1,620 3,722 2,827 1,481 873
Net income....................................................... $ 15,422 $ 18,425 $ 25,910 $ 4,716 $ 7,887
Net income per common share assuming full dilution............... $ 0.64 $ 0.69 $ 0.90 $ 0.18 $ 0.24
Weighted average number of Common Shares outstanding assuming
full dilution.................................................. 23,967 26,513 33,172 26,523 36,111
BALANCE SHEET DATA (AT END OF PERIOD)
Total assets..................................................... $308,755 $470,958 $761,667 $774,740
Total liabilities................................................ 208,650 357,063 553,732 549,247
Shareholders' equity............................................. 100,105 113,895 207,935 225,493
</TABLE>
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and in
accordance therewith is obligated to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
such proxy statements and distributed to the Company's stockholders and filed
with the Commission. Such reports, proxy statements and other information should
be available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Such reports, proxy statements and other
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such
material should also be available for inspection at the library of the NYSE, 20
Broad Street, New York, New York 10005. Except as otherwise noted in this Offer
to Purchase, all of the information with respect to the Company set forth in
this Offer to Purchase has been derived from publicly available information.
CERTAIN PROJECTIONS. In connection with the Parent's and the Purchaser's
due diligence review of the Company and during the course of negotiations
between the Parent and the Purchaser, the Company and their respective advisors
described in Section 10 of this Offer to Purchase, the Company provided the
Parent and the Purchaser with certain projections of future operating
performance of the Company which the Parent and the Purchaser believe are not
publicly available. Such projections cover the five-year period beginning with
1997 and, using the Company's 1996 fiscal year as a benchmark, assume, among
other things, (i) a compound annual growth rate for total revenues of 29.5%;
(ii) EBITDAR margins of approximately 18.2% to 19.5%; (iii) a compound annual
growth rate for EBITDAR of 27.8%; (iv) a compound annual growth rate for
earnings of 39.0%; and (v) annual capital expenditures for property, plant and
equipment and acquisitions for the years 1998,
10
<PAGE>
1999, 2000 and 2001 of $207.7 million, $215.6 million, $204.7 million and $218.5
million, respectively. Such projections did not take into account any of the
potential effects of the transactions contemplated by the Offer or the Merger.
Such projections provided by the Company to the Parent and the Purchaser
were prepared as part of the effort to sell the Company. While presented with
numerical specificity, such projections are based upon a variety of assumptions
relating to the business of the Company, industry performance, general business
and economic conditions and other matters and are subject to significant
uncertainties and contingencies, many of which are beyond the Parent's, the
Purchaser's or the Company's control, and therefore, such projections are
inherently imprecise, and there can be no assurances that any such projections
will be realized or that actual results will not differ significantly from those
set forth above. None of the Parent, the Purchaser, the Company, their
respective directors or any of such parties' respective financial advisors
accept any responsibility for such projections or the basis or assumptions on
which they were prepared. Such projections were not intended to be a forecast of
financial results by the Company and were not prepared with a view to public
disclosure or compliance with guidelines established by the American Institute
of Certified Public Accountants regarding projections and forecasts.
The Parent and the Purchaser reviewed the Company's projections but
disagreed with a number of key assumptions used by the Company's management in
preparing the projections. Accordingly, the Parent and the Purchaser did not use
or rely on the Company's projections nor did the Parent or the Purchaser conduct
a discounted cash flow analysis or any other valuation on the basis of such
projections in connection with its valuation of the Company. The foregoing
summary of such projections is being included herein only because such
information was made available to the Purchaser by the Company.
8. CERTAIN INFORMATION CONCERNING THE PARENT, THE PURCHASER, GENESIS, CYPRESS
AND TPG.
THE PARENT. The Parent is a newly formed Delaware corporation organized at
the direction of Genesis, Cypress and TPG in connection with the Offer and the
Merger. At the time of the Merger, it is anticipated that the Parent Common
Stock will be owned approximately 42% by Genesis, approximately 29% by Cypress
and approximately 29% by TPG. Until the acceptance for payment of the Shares
pursuant to the Offer, it is not anticipated that the Parent will have any
significant assets or liabilities or engage in any activities other than those
incident to its formation, the Offer the Merger and the transactions in
connection therewith. The address of the Parent is 148 West State Street,
Kennett Square, Pennsylvania 19348.
THE PURCHASER. The Purchaser is a newly formed Delaware corporation
organized at the direction of the Parent in connection with the Offer and the
Merger. The address of the Purchaser is the same as the address of the Parent.
11
<PAGE>
GENESIS.
Genesis is a leading provider of healthcare and support services to the
elderly. Genesis has developed the Genesis ElderCareSM delivery model of
integrated healthcare networks to provide cost-effective, outcome oriented
services to the elderly. Through these integrated healthcare networks, Genesis
provides basic healthcare and specialty medical services to more than 75,000
customers in five regional markets in the Eastern United States in which over
3,000,000 people over the age of 65 reside. The networks include 156 eldercare
centers with approximately 22,000 beds; 16 primary care physician clinics;
approximately 96 physicians, physician assistants and nurse practitioners; 12
institutional pharmacies and five medical supply distribution centers serving
over 52,000 beds; 28 professional pharmacies; certified rehabilitation agencies
providing services through over 375 contracts; and eight home healthcare
agencies. Genesis has concentrated its eldercare networks in five geographic
regions in order to achieve operating efficiencies, economics of scale and
significant market share. The five geographic markets that Genesis principally
serves are: Massachusetts/Connecticut/New Hampshire; Eastern
Pennsylvania/Delaware Valley; Southern Delaware/Eastern Shore of Maryland;
Baltimore, Maryland/Washington, D.C.; and Central Florida.
Set forth below are certain selected consolidated financial data relating
to Genesis and its subsidiaries for Genesis' last three fiscal years and the
periods ended March 31, 1996 and March 31, 1997 which have been derived from the
financial statements contained in Genesis' Annual Report on Form 10-K for the
fiscal years ended September 30, 1995 and September 30, 1996 and Genesis'
Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. More
comprehensive financial information is included in the reports (including
management's discussion and analysis of financial condition and results of
operations) and other documents filed by Genesis with the Commission, and the
following financial data is qualified in its entirety by reference to such
reports and other documents, including the financial information and related
notes contained therein. Such reports and other documents may be examined and
copies thereof may be obtained from the offices of the NYSE in the manner set
forth below.
GENESIS HEALTH VENTURES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net revenues................................................... $388,616 $486,393 $671,469 $287,517 $ 531,807
Operating income before capital costs.......................... 69,373 93,293 128,269 54,697 91,810
Earnings before income taxes & extraordinary items............. 27,710 40,296 58,086 21,532 39,372
Income taxes................................................... 10,019 14,765 20,917 7,864 14,370
Extraordinary items, net of tax................................ 18 1,923 -- -- 553
Net income..................................................... $ 17,673 $ 23,608 $ 37,169 $ 13,668 $ 24,449
BALANCE SHEET DATA (AT END OF PERIOD)
Total assets................................................... $511,698 $600,389 $950,669 $1,341,213
Total liabilities.............................................. 316,232 378,841 436,061 758,247
Shareholders' equity........................................... 195,466 221,548 514,608 582,966
</TABLE>
Genesis is subject to the informational filing requirements of the Exchange
Act and in accordance therewith is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Information as of particular dates
concerning Genesis' directors and officers, their remuneration, options granted
to them, the principal holders of Genesis' securities and any material interest
of such persons in transactions with Genesis is required to be disclosed in such
proxy statements and distributed to Genesis' stockholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Such reports, proxy statements and other
information may also be obtained at the Web site that the Commission maintains
at http://www.sec.gov. Copies of this material may also be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material is
12
<PAGE>
also available for inspection at the offices of the NYSE, 20 Broad Street, New
York, New York 10005. The financial statements set forth in Item 1 of Genesis'
Quarterly Report on Form 10-Q for the period ended March 31, 1997 and in Item 8
of Genesis' Annual Report on Form 10-K for the year ended September 30, 1996 are
incorporated herein by reference.
CYPRESS. It is anticipated that Cypress will invest in the common stock of
the Parent through Cypress Merchant Banking Partners L.P. ("CMBP L.P.") and
Cypress Offshore Partners L.P. ("Cypress Offshore"). CMBP L.P. is a Delaware
limited partnership formed in 1994 to invest in securities of entities selected
by its general partner. Cypress Offshore is a Cayman Islands limited partnership
formed in 1995 to invest in securities of entities selected by its investment
general partner. Cypress Associates L.P., a Delaware limited partnership, is the
sole general partner of CMBP L.P. and the investment general partner of Cypress
Offshore. The Cypress Group L.L.C. ("Cypress L.L.C."), a Delaware limited
liability company, is the sole general partner of Cypress Associates L.P., and
Onwist Ltd. ("Onwist"), a Cayman Islands limited liability company, is the
administrative general partner of Cypress Offshore
The business of Cypress L.L.C. consists of performing the functions of, and
serving as, the general partner of Cypress Associates L.P. and a related
partnership. The address of Cypress L.L.C. is 65 East 55th Street, 19th Floor,
New York, New York 10022.
The business of Onwist consists of performing the functions of, and serving
as, the administrative general partner of Cypress Offshore Partners L.P. and the
general partner of a related partnership. The address of Onwist is P.O. Box
1043, George Town, Grand Cayman, Cayman Islands.
TPG. It is anticipated that TPG will invest in the common stock of the
Parent through TPG Partners II, L.P. ("TPG II") and TPG Parallel II, L.P. ("TPG
Parallel"). TPG II and TPG Parallel are Delaware limited partnerships formed in
1997 to invest in securities of entities selected by their general partner. The
sole general partner of TPG II and TPG Parallel is TPG GenPar II, L.P. ("TPG
GenPar"), a Delaware limited partnership. The sole general partner of TPG GenPar
is TPG Advisors II, Inc., a Delaware corporation ("TPG Advisors").
The business of TPG Advisors consists of performing the functions of, and
serving as, the general partner of TPG GenPar. The address of TPG Advisors is
201 Main Street, Suite 2420, Fort Worth, Texas 76102.
The name, citizenship, business address, present principal occupation or
employment and five year employment history of each of the directors and
executive officers of the Parent, the Purchaser and Genesis, the members of
Cypress L.L.C. and the directors and executive officers of Onwist and TPG
Advisors are set forth on Schedule I hereto.
9. SOURCE AND AMOUNT OF FUNDS. The Purchaser will require approximately
$1.483 billion to (i) purchase the Shares pursuant to the Offer and the Merger,
(ii) pay fees and expenses to be incurred in connection with the completion of
the Offer, Merger and the financing transactions in connection with therewith,
(iii) refinance certain indebtedness of the Company and (iv) make certain cash
payments to employees in accordance with the Merger Agreement and in accordance
with the Noncompetition Agreements. The Offer is conditioned upon, among other
things, the Financing Condition. Of the funds required to finance the foregoing,
approximately $720 million will be furnished to the Purchaser as capital
contributions by the Parent from the sale by the Parent of its common stock
("Parent Common Stock") to Cypress, TPG and Genesis. The balance of the funds
necessary to finance the foregoing will come from (i) the proceeds of loans from
a syndicate of Lenders (as defined below) in the aggregate amount of up to $625
million (the "Bank Financing") and (ii) $200 million, in the aggregate, from the
proceeds of the issuance and sale by the Purchaser to Morgan Stanley Bridge
Fund, L.L.C. and Montgomery Group Holdings, L.L.C. of senior subordinated
increasing rate notes (the "Bridge Notes").
Set forth below is a summary description of the Financing. Consummation of
the Financing is subject to, among other things, the negotiation and execution
of definitive financing agreements on terms satisfactory to the parties thereto.
There can be no assurance that the terms set forth below will be contained in
such agreements or that such agreements will not contain materially different
provisions.
PARENT COMMON STOCK INVESTMENT BY CYPRESS, TPG AND GENESIS. On June 15, 1997,
each of Cypress, TPG and Genesis delivered commitment letters pursuant to which
Cypress and TPG have each agreed to purchase shares of Parent Common Stock for a
purchase price of $210 million and Genesis has agreed to purchase shares of
Parent Common Stock for a purchase price of $300 million (collectively, the
"Investors' Commitment") subject to satisfaction of certain conditions including
(i) the Minimum Condition and all other applicable conditions of the Offer set
forth in the Merger Agreement and (ii) the consummation of the Bank Financing in
the aggregate principal amount of $625 million and the sale of the Bridge Notes
in the aggregate amount of $200 million.
13
<PAGE>
In connection with such investments in Parent Common Stock, Cypress, TPG
and Genesis have agreed to enter into a Stockholders' Agreement (the
"Stockholders' Agreement") relating to their respective ownership interest in
the Parent. Pursuant to the Stockholders' Agreement, among other things, each of
Cypress, TPG and Genesis, as holders of Parent Common Stock, will at all times
have the right to designate one-third of the members to the Parent's Board of
Directors. The following actions by the Parent will require the consent of the
directors designated by Genesis: sales of capital stock, mergers, dissolution,
acquisitions in excess of specified thresholds, transactions with affiliates,
dividends and redemptions, loans and investments in excess of specified
thresholds, amendment of articles, by-laws and loan documents, change in
business, fundamental changes, material contracts (other than termination of the
Management Agreement (as defined below) in accordance with its terms).
The Stockholders' Agreement also will provide that sales of Parent Common
Stock by a stockholder to a party other than an affiliate of such stockholder
(including partners) and, in the case of Cypress, other than TPG, and in the
case of TPG, other than Cypress, will require approval of the other
stockholders, and shall be subject to a right of first offer on the part of each
such stockholder on terms to be set forth in the Stockholders' Agreement.
In connection with the funding pursuant to their respective equity
commitments, Genesis, Cypress and TPG also will enter into an agreement
("Put/Call Agreement") pursuant to which, among other things, Genesis will have
the option, on the terms and conditions set forth in the Put/Call Agreement to
purchase (the "Call") the Parent Common Stock held by Cypress and TPG commencing
on the fourth anniversary of the Merger and for a period of 270 days thereafter,
at a price determined pursuant to the terms of the Put/Call Agreement. Cypress
and TPG will have the option, on the terms and conditions set forth in the
Put/Call Agreement, to require Genesis to purchase (the "Put") such Parent
Common Stock commencing on the fifth anniversary of the Merger and for a period
of one year thereafter, at a price determined pursuant to the Put/Call
Agreement.
The prices determined for the Put and Call are based on a formula that
calculates the equity value attributable to Cypress' and TPG's Parent Common
Stock. The calculated equity value will be determined based upon a multiple of
the Parent's earnings before interest, taxes, depreciation, amortization and
rental expenses, as adjusted ("EBITDAR") after deduction of certain liabilities.
The multiple to be applied to EBITDAR will depend on whether the Put or the Call
is being exercised. Any payment to Cypress or TPG under the Call or the Put may
be in the form of cash or Genesis common stock at Genesis' option.
Upon exercise of the Call, Cypress and TPG will receive at a minimum their
original investment plus a 25% compound annual return thereon regardless of the
calculated equity value. Any additional equity value attributable to Cypress' or
TPG's Parent Common Stock will be determined on the basis set forth in the
Put/Call Agreement which provides generally for additional equity value of the
Parent to be divided based upon the proportionate share of the capital
contributions of the stockholders to the Parent. Upon exercise of the Put by
Cypress or TPG, there will be no minimum return to Cypress or TPG; any payment
to Cypress or TPG will be limited to Cypress' or TPG's share of the calculated
equity value based upon a formula set forth in the terms of the Put/Call
Agreement which provides generally for the preferential return of the
stockholders' capital contributions (subject to certain priorities), a 25%
compound annual return on Cypress' and TPG's capital contributions and the
remaining equity value to be divided based upon the proportionate share of the
capital contributions of the stockholders to the Parent.
Cypress' and TPG's rights to exercise the Put will be accelerated upon an
event of bankruptcy of Genesis, a change of control of Genesis or an
extraordinary dividend or the occurrence of the leverage recapitalization of
Genesis, with such terms to be defined in the Put/Call Agreement. Upon an event
of acceleration or the failure by Genesis to satisfy its obligations upon
exercise of the Put, Cypress and TPG will have the right to terminate the
Stockholders' Agreement and Management Agreement and to control the sale or
liquidation of the Parent. In the event of such sale, the proceeds from such
sale will be distributed among the parties as contemplated by the formula for
the put option exercise price and Cypress and TPG will retain a claim against
Genesis for the difference, if any, between the proceeds of such sale and the
put option exercise price. In the event of a change of control of Genesis, the
option price shall be payable solely in cash provided any such payment will be
subordinated to the payment of principal and interest under the Genesis Bank
Financing (as defined below).
GENESIS BANK FINANCING. Genesis has accepted an Amended and Restated
Commitment Letter dated June 14, 1997 (as so amended, the "Genesis Commitment
Letter") from Mellon Bank, N.A. ("Administrative Agent"), Citicorp Securities,
Inc., Citibank N.A., First Union Capital Markets Corp., First Union National
Bank and NationsBank, N.A. (singly, each is a "Lender", and collectively, all
are "Lenders") pursuant to which the Lenders have committed, subject to certain
conditions contained therein, to provide Genesis and its subsidiaries with four
loan facilities totaling $850 million for the purpose of
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refinancing the existing indebtedness of Genesis; funding interest and principal
payments on the facilities and certain remaining indebtedness; funding permitted
acquisitions; purchasing approximately 42% of the Parent Common Stock for an
aggregate purchase price of approximately $300 million; purchasing for
approximately $24 million, the rehabilitation and therapy business of the
Company; and funding Genesis' and its subsidiaries' working capital and general
corporate purposes, including fees and expenses of the transactions. The
Lenders' commitment terminates October 15, 1997. Lenders expect to syndicate all
or a portion of each of the facilities described above (collectively, the
"Genesis Bank Financing") to additional lenders ("New Lenders") prior to or
after consummation of the Offer.
Pursuant to the Genesis Commitment Letter, Genesis has agreed to (i)
indemnify the Administrative Agent, the Lenders and the New Lenders and their
respective affiliates, officers, directors, employees, agents and advisors
against any and all liabilities and expenses incurred in connection with the
transactions contemplated by the Genesis Commitment Letter and the Purchaser
Commitment Letter (as defined below), (ii) reimburse the Lenders for all
reasonable out-of-pocket expenses incurred in connection with the transactions
contemplated by the Purchaser Commitment Letter and (iii) pay a fee to the
Administrative Agent.
The Genesis Commitment Letter provides that subject to the applicable
conditions set forth therein, the Lenders will provide Genesis with a (i) $200
million six year Term Loan (the "Genesis Tranche A Term Facility"), (ii) $200
million seven year Term Loan (the "Genesis Tranche B Term Facility"), (iii) $200
million Term Loan maturing on June 1, 2005 (the "Genesis Tranche C Term
Facility") and (iv) $250 million six year Revolving Credit Facility (the
"Genesis Revolving Credit Facility"), including a $25 million sublimit for
standby letters of credit ("Letters of Credit") (collectively, the "Genesis
Senior Facilities" and individually, a "Genesis Senior Facility"). The Lenders
shall have equal commitments for each Genesis Facility.
The Genesis Senior Facilities will be secured by a first priority security
interest in all of the (i) stock, partnership interests and other equity of all
of Genesis' present and future direct and indirect subsidiaries (including,
without limitation, Genesis' and its subsidiaries' ownership interest in the
Parent) other than stock of the Purchaser, the Company and the Company's direct
and indirect subsidiaries and its direct and indirect subsidiaries and (ii) all
intercompany notes among Genesis and any subsidiaries or among any subsidiaries.
Loans under the Genesis Senior Facilities will bear, at the option of
Genesis, interest rates at the per annum Prime Rate as announced by the
Administrative Agent, or the applicable Adjusted LIBO Rate. "Adjusted LIBO Rate"
means a rate of interest on one, two, three or six month periods plus the
applicable margin determined by Lender. The Adjusted LIBO Rate will differ among
each Genesis Facility. The initial Adjusted LIBO Rates are as follows: loans
under the Genesis Tranche A Term Facility will bear interest at a rate equal to
LIBO Rate plus 2.5%; loans under the Genesis Tranche B Term Facility will bear
interest at a rate equal to LIBO Rate plus 2.75%; loans under the Genesis
Tranche C Term Facility will bear interest at a rate equal to LIBO Rate plus
3.0%; and loans under the Genesis Revolving Credit Facility will bear interest
at a rate equal to LIBO Rate plus 2.5%. Subject to meeting certain financial
covenants, the interest rate applicable to the Genesis Senior Facilities will be
reduced. Lenders are entitled to receive a commitment fee equal to .125% per
annum on the Genesis Senior Facilities commencing on May 31, 1997 ("Genesis
Initial Commitment Fee"), a commitment fee equal to 0.5% per annum on the
Genesis Senior Facilities commencing on Closing Date ("Genesis Commitment Fee"),
and a facility fee equal to 2.25% of the total Genesis Senior Facilities
("Facility Fee"). Upon five business days following receipt of quarterly and
annual compliance certificates, a reduction in the Commitment Fee will take
effect if performance standards are met.
The Genesis Tranche A Term Facility, Genesis Tranche B Term Facility and
Genesis Tranche C Term Facility are subject to amortization in quarterly
installments, commencing at the end of the first calendar quarter after the
Closing Date. The consummation of the transactions pursuant to the Genesis
Senior Facilities shall be no later than October 15, 1997, unless extended to a
later date in the sole discretion of the Lenders.
All the net cash proceeds received by Genesis from (i) the sale of assets
of Genesis or its subsidiaries other than sales in the ordinary course of
business and (ii) any sale of common stock or debt securities of Genesis or its
subsidiaries (other than the proceeds of equity raised for purposes of complying
with the Put/Call Agreement) will be applied as a mandatory prepayment pursuant
to the Genesis Senior Facilities. In addition, 50% of Excess Cash Flow (as
defined in the Genesis Commitment Letter) must be applied to the repayment of
the Genesis Senior Facilities and shall be payable annually within 120 days of
each fiscal year end. With respect to the Genesis Senior Facilities, all
prepayments shall be applied first, on a pro rata basis, to Genesis Tranche A
Term Facility, Genesis Tranche B Term Facility and Genesis Tranche C Term
Facility; and second, prepayments shall be applied to the Genesis Revolving
Credit Facility, with a corresponding reduction in the commitments thereunder.
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Loans under the Genesis Senior Facilities may be prepaid at any time, in
whole or in part, provided that (i) there are customary "breakage" fees for
prepaying LIBO Rate portions of loans and (ii) each partial prepayment shall be
in the amount of at least $10 million or an integral multiple of $5 million in
excess thereof.
The Lenders' obligation to make initial loans under the Genesis Senior
Facilities will be subject to the following conditions: (a) all loans made by
the Lenders under the Genesis Senior Facilities shall be in full compliance with
the Federal Reserve's Margin regulations; (b) all documentation relating to the
Genesis Senior Facilities shall be executed and delivered in form and substance
satisfactory to the Lenders; (c) the Administrative Agent, on behalf of the
Lenders, shall have a perfected first priority lien and security interest in all
the stock and other equity interests of Genesis' direct and indirect
subsidiaries, including any of Genesis' equity interest in the Parent (excluding
the Purchaser, the Company and its direct and indirect subsidiaries), as well as
all inter-company notes, and all filings, recordations and searches necessary or
desirable in connection with such liens and security interests shall have been
duly made and all filing and recording fees and taxes shall have been duly paid;
(d) Genesis shall have advised the Lenders of all of the material documents in
connection with the Offer, the Merger and related transactions (other than
documents to which the Lenders and New Lenders would be parties) and such
documents shall have been accepted by Lenders; (e) no material adverse change
shall have occurred in the business, condition (financial or otherwise),
operations, properties or prospects of Genesis and its subsidiaries taken as a
whole since December 31, 1996; (f) there shall exist no action, suit,
investigation, litigation or proceeding pending or threatened in any court or
before any arbitrator or governmental instrumentality that (i) could have a
material adverse effect on the business, condition (financial or otherwise),
operations, properties or prospects of Genesis and its subsidiaries taken as a
whole or on the Offer or (ii) in the judgment of the Lenders, could materially
adversely affect the Lenders, the Genesis Senior Facilities or the ability of
Genesis and its subsidiaries to perform their obligations thereunder; (g) the
Lenders shall have received such opinions of counsel to the various parties to
the transactions referred to herein as to such matters as shall be reasonably
satisfactory to the Lenders; (h) the Lenders shall have received such corporate
resolutions, certificates and other documents as the Lenders shall reasonably
request; (i) appropriate filings shall have been made by all necessary parties
under the HSR Act, and the applicable waiting periods shall have expired or been
terminated; (j) all governmental consents and approvals and third-party consents
and approvals necessary in connection with the Genesis Senior Facilities and
other related transactions shall have been obtained and shall be final (without
the imposition of any conditions that are not acceptable to the Lenders) and
shall remain in effect, and all applicable waiting periods shall have expired
without any action being taken by any competent authority; (k) there shall exist
no default under any of the loan documents and the representations and
warranties of Genesis and its subsidiaries therein shall be true and correct
immediately prior to, and after giving effect to, funding; (l) all accrued fees
and expenses with respect to the transactions shall have been paid; (m) all
conditions to the initial funding under the Bank Financing shall have been
satisfied and the closing thereunder shall have occurred simultaneously with the
closing of the Genesis Senior Facilities; (n) Genesis shall have paid $300
million for 42% of the Parent Common Stock, and Cypress and TPG, collectively
shall have paid at least $418.7 million for 58% of the Parent Common Stock; (o)
at least three business days prior to the initial funding, the Lenders shall
have received financial statements consisting of (i) a cash flow statement
accurately reflecting Genesis' earnings before interest, taxes, depreciation and
amortization ("EBITDA") of at least $124 million, on a PRO FORMA basis, giving
effect to all acquisitions and dispositions occurring within the twelve-month
period and (ii) a Genesis balance sheet reflecting total funded debt of not more
than $781 million, on a PRO FORMA basis, giving effect to the consummation of
all transactions in connection with the equity of the Parent, including, without
limitation, all borrowings in connection therewith or otherwise contemplated
thereunder, the application of all proceeds of such borrowings and the amount of
all outstanding indebtedness after giving effect to the foregoing, each of which
statements shall be in form and accompanied by explanatory notes acceptable to
the Lenders; (p) all indebtedness of Genesis and its subsidiaries shall have
been repaid in full and all commitments in respect thereof shall have been
canceled; (q) Genesis and the Company shall have entered into the Management
Agreement, satisfactory in form and substance to the Lenders under which Genesis
will provide management services to the Company and its subsidiaries in
consideration of the payment of management fees; (r) Genesis will provide an
opinion of counsel and a certificate of a firm of independent certified public
accountants (each of whom shall be satisfactory to the Lenders in their complete
discretion) demonstrating to the satisfaction of the Lenders that the entirety
of the Genesis Bank Financing will constitute "senior indebtedness" for purposes
of the Genesis publicly-held senior subordinated debt and that the consummation
of the transactions contemplated hereby do not violate the covenants governing
such indebtedness; and (s) Genesis shall have delivered letters in form and
substance satisfactory to the Lenders attesting to the solvency of Genesis,
including letters from (i) Genesis' chief financial officer and (ii) a
nationally recognized appraisal firm, valuation consultant or investment banking
firm satisfactory to the Lenders.
The Lenders' obligation to make initial loans under the Genesis Senior
Facilities after the initial funding is subject, among other things, to the
usual and customary conditions for transactions of the nature contemplated by
the Genesis Commitment Letter, including, without limitation, the following: (i)
no default shall exist under the loan documents, (ii) the
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representations and warranties of Genesis and its subsidiaries shall be true and
correct immediately prior to, and after giving effect to, funding; (iii) the
Lenders are satisfied that each incurrence of debt under the Genesis Senior
Facilities is permitted by, and will rank senior to, Genesis' publicly-held
senior subordinated debt; and (iv) the chief financial officer of Genesis shall
deliver a certificate demonstrating compliance with the Fixed Charge Coverage
ratio set forth in the Genesis Commitment Letter both before and after giving
effect to the loans requested at such time.
The Genesis Senior Facilities will contain representations and warranties,
events of default and affirmative, negative and financial covenants customary
for credit facilities of this nature.
BANK FINANCING. The Purchaser has accepted an Amended and Restated Commitment
Letter dated June 14, 1997 (as so amended, the "Commitment Letter") from the
Administrative Agent and the Lenders pursuant to which the Lenders have
committed, subject to certain conditions contained therein, to provide the
Purchaser and the Company with the Short Term Facilities (as defined below) and
the Senior Facilities (as defined below). The Short Term Facilities consist of
(a) a $200 million loan facility to the Purchaser to fund the purchase of Shares
and pay certain fees and expenses associated with the transactions herein
described and (b) a $425 million facility to the Company and its subsidiaries to
refinance existing indebtedness of the Company and its subsidiaries, to fund
working capital, general corporate purposes, and to pay interest, principal and
fees and expenses associated with the Short Term Facilities. The Senior
Facilities consist of four loan facilities totaling $625 million to the Company
and its subsidiaries for the purpose of refinancing the Short Term Facilities,
funding interest and principal payments on such facilities and on certain
remaining indebtedness, funding the purposes of the Short Term Facilities (if
the Short Term Facilities are not used) and funding working capital and general
corporate purposes. The Short Term Facilities and the Senior Facilities are
collectively referred to as the "Facilities" or the "Bank Financing". The
Lenders' commitment for the Short Term Facilities terminates October 15, 1997
and their commitment for the Senior Facilities terminates 120 days following the
expiration of the Offer. Lenders expect to syndicate all or a portion of each of
the Facilities to New Lenders prior to or after consummation of the Offer.
The Parent, the Purchaser and Genesis have agreed to (i) indemnify the
Lenders and the New Lenders and their respective affiliates, officers,
directors, employees, agents and advisors against certain liabilities and
expenses incurred in connection with the transactions contemplated by the
Commitment Letter and (ii) reimburse the Lenders for all reasonable out-of-
pocket expenses incurred in connection with the transactions contemplated by the
Commitment Letter.
The Lenders' obligation to make initial loans under both the Short Term
Facilities and Senior Facilities will be subject, among other things, to the
following conditions: (a) the restrictions in Section 203 of the DGCL and any
other impediment under Delaware law shall be inapplicable to the acquisition of
the Shares and to any subsequent transactions between the Purchaser or any of
its affiliates and the Company or any of its affiliates, and all conditions to
avoiding the restrictions contained therein shall have been satisfied; (b) at
least a majority of the Shares shall have been tendered to the Purchaser for
purchase pursuant to the Offer and shall be purchased concurrently with the
initial funding; (c) the Lenders shall be satisfied that no legal impediment to
the Merger under Section 253 or Section 251 of the DGCL on the terms set forth
in the Merger Agreement exist or would exist following the consummation of the
Offer; (d) all loans made by the Lenders under the Facilities shall be in full
compliance with the Federal Reserve's Margin regulations; (e) the Board of
Directors of the Company shall have recommended acceptance of the Offer and
shall have authorized execution of agreements with respect to the Merger; (f)
the Offer shall not be subject to any injunction or similar order and shall be
consummated in accordance with all applicable law; (g) all documentation
relating to the Facilities shall be executed and delivered and shall be in form
and substance satisfactory to the Lenders; (h) all filings, recordations and
searches necessary or desirable in connection with such liens and security
interests shall have been duly made and all filing and recording fees and taxes
shall have been duly paid; (i) all of the material documents in connection with
the Offer, the Merger and related transactions shall have been accepted by
Lenders; (j) no material adverse change shall have occurred in the business,
condition (financial or otherwise), operations, properties or prospects of the
Purchaser or the Company and their subsidiaries taken as a whole since December
31, 1996; (k) there shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that (i) could have a material adverse effect on
the business, condition (financial or otherwise), operations, properties or
prospects of the Company and its subsidiaries taken as a whole or on the Offer
or the Merger or (ii) in the judgment of the Lenders, could materially adversely
affect the Lenders, the Facilities or the ability of the Parent to perform its
obligations thereunder; (l) the Lenders shall have received such opinions of
counsel to the various parties to the transactions referred to herein as to such
matters as shall be reasonably satisfactory to the Lenders; (m) the Lenders
shall have received such corporate resolutions, certificates and other documents
as the Lenders shall reasonably request; (n) appropriate filings shall have been
made by all necessary parties under the HSR Act, and the applicable waiting
periods shall have expired or been terminated; (o) all governmental consents and
approvals and third-party consents and approvals necessary in connection with
the Offer, the Merger, the Facilities and other related transactions shall have
been
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obtained and shall be final and shall remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority; (p) there shall exist no default under any of the loan
documents and the representations and warranties of the Parent and its
subsidiaries therein shall be true and correct immediately prior to, and after
giving effect to, funding; (q) all accrued fees and expenses shall have been
paid; (r) all conditions to the initial funding under the Genesis Bank Financing
shall have been satisfied and the closing thereunder shall have occurred
concurrently with the closing of the first Facility to close; (s) Genesis shall
have paid $300 million for 42% of the Parent Common Stock, and Cypress and TPG,
collectively, shall have paid at least $418.7 million for 58% of the Parent
Common Stock; (t) all indebtedness of the Company shall have been repaid in full
and all existing credit facilities of the Company shall have been canceled,
except, as specified in the definitive credit agreement, mortgage debt,
industrial revenue bonds and other debt aggregating no more than $37 million
plus the amount of existing convertible debt of the Company that is not
converted into Common Stock of the Company prior to initial funding under the
Facilities; (u) the total amount payable by the Purchaser in the Offer and the
Merger, including consulting, non-competition, severance and other payments to
employees of the Company and all amounts provided to refinance existing
indebtedness of the Company and all amounts of assumed indebtedness, shall not
exceed $1.520 billion in the aggregate; (v) the Company and its subsidiaries,
and Genesis shall have entered into the Management Agreement satisfactory in
form and substance to the Lenders; (w) at least three business days prior to the
initial funding, the Lenders shall have received financial statements consisting
of (i) a cash flow statement accurately reflecting a minimum EBITDA of $124
million, on a PRO FORMA basis, giving effect to all acquisitions and
dispositions occurring within the prior twelve-month period and (ii) a balance
sheet reflecting total funded debt of not more than $781 million, on a PRO FORMA
basis, giving effect to the consummation of all transactions in connection with
the Merger, including, without limitation, all borrowings in connection
therewith or otherwise contemplated hereunder, the application of all proceeds
of such borrowings and the amount of all outstanding indebtedness after giving
effect to the foregoing, each of which statements shall be in form and
accompanied by explanatory notes acceptable to the Lenders; (x) concurrently
with the delivery of the financial statements, the Lenders shall have received a
certificate of the chief financial officer of the Parent, in form and content
satisfactory to the Lenders, demonstrating compliance with the financial
covenants set forth herein; (y) the Purchaser shall have received at least $200
million in proceeds from the Subordinated Bridge Facility (as defined below)
which facility shall be on such terms and conditions as shall be acceptable to
the Lenders, and (z) a tax-sharing agreement acceptable to the Lenders shall
have been executed by the Parent and the Company and its subsidiaries.
The Lenders' obligation to make loans under the Short Term Facilities and
Senior Facilities after the initial funding will be subject to the usual and
customary conditions for transactions of this nature, including, without
limitation, the following: (i) there shall exist no default under the loan
documents and (ii) the representations and warranties of the Purchaser and the
Company shall be true and correct immediately prior to, and after giving effect
to, funding.
SHORT TERM FACILITIES. The Short Term Facilities encompass two facilities,
a $200 million facility to the Purchaser ("Purchaser Facility") and the $425
million facility to the Company and its subsidiaries ("Company Facility"). All
indebtedness outstanding under the Short Term Facilities will be due and payable
on the earlier of 120 days after the initial closing date or upon the
effectiveness of the Merger between the Purchaser and the Company or the
abandonment thereof. Each facility is more fully described below.
Loans under the Short Term Facilities will bear interest at a rate per
annum equal to Prime Rate plus 1.5% (as defined in the Commitment Letter) and
payable on a quarterly basis. Lenders are entitled to receive a commitment fee
equal to .125% per annum on the unused amount of the total Short Term Facilities
payable quarterly in arrears, commencing on May 31, 1997 ("Initial Commitment
Fee") and a commitment fee equal to .5% per annum on the unused amount of the
total Short Term Facilities payable quarterly in arrears, commencing on the
Closing Date ("Commitment Fee"), and a facility fee equal to 2.25% of the total
Senior Facilities ("Facility Fee").
PURCHASER FACILITY. The proceeds of the loans made to the Purchaser under
the Purchaser Facility will be used to fund the purchase of Shares pursuant to
the Offer and to pay fees and expenses associated with the Offer, the
Subordinated Bridge Financing and the Short Term Facilities. Advances under the
Purchaser Facility shall be made at Purchaser's option either (i) on a dollar
for dollar basis with the Subordinated Bridge Financing or (ii) after the net
proceeds of the Subordinated Bridge Financing have been appropriately expended.
No funds under the Purchaser Facility shall be advanced if the ratio of Tendered
Stock Value (defined below) to the Purchaser's indebtedness to Lenders is (or,
after giving effect to the Purchaser Facility and Subordinated Bridge Financing
advances, would be) less than 2.5:1.0. "Tendered Stock Value" shall mean the
then current market value of the shares. Loans made under the Purchaser Facility
will be secured by a pledge of (i) all Shares purchased pursuant to the Offer or
otherwise owned by the Purchaser, the Parent or any of their affiliates and (ii)
an amount to be deposited in an account as an interest reserve to fund interest,
fees and expenses owing to Lenders under Purchaser
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Facility loans and advances ("Purchaser Facility Collateral"). The obligations
of the Purchaser in respect to the Purchaser Facility are to be fully guaranteed
by the Parent.
In addition to the conditions to the initial loans under the Short Term
Facilities and the Senior Facilities, the Lenders' obligation to make loans
under the Purchaser Facility will be subject to the following conditions: (i)
the Merger shall be effected as expeditiously as possible following the Offer;
(ii) the Purchaser shall have the unrestricted right, subject only to prior
notification pursuant to Section 14(f) of the Exchange Act, to designate and
cause to be appointed a majority of the Board of Directors of the Company; (iii)
the Administrative Agent, on behalf of the Lenders, shall have a perfected first
priority lien and security interest in the Purchaser Facility Collateral; (iv)
payment of the full amount of the Facility Fee; (v) payment of an Administrative
Agent and Lender fees in amounts to be agreed to by the Parent, the Purchaser
and the appropriate Lenders; (vii) the Purchaser shall have no activities other
than the acquisition and holding of Shares and the Merger between the Purchaser
and the Company, and (viii) the Purchaser shall use its best efforts to cause
the Merger between the Purchaser and the Company to occur as expeditiously as
possible.
COMPANY FACILITY. The proceeds of the Company Facility shall be used to
refinance existing indebtedness of the Company and its subsidiaries, to fund
working capital, general corporate purposes, interest principal and fees and
expenses associated with the Facilities. The Company and its subsidiaries shall
be jointly and severally liable for the obligations under the Company Facility.
The Company Facility will contain financial and other covenants and
representations and warranties customary in similar financings and shall be
secured by a pledge of the equity in all of the Company's present and future
direct and indirect subsidiaries and their intercompany notes.
SENIOR FACILITIES. The Commitment Letter provides that after completion of
the Merger and subject to the applicable conditions, Lenders will provide to the
Company as successor under the Merger a (i) $250 million six year Term Loan (the
"Tranche A Term Facility"), (ii) $150 million seven year Term Loan (the "Tranche
B Term Facility"), (iii) $100 million Term Loan maturing on June 1, 2005 (the
"Tranche C Term Facility") and (iv) $125 million six year Revolving Credit
Facility (the "Revolving Credit Facility").
The Senior Facilities will be secured by a first priority security interest
in all of the (i) stock of the Company, (ii) stock, partnership interests and
other equity of all of the Company's present and future direct and indirect
subsidiaries and of its stock in the pharmacy business of Genesis and (iii)
intercompany notes among the Parent and any subsidiaries or among any
subsidiaries. All of the obligations of the Company with respect to any
indebtedness under the Senior Facilities shall be guaranteed by the Parent.
Loans under the Senior Facilities will bear, at the option of the Company,
interest at the per annum Prime Rate as announced by the Administrative Agent,
or the applicable Adjusted LIBO Rate. "Adjusted LIBO Rate" means a rate of
interest on one, two, three or six month interest periods plus the applicable
margin determined by the Lender. The Adjusted LIBO Rate will differ among each
Facility. The initial Adjusted LIBO Rates are as follows: loans under the
Tranche A Term Facility will bear interest at a rate equal to LIBO Rate plus
2.5%; loans under the Tranche B Term Facility will bear interest at a rate equal
to LIBO Rate plus 2.75%; loans under Tranche C Term Facility will bear the
interest at a rate equal to LIBO Rate plus 3.0% and; loans under the Revolving
Credit Facility will bear interest at a rate equal to LIBO Rate plus 2.5%. Five
business days following receipt of the quarterly and annual compliance
certificates, if performance standards are met, changes in the interest rates
will take effect. Subject to meeting certain financial covenants, the interest
rate will be reduced. Lenders are entitled to receive a commitment fee equal to
0.5% per annum on Facilities and, upon five business days following receipt of
quarterly and annual compliance certificates, a reduction in the commitment fee
will take effect if performance standards are met.
The Tranche A Term Facility, Tranche B Term Facility and Tranche C Term
Facility are subject to amortization in quarterly installments, commencing at
the end of the first calendar quarter after the Closing Date, pursuant to an
amortization schedule set forth in Schedule I of the Commitment Letter.
All net proceeds received by the Company from (i) the sale of assets of the
Company or its subsidiaries other than sales in the ordinary course of business
(and other than the sale of the Company's rehabilitation and therapy business)
and (ii) any sale of common stock or debt securities of the Company (other than
(a) the Permanent Financing (as defined below) and (b) equity contributed by the
Parent) in respect of common stock will be applied as a mandatory prepayment. In
addition, 50% of Excess Cash Flow (as defined in the Commitment Letter) must be
applied to the Senior Facilities and shall be payable annually within 120 days
of each fiscal year end. With respect to the Senior Facilities, all prepayments
shall be applied first,
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on a pro rata basis, to Tranche A Term Facility, Tranche B Term Facility and
Tranche C Term Facility; and second, prepayments shall be applied to the
Revolving Credit Facility, with a corresponding reduction in the commitments.
With respect to net cash proceeds of a disposition of any Wisconsin, Illinois or
Ohio facilities within two years of the closing date, the prepayments shall be
applied first, to the Tranche A Term Facility; second, Tranche B Term Facility
and Tranche C Term Facility; and third, Revolving Credit Facility, with
corresponding reduction in the commitments.
Loans under the Senior Facilities may be prepaid at any time, in whole or
in part, provided that (i) there are customary "breakage" fees for prepaying
LIBO Rate portions of Loans and (ii) each partial prepayment shall be in the
amount of at least $10 million or an integral multiple of $5 million in excess
thereof.
In addition to the conditions to the initial loans under the Short Term
Facilities and the Senior Facilities, the Senior Facilities will be also subject
to the following conditions: (i) the Merger shall be effective; (ii) the
Administrative Agent on behalf of the Lenders, shall have a perfected first
priority lien and security interest in all stock and other equity interests of
the Company and its subsidiaries as well as all intercompany notes of the Parent
and its subsidiaries; (iii) the Parent shall have delivered letters to Lenders,
in form and substance satisfactory to the Lenders, attesting to the solvency of
the Parent, after giving effect to the transactions referred to herein, from (a)
the Company's chief financial officer and (b) from a nationally recognized
appraisal firm, valuation consultant or investment banking firm satisfactory to
the Lenders; (iv) the Short Term Facilities shall have been repaid in full and
all commitments thereunder canceled; (v) upon the completion of the Merger, the
Company shall confirm its agreement to be bound by the terms of the credit
documents by agreement satisfactory in form and content to the Lenders; and (vi)
the sale of the Company's rehabilitation and therapy business to Genesis shall
have been consummated in a transaction whereby the net cash proceeds after taxes
and related fees and expenses of such sale shall be approximately $20 million.
The Senior Facilities will contain representations and warranties, events
of default and affirmative, negative and financial covenants customary for
credit facilities of this nature, including those specified in the Short Term
Facility.
SUBORDINATED BRIDGE FINANCING. The Purchaser has accepted a commitment letter
(the "Bridge Financing Commitment Letter") from Morgan Stanley Bridge Fund,
L.L.C. and Montgomery Group Holdings, L.L.C. (collectively, the "Bridge
Lenders") pursuant to which Morgan Stanley Bridge Fund, L.L.C. and Montgomery
Group Holdings, L.L.C. have committed to purchase $133 million and $67 million,
respectively, of Bridge Notes. The proceeds from the sale of the Bridge Notes
will be used to pay a portion of the purchase price of the Shares purchased
pursuant to the Offer and to pay interest, fees and expenses incurred in
connection with the Offer. The Bridge Notes will mature one year from the date
of the Bridge Lenders' initial purchase of the Bridge Notes. The obligation of
each of the Bridge Lenders' to purchase the Bridge Notes pursuant to the Bridge
Financing Commitment Letter will expire on the earliest of (i) consummation of
the Offer or another transaction or series of transactions in which the Parent,
the Purchaser or any of their respective affiliates acquires, directly or
indirectly, any stock or assets of the Company, (ii) termination of the Merger
Agreement and (iii) 5:00 p.m. New York City time on September 30, 1997 or, at
the option of the Purchaser and subject to the payment in full of the Additional
Commitment Fee (as defined below), December 5, 1997.
Interest on the Bridge Notes is payable quarterly in arrears at the
Applicable Interest Rate. "Applicable Interest Rate" shall mean the highest of
the following, as determined as of the beginning of each three-month period: (i)
the base rate (as announced by Citibank, N.A.) plus 325 basis points, (ii)
three-month U.S. Dollar LIBO Rate plus 600 basis points and (iii) the highest
yield on any of the one, three, five and ten year direct obligations issued by
the United States plus 500 basis points. If the Bridge Notes are not retired in
whole within six months after their issuance, the Applicable Interest Rate
otherwise in effect will be increased by 100 basis points and will thereafter
increase by an additional 50 basis points at the end of each subsequent
three-month period as long as the Bridge Notes are outstanding (the "Incremental
Spread"), PROVIDED, however, that (i) in no event will the Applicable Interest
Rate exceed 17% and (ii) the amount of cash interest paid will be subject to a
cap of 14.50%, with the excess, if any, of the Applicable Interest Rate over
such interest rate cap to be paid in additional Bridge Notes.
The Bridge Notes will be unsecured and will be senior to all subordinated
indebtedness of the Purchaser and will be subordinate to all senior indebtedness
of the Purchaser, including but not limited to, the Bank Financing. The Bridge
Notes will be entitled to the benefits of a senior subordinated guarantee from
the Parent, the Company and each of the Company's subsidiaries.
In consideration of their commitment, the Bridge Lenders are entitled to
receive a non-refundable fee of 1.0% of the commitment in respect of the Bridge
Notes upon the Purchaser's acceptance of such commitment (the "Initial
Commitment
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Fee") and an additional fee of 1.5% of the principal amount of Bridge Notes
purchased by the Bridge Lenders (the "Takedown Fee"). In the event that the
Purchaser elects to extend the Bridge Lenders' commitment beyond September 30,
1997, the Bridge Lenders are entitled to receive an additional non-refundable
fee of 1.0% of the above-referenced commitment (the "Additional Commitment
Fee"). The Parent, the Purchaser and Genesis will pay all legal and other
out-of-pocket expenses of each of Morgan and Montgomery as incurred, including
travel costs, document production and other related expenses, and the fees of
outside counsel as well as other professional advisors engaged with the
Purchaser's consent thereto. In the event the Transaction (as defined below)
does not close, the Bridge Lenders shall be entitled to receive from Genesis an
amount equal to the lesser of (i) 33% of the amount of any fees paid to the
Parent pursuant to Section 8.2(a) of the Merger Agreement and (ii) the sum of
the Initial Commitment Fee, the Additional Commitment Fee (if the Bridge
Lenders' commitment has been extended beyond September 30, 1997) and any
out-of-pocket expenses incurred by the Bridge Lenders in connection therewith.
The Takedown Fee will be earned and payable upon the issuance of any Bridge
Notes. As additional consideration, each of the Parent, the Purchaser and
Genesis have agreed, jointly and severally, to indemnify the Bridge Lenders and
their officers, directors, employees and affiliates from any losses, claims,
damages or liabilities arising out of or related to the Transaction.
Upon the issuance of the Bridge Notes, warrants (the "Warrants")
representing 5.0% of the fully-diluted common equity of the Parent (the
"Escrowed Warrant Amount") will be placed in an escrow account with a mutually
agreeable escrow agent and will be released to the holders of the Rollover Notes
(as defined below), if any such Rollover Notes are issued, as follows: 2.5% at
the time the Rollover Notes are issued and an additional 0.625% at the end of
each three-month period thereafter if any Rollover Notes remain outstanding at
such time. If the aggregate amount of Bridge Notes issued is less than $200
million, then the Escrowed Warrant Amount will be reduced pro rata. All Warrants
will be exercisable at a nominal price for a period of five years from the date
such Warrants are released from escrow and will have customary anti-dilution
provisions and registration rights.
Subject to a ten-day notice requirement, the Bridge Notes may be redeemed,
in whole or in part, at the option of the Purchaser, at any time, at 102.8% of
par plus accrued interest. The Purchaser, however, is required to redeem the
Bridge Notes at par plus accrued interest with, subject to certain agreed upon
exceptions, (i) the net proceeds from a Permanent Financing (as defined below),
(ii) the net proceeds from the issuance of any other debt or equity securities
and (iii) the net proceeds from asset sales; PROVIDED, however, that the
redemption price shall be 102.8% of par plus accrued interest if the Bridge
Notes are redeemed with or in anticipation of funds raised by any means other
than a Permanent Financing in which Montgomery Securities and Morgan Stanley
have acted as exclusive agents or sole underwriters to the Purchaser. In
addition, the Purchaser is required to redeem the Bridge Notes upon any
change-of-control of the Purchaser at a redemption price of 101% of par plus
accrued interest.
The terms of the Bridge Financing Commitment Letter require the Purchaser
to use its best efforts to issue and sell as soon as practicable following the
Merger, debt securities in a public offering or private placement (the
"Permanent Financing") in which Montgomery Securities and Morgan Stanley will
act as exclusive agents or sole underwriters to the Purchaser, the proceeds of
which will be used to redeem the Bridge Notes in accordance with the terms and
provisions described above.
The Bridge Lenders' commitment to purchase the Bridge Notes is subject to
certain conditions, including but not limited to the following: (i) the
consummation of the transactions pursuant to the Merger Agreement (the
"Transaction") in accordance therewith; (ii) the Merger Agreement, Offer and
other documentation shall be reasonably satisfactory in form and substance to
the Bridge Lenders, in their sole discretion, without any material amendment,
modification or waiver of any of the terms or conditions thereof without the
prior written consent of the Bridge Lenders; (iii) the structure of the
Transaction, including the tax, federal margin regulation, ERISA, accounting and
other consequences thereof, and corporate and legal structure shall be
reasonably satisfactory to the Bridge Lenders; (iv) other financings and
transactions contemplated to be consummated on the date of the Closing shall be
consummated on terms reasonably satisfactory to the Bridge Lenders, including
but not limited to (a) the closing of the Bank Financing, if required to
consummate the Offer (but if borrowings under the Bank Financing are not
required to consummate the Offer, the credit agreement for the Bank Financing
shall have been executed and delivered and all conditions precedent to funding
thereunder (other than consummation of the Merger) shall have been satisfied or
waived in writing), (b) the issuance of Parent Common Stock in the aggregate
amount of $720 million, (c) the refinancing (or satisfactory arrangements
relating to the refinancing) of approximately $381 million of debt of the
Company and (d) the entry into the Management Agreement; (v) receipt by each of
the Bridge Lenders of solvency certificates and independent solvency opinions,
each in form and substance reasonably satisfactory to the Bridge Lenders, to the
extent required by the Lenders under the Bank Financing; (vi) completion of all
loan documentation and other documentation relating to the Bridge Notes, the
Rollover Notes and the Warrants in form and substance reasonably satisfactory to
the Bridge Lenders, including the issuance of appropriate Parent, Company and
subsidiary guarantees, and the receipt by each of
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the Bridge Lenders of reasonably satisfactory customary opinions of counsel as
to the transactions contemplated thereby; (vii) receipt of all material
regulatory, governmental agency or third party consents and approvals necessary
for the Purchaser to complete the Offer; (viii) absence of any material adverse
change in the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company and its subsidiaries, taken
as a whole, since December 31, 1996; (ix) absence of facts or circumstances
inconsistent with information disclosed to the Bridge Lenders prior to the date
of the Bridge Financing Commitment Letter that, individually or in the
aggregate, could reasonably be expected to have a material adverse effect on (a)
the condition (financial or otherwise), business, assets, liabilities
(contingent or otherwise), properties, value, operations, results of operations
or prospects of (i) either the Parent or the Purchaser, individually or (ii) the
Company and its subsidiaries, taken as a whole, or (b) any aspect of the
Transaction or the refinancing of the Bridge Notes; (x) absence of any event or
circumstance which would materially adversely affect the ability of Genesis to
perform its obligations under the Management Agreement; (xi) absence of any
action, suit, investigation, litigation or proceeding pending or threatened in
any court or before any arbitrator or governmental instrumentality that in the
reasonable judgment of the Bridge Lenders (a) could have a material adverse
effect on the business condition (financial or otherwise), operations,
properties or prospects of the Company and its subsidiaries, taken as a whole,
or on the Offer or the Merger or (b) could materially adversely affect the
Bridge Lenders, the Bridge Notes or the ability of the Purchaser or the Company
to perform its obligations thereunder; (xii) absence of any disruption or change
in financial, banking or capital markets or in the regulatory environment that
could materially and adversely affect the sale of the Bridge Notes or the
refinancing thereof; (xiii) absence of any material default or potential default
and accuracy of representations and warranties and (xiv) upon consummation of
the Offer, neither the Purchaser nor the Company nor any of their subsidiaries
will have any outstanding debt (other than arrangements satisfactory to the
Bridge Lenders relating to refinancing outstanding debt) other than the Bridge
Notes and the Bank Financing in excess of $37 million plus the amount of 7%
Debentures that does not convert into Company common stock.
The Purchaser has agreed that if the Bridge Notes are not redeemed at
maturity, they may be refinanced, subject to the fulfillment of certain
conditions, by the issuance of certain rollover notes (the "Rollover Notes")
having a maturity of ten years from the issuance date thereof.
Interest on the Rollover Notes is payable quarterly in arrears at a rate
per annum equal to the sum of (i) the Incremental Spread (as defined above) as
of the date of the issuance of the Rollover Notes, which shall increase by an
additional 50 basis points at the end of each three-month period for so long as
the Rollover Notes are outstanding, plus (ii) the highest of the following, as
determined as of the beginning of each three-month period: (a) the base rate (as
announced by Citibank, N.A.) plus 325 basis points, (b) three-month U.S. Dollar
LIBOR plus 600 basis points and (c) the highest yield on any of the one, three,
five and ten-year direct obligations issued by the United States plus 500 basis
points, PROVIDED, however, that (I) in no event shall the interest on the
Rollover Notes exceed 17% and (II) the amount of interest paid will be subject
to a cap of 14.50% with the excess, if any, of such interest rate over the
interest rate cap to be paid in additional Rollover Notes.
A funding fee equal to 2.8% of the principal amount of the Bridge Notes
will be payable in cash to the Bridge Lenders pro rata based on their respective
shares of Bridge Notes held upon the issuance thereof. Upon issuance of the
Rollover Notes, the Purchaser will be entitled to receive the Warrants held in
escrow in the amounts and at the times described above.
The Purchaser may redeem the Rollover Notes, in whole or in part, at any
time at par plus accrued interest, PROVIDED, however, that if the Rollover Notes
are sold to third party purchasers on a fixed rate basis no less favorable to
the Purchaser than the then applicable rate of interest, the Rollover Notes will
be non-callable for five years from the date of issuance and will be callable
thereafter at par plus accrued interest plus a premium equal to 50% of the
coupon in effect on the date of issuance of the Rollover Notes, declining
ratably on each yearly anniversary to par one year prior to the maturity of the
Rollover Notes. The Purchaser, however, is required to redeem the Rollover Notes
at par plus accrued interest with, subject to certain agreed upon exceptions,
(i) the net proceeds from a Permanent Financing, (ii) the net proceeds from the
issuance of any other debt or equity securities and (iii) the net proceeds from
asset sales; PROVIDED, however, that the redemption price shall be par plus
accrued interest. In addition, the Purchaser is required to redeem the Rollover
Notes upon any change-of-control of the Purchaser at a redemption price of 101%
of par plus accrued interest. Any redemption or other acquisition of the
Rollover Notes, whether optional, mandatory or upon a change of control, will be
made pro rata among the Bridge Lenders based on the principal amount of Rollover
Notes held by each of them.
Pursuant to the Bridge Financing Commitment Letter, the Purchaser is
required to use its best efforts to file a "shelf" registration statement with
respect to the Rollover Notes as soon as practicable after the issuance of the
Rollover Notes, and to keep such registration statement effective until the
Rollover Notes have been redeemed. If a "shelf" registration statement for the
Rollover Notes has either (i) not been filed within 60 days of the issuance of
the Rollover Notes or (ii) not been
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declared effective within 120 days of the issuance of the Rollover Notes, the
Purchaser will pay liquidated damages of $0.192 per week per $1000 principal
amount of Rollover Notes until such time as such registration statement has
become effective. The Purchaser will also pay such liquidated damages for any
period of time following the effectiveness of such registration statement that
the registration statement is not available for resales thereunder. In addition,
the Rollover Notes will have registration rights with respect any future
issuances of debt securities by the Purchaser.
The obligation of each of the Bridge Lenders to accept the Rollover Notes
in exchange for the Bridge Notes is subject to certain conditions, including but
not limited to the following: (i) at the time of issuance, there shall exist no
default or potential default under the agreement pursuant to which the Bridge
Notes are issued to the Bridge Lenders, (ii) all fees and other amounts owing to
the Bridge Lenders shall have been paid in full and (iii) no injunction, decree,
order or judgment enjoining the issuance of the Rollover Notes shall be in
effect.
The Rollover Notes will be unsecured and will be senior to all subordinated
indebtedness of the Purchaser and will be subordinate to all senior indebtedness
of the Purchaser, including but not limited to, the Bank Financing. The Rollover
Notes will be entitled to the benefits of a senior subordinated guarantee from
the Parent, the Company and each of the Company's subsidiaries.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In March 1997,
senior management of Genesis was contacted by representatives of Smith Barney
who indicated that the Company was exploring the possible sale of the Company.
On April 21, 1997, Genesis (through its financial advisor, Montgomery
Securities) contacted representatives of Smith Barney regarding its potential
interest in exploring a possible acquisition of or combination with the Company
and was advised that the Company was already in discussions regarding a
potential transaction with another party and was not in a position to invite
Genesis into the process.
On April 25, 1997, Smith Barney contacted Montgomery to indicate that the
Company was establishing a formal process whereby multiple strategic and
financial buyers were to be contacted with respect to a possible acquisition of
the Company and that Genesis would be one of the potential buyers contacted.
Similarly, Cypress was contacted with respect to a possible acquisition
of the Company. On April 29, 1997, Genesis executed a confidentiality
agreement with the Company and subsequently received certain information
about the Company and its subsidiaries.
On May 5, 1997, representatives of Cypress contacted senior management of
Genesis to discuss the possibility of a joint bid for the Company.
Following preliminary financial and other analysis of the information
concerning the Company provided on May 7, 1997, senior management of
Genesis met with representatives from Montgomery to discuss the possible
acquisition of the Company by Genesis. Based on this meeting, it was
concluded that Genesis would be prepared to submit an offer to acquire the
Company; however, it was also concluded that in order to enhance the
competitiveness of Genesis' offer, it would be prudent to explore the
possibility of a joint bid with Cypress.
On May 9, 1997, Michael R. Walker, Chairman and Chief Executive Officer of
Genesis, spoke with Daniel Straus to set up a meeting for the following week in
which they planned to discuss reasons for the sale and prospects for the
Company.
On May 13, 1997, Mr. Walker had dinner with Mr. Straus to discuss the
Company's goals and opportunities as well as Genesis' interest in acquiring the
Company. Mr. Straus indicated to Mr. Walker that subject to clarification of a
number of issues (including price), the Company would be interested in exploring
the possible sale of the Company to Genesis. Mr. Walker indicated to Mr. Straus
that to reach agreement on price, Genesis would need to have access to
additional confidential information regarding the Company. Mr. Straus agreed to
provide Genesis with access to the additional information.
On May 14, 1997, Genesis submitted an initial indication of interest
at a price of $26.00 to $27.50 per share payable in the form of cash and stock.
On May 20, 1997, Genesis, together with its financial and legal advisors,
met with representatives of the Company and Smith Barney to perform a due
diligence investigation of the Company. Also, on May 20, 1997, representatives
of TPG, which was then acting independently of Genesis and Cypress, met with Mr.
Straus at Smith Barney's office in New York.
On May 21, 1997, Genesis and its advisors again met with Mr. Straus to
discuss a potential acquisition of the Company by Genesis.
On May 23, 1997, Cypress contacted TPG with respect to the possibility of
TPG joining Genesis and Cypress in making a bid to acquire the Company.
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On May 28 and 29, 1997, senior management of Genesis visited facilities of
the Company. In the evening on May 29 and continuing through May 30, 1997, Mr.
Walker spoke with Mr. Straus regarding the structure of the proposed
transaction.
On June 1, 1997, Genesis, Cypress and TPG submitted a proposal for the
acquisition of the Company at a per share price in cash of $29.00 per share,
subject to finalization of the Merger Agreement. That evening, the Company,
Genesis, Cypress and TPG and their respective advisors met to negotiate the
final terms of the Merger Agreement. After a series of negotiations, the parties
did not agree to the terms of the Merger Agreement, and the negotiations ceased
that evening.
On June 2, 1997, Mr. Walker contacted Mr. Straus to discuss why the
negotiations had ceased the evening before, and to determine the feasibility of
restarting the negotiations. Thereafter, the principals and their respective
advisors again met to attempt to finalize the Merger Agreement. During the
negotiations, Genesis decided that the transaction as then negotiated and
structured had resulted in a transaction that was no longer economically
attractive to the Genesis shareholders. Consequently, the negotiations ceased
for a second time, and Genesis, Cypress and TPG indicated that they were
withdrawing their bid.
Between June 3, 1997 and June 5, 1997, representatives of Cypress,
Montgomery, Smith Barney and Schroeder Wertheim and Co. Incorporated, which had
recently been engaged as financial advisor to the Company in order to assist
the Company in reviewing various proposals and in the negotiation of such
proposals, had numerous conversations to discuss the scenarios under which
Genesis, Cypress and TPG would be prepared to resubmit a proposal to acquire the
Company. On June 5, 1997, Montgomery indicated to Smith Barney that Genesis,
Cypress and TPG would only reenter the process if the Company presented a
proposal to them that was, in their view, economically feasible and acceptable.
On June 6, 1997, Genesis was advised of the terms under which the Company
would be prepared to approve a proposal from Genesis, Cypress and TPG. In
addition, Mr. Walker received a separate letter on behalf of the Company
indicating that the Company had set a date of June 10, 1997 as the deadline
for final bids for the acquisition of the Company.
On June 10, 1997, Montgomery indicated to Smith Barney that Genesis,
Cypress and TPG would not be submitting a bid on that date, but that, assuming
the group could resolve certain structural issues, it may submit a proposal at a
later date.
On June 13, 1997, the Parent and Purchaser submitted a proposal to acquire
the Company for $28.00 per share in cash.
On June 14 and 15, 1997, legal counsel for Genesis, Cypress and TPG met
with legal counsel for the Company to negotiate terms of the Merger Agreement.
On June 16, 1997, the Merger Agreement was executed and Genesis, Cypress,
TPG and the Company issued press releases announcing the transaction.
11. THE MERGER AGREEMENT; CERTAIN OTHER AGREEMENTS. The following is a
summary of the Merger Agreement, the Tender Agreements and the Noncompetition
Agreements, which summary is qualified in its entirety by reference to the
copies thereof filed as exhibits to the Tender Offer Statement on Schedule
14D-1.
THE MERGER AGREEMENT
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as practicable after the date of the Merger Agreement, but in no
event later than five business days from and including the date of public
announcement of the execution of the Merger Agreement. The obligation of the
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer is subject only to the satisfaction or waiver by the Purchaser of the
conditions described in Section 15. Under the Merger Agreement, the Purchaser
expressly reserves the right, in its sole discretion, to waive any such
condition (other than the Minimum Condition, which may only by waived with the
Company's consent) and make any other changes in the terms and conditions of the
Offer; PROVIDED, that, unless previously approved by the Company in writing, no
change may be made which (a) reduces the number of Shares subject to the Offer,
(b) reduces the price per Share payable in the Offer, (c) modifies or adds to
the conditions to the Offer, (d) extends the Offer other than as described in
the next sentence, (e) changes the form of consideration payable in the Offer
(other than by increasing the cash offer price) or (f) amends or modifies any
term of the Offer in any manner adverse to any of the Company's stockholders.
The Purchaser may, without the consent of the Company, but subject to the
Company's right to terminate the Merger Agreement pursuant to Section 8.1(b)
(ii) thereof, (i) extend the Offer, if at the scheduled expiration date of the
Offer any of the conditions to the Purchaser's obligation to purchase Shares
shall not be satisfied, until such time as such conditions are satisfied or
waived or (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer or in order to obtain any material regulatory approval applicable to
the Offer. The Purchaser agrees
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that: (A) in the event it would otherwise be entitled to terminate the Offer at
any scheduled expiration thereof due to the failure of one or more of the
conditions to the Offer set forth in paragraphs (a), (f) or (g) or the first
sentence of the introductory paragraph of Exhibit A to the Merger Agreement to
be satisfied or waived, it will give the Company notice thereof and, at the
request of the Company, extend the Offer until the earlier of (1) such time as
such condition is or conditions are satisfied or waived and (2) the date chosen
by the Company which shall not be later than (x) September 15, 1997, or October
15, 1997 if the option to extend set forth in Section 8.1(b)(ii)(y) of the
Merger Agreement is exercised or (y) the date on which the Company reasonably
believes all such conditions will be satisfied; provided that if any such
condition is not satisfied by the date so chosen by the Company, the Company may
request and the Purchaser will make further extensions of the Offer in
accordance with the terms of this paragraph; and (B) in the event that it would
otherwise be entitled to terminate the Offer at any scheduled expiration date
thereof due solely to the failure of the Minimum Condition to be satisfied, it
will, at the request of the Company (which request may be made by the Company
only on one occasion), extend the Offer for such period as may be requested by
the Company not to exceed ten days from such scheduled expiration date. The
Merger Agreement provides that, subject to the terms and conditions of the Offer
and the Merger Agreement, the Purchaser will accept for payment and pay for
Shares promptly after the expiration of the Offer. Furthermore, the Merger
Agreement provides that the Parent is obligated to contribute to the Purchaser
any funds necessary to purchase shares pursuant to this Offer and to perform and
of its other obligations pursuant to the Merger Agreement.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with the DGCL, at the Effective
Time, the Purchaser will be merged with and into the Company. As a result of the
Merger, the separate corporate existence of the Purchaser will cease and the
Company will continue as the surviving corporation. At the Parent's election,
any direct or indirect subsidiary of the Parent other than the Purchaser may be
merged with and into the Company instead of the Purchaser.
At the Effective Time, each Share issued and outstanding immediately prior
to the Effective Time (unless otherwise provided for) will be cancelled,
extinguished and converted into the right to receive $28.00 in cash or any
higher price that may be paid pursuant to the Offer, payable to the holder
thereof, without interest, upon surrender of the certificate formerly
representing such Share in the manner described in the Merger Agreement (the
"Merger Consideration"). In addition, as of the Effective Time, each share of
the capital stock of the Purchaser issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation, and each share of Common Stock that is owned by the Company or any
subsidiary of the Company ("Treasury Shares") and each share of Common Stock
that is owned by the Parent, the Purchaser or other subsidiary of the Parent
("Parent Shares") shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
The Merger Agreement provides that, immediately prior to the Effective
Time, the unexercisable portion of each outstanding stock option to purchase
Shares (an "Option"), will become immediately exercisable in full, subject to
all expiration, lapse and other terms and conditions thereof, and the Company
shall take all action necessary so that each Option will be cancelled, in
exchange for the right to receive an amount in cash equal to the product of (i)
the number of Shares previously subject to such Option and (ii) the excess, if
any, of the Merger Consideration over the exercise price per Share previously
subject to such Option.
The Merger Agreement provides that Shares that are issued and outstanding
immediately prior to the Effective Time and which are held by stockholders who
have properly exercised and perfected appraisal rights under Section 262 of the
DGCL will not be converted into the right to receive the Merger Consideration,
but will be entitled to receive the consideration as determined pursuant to
Section 262 of the DGCL; PROVIDED, HOWEVER, that if such holder shall have
failed to perfect or shall have effectively withdrawn or lost his, her or its
right to appraisal and payment under the DGCL, such holder's Shares shall
thereupon be deemed to have been converted, at the Effective Time, into the
right to receive the Merger Consideration as described above.
The Merger Agreement also provides that at the Effective Time and without
any further action on the part of the Company and the Purchaser, the Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
of the Company, as in effect immediately prior to the Effective Time, will be
the certificate of incorporation of the Surviving Corporation until thereafter
and further amended as provided therein and under the DGCL. At the Effective
Time and without any further action on the part of the Company and the
Purchaser, the By-Laws of the Purchaser will be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms and as provided by law. The Merger Agreement provides that the directors
of the Purchaser immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-Laws
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of the Surviving Corporation, and the officers of the Company immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualify on their earlier resignation or removal.
AGREEMENTS OF THE PARENT, THE PURCHASER AND THE COMPANY.
STOCKHOLDERS MEETING. Pursuant to the Merger Agreement, following the
purchase of Shares pursuant to the Offer, the Company will take all action
necessary in accordance with applicable law to convene a meeting of its
stockholders (the "Stockholders Meeting") as promptly as practicable to consider
and vote upon the Merger Agreement and the transactions contemplated thereby.
The Company will, through the Board of Directors recommend that the Company's
stockholders vote in favor of the adoption of the Merger Agreement and the
transactions contemplated thereby, subject to the Board of Director's fiduciary
duty under applicable law. At the meeting of the Company's stockholders, the
Parent will cause all Shares owned by the Parent, the Purchaser or any other
subsidiary of Parent to be voted in favor of the adoption of the Merger
Agreement and the transactions contemplated thereby.
PROXY STATEMENT. As soon as practicable, following the purchase of Shares
pursuant to the Offer, the Company will prepare and file with the Commission
under the Exchange Act a proxy statement (the "Proxy Statement") and shall use
its reasonable best efforts to cause the Proxy Statement to be mailed to
stockholders of the Company as promptly as practicable after such filing.
COMPANY BOARD REPRESENTATION. The Merger Agreement provides that, promptly
upon the purchase by the Purchaser of such number of Shares pursuant to the
Offer as satisfies the Minimum Condition (the "Majority Acquisition"), and from
time to time thereafter, the Purchaser will be entitled to designate up to such
number of directors on the Board of Directors of the Company as will give the
Purchaser representation on the Board of Directors as represents a percentage of
the Board of Directors equal to the percentage of the aggregate number of Shares
owned by the Purchaser, provided that, from the Majority Acquisition until the
Effective Time, at least two persons who were directors of the Company on the
date of the Merger Agreement (the "Continuing Directors") will be directors of
the Company and that if the number of Continuing Directors is reduced below two
for any reason, any remaining Continuing Director will be entitled to fill such
vacancy or if no Continuing Directors remain, the other directors will fill such
vacancies with persons not affiliated with the Purchaser, the Parent or the
Company. From the time of the Majority Acquisition to the Effective Time, the
Company will use its reasonable best efforts to cause persons designated by the
Purchaser to constitute the same percentage as is on the board of (i) each
committee of the Board of Directors, (ii) each board of directors of each
subsidiary of the Company and (iii) each committee of each such board, in each
case only to the extent permitted by law. The Company's obligations to appoint
designees to its Board of Directors shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder.
ACCESS TO INFORMATION; CONFIDENTIALITY. Pursuant to the Merger Agreement,
from the date thereof to the Effective Time, the Company shall, and shall cause
its subsidiaries, to, afford the Parent and its authorized representatives
reasonable access during normal business hours to all of the properties,
personnel, contracts, agreements and books and records of the Company and its
subsidiaries, and will promptly deliver or make available to the Parent all
filings by the Company pursuant to federal or state securities laws, and all
other information concerning the business, properties, assets and personnel of
the Company and its subsidiaries as the Parent may from time to time reasonably
request.
The Merger Agreement also incorporates by reference the terms of a
Confidentiality Agreement between the Company and the Guarantor.
NO SOLICITATION OF TRANSACTIONS. The Merger Agreement provides that the
Company, its subsidiaries and their respective officers, directors, employees,
representatives and advisors will immediately cease any existing discussions or
negotiations, if any, with any parties conducted prior to the date of the Merger
Agreement with respect to any proposal (an "Acquisition Proposal") for an
acquisition of all or any substantial part of the business and properties or
capital stock of the Company and its subsidiaries taken as a whole, directly or
indirectly, whether by merger, consolidation, share exchange, tender offer,
purchase of assets or shares of capital stock or otherwise (an "Acquisition
Transaction"); PROVIDED that following the cessation of any such discussions or
negotiations, future discussions or negotiations with any such parties will be
governed by the remaining provisions of this paragraph. Except as set forth in
the Merger Agreement, neither the Company or any of its affiliates, nor any of
its or their respective officers, directors, employees, representatives or
agents, will, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
person or group (other than the Parent and the Purchaser, any affiliate or
associate of the Parent and the Purchaser or any designees of the Parent or the
Purchaser) concerning any Acquisition Proposal. Notwithstanding the foregoing,
(a) the Board of Directors may take, and disclose to the Company's stockholders,
a position contemplated by Rules 14d-9 and 14e-2 promulgated under
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the Exchange Act with respect to any tender offer for shares of capital stock of
the Company; PROVIDED, that the Board of Directors will not recommend that the
stockholders of the Company tender their shares in connection with any such
tender offer unless the Board of Directors shall have determined in good faith,
after consultation with outside counsel that failing to take such action would
constitute a breach of the Board of Directors' fiduciary duty under applicable
law; (b) the Company may, directly or indirectly, furnish information and
access, in each case only in response to unsolicited requests therefor, to any
person or group pursuant to customary confidentiality agreements, and may
participate in discussions and negotiate with such person or group concerning
any Acquisition Proposal, if such person or group has submitted a written
Acquisition Proposal to the Board of Directors and the Board of Directors
determines in its good faith judgment, after consultation with outside counsel
that failing to take such action would constitute a breach of the Board of
Directors' fiduciary duty under applicable law; and (c) the Company may
terminate the Merger Agreement if the Company receives an Acquisition Proposal
in writing (1) that the Board of Directors determines in its good faith judgment
is more favorable to the Company's stockholders than the Offer and the Merger
and (2) as a result of which, the Board of Directors determines in good faith,
after consultation with outside counsel, that it is obligated by its fiduciary
duty under applicable law to terminate the Merger Agreement; PROVIDED, that such
termination pursuant to this clause (c) will not be effective until the Company
has made payment of the full fee and expense reimbursement required by Section
8.2 of the Merger Agreement. Under the Merger Agreement, the Board of Directors
is obliged to notify the Parent immediately if any such proposal is made and
will in such notice, indicate in reasonable detail the identity of the offeror
and the terms and conditions of any proposal and, subject to the fiduciary
duties of the Board of Directors under applicable law, will keep the Parent
promptly advised of all developments which could reasonably be expected to
culminate in the Board of Directors withdrawing, modifying or amending its
recommendation of the Offer, the Merger and the other transactions contemplated
by the Merger Agreement. The Company has also agreed not to release any third
party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company is a party, unless the Board of Directors shall
have determined in good faith, that failing to release such third party or waive
such provisions would constitute a breach of the fiduciary duties of the Board
of Directors under applicable law.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that the Purchaser agrees that all rights to indemnification
existing in favor of the present or former directors, officers, and employees of
the Company (as such) or any of its subsidiaries or present or former directors
of the Company or any of its subsidiaries serving or who served at the Company's
or any of its subsidiaries' request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise (collectively, the "Covered Persons"), as provided in the
Company's Certificate of Incorporation or By-Laws, or the articles of
incorporation, by-laws or similar documents of any of the Company's subsidiaries
and the indemnification agreements with such present and former directors,
officers and employees as in effect as of the date of the Merger Agreement with
respect to matters occurring at or prior to the Effective Time will survive the
Merger and continue in full force and effect and without modification (other
than modifications following the Merger which would enlarge the indemnification
rights) for a period of not less than the statutes of limitations applicable to
such matters, and the Surviving Corporation is required to comply fully with its
obligations thereunder. Without limiting the foregoing, the Company will, and
after the Effective Time, the Surviving Corporation will periodically advance
reasonably incurred expenses as so incurred with respect to the foregoing
(including with respect to any action to enforce rights to indemnification or
the advancement of expenses) to the fullest extent permitted under applicable
law; PROVIDED, HOWEVER, that the person to whom the expenses are advanced must
provide an undertaking (without delivering a bond or other security) to repay
such advance if it is ultimately determined that such person is not entitled to
indemnification. In addition, for a period of six (6) years after the Effective
Time, the Surviving Corporation will maintain officers' and directors' liability
insurance and fiduciary liability insurance for the Covered Persons (whether or
not they are entitled to indemnification thereunder) who were covered at the
time of the Merger Agreement by the Company's existing officers' and directors'
or fiduciary liability insurance policies on terms no less advantageous to such
Covered Persons than insurance existing at the time of the Merger Agreement.
The Surviving Corporation will indemnify and hold harmless (and advance
expenses to), to the fullest extent permitted under applicable law, each
director, officer, employee, fiduciary and agent of the Company or any
subsidiary of the Company serving as such on the date of the Merger Agreement
against any costs and expenses in connection with any claim, action, suit,
proceeding or investigation relating to any of the transactions contemplated
thereby, and in the event of any such claim, action, suit, proceeding or
investigation, (i) the Surviving Corporation will pay the reasonable fees and
expenses of counsel selected by such parties and (ii) the parties to the Merger
Agreement will cooperate in the defense of any such matter; provided, however,
that the Surviving Corporation will not be liable for any settlement effected
without its prior written consent, which consent shall not unreasonably be
withheld. The Surviving Corporation shall pay all reasonable costs and expenses,
including attorneys' fees, that may be incurred by and indemnified parties in
enforcing the indemnity and other
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obligations provided for by Section 6.8 of the Merger Agreement, and such
obligations will survive the consummation of the Merger at the Effective Time
and shall continue for the periods specified in the Merger Agreement. In the
event the Surviving Corporation or any of its respective successors or assigns
(i) consolidates with or mergers into any other person and is not the continuing
or surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any person,
it is required to make proper provisions so that successors and assigns of the
Surviving Corporation assume the obligations set forth in Section 6.8 of the
Merger Agreement.
FURTHER ACTION; REASONABLE EFFORTS. The Merger Agreement provides that,
upon the terms and subject to the conditions thereof, each of the parties
thereto shall use its reasonable efforts to take, or cause to be taken, all
action, and to do or cause to be done, all things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by and in connection with the Merger Agreement as soon as
practicable to (i) obtain all consents, amendments to or waivers under the
Company's contractual arrangements (other than agreements relating to long term
debt or consents, amendments or waivers, the failure of which will not have a
Material Adverse Effect (as defined in the Merger Agreement) with respect to the
Company, impair the ability of the Company to perform its obligations under the
Merger Agreement or delay the transactions contemplated by the Merger Agreement,
(ii) make all necessary or appropriate registrations and filings with
governmental entities, (iii) defend any lawsuits challenging the Merger
Agreement or the transactions contemplated thereby, (iv) fulfill or cause the
fulfillment of the conditions to Closing set forth in Article 7 of the Merger
Agreement. In connection with and without limiting the foregoing, the Company
and its Board of Directors will (x) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, the Merger Agreement or the transaction contemplated
thereby or by the Tender Agreement, and (y) if any such statute or regulation
becomes applicable to any of the foregoing, take all action necessary to ensure
that the Offer, the Merger and the transactions contemplated by the Merger
Agreement and the Voting Agreement are consummated as promptly as practicable
and to otherwise minimize the effect of such statute or regulation on such
transactions. The Company and the Parent agreed to file as promptly as
practicable, but not later than 10 days following the commencement of the Offer,
the notification and report required pursuant to the HSR Act. The Parent agreed
to cause to be filed as promptly as practicable and in no event later than July
15, 1997, all other applications and notices required to be filed with
governmental authorities in order to consummate the Offer and the Merger, and to
pursue diligently the approval of such applications.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has covenanted and agreed that, during the period from the date of
the Merger Agreement to the Effective Time, (1) the Company will, and will cause
each of its subsidiaries, subject to certain exceptions, to, conduct its
operations according to its ordinary course of business consistent with past
practice (although it will not be a breach of such covenant if a deviation from
past practice occurs as a result of the limitations set forth in clauses (e) or
(g) below), (2) the Company will, and will cause each of its subsidiaries to,
use all reasonable efforts to preserve intact its business organization and to
maintain satisfactory relationships with its customers, suppliers and others
having material business relationships with it, (although it will not be a
breach of such covenant if a deviation from past practice occurs as a result of
the limitations set forth in clauses (e) or (g) below), and (3) the Company will
not and will not permit any of its subsidiaries to, without the prior written
consent of the Parent:
(a) amend or propose to amend its Certificate of Incorporation or
By-Laws or equivalent governing instruments;
(b) authorize for issuance, issue, sell, pledge, deliver or agree or
commit to issue, sell, pledge or deliver (whether through the issuance or
granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or other agreements) or otherwise encumber any
capital stock of any class or any securities convertible into or
exchangeable for shares of capital stock of any class, other than the
issuance of Shares issuable upon exercise of Company Stock Options (as
defined in the Merger Agreement) or conversion of 7% Debentures outstanding
on the date of the Merger Agreement or pursuant to the Stock Purchase Plan
or the Directors Plan (in each such case, in accordance with the present
terms thereof);
(c) split, combine or reclassify any of its capital stock or declare,
pay or set aside for payment any dividend or other distribution in respect
of or substitution for its capital stock, or redeem, purchase or otherwise
acquire any shares of its capital stock;
(d) except as set forth in Schedule 4.9 of the Merger Agreement,
increase or establish any compensation or benefit plan, agreement, policy,
practice, program or arrangement that would be a Plan (had such plan,
agreement, policy, practice, program or arrangement been adopted prior to
the date of the Merger Agreement) or otherwise increase in any manner the
compensation payable or to become payable by the Company or any of its
subsidiaries to any of their respective directors, officers, former
employees, or employees, other than in the ordinary course of business
consistent with past practice or as required under any existing employment
agreement or Plan or the Merger Agreement;
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(e) acquire or agree to acquire (x) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets, outside of the ordinary course of
business that in the aggregate is in excess of $10 million (the foregoing
does not, however, restrict any construction project identified or
commenced by the Company prior to the Merger Agreement that is not
prohibited by clause (h) below);
(f) sell, lease, license, or otherwise dispose of, or enter into any
material contract, commitment, lease or agreement with respect to, any
properties or assets (i) that are material to the Company and its
subsidiaries taken as a whole and (ii) other than in the ordinary course of
business consistent with past practice;
(g) (x) incur any long-term indebtedness in excess of the aggregate
amount of the Company's consolidated long-term indebtedness outstanding as
of June 16, 1997 other than (i) indebtedness not to exceed $10 million at
any one time outstanding, the proceeds of which are used to make
acquisitions permitted by clause (e) above; PROVIDED, that the ratio of the
principal amount of the indebtedness incurred to finance such acquisitions
to the aggregate pro forma cash flow of the businesses so acquired during
the four fiscal quarters preceding such acquisition does not exceed 6:1,
and (ii) additional indebtedness not to exceed $10 million on the date
shares are purchased in the Offer, and except for intercompany indebtedness
between the Company and any of its subsidiaries or between such
subsidiaries, or (y) make any loans, advances or capital contributions to,
or investments in, any other person, other than to the Company or any
subsidiary or joint venture of the Company or to officers and employees of
the Company or any of its subsidiaries for travel, business or relocation
expenses in the ordinary course of business consistent with past practice;
(h) make or agree to make any new capital expenditure or capital
expenditures other than in accordance with the Company's 1997 budget which
was delivered to the Parent;
(i) make any tax election or settle or compromise any tax liability
that will have a Material Adverse Effect with respect to the Company;
(j) make any material change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;
(k) enter into any other agreements, commitments or contracts that are
material to the Company and its subsidiaries taken as a whole, other than
in the ordinary course of business consistent with past practice, or
otherwise make any material change that is adverse to the Company
(including by way of termination) in (i) any existing agreement, commitment
or arrangement that is material to the Company and its subsidiaries taken
as a whole or (ii) the conduct of the business or operations of the Company
and its subsidiaries; or
(l) agree, commit or arrange to do any of the foregoing.
EMPLOYEE MATTERS. The Merger Agreement provides that on and after the
Effective Time, the Parent will cause the Surviving Corporation to comply in all
respects with the change of control provisions in the employment agreements of
Moshael J. Straus, Daniel E. Straus, Steven R. Baker, Andrew Horowitz, Alan D.
Solomont and Susan S. Bailis. Without limiting the foregoing, all amounts
payable upon such change in control shall be paid in cash immediately following
the Majority Acquisition.
Pursuant to the Merger Agreement, the Parent agreed to pay or to cause the
Surviving Corporation to pay, to certain employees of the Company identified to
the Parent (each an "Affected Employee") an amount (the "Accrued Bonus Payment")
equal to such employee's annual bonus multiplied by a fraction, the numerator of
which is the number of days that have elapsed from December 31, 1996 (or the
date of hire of the Affected Employee, if later) until the Effective Time and
the denominator of which is 365; provided, that if any such employee terminates
his or her employment other than for Good Reason to Terminate (as defined below)
prior to December 31, 1997, the numerator will be the lesser of 181 and the
number of days that have elapsed from the date of hire of the Affected Employee
until June 30, 1997. Payment of each Accrued Bonus Payment will be payable upon
the earlier to occur of (i) the termination following the purchase of Shares
pursuant to the Offer of the Affected Employee's employment, (ii) the occurrence
of an event that constitutes Good Reason to Terminate and (iii) not later than
February 15, 1998, if the Affected Employee is employed by the Surviving
Corporation or any of its subsidiaries on December 31, 1997.
In the Merger Agreement, the Parent agreed that the Surviving Corporation
would make certain severance payments to each of the Company's corporate and
non-facility employees and certain non-ancillary employees (which does not
include any person identified in the first paragraph of this section), on the
date of termination of any such employee by the Surviving Corporation or its
subsidiary (other than a termination for Cause (as defined below)), as the case
may be, or by such
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employee following the occurrence of an event that constitutes Good Reason to
Terminate. Prior to the date that is eighteen months after the Effective Time,
the Parent has agreed that the Surviving Corporation will not, and will not
permit its subsidiaries to, terminate any such employees on less than 90 days
prior written notice of such termination. Notwithstanding the foregoing, no
employee shall be entitled to a severance payment as described in the preceding
two sentences if such employee receives a notice of termination or is terminated
by the Company or voluntarily resigns at any time prior to the purchase of
Shares pursuant to the Offer or on a date that is after the date that is
eighteen months after the Effective Time. For purposes of the Merger Agreement,
"Cause" means conviction of a felony or a crime involving personal dishonesty or
theft or misappropriation of the property of the Surviving Corporation or its
subsidiaries and "Good Reason to Terminate" is deemed to occur if the Parent,
the Surviving Corporation or any of their subsidiaries or affiliates (i) takes
any action which substantially reduces an affected employee's title, duties,
responsibilities, salary, or, unless such change affects all employees of the
Surviving Corporation or its subsidiaries at a comparable level of seniority and
responsibility, benefits, or (ii) requires the affected employee to relocate
permanently in excess of 25 miles from the his or her primary place of business.
In addition, the Merger Agreement provides that notwithstanding anything
contained in the Merger Agreement or any other document, agreement or instrument
to the contrary, if any person is terminated by the Company (other than for
cause) following the purchase of Shares pursuant to the Offer but prior to the
Effective Time, all Options held by such person will be treated as provided in
Section 3.1(d) of the Merger Agreement.
REPRESENTATION AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations and warranties by the Company as to the
Company's organization, capitalization, authorization for the agreement, the
absence of conflicts with governing instruments or other agreements,
governmental approvals, compliance with SEC filings, preparation of financial
statements, undisclosed liabilities, veracity of information supplied, absence
of certain changes or events, finders and investment bankers fees, voting
requirement for approval, absence of litigation, taxes, compliance with certain
laws, title to properties, compliance with agreements, employee benefit plans,
and insurance, and environmental matters.
In addition, the Merger Agreement contains representations and warranties
by the Parent and the Purchaser concerning their organization, authorization for
the agreement, the absence of conflicts with governing instruments or other
agreements, governmental approvals, veracity of information supplied, financing,
fraudulent transfer laws, finders and investment bankers fees, and regulatory
approvals.
CONDITIONS OF THE MERGER. Under the Merger Agreement, the respective
obligations of the Parent, the Purchaser and the Company to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions: (a) the Merger Agreement shall have been approved by the
affirmative vote of the stockholders of the Company by the requisite vote in
accordance with the Company's Certificate of Incorporation and the DGCL (which
the Company has represented shall be solely the affirmative vote of a majority
of the outstanding Shares); (b) no legal requirements shall have been enacted,
entered, promulgated or enforced by any court or governmental entity which
prohibits or prevents the consummation of the Merger (PROVIDED, that the party
or parties invoking this condition shall use reasonable efforts to have any such
legal requirement vacated or removed); and (c) any applicable waiting period
under the HSR Act will have expired or been terminated.
TERMINATION, FEES AND EXPENSES. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after adoption by the stockholders of the Company, as follows:
(a) By the mutual written consent of the Parent, the Purchaser and the
Company (but only by action of the Continuing Directors (as defined in the
Merger Agreement) after the purchase of Shares pursuant to the Offer);
(b) By the Parent, the Purchaser or the Company (but only by action of
the Continuing Directors after the purchase of Shares pursuant to the
Offer):
(i) if a court of competent jurisdiction or other governmental
entity of the United States shall have issued an order or taken any
other action permanently restraining, enjoining or otherwise prohibiting
the Merger and such Order or other action shall have become final and
nonappealable; or
(ii) (x) as a result of the failure, occurrence or existence of any
of the conditions set forth in Exhibit A to the Merger Agreement (1) the
Purchaser shall have failed to commence the Offer within five business
days following the date of the Merger Agreement or (2) the Offer shall
have terminated or expired in accordance with its terms without the
Purchaser having accepted for payment any Shares pursuant to the Offer
or (y) the Purchaser shall not have accepted for payment any Shares
pursuant to the Offer by September 15, 1997, PROVIDED, that such date
may
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be extended at the option of the Parent to October 15, 1997, but only if
the Parent is and has been diligently pursuing approval of the
applications with the relevant governmental authorities, PROVIDED,
FURTHER, HOWEVER, that the passage of the period referred to in clause
(y) shall be tolled for any part thereof (but not exceeding 30 calendar
days in the aggregate) during which any party shall be subject to a
non-final order, decree, ruling or action restraining, enjoining or
otherwise prohibiting the purchase of Shares pursuant to the Offer or
the consummation of the Merger; and PROVIDED FURTHER that the right to
terminate the Merger Agreement pursuant to clause (b) (ii) will not be
available to any party whose willful breach of its representations and
warranties contained in the Merger Agreement or whose failure to perform
any of its obligations under the Merger Agreement results in the
failure, occurrence or existence of any such condition;
(c) By the Company, if the Company receives an Acquisition Proposal in
writing from any person or group (i) that the Board of Directors determines
in its good faith judgment is more favorable to the Company's stockholders
than the Offer and the Merger and (ii) as a result of which, the Board of
Directors determines in good faith, after consultation with outside
counsel, that it is obligated by its fiduciary duty under applicable law to
terminate the Merger Agreement; PROVIDED, that such termination pursuant to
this clause (c) will not be effective until the Company has made payment of
the full fee and expense reimbursement required by Section 8.2 of the
Merger Agreement.
(d) By the Parent or the Purchaser prior to the purchase of Shares
pursuant to the Offer in the event of a material breach by the Company of
any representation, warranty, covenant or other agreement contained in the
Merger Agreement which has not been cured within 15 days after giving of
written notice to the Company;
(e) By the Company, if the Parent or the Purchaser shall have breached
in any material respect any of their respective representations,
warranties, covenants or other agreements contained in the Merger
Agreement, which failure to perform has not been cured within 15 days after
the giving of written notice to the Parent or the Purchaser;
(f) By the Parent, if, prior to the purchase of Shares in the Offer,
the Company shall have (i) withdrawn, modified or amended in any respect
adverse to the Parent or the Purchaser its approval or recommendation of
the Merger Agreement or any of the transactions contemplated herein, (ii)
failed to include in the Proxy Statement or Information Statement such
recommendation, (iii) recommended any Acquisition Proposal or Acquisition
Transaction from or with a person other than the Parent or any of its
subsidiaries or (iv) resolved to do any of the foregoing;
(g) By the Parent, if, prior to the purchase of Shares in the Offer
(i) an Acquisition Proposal that is publicly disclosed shall have been
commenced, publicly proposed or communicated to the Company which contains
a proposal as to price (without regard to the specificity of such price
proposal) and (ii) the Company shall not have rejected such proposal within
10 business days of its receipt or the date its existence first becomes
publicly disclosed, if sooner;
(h) By the Parent, if (i) any person or group (as defined in Section
13(d)(2) of the Exchange Act) (other than Genesis, the Parent, the
Purchaser or any of its or their affiliates) shall have become, or shall
have made a proposal seeking to become, after the date hereof the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange
Act) of at least 35% of the outstanding Shares, other than acquisitions of
securities for bona fide arbitrage purposes only, and other than
acquisition of beneficial ownership solely as a result of a person having
discretionary authority to vote or dispose of shares in an investment
advisory or similar capacity or shall have made a proposal to acquire,
directly or indirectly, all or substantially all of the consolidated assets
of the Company and its subsidiaries and (ii) following public announcement
of such person or group becoming such beneficial owner or proposing such
beneficial ownership or acquisition, at the next scheduled expiration of
the Offer all conditions to the Offer (other than the Minimum Condition)
shall have been satisfied or waived; and
(i) By the Company, if Parent shall not have delivered the Letter of
Credit (as defined below) by June 25, 1997.
The Merger Agreement provides further that if: (1) the Company terminates
the Merger Agreement pursuant to clause (c) above; (2) the Company terminates
the Merger Agreement pursuant to clause (b) (ii) above and at such time the
Parent would have been permitted to terminate the Merger Agreement under clause
(f) or (g) above; (3) the Parent terminates the Merger Agreement pursuant to
clause (f) or (g) above; or (4) the Parent terminates the Merger Agreement
pursuant to clause (d) or (h) above and (in the case of clause (4) only) within
one year of such termination the Company shall have consummated, or have entered
into a definitive agreement with respect to, an Acquisition Transaction pursuant
to which the holders of the Shares have received or will receive consideration
(including the value of any retained equity) equal to or greater than the Merger
Consideration, then the Company shall pay to Parent, within one business day
following (in the case of clauses (1), (2) and (3)) such termination and, in the
case of clause (4), such consummation or entering into of a definitive
agreement, a fee, in cash, of $25 million, PROVIDED, HOWEVER, that the Company
in no event shall be obligated to pay more than one such
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fee and the amount of fees paid as provided in this paragraph and the amount of
expense reimbursement paid under the next paragraph shall not exceed $25
million.
Upon the termination of the Merger Agreement under circumstances in which
the Company would be obligated to pay a fee as described in the previous
paragraph, then the Company is obligated to reimburse the Parent and Genesis
(not later than one business day after submission of statements therefor) for
all actual documented out-of-pocket expenses incurred by or on behalf of any of
them or their affiliates in connection with the Offer and the Merger and the
consummation of all transactions contemplated by the Merger Agreement
(including, without limitation, fees and disbursements payable to financing
sources, investment bankers, counsel to Purchaser, Parent, the Guarantor or any
of the foregoing, and accountants) ("expenses"). In all cases, the total amount
of fees paid as described in the previous paragraph and reimbursement of
expenses as described in this paragraph shall not exceed $25 million. Upon
termination of the Merger Agreement pursuant to clause (d) above, the Company
shall reimburse the Parent (not later than one business day after submission of
statements therefor) for expenses, which reimbursement in no event will exceed
$12 million.
GUARANTY. The Merger contains a guaranty (the "Guaranty") by Genesis, as a
primary obligor and not as surety, to the Company, of the due and punctual
observance, performance and discharge of each obligation of the Parent and the
Purchaser contained in the Merger Agreement and the Voting Agreement.
Obligations of the Parent and the Purchaser so guaranteed are hereinafter
referred to as the "Obligations."
Genesis agreed that if either or both of the Parent and the Purchaser fails
to observe, perform or discharge any Obligation, Genesis shall promptly itself,
observe, perform or discharge such Obligation, or cause either the Parent or the
Purchaser to observe, perform or discharge such Obligation, in all cases as if
and to the extent that Genesis was the primary obligor with respect to such
Obligation, and shall pay any and all actual damages that may be incurred or
suffered by the Company in consequence thereof, and any and all costs and
expenses, including, without limitation, attorneys' fees and expenses, that may
be incurred by the Company in collecting such Obligation and/or in preserving or
enforcing any rights under the Guaranty or under the Obligations.
The liability of Genesis under the Guaranty with respect to each and all of
the Obligations is absolute and unconditional, irrespective of any waiver of,
amendment to, modification of, consent or departure from, the guaranteed
agreements, including, without limitation, any waiver or consent involving a
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations.
Notwithstanding anything to the contrary set forth in the Merger Agreement,
in consideration of the substantial time and expense invested by the Company in
the transactions contemplated by the Merger Agreement and the loss of
opportunities otherwise available to the Company as a result thereof, if, at any
scheduled expiration of the Offer occurring after August 15, 1997 on which each
of the conditions set forth in clauses (a) through (g) on Exhibit A to the
Merger Agreement (as well as the HSR Act condition set forth in clause (ii) of
the first sentence of the introductory paragraph of such Exhibit A) has been
satisfied or waived, the Parent shall not have satisfied or waived the condition
set forth in clause (iii) of the first sentence of the introductory paragraph of
such Exhibit A and the Merger Agreement is thereafter terminated, then Genesis
shall pay to the Company $30 million, in cash in immediately available funds.
Subject to the next sentence, upon making such payment none of the Parent, the
Purchaser, Genesis or any of their affiliates shall have any further liability
with respect to the failure to complete the transactions contemplated by the
Merger Agreement. This limitation will not apply if the Parent or the Purchaser
breaches the Merger Agreement (and the breach remains unremedied after five days
notice to the Parent or the Purchaser) or if Genesis, the Parent or the
Purchaser fail to use reasonable best efforts to obtain such financing.
In addition, Genesis has agreed to deliver to the Company a clean,
irrevocable letter of credit (the "Letter of Credit") for $30 million, drawn on
Mellon Bank, N.A., in form reasonably acceptable the Company to secure its
obligation to pay the amount as set forth in the previous paragraph. Genesis
will use its reasonable best efforts to deliver the Letter of Credit prior to
commencement of the Offer, but in all events will deliver it not later than June
25, 1997.
TENDER AGREEMENTS AND IRREVOCABLE PROXIES
As an inducement and a condition to the Parent and the Purchaser entering
into the Merger Agreement and incurring the obligations set forth therein,
including the Offer and the Merger, the Parent required that each of Daniel E.
Straus and Moshael J. Straus (each, a "Stockholder" and together, the
"Stockholders") enter into a Tender Agreement and Irrevocable Proxy (the "Tender
Agreements") with the Parent and the Purchaser.
Pursuant to the Tender Agreements, each Stockholder agreed to validly
tender (or cause the record owner thereof) and not withdraw, pursuant to and in
accordance with the terms of the Offer, all of the Shares and any other
securities entitled to
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vote generally in the election of directors beneficially owned by such
Stockholder (the "Owned Shares"). The Tender Agreements provide that each
Stockholder will, for all Owned Shares tendered by such Stockholder in the Offer
and accepted for payment by the Purchaser, receive a price per Owned Share equal
to $28.00, or such higher per share consideration paid to other stockholders who
have tendered into the Offer.
Pursuant to the Tender Agreements, each Stockholder agreed that during the
period commencing on the date thereof and continuing until the earlier of (x)
the consummation of the Offer and (y) the termination of the Tender Agreements,
at any meeting (whether annual or special, and whether or not an adjourned or
postponed meeting) of the Company's stockholders, however called, or in
connection with any written consent of the Company's stockholders, subject to
the absence of a preliminary or permanent injunction or other requirement under
applicable law by any United States federal, state or foreign court barring such
action, such Stockholder shall vote (or cause to be voted) all Owned Shares: (i)
in favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval and adoption of the Merger and the terms thereof and
each of the other actions contemplated by the Merger Agreement and the Tender
Agreements and any actions required in furtherance thereof; (ii) against any
action or agreement that would impede, interfere with, or prevent the Offer or
the Merger; and (iii) except as otherwise agreed to in writing in advance by the
Parent, against the following actions (other than the Offer, the Merger and the
transactions contemplated by the Merger Agreement and the Tender Agreements):
(I) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company or any of its subsidiaries
(including any transaction contemplated by an Acquisition Proposal); (II) any
sale, lease or transfer of a material amount of the assets or business of the
Company or its subsidiaries, or any reorganization, restructuring,
recapitalization, special dividend, dissolution, liquidation or winding up of
the Company or its subsidiaries; (III) any change in the present capitalization
of the Company including any proposal to sell any material equity interest in
the Company or any amendment of the Certificate of Incorporation of the Company;
and (IV) against an election of new members of the Board of Directors of the
Company except where the vote is cast in favor of the nominees of a majority of
the existing directors of the Company. In addition, each Stockholder agreed not
to enter into any agreement, arrangement or understanding with any person the
effect of which would be inconsistent or violative of the foregoing.
Pursuant to the Tender Agreements, each Stockholder granted to, and
appointed the Purchaser and any designee of the Purchaser, each of them
individually, such Stockholder's Irrevocable (until the termination of the
Tender Agreements) Proxy and Attorney-In-Fact (with full power of substitution)
to vote the Owned Shares of such Stockholder as indicated in the preceding
paragraph.
As of June 16, 1997, the Stockholders beneficially owned 14,013,966 Shares,
or 36.1% of the outstanding Shares on a fully-diluted basis.
The Tender Agreements provide that the Stockholders entered into such
agreements solely as the owner of Owned Shares and not in his capacity as a
director or officer, and that the agreements set forth therein shall in no way
restrict the Stockholders in the exercise of his fiduciary duties as a director
and officer of the Company, which, in the case of the following paragraph, such
duties will be exercised only in accordance with the instructions of the
Company's Board of Directors acting in compliance with the requirements of the
Merger Agreement.
The Tender Agreements provide that each Stockholder will immediately cease
any existing discussions or negotiations, if any, with any parties conducted
with respect to any Acquisition Proposal. The Tender Agreements further provide
that each Stockholder will not, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any person or group (other than the Parent and the Purchaser or
any affiliate, associate or designee of the Parent or the Purchaser) concerning
any proposal for an acquisition of all or any substantial part of the business
and properties or capital stock of the Company and its subsidiaries taken as a
whole, directly or indirectly, whether by merger, consolidation, share exchange,
tender offer, purchase of assets or shares of capital stock or otherwise.
The Tender Agreements provide that each Stockholder will not, until the
termination thereof, directly or indirectly (i) except as permitted thereby,
sell, transfer, pledge, hypothecate, encumber, assign or dispose of such
security or the Beneficial Ownership thereof (as determined pursuant to Rule
13d-3 under the Exchange Act), offer to sell, transfer or dispose or make an
option, agreement or arrangement or understanding to do the foregoing
("Transfer") to any person any or all Owned Shares or (ii) except as permitted
thereby, grant any proxies or powers of attorney, deposit any Owned Shares into
a voting trust or enter into a voting agreement, understanding or arrangement
with respect to such Owned Shares. The Tender Agreements provide that
notwithstanding anything to the contrary therein, each Stockholder shall have
the right to Transfer Owned Shares (i) to any Family Member, (ii) to the trustee
or trustees of a trust solely (except for remote contingent interests) for the
benefit of such Stockholder and/or one or more Family Members, (iii) to a
foundation created or established by such Stockholder, (iv) to a corporation of
which such Stockholder and/or any Family Members owns all of the outstanding
capital stock,
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(v) to a partnership of which such Stockholder and/or any Family Members owns
all of the partnership interests, (vi) to the executor, administrator or
personal representative of the estate of such Stockholder, (vii) to any
guardian, trustee or conservator appointed with respect to the assets of such
Stockholder or (viii) by operation of law; provided, that in the case of any
Transfer pursuant to clauses (i) through (vii), the transferee shall execute an
agreement to be bound by the terms of the Tender Agreements, or terms
substantially identical thereto. For purposes of the foregoing, "Family Member"
has the meaning ascribed to "Related Parties" under Section 672(c) of the
Internal Revenue Code of 1986, as amended.
Each Tender Agreement, and all rights and obligations of the parties
thereunder, terminates upon the earlier of (i) the date upon which the Parent
has purchased and paid for all of the Owned Shares of the applicable Stockholder
in accordance with the Offer, (ii) the date on which the Merger Agreement is
terminated under such circumstances in which Parent is not and will not be
entitled to a fee pursuant to Section 8.2(a) of the Merger Agreement and (iii)
May 31, 1998.
The Tender Agreements contain customary representations and warranties by
the parties.
NONCOMPETITION AND CONSULTING AGREEMENTS
In connection with the Merger Agreement, the Parent and the Purchaser
entered into Noncompetition and Consulting Agreements (the "Noncompetition
Agreements") with each of Daniel E. Straus and Moshael J. Straus (each, a
"Consultant" and together the "Consultants").
Pursuant to the Noncompetition Agreements, the Parent irrevocably appointed
each Consultant, and each Consultant agreed to act as a consultant, for a
period of 12 months (the "Consulting Term") commencing on the date of the
consummation of the Merger (the "Closing") , to perform such reasonable
consulting services as the chief executive officer of the Parent requests,
subject to following paragraph. If the Merger Agreement is terminated, the
Noncompetition Agreements will be simultaneously terminated.
During the Consulting Term, each Consultant as an independent contractor
will make himself available upon reasonable notice for such time during regular
business hours as shall be reasonably necessary for the business of the Company.
Such consulting services will be rendered in Hackensack, New Jersey.
As compensation for each Consultant's services, the Parent agreed to pay
each Consultant a consulting fee of $1.5 million payable in immediately
available funds at the Closing. In addition, each Consultant will be
reimbursed for all expenses actually incurred by such Consultant in the
performance of his duties.
As consideration for each Consultant's agreement to the restrictive
covenants described in the second following paragraph (the "Restrictive
Covenants"), the Parent, among other things, agreed to pay each Consultant and
each Consultant agreed to accept as full consideration for his agreement to the
Restrictive Covenants a cash payment in the amount of $1.5 million payable in
immediately available funds at the Closing.
The Noncompetition Agreements provide that the Consultants will not, for a
period of one year after the date thereof, in any capacity (including, but not
limited to, owner, partner, shareholder, consultant, agent, employee, officer,
director or otherwise), directly or indirectly, for his own account or for the
benefit of any person, establish, engage in or be connected with any Competitive
Business. The term "Competitive Business" means any Restricted Business
conducted in the Restricted Zone. Restricted Business means institutional
pharmacy, rehabilitation services, long-term care services, skilled nursing
facilities or assisted living facilities but does not include providing any
other goods or services to skilled nursing facilities, assisted living
facilities and other health care facilities. The Restricted Zone means any town
in Connecticut or Rhode Island in which the Company operates a long term care
facility and an area of 15 miles surrounding such facility; any county in
Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the Company
operates a long term care facility and an area of 15 miles surrounding such
facility; all portions of Massachusetts east of Worcester; all portions of
Pennsylvania east of Harrisburg and an area of 15 miles around any facility
located in Virginia or Vermont; but in no event includes any portion of any
state other than Connecticut, Rhode Island, Illinois, New Jersey, Ohio, West
Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or Wisconsin. The
foregoing does not restrict either Consultant from owning interests in, or
developing, real estate so long as such Consultant is not operating any
Restricted Business. In addition, the Consultants may not pursue certain
development projects.
For a period of three years commencing on the Closing Date, each Consultant
will not, except with the express prior written consent of Parent, directly or
indirectly, disclose, communicate or divulge to any person, or use for the
benefit of any person, any secret, confidential or proprietary knowledge or
information with respect to the conduct or details of the Company or the
business engaged in by the Company, including, but not limited to, technical
know-how, processes, customers,
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prospects, costs, designs, marketing methods and strategies, finances and
suppliers. This provision does not apply to any information which at the time of
disclosure (i) is generally available to or known to the public (other than as a
result of unauthorized disclosure directly or indirectly by such Consultant) or
(ii) such Consultant discloses, at the direction and authorization of Parent, or
as required by law. If either Consultant is required in a judicial,
administrative or governmental proceeding to disclose any information which is
the subject of the restrictions contained in this paragraph, then such
Consultant will notify Parent as soon as possible so that Parent may either seek
an appropriate protective order or relief, or waive the provisions of this
paragraph. If, in the absence of such an order, relief or waiver, such
Consultant is required, in the written opinion of counsel, to disclose such
information to any court, administrative agency or governmental authority, then
such Consultant may disclose such information without liability.
The Noncompetition Agreement provides that neither Consultant will for a
period of two years after the date thereof, except with the express written
consent of Parent (which shall not be unreasonably withheld or delayed in the
case of an employee of the Company or the Surviving Corporation who has received
a notice of termination from the Company or the Surviving Corporation, as the
case may be) or as is otherwise contemplated by the Merger Agreement, directly
or indirectly, whether as an employee, owner, partner, agent, director, officer,
shareholder or in any other capacity, for his own account or for the benefit of
any person (i) solicit, divert or induce any of (1) the Company's employees or
(2) the Surviving Corporation's employees to leave or to work for him or any
person with which he is connected or (ii) hire any of the Company's or the
Surviving Corporation's employees other than the other Consultant, the Chief
Operating Officer, such Consultant's personal secretary and the persons who
shall be acceptable to Parent and identified on a schedule to be agreed upon
prior to the purchase of Shares in the Offer.
In the event either Consultant is found by a nonappealable judgment of a
court of competent jurisdiction to have violated the nonsolicitation provision
described in the preceding paragraph, in addition to the reasonable fees and
expenses of Parent's counsel incurred to enforce such provision, such Consultant
shall pay to Parent, as liquidated damages, an amount equal to 200% of the
applicable employee's annual compensation (including, without limitation,
salary, bonus and benefits) at the time of the violation; PROVIDED, that in the
event such Consultant is found by such court to have not violated such
nonsolicitation provision, Parent shall pay to such Consultant the reasonable
fees and expenses of counsel incurred by such Consultant to defend such action
and any actual damages resulting from Parent's interference with such
Consultant's commercial relationships.
Pursuant to the Noncompetition Agreements, each Consultant agreed to pay to
the Surviving Corporation, immediately following the Closing, the principal
amount of indebtedness, and accrued interest thereon, owed by such Consultant or
Health Resources of Cinnaminson, Inc., one of the Company's subsidiaries.
Simultaneously with the execution of the Merger Agreement, the Parent and
the Purchaser also entered into a Noncompetition Agreement with Stephen R.
Baker. The terms of such agreement are identical in all material respects to the
terms of the Noncompetition Agreements described above, except that the
Noncompetition Agreement with Mr. Baker (i) does not contain any provisions
relating to the rendering of, or payment for, consulting services by Mr. Baker,
(ii) provides for a cash payment of $500,000 to Mr. Baker as consideration for
his agreement to the Restrictive Covenants and (iii) does not contain any
provision relating to Health Resources Cinnaminson, Inc.
COLCHESTER
Genesis has agreed to acquire for $8.4 million the land and buildings of an
eldercare facility located in New London, Connecticut owned by Straus
Associates, a partnership which is owned by Daniel E. Straus, Moshael J. Straus
and certain other members of their family. The facility is currently under lease
to a subsidiary of the Company. Upon acquisition of the facility, Genesis will
assume the lease. Acquisition of the facility is subject to certain conditions
including receipt of all necessary governmental and third party licenses,
permits and approvals and consummation of the Merger.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY.
PURPOSE. The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. The Offer is being made pursuant to the Merger
Agreement. As promptly as practicable following consummation of the Offer and
after satisfaction or waiver of all conditions to the Merger set forth in the
Merger Agreement, the Purchaser intends to acquire the remaining equity interest
in the Company not acquired in the Offer by consummating the Merger.
VOTE REQUIRED TO APPROVE THE MERGER. The Board of Directors of the Company
has approved the Merger Agreement in accordance with the DGCL. If required for
approval of the Merger, the Company has agreed, subject to the satisfaction of
the conditions to the Merger set forth in the Merger Agreement, in accordance
with and subject to the DGCL, to duly convene a
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meeting of its stockholders as promptly as practicable following the purchase of
Shares pursuant to the Offer for the purpose of considering and taking action on
the Merger Agreement. If stockholder approval is required, the Merger Agreement
must generally be approved by the vote of the holders of a majority of the
outstanding Shares. As a result, if the Minimum Condition is satisfied, the
Purchaser will have the power, to approve the Merger Agreement without the
affirmative vote of any other stockholder.
APPRAISAL RIGHTS. Stockholders do not have appraisal rights as a result of
the Offer. However, if the Merger is consummated, stockholders of the Company at
the time of the Merger who do not vote in favor of the Merger and comply with
all statutory requirements will have the right under the DGCL to demand
appraisal of, and receive payment in cash of the fair value of, their Shares
outstanding immediately prior to the effective date of the Merger in accordance
with Section 262 of the DGCL.
Under the DGCL, stockholders who properly demand appraisal and otherwise
comply with the applicable statutory procedures will be entitled to receive a
judicial determination of the fair value of their Shares (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In WEINBERGER V. UOP, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Stockholders should recognize that the value so determined
could be equal to or higher or lower than the price per Share paid pursuant to
the Offer or the consideration per Share to be paid in the Merger.
In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
WEINBERGER and RABKIN V. PHILIP A. HUNT CHEMICAL CORP that the remedy ordinarily
available to minority stockholders in a cash-out merger is the right to
appraisal described above. However, a damages remedy or injunctive relief may be
available if a merger is found to be the product of unfairness, including fraud,
misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF STOCKHOLDERS DOES NOT PURPORT TO BE
A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS DESIRING
TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE PRESENTATION AND EXERCISE OF
APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE
DELAWARE LAW.
The foregoing description of certain provisions of the DGCL is not
necessarily complete and is qualified in its entirety by reference to the DGCL.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger following the purchase of
Shares pursuant to the Offer in which the Purchaser seeks to acquire any
remaining Shares. Rule 13e-3 should not be applicable to the Merger if the
Merger is consummated within one year after the expiration or termination of the
Offer and the price paid in the Merger is not less than the per Share price paid
pursuant to the Offer. However, in the event that the Purchaser is deemed to
have acquired control of the Company pursuant to the Offer and if the Merger is
consummated more than one year after completion of the Offer or an alternative
acquisition transaction is effected whereby stockholders of the Company receive
consideration less than that paid pursuant to the Offer, in either case at a
time when the Shares are still registered under the Exchange Act, the Purchaser
may be required to comply with Rule 13e-3 under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
Merger or such alternative transaction and the consideration offered to minority
stockholders in the Merger or such alternative transaction, be filed with the
Commission and disclosed to stockholders prior to consummation of the Merger or
such alternative transaction. The purchase of a substantial number of Shares
pursuant to the Offer may result in the Company being able to terminate its
Exchange Act registration. See Section 14. If such registration were terminated,
Rule 13e-3 would be inapplicable to any such future Merger or such alternative
transaction.
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PLANS FOR THE COMPANY. If the Purchaser obtains control of the Company
pursuant to the Offer, the Parent expects to conduct a detailed review of the
Company and its businesses, assets, corporate structure, capitalization,
operations, properties, policies, management and personnel and to consider what,
if any, changes would be desirable in light of the circumstances that then
exist. Such changes could include changes in the Company's businesses, corporate
structure, certificate of incorporation, by-laws, capitalization, board of
directors, management or dividend policy.
The Company and Genesis will enter into a management agreement (the
"Management Agreement") pursuant to which Genesis will manage the Company's
operations. The Management Agreement will be for a term of five years with
automatic renewals for one year unless either party terminates the Agreement.
Genesis will be paid a fee of six percent of the Company's net revenues for its
services under the Management Agreement provided that payment of one third of
such fee shall be subordinate to the satisfaction of the Company's senior and
subordinate debt covenants and that payment of the management fee shall be no
less than $23.9 million in any one year. Under the Management Agreement, Genesis
will be responsible for the Company's non-extraordinary sales, general and
administrative expenses (other than certain specified third-party expenses), and
all other expenses of the Company will be paid by the Company.
As soon as reasonably practicable following the consummation of the Merger,
Parent, Genesis and NeighborCare, Inc., a subsidiary of Genesis, will enter into
a joint venture pursuant to which Parent will contribute the stock and/or assets
of the pharmacy businesses owned by the Company and Genesis will contribute the
stock and/or assets of NeighborCare, Inc. Ownership interests in the pharmacy
joint venture shall be allocated to the Parent and Genesis in proportion to the
value of the pharmacy business contributed to the joint venture by the Company
and Genesis, respectively. In addition, as soon as reasonably practicable
following the consummation of the Merger, Genesis will acquire the assets of the
rehabilitation and therapy businesses owned by the Company for an aggregate
consideration of approximately $24 million.
Except as described in this Offer to Purchase, neither the Parent nor the
Purchaser has any present plans or proposals that would relate to or result in
an extraordinary corporate transaction such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries or a sale or other
transfer of a material amount of assets of the Company or any of its
subsidiaries, any material change in the capitalization or dividend policy of
the Company or any other material change in the Company's corporate structure or
business or the composition of its Board of Directors or management.
13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the
date of the Merger Agreement (except as contemplated thereby), split, combine or
otherwise change the Shares or its capitalization, or disclose that it has taken
any such action, then without prejudice to the Purchaser's rights under Section
15, the Purchaser may make such adjustments to the purchase price and other
terms of the Offer as it deems appropriate to reflect such split, combination or
other change.
If on or after the date of the Merger Agreement (except as contemplated
thereby), the Company should declare or pay any cash or stock dividend or other
distribution on, or issue any right with respect to, the Shares that is payable
or distributable to stockholders of record on a date prior to the transfer to
the name of the Purchaser or the nominee or transferee of the Purchaser on the
Company's stock transfer records of such Shares that are purchased pursuant to
the Offer, then without prejudice to the Purchaser's rights under Section 15,
(i) the purchase price payable per Share by the Purchaser pursuant to the Offer
will be reduced to the extent any such dividend or distribution is payable in
cash and (ii) any non-cash dividend, distribution (including additional Shares)
or right received and held by a tendering stockholder shall be required to be
promptly remitted and transferred by the tendering stockholder to the Depositary
for the account of the Purchaser, accompanied by appropriate documentation of
transfer. Pending such remittance or appropriate assurance thereof, the
Purchaser will, subject to applicable law, be entitled to all rights and
privileges as owner of any such non-cash dividend, distribution or right and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by the Purchaser in its sole discretion.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, NYSE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will
reduce the number of Shares that might otherwise trade publicly and will reduce
the number of holders of Shares. This could adversely affect the liquidity and
market value of the remaining Shares held by the public. Depending upon the
number of Shares purchased pursuant to the Offer, the Shares may no longer meet
the requirements of the NYSE for continued listing. The NYSE would normally give
consideration to suspending or removing from the list a security of a company
when (i) the number of shareholders is less than 1,200 or (ii) the number of
publicly-held shares is less than 600,000, and the aggregate market value of
publicly held shares subject to adjustment is less than $8 million. For purposes
of (i) above, the number of beneficial holders of stock held in the name of NYSE
member organizations will be considered in addition to the holders of record.
For purposes of (ii) above, the shares held by officers, directors, or their
immediate families and other concentrated holdings of 10% or more are excluded
in calculating the number of publicly held
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shares. If as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NYSE for continued
listing the market for the Shares could be adversely affected.
In the event that the Shares no longer meet the requirements of the NYSE
for continued listing, it is possible that such Shares would continue to trade
on other securities exchanges or in the over-the-counter market and that price
quotations would be reported by such exchanges or through other sources.
However, the extent of the public market for the Shares and the availability of
such quotations would depend upon such factors as the number of stockholders
and/or the aggregate market value of the Shares remaining at such time, the
interest in maintaining a market in the Shares on the part of securities firms,
the possible termination of registration under the Exchange Act as described
below and other factors. The Purchaser cannot predict whether the reduction in
the number of Shares that might otherwise trade publicly would have an adverse
or beneficial effect on the market price for or marketability of the Shares.
The Shares are currently registered under the Exchange Act. The purchase of
Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration under the Exchange Act. Registration of the Shares may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange and there are fewer than 300 record
holders. The termination of the registration of the Shares under the Exchange
Act would substantially reduce the information required to be furnished by the
Company to holders of the Shares and would make certain provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act
with respect to "going private" transactions, no longer applicable to the
Shares. Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of the
securities pursuant to Rule 144 under the Securities Act of 1933.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of
the Offer, but subject to the terms and conditions of the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares promptly after termination or withdrawal of the Offer),
pay for any Shares tendered pursuant to the Offer, unless (i) there shall have
been validly tendered and not properly withdrawn prior to the expiration of the
Offer such number of Shares which would constitute, on a fully diluted basis, a
majority of the Company's voting power on the date of purchase, of all
securities of the Company entitled to vote generally in the election of
directors or in a merger (the "Minimum Condition"), (ii) any applicable waiting
period under the HSR Act has been terminated and (iii) the Purchaser shall have
received the funding pursuant to the Debt Financing Commitments. Furthermore,
the Purchaser will not be required to pay for any Shares not theretofore
accepted and may terminate the Offer if at any time before such acceptance, any
of the following conditions exists (other than as a result of action or inaction
on the part of the Parent or its subsidiaries which constitutes a breach of the
Merger Agreement):
(i) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court or governmental,
administrative or regulatory authority or agency, located or having
jurisdiction within the United States, or any statute, rule, regulation or
legislation enacted, promulgated or issued by any governmental authority
located or having jurisdiction within the United States, which has or would
reasonably be expected to have the effect of: (a) making illegal or
otherwise directly or indirectly restraining, prohibiting or making
materially more costly the making of the Offer, the acceptance for payment
of, payment for or ownership of the Shares by the Parent or the Purchaser,
the consummation of any of the transactions contemplated by the Merger
Agreement or materially delaying the Merger; (b) prohibiting or materially
limiting the ownership or operation by the Company or any of its
subsidiaries, or by the Parent, the Purchaser or any of the Parent's
subsidiaries or Genesis or any of its subsidiaries of all or any material
portion of the business or assets of the Company or any of its material
subsidiaries, or the Parent or any of its material subsidiaries, or
compelling the Purchaser, the Parent or any of the Parent's subsidiaries to
dispose of or hold separate all or any material portion of the business or
assets of the Company or any of its material subsidiaries or the Parent or
any of its material subsidiaries, as a result of the transactions
contemplated by the Offer or the Merger Agreement; (c) imposing or
confirming limitations on the ability of the Purchaser, the Parent, or any
of the Parent's subsidiaries effectively to acquire or to exercise full
rights of ownership of Shares; or (d) requiring divestiture by the Parent
or the Purchaser of any Shares;
(ii) there shall have occurred any event, or the Purchaser shall have
become aware of any fact that will have a Material Adverse Effect with
respect to the Company;
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(iii) any of the representations and warranties of the Company set
forth in the Merger Agreement (without giving any effect to any
qualification regarding materiality) shall not be true and correct in any
material respect, in each case as if such representations and warranties
were made at the time of determination;
(iv) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(v) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the consent of the
Company;
(vi) there shall have occurred (a) any general suspension of or
limitation on prices for trading on the NYSE, American Stock Exchange or
NASDAQ National Market, (b) any declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (c) any
material limitation (whether or not mandatory) by any government or
governmental, administrative or regulatory authority or agency, domestic or
foreign, on, or any other event that would limit the extension of credit by
banks or other lending institutions, (d) any commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States having a significant adverse effect
on the functionality of financial markets in the United States or (e) in
the case of any of the foregoing existing at the time of commencement of
the Offer, a material acceleration or worsening thereof; or
(vii) any material approval, permit, authorization, consent or waiting
period of any governmental authority applicable to the purchase of Shares
pursuant to the Offer or the Merger or the ownership or operation by the
Company or any of its subsidiaries, or by the Parent or any of its
subsidiaries or by Genesis or any of its subsidiaries of all or a material
portion of the business or assets of the Company or any of its subsidiaries
shall not have been obtained or satisfied on terms satisfactory to the
Parent in its reasonable discretion.
Notwithstanding anything contained in the Merger Agreement, no condition
involving (i) performance of agreements by the Company or (ii) the accuracy of
representations and warranties made by the Company, will be deemed not
fulfilled, and the Parent and the Purchaser will not be entitled to fail to
accept Shares for payment or terminate the Offer on such basis, if the respects
in which such agreements have not been performed or the representations and
warranties are inaccurate (without giving effect to any qualification regarding
materiality), in the aggregate, are not materially adverse to the business,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
The foregoing conditions are for the sole benefit of the Purchaser and the
Parent and may, subject to the terms of the Merger Agreement, be waived by the
Purchaser and the Parent in whole or in part at any time and from time to time
in their sole discretion. The failure by the Parent, or the Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
GENERAL. Except as set forth below, neither the Purchaser nor the Parent is
aware of any licenses or other regulatory permits that appear to be material to
the business of the Company and its subsidiaries, taken as a whole, that might
be adversely affected by the Purchaser's acquisition of Shares (and the indirect
acquisition of the stock of the Company's subsidiaries) as contemplated herein,
or of any filings, approvals or other actions by or with any domestic (federal
or state), foreign or supranational governmental authority or administrative or
regulatory agency that would be required prior to the acquisition of Shares (or
the indirect acquisition of the stock of the Company's subsidiaries) by the
Purchaser pursuant to the Offer as contemplated herein. Should any such approval
or other action be required, it is the Parent's present intention to seek such
approval or action. There can be no assurance that any such approval or other
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company, the Parent
or the Purchaser or that certain parts of the businesses of the Company, the
Parent or the Purchaser might not have to be disposed of or held separate or
other substantial conditions complied with in order to obtain such approval or
other action or in the event that such approval was not obtained or such other
action was not taken, any of which could cause the Purchaser to elect (subject
to the terms of the Merger Agreement) to terminate the Offer without the
purchase of the Shares thereunder. The Purchaser's obligation under the Offer to
accept for payment and pay for Shares is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section 16.
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STATE TAKEOVER LAWS. A number of states have adopted takeover laws and
regulations which purport to varying degrees to be applicable to attempts to
acquire securities of corporations which are incorporated in such states or
which have or whose business operations have substantial economic effects in
such states, or which have substantial assets, security holders, principal
executive offices or principal places of business therein. To the extent that
certain provisions of certain of these state takeover statutes purport to apply
to the Offer, the Purchaser believes that such laws conflict with federal law
and constitute an unconstitutional burden on interstate commerce. In 1982, the
Supreme Court of the United States, in EDGAR V. MITE CORP., invalidated on
constitutional grounds the Illinois Business Takeovers Act, which as a matter of
state securities law made takeovers of corporations meeting certain requirements
more difficult, and the reasoning in such decision is likely to apply to certain
other state takeover statutes. However, in 1987, in CTS CORP. V. DYNAMICS CORP.
OF AMERICA, the Supreme Court of the United States held that the State of
Indiana could, as a matter of corporate law and in particular those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquiror from voting on the affairs of a target corporation without
the prior approval of the remaining stockholders, provided that such laws were
applicable only under certain conditions. Subsequently, in TLX ACQUISITION CORP.
V. TELEX CORP., a federal district court in Oklahoma ruled that the Oklahoma
statutes were unconstitutional insofar as they applied to corporations
incorporated outside Oklahoma in that they would subject such corporations to
inconsistent regulations. Similarly, in TYSON FOODS, INC. V. MCREYNOLDS, a
federal district court in Tennessee ruled that four Tennessee takeover statutes
were unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit. In December 1988, a federal district court in Florida held in GRAND
METROPOLITAN PLC V. BUTTERWORTH that the provisions of the Florida Affiliated
Transactions Act and the Florida Control Share Acquisition Act were
unconstitutional as applied to corporations incorporated outside of Florida.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer. The Purchaser reserves
the right to challenge the validity or applicability of any state law allegedly
applicable to the Offer and nothing in this Offer to Purchase nor any action
taken in connection herewith is intended as a waiver of that right. In the event
that any state takeover statute is found applicable to the Offer, the Purchaser
might be unable to accept for payment or purchase Shares tendered pursuant to
the Offer or be delayed in continuing or consummating the Offer. In such case,
the Purchaser may not be obligated to accept for purchase or pay for, any Shares
tendered. See Section 16.
ANTITRUST. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The purchase of the Parent Common Stock pursuant to the
Investors' Commitment is subject to such requirements and, as a result
thereof, the acquisition of Shares may not be consummated until expiration of
the waiting period under the HSR Act with respect to the purchase of the Parent
Common Stock pursuant to the Investors' Commitment. See Section 2.
Genesis, Cypress and TPG intend, as soon as reasonably practicable
following the date hereof, to file with the FTC and the Antitrust Division a
Premerger Notification and Report Form in connection with the purchase of the
Parent Common Stock pursuant to the Investors' Commitment. Under the provisions
of the HSR Act, the purchase of the Parent Common Stock pursuant to the
Investors' Commitment may not be consummated until the expiration of a
30-calendar day waiting period following the filing by Genesis, Cypress and TPG
unless both the Antitrust Division and the FTC terminate the waiting period
prior thereto. If, within such 30-calendar day waiting period, either the
Antitrust Division or the FTC requests additional information or documentary
material from Genesis, Cypress and TPG the waiting period would be extended for
an additional 20 calendar days following substantial compliance by Genesis,
Cypress and TPG with such request. Thereafter, the waiting period could be
extended only by court order. If the purchase of the Parent Common Stock
pursuant to the Investors' Commitment is delayed pursuant to a request by the
FTC or the Antitrust Division for additional information or documentary material
pursuant to the HSR Act, the Offer may, but need not (other than as may be
requested by the Company pursuant to the Merger Agreement), be extended and in
any event the purchase of and payment for Shares will be deferred until 20 days
after the request is substantially complied with, unless the waiting period is
sooner terminated by the FTC and the Antitrust Division or a court order is
obtained by the FTC or the Antitrust Division prohibiting the sale of the Parent
Common Stock pursuant to the Investors' Commitment. See Section 2. Only one
extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. Any such extension of the waiting period will not give
rise to any withdrawal rights not otherwise provided for by applicable law. See
Section 4.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase by
the
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Purchaser of Shares pursuant to the Offer, either of the FTC and the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking the divestiture of Shares purchased by
the Purchaser or the divestiture of substantial assets of the Parent, its
subsidiaries or the Company. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances.
Based upon an examination of publicly available information relating to the
businesses in which the Company and its subsidiaries are engaged, the Purchaser
has determined that the Company and Genesis both provide similar services in
certain geographic areas. Although the Purchaser believes that the acquisition
of Shares pursuant to the Offer would not violate the antitrust laws, there can
be no assurance that a challenge to the Offer on antitrust grounds will not be
made or, if such challenge is made, what the outcome will be. See Section 15 for
certain conditions to the Offer, including conditions with respect to litigation
and certain government actions.
FEDERAL AND STATE HEALTHCARE REGULATORY AUTHORITIES. The Company owns,
operates and/or manages long term care facilities and assisted living
facilities, and provides institutional pharmacy services and other non-acute
health services. Certain of the above services or facilities are provided or
operated in Connecticut, Illinois, New Jersey, Massachusetts, Ohio,
Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia and Wisconsin.
The regulatory requirements of these jurisdictions may require notice of
and/or approval prior to any direct or indirect change in ownership, control or
management of any of the facilities or services. These regulatory requirements
include, without limitation, those providing for licensure, dispensing
pharmaceuticals and related medical supplies, certificate of need or similar
laws restricting development and/or expansion activities ("CON laws" or "CON"),
participation in the Medicaid program, as well as federal laws regarding
participation in the Medicare and the Medicaid programs and dispensing
pharmaceuticals. To the extent that the consummation of the Offer or the
consummation of the Merger is determined to constitute any such change in
ownership, control or management of facilities or services under the applicable
regulatory requirements, consummation of the Offer and the consummation of the
Merger would be subject to compliance with the regulatory requirements of the
applicable state, as well as any applicable federal laws and receipt, to the
extent applicable, of any required approvals or other authorizations. The state
and federal requirements are subject to interpretation by the various agencies
and may, in certain instance, be subject to waiver.
Pursuant to federal Medicare program standards, providers must notify the
Medicare program as promptly as possible upon initiating negotiations for a
change of ownership but in no event later than 15 working days after the
transaction causing the change in ownership occurs. When a provider undergoes a
change of ownership, the provider must also file a final cost report no later
than 45 days following the change in ownership. According to Medicare program
standards, the merger of the provider corporation into another corporation, or
the consolidation of two or more corporations, resulting in the creation of a
new corporation constitutes a change in ownership. However, transfer of
corporate stock or the merger of another corporation into the provider
corporation does not constitute a change of ownership. The Drug Enforcement
Agency ("DEA") standards provide that written consent of the administrator of
the DEA is required for or other transfer of DEA registration.
CONNECTICUT. The Connecticut regulatory requirements provide that notice of
any change of ownership of a long term care facility owned by an individual,
partnership or association, or the change in ownership of 10% or more of stock
of a corporation which owns, conducts, operates or maintains such a facility
must be given to the Connecticut Department of Public Health ("CtDPH") at least
90 days prior to the effective date of the proposed change. Upon receipt of the
notice the CtDPH will forward an application which must be completed and filed
with the CtDPH. Additionally, filings and approvals must be obtained from the
Connecticut Departments of Public Health and Social Services in the event any
facility intends to transfer all or part of its ownership or control prior to
being initially licensed.
ILLINOIS. The Illinois licensure regulatory requirements provide that
whenever ownership of a long term care facility is transferred the transferee
must obtain a new probationary license and the transferee must notify the
Illinois Department of Public Health at least 30 days prior to final transfer.
Likewise, long term care facility Medicaid providers must notify the Department
of Public Aid at least 30 days prior to a change in ownership of a facility or
prior to the lease of a facility to a new operator. The applicable regulations
provide that approval of a corporate entity, such as a pharmacy or home health
agency, as a participant in the Medicaid Program applies only to existing
ownership and corporate structure and is not transferable and therefore prior to
a change in ownership or corporate structure approval for the new provider must
be obtained. The Illinois CON law prohibits the construction or modification of
a long term care facility, including a change of ownership of a long term care
facility without obtaining CON approval. A change of ownership is defined as a
transfer of stock of over 50%, the issuance of a new license or the issuance of
a new Medicaid or Medicare provider number. However, an exemption can be
requested from the Health Facilities Planning Board prior to the acquisition of
the ownership interest.
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Such exemption will be granted if certain information is provided to the Board,
and a legal notice is published, certain other procedural requirements are met
and the Board determines an exemption is appropriate under applicable standards.
The Illinois pharmacy regulatory requirements prohibit operation of a pharmacy
without a license. Those regulations require that any entity proposing a change
of ownership of a pharmacy file an application with the Illinois Department of
Professional Regulation and receive a new license in order to proceed with the
transfer. The Illinois home health agency licensure standards require licensure
by a new owner or person in interest prior to the sale or transfer of a home
health agency.
MASSACHUSETTS. The Massachusetts regulatory requirements provide that a
completed notice of intent form must be submitted to the Massachusetts
Department of Public Health ("MaDOH") at least 90 days in advance of any
transfer of ownership (including a transfer of a majority of stock) of any long
term care facility in order to allow the MaDOH to determine whether the
applicant is suitable for licensure. Additionally, an applicant must apply for a
license within 48 hours of the transfer. The Massachusetts Department of Elder
Affairs ("MaDEA") requires that an Application for Certification to MaDEA be
submitted at least 30 days prior to the transfer of ownership of an assisted
living residence and approval of such certification is dependent INTER ALIA,
upon the MaDEA determining that the applicant satisfies the various standards.
The acquisition of an existing long term care facility is generally subject to
CON review unless the MaDOH is notified of the intent to acquire the facility at
least 30 days prior to contractual arrangements are entered into to acquire the
facility and there will be no change in the services or bed capacity of the
facility to be acquired. The Massachusetts Board of Registration in Pharmacy
requires the filing of an application in connection with the change of ownership
or management of a pharmacy. Additionally, any corporation or partnership which
owns a pharmacy must notify the Board within ten working days of certain changes
to the entity including in certain instances, a change in the stockholders.
According to the Massachusetts Department of Public Welfare, Division of Medical
Assistance a provider must notify the Division prior to a change of direct or
indirect ownership of a healthcare entity (including a long term care facility,
a pharmacy, home health agency, or in certain circumstances an assisted living
facility). Upon receipt of such notice the Division will determine whether an
application needs to be filed prior to the actual ownership change.
NEW JERSEY. The New Jersey CON standards exempt from CON review a transfer
of ownership interest in a long term care facility in which the prospective
owner satisfies the New Jersey Department of Health and Senior Services
("NJDOH") review of the prospective owner's prior operating experience and
compliance with other laws. Regardless of whether CON review is required,
according to the NJDOH, ownership may not be transferred in a long term care
facility unless the prospective owner has applied for a new license and received
approval prior to the transfer of ownership. The licensure review process will
include a review of the prospective owner's operations in New Jersey and other
jurisdictions. The New Jersey State Board of Pharmacy regulations provide, that
whenever there is any change of ownership of the business entity holding a
permit to operate a pharmacy, the new ownership of the entity must apply for a
permit not less than 30 days in advance of the change of ownership. The New
Jersey Medicaid standards require that, upon sale or change of ownership of an
approved pharmacy, the new owner must apply in order to participate in the
Medicaid program.
OHIO. The Ohio licensure requirements provide that health care facilities
must provide notice of changes in ownership to the Department of Health. A
certificate of need is not needed for the acquisition or merger of an existing
health care facility that does not involve a change in the number of beds, by
service or in the number or type of service. However, a notice of intent is
required to be filed with the Ohio Department of Health ("OHDOH") and the health
service agency designated for the health service area in which the activity will
be conducted. The Ohio Medical Assistance regulations require long term care
providers to notify the OHDOH at least 45 days prior to the effective date of
certain changes including any contract of sale. Other providers are required to
inform the Ohio Department of Human Services within ownership.
PENNSYLVANIA. The Pennsylvania Department of Health ("PaDOH") requirements
provide that long term care facilities must notify PaDOH in writing at least 90
days in advance of a potential change in ownership or licensee and within 30
days of the effective date of any transfer of stock of 5% or more. The PaDOH
licensure regulations require home health care agencies to notify PaDOH in
writing within 30 days of a change in the partners, officers, directors,
principal stockholders or persons in charge of a home health care agency owned
by a partnership or corporation. The Pennsylvania State Board of Pharmacy
("PaBOP") regulations provide that pharmacy licenses are not transferable and
require the submission of an application, and issuance of a permit in order to
change ownership of a pharmacy. To the extent assisted living beds are operated
as a personal care facility, the Pennsylvania Department of Public Welfare
("PaDPW") requires notice within thirty days of the change in ownership. The
Pennsylvania Medicaid regulations require a change in ownership or control
interest of 5% or more of a long term care facility, home health agency, or
pharmacy to be reported to PaDPW within 30 days of the date the change occurs.
Additionally, any long term care facility provider that enters into an agreement
of sale that will result in a change of ownership of the long term care facility
must notify PaDPW at least 30 days prior to the effective date of sale and
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PaDPW will enter into a provider agreement with the buyer or transfer the
current agreement subject to the buyer's satisfaction of certain standards. The
Pennsylvania CON law was subject to a "sunset" provision in December, 1996 and
is no longer in effect. PaDPW has issued a policy statement to the effect that
generally it will not enter into a provider agreement with any long term care
facility which did not receive CON approval for the beds at issue prior to the
sunset of the CON law.
RHODE ISLAND. The Rhode Island regulatory requirements provide that any
change in owner (including in the case of a partnership, the removal of,
addition or substitution of a partner which results in a new partner acquiring a
controlling interest in the partnership), operator (including a change in the
person or entity responsible for certain management functions), or lessee of a
licensed health care facility, including a long term care facility, requires
prior review by the Health Services Council and approval of the Rhode Island
Department of Health ("RIDOH") as a condition precedent to the transfer,
assignment or issuance of a new license. Notice of change in owner or operator
of a long term care facility must be provided to RIDOH at least six weeks prior
to the date of the proposed change. The approval process includes notice to the
public and the opportunity for public comment, as well as consideration of the
applicant's record of providing services.
VERMONT. The Vermont long term care facility licensure standards require
that a facility provide notice to the Vermont Division of Licensing and
Protection at least 90 days prior to any proposed change of ownership which will
cause a discharge or transfer of residents. Written notice must also be given of
any change in the persons with an ownership or control interest of five percent
or more. A CON to operate a long term care facility can be transferred in the
event of a change in ownership. Such transfers require 30 days prior written
notice to the Health Policy Council. Failure to give such notice invalidates the
CON held by the long term care facility. When the Health Policy Council receives
notice of a transfer of a CON, the Health Policy Council may in its discretion
reopen its review for the purpose of evaluating the management and financial
capabilities of the proposed transferee. According to the Vermont Division of
Rate Setting, 60 days notice is required to be given upon a transfer of
ownership of a long term care facility if there is going to be a request for a
set up of basis of assets.
VIRGINIA. The Virginia CON laws provide that at least 30 days before any
person is contractually obligated to acquire an existing nursing home for a cost
in excess of $600,000, the purchaser must notify the commissioner of the
Virginia Department of Health ("VaDoH") and the regional health planning agency
that serves the area in which the facility is located. If the commissioner finds
that a reviewable clinical health service or beds are to be added as a result of
the acquisition, the commissioner may require the proposed new owner to obtain
approval prior to acquisition. If such approval is required, the application
will be considered under the appropriate batch group. The licensure regulations
require a long term facility to notify the VaDoH of any changes; which affect
the accuracy of the license of long term care facility including a change in
management or ownership, at least 30 days in advance of the change.
WEST VIRGINIA. The West Virginia long term care facility licensure
standards provide that, in the case of a transfer of ownership, the proposed new
owner must file an application with the West Virginia Department of Health and
Human Resources ("WVaDHHR") no later than 30 days before the proposed transfer
date. Thereafter, the WVaDHHR is required to issue or deny the license within
three months of proof of the transfer of ownership is submitted. During the time
period between the application and the determination of the WVaDHHR, the pending
application serves as a license. The West Virginia personal care home licensure
standards require submission of an application at least 90 days prior to change
in a licensee. West Virginia CON laws prohibit the transfer of ownership of a
long term care facility without first obtaining CON approval. The CON process
includes notification of intent and submission of an application which is
considered under an appropriate batch group. The approval is subject to the
applicant's satisfaction INTER ALIA of various standards require. West Virginia
Board of Pharmacy ("WVaBOP") requirements provide that a pharmacy permit is not
transferable. According to WVaBOP, a new permit will be necessary if a new DEA
number is issued.
WISCONSIN. The Wisconsin CON standards provide that no person may transfer
through sale or lease any long term care approval. The Wisconsin regulatory
requirements provide that a long term care facility license is issued only for
the premises and persons named in the application and require a new license to
be issued whenever ownership of a long term care facility is transferred.
Notification of the proposed transfer, the filing of an application and license
must occur at least 30 days prior to final transfer. Moreover, notification of
any change in management of such a facility must be provided to the state. The
Wisconsin pharmacy licensure requirements prohibit operation of a pharmacy
following a change in ownership unless the change in ownership has been reported
to the Wisconsin Pharmacy Board Examining Office and a new license has been
issued. The Wisconsin Medical Assistance regulations provide that any change in
the status of provider (including any change in ownership, management or
control) must be reported in the Wisconsin Department of Social Services
("WiDSS") by the effective date of change. With regard to changes in ownership,
a non-nursing home provider must notify WiDSS and obtain a new Medicaid provider
agreement and a nursing home provider will be assigned the provider agreement of
the prior owner.
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MARGIN CREDIT REGULATIONS. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
17. FEES AND EXPENSES. Montgomery Securities and Morgan Stanley are acting
as Dealer Managers in connection with the Offer. In addition, Montgomery
Securities is acting as financial advisor to Genesis in connection with its
investment in the Parent and Morgan Stanley is acting as financial advisor to
the Parent in connection with the Transactions described in the Offer. As
compensation for its services as Dealer Manager and advisor Montgomery
Securities will receive a fee of approximately $5.0 million if the Offer is
consummated. In the event the Offer is not consummated, Montgomery Securities
will receive a fee of approximately $2.5 million. As compensation for its
services, Morgan Stanley will receive a fee of approximately $5.0 million if the
Transactions are consummated. Genesis will also reimburse Montgomery Securities
for reasonable out-of-pocket expenses including reasonable attorney's fees and
has also agreed to indemnify Montgomery Securities against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the Federal Securities Laws. The Parent will also reimburse Morgan Stanley for
reasonable out-of-pocket expenses including reasonable attorney's fees and have
also agreed to indemnify Morgan Stanley against certain liabilities and expenses
in connection with the Offer, including certain liabilities under the Federal
Securities Law. For a discussion of certain fees and expenses payable to the
Bridge Lenders, see Section 9 ("Source and Amount of Funds -- Subordinated
Bridge Financing").
The Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and ChaseMellon Shareholder Services, L.L.C. to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee stockholders to forward the Offer materials
to beneficial owners. The Information Agent and the Depositary will receive
reasonable and customary compensation for services relating to the Offer and
will be reimbursed for certain out-of-pocket expenses. The Purchaser and the
Parent have also agreed to indemnify the Information Agent and the Depositary
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of Shares pursuant to the Offer
(other than to the Dealer Managers, the Information Agent and the Depositary).
Brokers, dealers, commercial banks and trust companies will, upon request, be
reimbursed by the Purchaser for customary mailing and handling expenses incurred
by them in forwarding offering materials to their customers.
18. MISCELLANEOUS. The Offer is being made solely by this Offer to Purchase
and the related Letter of Transmittal and is being made to all holders of
Shares. The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to nor will tenders be accepted from or on
behalf of the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by the Dealer Managers or one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
The Purchaser and the Parent have filed with the Commission a Schedule
14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the offices of the Commission (except that they will
not be available at the regional offices of the Commission) in the manner set
forth in Section 8 of this Offer to Purchase.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
GENESIS ELDERCARE ACQUISITION CORP.
June 20, 1997
44
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PARENT, THE PURCHASER AND GENESIS,
MEMBERS OF CYPRESS L.L.C. AND
DIRECTORS AND EXECUTIVE OFFICERS OF
ONWIST AND TPG ADVISORS
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT AND THE PURCHASER. The
name, present principal occupation or employment and five-year employment
history of each director and executive officer of the Parent and the Purchaser
are set forth below. All directors and executive officers listed below are
citizens of the United States, other than Mr. Spiegel who is a citizen of
Canada. The business address of Mr. Walker, Mr. Hager and Mr. Howard is 148 West
State Street, Kennett Square, Pennsylvania 19348. The business address of Mr.
Singleton, Mr. Spiegel and Mr. Stern is 65 East 55th Street, 19th Floor, New
York, New York 10022. The business address of Mr. Coulter, Mr. Coslet and Mr.
Peterson is 600 California Street, Suite 1850, San Francisco, California 94108.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME AND POSITION EMPLOYMENT HISTORY
<S> <C>
Michael R. Walker Founder, Chairman and Chief Executive Officer of Genesis since 1985. From 1981
Chairman, Chief through 1985, Mr. Walker served as Chief Financial Officer and, later, as
Executive Officer and President and Chief Operating Officer of Health Group Care Centers.
Director
George V. Hager, Jr. Senior Vice President and Chief Financial Officer of Genesis since February
Senior Vice 1996. Mr. Hager joined Genesis in July 1992 as Vice President and Chief
President, Chief Financial Officer. Prior thereto, Mr. Hager was the partner in charge of the
Financial Officer and healthcare practice for KPMG Peat Marwick LLP in the Philadelphia office.
Director
James L. Singleton Vice Chairman of Cypress since May 1994. Prior to May 1994, Mr. Singleton was
Vice President, a Managing Director with Lehman Brothers where he worked in the Merchant
Assistant Secretary Banking Group.
and Director
James G. Coulter Managing partner of TPG since 1992. Prior to 1992, Mr. Coulter was a Vice
Vice President, President of Keystone, Inc.
Assistant Secretary
and Director
Jonathan J. Coslet Partner of TPG since 1993. Prior to 1993, Mr. Coslet was in the Investment
Director Banking Department of Donaldson, Lufkin & Jenrette Securities Corporation,
specializing in leveraged acquisitions and high-yield finance.
Richard R. Howard Director of Genesis since 1985; President of Genesis since June, 1986. Mr.
Director Howard joined Genesis in September 1985 as Vice President of Development.
Previously, Mr. Howard was the Chief Financial Officer of Health Group Care
Centers.
Karl I. Peterson Vice President of TPG since 1995. From 1992 until 1995, Mr. Peterson was in
Director the Mergers and Acquisitions Department and the Leveraged Buyout Group of
Goldman, Sachs & Co.
William Spiegel Principal of Cypress since May 1994. Prior to May 1994, Mr. Spiegel was with
Director Lehman Brothers where he worked in the Merchant Banking Group.
James A. Stern Chairman of Cypress since May 1994. Prior to May 1994, Mr. Stern was a
Director Managing Director with Lehman Brothers where he was the head of the Merchant
Banking Group.
</TABLE>
I-1
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF GENESIS. The name, present principal
occupation or employment and five-year employment history of each director and
executive officer of Genesis are set forth below. All directors and executive
officers listed below are citizens of the United States. The business address of
all of the persons set forth below is 148 West State Street, Kennett Square,
Pennsylvania 19348.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
<S> <C>
Michael R. Walker Founder, Chairman and Chief Executive Officer of Genesis since 1985. From 1981
through 1985, Mr. Walker served as Chief Financial Officer and, later, as
President and Chief Operating Officer of Health Group Care Centers.
Roger C. Lipitz Director of Genesis since 1994; Chairman of Meridian Healthcare, Inc. from
1969 through 1993.
Alan B. Miller Director of Genesis since October, 1993; Chairman, President and Chief
Executive Officer of Universal Health Services, Inc. since 1978.
Fred F. Nazem Director of Genesis since January, 1989; Founder and Managing Partner of Nazem
& Company.
Richard R. Howard Director of Genesis since 1985; President of Genesis since June, 1986. Mr.
Howard joined Genesis in September 1985 as Vice President of Development.
Previously, Mr. Howard was the Chief Financial Officer of Health Group Care
Centers.
Samuel H. Howard Director of Genesis since March, 1988; Founder and Chairman of Phoenix
Healthcare Corporation and the founder and President of Phoenix Communi-
cations Group, Inc. and Phoenix Holdings, Inc.
Allen R. Freedman Director of Genesis since February, 1996; Chairman and Chief Executive Officer
of Fortis, Inc. and Chairman of the Board of its principal insurance and
investment affiliates in the United States since 1990.
Stephen E. Luongo Director of Genesis since October, 1993; Partner in the law firm of Blank Rome
Comisky & McCauley since 1979. Blank Rome Comisky & McCauley serves as outside
legal counsel for Genesis.
David C. Barr Executive Vice President of Genesis since October 1988.
John F. DePodesta Senior Vice President, Law and Public Policy since January 1996. Prior
thereto, he was a partner and currently is of-counsel in the law firm of
Pepper, Hamilton & Scheetz. Mr. Depodesta currently serves as the Executive
Vice President, Law and Regulatory Affairs and Director of Primus
Telecommunications, Inc., and the Chairman of the Board of Iron Road Railways,
Incorporated, both of which he co-founded in 1994. Pepper, Hamilton & Scheetz
performs outside legal services for Genesis.
George V. Hager, Jr. Senior Vice President and Chief Financial Officer since February 1996. Mr.
Hager joined Genesis in July 1992 as Vice President and Chief Financial
Officer. Prior thereto, Mr. Hager was the partner in charge of the healthcare
practice for KPMG Peat Marwick LLP in the Philadelphia office.
Edward B. Romanov, Senior Vice President, Development of Genesis since May 1992.
Jr.
Maryann Timon Senior Vice President for Genesis' Managed Care Division since May 1996. From
January 1995 through May 1996 Ms. Timon served as Corporate Vice President of
the Managed Care Division. Ms. Timon joined Genesis in December 1990 to form
and serve as President of a wholly owned subsidiary, Healthcare Services
Network.
</TABLE>
I-2
<PAGE>
<TABLE>
<S> <C>
James V. McKeon Vice President and Corporate Controller of Genesis since April 1997. Mr.
McKeon joined Genesis in June 1994 as Director of Financial Reporting and
Investor Relations. From September 1986 until June 1994 Mr. McKeon was
employed by KPMG Peat Marwick, most recently as Senior Manager.
Kenneth R. Kuhnle Vice President and Treasurer of Genesis since February 1990.
Marc D. Rubinger Vice President and Chief Information Officer of Genesis since November 1995.
Prior thereto, Mr. Rubinger served as General Manager-Decision Support Systems
of Shared Medical Systems.
Michael G. Bronfein President and Chief Executive Officer of NeighborCare, Inc. since 1991.
Deborah M. Soutar President of Genesis ElderCareSM Rehabilitation Services since December, 1993.
From August 1991 through November, 1993, Ms. Soutar served as Vice President,
Operations of Genesis.
Dr. Vincent T. President of New England Region, Genesis since October, 1996. Prior thereto,
Barnaba Dr. Barnaba was President of Genesis ElderCareSM Physician Services, Inc.
since February, 1988.
David C. Almquist President of Chesapeake Region, Genesis since October 1996. Prior thereto, Mr.
Almquist served in the capacity of both Senior Vice President and Divisional
President of Centers Division with Genesis. From June 1991 through November
1993, Mr. Almquist served as Senior Vice President of Nursing Centers for
Meridian Healthcare.
Robert A. Reitz President of Mid Atlantic Region Genesis since October 1996. From November
1993 through September 1996, Mr. Reitz was Vice President of Centers Division
and was Vice President of Meridian Healthcare from 1992 to 1993.
Mary Ann Miller President of Centers Southern Region Genesis since October 1996. Prior
thereto, Ms. Miller was President of ASCO Healthcare.
</TABLE>
3. MEMBERS OF CYPRESS L.L.C. The name, present principal occupation or
employment and five-year employment history of each member of Cypress L.L.C. are
set forth below. All persons listed below are citizens of the United States. The
business address of each of the persons listed below is 65 East 55th Street,
19th Floor, New York, New York 10022.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
<S> <C>
James A. Stern Chairman of Cypress since May 1994. Prior to May 1994, Mr. Stern was a Managing
Director with Lehman Brothers where he was the head of the Merchant Banking
Group.
Jeffrey P. Hughes Vice Chairman of Cypress since May 1994. Prior to May 1994, Mr. Hughes was a
Managing Director with Lehman Brothers where he worked in the Merchant Banking
Group.
James L. Singleton Vice Chairman of Cypress since May 1994. Prior to May 1994, Mr. Singleton was a
Managing Director with Lehman Brothers where he worked in the Merchant Banking
Group.
David P. Spalding Vice Chairman of Cypress since May 1994. Prior to May 1994, Mr. Spalding was a
Managing Director with Lehman Brothers where he worked in the Merchant Banking
Group.
</TABLE>
I-3
<PAGE>
4. DIRECTORS AND EXECUTIVE OFFICERS OF ONWIST. The name, present principal
occupation or employment and five-year employment history of each director of
Onwist are set forth below. Mr. Douglas and Mr. Smith are citizens of Bermuda.
Mr. Spalding is a citizen of the United States. The business address of Mr.
Douglas and Mr. Smith is c/o Bank of Bermuda (Cayman) Limited, P.O. Box 513
G.T., British American Tower, Third Floor, Georgetown, Grand Caymen, Caymen
Islands, B.W.I. The business address of Mr. Spalding is 65 East 55th Street,
19th Floor, New York, New York 10022.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
<S> <C>
Luis A. Douglas Senior Executive Vice President, Corporate Clients of The Bank of Bermuda Limited
since March 1997. Prior to March 1997, Mr. Douglas was Executive Vice President,
Corporate Trust of The Bank of Bermuda Limited.
David T. Smith Senior Vice President, Corporate Trust of The Bank of Bermuda Limited since March
1997. Prior to March 1997, Mr. Smith was a Vice President of The Bank of Bermuda
Limited.
David P. Spalding Vice Chairman of Cypress since May 1994. Prior to May 1994, Mr. Spalding was a
Managing Director with Lehman Brothers where he worked in the Merchant Banking
Group.
</TABLE>
5. DIRECTORS AND EXECUTIVE OFFICERS OF TPG ADVISORS. The name, present
principal occupation or employment and five-year employment history of each
director and executive officer of TPG Advisors are set forth below. All
directors and executive officers listed below are citizens of the United States.
The business address of Mr. Bonderman and Mr. O'Brien is 201 Main Street, Suite
2420, Fort Worth, Texas 76102. The business address of Mr. Coulter and Mr. Price
is 600 California Street, Suite 1850, San Francisco, California 94108. The
business address of Mr. Schifter is 1133 Connecticut Avenue, N.W., Washington,
D.C. 20036.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
<S> <C>
David Bonderman Managing partner of TPG since 1992. Prior to 1992, Mr. Bonderman was Chief
Operating Officer and Chief Investment Officer of Keystone Inc.
James G. Coulter Managing partner of TPG since 1992. Prior to 1992, Mr. Coulter was a Vice
President of Keystone Inc.
William S. Price Managing partner of TPG since 1992. Prior to 1992, Mr. Price was Vice
President of Strategic Planning and Business Development for GE Capital.
Richard P. Schifter Managing partner of TPG since 1994. From prior to 1992 until joining TPG in
1994, Mr. Schifter was a partner at the law firm of Arnold & Porter in
Washington, D.C.
James J. O'Brien Chief Financial Officer of TPG since 1992. Prior to 1992, Mr. O'Brien was
an independent financial and business consultant to a wide range of
corporate clients.
</TABLE>
I-4
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT COURIER DELIVERY:
<S> <C> <C>
Post Office Box 3301 120 Broadway -- 13th Floor 85 Challenger Road --
South Hackensack, NJ 07606 New York, New York 10271 Mail Drop -- Reorg. Dept.
Attn: Reorganization Department Attn: Reorganization Department Ridgefield Park, NJ 07660
Attn: Reorganization Department
BY FACSIMILE TRANSMISSION:
(201) 329-8936
CONFIRM BY TELEPHONE:
(201) 296-4860
</TABLE>
Any questions and requests for assistance may be directed to the
Information Agent or the Dealer Manager at their respective telephone numbers
and addresses listed below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained
from the Information Agent. You may also contact your broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Call Toll Free (800) 488-8035
THE DEALER MANAGERS FOR THE OFFER ARE:
MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, CA 94111
1-800-227-4786 (ext. 5945)
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co., Incorporated
1585 Broadway -- 35th Floor
New York, NY 10036
(212) 761-4341
<PAGE>
[EXHIBIT 11(A)(2)]
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
THE MULTICARE COMPANIES, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 20, 1997
BY
GENESIS ELDERCARE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
GENESIS ELDERCARE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JULY 18, 1997 UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT COURIER DELIVERY:
<S> <C> <C>
Post Office Box 3301 120 Broadway -- 13th Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, New York 10271 Mail Drop -- Reorg. Dept.
Attn: Reorganization Department Attn: Reorganization Department Ridgefield Park, NJ 07660
Attn: Reorganization Department
BY FACSIMILE TRANSMISSION:
(201) 329-8936
CONFIRM BY TELEPHONE:
(201) 296-4860
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders, either if
certificates for Shares (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase)] is utilized, if
tenders of Shares are to be made by book-entry transfer into the account of
ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"), at
the Depository Trust Company ("DTC") or the Philadelphia Depository Trust
Company ("PDTC") (each a "Book-Entry Transfer Facility" and collectively the
"Book-Entry Transfer Facilities") pursuant
<PAGE>
to the procedures set forth in Section 3 of the Offer to Purchase (as defined
below). Stockholders who tender Shares by book-entry transfer are referred to
herein as "Book-Entry Stockholders".
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), or who
cannot complete the procedure for book-entry transfer on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS SHARES CERTIFICATE(S) AND SHARE(S) TENDERED
NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
<S> <C> <C> <C>
TOTAL NUMBER
SHARE OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
Total Shares......................
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed to have been
tendered. See Instruction 4.
</TABLE>
h CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY
MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
Check box of Book-Entry Transfer Facility (check one):
h The Depository Trust Company
h The Philadelphia Depository Trust Company
Account Number Transaction Code Number
h CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution that Guaranteed Delivery:
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer
Facility (check one):
h The Depositary Trust Company
h The Philadelphia Depository Trust Company
Account Number Transaction Code Number
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Genesis ElderCare Acquisition Corp., a
Delaware corporation formerly known as Waltz Acquisition Corp. (the
"Purchaser"), a wholly owned subsidiary of Genesis ElderCare Corp., a Delaware
corporation formerly known as Waltz Corp. (the "Parent"), the above-described
shares of Common Stock, $.01 par value per share (the "Shares"), of The
Multicare Companies, Inc., a Delaware corporation (the "Company"), at a purchase
price of $28.00 per Share, net to the seller in cash without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated June 20, 1997 (the "Offer to Purchase") and in this Letter of Transmittal
(which together constitute the "Offer"). The undersigned understands that the
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, receipt of which is hereby
acknowledged.
Subject to, and effective upon, acceptance for payment for the Shares tendered
herewith in accordance with the terms of the Offer, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Purchaser all right,
title and interest in and to all of the Shares that are being tendered hereby
and any and all dividends, distributions (including additional Shares) or rights
declared, paid or issued with respect to the tendered Shares on or after the
date hereof and payable or distributable to the undersigned on a date prior to
the transfer to the name of the Purchaser or nominee or transferee of the
Purchaser on the Company's stock transfer records of the Shares tendered
herewith (collectively, a "Distribution"), and appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any Distribution) with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver such Share Certificates (as defined herein) (and any Distribution)
or transfer ownership of such Shares (and any Distribution) on the account books
maintained by a Book-Entry Transfer Facility, together in either case with
appropriate evidences of transfer, to the Depositary for the account of the
Purchaser, (b) present such Shares (and any Distribution) for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and any Distribution), all in
accordance with the terms and subject to the conditions of the Offer.
The undersigned irrevocably appoints designees of the Purchaser as such
stockholder's proxy, with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after the date hereof. Such appointment will be effective when, and only to the
extent that, the Purchaser accepts such Shares for payment. Upon such acceptance
for payment, all prior proxies given by such stockholder with respect to such
Shares (and such other shares and securities) will be revoked without further
action, and no subsequent proxies may be given nor any subsequent written
consents executed (and, if given or executed, will not be deemed effective). The
designees of the Purchaser will be empowered to exercise all voting and other
rights of such stockholder as they in their sole discretion may deem proper at
any annual or special meeting of the Company's stockholders or any adjournment
or postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares the Purchaser must be able to exercise full voting rights with respect to
such Shares.
The undersigned hereby represents and warrants that (a) the undersigned has full
power and authority to tender, sell, assign and transfer the Shares (and any
Distribution) tendered hereby and (b) when the Shares are accepted for payment
by the Purchaser, the Purchaser will acquire good, marketable and unencumbered
title to the Shares (and any Distribution), free and clear of all liens,
restrictions, charges and encumbrances, and the same will not be subject to any
adverse claim. The undersigned, upon request, will execute and deliver any
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby (and any Distribution). In addition, the undersigned shall
promptly remit and transfer to the Depositary for the account of the Purchaser
any and all Distributions in respect of the Shares tendered hereby, accompanied
by appropriate documentation of transfer; and pending such remittance or
appropriate assurance thereof, the Purchaser will be, subject to applicable law,
entitled to all rights and privileges as owner of any such Distribution and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by the Purchaser in its sole discretion.
3
<PAGE>
All authority herein conferred or agreed to be conferred shall not be affected
by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in the Offer to Purchase) and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after August 18, 1997. See Section 4 of the Offer to
Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation that the undersigned owns the
Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions", please
issue the check for the purchase price and/or issue or return any certificate(s)
for Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered".
Similarly, unless otherwise indicated herein under "Special Delivery
Instructions", please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered". In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. Unless otherwise indicated herein under "Special Payment
Instructions", please credit any Shares tendered herewith by book-entry transfer
that are not accepted for payment by crediting the account at the Book-Entry
Transfer Facility (as defined herein) designated above. The undersigned
recognizes that the Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name(s) of the registered
holder(s) thereof if the Purchaser does not accept for payment any of the Shares
so tendered.
4
<PAGE>
<TABLE>
<S> <C> <C>
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if certificate(s) for Shares not
tendered or not accepted for payment and/or the check
for the purchase price of Shares accepted for payment
are to be issued in the name of someone other than the
undersigned or if Shares tendered by book-entry
transfer which are not accepted for payment are to be
returned by credit to an account maintained at a
Book-Entry Transfer Facility.
Issue: h check h certificates to:
Name
(Please Print)
Address
(Include Zip Code)
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
h Credit Shares tendered by book-entry transfer that
are not accepted for payment to (Check one):
h DTC h PDTC
(DTC or PDTC Account No.)
</TABLE>
<TABLE>
<S> <C> <C>
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if certificate(s) for Shares not
tendered or not accepted for payment and/or the check
for the purchase price of Shares accepted for payment
are to be sent to someone other than the undersigned
or to the undersigned at an address other than that
shown above.
Mail: h check h certificates to:
Name
(Please Print)
Address
(Include Zip Code)
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
</TABLE>
5
<PAGE>
<TABLE>
<C> <S> <C> <C>
SIGN SIGN HERE
HERE AND COMPLETE SUBSTITUTE FORM W-9
g X
X
(Signature(s) of Holder(s))
Dated: , 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificate(s)
or on a security position listing or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information and see
Instruction 5.)
Name(s)
(Please Print)
Capacity (full title)
Address
(Include Zip Code)
Area Code and Telephone Number
Tax Identification or Social Security Number
COMPLETE SUBSTITUTE FORM W-9
Guarantee of Signature(s)
(See Instructions 1 and 5)
Authorized Signature
Name
Name of Firm
(Please Print)
Address
(Include Zip Code)
Area Code and Telephone Number
Dated , 1997
<CAPTION>
SIGN SIGN
HERE HERE
g s
</TABLE>
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" above, or (b) if such Shares are
tendered for the account of a firm which is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message is utilized, if tenders are to be made pursuant to the procedure
for tender by book-entry transfer set forth in Section 3 of the Offer to
Purchase. Share Certificates evidencing tendered Shares, or timely confirmation
(a "Book-Entry Confirmation") of a book-entry transfer of Shares into the
Depositary's account at a Book-Entry Transfer Facility, as well as this Letter
of Transmittal (or a facsimile hereof), properly completed and duly executed,
with any required signature guarantees, or an Agent's Message in connection with
a book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date (as defined in Section 1 of the Offer
to Purchase). Stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser, must be received by the Depositary prior to the Expiration
Date; and (iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer, in each case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in the
case of a book-entry delivery, an Agent's Message) and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three New York Stock Exchange trading days after the date of execution of
such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITORY
(INCLUDING, IN THE CASE OF BOOK ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (NOT APPLICABLE TO BOOK-ENTRY STOCKHOLDERS) If fewer
than all the Shares evidenced by any Share Certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered". In such cases, new Share Certificates for
the Shares that were evidenced by your old Share Certificates, but were not
tendered by you, will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
7
<PAGE>
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or not purchased are to be issued in the
name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificate(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Purchaser will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificate(s) for Shares
not tendered or accepted for payment are to be registered in the name of, any
person other than the registered holder(s), or if tendered certificate(s) are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s) or such person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or an exemption therefrom, is submitted.
Except as otherwise provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the certificate(s) listed in
this Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the person(s) signing this Letter of Transmittal or to an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed. A Book-Entry Stockholder
may request that Shares not accepted for payment be credited to such account
maintained at a Book-Entry Transfer Facility as such Book-Entry Stockholder may
designate under "Special Payment Instructions". If no such instructions are
given, such Shares not accepted for payment will be returned by crediting the
account at the Book-Entry Transfer Facility designated above.
8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the Merger
Agreement (as defined in the Offer to Purchase), the conditions of the Offer
(Other than the Minimum Condition (as defined in the Offer to Purchaser)) may be
waived by the Purchaser in whole or in part at any time and from time to time in
its sole discretion.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty. In addition, payments that are made
to such stockholder or other payee with respect to Shares purchased pursuant to
the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
8
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to the Dealer Managers or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or the
Dealer Managers or from brokers, dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary. The stockholder will then be instructed as to the steps
that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF
GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
9
<PAGE>
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE
FORM W-9 PART 1 -- PLEASE PROVIDE YOUR TIN Social Security Number
IN THE BOX AT RIGHT AND CERTIFY or
BY SIGNING AND DATING BELOW: Employer Identification Number
Department of the
Treasury Internal
Revenue Service. PART 2 -- Certification -- Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me), and
PAYEE'S REQUEST FOR
TAXPAYER (2) I am not subject to backup withholding because (a) I am exempt from backup
IDENTIFICATION withholding, or (b) I have not been notified by the Internal Revenue Service (the
NUMBER ("TIN") "IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
under-reporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do not
cross out such item (2).
Sign Here g
SIGNATURE PART 3 --
DATE , 1997 Awaiting TIN h
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF THE SUBSTITUTE FORM W-9.
<TABLE>
<S> <C>
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1)
I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal
Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature Date , 1997
<CAPTION>
</TABLE>
10
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Call Toll Free (800) 488-8035
THE DEALER MANAGERS FOR THE OFFER ARE:
MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, CA 94111
1-800-227-4786 (ext. 5945)
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co., Incorporated
1585 Broadway -- 35th Floor
New York, NY 10036
(212) 761-4341
June 20, 1997
11
<PAGE>
[EXHIBIT 11(A)(3)]
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK
OF
THE MULTICARE COMPANIES, INC.
As set forth in Section 3 of the Offer to Purchase described below, this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) are not
immediately available or the certificates for Shares and all other required
documents cannot be delivered to ChaseMellon Shareholder Services, L.L.C. ("the
Depositary") on or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase) or if the procedure for delivery by book-entry transfer
cannot be completed on a timely basis. This instrument may be delivered by hand
or transmitted by facsimile transmission or mailed to the Depositary.
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT COURIER DELIVERY:
<S> <C> <C>
Post Office Box 3301 120 Broadway -- 13th Floor 85 Challenger Road
South Hackensack, NJ 07606 New York, New York 10271 Mail Drop -- Reorg. Dept.
Attn: Reorganization Department Attn: Reorganization Department Ridgefield Park, NJ 07660
Attn: Reorganization Department
BY FACSIMILE TRANSMISSION:
(201) 329-8936
CONFIRM BY TELEPHONE:
(201) 296-4860
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to Genesis ElderCare Acquisition Corp., a
Delaware corporation formerly known as Waltz Acquisition Corp. and a wholly
owned subsidiary of Genesis ElderCare Corp., a Delaware corporation formerly
known as Waltz Corp., upon the terms and subject to the conditions set forth in
the Offer to Purchase dated June 20, 1997 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer"), receipt
of which is hereby acknowledged, the number of shares of Common Stock, par value
$.01 per share (the "Shares"), of The Multicare Companies, Inc., a Delaware
corporation, pursuant to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase.
Signature(s)
Name(s) of Record Holders
Number of Shares PLEASE TYPE OR PRINT
Certificate Nos. (If Available)
Dated , 1997
Address(es)
ZIP CODE
Area Code and Tel. No(s)
Check one box if Shares will be tendered by book-entry transfer)
h The Depository Trust Company
h Philadelphia Depository Trust Company
Account Number
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, (a) represents that the above
named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b)
represents that such tender of Shares complies with Rule 14e-4, and (c)
guarantees to deliver to the Depositary either the certificates evidencing all
tendered Shares, in proper form for transfer, or to deliver Shares pursuant to
the procedure for book-entry transfer into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility"), in either case together with the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees or an Agent's Message (as defined in the Offer
to Purchase) in the case of a book-entry delivery, and any other required
documents, all within three Nasdaq National Market trading days after the date
hereof.
NAME OF FIRM
ADDRESS
ZIP CODE
AREA CODE AND TEL. NO
AUTHORIZED SIGNATURE
Name
PLEASE TYPE OR PRINT
Title
Dated , 1997
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
[EXHIBIT 11(A)(4)]
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
THE MULTICARE COMPANIES, INC.
AT
$28.00 NET PER SHARE
BY
GENESIS ELDERCARE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
GENESIS ELDERCARE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON JULY 18, 1997 UNLESS THE OFFER IS EXTENDED.
June 20, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Genesis ElderCare Acquisition Corp., a Delaware
corporation formerly known as Waltz Acquisition Corp. (the "Purchaser") and a
wholly owned subsidiary of Genesis ElderCare Corp., a Delaware corporation
formerly known as Waltz Corp. (the "Parent"), to act as Dealer Managers in
connection with the Purchaser's offer to purchase for cash all the outstanding
shares of Common Stock, par value $.01 per share (the "Shares"), of The
Multicare Companies, Inc., a Delaware corporation (the "Company") at a purchase
price of $28.00 per Share, net to the seller in cash without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated June 20, 1997 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer") enclosed herewith. Holders of Shares whose certificates for such Shares
(the "Share Certificates") are not immediately available or who cannot deliver
their Share Certificates and all other required documents to the Depositary (as
defined below) prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot complete the procedures for book-entry transfer on a
timely basis, must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated June 20, 1997.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if Share Certificates are not immediately available or if such
certificates and all other required documents cannot be delivered to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") by the
Expiration Date or if the procedure for book-entry transfer cannot be
completed by the Expiration Date.
4. The Letter to Stockholders of the Company from the Chairman,
President and Chief Executive Officer of the Company, accompanied by the
Company's Solicitation/Recommendation Statement on Schedule 14D-9.
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
7. A return envelope addressed to ChaseMellon Shareholder Services,
L.L.C., the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON JULY 18, 1997 UNLESS THE OFFER IS
EXTENDED.
1
<PAGE>
The offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the expiration of the Offer such
number of Shares which constitutes, on a fully diluted basis, a majority of the
voting power of all securities of the Company entitled to vote generally in the
election of directors or in a merger, (ii) the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended and (iii) the receipt by the Purchaser of the proceeds of
the financing pursuant to the Debt Financing Commitments (as defined in Section
9 of the Offer to Purchase).
The Board of Directors of the Company (the "Board of Directors") has
approved the Merger Agreement (as defined below) and the transactions
contemplated thereby, including the Offer and the Merger (as defined below) and
determined that terms of the Offer and the Merger are fair to, and in the best
interests of, the holders of the Shares and recommends that the holders of the
Shares accept the Offer and tender their Shares to the Purchaser.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 16, 1997 (the "Merger Agreement"), among the Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, for the
making of the Offer by the Purchaser, and further provides that, following the
completion of the Offer, upon the terms and subject to the conditions of the
Merger Agreement, and in accordance with the Delaware General Corporation Law,
the Purchaser will be merged with and into the Company (the "Merger"). Following
the Merger, the Company will continue as the surviving corporation and become a
wholly owned subsidiary of the Parent, and the separate corporate existence of
the Purchaser will cease.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a book-
entry delivery of Shares, and other required documents should be sent to the
Depositary, and (ii) either Share Certificates, representing the tendered Shares
should be delivered to the Depositary, or such Shares should be tendered by
book-entry transfer into the Depositary's account maintained at one of the
Book-Entry Transfer Facilities (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Managers, the Depositary and D.F. King &
Co., Inc. (the "Information Agent") (as described in the Offer to Purchase)) for
soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however,
upon request, reimburse you for customary clerical and mailing expenses incurred
by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Inquiries you may have with respect to the Offer should be addressed to the
Information Agent or the undersigned, at the respective addresses and telephone
numbers set forth on the back cover of the Offer to Purchase. Additional copies
of the enclosed materials may be obtained from the Information Agent.
Very truly yours,
MONTGOMERY SECURITIES
MORGAN STANLEY & CO. INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEALER MANAGER,
THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
[EXHIBIT 11(A)(5)]
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
THE MULTICARE COMPANIES, INC.
AT
$28 NET PER SHARE
BY
GENESIS ELDERCARE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
GENESIS ELDERCARE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, JULY 18, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated June
20, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal
relating to an offer by Genesis ElderCare Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Genesis
ElderCare Corp., a Delaware corporation (the "Parent"), to purchase all of
the outstanding shares of Common Stock, $.01 par value per share (the
"Shares"), of The Multicare Companies, Inc., a Delaware corporation (the
"Company"), at a purchase price of $28.00 per Share, net to the seller in
cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which, as amended from time to time, together constitute the
"Offer"). Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their
Share Certificates and all other required documents to ChaseMellon
Shareholder Services, L.L.C., the Depositary, prior to the Expiration Date
(as defined in the Offer to Purchase), or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO
YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES
HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on
your behalf any or all of such Shares held by us for your account,
pursuant to the terms and subject to the conditions set forth in the Offer
to Purchase.
Your attention is directed to the following:
1. The tender price is $28.00 per share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Board of Directors of the Company has approved the Merger
Agreement (as defined below) and the transactions contemplated
thereby, including the Offer and the Merger (as defined below)
and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the holders of Shares
and recommends that holders of the Shares accept the Offer and
tender their Shares to the Purchaser.
1
<PAGE>
4. The Offer is being made pursuant to an Agreement and Plan of
Merger, dated as of June 16, 1997 (the "Merger Agreement") by
and among the Parent, the Purchaser and the Company. The Merger
Agreement provides, among other things, that subsequent to the
consummation of the Offer, the Purchaser will merge with and
into the Company (the "Merger"). At the effective time of the
Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than
Shares owned by the Company or any subsidiary of the Company
and each Share owned by the Parent, the Purchaser or any other
subsidiary of the Parent, which shall be cancelled, and other
than Shares, if any, held by stockholders who have properly
exercised appraisal rights under Section 262 of the Delaware
General Corporation Law) will, by virtue of the Merger and
without any action on the part of the holders of the Shares be
converted into the right to receive $28.00 in cash, payable to
the holder thereof, without interest, upon surrender of the
certificate formerly representing such Share, less any required
withholding taxes.
5. The Offer and withdrawal rights will expire at 12:00 Midnight,
New York City time, on July 18, 1997, unless the Offer is
extended.
6. Tendering stockholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, stock transfer taxes on the purchase
of Shares pursuant to the Offer.
7. The Offer is conditioned upon, among other things, (i) there
being validly tendered and not properly withdrawn prior to the
expiration of the Offer, such number of Shares which
constitutes, on a fully-diluted basis, a majority of the voting
power on the date of purchase of all securities of the Company
entitled to vote generally in the election of directors or in a
merger, (ii) the expiration or termination of any applicable
waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended and (iii) the receipt by
the Purchaser of the proceeds of the financing pursuant to the
debt Financing Commitments (as defined in the Offer to
Purchase) entered into in connection with the Merger Agreement
in order to purchse the Shares pursuant to the Offer and the
Merger, refinance all indebtedness of the Company due as a
result of the consummation of the Offer or the Merger and to
pay related fees and expenses.
The Offer is being made solely by the Offer to Purchase and the
related Letter of Transmittal and is being made to all holders of Shares.
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid
state statute. If the Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, the Purchaser cannot
comply with such state statute, the Offer will not be made to, nor will
tenders be accepted from or on behalf of, the holders of Shares in such
state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of the Purchaser by Montgomery
Securities and Morgan Stanley & Co. Incorporated, the Dealer Managers for
the Offer, or one or more registered brokers or dealers that are licensed
under the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us
for your account, please instruct us by completing, executing and
returning to us the instruction form contained in this letter. If you
authorize a tender of your Shares, all such Shares will be tendered unless
otherwise specified in such instruction form. YOUR INSTRUCTIONS SHOULD BE
FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
THE MULTICARE COMPANIES, INC.
BY
GENESIS ELDERCARE ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter enclosing the
Offer to Purchase dated June 20, 1997 (the "Offer to Purchase") and the
related Letter of Transmittal pursuant to an offer by Genesis ElderCare
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Genesis ElderCare Corp., a Delaware corporation, to purchase all
outstanding shares of Common Stock, $.01 par value per share (the
"Shares"), of The Multicare Companies, Inc., a Delaware corporation at a
purchase price of $28.00 per Share, net to the seller in cash without
interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase and the related Letter of Transmittal.
This will instruct you to tender the number of Shares indicated
below (or, if no number is indicated below, all Shares) which are held by
you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal furnished to the undersigned.
Number of Shares to be
Tendered* Shares
Dated SIGN HERE
,
1997
Signature(s)
Please Print Name(s)
Address
Area Code and Telephone Number
Tax, Identification, or Social Security Number
* Unless otherwise indicated, it will be assumed that all of your Shares
held by us for your account are to be tendered.
3
<PAGE>
EXHIBIT 11(A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens: I.E.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: I.E., 00-00000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GIVE THE GIVE THE
SOCIAL EMPLOYER
SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF -- FOR THIS TYPE OF ACCOUNT: NUMBER OF --
<CAPTION>
</TABLE>
<TABLE>
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account1
3. Husband and wife The actual owner of the
(joint account) account or, if
joint funds, either
person1
4. Custodian account of a minor The minor2
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the
minor is the only
contributor, the
minor1
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent person3
ward, minor or incompetent
person
7. a. The usual revocable savings The grantor-trustee1
trust account (grantor is
also trustee)
b. So-called trust account that The actual owner4
is not a legal or valid trust
under State law
8. Sole proprietorship account The owner4
9. A valid trust, estate or pension The legal entity (Do not
trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)5
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the partnership
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
</TABLE>
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4 Show your individual name. You may also enter your business name. You may use
either your Social Security Number or your Employer Identification Number.
5 List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
businesses and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service (the "IRS") and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
(Bullet) A corporation.
(Bullet) A financial institution.
(Bullet) An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
(Bullet) The United States or any agency or instrumentalities.
(Bullet) A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality.
(Bullet) A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
(Bullet) An international organization or any agency or instrumentality thereof.
(Bullet) A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
(Bullet) A real estate investment trust.
(Bullet) A common trust fund operated by a bank under section 584(a) of the
Code.
(Bullet) An exempt charitable remainder trust, or non-exempt trust described in
section 4947(a)(1) of the Code.
(Bullet) An entity registered at all times under the Investment Company Act of
1940.
(Bullet) A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
(Bullet) Payments to nonresident aliens subject to withholding under section
1441 of the Code.
(Bullet) Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
(Bullet) Payments of patronage dividends where the amount received is not paid
in money.
(Bullet) Payments made by certain foreign organizations.
(Bullet) Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
(Bullet) Payments of interest on obligations issued by individuals. NOTE: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
(Bullet) Payments of tax-exempt interest (including exempt-interest dividends
under section 852 of the Code).
(Bullet) Payments described in section 6049(b)(5) of the Code to nonresident
aliens.
(Bullet) Payments on tax-free covenant bonds under section 1451 of the Code.
(Bullet) Payments made by certain foreign organizations.
(Bullet) Payments made to a nominee.
Exempt payees described above should file a Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN
ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL
REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6045, 6050A and 6050N of
the Code and the regulations promulgated therein.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividends and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
Exhibit 11(a)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated June 20, 1997 and the related Letter of
Transmittal (and any amendments thereto) and is being made to all holders of
Shares. The Purchaser (as defined below) is not aware of any state where the
making of the Offer is prohibited by administrative or judicial action pursuant
to a state statute. If the Purchaser becomes aware of any state where the making
of the Offer is prohibited, the Purchaser will make a good faith effort to
comply with any such statute or seek to have such statute declared inapplicable
to the Offer. If, after such good faith effort, the Purchaser cannot comply with
any applicable statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In those
jurisdictions where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by Montgomery Securities or Morgan Stanley & Co.
Incorporated or one or more registered brokers or dealers licensed under the
laws of such jurisdictions.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
The Multicare Companies, Inc.
at
$28.00 Net Per Share
by
Genesis ElderCare Acquisition Corp.
a wholly owned subsidiary of
Genesis ElderCare Corp.
Genesis ElderCare Acquisition Corp., a Delaware corporation formerly
known as Waltz Acquisition Corp. (the "Purchaser") and a wholly owned subsidiary
of Genesis ElderCare Corp., a Delaware corporation formerly known as Waltz Corp.
(the "Parent"), is offering to purchase all of the outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of The Multicare Companies,
Inc., a Delaware corporation (the "Company"), at a purchase price of $28.00 per
Share, net to the seller in cash without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated June 20, 1997
(the "Offer to Purchase") and in the related Letter of
<PAGE>
2
Transmittal (which, as amended from time to time, together constitute the
"Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, JULY 18, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration of the Offer
such number of Shares which constitutes, on a fully diluted basis, a majority of
the voting power on the date of purchase of all securities of the Company
entitled to vote generally in the election of directors or in a merger, (ii) the
expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Act of 1976, as amended, and (iii) the receipt by the
Purchaser of the proceeds pursuant to the debt financing commitment letters
entered into in connection with the Merger Agreement (as defined below) in order
to purchase the Shares pursuant to the Offer and the Merger (as defined below),
refinance all indebtedness of the Company due as a result of the consummation of
the Offer or the Merger and pay related fees and expenses.
The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. Following the consummation of the Offer, the
Purchaser intends to effect the Merger, as described below.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
June 16, 1997 (the "Merger Agreement"), by and among the Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, for the
making of the Offer by the Purchaser, and further provides that, following the
completion of the Offer, upon the terms and subject to the conditions of the
Merger Agreement, and in accordance with the Delaware General Corporation Law
("DGCL"), the Purchaser will be merged with and into the Company (the "Merger"),
and each Share issued and outstanding immediately prior to the effective time of
the Merger (other than Shares owned by the Company or any subsidiary of the
Company and each Share owned by the Parent, the Purchaser or any other
subsidiary of the Parent, which shall be cancelled, and other than Shares, if
any, held by stockholders who have properly exercised appraisal rights under the
DGCL) will, by virtue of the Merger and without any action on the part of the
holders of the Shares, be converted into the right to receive $28.00 in cash,
payable to the holder thereof, without interest, upon the surrender of the
certificate formerly representing such Share, less any required withholding
taxes. The Merger Agreement is more fully described in Section 11 of the Offer
to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
<PAGE>
3
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND DETERMINED THAT THE TERMS OF
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE HOLDERS
OF SHARES AND RECOMMENDS THAT HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES TO THE PURCHASER.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) Shares validly tendered and not
properly withdrawn as, if and when the Purchaser gives oral or written notice to
ChaseMellon Shareholder Services, L.L.C. (the "Depositary") of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Upon the
terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent
for tendering stockholders for the purpose of receiving payments from the
Purchaser and transmitting such payments to stockholders whose Shares
have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE
PURCHASE PRICE FOR SHARES BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION
OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for
Shares tendered and accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) certificates representing Shares
(the "Share Certificates") or timely confirmation of a book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company or
the Philadelphia Depository Trust Company (each a "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3 of the Offer to
Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined in Section 2 of the Offer to Purchase) in connection
with a book-entry transfer, and (iii) any other documents required by the Letter
of Transmittal.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission and the terms of the Merger Agreement, the Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, and regardless of whether or not any of the events set forth in
Section 15 of the Offer to Purchase shall have occurred, to (i) extend the
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) amend the Offer in any respect by
giving oral or written notice of such amendment to the Depositary. Any
extension, delay, termination, waiver or amendment will be followed as promptly
as practicable by public announcement to be made no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date. During any such extension, all Shares previously tendered and
not properly withdrawn will remain subject to the Offer, subject to the rights
of a tendering stockholder to withdraw such stockholder's Shares.
<PAGE>
4
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Friday, July 18, 1997, unless and until the Purchaser, in its sole discretion
(but subject to the terms and conditions of the Merger Agreement), shall have
extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except
that Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after August
18, 1997. For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered such Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If Share Certificates to be withdrawn have been delivered
or otherwise identified to the Depositary, then prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in Section 3 of the
Offer to purchase) unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the second sentence of this paragraph. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security
<PAGE>
5
position listing for subsequent transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer
Managers or the Information Agent as set forth below. Requests for copies of the
Offer to Purchase and the related Letter of Transmittal and all other tender
offer materials may be directed to the Information Agent or the Dealer Managers,
and copies will be furnished promptly at the Purchaser's expense. The Purchaser
will not pay any fees or commissions to any broker or dealer or any other person
(other than the Dealer Managers and the Information Agent) for soliciting
tenders of Shares pursuant to the Offer.
<PAGE>
6
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Call Toll Free 1-800-488-8035
The Dealer Managers for the Offer are:
MORGAN STANLEY DEAN WITTER
MONTGOMERY SECURITIES Morgan Stanley & Co.
600 Montgomery Street Incorporated
San Francisco, California 94111 1585 Broadway 35th Floor
1-800-227-4786 (ext. 5945) New York, New York 10036
(212) 761-4341
June 20, 1997
<PAGE>
(GENESIS LETTERHEAD)
CONTACT ON DAY OF ANNOUNCEMENT: LYNN MADONNA
(212) 583-8525
CONTACT AFTER JUNE 16: GEORGE HAGER
(610) 444-6350
CYPRESS/TPG CONTACT: OWEN BLICKSILVER
(212) 303-7603
FOR IMMEDIATE RELEASE
GENESIS HEALTH VENTURES, INC.
TO ACQUIRE THE MULTICARE COMPANIES, INC. WITH
THE CYPRESS GROUP LLC AND TEXAS PACIFIC GROUP
GENESIS SIGNS MULTI-YEAR MANAGEMENT
CONTRACT WITH AN OPTION TO ACQUIRE
MULTICARE'S OPERATIONS
KENNETH SQUARE, PA - JUNE 16, 1997 - Genesis Health Ventures, Inc. (NYSE: GHV)
("Genesis"), The Cypress Group, LLC ("Cypress") and The Texas Pacific Group
("TPG") today announced that they have formed a new company, to be named Genesis
ElderCare Acquisition Corp. ("GEAC") and signed an agreement to acquire The
Multicare Companies, Inc. (NYSE:MUL) for $28.00 per share. The transaction is
valued at $1.4 billion.
Multicare, a New Jersey-based long term care company with first quarter 1997
annualized revenues of approximately $675 million, provides services through 155
facilities with approximately 16,000 beds. Multicare has approximately 37.0
million fully diluted shares outstanding and as of March 31, 1997 had $342
million in debt outstanding, excluding $75 million in convertible debt.
Separately, Genesis announced that it will enter into a multi-year management
services contract with GEAC to manage Multicare's operations for an annual
management fee of six percent of total revenues. All Multicare services and
products will be branded under the Genesis ElderCare banner.
Under the merger agreement, GEAC will promptly commence a cash tender offer for
all Multicare shares at $28.00 per share. The offer is subject to, among other
things, the tender of a majority of the outstanding shares on a fully diluted
basis, GEAC's receipt of financing pursuant to its debt financing commitments,
the expiration of termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and all other
<PAGE>
2
regulatory approvals. The cash offer to shareholders is to be followed by a
merger in which each remaining share will be converted into the right to receive
the cash price per share paid in the offer. The offer will be made only pursuant
to definitive offering documents.
The agreement was approved by the Board of Directors of both companies. It is
anticipated that the transaction will close in the third quarter of 1997.
Additionally, Multicare co-founders Daniel and Moshael Straus have entered into
a voting agreement whereby they will tender and vote their shares in favor of
the transaction.
Specific terms of the agreements call for:
o Genesis to invest $300 million in exchange for approximately 42% of
GEAC common stock and Cypress and TPG to invest $420 million in GEAC in
exchange for approximately 58% of GEAC common stock. Following
completion of the transaction, GEAC will be a consolidated subsidiary
of Genesis.
o Genesis to enter into a put/call agreement with Cypress and TPG giving
Genesis the option to acquire the equity of Cypress and TPG in GEAC
after four years; Cypress and TPG will have the option to put their
equity to GEAC to Genesis after five years.
Under a separate agreement, Genesis will contribute its institutional pharmacy
and GEAC will contribute the Multicare institutional pharmacy to a joint venture
to be operated by Genesis. Multicare's institutional pharmacy business currently
serves approximately 28,000 beds through eight pharmacies.
In addition, Genesis will acquire upon closing of the merger Multicare's
rehabilitation therapy business. Multicare's therapy business is running at an
annualized rate of approximately $20 million in revenues.
"As a result of this transaction, we have established a contiguous market
concentration from New Hampshire down the eastern corridor to Washington, D.C.
Genesis is now strategically positioned, as the eldercare provider of choice, to
offer our customers, partners and affiliates a comprehensive array of eldercare
services and products unsurpassed by any other healthcare provider," commented
Michael R. Walker, Genesis chairman and chief executive officer.
"Our management agreement will allow us to fold Multicare's operations into our
Genesis ElderCare Networks and enable us to delivery the high quality,
cost-effective, integrated care demanded in today's managed care environment. We
see an exceptionally strong strategic and geographic fit between the two
companies, especially in Massachusetts, New Jersey, Pennsylvania and West
Virginia, and anticipate substantive operating synergies as well as future
margin improvement in our specialty medical services and management services
businesses, "he noted.
<PAGE>
3
"The achievement of these initiatives and the synergies of combining these
companies will benefit the shareholders, customers and employees of Genesis and
Multicare," Walker concluded.
"We could not be more pleased than to enter into this strategic acquisition with
Mike Walker and the Genesis team," said Jamie Singleton, vice chairman, The
Cypress Group. "We believe the fit between these two outstanding companies will
drive a standard of care in the healthcare industry that is unparalleled among
long term care providers."
"These two companies offer a natural strategic fit. They are high margin, fast
growing businesses with an excellent reputation for quality care," said James G.
Coulter, founding partner, Texas Pacific Group. "The combination should provide
benefits to the company's customers and stakeholders."
Bank financing for the transaction will be provided by Mellon Bank, NationsBank,
First Union and Citibank. Morgan Stanley and Montgomery Securities will provide
a bridge loan commitment and high yield take-out financing. Montgomery
Securities acted as advisor to Genesis and Morgan Stanley acted as advisor to
Cypress and TPG.
Genesis Health Ventures, Inc. a recognized innovator in the healthcare industry,
was founded in 1985 to redefine how America cares for the elderly and is
dedicated to helping older adults live a full life as independently as possible
in their later years. The Company, which consolidated its businesses under the
brand name Genesis ElderCare in 1996, has established Genesis ElderCare Networks
in four regional markets in the eastern United States and currently serves more
than 100,000 customers daily.
The Cypress Group manages a private equity fund with more than $1 billion in
commitments. Cypress invests in privately negotiated transactions, targeting
established operating companies and investing with management to foster
continued growth. The Cypress Group, based in New York City is headed by its
four partners: James A. Stern, Jeffrey P. Hughes, James L. Singleton, and David
P. Spalding.
Texas Pacific Group, based in San Francisco and Fort Worth, Texas, is sponsor of
TPG Partners II, L.P., of Fort Worth, a $2.5 billion investment partnership
which specializes in corporate acquisitions in a wide range of industries and
succeeds TPG Partners, L.P., a $720 million partnership formed in December 1993.
TPG's principles include David Bonderman, James G. Coulter, and William S.
Price.
CERTAIN OF THE MATTERS DISCUSSED IN THIS NEWS RELEASE WHICH ARE NOT STATEMENTS
OF HISTORICAL FACT ARE FORWARD LOOKING STATEMENTS, AND BECAUSE SUCH STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES ACTUAL RESULTS MAY DIFFER FROM THOSE EXPRESSED
OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH
DIFFERENCES INCLUDE BUT ARE NOT LIMITED TO THOSE DISCUSSED IN GENESIS' ANNUAL
REPORT ON FORM 10K FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND ITS OTHER PUBLIC
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
3
*************************
FOR MORE INFORMATION, PLEASE DIAL INTO TODAY'S CONFERENCE CALL TO BE HOSTED BY
MICHAEL WALKER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER AND GEORGE HAGER, CHIEF
FINANCIAL OFFICER OF GENESIS HEALTH VENTURES AT 9:00AM EASTERN DAYLIGHT TIME
1-800-227-7067
<PAGE>
Exhibit 11(b)(1)
MELLON BANK, N.A.
CITICORP SECURITIES, INC.
CITIBANK N.A.
FIRST UNION CAPITAL MARKETS CORP.
FIRST UNION NATIONAL BANK
NATIONSBANK, N.A.
June 14, 1997
Genesis ElderCare Acquisition Corp.
(formerly known as Waltz Acquisition Corp.)
c/o The Cypress Group L.L.C.
65 E. 55th Street, 19th Floor
New York, NY 10022
Amended and Restated Commitment Letter (Revised)
Gentlemen:
Reference is made to that certain Commitment Letter, dated May
31, 1997, issued to you by Mellon Bank, N.A., Citicorp Securities, Inc., First
Union Capital Markets Corp. and NationsBank, N.A. as amended and restated
pursuant to that certain Amended and Restated Commitment Letter, dated June 14,
1997 issued to you by Mellon Bank, N.A. ("Mellon"), Citicorp Securities, Inc.
and Citibank, N.A. (collectively, "Citicorp"), First Union Capital Markets Corp.
and First Union National Bank (collectively, "First Union") and NationsBank,
N.A. ("NationsBank") (as so modified, the "Existing Commitment Letter"). You
have requested that the Existing Commitment Letter be amended in certain
respects and the undersigned Co-Arrangers are willing to so amend the Existing
Commitment Letter on the terms and conditions set forth below in this Amended
and Restated Commitment Letter (this "Commitment Letter"). Upon your execution
of this Commitment Letter, the terms hereof shall amend and replace the terms
set forth in the Existing Commitment Letter except that any fees, indemnities or
other amounts that shall have accrued under the Existing Commitment Letter shall
remain in full force and effect. If you do not execute and deliver this
Commitment Letter at or before 5:00 p.m. (Philadelphia local time) on June 19,
1997, this Commitment Letter shall be of no effect and the terms of the Existing
Commitment Letter shall remain in full force and effect without any
modifications.
<PAGE>
Based on our discussions, Mellon, Citicorp, First Union and
NationsBank and/or their affiliates are pleased to provide Genesis ElderCare
Acquisition Corp. (formerly known as Waltz Acquisition Corp.) ("Merger Sub")
with financing commitments for, to agree to act as co-arranging banks (the
"Co-Arrangers")1 in connection with and to arrange for the syndication of, the
senior debt facilities described below and on Annex A. Terms not otherwise
defined herein are used herein as defined in Annex A hereto. We are advised that
you are wholly owned by Genesis ElderCare Corp. (formerly known as Waltz Corp.)
("Parent"), the capital stock of which is, or shall be, owned by The Cypress
Group L.L.C., TPG Partners II, L.P. and Genesis Health Ventures, Inc. We further
understand that you intend to acquire outstanding shares of The Multicare
Companies, Inc. ("Multicare") through a cash tender offer and merger in which
Multicare will be the survivor and a wholly-owned subsidiary of Parent.
You have asked the Co-Arrangers to provide commitments for the
senior debt facilities to Multicare and to you described on the attached Annex A
(the "Credit Facilities"). The Credit Facilities will be available for the
purposes set forth on Annex A attached hereto. Certain fees payable in
connection with the Credit Facilities are set forth on Annex B attached hereto.
Subject to the satisfaction of the conditions contained in
this Commitment Letter and your acceptance hereof, Mellon, Citicorp, First Union
and NationsBank each severally commit to lend one quarter of the aggregate
amount of the Credit Facilities on the terms and conditions referred to herein
and described in the attached Annex A subject to, among other things, payment of
the fees set forth in Annex B. Once paid or payable, the fees or any part
thereof, payable hereunder shall not be refundable under any circumstances,
regardless of whether the transactions or borrowings contemplated hereby are
consummated. Except as set forth on Annex B, all fees payable hereunder shall be
paid in immediately available funds and shall be in addition to reimbursement of
out-of-pocket expenses incurred by the Co-Arrangers. The fees referred to herein
are in addition to (1) the commitment and other fees, expenses and charges
referred to in the Term Sheet, and (2) the fees to be paid to Mellon, as
Administrative Agent, as separately agreed between the Borrower and Mellon.
The terms and conditions of this commitment and undertaking
are not limited to those set forth in the attached Annex A and Annex B. Those
matters that are not covered or made clear herein or in such Annex A or Annex B
are subject to mutual agreement of the parties.
- --------
1 For purposes of determining allocable shares of entitlements and
obligations, Citicorp Securities, Inc. and Citibank, N.A. shall be
deemed to be one entity and First Union Capital Markets Corp. and First
Union National Bank shall be deemed to be one entity.
-2-
<PAGE>
In addition, this commitment and undertaking is subject to (i)
the preparation, execution and delivery of mutually acceptable loan
documentation, incorporating substantially the terms and conditions outlined
herein and in the attached Annex A, (ii) the absence of any material adverse
change in the loan syndication market for transactions of this type or any
relevant information (financial or otherwise) provided to the Co-Arrangers in
connection with this Commitment Letter or the transactions contemplated hereby,
(iii) the condition that the financing closes no later than as provided in Annex
A, (iv) your execution and delivery of this commitment letter and the payment of
the fees at such times and in such amounts as are set forth on Annex B, (v) the
execution and delivery of the amended and restated commitment letter, dated as
of even date herewith, by Genesis (the "Genesis Commitment Letter") and the
payment of the fees required to be paid thereunder and (vi) our favorable review
and acceptance of the Non-Accepted Documents or the favorable resolution of the
exceptions to Accepted Documents (as defined in Annex A).
The Co-Arrangers intend to syndicate the Credit Facilities to
additional lenders with corresponding reductions in the initial commitments of
the Co-Arrangers. The syndication may occur before or after initial funding. The
Co-Arrangers will manage all aspects of the syndication (in consultation with
you), including the timing of all offers to potential Lenders and the acceptance
of commitments, the amounts offered and the compensation provided. You shall
fully cooperate with the Co-Arrangers in the syndication process. You agree that
any of the Co-Arrangers, in connection with the syndication of any portion of
its commitment, may share all or a portion of any of the fees payable pursuant
to this Commitment Letter, in its sole discretion, with any of the other
Lenders.
You agree to indemnify and hold harmless the Administrative
Agent, the Co- Arrangers, each Lender and their respective affiliates, officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities, amounts paid in
settlement, court costs and expenses (including, without limitation, fees and
disbursements of counsel) that may be incurred by or asserted or awarded against
any Indemnified Party, in each case arising out of or by reason of, or in
connection with any claims or actions arising out of the Existing Commitment
Letter, this Commitment Letter, Existing Genesis Commitment Letter (as defined
in the Genesis Commitment Letter), the Genesis Commitment Letter or the
transactions contemplated hereby or thereby including, without limitation, the
preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with the proposed tender offer, the
proposed merger, the equity investment of Genesis or others in Parent, any
financing related thereto or other transaction referred to in Annex A hereto or
Annex A to the Genesis Commitment Letter, whether or not an Indemnified Party is
a party thereto and whether or not the transactions contemplated herein are
consummated, except to the extent such claim, damage, loss, liability, amount
paid in settlement, court cost or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or wilful misconduct.
-3-
<PAGE>
In further consideration of the commitment and undertaking of
the Co- Arrangers hereunder and recognizing that in connection herewith the
Co-Arrangers are incurring costs and expenses, including, without limitation,
fees and expenses of counsel and due diligence, transportation, computer,
duplication, search, filing and recording fees, you hereby acknowledge your
obligation to pay such costs and expenses (whether incurred before or after the
date hereof) regardless of whether any of the transactions contemplated hereby
are consummated or any loan documents are agreed to and signed.
The obligations hereunder are absolute and unconditional and
shall be due and payable as and when they arise and shall be subject to no
set-off or counterclaim notwithstanding (a) any failure of the Co-Arrangers to
assert claims against any other persons or collateral, or (b) any other event or
condition which could serve as a defense to the obligations arising hereunder,
each such defense being, to the fullest extent permitted by applicable law,
hereby waived.
This letter is for your confidential use only. We understand
that you will not disclose this letter to any person other than to your
accountants, attorneys, investment bankers and other advisors, and then only in
connection with the transactions contemplated hereby and on a confidential
basis, except that you may file a copy of this letter in any public record in
which it is required by law to be filed and, subject to the last sentence of
this commitment letter, you may provide a copy of this letter on a confidential
basis to Genesis and Multicare and its/their accountants, attorneys, investment
bankers and other advisors. We also understand that you will permit each of the
undersigned to review and approve any reference to it or any of its affiliates
contained in any press release or similar public disclosure prior to public
release. Please be advised that companies with interests that may conflict with
yours may be or become customers of one or more of the undersigned and that one
or more of the undersigned may be providing financing or other services to them.
EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER AND THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE CO-ARRANGERS OR THEIR
AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.
In issuing this commitment and undertaking, the Co-Arrangers
are relying on the accuracy of the information furnished to them by you or by
others on your behalf and by your affiliates, including that summarized above.
This Commitment Letter may not be amended or waived except by
an instrument in writing signed by the Co-Arrangers and you. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one agreement.
Delivery of an executed signature page
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<PAGE>
of this Commitment Letter by facsimile transmission shall be as effective as a
hand delivery of an original executed counterpart hereof.
This Commitment Letter shall be governed by, and construed in
accordance with, the internal laws of the Commonwealth of Pennsylvania. The
parties hereto agree that any dispute under this Commitment Letter shall be
brought only in a Pennsylvania state court or in the United States District
Court for the Eastern District of Pennsylvania.
Please evidence your acceptance of the provisions of this
Commitment Letter, Annex A, Annex B and the other matters referred to above by
signing in the space provided below and returning a copy of this Commitment
Letter to us (together with payment of the required fees at or before 5:00 p.m.
(Philadelphia local time) on June 19, 1997, the time at
[INTENTIONALLY LEFT BLANK]
-5-
<PAGE>
which the Co-Arrangers' commitments and undertakings set forth above (if not
accepted prior thereto) will expire. DELIVERY OF A COPY OF THIS COMMITMENT
LETTER TO THE MULTICARE COMPANIES, INC. OR ANY REPRESENTATIVE OR AGENT
THEREOF SHALL BE DEEMED TO BE YOUR ACCEPTANCE OF THE TERMS
HEREOF.
Very truly yours,
MELLON BANK, N.A.
By /s/ Barbara J. Hauswald
Title: Vice President
CITICORP SECURITIES, INC.
By /s/ E. Ogimachi
Title: Vice President
CITIBANK, N.A.
By /s/ E. Ogimachi
Title: Vice President
FIRST UNION CAPITAL MARKETS CORP.
By /s/ Andrew J. Gamble
Title: Managing Director
-6-
<PAGE>
FIRST UNION NATIONAL BANK
By /s/ Joseph H. Towell
Title: Senior Vice President
NATIONSBANK, N.A.
By /s/ Lucine Kirchhoff
Title: Director
ACCEPTED this ____ day
of _______, 1997
GENESIS ELDERCARE ACQUISITION CORP.
(formerly known as WALTZ ACQUISITION CORP.)
By /s/ James L. Singleton
Title:
The undersigned agrees as of the date first
above written to guarantee and act as surety
for all obligations of Genesis ElderCare
Acquisition Corp. (formerly
known as Waltz Acquisition Corp.)
arising out of or in connection with this Amended
and Restated Commitment Letter. This
obligation is absolute and subject to
no set-off or counterclaim.
GENESIS ELDERCARE CORP.
(formerly known as Waltz Corp.)
By /s/ James L. Singleton
Title: Vice President
-7-
<PAGE>
Dated: June 14, 1997
ANNEX A
SUMMARY OF TERMS
Borrower(s): Genesis ElderCare Acquisition Corp.
(formerly known as Waltz Acquisition Corp.)
("Merger Sub") is the Borrower under the
Short- Term Merger Sub Facility, and The
Multicare Companies, Inc. ("Multicare") and
its present and future direct and indirect
subsidiaries are, collectively, the
Borrowers under the Short-Term Multicare
Facility and the Senior Facilities.
Accordingly, the terms "Borrower" and
"Borrowers" shall mean Merger Sub when
applicable or used with reference to the
Short-Term Merger Sub Facility and shall
mean Multicare and its subsidiaries or any
one or more of them, as the context may
require, when applicable or used with
reference to the Short-Term Multicare
Facility or the Senior Facilities.
Parent: Genesis ElderCare Corp. (formerly known as
Waltz Corp.), the capital stock of which is
owned by The Cypress Group L.L.C.
("Cypress"), TPG Partners II, L.P. ("TPG")
and Genesis Health Ventures, Inc.
("Genesis"), owns 100% of the capital stock
of Genesis ElderCare Acquisition Corp.
(formerly Waltz Acquisition Corp.) (herein
"Merger Sub") and, after the merger
described below, will own 100% of the
capital stock of Multicare.
Transactions: Merger Sub shall enter into an Agreement and
Plan of Merger (the "Merger Agreement") with
Multicare. Thereafter, Merger Sub shall
make a tender offer (the "Offer") for all of
the shares of common stock of Multicare (the
"Shares"). In the event that 90% or more of
the Shares are tendered in the Offer, Merger
Sub shall immediately effect a merger (the
"253 Merger") with Multicare under Section
253 of the Delaware General Corporation Law
and Multicare shall be the survivor of the
253 Merger. In the event that less than 90%
(but more than 50%) of the Shares are
tendered in the Offer, Merger Sub and
Multicare shall proceed as promptly and
diligently as possible to effect a merger
under Section 251 of the Delaware General
Corporation Law (the "251 Merger"). If the
253 Merger can be effected, the sole lending
Facility available shall be the Senior
Facility referred to below. If, at the
expiration of the Offer, less than 90% (but
more than 50%) of the Shares are tendered,
the Short-Term Merger Sub Facility and the
Short-Term Multicare Facility referred to
below shall be available but the Senior
Facilities shall not be available until the
effectiveness of the 251 Merger. Upon
effectiveness of the 251 Merger, the Senior
Facilities shall be
-1-
<PAGE>
closed, and the Short-Term Merger Sub
Facility and the Short-Term Multicare
Facility shall be repaid and terminated.
Co-Arrangers: Mellon Bank, N.A. ("Mellon"), Citicorp
Securities, Inc. and Citibank, N.A.
(collectively, "Citicorp"), First Union
Capital Markets Corp. and First Union
National Bank (collectively, "First Union")
and NationsBanc Capital Markets, Inc.
("NationsBanc").**
Administrative
Agent: Mellon.
Lenders: The Co-Arrangers and/or their affiliates and
other financial institutions (the "Lenders")
to be arranged by the Co-Arrangers and
approved by the Company, whose approval will
not be unreasonably withheld. The Borrowers
shall cooperate with the Co-Arrangers in the
syndication of the Senior Facilities,
whether before or after the initial funding
of the Senior Facilities, and shall provide
and cause its advisors to provide all
information reasonably deemed necessary by
the Co-Arrangers to complete a successful
syndication.
Facility Fee: As set forth in that separate commitment
letter, dated as of May 31, 1997, as amended
and restated, between Merger Sub and the Co-
Arrangers.
Unused
Commitment Fee: As set forth on Schedule I attached hereto.
Short Term
Facilities: The following facilities will terminate 120
days after the initial closing date or
earlier upon the effectiveness of the 251
Merger or the abandonment thereof.
Short-Term Merger
Sub Facility: A multiple draw credit facility to Merger
Sub in an amount not to exceed $200,000,000
subject to the following:
(a) To be used exclusively, but only
after the proceeds of capital
contributions to Merger Sub by
Parent (in an aggregate amount of at
least $718,700,000 are used, (i) to
fund the purchase of Shares pursuant
to the Offer and (ii) to pay fees
and expenses associated with the
Offer, Subordinated Bridge Financing
and the Facilities.
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** For purposes of determining each Co-Arranger's ratable share of
entitlements and obligations hereunder, Citicorp Securities, Inc. and
Citibank N.A. shall be one entity and First Union Capital Markets
Corp. and First Union National Bank shall be deemed to be one entity.
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<PAGE>
(b) Advances under the Short-Term Merger
Sub Facility shall, at the election
of Merger Sub, be made either (i) on
a dollar for dollar basis with the
Subordinated Bridge Financing
(hereinafter defined) or (ii) after
the net proceeds of the Subordinated
Bridge Financing have been utilized
for the purposes in (a) above.
(c) No funds shall be advanced if the
ratio of Tendered Stock Value/Merger
Sub indebtedness is (or, after
giving effect to the proposed senior
and subordinated advances, would be)
less than 2.5:1.0. "Tendered Stock
Value" shall mean the then current
market value of the Shares as such
term is used in Regulation U.
A portion of the Facility, as
determined by the Co-Arrangers,
shall be held back to pay interest,
fees and expenses owing to the
Lenders.
Interest shall be paid quarterly at
the Prime Rate (as defined in
Schedule I) plus 1 1/2% and the
commitment fee on the unused amount
of the commitment shall be 0.5%
payable quarterly in arrears.
All Conditions set forth herein
(other than Nos. (8) and (24)) shall
be satisfied as to Merger Sub (and,
unless the context otherwise
requires, as to Multicare) plus the
additional conditions that (i) more
than 50% of the Shares (including,
for this purpose, shares of common
stock of Multicare subject to
conversion rights and rights to
purchase) shall have been tendered
pursuant to the Offer, (ii) Merger
Sub shall have the unrestricted
right, subject only to prior
notification pursuant to Section
14(f) of the Securities Exchange Act
of 1934, to designate and cause to
be appointed a majority of the Board
of Directors of Multicare, (iii) the
Board of Directors of Multicare (as
constituted before the change in its
composition referred to in clause
(ii)) shall have approved the 251
Merger, and (iv) the Lenders shall
be satisfied that no legal
impediment to a merger under Section
251 of the Delaware General
Corporation Law on the terms set
forth in the Merger Agreement
(hereinafter defined) exists or
would exist after the Offer. The
full amount of the Facility Fee
referred to above shall be payable
at the initial funding. The
representations and warranties and
the covenants and the other terms of
the Short-Term Merger Sub Facility
shall be such as shall be deemed
appropriate by the Co-Arrangers for
transactions of this nature,
including Administrative Agent and
Co-Arranger fees. Merger Sub shall
have no activities other than the
acquisition and holding of the
Shares and the merger with
Multicare. Merger Sub shall use its
best efforts to cause a merger with
Multicare to occur as expeditiously
as possible.
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<PAGE>
Parent shall guarantee the debt and
shall secure its guarantee with a
pledge of the stock of Merger Sub
and Merger Sub shall secure its
obligations with the Shares
tendered.
If the Subordinated Bridge Financing
is guaranteed by Multicare and its
subsidiaries on a subordinated
basis, then Multicare and its
subsidiaries shall guaranty the
indebtedness of Merger Sub under
each Facility hereunder on a senior
basis and shall secure their
guarantees of each Facility
hereunder by pledges of equity in
Multicare's direct and indirect
subsidiaries.
Short-Term
Multicare
Facility: A revolving senior credit facility
to Multicare in an amount not to
exceed $425,000,000 to be used to
refinance existing indebtedness of
Multicare and its subsidiaries, to
fund interest and principal payments
on the Short-Term Multicare
Facility, to fund working capital
and general corporate purposes and
to pay fees and expenses associated
with the Facility. Multicare and
its direct and indirect subsidiaries
shall be jointly and severally
liable as Borrowers under the
Facility.
Interest shall be paid quarterly at
the Prime Rate (as defined in
Schedule I hereto) plus 1 1/2% per
annum, and the commitment fee on the
unused amount of the Facility shall
be 0.5%.
Multicare and its subsidiaries shall
be joint and several Borrowers under
the Facility. The Facility shall be
secured by a pledge of the equity in
all of Multicare's present and
future direct and indirect
subsidiaries as well as intercompany
notes.
It shall be a condition of funding
the Short-Term Multicare Facility
that all conditions to the initial
funding under the Short- Term Merger
Sub Facility shall have been
satisfied prior to or concurrently
with closing under the Short-Term
Multicare Facility. The
representations and warranties and
the covenants and other terms of the
Short-Term Multicare Facility shall
be such as shall be deemed
appropriate by the Co-Arrangers for
transactions of this nature,
including, without limitation,
financial covenants of the type
applicable to the Senior Facility
and, also, Administrative Agent and
Co-Arranger Fees.
Senior
Facilities: Except as expressly noted below,
incorporated in the descriptions of the
Short-Term Facilities or included in the
definitive credit agreement for the
Short-Term Facilities, the terms set forth
below expressly relate to the Senior
Facilities.
-4-
<PAGE>
Senior
Facilities: Total facility equal to $625,000,000
comprising the following:
A. $250,000,000 Six Year Term Loan (the
"Tranche A Term Facility").
B. $150,000,000 Seven Year Term Loan
(the "Tranche B Term Facility").
C. $100,000,000 Term Loan maturing
6/01/05 (the "Tranche C Term
Facility").
D. $125,000,000 Six Year Revolving
Credit Facility (the "Revolving
Credit Facility").
The Co-Arrangers shall share equally in each
of the facilities.
Use of Proceeds: The Senior Facilities shall be available for
the following purposes:
(i) to refinance the Short-Term
Facilities;
(ii) to fund interest and principal
payments on the Senior
Facilities and existing
indebtedness;
(iii) to pay the consideration
required by the merger of Merger
Sub and Multicare as well as the
transaction costs related
thereto; and
(iv) to fund the Borrowers' working
capital, capital expenditure
needs and general corporate
purposes.
Closing Dates: (i) For the Short-Term Facilities and,
unless (ii) is applicable, the
Senior Facilities: no later than
October 15, 1997, unless extended to
a later Closing Date in the sole
discretion of the Co-Arrangers.
(ii) For the Senior Facilities if there
shall have been a prior funding
under a Short-Term Facility: no
later than the date that is 120 days
following the expiration of the
Offer, unless extended to a later
Closing Date in the sole discretion
of the Co-Arrangers.
Security for
Senior Facility: (a) A pledge of stock of Multicare, (b) a
pledge of stock, partnership interests and
other equity of all of its present and
future direct and indirect subsidiaries and
of its stock in the pharmacy business of
Genesis, and (c) a pledge of all
intercompany notes among Parent and any
Borrowers or among any of the Borrowers. In
addition, Parent shall guaranty the
indebtedness under the Senior Facilities.
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<PAGE>
Term
Amortization: A. Tranche A Term Facility: Six years
from closing, with annual
amortization, payable quarterly, as
follows:
Year 1 $30,000,000 12%
Year 2 $35,000,000 14%
Year 3 $40,000,000 16%
Year 4 $45,000,000 18%
Year 5 $50,000,000 20%
Year 6 $50,000,000 20%
B. Tranche B Term Facility: Seven years
from closing, with annual amortization,
payable quarterly, as follows:
Year 1 $ 1,500,000 1%
Year 2 $ 1,500,000 1%
Year 3 $ 1,500,000 1%
Year 4 $ 1,500,000 1%
Year 5 $ 1,500,000 1%
Year 6 $ 1,500,000 1%
Year 7 $141,000,000 94%
C. Tranche C Term Facility: Maturing
6/01/05, with annual amortization,
payable quarterly, as follows:
Year 1 $ 1,000,000 1%
Year 2 $ 1,000,000 1%
Year 3 $ 1,000,000 1%
Year 4 $ 1,000,000 1%
Year 5 $ 1,000,000 1%
Year 6 $ 1,000,000 1%
Year 7 $ 1,000,000 1%
Year 8 $93,000,000 93%
D. Revolving Credit Facility: Six years
from closing.
Mandatory
Prepayments: Subject to any mandatory prepayment
provisions respecting proceeds of equity set
forth in the Subordinated Bridge Facility
(as defined below in "Covenants of the
Borrowers") which mandatory prepayment
provisions shall, unless a default shall
then exist under the Senior Facilities or
shall be caused thereby, be satisfied prior
to the mandatory prepayment provisions set
forth herein, there shall be a mandatory
prepayment of the Senior Facilities equal to
the amount of all net cash proceeds from (a)
the sale of assets of the Borrowers other
than sales in the ordinary course of
business and other than the sale of
Multicare's therapy business consistent with
paragraph (e) of "Covenants of Borrowers"
set forth below and (b) any sale of common
stock or debt securities of the
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<PAGE>
Borrowers (other than (i) the Permanent
Subordinated Debt Facility (as defined below
in "Covenants of the Borrowers") and (ii)
equity contributed by Parent in respect of
common stock.
An amount equal to 50% of Excess Cash Flow
(as defined below in "Selected Financial
Definitions") shall be payable annually
within 120 days of fiscal year end.
With respect to the Senior Facilities,
except with respect to net cash proceeds of
a disposition of any Wisconsin, Illinois or
Ohio facilities within two years of the date
of closing consistent with paragraph (e) of
"Covenants of the Borrowers" set forth below
or any sale of Multicare's contract therapy
business consistent with paragraph (e) of
"Covenants of the Borrowers" set forth
below, all prepayments shall be applied to
the Senior Facilities in the following
order:
1. First on a pro rata basis (except to
the extent that any holder of the
Tranche B Term Facility or any
holder of the Tranche C Term
Facility shall decide not to accept
a prepayment thereof) to the Tranche
A Term Facility, Tranche B Term
Facility, and Tranche C Term
Facility (which reductions shall be
applied to each subsequent payment
under the applicable amortization
schedule on a pro rata basis); and
2. Second, to the Revolving Credit
Facility with a corresponding
reduction in the commitments.
As to any prepayment in respect of net cash
proceeds of a disposition of any Wisconsin,
Illinois or Ohio facilities within two years
of the date of closing consistent with
paragraph (e) of "Covenants of the
Borrowers" set forth below, all prepayments
shall be applied in the following order:
1. First, to the Tranche A Term
Facility (which reductions shall be
applied to each subsequent payment
under the applicable amortization
schedule on a pro rata basis);
2. Then, pro rata to the Tranche B Term
Facility and Tranche C Term Facility
(except to the extent that any
holder of the Tranche B Term
Facility or any holder of the
Tranche C Term Facility shall decide
not to accept a prepayment thereof)
(which reductions shall be applied
to each subsequent payment under the
applicable amortization schedule on
a pro rata basis); and
3. Then to the Revolving Credit
Facility with a corresponding
reduction in the commitments.
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<PAGE>
All prepayments in respect of the Short-Term
Facilities shall be applied as agreed upon
by the parties prior to the execution of a
definitive credit agreement.
Commitment
Reductions: The Borrowers will have the right, upon at
least three business days' notice, to
terminate or cancel, in whole or in part,
the unused portion of the Revolving Credit
Facility; provided that each partial
reduction shall be in the amount of at least
$10,000,000 or an integral multiple of
$5,000,000 in excess thereof.
Voluntary
Prepayment: Allowed in full (or in part) provided that
(i) loans bearing interest at the Prime Rate
(each a "Prime Rate Loan") may be prepaid on
one business day's prior notice and loans
bearing interest at the LIBO Rate (each a
"LIBO Rate Loan") may be prepaid upon five
business days' prior notice (subject to
breakage indemnity) and (ii) each partial
prepayment shall be in the amount of at
least $10,000,000 or an integral multiple of
$5,000,000 in excess thereof.
Interest: See Schedule I attached hereto.
Drawings under
Revolving Credit
Facility: On one business day's prior notice for Prime
Rate Loans and three business days' prior
notice for LIBO Rate Loans. Each borrowing
must be in the amount of $10,000,000 or an
integral multiple of $5,000,000 in excess
thereof.
Representations
and Warranties: Usual and customary for transactions of this
nature, including, without limitation,
absence of any material adverse change in
the business, condition (financial or
otherwise), operations, properties or
prospects of Borrowers or Multicare or in
the industry served by Multicare generally,
the absence of any environmental hazards or
liabilities, the absence of material
litigation, accurate and complete
disclosure, existence of a December 31
fiscal year and such additional
representations and warranties as are deemed
appropriate by the Co-Arrangers for this
transaction.
Conditions Precedent
to Initial Funding
of the Facilities: Usual and customary for transactions of this
nature, including, without limitation, the
following:
(1) The restrictions in Section 203 of
the Delaware General Corporation Law
and any other impediment under
Delaware law shall be inapplicable
to the acquisition of the shares of
Multicare
-8-
<PAGE>
and to any subsequent transactions
between Merger Sub or any of its
affiliates and Multicare or any of
its affiliates, and all conditions
to avoiding the restrictions
contained therein shall have been
satisfied.
(2) At least a majority of the Shares of
each outstanding class of stock of
Multicare shall have been tendered
to Merger Sub for purchase pursuant
to the Offer and shall be purchased
concurrently with the initial
funding.
(3) The Lenders shall be satisfied that
no legal impediment to the merger
under Section 253 or 251, as the
case may be, of the Delaware General
Corporation Law on the terms set
forth in the Merger Agreement or
would exist following the
consummation of the Offer and (a) in
the case of a Short-Term Facility,
the merger shall be effected as
expeditiously as possible following
such consummation and (b) in the
case of the Senior Facilities, the
merger shall be effective.
(4) All loans made by the Lenders under
the Facilities shall be in full
compliance with the Federal
Reserve's Margin regulations.
(5) The Offer shall not be subject to
any injunction or similar order and
shall be consummated in accordance
with all applicable law. The Board
of Directors of Multicare shall have
recommended acceptance of the Offer
and shall have authorized execution
of agreements with respect to the
merger.
(6) All documentation relating to the
Facilities shall be in form and
substance satisfactory to the
Lenders.
(7) The Administrative Agent, on behalf
of the Lenders, shall have a
perfected first priority lien and
security interest in (a) in the case
of the Senior Facilities, all stock
and other equity interests of
Multicare and its subsidiaries as
well as all intercompany notes
(among any of the Borrowers or among
Parent and any of the Borrowers) and
(b) in the case of the Short-Term
Facilities, the security described
under the caption "Short-Term Merger
Sub Facility" or "Short-Term
Multicare Facility," as the case may
be, and, in each case, all filings,
recordations and searches necessary
or desirable in connection with such
liens and security interests shall
have been duly made and all filing
and recording fees and taxes shall
have been duly paid. In the event
that, upon the initial funding of
the Short-Term Merger Sub Facility,
Merger Sub shall not be the
registered owner of the tendered
Shares, Merger Sub shall execute a
pledge agreement and take or cause
to be taken such other actions as
the Co-Arrangers may
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<PAGE>
request to assure perfection of the
Lenders' security interest in the
Shares as promptly as possible.
(8) The Borrowers shall have delivered
letters in form and substance
satisfactory to the Lenders
attesting to the solvency of the
Borrowers, after giving effect to
the transactions referred to herein,
from their chief financial officer
and from a nationally recognized
appraisal firm, valuation consultant
or investment banking firm
satisfactory to the Lenders.
(9) Merger Sub has advised the
Co-Arrangers that all of the
material documents in connection
with the Offer, merger and related
transactions (other than documents
to which the Co-Arrangers and other
Lenders would be parties) are listed
on Schedule II attached hereto,
which Schedule also reflects those
documents which have been accepted
by the Co-Arrangers (and, if
applicable, exceptions to such
acceptances) and those which have
not yet been accepted by the
Co-Arrangers (respectively, the
"Accepted Documents" and, together
with any other material documents
omitted from Schedule II, the
"Non-Accepted Documents"). The
Co-Arrangers shall be reasonably
satisfied with all Non-Accepted
Documents, and the Non-Accepted
Documents shall be delivered in
final form to the Co-Arrangers as
promptly as possible following the
date hereof. Upon notification in
writing by the Co-Arrangers that a
Non-Accepted Document has been
accepted, such document shall be
deemed an Accepted Document. If the
Co-Arrangers shall be reasonably
satisfied that the requested
revisions to a previously delivered
document or other actions with
respect thereto noted on Schedule II
hereto have been made or taken
without any other alteration to such
document to which the Co-Arrangers
may reasonably object, the
exceptions shall be deemed
withdrawn. No Accepted Document
(including those as to which
exceptions shall be deemed
withdrawn) may be amended, modified
or supplemented, nor may any of its
terms or conditions in favor of
Parent, Merger Sub, Multicare or
Genesis be waived, and the Offer,
merger and other transactions
contemplated thereunder shall take
place in strict compliance
therewith. At the request of Merger
Sub, the Co-Arrangers will deliver a
revised Schedule II reflecting the
then current status of the documents
listed on Schedule II as among
Accepted, Accepted subject to
exceptions or Non-Accepted.
(10) No material adverse change shall
have occurred in the business,
condition (financial or otherwise),
operations, properties or prospects
of the Borrowers taken as a whole
since December 31, 1996.
-10-
<PAGE>
(11) There shall exist no action, suit,
investigation, litigation or
proceeding pending or threatened in
any court or before any arbitrator
or governmental instrumentality that
(i) could have a material adverse
effect on the business, condition
(financial or otherwise),
operations, properties or prospects
of Multicare and its subsidiaries
taken as a whole or on the Offer or
the merger or (ii) in the judgment
of the Lenders, could materially
adversely affect the Lenders, the
Facilities or the ability of the
Borrowers to perform their
obligations thereunder.
(12) The Lenders shall have received such
opinions of counsel to the various
parties to the transactions referred
to herein as to such matters
(including, without limitation, due
organization, due authorization for
the various transactions referred to
herein, and compliance with health
care, corporate and other laws and
regulations) as the Co-Arrangers
shall reasonably request, and each
thereof shall be reasonably
satisfactory to the Lenders. The
Lenders shall also have received
such corporate resolutions,
certificates and other documents as
the Lenders shall reasonably
request.
(13) Appropriate filings shall have been
made by all necessary parties under
the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, and the
applicable waiting period shall have
expired or been terminated.
(14) All governmental consents and
approvals and third party consents
and approvals necessary in
connection with the Offer, the
merger, the Facilities and other
related transactions shall have been
obtained and shall be final (without
the imposition of any conditions
that are not acceptable to the
Lenders) and shall remain in effect,
and all applicable waiting periods
shall have expired without any
action being taken by any competent
authority.
(15) There shall exist no default under
any of the loan documents and the
representations and warranties of
the Borrowers therein shall be true
and correct immediately prior to,
and after giving effect to, funding.
(16) All accrued fees and expenses
(including reasonable fees and
disbursements of counsel to the
Co-Arrangers) shall have been paid.
(17) All conditions to the initial
funding under the credit facilities
described in the amended and
restated Commitment Letter, dated of
even date herewith, issued by the
Co-Arrangers to Genesis shall have
been satisfied and the closing
thereunder shall have
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<PAGE>
occurred concurrently with the
closing of the first Facility to
close.
(18) Substantially contemporaneously with
the initial funding, Genesis shall
pay at least $300,000,000 for 42% of
the common stock of Parent, and
Cypress and TPG collectively shall
pay at least $418,700,000 for 58% of
the common stock of Parent. All of
the proceeds of such sales of stock
shall have been contributed in
respect of common stock to Merger
Sub.
(19) As this relates to the Short-Term
Facilities, all indebtedness of
Multicare shall have been repaid in
full and all existing credit
facilities of Multicare shall have
been cancelled, except, as specified
in the definitive credit agreement,
mortgage debt, industrial revenue
bonds and other debt aggregating no
more than $37,000,000 plus the
amount of existing convertible debt
of Multicare that is not converted
into common stock of Multicare prior
to initial funding under the
Facilities. As this relates to the
Senior Facilities, the indebtedness
of Multicare shall have been paid
and cancelled to the extent set
forth above and the Short- Term
Facilities shall have been repaid in
full and all commitments thereunder
cancelled.
(20) The total amount payable by Merger
Sub in the Offer and the merger,
including consulting,
non-competition, severance and other
payments to employees of Multicare
and all amounts provided to
refinance existing indebtedness of
Multicare and all amounts of assumed
indebtedness, shall not exceed
$1,520,000,000 in the aggregate.
(21) The Borrowers and Genesis shall have
entered into a management agreement
satisfactory in form and substance
to the Co-Arrangers (the "Management
Agreement"), under which Genesis
will provide management services to
the Borrowers in consideration of
the payment of management fees.
(22) At least three business days prior
to the initial funding, the Lenders
shall have received financial
statements, accompanied by a
certificate of the chief financial
officer of the Borrower, at the end
of and for the twelve month period
ending on the last day of the month
preceding initial funding. The
financial statements shall consist
of (i) a cash flow statement
accurately reflecting EBITDA, on a
pro forma basis to the beginning of
the period (as required for the
financial covenants), all
acquisitions and dispositions
occurring within the twelve month
period and (ii) a balance sheet
reflecting, on a pro forma basis,
the consummation of all
transactions in connection with the
Multicare merger, including, without
limitation, all borrowings in
connection
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<PAGE>
therewith or otherwise contemplated
hereunder, the application of all
proceeds of such borrowings and the
amount of all outstanding
indebtedness after giving effect to
the foregoing, each of which
statements shall be in form and
accompanied by explanatory notes
acceptable to the Co--Arrangers. The
cash flow statement shall reflect
EBITDA for the twelve month period
of no less than $124,000,000, and
the balance sheet shall reflect
total funded debt of not more than
$781,000,000. Concurrently with the
delivery of the financial
statements, the Lenders shall have
received a certificate of the chief
financial officer of the Borrower,
in form and content satisfactory to
the Co-Arrangers, demonstrating
compliance with the financial
covenants set forth herein.
(23) Merger Sub shall have received at
least $200,000,000 in proceeds from
the Subordinated Bridge Facility
which facility shall be on such
terms and conditions as shall be
acceptable to the Co-Arrangers (the
"Subordinated Bridge Facility").
(24) Upon the merger, Multicare shall
confirm its agreement to be bound by
the terms of the credit documents by
agreement satisfactory in form and
content to the Lenders.
(25) A tax-sharing agreement acceptable
to the Co-Arrangers shall have been
executed by Parent and Multicare and
its subsidiaries.
(26) The transactions referred to in
clause (iii) of paragraph (e) under
"Covenants of the Borrowers" shall
have been consummated prior to or
concurrently with closing under the
Senior Facilities.
Conditions
Precedent to Each
Loan After the
Initial Funding: Usual and customary for transactions of this
nature, including, without limitation, the
following: there shall exist no default under
the loan documents and the representations and
warranties of the Borrowers shall be true and
correct immediately prior to, and after giving
effect to, funding.
Covenants of
the Borrowers: Usual and customary for transactions of this
nature, including, without limitation, the
following, applicable to the Borrowers (except
as otherwise provided herein), and such
additional covenants as are deemed appropriate
by the Co-Arrangers for this transaction as a
result of their due diligence:
(a) Restriction on loans, advances and
other investments other than (i)
investments in cash equivalents,
(ii) loans, advances and other
investments in wholly-owned
subsidiaries, (iii) the investment
in
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<PAGE>
the institutional pharmacy business
of Genesis referred to in paragraph
(e) below and (iv) such other
investments as shall be agreed upon
by the Borrowers and Co-Arrangers
prior to the execution of a
definitive credit agreement.
(b) Restriction on other indebtedness
(including, without limitation,
guarantees, capital leases and
assumed debt) other than (i)
intercompany indebtedness among
Multicare and its wholly-owned
subsidiaries, (ii) a Subordinated
Bridge Facility of at least
$200,000,000 and other subordinated
debt which is incurred to refinance
the Subordinated Bridge Facility and
which contains terms no more onerous
to the Borrowers and at least as
favorable to the senior debt holders
as the terms set forth in the
Subordinated Bridge Facility (the
"Permanent Subordinated Debt
Facility") and (iii) such other
indebtedness as shall be agreed upon
by the Co-Arrangers and the
Borrowers prior to the execution of
a definitive credit agreement.
(c) Prohibition on distributions to
shareholders of Multicare (and prior
to the 251 Merger or the 253 Merger,
to shareholders of Merger Sub)
except dividends payable solely in
common stock, or options, warrants
or other rights to purchase common
stock, of Multicare.
(d) Restriction on mergers or
consolidations except (i) mergers
between or among Multicare and its
wholly-owned subsidiaries or in
connection with permitted
acquisitions in which Multicare is
the surviving entity, (ii) mergers
among wholly-owned subsidiaries of
Multicare and (iii) the 251 Merger
or the 253 Merger.
(e) Restriction on sale, lease or other
disposition of assets, other than
(i) in the ordinary course of
business, (ii) with the consent of
the Required Lenders, and subject to
the Mandatory Prepayment provisions
set forth above, the sale of the
facilities in Ohio, Wisconsin and/or
Illinois for cash on terms which
reflect the fair market value of the
assets sold, (iii) the sale of
Multicare's contract therapy
business to Genesis in a transaction
whereby the net cash proceeds after
taxes and related fees and expenses
of such sale shall be approximately
$20,000,000; (iv) the transfer of
Multicare's institutional pharmacy
business to Genesis in exchange for
approximately 20-25% of the
outstanding common stock in the
institutional pharmacy business of
Genesis; and (v) such other sales,
leases and dispositions as may be
agreed upon by the Borrowers and
Co-Arrangers prior to the execution
of a definitive credit agreement.
(f) Conduct all transactions with
affiliates on an arm's-length basis.
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<PAGE>
(g) Prohibition on prepayment,
defeasance, purchase, redemption or
making of any payment in respect of
subordinated debt, except payments
may be made (i) in respect of
permitted management fees as set
forth in paragraph (n) below, (ii)
so long as no default exists after
giving effect to such payment, in
respect of interest on the
Subordinated Bridge Facility and the
Permanent Subordinated Debt Facility
and (iii) in respect of principal of
the Subordinated Bridge Facility,
with proceeds of the Permanent
Subordinated Debt Facility.
(h) Prohibition on material changes in
accounting treatment and reporting
practices including, without
limitation, changes in the
Borrowers' or Parent's fiscal year.
(i) Maintenance of appropriate and
adequate insurance.
(j) Prohibition on creation of any lien,
charge or other encumbrance except
(i) ordinary course statutory and
tax liens, (ii) ordinary course
liens for workers' compensation,
performance bonds, and other similar
liens, (iii) minor encumbrances on
title to real property, and (v) such
other liens as may be agreed upon by
the Co-Arrangers and the Borrowers
prior to the execution of a
definitive credit agreement.
(k) Prohibition on giving or agreeing to
give a negative pledge on assets,
other than (i) pursuant to the
Facilities and (ii) in connection
with any permitted existing
indebtedness so long as such
permitted indebtedness does not
prohibit security interests
supporting the Facilities.
(l) Maintenance of corporate or
partnership existence, as the case
may be.
(m) Compliance (and maintenance of
procedures to assure compliance)
with all applicable laws, ordinances
or governmental rules and
regulations and obtain and maintain
all necessary licenses, permits and
approvals. Without limiting the
generality of the foregoing, the
Borrowers shall maintain all
licensing, Medicaid and Medicare
reimbursement privileges and other
rights.
(n) Maintenance in full force and effect
of the Management Agreement subject
to no amendment, modification or
waiver except as permitted by the
Required Lenders, which agreement
shall be the exclusive agreement for
management services to any Borrower.
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<PAGE>
(i) Provision that management
fees thereunder shall be no
less than $23,900,000 per
annum but shall otherwise be
limited to 6% of
consolidated net revenues of
Multicare and shall be
subordinated to the
Facilities on terms
satisfactory to the Co-
Arrangers. Management fees
may be accrued but not paid
except as set forth in this
paragraph. Management fees
shall be payable to the
extent they do not exceed in
any fiscal year the greater
of (A) 4% of the
consolidated net revenues of
Multicare and (B) an annual
rate of $23,900,000. To the
extent management fees
provided for under the
Management Agreement in any
fiscal year (including the
payment of accrued
management fees) would
exceed the amount specified
in the preceding sentence,
such excess amount shall be
payable only to the extent
that, both before and after
giving effect to a payment,
(i) there shall exist no
default under the Facilities
and (ii) the Fixed Charge
Coverage Ratio shall be at
least 1.5/1 for the two most
recent fiscal quarters of
the Borrower.
(ii) Prohibition on any
consensual restriction
directly or indirectly
limiting the ability or
right (whether by covenant,
event of default,
subordination, penalty, or
otherwise) of Borrower or
any of its subsidiaries to
pay on a timely basis
management fees of at least
$23,900,000 annually to
Genesis or any of its
subsidiaries under the
Management Agreement except
in the event of a material
default by Genesis or a
subsidiary of Genesis
thereunder.
(iii) Provision in the Management
Agreement acceptable to the
Co-Arrangers effectively
prohibiting any party
thereto from entering into,
or permitting to exist, any
direct or indirect
restriction on its ability
to comply with the terms of,
as applicable, either or
both of (i) and (ii) above.
(o) Prohibition on acquisitions subject
to such exceptions as may be agreed
to by the Borrowers and the
Co-Arrangers prior to the execution
of a definitive credit agreement.
(p) Prohibition on amendments,
modifications or waivers of any
provision of articles or bylaws or
Accepted Documents or any material
partnership, joint venture or other
similar agreement, except such
amendments, modifications or waivers
that do not materially adversely
affect the rights or interests of
the Lenders.
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<PAGE>
(q) Limitation on Capital Expenditures.
(r) Within 45 days after the end of the
first three fiscal quarters of each
fiscal year, furnish quarterly
consolidated and consolidating
balance sheets, income statements
and statements of cash flow of the
Borrowers, such financial statements
to be certified by the chief
financial officer of Multicare or
Merger Sub, as the case may be,
(which certification may be subject
to year-end audit adjustments) and
accompanied by appropriate
compliance certificates. Within 90
days after the end of each fiscal
year, furnish annual audited
financial statements of the
Borrowers certified by the
Borrowers' independent accountants,
accompanied by appropriate
compliance certificates. Annually,
the Borrowers shall provide
accountants' management letters and
annual budgets and independent
evaluations from persons and in form
acceptable to the Administrative
Agent confirming (i) the arm's
length nature of the Borrowers'
transactions with affiliates during
the preceding fiscal year and (ii)
compliance by Genesis or its
management subsidiary with material
terms of the Management Agreement
during the preceding fiscal year.
Within 10 days after the same are
distributed, copies of all financial
statements and reports sent to
shareholders of the Borrowers or
filed with the SEC or NASD.
Promptly after request, furnish all
other business and financial
information that any Lender, through
the Administrative Agent, may
reasonably request, including,
without limitation, information
submitted by the Borrowers to any
regulatory body.
(s) Restrictions on change of control.
For purposes of the Senior
Facilities, "change of control"
shall include, among other things,
any event or condition whereby (i)
51% of the capital stock of Parent
is not owned directly or indirectly
by Cypress, Genesis and TPG Partners
II, L.P. or any one or more of them
or (ii) 100% of the capital stock of
Merger Sub or Multicare, as the case
may be, is not owned directly by
Parent.
(t) Maintenance of corporate
separateness, including provisions
restricting transactions between the
Borrowers and Genesis.
Financial
Covenants: All covenants will be maintained continuously
and measured as of the most recent fiscal
quarter of the Borrowers, using a rolling
four-quarter period for net income and Cash
Flow unless otherwise stated. Following the
closing of a permitted acquisition, the
financial covenants and other covenants as
agreed will be calculated as if the
acquisition had been
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<PAGE>
consummated on the first day of the first of
the last four completed fiscal quarters.
(i) Fixed Charge Coverage Ratio:
minimum levels to be agreed.
(ii) Adjusted Senior Debt/Cash Flow:
maximum levels to be agreed.
(iii) Adjusted Total Debt/Cash Flow:
maximum levels to be agreed.
(iv) Consolidated Net Worth not less than
an initial amount to be agreed plus
(a) 75% of positive net income
determined in accordance with GAAP
(not to be reduced by losses) plus
(b) the proceeds of the sale of
equity plus (c) the reduction of
debt as a result of the conversion
of debt into equity.
Selected Financial
Definitions:
Net Income: Net income determined in accordance with
GAAP, less non-cash interest income, less
extraordinary gains, plus extraordinary
non-cash losses.
Cash Flow: Net Income plus interest expense plus
rental expense plus depreciation expense
plus amortization expense plus income taxes
and as adjusted for changes in accrued
management fees payable.
Fixed Charge
Coverage
Ratio: As at any date of determination, (1) Cash
Flow of the Borrowers on a consolidated
basis divided by (2) the sum of interest
expense, income taxes and rental expense of
the Borrowers on a consolidated basis for
the most recent four fiscal quarters plus
principal payments required to have been
paid on indebtedness during the most recent
four fiscal quarters.
Adjusted
Total Debt: As of any date, the sum of (a) all
indebtedness, including the current portion
thereof, plus (b) the product of rental
expense for the four preceding fiscal
quarters multiplied by eight.
Adjusted
Senior Debt: As of any date, the sum of (a) all
indebtedness, including the current portion
thereof, other than subordinated
indebtedness plus (b) the product of rental
expense for the four preceding fiscal
quarters multiplied by eight.
Consolidated
Net Worth: The total amount of consolidated
stockholders' equity of Multicare and its
Subsidiaries as of any date of
determination.
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<PAGE>
Net Cash
Provided by
Operations: Net Income plus depreciation plus
amortization less capital expenditures, and
as adjusted for changes in working capital.
Excess
Cash Flow: For any fiscal year, the amount, if
any, by which (a) Net Cash Provided by
Operations of the Borrowers on a
consolidated basis for such fiscal year
exceeds (b) the aggregate principal amount
of indebtedness scheduled to be repaid
during such fiscal year.
Covenants
of Parent: Usual and customary for transactions
of this nature, including, without
limitation, the following and such
additional covenants as are deemed
appropriate by the Co-Arrangers for this
transaction as a result of their due
diligence.
(a) Prohibition on prepayment,
defeasance, purchase, redemption or
making of any payment in respect of
subordinated debt.
(b) Prohibition on distributions to
shareholders of Parent except
dividends payable solely in common
stock, or options, warrants or other
rights to purchase common stock of
Parent.
(c) Requirement that any cash proceeds
of equity or any capital
contributions be contributed as
equity to Multicare or Merger Sub.
(d) Maintenance of corporate existence
and prohibition on mergers or
consolidations.
(e) Maintenance of 100% of capital stock
of Multicare or Merger Sub subject
to no liens except the pledge to the
Administrative Agent for the benefit
of the Co-Arrangers, the
Administrative Agent and the
Lenders.
(f) Restriction on incurring additional
indebtedness or carrying on any
business or activity or entering
into any transaction except holding
the stock of Multicare or Merger
Sub.
(g) Within 45 days after the end of the
first three fiscal quarters of each
fiscal year, furnish quarterly
balance sheets, income statements
and statements of cash flow of
Parent, such financial statements to
be certified by Parent's chief
financial officer (which
certification may be subject to
year-end audit adjustments) and
accompanied by appropriate
compliance certificates. Within 90
days after the end of each fiscal
year, furnish audited annual
financial statements of Parent
certified by
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<PAGE>
Parent's independent accountants,
accompanied by appropriate
compliance certificates.
Within 10 days after the same are
distributed, copies of all financial
statements and reports sent to
shareholders of Parent or filed with
the SEC or NASD.
Promptly after request, furnish all
other business and financial
information that any Lender, through
the Administrative Agent, may
reasonably request.
Events of
Default: Usual and customary for transactions of this
nature (relating to the Borrowers and
Parent), including, without limitation,
payment defaults, covenant defaults, breach
of representations or warranties, change of
control, termination of Management Agreement
or breach by either party thereto, material
adverse effect, cross-defaults to other
indebtedness or material agreements and
bankruptcy and insolvency.
Required Lenders: Amendments and waivers will require the
approval of Lenders holding more than 50% of
the commitments (the "Required Lenders"),
except that the consent of each affected
Lender will be required, inter alia, to date
or the amortization schedule, reduce the
rate of interest or fees payable to the
Lenders or release collateral except in the
case of permitted asset sales.
Interest Rate
Protection: Within 90 days after the initial funding of
the Senior Facilities, at least 50% of the
Borrower's total funded indebtedness shall
be fixed or have interest rate protection
for a term of at least 3 years. Any Lender
that provides interest rate protection shall
be secured on a pari passu basis with the
Lenders.
Assignment and
Participations: Any Lender may, upon notice to the Borrower
and to the Administrative Agent, assign or
sell a participation in a portion of its
interest in the Senior Facilities to one or
more lenders who are financial institutions
or other persons; provided that (i) any
assignment to a person not already a Lender
shall require the approval of Borrower (not
to be unreasonably withheld) and the
Administrative Agent; and (ii) any
assignment shall be subject to the payment
of processing fees to the Administrative
Agent by the parties to the assignment and
requirements as to minimum transfers and
retention, except in connection with the
primary syndication by the Co-Arrangers.
Miscellaneous: Standard acquisition financing indemnity and
yield protection (including capital adequacy
requirement, increased costs, payments free
and clear
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<PAGE>
of withholding taxes and interest period
breakage indemnities), eurodollar illegality
and similar provisions. The Lenders will
agree to maintain the confidentiality of all
information received from the Borrowers in a
manner customary for such undertaking.
Indemnification: The Borrowers will indemnify and hold
harmless the Administrative Agent, the
Co-Arrangers and each Lender from any
damages, losses, liabilities and expenses
that may be incurred by or asserted against
any of them, in each case arising out of, in
connection with or by reason of the Offer or
any other transaction contemplated hereby or
the use or intended use of the proceeds of
the Facilities, except to the extent that
any of the foregoing is found in a final,
non-appealable judgment to have resulted
from the Administrative Agent's or such
Co-Arranger's or Lender's gross negligence
or wilful misconduct.
Administrative
Agency Fee: As agreed between the Borrowers and the
Administrative Agent.
Co-Arranger Fees: As agreed between the Borrowers and the
Co-Arrangers.
Expenses: The Borrower will pay all legal and other
reasonable out-of-pocket expenses of the
Co-Arrangers related to this transaction
(including all reasonable due diligence and
syndication expenses and reasonable expenses
associated with domestic and foreign
meetings) whether or not any of the
transactions contemplated hereby are
consummated. Such expenses shall be
separate from and in addition to fees paid
directly to the Co-Arrangers. The Borrower
shall also pay the expenses of each Lender
in connection with the enforcement of any
loan document.
Counsel: Drinker Biddle & Reath LLP
Governing Law: Pennsylvania.
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<PAGE>
SCHEDULE I
Commitment Fee: Payable quarterly in arrears on the unused
amount of the Revolving Credit Facility, as
follows:
Adjusted Total Commitment
Debt/Cash Flow Fee
below 3.0 .25%
>3.0<3.50 .25%
>3.50<4.0 .3125%
>4.0<4.5 .3125%
>4.5<5.0 .375%
>5.0<5.5 .50%
>5.5<6.0 .50%
>6.0 .50%
Interest Rate
Options: The principal amount of the loans shall bear
interest at the Prime Rate or at the
Adjusted LIBO Rate at the Borrower(s)'
option.
Prime Rate: The rate of interest announced publicly by
the Administrative Agent as its prime rate,
which rate may not be the lowest rate
available to its customers.
Adjusted LIBO
Rate: The LIBO Rate (for one, two, three or six
month interest periods) plus the applicable
margin determined as follows:
LIBO Rate Margin
for Tranche A
Term Facility
Adjusted Total and for Revolving
Debt/Cash Flow Credit Facility
below 3.0 .75%
>3.0<3.50 1.00%
>3.50<4.0 1.25%
>4.0<4.5 1.50%
>4.5<5.0 1.75%
>5.0<5.5 2.00%
>5.5<6.0 2.25%
>6.0 2.50%
The applicable margin for Tranche B Term
Loans bearing interest at the LIBO Rate plus
applicable margin shall be 2.75 and the
applicable margin for Tranche C Term Loans
bearing interest at the LIBO Rate plus
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<PAGE>
applicable margin shall be 3.0 provided,
however, at any time that the Adjusted Total
Debt/Cash Flow is less than 4.5, the
applicable margin for such Tranche B Term
Loans shall be 2.5 and the applicable margin
for such Tranche C Term Loans shall be 2.75.
Notwithstanding the foregoing, at closing and
until such time as the Borrowers' 1997 fiscal
year-end financial statements have been
delivered to the Lenders, (a) the applicable
LIBO Rate Margin for all Tranche A Term
Facility and Revolving Credit Facility loans
shall be 2.5%, (b) the applicable LIBO Rate
Margin for all Tranche B Term Facility loans
shall be 2.75% and (c) the applicable LIBO
Rate Margin for all Tranche C Term Loan
Facility loans shall be 3.0%, and (d) the
rate applicable to the commitment fee shall
be 0.5%. Thereafter, all changes in margins
and commitment fee rates will take effect
five (5) business days following receipt of
the quarterly or annual compliance
certificate.
Default
Interest Rate: Default interest rate shall be calculated at
2% plus the rate(s) otherwise applicable.
Basis of
Calculation: Actual/360 day basis for LIBO Rate;
actual/365(366) day basis for Prime.
Payment Dates: Interest on Prime based loans shall be
due and payable quarterly in arrears.
Interest on LIBO Rate based loans shall be
due and payable on the last day of the
applicable LIBO Rate period, and quarterly if
LIBO Rate funding periods exceed three
months.
Prepayment: The Borrowers will be responsible for
breakage fees on borrowings under LIBO Rate
funding periods which are prepaid, for any
reason, prior to the end of the contract
period.
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<PAGE>
NOTE: This Schedule II was prepared in
connection with a review of certain
documents in the context of the
transactions described in the Existing
Commitment Letter. To the extent that
(a) the documents referred to on this
Schedule have been modified since the
drafts referred to on this Schedule,
(b) new documents have been added or
documents have been deleted from the
list of documents to be approved or (c)
the transactions have changed from
those described in the Existing
Commitment Letter in a manner which
could reasonably affect the analysis of
the documents, this Schedule II is
subject to such modifications as the
Co-Arrangers reasonably deem necessary
or appropriate in light of such
changes.
SCHEDULE II
LEGEND: NOTE: References to
1 = Accepted Documents refer to
2 = Accepted, subject to drafts described
comment attached on attached materials,
3 = Non-Accepted except where otherwise
indicated.
Accepted/Non-Accepted
Agreement and Plan of Merger among [G], [C],
[T], [JV], [Merger Sub] and [Company] (1) 2
Non-Competition Agreements of Principal
Shareholders (as described in Merger Agreement)(2) 2
Schedule 14D-9 (as described in Merger Agreement) 3
Certificate of Merger (as described in Merger 3
Agreement)
Certificate of Incorporation of Multicare 1
By-laws of Multicare 1
Certificate of Incorporation of Merger Sub (3) 1
By-laws of Merger Sub (4) 1
Certificate of Incorporation of Surviving 3
Corporation
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<PAGE>
By-laws of Surviving Corporation 3
Management Agreement between Genesis 2
Eldercare Network Services, Inc. and Multicare
Stock Purchase Agreement (Agreement to 2
Purchase Institutional Pharmacies)
between Parent and Genesis Health Ventures, Inc.
Subscription Agreements of __________ for common 2
stock of Parent
Put/Call and Warrant Purchase Agreement between 2
________ and ________ (including Warrant attached
thereto) (5)
Protective Agreement among [NEWCO] and [Caddie] 1
Commitment letter for Subordinated Parent (PIK) 2
Debt
Subordinated Note Purchase Agreement 3
between Parent and Genesis Health
Ventures, Inc.
Subordinated Parent Note 3
Certificate of Incorporation of Parent (6) 1
By-laws of Parent (7) 1
Voting Agreements (as defined in Merger Agreement) 3
Subordinated Bridge Facility Commitment Letter 2
- -------------------------
(1) PWRW&G Draft 5/29/97 (Doc. #DS4:59320.1)
(2) PWRW&G Draft 5/29/97 (Doc. #DS4:48874.7)
(3) Certificate of incorporation of Genesis Eldercare
Acquisition Corp., filed 5/29/97 Delaware
Secretary of State
(4) ST&B Draft by-laws, Genesis ElderCare Acquisition
Corp. (5/30/97, 1:52 a.m.)
(5) ST&B Draft (Doc 975PF39.CMP; 5/30/97 7:03 a.m.)
(6) Certificate of incorporation of Genesis ElderCare Corp.
filed 5/29/97 Delaware Secretary of State
(7) ST&B Draft by-laws, Genesis ElderCare Corp. (5/30/97,
1:53 a.m.)
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<PAGE>
DESCRIPTION OF CONDITIONAL ACCEPTANCE OF CERTAIN DOCUMENTS
Except where otherwise indicated,
the comments set forth below refer to draft agreements prepared by Blank, Rome,
Comisky & McCauley, counsel for Genesis Health Ventures, Inc., and distributed
to Drinker Biddle & Reath LLP, counsel for the Administrative Agent, under cover
of a letter dated May 29, 1997, from Richard J. McMahon to Howard Blum and Alan
Schnitzer.
AGREEMENT AND PLAN OF MERGER
The most recent draft of the Merger
Agreement circulated by Paul, Weiss, Rifkind, Wharton & Garrison (PWRW&G Draft
5/29/97; Doc #DS4:59320.1) is accepted by the Lenders, subject to the following
additional provisions:
1. The Merger Consideration
must be disclosed and approved by the
Lenders.
2. Acceptance of tendered shares
pursuant to the Offer must be conditioned
upon receipt of all regulatory approvals and
consents, and must not result in the loss of
any license or permit or material contract.
3. Acceptance and purchase of
tendered Common Stock pursuant to the Offer
to be added as a condition to the Merger in
Section 7.1.
4. The Merger Agreement should
provide for the delivery of appropriate
opinions of counsel with respect to the
authorization, execution and delivery of the
Merger Agreement and the legality and
validity of the transactions contemplated
thereby.
5. The Disclosure Letter must
be provided to and approved by the Lenders.
NON-COMPETITION AGREEMENTS
Any agreement other than a
reasonable non-competition agreement to be included therein, e.g. an additional
agreement to acquire assets or make other payments to a Principal Shareholder
(other than payments, not to exceed $8,500,000 to acquire the Colchester
facility), must be expressly approved by the Lenders.
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<PAGE>
SUBORDINATED BRIDGE FINANCING COMMITMENT
The Morgan Stanley/Montgomery
Securities commitment by Shearman & Sterling for $200 million of bridge
financing, as circulated on 5/31/97 (S&S Draft 5/30/97; Doc. 3929.11/NYL3A), is
accepted, subject to the following provisions:
1. The commitment letter and
term sheet will be revised to reflect the
revised tender offer structure.
2. Upon the funding of the bridge
financing, we understand that the bridge
lenders desire to have subordinated
guarantees of the Borrowers. The Lenders will
permit such guarantees only when Multicare
ceases to be a public company (i.e. upon
consummation of the Merger). The funding of
the bridge financing will be subject to
approval by the Lenders of subordination
terms applicable to the subordinated
guaranties and, generally, to the bridge
financing (including provisions for both the
blockage of payment to the bridge lenders and
standstill by the bridge lenders upon the
exercise of remedies).
3. Clause (ii) of the
definition of "Applicable Interest Rate" to
read: "(ii) three-month U.S. Dollar LIBOR (as
determined from specified sources), plus 600
basis points..."
4. The cash interest payment
cap should be reduced to 14 1/2%.
5. The requirement for a
guarantee from Genesis upon exercise of the
put or call under the Put/Call Agreement must
be deleted.
6. Mandatory redemptions out of net
proceeds from asset sales will be permitted
only to the extent such proceeds are not
required to be used for the prepayment of the
Senior Debt.
7. All terms which are subject
to future agreement between the bridge
lenders and Multicare must be approved by the
Lenders.
SUBORDINATED PIK DEBT COMMITMENT
The draft PIK debt commitment, as
first circulated to us by Samuel Becker of Blank Rome Comisky & McCauley on
5/29/97, is acceptable, provided that, in the event of any conflict between the
provisions thereof and the provisions of Schedule III hereto (or to the Term
Sheet attached as Annex A to the Waltz Commitment Letter), the provisions of
such Schedule will control.
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<PAGE>
STOCK PURCHASE AGREEMENT
1. We need verification of the entities
which comprise the institutional pharmacy business.
2. The Lenders require additional
information as to whether "Merger Sub" should be a party to the Stock Purchase
Agreement, as it will merge into the entity which owns the stock to be sold.
3. The Lenders require additional
information as to the timing of the Closing in Section 2.2.
4. As written, Section 3.3 is not true.
The "Seller" is Newco, which will not be the owner of the Shares.
5. The Lenders would like assurances in
the Agreement, by way of additional conditions, that all regulatory approvals
and consents, in addition to HSR, will be obtained as a condition to the
transfer of stock, that any consents required under material contracts have been
obtained, and that there has been no material adverse change in the
institutional pharmacy business.
PUT/CALL AND WARRANT PURCHASE AGREEMENT
The mark-up to the Simpson Thatcher
draft of 5/28/97 (7:05 pm), circulated by Blank Rome to Simpson Thatcher on
5/29/97, is accepted. The Lenders will not permit, under any circumstances, a
Put to be exercised for Green's cash or debt.
MANAGEMENT AGREEMENT
1. Revise the end of Section 4.4 as
follows:
...., except as may otherwise be permitted
under this Agreement or in the Senior Credit
Agreement (as defined in Section 14.13
hereof).
2. Add the following to the end of
Section 5.1:
Notwithstanding the foregoing, in no event
shall the Management Fee payable hereunder be
less than $1,991,666 in any month or less
than $23,900,000 in the aggregate in any year
(the "Minimum Fee"). To the extent that the
Management Fee payable hereunder in any month
would exceed the Minimum Fee, such excess
shall be payable only to the extent that,
both before and after giving effect to the
payment thereof, there shall exist no default
under the Senior Credit Agreement (as defined
in Section 14.13 below); and any portion of
the Management Fee which is not paid shall
accrue and be owing to the Manager only to
the extent permitted under the Senior Credit
Agreement. Neither party hereto shall
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<PAGE>
enter into or suffer to exist, any direct or
indirect restriction of the ability of the
Owner to make payment to the Manager of the
Minimum Fee on a timely basis hereunder.
3. Delete Section 5.4.
4. Section 14.13 should be revised to
properly define the "Senior Credit Agreement."
PROTECTIVE AGREEMENT
1. Section 3.3 should not prohibit the
moving of funds between Subsidiaries.
SUBSCRIPTION AGREEMENT
1. The Lenders understand that the
Exhibits will be the respective term sheets which have been reviewed and
accepted (subject to the provisions hereof) by the Lenders.
2. "Conditions to Closing" on page 1
should read as follows:
Closing of the purchase of the Common Stock
is conditioned upon each of the following,
which shall have occurred prior to or
concurrently with such purchase:
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<PAGE>
ANNEX B
(to Waltz Commitment Letter)
Fees
A facility fee (the ("Facility
Fee"), equal to 2 1/4% of the amount of the total Credit Facilities, but not
less than $14,062,500 irrespective of any reduction in the Credit Facilities, is
earned by the Co-Arrangers at the time of the execution of the commitment letter
to which this Annex B is attached (the "Commitment Letter"), and is payable by
Genesis ElderCare Acquisition Corp. (formerly known as Waltz Acquisition Corp.)
("Waltz") as follows:
(1) Upon the execution by Multicare and
Merger Sub (or any affiliate of Merger
Sub) of an agreement respecting merger,
$2,109,375 of the Facility Fee shall be
payable, but shall be deferred until the
occurrence of the earlier to occur of the
following: (a) the latest Closing Date
set forth on Annex A, as the same may be
extended, shall have expired prior to the
date that a majority of the Shares of
Multicare shall have been tendered under
the Offer, in which event Waltz shall
promptly pay the $2,109,375 in equal
shares to each of Mellon, Citicorp, First
Union and NationsBank and (b) the date
prior to the latest Closing Date, as the
same may be extended, by which a majority
of the Shares of Multicare shall have
been tendered under the Offer; provided,
however, that, unless the conditions to
payment in paragraph (2) below shall have
been met, the amount of the Facility Fee
payable under this paragraph (1) shall
not exceed 33% of the breakup fees paid
to Waltz or any one or more of its direct
or indirect shareholders.
(2) The $11,953,500 balance of the Facility
Fee (shared equally by the Co-Arrangers)
is payable when and if and only if (a) a
majority of the Shares of Multicare shall
have been tendered under the Offer prior
to the latest Closing Date, as the date
may be extended, and (b) a Transaction
(as herein defined) shall occur at any
time within two years of the Closing
Date, as the date may be extended,
whether or not any funding under the
Credit Facilities shall take place and
whether or not a definitive credit
agreement shall have been executed. A
"Transaction" shall be deemed to have
taken place if (a) any Shares tendered in
the Offer are purchased or (b) Waltz or
The Cypress Group L.L.C. or TPG Partners
II, L.P. or any person or persons
affiliated with any of the foregoing or a
group (within the meaning of Section
<PAGE>
13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended, and the
rules and regulations promulgated
thereunder) which includes, among other
members, any of the foregoing, or any
member of any such group shall have
entered into any transaction or series or
combination of transactions whereby,
directly or indirectly, control of a
material interest in Multicare or its
business or a material portion of its
assets is transferred to any, or any
combination of, the foregoing or to any
entity in which any of the foregoing has
an interest, or (c) any funding shall
occur under the Credit Facilities.
(3) In addition to the foregoing fees, Waltz
shall pay a Commitment Fee which
commenced accruing on May 31, 1997 in an
amount equal to .125% per annum of the
total Credit Facilities, which shall be
paid in equal amounts to the Co-Arrangers
upon the initial funding of the
Facilities or the Closing Date for the
Short-Term Facilities as set forth on
Annex A, whichever shall first occur.
Notwithstanding the foregoing, it is
understood that, unless the conditions in
(a) and (b) set forth in paragraph (2)
above to the payment of the Facility Fee
shall be met, Waltz shall not be required
to pay a Commitment Fee, but this
sentence shall not relieve any other
party obligated in respect of the
Commitment Fee from liability in respect
thereof.
Terms used in this Annex B but not
defined herein are used herein as defined in Annex A to the Commitment Letter.
Exhibit 11(b)(2)
MELLON BANK, N.A.
CITICORP SECURITIES, INC.
CITIBANK, N.A.
FIRST UNION CAPITAL MARKETS CORP.
FIRST UNION NATIONAL BANK
NATIONSBANK, N.A.
June 14, 1997
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, PA 19348
Attention: George V. Hager, Jr.
Senior Vice President and
Chief Financial Officer
Amended and Restated Commitment Letter (Revised)
Gentlemen:
Reference is made to that certain Commitment Letter, dated May
31, 1997, issued to you by Mellon Bank, N.A., Citicorp Securities, Inc., First
Union Capital Markets Corp. and NationsBank, N.A. as amended and restated
pursuant to that certain Amended and Restated Commitment Letter dated June 14,
1997 issued to you by Mellon Bank, N.A. ("Mellon"), Citicorp Securities, Inc.
and Citibank, N.A. (collectively, "Citicorp"), First Union Capital Markets Corp.
and First Union National Bank (collectively, "First Union") and NationsBank,
N.A. ("NationsBank"). You have requested that the Existing Commitment Letter be
amended in certain respects and the undersigned Co-Arrangers are willing to so
amend the Existing Commitment Letter on the terms and conditions set forth below
in this Amended and Restated Commitment Letter (this "Commitment Letter").
Upon your execution of this Commitment Letter, the terms hereof shall amend
and replace the terms set forth in the Existing Commitment Letter except
that any fees, indemnities or other amounts that shall have accrued under the
Existing Commitment Letter shall remain in full force and effect. If you do not
execute and deliver this Commitment Letter at or before 5:00 p.m. (Philadelphia
local time) on June 19, 1997, this Commitment Letter shall be of no effect and
the terms of the Existing Commitment Letter shall remain in full force and
effect without any modifications.
Based on our discussions, Mellon, Citicorp, First Union and
NationsBank and/or their affiliates are pleased to provide Genesis Health
Ventures, Inc. ("Genesis") with
<PAGE>
financing commitments for, to agree to act as co-arranging banks (the
"Co-Arrangers")1 in connection with and to arrange for the syndication of, the
senior debt facilities described below and on Annex A. Terms not otherwise
defined herein are used herein and Annex B as defined in Annex A hereto.
You have asked the Co-Arrangers to provide you with
commitments for the senior debt facilities to Genesis consisting of (i) a
$200,000,000 Six Year Term Loan Facility (the "Tranche A Term Facility"), (ii) a
$200,000,000 Seven Year Term Loan Facility (the "Tranche B Term Facility"),
(iii) a $200,000,000 Term Loan maturing 6/01/05 (the "Tranche C Term Facility")
and (iv) a $250,000,000 Six Year Revolving Credit Facility (the "Revolving
Credit Facility"), all as more fully described on the attached Annex A. The
Tranche A Term Facility, the Tranche B Term Facility, the Tranche C Term
Facility and the Revolving Credit Facility are collectively referred to herein
as the "Senior Facilities." The Senior Facilities will be available for the
purposes set forth on Annex A attached hereto. Certain fees payable in
connection with the Senior Facilities are set forth on Annex B attached hereto.
Subject to the satisfaction of the conditions contained in
this Commitment Letter and your acceptance hereof, Mellon, Citicorp, First Union
and NationsBank each severally commit to lend one quarter of the aggregate
amount of the Senior Facilities on the terms and conditions referred to herein
and described in the attached Annex A subject to, among other things, payment of
the fees set forth in Annex B. Once paid or payable, the fees or any part
thereof, payable hereunder shall not be refundable under any circumstances,
regardless of whether the transactions or borrowings contemplated hereby are
consummated. Except as set forth on Annex B, all fees payable hereunder shall be
paid in immediately available funds and shall be in addition to reimbursement of
out-of-pocket expenses incurred by the Co-Arrangers. The fees referred to herein
are in addition to (1) the commitment and other fees, expenses and charges
referred to in the Term Sheet, and (2) the fees to be paid to Mellon, as
Administrative Agent, as separately agreed between the Borrower and Mellon.
The terms and conditions of this commitment and undertaking
are not limited to those set forth in the attached Annex A and Annex B. Those
matters that are not covered or made clear herein or in such Annex A or Annex B
are subject to mutual agreement of the parties.
In addition, this commitment and undertaking is subject to (i)
the preparation, execution and delivery of mutually acceptable loan
documentation, incorporating substantially
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1 For purposes of determining allocable shares of entitlements and obligations,
Citicorp Securities, Inc. and Citibank, N.A. shall be deemed to be one entity
and First Union Capital Markets Corp. and First Union National Bank shall be
deemed to be one entity.
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<PAGE>
the terms and conditions outlined herein and in the attached Annex A, (ii) the
absence of any material adverse change in the loan syndication market for
transactions of this type or any relevant information (financial or otherwise)
provided to the Co-Arrangers in connection with this Commitment Letter or the
transactions contemplated hereby, (iii) the condition that the financing closes
no later than as provided in Annex A, (iv) your execution and delivery of this
commitment letter and the payment of the fees at such times and in such amounts
as are set forth on Annex B, (v) the execution and delivery of the amended and
restated commitment letter, dated as of even date herewith, by Genesis ElderCare
Acquisition Corp. (formerly Waltz Acquisition Corp.) (the "Waltz Commitment
Letter") and the payment of the fees required to be paid thereunder and (vi) our
favorable review and acceptance of the Non- Accepted Documents or the favorable
resolution of the exceptions to Accepted Documents (as defined in Annex A).
The Co-Arrangers intend to syndicate the Senior Facilities to
additional lenders with corresponding reductions in the initial commitments of
the Co-Arrangers. The syndication may occur before or after initial funding. The
Co-Arrangers will manage all aspects of the syndication (in consultation with
you), including the timing of all offers to potential Lenders and the acceptance
of commitments, the amounts offered and the compensation provided. You shall
fully cooperate with the Co-Arrangers in the syndication process. You agree that
any of the Co-Arrangers, in connection with the syndication of any portion of
its commitment, may share all or a portion of any of the fees payable pursuant
to this Commitment Letter, in its sole discretion, with any of the other
Lenders.
You agree to indemnify and hold harmless the Administrative
Agent, the Co- Arrangers, each Lender and their respective affiliates, officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities, amounts paid in
settlement, court costs and expenses (including, without limitation, fees and
disbursements of counsel) that may be incurred by or asserted or awarded against
any Indemnified Party, in each case arising out of or by reason of, or in
connection with any claims or actions arising out of this Commitment Letter, the
Existing Commitment Letter, or the Waltz Commitment Letter, the Existing Waltz
Commitment Letter (as defined in the Waltz Commitment Letter or the transactions
contemplated hereby or thereby including, without limitation, the preparation
for a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with the proposed tender offer, the proposed merger,
the equity investment of you or others, any financing related thereto or other
transaction referred to in Annex A hereto or Annex A to the Waltz Commitment
Letter, whether or not an Indemnified Party is a party thereto and whether or
not the transactions contemplated herein are consummated, except to the extent
such claim, damage, loss, liability, amount paid in settlement, court cost or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
wilful misconduct.
In further consideration of the commitment and undertaking of
the Co- Arrangers hereunder and under the Waltz Commitment Letter, and
recognizing that in
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connection herewith and therewith the Co-Arrangers are incurring costs and
expenses, including, without limitation, fees and expenses of counsel and due
diligence, transportation, computer, duplication, search, filing and recording
fees, you hereby acknowledge your obligation to pay such costs and expenses
(whether incurred before or after the date hereof) regardless of whether any of
the transactions contemplated hereby are consummated or any loan documents are
agreed to and signed.
Without limiting the generality of any other obligations
hereunder, Genesis agrees that it shall pay the commitment fee of .125% per
annum referred to on Annex B to the Waltz Term Sheet in accordance with the
terms set forth on said Annex B if the Facilities described in Annex A to the
Waltz Commitment Letter do not close.
The obligations hereunder, including without limitation, the
indemnification and cost payment provisions relating to the Waltz Commitment
Letter and transactions contemplated thereby, are absolute and unconditional and
shall be due and payable as and immediately when they arise and shall be subject
to no set-off or counterclaim notwithstanding (a) any invalidity of the
obligations set forth in the Waltz Commitment Letter or agreements, instruments
or other documents delivered in connection therewith, (b) any failure of the
Co-Arrangers to assert claims against any other persons or collateral, or (c)
any other event or condition which could serve as a defense to the obligations
arising hereunder, each such defense being, to the fullest extent permitted by
applicable law, hereby waived.
Each undertaking of Genesis hereunder is for the sole and
exclusive benefit of the Co-Arrangers and there are no third party beneficiaries
to such undertakings.
This letter is for your confidential use only. We understand
that you will not disclose this letter to any person other than to your
accountants, attorneys, investment bankers and other advisors, and then only in
connection with the transactions contemplated hereby and on a confidential
basis, except that you may file a copy of this letter in any public record in
which it is required by law to be filed and, subject to the last sentence of
this commitment letter, you may provide a copy of this letter on a confidential
basis to The Multicare Companies, Inc. and its accountants, attorneys,
investment bankers and other advisors. We also understand that you will permit
each of the undersigned to review and approve any reference to it or any of its
affiliates contained in any press release or similar public disclosure prior to
public release. Please be advised that companies with interests that may
conflict with yours may be or become customers of one or more of the undersigned
and that one or more of the undersigned may be providing financing or other
services to them.
EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS COMMITMENT LETTER AND THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE CO-ARRANGERS OR THEIR
AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.
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<PAGE>
In issuing this commitment and undertaking, the Co-Arrangers
are relying on the accuracy of the information furnished to them by or on behalf
of Genesis and its affiliates, including that summarized above.
This Commitment Letter may not be amended or waived except by
an instrument in writing signed by the Co-Arrangers and you. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one agreement.
Delivery of an executed signature page of this Commitment Letter by facsimile
transmission shall be as effective as a hand delivery of an original executed
counterpart hereof.
This Commitment Letter shall be governed by, and construed in
accordance with, the internal laws of the Commonwealth of Pennsylvania. The
parties hereto agree that any dispute under this Commitment Letter shall be
brought only in a Pennsylvania state court or in the United States District
Court for the Eastern District of Pennsylvania.
Please evidence your acceptance of the provisions of this
Commitment Letter, Annex A, Annex B and the other matters referred to above by
signing in the space provided below and returning a copy of this Commitment
Letter to us (together with payment of the required fees) at or before 5:00 P.M.
(Philadelphia local time) on June 19, 1997, the time at
[INTENTIONALLY LEFT BLANK]
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<PAGE>
which the Co-Arrangers' commitments and undertakings set forth above (if not
accepted prior thereto) will expire. DELIVERY OF A COPY OF THIS COMMITMENT
LETTER TO THE MULTICARE COMPANIES, INC. OR ANY REPRESENTATIVE OR AGENT THEREOF
SHALL BE DEEMED TO BE YOUR ACCEPTANCE OF THE TERMS HEREOF.
Very truly yours,
MELLON BANK, N.A.
By /s/ Barbara J. Hauswald
Title: Vice President
CITICORP SECURITIES, INC.
By /s/ E. Ogimachi
Title: Vice President
CITIBANK N.A.
By /s/ E. Ogimachi
Title: Vice President
FIRST UNION CAPITAL MARKETS CORP.
By /s/ Andrew J. Gamble
Title: Managing Director
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<PAGE>
FIRST UNION NATIONAL BANK
By /s/ Joseph H. Towell
Title: Senior Vice President
NATIONSBANK, N.A.
By /s/ Lucine Kirchhoff
Title: Director
ACCEPTED this ____ day
of ______, 1997
GENESIS HEALTH VENTURES, INC.
By /s/ George V. Hager
Title: Senior Vice President
and CFO
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<PAGE>
Dated: June 14, 1997
ANNEX A
SUMMARY OF TERMS
Borrowers: Genesis Health Ventures, Inc. (the "Company"), and its direct
and indirect subsidiaries, all of which (subject to the
following proviso) shall be jointly and severally liable (the
Company and such subsidiaries, collectively, the "Borrowers")
provided, however, that Genesis ElderCare Acquisition Corp.
(formerly Waltz Corp.) ("Parent") and its direct and indirect
subsidiaries (including, without limitation, the survivor of
the merger of Genesis ElderCare Acquisition Corp. (formerly
Waltz Acquisition Corp.) into The Multicare Companies, Inc.
("Multicare")) shall not be Borrowers hereunder (such
entities referred to in this proviso being referred to herein
collectively as the "Multicare Group").
Senior
Facilities: Total facility equal to $850,000,000 comprising the
following:
A. $200,000,000 Six Year Term Loan (the "Tranche A Term
Facility").
B. $200,000,000 Seven Year Term Loan (the "Tranche B
Term Facility").
C. $200,000,000 Term Loan maturing 6/01/05 (the "Tranche
C Term Facility").
D. $250,000,000 Six Year Revolving Credit Facility (the
"Revolving Credit Facility"), including a $25,000,000
sublimit for standby letters of credit ("Letters of
Credit").
The Co-Arrangers shall share equally in each of the
facilities
Co-Arrangers: Mellon Bank, N.A. ("Mellon"), Citicorp Securities, Inc. and
Citibank, N.A. (collectively, "Citicorp"), First Union
Capital Markets Corp. and First Union National Bank
(collectively, "First Union") and NationsBanc Capital
Markets, Inc. ("NationsBanc").**
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** For purposes of determining each Co-Arranger's ratable share of
entitlements and obligations hereunder, Citicorp Securities, Inc. and
Citibank, N.A. shall be deemed to be one entity and First Union Capital
Markets Corp. and First Union National Bank shall be deemed to be one
entity.
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Issuing Bank: Mellon will be the issuer of Letters of Credit.
Administrative
Agent: Mellon.
Lenders: The Co-Arrangers and/or their affiliates and other
financial institutions (the "Lenders") to be arranged
by the Co-Arrangers and approved by the Company, whose
approval will not be unreasonably withheld. The
Borrowers shall cooperate with the Co-Arrangers in the
syndication of the Senior Facilities, whether before or
after the initial funding of the Senior Facilities, and
shall provide and cause their advisors to provide all
information reasonably deemed necessary by the
Co-Arrangers to complete a successful syndication.
Facility Fee: As set forth in that commitment letter, dated as of May
31, 1997, as amended and restated, between the Company
to the Co-Arrangers.
Unused
Commitment Fee: As set forth on Schedule I attached hereto.
Letter of Credit
Commissions and
Fees: As set forth on Schedule I attached hereto.
Use of Proceeds: The Senior Facilities shall be available for the
following purposes:
(i) to refinance existing indebtedness of
the Borrowers, including the present
synthetic lease facility;
(ii) to purchase approximately 42% of the
common stock of Parent for an
aggregate purchase price approximately
equal to $300,000,000;
(iii) to purchase for approximately
$24,000,000 the contract therapy
business of Multicare;
(iv) to fund interest and principal
payments on the Senior Facilities and
existing indebtedness;
(v) to fund the Borrowers' working
capital, capital expenditure needs and
general corporate purposes; and
(vi) to fund permitted acquisitions.
Closing Date: No later than October 15, 1997, unless extended to a
later Closing Date in the sole discretion of the
Co-Arrangers.
Security: (a) A pledge of stock and partnership interests and
other equity of all of the Company's present and future
direct and indirect subsidiaries (including, without
limitation, any Borrower's ownership interest in
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Parent) other than the stock of Genesis
ElderCare Acquisition Corp. (formerly Waltz
Acquisition Corp.), Multicare and its direct
and indirect subsidiaries, and (b) a pledge
of all intercompany notes.
Term
Amortization: A. Tranche A Term Facility: Six years from
closing, with annual amortization, payable
quarterly, as follows:
Year 1 $15,000,000 7-1/2%
Year 2 $25,000,000 12-1/2%
Year 3 $35,000,000 17-1/2%
Year 4 $35,000,000 17-1/2%
Year 5 $45,000,000 22-1/2%
Year 6 $45,000,000 22-1/2%
B. Tranche B Term Facility: Seven years from
closing, with annual amortization, payable
quarterly, as follows:
Year 1 $ 2,000,000 1%
Year 2 $ 2,000,000 1%
Year 3 $ 2,000,000 1%
Year 4 $ 2,000,000 1%
Year 5 $ 2,000,000 1%
Year 6 $ 2,000,000 1%
Year 7 $188,000,000 94%
C. Tranche C Term Facility: Maturing 6/01/05,
with annual amortization, payable quarterly, as
follows:
Year 1 $ 2,000,000 1%
Year 2 $ 2,000,000 1%
Year 3 $ 2,000,000 1%
Year 4 $ 2,000,000 1%
Year 5 $ 2,000,000 1%
Year 6 $ 2,000,000 1%
Year 7 $ 2,000,000 1%
Year 8 $186,000,000 93%
D. Revolving Credit Facility: Six years from
closing.
Mandatory
Prepayments: All net cash proceeds from (a) the sale of
assets of the Borrowers other than sales in
the ordinary course of business and (b) any
sale of common stock or debt securities of
Borrowers (other than the proceeds of equity
used as permitted under subparagraph (p)(ii)
under "Covenants").
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<PAGE>
An amount equal to 50% of Excess Cash Flow
(as defined below in "Selected Financial
Definitions"), payable annually within 120
days of the fiscal year end.
All prepayments shall be applied to the
Senior Facilities in the following order:
1. First, on a pro rata basis (except to the
extent that any holder of the Tranche B Term
Facility or any holder of the Tranche C Term
Facility shall decide not to accept a
prepayment thereof) to the Tranche A Term
Facility, Tranche B Term Facility and Tranche
C Term Facility (which reduction shall be
applied to each subsequent payment under the
applicable amortization schedule on a pro rata
basis); and
2. Second, to the Revolving Credit Facility with
a corresponding reduction in the commitments.
Commitment
Reductions: The Borrowers will have the right, upon at
least three business days' notice, to
terminate or cancel, in whole or in part,
the unused portion of the Revolving Credit
Facility; provided that each partial
reduction shall be in the amount of at least
$10,000,000 or an integral multiple of
$5,000,000 in excess thereof.
Voluntary
Prepayment: Allowed in full (or in part) provided that (i) loans
bearing interest at the Prime Rate (each a "Prime Rate
Loan") may be prepaid on one business day's prior
notice and loans bearing interest at the LIBO Rate
(each a "LIBO Rate Loan") may be prepaid upon five
business days' prior notice (subject to breakage
indemnity) and (ii) each partial prepayment shall be
in the amount of at least $10,000,000 or an integral
multiple of $5,000,000 in excess thereof.
Interest: See Schedule I attached hereto.
Drawings under
Revolving Credit
Facility: On one business day's prior notice for Prime
Rate Loans and three business days' prior
notice for LIBO Rate Loans. Each borrowing
must be in the amount of $10,000,000 or an
integral multiple of $5,000,000 in excess
thereof.
Letters of Credit: Letters of Credit will be issued
by the Issuing Bank, at the ratable risk of
the Lenders, for purposes to be agreed. No
Letter of Credit will have a term longer
than to be agreed, but Letters of Credit may
provide for automatic renewal, subject to
the Issuing Bank's contrary notification to
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the beneficiary. The Borrower will post cash
collateral for any Letters of Credit that have a term
longer than that of the commitments under the
Revolving Credit Facility or that remain outstanding
after the expiration or termination of the Revolving
Credit Facility (because of default or otherwise).
Representations
and Warranties: Usual and customary for transactions of this nature,
including, without limitation, absence of any material
adverse change in the business, condition (financial
or otherwise), operations, properties or prospects of
Borrowers or in the industry served by Borrowers
generally, the absence of any environmental hazards or
liabilities, the absence of material litigation,
accurate and complete disclosure and such additional
representations and warranties as are deemed
appropriate by the Co- Arrangers for this transaction.
Conditions Precedent
to Initial Funding
of the Senior
Facilities: Usual and customary for transactions of this nature,
including, without limitation, the following:
(1) All documentation relating to the Senior
Facilities shall be in form and substance
satisfactory to the Lenders.
(2) The Administrative Agent, on behalf of the
Lenders, shall have a perfected first priority
lien and security interest in all the stock
and other equity interests of the Company's
direct and indirect subsidiaries including any
Borrower's equity interest in Parent
(excluding Genesis ElderCare Acquisition
Corp., Multicare and its direct and indirect
subsidiaries) as well as all intercompany
notes, and all filings, recordations and
searches necessary or desirable in connection
with such liens and security interests shall
have been duly made and all filing and
recording fees and taxes shall have been duly
paid.
(3) The Borrowers shall have delivered letters in
form and substance satisfactory to the Lenders
attesting to the solvency of the Borrowers,
after giving effect to the transactions
referred to herein, from their chief financial
officer and from a nationally recognized
appraisal firm, valuation consultant or
investment banking firm satisfactory to the
Lenders.
(4) The Company has advised the Co-Arrangers that
all of the material documents in connection
with the tender offer by Merger Sub, the
merger between Merger Sub and Multicare and
related transactions (other than documents to
which the Co-
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<PAGE>
Arrangers and other Lenders would be parties)
are listed on Schedule II attached hereto,
which Schedule also reflects those documents
which have been accepted by the Co-Arrangers
(and, if applicable, exceptions to such
acceptances) and those which have not yet been
accepted by the Co-Arrangers (respectively,
the "Accepted Documents" and, together with
any other material documents omitted from
Schedule II, the "Non-Accepted Documents").
The Co-Arrangers shall be reasonably satisfied
with all Non-Accepted Documents, and the
Non-Accepted Documents shall be delivered in
final form to the Co-Arrangers as promptly as
possible following the date hereof. Upon
notification in writing by the Co-Arrangers
that a Non-Accepted Document has been
accepted, such document shall be deemed an
Accepted Document. If the Co-Arrangers shall
be reasonably satisfied that the requested
revisions to a previously delivered document
or other actions with respect thereto noted on
Schedule II hereto have been made or taken
without any other alteration to such document
to which the Co-Arrangers may reasonably
object, the exceptions shall be deemed
withdrawn. No Accepted Document (including
those as to which exceptions shall be deemed
withdrawn) may be amended, modified or
supplemented, nor may any of its terms or
conditions in favor of Genesis, Multicare or
Merger Sub be waived, and the tender offer,
merger and other transactions contemplated
thereunder shall take place in strict
compliance therewith. At the request of Merger
Sub, the Co-Arrangers will deliver a revised
Schedule II reflecting the then current status
of the documents listed on Schedule II as
among Accepted, Accepted subject to exceptions
or Non-Accepted.
(5) No material adverse change shall have occurred
in the business, condition (financial or
otherwise), operations, properties or
prospects of the Borrowers taken as a whole
since December 31, 1996.
(6) There shall exist no action, suit,
investigation, litigation or proceeding
pending or threatened in any court or before
any arbitrator or governmental instrumentality
that (i) could have a material adverse effect
on the business, condition (financial or
otherwise), operations, properties or
prospects of the Borrowers taken as a whole or
(ii) in the judgment of the Lenders, could
materially adversely affect the Lenders, the
Senior Facilities or the ability of the
Borrowers to perform their obligations
thereunder.
(7) The Lenders shall have received such opinions
of counsel to the various parties to the
transactions referred to herein as to matters
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(including, without limitation, due
organization, due authorization for the
various transactions referred to herein, and
compliance with health care, corporate and
other laws and regulations) as the
Co-Arrangers shall reasonably request, and
each thereof shall be reasonably satisfactory
to the Lenders. The Lenders shall also have
received such corporate resolutions,
certificates and other documents as the
Lenders shall reasonably request.
(8) All governmental consents and approvals and
third party consents and approvals necessary
in connection with the Senior Facilities and
other related transactions shall have been
obtained and shall be final (without the
imposition of any conditions that are not
acceptable to the Lenders) and shall remain in
effect, and all applicable waiting periods
shall have expired without any action being
taken by any competent authority.
(9) There shall exist no default under any of the
loan documents and the representations and
warranties of the Borrowers therein shall be
true and correct immediately prior to, and
after giving effect to, funding.
(10) All accrued fees and expenses (including
reasonable fees and disbursements of counsel
to the Co-Arrangers) shall have been paid.
(11) All conditions to the initial funding under
the credit facilities described in the amended
and restated Commitment Letter, dated of even
date herewith, issued by the Co-Arrangers to
Genesis ElderCare Acquisition Corp. (formerly
Waltz Acquisition Corp.) (the "Waltz
Commitment Letter") shall have been satisfied,
and the closing thereunder shall have occurred
simultaneously with the closing under the
Senior Facilities.
(12) All loans made by the Lenders under the Senior
Facilities shall be in full compliance with
the Federal Reserve's Margin regulations.
(13) Substantially contemporaneously with the
initial funding, the Company shall pay at
least $300,000,000 for 42% of the common stock
of Parent and The Cypress Group L.L.C. and TPG
Partners II, L.P., collectively shall pay at
least $418,700,000 for 58% of the common stock
of Parent.
(14) All indebtedness of the Borrowers, including
the present synthetic lease facility, shall
have been repaid in full and all commitments
in respect thereof shall have been cancelled
other
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than the debt permitted by the covenant
contemplated below respecting limitations on
indebtedness.
(15) The Company and Multicare and its subsidiaries
shall have entered into a management
agreement, satisfactory in form and substance
to the Co-Arrangers (the "Management
Agreement") under which the Company will
provide management services to Multicare and
its subsidiaries in consideration of the
payment of management fees.
(16) The Company will provide an opinion of counsel
and a certificate of a firm of independent
certified public accountants (each of whom
shall be satisfactory to the Co-Arrangers in
their complete discretion) demonstrating to
the satisfaction of the Co- Arrangers that the
entirety of the Senior Facilities will
constitute "senior indebtedness" for purposes
of the 1995 Indenture and the 1996 Indenture
and that the consummation of the transactions
contemplated hereby do not violate the 1995
Indenture or the 1996 Indenture.
(17) At least three business days prior to the
initial funding, the Lenders shall have
received financial statements, accompanied by
a certificate of the chief financial officer
of the Borrowers, at the end of and for the
twelve month period ending on the last day of
the month preceding initial funding. The
financial statements shall consist of (i) a
cash flow statement accurately reflecting
EBITDA, on a pro forma basis to the beginning
of the period (as required for the financial
covenants), all acquisitions and dispositions
occurring within the twelve month period and
(ii) a balance sheet reflecting, on a pro
forma basis, the consummation of all
transactions in connection with purchase of
the equity of Parent including, without
limitation, all borrowings in connection
therewith or otherwise contemplated hereunder,
the application of all proceeds of such
borrowings and the amount of all outstanding
indebtedness after giving effect to the
foregoing, each of which statements shall be
in form and accompanied by explanatory notes
acceptable to the Co-Arrangers. The cash flow
statement shall reflect EBITDA for the twelve
month period of no less than $167,000,000, and
the balance sheet shall reflect total funded
debt of not more than $1,055,000,000.
Concurrently with the delivery of the
financial statements, the Lenders shall have
received a certificate of the chief financial
officer of the Borrower, in form and content
satisfactory to the Co-Arrangers,
demonstrating compliance with the financial
covenants.
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(18) Appropriate filings shall have been made by
all necessary parties under the
Hart-Scott-Rodino Antitrust Improvements Act
of 1976, and the applicable waiting period
shall have expired or been terminated.
Conditions
Precedent to
Each Loan: Usual and customary for transactions of this nature,
including, without limitation, the following: there
shall exist no default under the loan documents and
the representations and warranties of the Borrowers
shall be true and correct immediately prior to, and
after giving effect to, funding. The Co-Arrangers
shall be satisfied that each incurrence of debt under
the Senior Facilities is permitted by, and will rank
senior to, the Company's publicly-held subordinated
debt and the chief financial officer of the Company
shall deliver a certificate demonstrating compliance
with the Fixed Charge Coverage ratio set forth therein
both before and after giving effect to the loans
requested at such time.
Covenants: Usual and customary for transactions of this nature,
including, without limitation, the following,
applicable to the Borrowers (except as otherwise
provided herein), and such additional covenants as are
deemed appropriate by the Co-Arrangers for this
transaction as a result of their due diligence:
(a) Restriction on loans, advances and other
investments other than (i) investments in cash
equivalents, (ii) loans, advances and other
investments in wholly-owned subsidiaries
(excluding (if otherwise applicable) the
Multicare Group unless otherwise agreed to by
the Required Lenders), (iii) the purchase of
42% of the common stock of Parent, (iv) the
option to purchase shares of Parent pursuant
to the Put/Call and Warrant Purchase Agreement
referred to on Schedule II attached hereto
(the "Put/Call Agreement"), including the
purchase and ownership of shares of Parent
consistent with paragraph (p) below, (v) the
investment in the institutional pharmacy
business referred to in paragraph (e) below
and (vi) such other investments as shall be
agreed upon by the Borrowers and Co-Arrangers
prior to the execution of a definitive credit
agreement.
(b) Restriction on other indebtedness (including,
without limitation, guarantees, capital leases
and assumed debt) other than (i) intercompany
indebtedness among the Company and its
wholly-owned subsidiaries (excluding, if
applicable, the Multicare Group), (ii) the
subordinated debt issued pursuant to the 1995
Indenture and the 1996 Indenture, and (iii)
such other indebtedness as shall be agreed
upon by the Co-Arrangers and
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the Borrowers prior to the execution of a
definitive credit agreement.
(c) Prohibition on distributions to
shareholders of the Company except
dividends payable solely in common
stock, or options, warrants or other
rights to purchase common stock, of
the Company.
(d) Restriction on mergers or consolidations
except (i) mergers between or among the
Company and its wholly-owned subsidiaries
(except the Multicare Group, if applicable,)
or in connection with permitted acquisitions
in which the Company is the surviving entity,
(ii) mergers among wholly-owned subsidiaries
of the Company (excluding the Multicare Group
unless otherwise agreed to by the Required
Lenders) and (iii) as set forth in (p) below.
(e) Restriction on sale, lease or other
disposition of assets, other than (i) in the
ordinary course of business, (ii) the
disposition of no more than 25% of the equity
of the Company's institutional pharmacy
business in connection with a transaction
whereby Multicare would transfer its
institutional pharmacy business to the
Company's pharmacy subsidiary (or parent
thereof) in exchange for said equity and (iii)
such other sales, leases and dispositions as
may be agreed upon by the Borrowers and Co-
Arrangers prior to the execution of a
definitive credit agreement.
(f) Conduct all transactions with affiliates on an
arm's-length basis.
(g) Prohibition on prepayment,
defeasance, purchase, redemption or
making of any payment in respect of
subordinated debt except that, so
long as no default exists after
giving effect to such payment,
interest on the Company's
publicly-held subordinated debt may
be paid in cash.
(h) Prohibition on material changes in accounting
treatment and reporting practices including,
without limitation, changes in the Borrowers'
fiscal year.
(i) Maintenance of appropriate and adequate
insurance.
(j) Prohibition on creation of any lien, charge or
other encumbrance except (i) ordinary course
statutory and tax liens, (ii) ordinary course
liens for workers' compensation, performance
bonds, and other similar liens, (iii) minor
encumbrances on title to real property, and
(iv) such other liens as may be agreed upon by
the
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Co-Arrangers and the Borrowers prior to the
execution of a definitive credit agreement.
(k) Prohibition on giving or agreeing to give a
negative pledge on assets, other than (i)
pursuant to the Senior Facilities and (ii) in
connection with any permitted existing
indebtedness so long as such permitted
indebtedness does not prohibit security
interests supporting the Senior Facilities.
(l) Maintenance of corporate or partnership
existence, as the case may be.
(m) Compliance (and maintenance of procedures to
assure compliance) with all applicable laws,
ordinances or governmental rules and
regulations and obtain and maintain all
necessary licenses, permits and approvals.
Without limiting the generality of the
foregoing, the Borrowers shall maintain all
licensing, Medicaid and Medicare reimbursement
privileges and other rights.
(n) Maintenance in full force and effect of the
Management Agreement subject to no amendment,
modification or waiver except as permitted by
the Required Lenders.
(i) Provision that management
fees thereunder shall be no
less than $23,900,000 per
annum but shall otherwise be
limited to 6% of
consolidated net revenues
and shall be subordinated to
the Multicare senior
facilities on terms
satisfactory to the
Co-Arrangers. Management
fees may be accrued but not
paid except as set forth in
this paragraph. Management
fees shall be payable to the
extent they do not exceed in
any fiscal year the greater
of (A) 4% of the
consolidated net revenues of
Multicare and (B) an annual
rate of $23,900,000. To the
extent management fees
provided for under the
Management Agreement in any
fiscal year (including the
payment of accrued
management fees) would
exceed the amount specified
in the preceding sentence,
such excess amount shall be
payable only to the extent
that, both before and after
giving effect to a payment,
(i) there shall exist no
default under the Multicare
senior facilities and (ii)
the Fixed Charge Coverage
Ratio shall be at least
1.5/1 for the two most
recent fiscal quarters of
the Borrowers.
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(ii) Prohibition on any
consensual restriction
directly or indirectly
limiting the ability or
right (whether by covenant,
event of default,
subordination, penalty, or
otherwise) of Multicare or
any of its subsidiaries to
pay on a timely basis
management fees of at least
$23,900,000 annually to the
Company or any of its
subsidiaries under the
Management Agreement except
in the event of a material
default by the Company or a
subsidiary of the Company
thereunder.
(iii) Provision in the Management
Agreement acceptable to the
Co-Arrangers effectively
prohibiting any party
thereto from entering into
or permitting to exist, any
direct or indirect
restriction on its ability
to comply with the terms of,
as applicable, either or
both of (i) or (ii) above.
(o) Maintenance in full force and effect of the
Put/Call Agreement, subject to no amendment or
modification except as permitted by the
Required Lenders. Restrictions on cash
payments under the Put/Call Agreement.
(p) Prohibition on acquisitions subject to the
following and such other exceptions as may be
agreed to by the Borrowers and the
Co-Arrangers prior to the execution of a
definitive credit agreement:
(i) The Company may effect the
acquisition described in
paragraph (y) below.
(ii) The Company (or a
wholly-owned subsidiary of
the Company) may acquire in
a single transaction under
the Put/Call Agreement
described in (o) above 100%
of the capital stock of
Parent in exchange solely
for common stock of the
Company and/or net cash
proceeds received by Genesis
from a contemporaneous sale
of its common stock.
(iii) The Company or one of its
subsidiaries may acquire the
institutional pharmacy
business of Multicare
pursuant to the transactions
described in paragraph (e)
above.
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(q) Prohibition on amendments, modifications or
waivers of any provision of articles or bylaws
or any Accepted Documents or any material
partnership, joint venture or other similar
agreement, except such amendments,
modifications or waivers that do not
materially adversely affect the rights or
interests of the Lenders.
(r) Limitation on Capital Expenditures.
(s) Within 45 days after the end of the first
three fiscal quarters of each fiscal year,
furnish quarterly consolidated and
consolidating balance sheets, income
statements and statements of cash flow of (1)
the Borrowers and (2) the Company and its
consolidated subsidiaries, all such financial
statements to be certified by the Company's
chief financial officer (which certification
may be subject to year-end audit adjustments)
and accompanied by appropriate compliance
certificates. Within 90 days after the end of
each fiscal year, furnish audited annual
financial statements of (1) the Borrowers and
(2) the Company and its consolidated
subsidiaries, in each case certified by the
Borrowers' independent accountants,
accompanied by appropriate compliance
certificates. The Company's quarterly
compliance certificate shall demonstrate
compliance with the Fixed Charge Coverage
Ratio set forth in the Company's public
indentures. Annually, the Borrowers shall
provide accountants' management letters and
annual budgets and an independent evaluation
acceptable to the Administrative Agent
confirming the arm's length nature of the
Borrowers' transactions with affiliates.
Within 10 days after the same are distributed,
copies of all financial statements and reports
sent to shareholders of the Borrowers or filed
with the SEC or NASD.
Promptly after request, furnish all other
business and financial information that any
Lender, through the Administrative Agent, may
reasonably request, including, without
limitation, information submitted by the
Borrowers to any regulatory body.
(t) Restrictions on change of control.
(u) Maintenance of corporate separateness
including provisions restricting transactions
between the Borrowers and the Multicare Group.
(v) Compliance with the terms of the 1995
Indenture, the 1996 Indenture and other
material agreements.
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<PAGE>
(w) If, for any reason other than a final order of
a court of competent jurisdiction obtained by
Multicare in a contested proceeding based on
factors other than a material breach by
Genesis under the Management Agreement,
Genesis shall suffer a termination of the
Management Agreement or a diminution of its
responsibilities or authority thereunder,
Genesis shall provide to Multicare (in a
manner acceptable to the Co-Arrangers as
reflected in the definitive credit agreement)
a cash fund of at least $30,000,000 to be used
in connection with obtaining the services of a
replacement manager.
(x) The institutional pharmacy business of the
Company shall not be subject to any
indebtedness or liens, other than in favor of
the Lenders under the Senior Facilities.
(y) Substantially contemporaneously with the
merger of Genesis ElderCare Acquisition Corp.
into Multicare, the Company shall acquire the
contract therapy business of Multicare for a
cash price of approximately $24,000,000 unless
there shall have been a material adverse
change in such business or the Company shall
be in default under the Senior Facilities.
Provisions Respecting
The Multicare Group: Unless, and then only to the extent, agreed by
the Required Lenders, the operations and
financial affairs of the Multicare Group shall
be maintained separately from those of the
Company and its other subsidiaries (the
"Genesis Group"), provided, however, that the
Multicare Group may continue to be managed by
the Company or a subsidiary of the Company
pursuant to the Management Agreement.
Accordingly, the definitive credit agreement
shall contain, among other provisions to a
similar effect, covenants acceptable to the
Co-Arrangers prohibiting any merger or other
combination or transfer of assets between a
member of the Multicare Group and a member of
the Genesis Group, and prohibiting or
restricting any investments, loans or
guarantees of any nature between a member of
the Genesis Group and a member of the
Multicare Group or any cash or other dividends
or distributions between a member of the
Genesis Group and a member of the Multicare
Group, except that Genesis may invest in or
advance funds to members of the Multicare
Group to the extent of net cash proceeds
received by the Company from a contemporaneous
sale of its common stock.
Financial
Covenants: All covenants will be maintained continuously and
measured as of the most recent fiscal quarter of the
Borrowers, using a rolling four-quarter period for net
income and Cash Flow unless otherwise stated.
Following
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the closing of a permitted acquisition, the financial
covenants and other covenants as agreed will be
calculated as if the acquisition had been consummated
on the first day of the first of the last four
completed fiscal quarters. Unless otherwise agreed to
by the Required Lenders, the financial condition and
results of operations of the Multicare Group shall not
be combined with those of the Borrowers for purposes
of covenant compliance under the credit agreement.
(i) Fixed Charge Coverage Ratio:
minimum levels to be agreed.
(ii) Adjusted Senior Debt/Cash Flow:
maximum levels to be agreed.
(iii) Adjusted Total Debt/Cash Flow:
maximum levels to be agreed.
(iv) Consolidated Net Worth not less
than an initial amount to be
agreed plus 75% of the sum of (a)
positive net income determined in
accordance with GAAP (not to be
reduced by losses), (b) the
proceeds of the sale of equity
(other than proceeds used to
acquire shares of Parent or
contributed or advanced to
Multicare as permitted in
paragraph (p) under "Covenants"
if, at such time, Multicare is
not combined with the Borrowers
for the purpose of compliance
with the financial covenants) and
(c) the reduction of debt as a
result of the conversion of debt
into equity.
Selected
Financial
Definitions:
Net Income: Net income determined in accordance with GAAP, less
non-cash interest income, less extraordinary gains,
plus extraordinary non-cash losses.
Cash Flow: Net Income plus interest expense plus rental
expense plus depreciation expense plus amortization
expense plus income taxes, and as adjusted for changes
in accrued management fees receivable.
Fixed Charge
Coverage
Ratio: As at any date of determination, (1) Cash Flow of the
Borrowers on a consolidated basis divided by (2) the
sum of interest expense, income taxes and rental
expense of the Borrowers on a consolidated basis for
the
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<PAGE>
most recent four fiscal quarters plus
principal payments required to have been
paid on indebtedness during the most recent
four fiscal quarters.
Adjusted
Total Debt: As of any date, the sum of (a) all indebtedness,
including the current portion thereof, plus (b) the
product of rental expense for the four preceding
fiscal quarters multiplied by eight.
Adjusted
Senior Debt: As of any date, the sum of (a) all
indebtedness, including the current portion
thereof, other than subordinated
indebtedness plus (b) the product of rental
expense for the four preceding fiscal
quarters multiplied by eight.
Consolidated
Net Worth: The total amount of consolidated stockholders' equity
of the Borrowers as of any date of determination.
Net Cash
Provided by
Operations: Net Income plus depreciation plus amortization less
capital expenditures, and as adjusted for changes in
working capital.
Excess
Cash Flow: For any fiscal year, the amount, if
any, by which (a) Net Cash Provided by
Operations of the Borrowers on a
consolidated basis for such fiscal year
exceeds (b) aggregate principal amount of
indebtedness scheduled to be repaid during
such fiscal year.
Events of
Default: Usual and customary for a transaction of this nature,
including, without limitation, payment defaults,
covenant defaults, breach of representations or
warranties, change of control, termination of or
default under the Management Agreement or breach by
any party thereto, the Put/Call Agreement or other
Accepted Documents, material adverse effect, cross-
defaults to other indebtedness or material agreements
of the Borrowers, and bankruptcy and insolvency.
Required Lenders: Amendments and waivers will require the approval of
Lenders holding more than 50% of the commitments (the
"Required Lenders"), except that the consent of each
affected Lender will be required, inter alia, to
increase the amount of any Lender's commitment, extend
the maturity date or the amortization schedule, reduce
the rate of interest or fees payable to the Lenders or
to release collateral except in the case of permitted
asset sales.
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<PAGE>
Interest
Rate Protection: Within 90 days after the initial
funding of the Senior Facilities, at least
50% of the Borrower's total funded
indebtedness shall be fixed or have interest
rate protection for a term of at least 3
years. Any Lender that provides interest
rate protection shall be secured on a pari
passu basis with the Lenders.
Assignment and
Participations: Any Lender may, upon notice to the Borrower and to the
Administrative Agent, assign or sell a participation
in a portion of its interest in the Senior Facilities
to one or more lenders who are financial institutions
or other persons; provided that (i) any assignment to
a person not already a Lender shall require the
approval of Borrower (not to be unreasonably withheld)
and the Administrative Agent; and (ii) any assignment
shall be subject to the payment of processing fees to
the Administrative Agent by the parties to the
assignment and requirements as to minimum transfers
and retention, except in connection with primary
syndication by the Co- Arrangers.
Miscellaneous: Standard acquisition financing indemnity and yield
protection (including capital adequacy requirement,
increased costs, payments free and clear of
withholding taxes and interest period breakage
indemnities), eurodollar illegality and similar
provisions. The Lenders will agree to maintain the
confidentiality of all information received from the
Borrowers in a manner customary for such undertaking.
Indemnification: The Borrowers will indemnify and hold harmless the
Administrative Agent, the Co-Arrangers, the Issuing
Bank and each Lender from any damages, losses,
liabilities and expenses that may be incurred by or
asserted against any of them, in each case arising out
of, in connection with or by reason of the tender
offer or any other transaction contemplated hereby or
the use or intended use of the proceeds of the Senior
Facilities, except to the extent that any of the
foregoing is found in a final, non-appealable judgment
to have resulted from the Administrative Agent's, such
Co-Arranger's, the Issuing Bank's or such Lender's
gross negligence or wilful misconduct.
Administrative
Agency Fee: As agreed between the Borrowers and the Administrative
Agent.
Co-Arranger Fees: As agreed between the Borrowers and the Co-Arrangers.
Expenses: The Borrower will pay all legal and other reasonable
out-of-pocket expenses of the Co-Arrangers related to
this transaction (including all reasonable due
diligence and syndication expenses and reasonable
expenses associated with domestic and foreign
meetings) whether or not any of the transactions
contemplated hereby are consummated. Such
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expenses shall be separate from and in addition to
fees paid directly to the Co-Arrangers. The Borrower
shall also pay the expenses of each Lender in
connection with the enforcement of any loan document.
Counsel: Drinker Biddle & Reath LLP
Governing Law: Pennsylvania.
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SCHEDULE I
Commitment Fee: Payable quarterly in arrears on the unused amount of
the Revolving Credit Facility, as follows:
Adjusted Total Commitment
Debt/Cash Flow Fee
below 3.0 .25%
>3.0<3.50 .25%
>3.50<4.0 .3125%
>4.0<4.5 .3125%
>4.5<5.0 .375%
>5.0<5.5 .50%
>5.5<6.0 .50%
>6.0 .50%
Interest Rate
Options: The principal amount of the loans shall bear interest
at the Prime Rate or at the Adjusted LIBO Rate at the
Company's option.
Prime Rate: The rate of interest announced publicly by the
Administrative Agent as its prime rate, which rate may
not be the lowest rate available to its customers.
Adjusted LIBO
Rate: The LIBO Rate (for one, two, three or six month
interest periods) plus the applicable margin
determined as follows:
LIBO Rate Margin for
Tranche A Term Facility,
IP Purchase Term Loan
Adjusted Total and for Revolving
Debt/Cash Flow Credit Facility
below 3.0 .75%
>3.0<3.50 1.00%
>3.50<4.0 1.25%
>4.0<4.5 1.50%
>4.5<5.0 1.75%
>5.0<5.5 2.00%
>5.5<6.0 2.25%
>6.0 2.50%
The applicable margin for Tranche B Term Loans bearing
interest at the LIBO Rate plus applicable margin shall
be 2.750% and the applicable
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<PAGE>
margin for Tranche C Term Loans bearing interest at the
LIBO Rate plus applicable margin shall be 3.0%
provided, however, at any time that the Adjusted Total
Debt/Cash Flow is less than 4.5, the applicable margin
for such Tranche B Term Loans shall be 2.5% and the
applicable margin for such Tranche C Term Loans shall
be 2.75%.
Notwithstanding the foregoing, at closing and until
such time as the Borrowers' 1997 fiscal year-end
financial statements shall have been delivered to the
Lenders, (a) the applicable LIBO Rate Margin for all
Tranche A Term Facility loans, Revolving Credit
Facility Loans and IP Purchase Term Loans shall be
2.5%, (b) the applicable LIBO Rate Margin for all
Tranche B Term Facility loans shall be 2.75%, (c) the
applicable LIBO Rate Margin for all Tranche C Term Loan
Facility Loans shall be 3.0% and (d) the rate
applicable to the commitment fee shall be 0.5%.
Thereafter, all changes in margins and commitment fee
rates will take effect five (5) business days following
receipt of the quarterly or annual compliance
certificate.
Letter of Credit
Commission and
Fees: For standby Letters of Credit, the applicable LIBO Rate
Margin on the face amount thereof for the period
outstanding, payable on issuance and on any renewal,
for the ratable account of the Lenders.
In addition, the Borrowers will pay the Issuing Bank,
for its sole account, .10% per annum on the face amount
thereof for the benefit of the issuer plus its standard
posted charges for such matters as opening, negotiation
and transfer.
Default
Interest Rate: Default interest rate shall be calculated at 2% plus
the rate(s) otherwise applicable.
Basis of
Calculation: Actual/360 day basis for LIBO Rate; actual/365(366) day
basis for Prime.
Payment Dates: Interest on Prime based loans shall be due and payable
quarterly in arrears. Interest on LIBO Rate based loans
shall be due and payable on the last day of the
applicable LIBO Rate period, and quarterly if LIBO Rate
funding periods exceed three months.
Prepayment: The Borrowers will be responsible for breakage fees on
borrowings under LIBO Rate funding periods which are
prepaid, for any reason, prior to the end of the
contract period.
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NOTE: This Schedule II was prepared in
connection with a review of certain
documents in the context of the
transactions described in the
Existing Commitment Letter. To the
extent that (a) the documents
referred to on this Schedule have
been modified since the drafts
referred to on this Schedule, (b)
new documents have been added or
documents have been deleted from
the list of documents to be
approved or (c) the transactions
have changed from those described
in the Existing Commitment Letter
in a manner which could reasonably
affect the analysis of the
documents, this Schedule II is
subject to such modifications as
the Co- Arrangers reasonably deem
necessary or appropriate in light
of such changes.
SCHEDULE II
LEGEND: NOTE: References to
1 = Accepted Documents refer to
2 = Accepted, subject to drafts described
comment attached on attached materials,
3 = Non-Accepted except where otherwise
indicated.
Accepted/Non-Accepted
Agreement and Plan of Merger among [G], [C],
[T], [JV], [Merger Sub] and [Company] (1) 2
Non-Competition Agreements of Principal
Shareholders (as described in Merger Agreement) (2) 2
Schedule 14D-9 (as described in Merger Agreement) 3
Certificate of Merger (as described in Merger 3
Agreement)
Certificate of Incorporation of Multicare 1
By-laws of Multicare 1
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Certificate of Incorporation of Merger Sub (3) 1
By-laws of Merger Sub (4) 1
Certificate of Incorporation of Surviving 3
Corporation
By-laws of Surviving Corporation 3
Management Agreement between Genesis 2
Eldercare Network Services, Inc. and Multicare
Stock Purchase Agreement (Agreement to 2
Purchase Institutional Pharmacies)
between Parent and Genesis Health Ventures, Inc.
Subscription Agreements of __________ for common 2
stock of Parent
Put/Call and Warrant Purchase Agreement between 2
________ and ________ (including Warrant attached
thereto) (5)
Protective Agreement among [NEWCO] and [Caddie] 1
Commitment letter for Subordinated Parent (PIK) 2
Debt
Subordinated Note Purchase Agreement 3
between Parent and Genesis Health
Ventures, Inc.
Subordinated Parent Note 3
Certificate of Incorporation of Parent (6) 1
By-laws of Parent (7) 1
Voting Agreements (as defined in Merger Agreement) 3
Subordinated Bridge Facility Commitment Letter 2
- -------------------------------------------------
(1) PWRW&G Draft 5/29/97 (Doc. #DS4:59320.1)
(2) PWRW&G Draft 5/29/97 (Doc. #DS4:48874.7)
(3) Certificate of incorporation of Genesis ElderCare
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Acquisition, Inc., filed 5/29/97 Delaware
Secretary of State
(4) ST&B Draft by-laws, Genesis ElderCare Acquisition Corp.
(5/30/97, 1:52 a.m.)
(5) ST&B Draft (Doc 975PF39.CMP; 5/30/97 7:03 a.m.)
(6) Certificate of incorporation of Genesis ElderCare Corp.
filed 5/29/97 Delaware Secretary of State
(7) ST&B Draft by-laws, Genesis ElderCare Corp. (5/30/97,
1:53 a.m.)
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<PAGE>
DESCRIPTION OF CONDITIONAL ACCEPTANCE OF CERTAIN DOCUMENTS
Except where otherwise indicated,
the comments set forth below refer to draft agreements prepared by Blank, Rome,
Comisky & McCauley, counsel for Genesis Health Ventures, Inc., and distributed
to Drinker Biddle & Reath LLP, counsel for the Administrative Agent, under cover
of a letter dated May 29, 1997, from Richard J. McMahon to Howard Blum and Alan
Schnitzer.
AGREEMENT AND PLAN OF MERGER
The most recent draft of the Merger
Agreement circulated by Paul, Weiss, Rifkind, Wharton & Garrison (PWRW&G Draft
5/29/97; Doc #DS4:59320.1) is accepted by the Lenders, subject to the following
additional provisions:
1. The Merger Consideration
must be disclosed and approved by the
Lenders.
2. Acceptance of tendered shares
pursuant to the Offer must be conditioned
upon receipt of all regulatory approvals and
consents, and must not result in the loss of
any license or permit or material contract.
3. Acceptance and purchase of
tendered Common Stock pursuant to the Offer
to be added as a condition to the Merger in
Section 7.1.
4. The Merger Agreement should
provide for the delivery of appropriate
opinions of counsel with respect to the
authorization, execution and delivery of the
Merger Agreement and the legality and
validity of the transactions contemplated
thereby.
5. The Disclosure Letter must
be provided to and approved by the Lenders.
NON-COMPETITION AGREEMENTS
Any agreement other than a
reasonable non-competition agreement to be included therein, e.g. an additional
agreement to acquire assets or make other payments to a Principal Shareholder
(other than payments, not to exceed $8,500,000 to acquire the Colchester
facility), must be expressly approved by the Lenders.
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SUBORDINATED BRIDGE FINANCING COMMITMENT
The Morgan Stanley/Montgomery
Securities commitment by Shearman & Sterling for $200 million of bridge
financing, as circulated on 5/31/97 (S&S Draft 5/30/97; Doc. 3929.11/NYL3A), is
accepted, subject to the following provisions:
1. The commitment letter and
term sheet will be revised to reflect the
revised tender offer structure.
2. Upon the funding of the
bridge financing, we understand that the
bridge lenders desire to have subordinated
guarantees of the Borrowers. The Lenders will
permit such guarantees only when Multicare
ceases to be a public company (i.e. upon
consummation of the Merger). The funding of
the bridge financing will be subject to
approval by the Lenders of subordination
terms applicable to the subordinated
guaranties and, generally, to the bridge
financing (including provisions for both the
blockage of payment to the bridge lenders and
standstill by the bridge lenders upon the
exercise of remedies).
3. Clause (ii) of the
definition of "Applicable Interest Rate" to
read: "(ii) three-month U.S. Dollar LIBOR (as
determined from specified sources), plus 600
basis points..."
4. The cash interest payment
cap should be reduced to 14 1/2%.
5. The requirement for a
guarantee from Genesis upon exercise of the
put or call under the Put/Call Agreement must
be deleted.
6. Mandatory redemptions out
of net proceeds from asset sales will be
permitted only to the extent such proceeds
are not required to be used for the
prepayment of the Senior Debt.
7. All terms which are subject
to future agreement between the bridge
lenders and Multicare must be approved by the
Lenders.
SUBORDINATED PIK DEBT COMMITMENT
The draft PIK debt commitment, as
first circulated to us by Samuel Becker of Blank Rome Comisky & McCauley on
5/29/97, is acceptable, provided that, in the event of any conflict between the
provisions thereof and the provisions of Schedule III hereto (or to the Term
Sheet attached as Annex A to the Waltz Commitment Letter), the provisions of
such Schedule will control.
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STOCK PURCHASE AGREEMENT
1. We need verification of the entities
which comprise the institutional pharmacy business.
2. The Lenders require additional
information as to whether "Merger Sub" should be a party to the Stock Purchase
Agreement, as it will merge into the entity which owns the stock to be sold.
3. The Lenders require additional
information as to the timing of the Closing in Section 2.2.
4. As written, Section 3.3 is not true.
The "Seller" is Newco, which will not be the owner of the Shares.
5. The Lenders would like assurances in
the Agreement, by way of additional conditions, that all regulatory approvals
and consents, in addition to HSR, will be obtained as a condition to the
transfer of stock, that any consents required under material contracts have been
obtained, and that there has been no material adverse change in the
institutional pharmacy business.
PUT/CALL AND WARRANT PURCHASE AGREEMENT
The mark-up to the Simpson Thatcher
draft of 5/28/97 (7:05 pm), circulated by Blank Rome to Simpson Thatcher on
5/29/97, is accepted. The Lenders will not permit, under any circumstances, a
Put to be exercised for Green's cash or debt.
MANAGEMENT AGREEMENT
1. Revise the end of Section 4.4 as
follows:
...., except as may otherwise be permitted
under this Agreement or in the Senior Credit
Agreement (as defined in Section 14.13
hereof).
2. Add the following to the end of
Section 5.1:
Notwithstanding the foregoing, in no event
shall the Management Fee payable hereunder be
less than $1,991,666 in any month or less
than $23,900,000 in the aggregate in any year
(the "Minimum Fee"). To the extent that the
Management Fee payable hereunder in any month
would exceed the Minimum Fee, such excess
shall be payable only to the extent that,
both before and after giving effect to the
payment thereof, there shall exist no default
under the Senior Credit Agreement (as defined
in Section 14.13 below); and any portion of
the Management Fee which is not paid shall
accrue and be owing to the Manager only to
the extent permitted under the Senior Credit
Agreement. Neither party hereto shall
-26-
<PAGE>
enter into or suffer to exist, any direct or
indirect restriction of the ability of the
Owner to make payment to the Manager of the
Minimum Fee on a timely basis hereunder.
3. Delete Section 5.4.
4. Section 14.13 should be revised to
properly define the "Senior Credit Agreement."
PROTECTIVE AGREEMENT
1. Section 3.3 should not prohibit the
moving of funds between Subsidiaries.
SUBSCRIPTION AGREEMENT
1. The Lenders understand that the
Exhibits will be the respective term
sheets which have been reviewed and
accepted (subject to the provisions
hereof) by the Lenders.
2. "Conditions to Closing" on page 1
should read as follows:
Closing of the purchase of the Common Stock
is conditioned upon each of the following,
which shall have occurred prior to or
concurrently with such purchase:
-27-
<PAGE>
ANNEX B
(to Genesis Commitment Letter)
Fees
A facility fee (the ("Facility Fee")
equal to 2 1/4% of the amount of the total Senior Facility, but not less than
$19,125,000 irrespective of any reduction in the credit facility, is earned by
the Co-Arrangers at the time of the acceptance of the commitment letter to which
this Annex B is attached (the "Commitment Letter"), and is payable as
follows:***
(1) $1,000,000 ($250,000,000 to each of the
Co-Arrangers) was payable on May 31, 1997.
(2) Upon the execution by Multicare and Merger Sub
(or any affiliate of Merger Sub) of an
agreement respecting merger, $1,868,750 of the
Facility Fee shall be payable, but shall be
deferred until the occurrence of the earlier
to occur of the following: (a) the latest
Closing Date set forth on Annex A, as the same
may be extended, shall have expired prior to
the date that a majority of the Shares of
Multicare shall have been tendered under the
Offer, in which event Genesis shall promptly
pay $467,187.50 to each of Mellon, Citicorp,
First Union and NationsBank and (b) the date
prior to the latest Closing Date, as the same
may be extended, by which a majority of the
Shares of Multicare shall have been tendered
under the Offer in which event the aggregate
sum set forth in this paragraph (2) shall be
paid as part of the sums set forth in (3)
below.
(3) If a majority of the Shares of Multicare shall
have been tendered under the Offer prior to
the latest Closing Date, as the same may be
extended, the unpaid balance of the Facility
Fee (including the aggregate sum under
paragraph (2) above) shall be payable (and
shall be promptly paid) as follows: $4,343,750
to NationsBank and $4,593,750 to each of
Mellon, Citicorp and First Union. A credit
shall be available against the balance of the
Facility Fee referred to in this paragraph (3)
in an amount equal to 1.5% of the cash
proceeds received by Genesis prior to or
concurrently with the initial funding
- --------
*** The dollar amounts referred to in paragraphs (2) and (3) assume a
Facility Fee of $19,125,000; if the total Facility Fee is greater, then
each amount shall be adjusted accordingly.
<PAGE>
under the Senior Facilities from the issuance
on terms acceptable to the Co-Arrangers of
indebtedness subordinated to the Senior
Facilities, but the credit shall not exceed
$3,000,000.
(4) In addition to the foregoing fees, Genesis
shall pay a Commitment Fee which commenced
accruing on May 31, 1997 in an amount equal
to .125% per annum of the total Senior
Facilities, which shall be paid in equal
amounts to the Co-Arrangers upon the initial
funding of the Senior Facilities or the
Closing Date, as the same may be extended,
whichever shall first occur.
Terms used in this Annex B but not
defined in Annex A are used herein as defined in Annex A to the Waltz Commitment
Letter.
<PAGE>
MORGAN STANLEY BRIDGE FUND, L.L.C. MONTGOMERY GROUP HOLDINGS, L.L.C.
1585 Broadway 600 Montgomery Street
New York, NY 10036 San Francisco, CA 94111
June 15, 1997
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, PA 19348
Waltz Acquisition Corp.
c/o The Cypress Group L.L.C.
65 East 55th Street
19th Floor
New York, NY 10022
Ladies and Gentlemen:
We understand that Waltz Corp. ("Holdings"), a Delaware
corporation formed and wholly owned by Genesis Health Ventures, Inc.
("Genesis"), The Cypress Group L.L.C. ("Cypress") and TPG Partners II, L.P.
("TPG"), intends to acquire, through its wholly owned subsidiary Waltz
Acquisition Corp., a Delaware corporation (together with any successor by
merger, including with The Multicare Companies, Inc., "Merger Sub"), all of the
outstanding common stock of The Multicare Companies, Inc., a Delaware
corporation (the "Company"), pursuant to a tender offer and merger agreement
(the "Merger Agreement") to be negotiated and entered into among Holdings,
Merger Sub and the Company (such tender offer transaction, the "Acquisition").
After consummation of the Acquisition, Merger Sub would be merged with and into
the Company (the "Merger"), with the Company being the surviving corporation. We
understand that, the Company, Merger Sub and Holdings will enter into certain
arrangements in connection with the Acquisition and the Merger:
(i) Merger Sub proposes to enter into a Credit Agreement (the
"Bank Credit Facility") with NationsBank, N.A., First Union,
National Bank of North Carolina, Mellon Bank, N.A. and Citicorp
Securities, Inc. and certain other financial institutions (the
"Senior Lenders") for an aggregate of $625 million in bank
borrowings, $500 million of which shall consist of term loans
and $125 million of which shall consist of a revolving credit
facility; provided, however, that if Genesis acquires the Company's
institutional pharmacy business (the "IP Sale") prior to or
simultaneously with the issuance of any Bridge Notes (as
defined below), the availability under the Bank Credit Facility shall
be automatically and permanently reduced by an amount equal to the
after-tax proceeds received by Genesis from the IP Sale;
<PAGE>
2
(ii) Merger Sub proposes to issue and sell on the date on
which the Acquisition is consummated (the "Closing Date") and, if
necessary, on the date on which the Merger is consummated (the "Merger
Date") senior subordinated increasing rate notes (the "Bridge Notes")
having substantially the terms (including guarantees) set forth in
Exhibit A hereto (such Exhibit, together with Exhibit B hereto referred
to below, being the "Term Sheet"), such that the aggregate cash
proceeds from the issuance and sale of the Bridge Notes will be
approximately $200 million, less fees and expenses payable to the
Purchasers;
(iii) Holdings proposes to issue and sell on the Closing Date
shares of its common stock ("Holdings Shares") to Genesis, such that
the cash proceeds from the issuance and sale of such Holdings Shares
will be at least $300 million, which will be contributed as common
equity to Merger Sub;
(iv) Holdings proposes to issue and sell on the Closing Date
Holdings Shares to Cypress and TPG, such that the cash proceeds from
the issuance and sale of such Holdings Shares will be at least $400
million, which will be contributed as common equity to Merger Sub;
(v) the Company would issue and sell as soon as practicable
following the Acquisition, in a public offering or private placement,
debt securities (the "Permanent Financing"), the proceeds of which will
be used to redeem the Bridge Notes purchased hereunder. The Company and
Merger Sub will offer Morgan Stanley & Co. Incorporated and Montgomery
Securities the opportunity to act as exclusive agents or sole
underwriters for the Permanent Financing, with the total underwriting
or placement compensation associated therewith to be allocated between
Morgan Stanley & Co. Incorporated and Montgomery Securities in the
ratio of two-thirds and one third, respectively. In addition, if by the
maturity date of the Bridge Notes the Permanent Financing shall not
have been issued, or shall not have been issued in an amount sufficient
to repay the principal of and accrued and unpaid interest on the Bridge
Notes, such unpaid principal and interest will be satisfied by the
issuance to the holders of the Bridge Notes of debt securities of the
Company having substantially those terms set forth in Exhibit B hereto
(the "Rollover Notes");
(vi) (a) Genesis, Cypress and TPG would collectively own all
of the outstanding capital stock of Holdings; (b) Holdings would
continue to own all of the outstanding capital stock of Merger Sub; (c)
Merger Sub will make a tender offer for any and all outstanding common
stock of the Company; (d) Merger Sub would own at least 51% of the
outstanding capital stock of the Company after consummation of the
Acquisition and (e) as soon as practicable after consummation of the
Acquisition, Merger Sub will merge with and into the Company, with the
Company surviving the Merger;
<PAGE>
3
(vii) Genesis proposes to enter into a management services
agreement (the "Management Agreement") with the Company on the Closing
Date to manage the operations of the Company; and
(viii) Genesis proposes to enter into a purchase agreement to
acquire the therapy group business (the "Therapy Sale") from the
Company for minimum after tax net cash proceeds to the Company of $20
million.
The Acquisition, the Merger, the entry into the Management Agreement, if
occurring prior to or simultaneously with the issuance of any Bridge Notes, the
IP Sale, the Therapy Sale and the debt and equity financings thereof described
above are hereinafter referred to as the "Transaction".
Borrowings under the term loan portion of the Bank Credit
Facility, together with the net cash proceeds from the issuance and sale of the
Bridge Notes and the Holdings Shares, will provide funds sufficient to
consummate the Acquisition, to refinance concurrently with the Acquisition
approximately $381 million of the outstanding debt of the Company and to pay the
fees and expenses incurred in connection with the consummation of the
Transaction, and such proceeds shall be used for that purpose. We understand
that the purchase price in respect of the Acquisition will be approximately
$1,000 million. Not less than $50 million under the revolving credit facility
shall remain undrawn at the time the Merger is completed; and, thereafter, such
revolving credit facility will be used by the Company solely for its ongoing
working capital needs and general corporate purposes (but not to finance the
Transaction.
Based upon and subject to the foregoing and as further
provided below and in the Term Sheet, Morgan Stanley Bridge Fund L.L.C. and
Montgomery Group Holdings, L.L.C. hereby severally commit to purchase, or to
cause one or more of their respective affiliates, to purchase, at the Closing
Date and, if necessary, on the Merger Date up to an aggregate amount (i) in the
case of Morgan Stanley Bridge Fund L.L.C., equal to $133 million of the Bridge
Notes and (ii) in the case of Montgomery Group Holdings, L.L.C., equal to $67
million of the Bridge Notes, in each case on the terms and subject to the
conditions set forth in the Term Sheet. The term "Purchasers" as used in this
Commitment Letter shall mean Morgan Stanley Bridge Fund L.L.C. and Montgomery
Group Holdings, L.L.C., and one or more other persons who actually purchase or
undertake the commitment to purchase the Bridge Notes referred to herein. If
less than $200 million (less fees and expenses payable to the Purchasers) in
Bridge Notes are issued, each Purchaser will purchase its pro rata portion of
the issued Bridge Notes based upon its respective commitment. The obligations of
each Purchaser to purchase Bridge Notes are several and not joint. You agree to
continue to provide or cause to be provided to the Purchasers all of the
information received by you or on your behalf or of which you become aware that
is related to or affects Holdings, Merger Sub or the Company or any of its
Subsidiaries, or any aspect of the Transaction. Please note, however, that the
terms and conditions of this
<PAGE>
4
Commitment Letter are not limited to those set forth herein or in the Term
Sheet. Those matters that are not covered or made clear herein or in the Term
Sheet are subject to mutual agreement of the parties. Neither the Purchasers nor
any of you shall be liable or responsible for any consequential damages that may
be alleged as a result of any failure to issue or purchase the Bridge Notes.
Each of Merger Sub, Holdings and Genesis hereby jointly and
severally agrees to pay each of the Purchasers in cash (a) a non-refundable
commitment fee (the "Initial Commitment Fee") in an amount equal to 1.00% of the
principal amount of the Bridge Notes to be purchased pursuant to this Commitment
Letter, (b) a takedown fee (the "Takedown Fee") in an amount equal to 1.50% of
the principal amount of the Bridge Notes actually purchased by such Purchaser
and (c) if Merger Sub elects to extend the Purchasers' commitment hereunder
beyond September 30, 1997, whether or not a portion of the Bridge Notes have
been purchased hereunder, an additional non-refundable commitment fee (the
"Additional Commitment Fee") in an amount equal to 1.00% of the principal amount
of any remaining Bridge Notes to be purchased pursuant to this Commitment
Letter. The Initial Commitment Fee will be earned upon your acceptance of this
Commitment Letter (as evidenced by your execution hereof) and payable in cash
concurrently with the closing of the Acquisition. The Additional Commitment Fee
will be earned and payable in cash immediately upon your extension of the
commitment of the Purchasers hereunder. In the event the Acquisition does not
close, the Purchasers shall be entitled to receive from Genesis an amount equal
to the lesser of (i) 33% of the amount of any breakup fees paid to Genesis,
Cypress or TPG and (ii) the sum of the Initial Commitment Fee, the Additional
Commitment Fee (if the Purchasers' commitment hereunder has been extended beyond
September 30, 1997) and any out-of-pocket expenses incurred by the Purchasers in
connection with the matters referred to herein, payable at the time of payment
of any such breakup fee. The Takedown Fee will be earned and payable upon the
issuance of any Bridge Notes. If less than $200 million of Permanent Financing
is issued then Merger Sub, Holdings and Genesis shall pay to the Purchasers in
cash on the date the Permanent Financing is consummated an amount equal to 0.028
multiplied by the difference between $200 million and the gross proceeds raised
in the Permanent Financing. In addition, Holdings agrees to deliver, upon the
first issuance of any Bridge Notes, Warrants (as defined in the Term Sheet)
representing 5.0% of the fully-diluted common stock of Holdings, to be placed in
an escrow account and released as described in the Term Sheet. Payments of the
amounts and delivery of the Warrants referred to in this paragraph shall be
allocated among the Purchasers based on their respective pro rata commitments to
purchase Bridge Notes.
In partial consideration for our commitment hereunder each of
Holdings, Merger Sub and Genesis hereby agrees, jointly and severally, to
indemnify and hold harmless the Purchasers, each of the members or shareholders
or other investors or holders of interests in, or other transferees of the
Purchasers (collectively, "Additional Investors"), any affiliates of the
Purchasers (including without limitation Morgan Stanley Group Inc., Montgomery
Securities and
<PAGE>
5
their respective affiliates) and the Additional Investors, and each other
person, if any, controlling the Purchasers or any Additional Investors and any
of their respective affiliates, and any of the directors, officers, agents and
employees of any of the foregoing (each, an "Indemnified Person") from and
against any losses, claims, damages or liabilities related to, arising out of or
in connection with the matters which are the subject of the commitment made
hereunder (including, but without limitation, any use made or proposed to be
made by Holdings, Merger Sub or the Company of the proceeds from the
transactions referred to above) or in connection with any aspect of the
Transaction (collectively, the "Subject Matter"), and will reimburse any
Indemnified Person for all expenses (including fees and expenses of counsel) as
they are incurred in connection with investigating, preparing, pursuing or
defending any action, claim, suit, investigation or proceeding related to,
arising out of or in connection with the Subject Matter, whether or not pending
or threatened and whether or not such action, claim, suit or proceeding is
brought by you, your subsidiaries, creditors or any Indemnified Person, or any
Indemnified Person is otherwise a party thereto, and whether or not the
Transaction is consummated. Holdings, Merger Sub and Genesis will not, however,
be responsible for any losses, claims, damages or liabilities (or expenses
relating thereto) that are finally judicially determined to have resulted from
the bad faith or gross negligence of any Indemnified Person. Holdings, Merger
Sub and Genesis also agree that no Indemnified Person shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to Holdings,
Merger Sub, Genesis or any of their respective affiliates or associates for or
in connection with the Subject Matter, except for any such liability for losses,
claims, damages or liabilities incurred by you that are finally judicially
determined to have resulted from the bad faith or gross negligence of such
Indemnified Person.
Neither Holdings, Merger Sub nor Genesis will, without the
prior written consent of the Purchasers, settle, compromise, consent to the
entry of any judgment in or otherwise seek to terminate any action, claim, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not any Indemnified Person is a party thereto) unless such
settlement, compromise, consent or termination includes a full and unconditional
release of each Indemnified Person from any liabilities arising out of such
action, claim, suit or proceeding.
If the indemnification provided for in the second preceding
paragraph of this Commitment Letter is judicially determined to be unavailable
(other than in accordance with the terms hereof) to an Indemnified Person in
respect of any losses, claims, damages or liabilities referred to herein, then,
in lieu of indemnifying such Indemnified Person hereunder, Holdings, Merger Sub
and Genesis agree to contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or liabilities
(and expenses relating thereto) (i) in such proportion as is appropriate to
reflect the relative benefits to you on the one hand, and the Purchasers, on the
other hand, of the Acquisition or (ii) if the allocation provided by clause (i)
is not available, in such proportion as is appropriate to reflect not only the
relative benefits referred to in such clause (i) but also the relative fault of
each of you and the Purchasers, as well as any other relevant equitable
considerations; provided that in no event shall
<PAGE>
6
the Purchasers' aggregate contribution to the amount paid or payable exceed the
aggregate amount of fees actually received by us under the Commitment Letter.
Each of Holdings, Merger Sub and Genesis agrees to pay as
incurred all legal and other out-of-pocket expenses of the Purchasers in
connection with the matters referred to herein, including travel costs, document
production and other expenses of this type, and the fees of outside counsel and
fees of other professional advisors retained with your consent, whether or not
the Acquisition or the Merger is consummated or any Bridge Notes are actually
issued.
This commitment will expire at 5:00 p.m. New York City time on
June 16, 1997 unless accepted prior to such time and, if accepted prior to such
time, shall expire at the earliest of (i) consummation of the Acquisition or
another transaction or series of transactions in which Holdings, Merger Sub,
Genesis or any of their respective affiliates acquires, directly or indirectly,
any stock or assets of the Company, (ii) termination of the Merger Agreement and
(iii) 5:00 p.m. New York City time on September 30, 1997 or, at the option of
Merger Sub and subject to the payment in full of the Additional Commitment Fee,
December 5, 1997, if the closing of the Transaction shall not have occurred by
such time. No such termination shall affect your obligations under each of the
four immediately preceding paragraphs, which shall remain in full force and
effect regardless of any termination or the completion of the transactions
referred to herein.
This Commitment Letter shall be governed by and construed in
accordance with the internal laws of the State of New York. Any right to trial
by jury with respect to any claim, action, suit or proceeding arising out of or
contemplated by this letter is hereby waived and the parties hereto hereby
submit to the non-exclusive jurisdiction of the federal and New York State
courts located in the City of New York in connection with any dispute related to
this letter and/or any matters contemplated hereby. This Commitment Letter is
not assignable by you to any other Person. This Commitment Letter and the Term
Sheet (and the contents thereof) may not be disclosed to any other person except
your accountants and attorneys and to the Company in connection with the
Acquisition and then only on a confidential basis and in connection with the
Transaction.
This letter may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same agreement. Delivery of an executed counterpart
of a signature page to this letter by telecopier shall be effective as delivery
of a manually executed counterpart of this letter.
<PAGE>
7
Please confirm that the foregoing is in accordance with your
understanding by signing and returning to us an executed duplicate of this
letter. Upon your acceptance hereof, this letter will constitute a binding
agreement between us.
MORGAN STANLEY BRIDGE FUND L.L.C.
By: /s/ James M. Wickroit
Name: James M. Wickroit
Title: Vice President
MONTGOMERY GROUP HOLDINGS, L.L.C.
By: MMJ Investments, Inc., a Managing Member
By: /s/ Jerome S. Markowitz
Name: Jerome S. Markowitz
Title: President
Agreed to and Accepted:
GENESIS HEALTH VENTURES, INC.
By: /s/ George V. Hager
Name:
Title:
WALTZ CORP.
By: /s/ Karl Peterson
Name:
Title:
WALTZ ACQUISITION CORP.
By: /s/ Karl Peterson
Name:
Title:
<PAGE>
EXHIBIT A
SENIOR SUBORDINATED INCREASING RATE NOTES:
SUMMARY OF TERMS AND CONDITIONS(1)
ISSUER: Merger Sub.
AGENT: Morgan Stanley Group Inc.
ISSUE: Senior Subordinated Increasing Rate Notes (the "Bridge
Notes") issued pursuant to a Securities Purchase
Agreement (the "Securities Purchase Agreement").
USE OF PROCEEDS: The proceeds of the Bridge Notes will be
used (i) to finance, in part, the purchase price of the
Acquisition and (ii) to pay costs and expenses in
connection with the Transaction.
PRINCIPAL AMOUNT: $200 million, less fees and expenses payable to
the Purchasers, to be funded in one or two issuances.
PRICE: 100% of the principal amount.
INTEREST RATE: Interest on the Bridge Notes shall be paid at the
Applicable Interest Rate (as defined below) and payable
quarterly in arrears. "Applicable Interest Rate" means
the highest of the following, as determined as of the
beginning of each three-month period: (i) the base rate
(as announced from time to time by Citibank, N.A.) plus
325 basis points, (ii) three-month U.S. Dollar LIBOR
(as determined from specified sources) plus 600 basis
points and (iii) the highest yield on any of the 1, 3,
5 and 10-year direct obligations issued by the United
States plus 500 basis points; provided that if the
Bridge Notes are not retired in whole by the end of the
first six months following the first issuance date, the
Applicable Interest Rate otherwise in effect will
increase by 100 basis points and shall thereafter
increase by an additional 50 basis
- --------
(1) Capitalized terms used but not defined herein are used as defined in the
Commitment Letter (the "Commitment Letter") to which this Summary of Terms and
Conditions is attached.
<PAGE>
2
points at the end of each subsequent three-month period
for so long as the Bridge Notes are outstanding (the
"Incremental Spread"); and provided further that (A) in
no event shall the Applicable Interest Rate exceed 17%
and (B) the amount of cash interest paid will be
subject to a cap of 14.50%, with the excess (if any) of
the Applicable Interest Rate over such interest rate
cap to be paid in additional Bridge Notes.
MATURITY: One year from the date of first issuance of any Bridge
Notes.
RANKING: The Bridge Notes will be senior to all subordinated
indebtedness of Merger Sub and will be subordinated to
all senior indebtedness of Merger Sub, including the
Bank Credit Facility.
GUARANTEES: Holdings, the Company and each of the Company's
subsidiaries will issue a senior subordinated guarantee
of the Bridge Notes and the Rollover Notes and under
the Securities Purchase Agreement.
MANDATORY REDEMPTION: Merger Sub will redeem the Bridge Notes at par plus
accrued interest to the redemption date with, subject
to certain agreed exceptions (including, solely with
respect to clauses (ii) and (iii) below, required
prepayments under the Bank Credit Facility), (i) the
net proceeds from the issuance of any high yield debt
securities (the "Permanent Financing"), (ii) the net
proceeds from the issuance of any other debt or equity
securities (with exceptions to be determined), and
(iii) the net proceeds from asset sales (with
exceptions to be determined); provided that the
redemption price shall be 102.8% of par plus accrued
interest if the Bridge Notes are redeemed with or in
anticipation of funds raised by any means other than a
Permanent Financing in which Morgan Stanley & Co.
Incorporated and Montgomery Securities, together with
such other parties with whom they mutually agree, have
acted as exclusive agents or sole underwriters to
Merger Sub.
CHANGE-OF-CONTROL: Merger Sub will redeem the Bridge Notes upon any
change-of-control (to be defined in a mutually
acceptable manner) of Merger Sub at a redemption price
of 101% of par plus accrued interest. The
change-of-control provision will permit the put and
call arrangements among Cypress, TPG and Genesis to be
exercised in accordance with their terms. Any
redemption or other acquisition of Bridge Notes,
whether optional (as set forth below), mandatory
<PAGE>
3
(as set forth above) or upon a change of control, will
be made pro rata among the Purchasers based on the
principal amount of Bridge Notes held by each of them.
INTEREST PAYMENT: Quarterly in arrears.
OPTIONAL REDEMPTION: The Bridge Notes will be callable, in whole
or in part, upon not less than 10 days written notice,
at the option of Merger Sub, at any time at 102.8% of
par plus accrued interest to the redemption date.
MANDATORY EXCHANGE: If the Bridge Notes have not been previously
redeemed in full for cash on or prior to maturity, the
principal of the Bridge Notes outstanding at maturity
may, subject to certain conditions precedent, be
satisfied at maturity through the issuance and delivery
of the Rollover Notes described below in the attached
term sheet (Exhibit B). The Rollover Notes will be
issued at the same time as the Bridge Notes and held in
escrow, as described above, pending such mandatory
exchange.
RIGHT TO RESELL
BRIDGE NOTES: The Purchasers shall have the absolute and
unconditional right to resell the Bridge Notes to one
or more third parties, whether by assignment or
participation.
EQUITY AMOUNT;
ESCROW: On the date of the first issuance of the Bridge Notes,
warrants ("Warrants") representing 5.0% of the
fully-diluted common stock of Holdings (the "Escrowed
Warrant Amount") will be placed in an escrow account
with a mutually agreeable escrow agent. The Warrants
will be released to the holders of the Rollover Notes
(if any are issued) as follows: 2.5% at the time the
Rollover Notes (as defined below) are issued and an
additional 0.625% at the end of each three-month period
thereafter if any Rollover Notes remain outstanding at
such time. If the aggregate amount of Bridge Notes
issued is less than $200 million, then the Escrowed
Warrant Amount will be reduced pro rata.
<PAGE>
4
All Warrants will be exercisable at a nominal price for
a period of five years from the date such warrants are
released from the Escrow and will have customary
anti-dilution provisions and demand, drag-along,
tag-along and "piggy back" registration rights.
In addition, the Rollover Notes will be held, undated,
in escrow by the same escrow agent from the date that
the Bridge Notes are purchased.
CONDITIONS TO FUNDING: The execution and closing of the Securities
Purchase Agreement and the funding of the Bridge Notes
will be subject to satisfaction of conditions
precedent, including but not limited to the following:
1. The Acquisition shall have been consummated in
accordance with the Merger Agreement, and the
Merger Agreement, tender offer and other
documentation shall be reasonably satisfactory in
form and substance to the Purchasers, without any
material (as determined by the Purchasers in their
reasonably excercised and sole discretion)
amendment, modification or waiver of any of the
terms or conditions thereof without the prior
written consent of the Purchasers. The structure of
the Transaction, including the tax, federal margin
regulation, ERISA, accounting and other
consequences thereof, and corporate and legal
structure shall be reasonably satisfactory to the
Purchasers.
2. The other financings and transactions contemplated
to be consummated on the Closing Date shall have
been consummated on terms reasonably satisfactory
to the Purchasers, including without limitation (i)
the closing of the Bank Credit Facility, if
required to consummate the Acquisition (but if
borrowings under the Bank Credit Facility are not
required in order to consummate the Acquisition,
the Bank Credit Facility shall have been executed
and delivered and all conditions precedent to
funding thereunder (other than the consummation of
the Merger) shall have been satisfied or waived in
writing), (ii) the issuance of the Holdings Shares
referred to in the Commitment Letter (including
<PAGE>
5
the issuance of such shares for aggregate cash
proceeds of at least $700 million), (iii) the
refinancing (or satisfactory arrangements relating
to the refinancing) of approximately $381 million
of debt of the Company, (iv) the entry into the
Management Agreement (and provision thereunder for
all accrued fees payable to Genesis to be junior
and subordinate to the prior payment in full in
cash of all principal, interest and fees owed to
the Purchasers in connection with the Bridge Notes
or any Permanent Financing), (v) the consummation
of the Therapy Sale prior to (or simultaneously
with) the Merger Date and (vi) if consummated prior
to or simultaneously with the issuance of any
Bridge Notes, the consummation of the IP Sale, all
on terms and conditions (including the terms and
conditions of (A) any stockholder agreements or
arrangements and (B) any put/call arrangements),
and in accordance with documentation, reasonably
satisfactory to the Purchasers. The Bank Credit
Facility will be on terms and conditions, and in
accordance with documentation, reasonably
satisfactory to the Purchasers. If the IP Sale is
consummated prior to or simultaneously with the
issuance of any Bridge Notes, availability under
the Bank Credit Facility shall be automatically and
permanently reduced by an amount equal to the
after-tax proceeds received by Genesis in
connection therewith.
3. Receipt by the Purchasers of solvency certificates
and independent solvency opinions, each in form and
substance reasonably satisfactory to the
Purchasers, to the extent required by the lenders
under the Bank Credit Facility.
4. Reasonably satisfactory completion of all loan
documentation and other documentation relating to
the Bridge Notes, the Rollover Notes and the
Warrants in form and substance reasonably
satisfactory to the Purchasers, including issuance
of appropriate Holdings, Company and subsidiary
guarantees, and receipt by the
<PAGE>
6
Purchasers of reasonably satisfactory customary
opinions of counsel as to the transactions
contemplated thereby (including without limitation
the tax aspects thereof and compliance with all
applicable medicare, medicaid, state healthcare
laws and regulations and securities laws), together
with customary closing documentation that will be
prepared within thirty days of the date of the
Commitment Letter.
5. Receipt of all material governmental, shareholder
and third party consents and approvals necessary or
reasonably desirable in connection with any aspect
of the Transaction or any other transactions
contemplated hereby and satisfactory expiration of
all applicable waiting periods without any actions
to materially affect any material aspect of the
Transaction.
6. Absence of any material adverse change in the
business, condition (financial or otherwise),
operations, performance, properties or prospects of
the Company and its subsidiaries, taken as a whole,
since December 31, 1996. No additional facts or
information (including the occurrence of any events
or circumstances) shall have come to the attention
of Purchasers that are inconsistent with the
information disclosed to the Purchasers by or on
behalf of Genesis, Cypress or TPG prior to the date
of the Commitment Letter and that, either
individually or in the aggregate, could reasonably
be expected to have a material adverse effect on
(a) the condition (financial or otherwise),
business, assets, liabilities (contingent or
otherwise), properties, value, operations, results
of operations or prospects of (i) either Holdings
or Merger Sub, individually, or (ii) the Company
and its Subsidiaries, taken as a whole, or (b) any
aspect of the Transaction or the refinancing of the
Bridge Notes. Neither Holdings nor Merger Sub shall
have incurred any material contractual obligations
other than (i) the execution of the Merger
Agreement, this Commitment Letter and one or more
other commitment letters for
<PAGE>
7
the Bank Credit Facility and the equity financings
comprising part of the Transaction and the
execution of the documentation thereunder and (ii)
such other obligations as are acceptable to the
Purchasers. No event or circumstance shall have
occurred which would materially adversely affect
the ability of Genesis to perform its obligations
under the Management Agreement.
7. Absence of any action, suit, investigation,
litigation or proceeding pending or threatened in
any court or before any arbitrator or governmental
instrumentality that in the reasonable judgment of
the Purchasers (i) could have a material adverse
effect on the business, condition (financial or
otherwise), operations, properties or prospects of
the Company and its subsidiaries taken as a whole
or on the Acquisition or the Merger or (ii) could
materially adversely affect the Purchasers, the
Bridge Notes or the ability of Merger Sub or the
Company to perform its obligations thereunder.
8. Absence of any disruption or change in financial,
banking or capital markets or in the regulatory
environment that in the good faith judgment of the
Purchasers could materially and adversely affect
the sale of the Bridge Notes or the refinancing
thereof.
9. Absence of any material default or potential
default and accuracy of representations and
warranties.
10. Upon consummation of the Acquisition, neither
Merger Sub nor the Company nor any of their
subsidiaries will have any outstanding debt (other
than arrangements satisfactory to the Purchasers
relating to refinance outstanding debt) other than
the Bridge Notes and the Bank Credit Facility in
excess of $37 million plus the amount of public
convertible debt of the Company that does not
convert into common stock (provided that the amount
of available borrowings under the Bank Credit
Facility are reduced by an equal amount).
<PAGE>
8
REPRESENTATIONS AND
WARRANTIES: The Securities Purchase Agreement will contain
representations and warranties which are usual and
customary for transactions of this nature or which the
Purchasers reasonably determine to be appropriate in
light of the business or operations of the Company or
any of its subsidiaries (with the scope, exceptions and
qualifications. to be agreed upon), including but not
limited to the following:
1. Corporate existence.
2. Corporate and governmental authorizations; no
contravention; binding and enforceable agreements.
3. Financial information
4. No material adverse change.
5. Environmental matters
6. Compliance with laws, including Medicare, Medicaid,
ERISA and environmental laws.
7. No material litigation.
8. Existence, incorporation, etc., of subsidiaries.
9. Payment of taxes and other material obligations.
10. Full disclosure.
11. After consummation of the Transactions Genesis is
in material compliance with its material debt.
COVENANTS: The Securities Purchase Agreement will contain usual
and customary covenants for transactions of this nature
or which the Purchasers reasonably determine to be
appropriate in light of the business or operations of
the Company or any of its subsidiaries (with the scope
and exceptions to be agreed upon), including without
limitation the following:
1. Furnishing of information (including quarterly
financial and operating reports).
2. Maintenance of property; insurance coverage.
3. Compliance with laws; conduct of business.
4. Use of proceeds.
5. Restrictions on indebtedness.
6. Negative pledge and restrictions on
sale-leasebacks.
7. Restrictions on dividends and other restricted
payments (including redemptions and prepayment of
junior or pari passu indebtedness).
<PAGE>
9
8. Restrictions on asset sales (other than, subject to
mandatory redemption provisions, the IP Sale and
the sale of the Ohio, Wisconsin and/or Illinois
facilities for cash on terms which reflect the fair
market value of the facilities sold).
9. Restrictions on transactions with affiliates.
10. Restrictions on mergers and consolidations.
11. Use best efforts to effect refinancing of Bridge
Notes through the Permanent Financing as soon as
practicable.
12. Limitation on investments.
13. Sales of subsidiaries' stock and absence of
limitations on the ability of subsidiaries to
upstream assets to Merger Sub.
14. Limitation on capital expenditures and
acquisitions.
15. Availability of management to meet with holders of
Bridge Notes or Rollover Notes upon request.
16. Maintenance of minimum net worth.
EVENTS OF DEFAULT: The Securities Purchase Agreement will
contain usual and customary events of default for
transactions of this nature or which the Purchasers
reasonably determine to be appropriate in light of the
business or operations of the Company or any of its
subsidiaries, including without limitation the
following:
1. Failure to pay any principal when due or any
interest or fees payable within five days of when
due.
2. Failure to meet covenants, with grace periods where
appropriate.
3. Representations or warranties false in any material
respect when made.
4. Cross default to other debt of Merger Sub, the
Company and their subsidiaries which is triggered
by a default of such other debt (with minimum
dollar amounts to be agreed upon).
5. Judgment defaults (with minimum dollar amounts to
be agreed upon).
6. Other usual defaults, including without limitation,
insolvency, bankruptcy and ERISA.
7. Any event or circumstance occurs that would
materially adversely affect the ability of Genesis
to perform its obligations under the Management
Agreement or any party thereto materially breaches
its obligations thereunder.
<PAGE>
10
If an Event of Default shall occur and for so long as
it shall be continuing, the Purchasers shall have, in
addition to other customary rights and remedies
(including without limitation the right to declare the
principal of and all accrued interest on all Bridge
Notes to be immediately due and payable), the right to
appoint one representative to sit on the Board of
Directors of Holdings.
INDEMNIFICATION: Holdings, Merger Sub and Genesis will indemnify the
Purchasers against all losses, liabilities, claims,
damages, or expenses relating to the Bridge Notes, the
Securities Purchase Agreement and the use of the Bridge
Note proceeds or the commitments, including but not
limited to attorney's fees and settlement costs,
substantially on the terms set forth in the Commitment
Letter.
EXPENSES: Holdings, Merger Sub and Genesis will pay all legal and
other out-of-pocket expenses of the Purchasers as
incurred, including travel costs, document production
and other expenses of this type, and the fees of
outside counsel and fees of other professional advisors
engaged with Merger Sub's consent.
GOVERNING LAW: State of New York.
AMENDMENTS AND
WAIVERS: After the first issuance of the Bridge Notes,
amendments and waivers will require the consent of
persons holding in the aggregate at least 51% of the
principal amount of the Bridge Notes outstanding,
provided, that any such amendment will require the
approval of each of Morgan Stanley Bridge Fund, L.L.C.
and Montgomery Group Holdings, L.L.C. and provided
further, that changes to certain economic provisions
will require unanimous consent.
MISCELLANEOUS: The provisions of the Commitment Letter and Term Sheet
will be replaced by the provisions of any definitive
documentation executed in connection with the Bridge
Notes.
Standard yield protection (including payments free and
clear of withholding taxes and interest period breakage
indemnities), eurodollar illegality and similar
provisions.
<PAGE>
EXHIBIT B
SENIOR SUBORDINATED ROLLOVER NOTES:
SUMMARY OF TERMS AND CONDITIONS
ISSUER: Merger Sub.
ISSUE: Senior Subordinated Rollover Notes (the "Rollover
Notes").
PRINCIPAL AMOUNT: Up to the outstanding principal amount of the
Bridge Notes plus an amount equal to 2.8% of such
principal amount, representing a funding fee payable to
the Purchasers, to be paid to the Purchasers pro rata
based on their respective shares of Bridge Notes held.
PURPOSE: The Rollover Notes will be used in their entirety to
redeem 100% of the outstanding principal amount of the
Bridge Notes.
MATURITY: 10 years after the issuance date of the Rollover Notes.
INTEREST RATE: Interest on the Rollover Notes shall be paid at
the Applicable Interest Rate (as defined below) and
payable quarterly in arrears. "Applicable Interest
Rate" means the sum of (A) the Incremental Spread (as
defined in the Summary of Terms and Conditions for the
Bridge Notes) as of the date of the issuance of the
Rollover Notes, which shall (for so long as the
Rollover Notes are held by the Purchasers) increase by
an additional 50 basis points at the end of each
three-month period for so long as the Rollover Notes
are outstanding, plus (B) the highest of the following,
as determined as of the beginning of each three-month
period: (i) the base rate (as announced from time to
time by Citibank, N.A.) plus 325 basis points, (ii)
three months U.S. Dollar LIBOR (as determined from
specified sources) plus 600 basis points and (iii) the
highest yield on any of the 1, 3, 5 and 10 year direct
obligations issued by the United States plus 500 basis
points; and provided further that (A) in no event shall
the Applicable Interest Rate exceed 17% and (B) the
amount of cash interest paid will be subject to a cap
of 14.50%, with the excess (if any) of the Applicable
Interest Rate over such interest rate cap to be paid in
additional Rollover Notes.
OPTIONAL REDEMPTION: For so long as they are held by the
Purchasers, the Rollover Notes will be redeemable at
the option of Merger Sub, in whole or in
<PAGE>
2
part, at any time at par plus accrued and unpaid
interest to the redemption date, provided, however,
that if the Rollover Notes are sold to third party
purchasers on a fixed rate basis no less favorable to
Merger Sub than the then applicable rate of interest
(it being understood that the Purchasers shall have the
right to unilaterally fix the Interest Rate on the
Rollover Notes in conjunction with such third party
sales and it also being understood that no such third
party sales shall take place unless Merger Sub has been
given 10 days' prior notice), the Rollover Notes will
be non-callable for 5 years from the date of issuance
and will be callable thereafter at par plus accrued
interest plus a premium equal to 50% of the coupon in
effect on the date of issuance of the Rollover Notes,
declining ratably on each yearly anniversary to par one
year prior to the maturity of the Rollover Notes.
MANDATORY REDEMPTION: Same as Bridge Notes, except that the redemption price
shall be at par plus accrued interest.
CHANGE-OF-CONTROL: Merger Sub will redeem the Rollover Notes upon any
change-of-control of Merger Sub at a redemption price
of 101% of par plus accrued interest. Any redemption or
other acquisition of Rollover Notes, whether optional
(as set forth above), mandatory (as set forth above) or
upon a change of control, will be made pro rata among
the Purchasers based on the principal amount of
Rollover Notes held by each of them.
RANKING: Same as Bridge Notes.
GUARANTEES: Same as Bridge Notes.
REGISTRATION RIGHTS: Merger Sub will file, and will use its best efforts to
cause to become effective, a "shelf" registration
statement with respect to the Rollover Notes as soon as
practicable after the issuance of the Rollover Notes.
Merger Sub will keep the registration statement for the
Rollover Notes effective until the Rollover Notes shall
have been redeemed. If a "shelf" registration statement
for the Rollover Notes has either (i) not been filed
within 60 days from the date of issuance of the
Rollover Notes, or (ii) not been declared effective
within 120 days from the date of issuance of the
Rollover Notes, Merger Sub will pay liquidated damages
of $.192 per week per $1,000 principal amount of
Rollover Notes until such time as such
<PAGE>
3
registration statement has become effective. Merger Sub
will also pay such liquidated damages for any period of
time following the effectiveness of such registration
statement that the registration statement is not
available for resales thereunder. In addition, the
holders of the Rollover Notes will have the right to
"piggy back" in the registration of any debt securities
which are registered by Merger Sub unless all of the
Rollover Notes will be redeemed from the proceeds of
such securities.
RIGHT TO RESELL
ROLLOVER NOTES
AND WARRANTS: The Purchasers shall have the absolute and
unconditional right to resell Rollover Notes and
Warrants in compliance with applicable law to any third
parties.
RELEASE OF EQUITY
FROM ESCROW: In the event that the Rollover Notes are exchanged for
the Bridge Notes, the Purchasers shall be entitled to
receive the Warrants held in escrow in the amounts and
at the times described in the Bridge Notes Summary of
Terms and Conditions.
DEFEASANCE PROVISIONS: None.
CONDITIONS TO ISSUANCE: The right to issue the Rollover Notes will be subject
to satisfaction of the following conditions precedent:
(i) at the time of issuance, there shall exist no
default or potential default under the Securities
Purchase Agreement, (ii) all fees and other amounts
owing to the Purchasers shall have been paid in full
and (iii) no injunction, decree, order or judgment
enjoining such issuance shall be in effect.
REPRESENTATION,
WARRANTIES,
COVENANTS, EVENTS OF
DEFAULT, INDEMNITIES
AND EXPENSES: As in the Securities Purchase Agreement (see above).
GOVERNING LAW: State of New York.
<PAGE>
Exhibit 11(c)(1)
AGREEMENT AND PLAN OF MERGER
by and among
WALTZ CORP.,
WALTZ ACQUISITION CORP.
and
THE MULTICARE COMPANIES, INC.
__________________
JUNE 16, 1997
__________________
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE OFFER.........................................................2
Section 1.1 The Offer.......................................................2
Section 1.2 Company Actions.................................................4
ARTICLE 2 THE MERGER........................................................5
Section 2.1 The Merger......................................................5
Section 2.2 Closing; Effective Time.........................................6
Section 2.3 Certificate of Incorporation....................................6
Section 2.4 By-laws.........................................................6
Section 2.5 Directors and Officers..........................................6
ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATION;
EXCHANGE OF CERTIFICATES..........................................7
Section 3.1 Effect on Capital Stock.........................................7
Section 3.2 Exchange of Common Stock........................................8
Section 3.3 No Liability...................................................10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................10
Section 4.1 Organization.................................................10
Section 4.2 Capitalization...............................................10
Section 4.3 Subsidiaries.................................................11
Section 4.4 Authorization; Binding Agreement.............................12
Section 4.5 Noncontravention.............................................12
Section 4.6 Governmental Approvals.......................................13
Section 4.7 SEC Filings; Financial Statements; Undisclosed Liabilities...13
Section 4.8 Information Supplied.........................................14
Section 4.9 Absence of Certain Changes or Events.........................15
Section 4.10 Finders and Investment Bankers...............................15
Section 4.11 Voting Requirement...........................................15
Section 4.12 Litigation...................................................16
Section 4.13 Taxes........................................................16
Section 4.14 Compliance with Laws.........................................17
Section 4.15 Title to Properties..........................................17
Section 4.16 Other Agreements.............................................17
Section 4.17 Employee Benefit Plans.......................................17
Section 4.18 Insurance....................................................19
Section 4.19 Environmental Matters........................................19
i
<PAGE>
Page
----
ARTICLE 5 REPRESENTATIONS AND WARRANTIESOF PARENT AND MERGER SUB...........20
Section 5.1 Organization...................................................20
Section 5.2 Authorization; Binding Agreement...............................20
Section 5.3 Noncontravention...............................................21
Section 5.4 Governmental Approvals.........................................21
Section 5.5 Information Supplied...........................................22
Section 5.6 Financing......................................................22
Section 5.7 Fraudulent Transfer Laws.......................................22
Section 5.8 Finders and Investment Bankers.................................23
Section 5.9 Regulatory Approval............................................23
ARTICLE 6 COVENANTS........................................................23
Section 6.1 Conduct of Business of the Company.............................23
Section 6.2 Stockholder Approval; Proxy Statement..........................25
Section 6.3 Access and Information.........................................26
Section 6.4 No Solicitation................................................26
Section 6.5 Reasonable Efforts; Additional Actions.........................27
Section 6.6 Notification of Certain Matters................................29
Section 6.7 Public Announcements...........................................29
Section 6.8 Indemnification and Insurance..................................29
Section 6.9 Indemnification of Brokerage...................................31
Section 6.10Directors......................................................31
Section 6.11Company Debt...................................................32
Section 6.12Employee Matters...............................................32
ARTICLE 7 CONDITIONS.......................................................34
Section 7.1 Conditions to Each Party's Obligations.........................34
ARTICLE 8 TERMINATION......................................................35
Section 8.1 Termination....................................................35
Section 8.2 Fees and Expenses..............................................37
Section 8.3 Procedure for and Effect of Termination........................38
ARTICLE 9 GUARANTY.........................................................38
Section 9.1 Guaranty.......................................................38
Section 9.2 Absolute Guaranty..............................................39
Section 9.3 Continuing Guaranty............................................39
Section 9.4 Limitation.....................................................39
Section 9.5 Representations and Warranties.................................40
ii
<PAGE>
Page
----
ARTICLE 10 MISCELLANEOUS....................................................40
Section 10.1 Certain Definitions..........................................40
Section 10.2 Amendment and Modification...................................41
Section 10.3 Waiver of Compliance; Consents...............................41
Section 10.4 Survival.....................................................42
Section 10.5 Notices......................................................42
Section 10.6 Assignment...................................................43
Section 10.7 Expenses.....................................................43
Section 10.8 GOVERNING LAW................................................43
Section 10.9 Counterparts.................................................44
Section 10.10 Interpretation...............................................44
Section 10.11 Entire Agreement.............................................44
Section 10.12 No Third Party Beneficiaries.................................44
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of June 16, 1997
(the "Agreement") by and among WALTZ CORP., a Delaware corporation ("Parent"),
WALTZ ACQUISITION CORP. a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub") and THE MULTICARE COMPANIES, INC., a Delaware corporation
(the "Company"). Merger Sub and the Company are sometimes collectively referred
to herein as the "Constituent Corporations."
WHEREAS, the respective Boards of Directors (or comparable
body or entity) of the Guarantor, Parent, Merger Sub and the Company have
approved the acquisition of the Company by Parent and the merger of Merger Sub
with and into the Company on the terms and subject to the conditions set forth
in this Agreement;
WHEREAS, in furtherance of such acquisition, Parent
proposes to cause Merger Sub to make a tender offer (as it may be amended from
time to time as permitted under this Agreement, the "Offer") to purchase all the
issued and outstanding shares of Common Stock, par value $.01 per share, of the
Company (the "Common Stock"), at a price per share of Common Stock of $28.00 net
to the seller in cash, upon the terms and subject to the conditions set forth in
this Agreement; and the Board of Directors of the Company has approved the Offer
and the Merger (as hereinafter defined) and is recommending that the Company's
stockholders accept the Offer;
WHEREAS, as a condition of the willingness of Parent and
Merger Sub to enter into this Agreement, those individuals (the "Principal
Stockholders") who are today executing a Tender and Voting Agreement (as defined
below), have entered into the Tender and Voting Agreement dated as of the date
hereof (each, a "Voting Agreement") with Parent, pursuant to which, among other
things, each Principal Stockholder will agree to tender his shares of Common
Stock pursuant to the Offer and vote, subject to the terms and conditions
thereof, such Principal Stockholder's shares of the Common Stock, in favor of
the Merger and the approval and adoption of this Agreement;
WHEREAS, the Board of Directors of the Company has
approved the terms of the Voting Agreements; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
<PAGE>
2
NOW THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1.
THE OFFER
Section 1.1 The Offer.
(a) Subject to the provisions of this Agreement, as
promptly as practicable but in no event later than the fifth business day from
and including the date of the public announcement of this Agreement, Merger Sub
shall, and Parent shall cause Merger Sub to, commence the Offer. The obligation
of Merger Sub to, and of Parent to cause Merger Sub to, commence the Offer and
accept for payment, and pay for, any shares of Common Stock tendered pursuant to
the Offer shall be subject only to the conditions set forth in Exhibit A (any of
which may be waived by Merger Sub in its sole discretion, provided that, without
the consent of the Company, Merger Sub shall not waive the Minimum Condition (as
defined in Exhibit A)) and to the terms and conditions of this Agreement. Merger
Sub expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Merger Sub shall not (i) reduce the number
of shares of Common Stock subject to the Offer, (ii) reduce the price per share
of Common Stock to be paid pursuant to the Offer, (iii) modify or add to the
conditions set forth in Exhibit A, (iv) except as provided in the next sentence,
extend the Offer, (v) change the form of consideration payable in the Offer
(other than by increasing the cash offer price) or (vi) amend or modify any term
of the Offer in any manner adverse to any of the Company's stockholders. The
initial expiration date shall be twenty business days from and including the
commencement of the Offer. Notwithstanding the foregoing, Merger Sub may,
without the consent of the Company, but subject to the Company's right to
terminate this Agreement pursuant to Section 8.1(b)(ii), (i) extend the Offer,
if at the scheduled expiration date of the Offer any of the conditions to Merger
Sub's obligation to purchase shares of Common Stock shall not be satisfied,
until such time as such conditions are satisfied or waived or (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or in order to obtain any material regulatory
approval applicable to the Offer. Merger Sub agrees that: (A) in the event it
would otherwise be entitled to terminate the Offer at any scheduled expiration
thereof due to the failure of one or more of the conditions set forth in the
first sentence of the introductory paragraph or paragraphs (a), (f), or (g) of
Exhibit A to be satisfied or waived, it shall give the Company notice thereof
and, at the request of the Company, extend the Offer until the earlier of
(1) such time as such condition is, or conditions are, satisfied or waived and
(2) the date chosen by
<PAGE>
3
the Company which shall not be later than (x) September 15, 1997, or October 15,
1997 if the option to extend set forth in Section 8.1(b)(ii)(y) is exercised or
(y) the date on which the Company reasonably believes all such conditions will
be satisfied; provided that if any such condition is not satisfied by the date
so chosen by the Company, the Company may request and Merger Sub shall make
further extensions of the Offer in accordance with the terms of this Section
1.1(a); and (B) in the event that Merger Sub would otherwise be entitled to
terminate the Offer at any scheduled expiration date thereof due solely to the
failure of the Minimum Condition to be satisfied, it shall, at the request of
the Company (which request may be made by the Company only on one occasion),
extend the Offer for such period as may be requested by the Company not to
exceed ten days from such scheduled expiration date. Subject to the terms and
conditions of the Offer and this Agreement, Merger Sub shall, and Parent shall
cause Merger Sub to, pay for all shares of Common Stock validly tendered and not
withdrawn pursuant to the Offer that Merger Sub becomes obligated to purchase
pursuant to the Offer promptly after the expiration of the Offer.
(b) On the date of commencement of the Offer, the
Parent and Merger Sub shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 with respect to the Offer, which shall contain an offer to
purchase and a related letter of transmittal and summary advertisement (such
Schedule 14D-1 and the documents and exhibits included therein pursuant to which
the Offer will be made, together with any supplements or amendments thereto, the
"Offer Documents"). The Offer Documents shall comply as to form in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder and the Offer Documents on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by Parent or Merger Sub with respect to information supplied by the Company
in writing for inclusion in the Offer Documents. Each of Parent, Merger Sub and
the Company agrees promptly to correct any information provided by it for use in
the Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and each of Parent and Merger Sub
further agrees to take all steps necessary to amend or supplement the Offer
Documents and to cause the Offer Documents as so amended or supplemented to be
filed with the SEC and to be disseminated to the Company's stockholders, in each
case as and to the extent required by applicable Federal securities laws. The
Company and its counsel shall be given a reasonable opportunity to review the
Offer Documents and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. Parent and Merger
Sub agree to provide the Company and its counsel any comments Parent, Merger Sub
or their counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly upon the receipt of such comments.
<PAGE>
4
(c) Parent shall contribute to Merger Sub on a timely
basis the funds necessary to purchase any shares of Common Stock that Merger Sub
becomes obligated to purchase pursuant to the Offer and to perform any of its
other obligations pursuant to this Agreement.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to
the Offer and represents that the Board of Directors of the Company, at a
meeting duly called and held on June 15, 1997, unanimously adopted resolutions
approving this Agreement and the transactions contemplated hereby, including,
the Offer, the Merger and the Voting Agreement, determining that the terms of
the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that the Company's stockholders accept
the Offer and tender their shares pursuant to the Offer and approve and adopt
this Agreement. The Company further represents that Smith Barney Inc. ("Smith
Barney") has delivered to the Board of Directors of the Company its opinion to
the effect that, as of the date hereof, the consideration to be received by the
holders of Common Stock (other than Parent and its affiliates) in the Offer and
the Merger is fair to such holders from a financial point of view. The Company
hereby consents to the inclusion in the Offer Documents of the recommendations
of the Company's Board of Directors described in this Section 1.2(a). The
Company has been advised by each of its directors and by each executive officer
who as of the date hereof is aware of the transactions contemplated hereby, that
such person intends to tender pursuant to the offer all Common Stock owned, of
record or beneficially, by such person which such person may sell without
liability under Section 16(b) of the Exchange Act.
(b) Promptly following the filing of the Offer
Documents with the SEC, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9")
containing the recommendation described in Section 1.2(a) and shall mail the
Schedule 14D-9 to the stockholders of the Company; provided that the Company
shall not be required to include such recommendation in the Schedule 14D-9 if
the Company receives an Acquisition Proposal (as defined in Section 6.4) from
any person or group (i) that the Board of Directors of the Company determines in
its good faith judgment is more favorable to the Company's stockholders than the
Offer and the Merger and (ii) as a result of which, the Board determines in good
faith, after consultation with outside counsel, that it would constitute a
breach of the Board's fiduciary duty under applicable law to so include such
recommendation. The Schedule 14D-9 shall comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder and, on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to
<PAGE>
5
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Merger Sub in writing for inclusion in the Schedule 14D-9. Each of the
Company, Parent and Merger Sub agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to amend or supplement
the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented
to be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by applicable Federal securities laws. The
Parent and its counsel shall be given a reasonable opportunity to review the
Schedule 14D-9 and all amendments and supplements thereto prior to their filing
with the SEC or dissemination to stockholders of the Company. The Company agrees
to provide the Parent and its counsel in writing with any comments the Company
or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly upon the receipt of such comments.
(c) In connection with the Offer, the Company shall
cause its transfer agent to furnish Merger Sub promptly with mailing labels
containing the names and addresses of the record holders of Common Stock as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Common Stock, and shall
furnish to Merger Sub such information and assistance (including updated lists
of stockholders, security position listings and computer files) as the Parent
may reasonably request in communicating the Offer to the Company's stockholders.
Subject to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent and Merger Sub shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, will, upon request, deliver to the Company all
copies (in all forms) of such information then in their possession or control.
ARTICLE 2
THE MERGER
Section 2.1 The Merger.
(a) Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in Section 2.2) and in
accordance with
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6
the General Corporation Law of the State of Delaware (the "DGCL"), Merger Sub
shall be merged with and into the Company, which shall be the surviving
corporation in the Merger (the "Surviving Corporation"). At the Effective Time,
the separate existence of Merger Sub shall cease and the other effects of the
Merger shall be as set forth in Section 259 of the DGCL.
(b) At the election of the Parent, any direct or
indirect wholly owned Delaware subsidiary (as defined in Section 9.1(e)) of the
Parent may be substituted for Merger Sub as a Constituent Corporation in the
Merger. In such event, the parties agree to execute an appropriate amendment to
this Agreement in order to reflect such substitution.
Section 2.2 Closing; Effective Time . Subject to the
provisions of Article 7, the closing of the Merger (the "Closing") shall take
place in New York City at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, as soon as practicable but in no event later than 10:00 a.m. New York
City time on the first business day after the date on which each of the
conditions set forth in Article 7 have been satisfied or waived by the party or
parties entitled to the benefit of such conditions, or at such other place, at
such other time or on such other date as the Parent, Merger Sub and the Company
may mutually agree. The date on which the Closing actually occurs is hereinafter
referred to as the "Closing Date." At the Closing, Parent, Merger Sub and the
Company shall cause a certificate of merger (the "Certificate of Merger") to be
executed and filed with the Secretary of State of the State of Delaware in
accordance with the DGCL. The Merger shall become effective as of the date and
time of such filing, or such other time within twenty-four hours of such filing
as Merger Sub and the Company shall agree to be set forth in the Certificate of
Merger (the "Effective Time").
Section 2.3 Certificate of Incorporation. The
certificate of incorporation of the Company, as in effect immediately prior to
the Effective Time, shall become, from and after the Effective Time, the
certificate of incorporation of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
Section 2.4 By-laws. The by-laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall become, from and after the
Effective Time, the by-laws of the Surviving Corporation, until thereafter
altered, amended or repealed as provided therein and in accordance with
applicable law.
Section 2.5 Directors and Officers. The directors of
Merger Sub and officers of the Company immediately prior to the Effective Time
shall become, from and after the Effective Time, the directors and officers of
the Surviving Corporation, until their respective successors are duly elected or
appointed and qualify or their earlier resignation or removal.
<PAGE>
7
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATION; EXCHANGE OF CERTIFICATES
Section 3.1 Effect on Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Common Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each share of the
capital stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(b) Treasury Stock and Parent-Owned Stock. Each share
of Common Stock that is owned by the Company or any subsidiary of the Company
("Treasury Shares") and each share of Common Stock that is owned by Parent,
Merger Sub or any other subsidiary of Parent ("Parent Shares") shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Common Stock. Subject to
Section 3.1(e), each issued and outstanding share of Common Stock (other than
shares to be canceled in accordance with Section 3.1(b)) shall be converted into
the right to receive in cash, without interest, the price paid for each share of
Common Stock in the Offer (the "Merger Consideration"). As of the Effective
Time, all shares of Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
(d) Options. Immediately prior to the Effective Time,
the unexercisable portion of each outstanding option (a "Company Stock Option")
to purchase shares of Common Stock, shall become immediately exercisable in
full, subject to all expiration, lapse and other terms and conditions thereof.
The Company shall take all action necessary so that each Company Stock Option
(and any rights thereunder) outstanding immediately prior to the Effective Time
shall be canceled immediately prior to the Effective Time in exchange for the
right to receive an amount in cash equal to the product of (A) the number of
shares of Common Stock subject to such Company Stock Option immediately prior to
the Effective Time (after giving effect to the first sentence of this
Section 3.1(d)) and (B) the excess, if any, of (1) the Merger Consideration over
(2) the per share exercise price of such Company
<PAGE>
8
Stock Option, to be delivered by the Surviving Corporation immediately following
the Effective Time.
(e) Dissenting Shares. Notwithstanding anything in
this Agreement to the contrary, each share of Common Stock that is issued and
outstanding immediately prior to the Effective Time and that is held by a
stockholder who has properly exercised and perfected appraisal rights under
Section 262 of the DGCL (the "Dissenting Shares"), shall not be converted into
or exchangeable for the right to receive the Merger Consideration, but shall be
entitled to receive such consideration as shall be determined pursuant to
Section 262 of the DGCL; provided, however, that if such holder shall have
failed to perfect or shall have effectively withdrawn or lost the right to
appraisal and payment under the DGCL, each share of Common Stock of such holder
shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, in accordance with Section 3.1(a),
and such shares shall no longer be Dissenting Shares. The Company shall give
prompt notice to Parent of any demands received by the Company for appraisal of
shares of Common Stock, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
Section 3.2 Exchange of Common Stock.
(a) On or before the Effective Time, Parent shall
cause to be deposited in trust with a bank or trust company designated by the
Parent and reasonably satisfactory to the Company (the "Paying Agent") cash,
cash equivalents or a combination thereof in an aggregate amount equal to the
product of (a) the number of shares of Common Stock issued and outstanding at
the Effective Time (other than Dissenting Shares, Treasury Shares and Parent
Shares), multiplied by (b) the Merger Consideration (such product being
hereinafter referred to as the "Payment Fund"). Parent shall cause the Paying
Agent to make the payments provided for in Section 3.1 out of the Payment Fund
(other than Section 3.1(d) which shall be paid by the Surviving Corporation
immediately following the Effective Time and other than Section 3.1(e)). The
Paying Agent shall invest undistributed portions of the Payment Fund as Parent
directs in obligations of or guaranteed by the United States of America, in
commercial paper obligations receiving the highest investment grade rating from
both Moody's Investor Services, Inc. and Standard & Poor's Corporation, or in
certificates of deposit, bank repurchase agreements or banker's acceptances of
commercial banks with capital exceeding $1,000,000,000 (collectively, "Permitted
Investments"); provided, however, that the maturities of Permitted Investments
shall be such as to permit the Paying Agent to make prompt payment to former
holders of shares of Common Stock entitled thereto as contemplated by this
Section. Parent shall cause the Payment Fund to be promptly replenished to the
<PAGE>
9
extent of any losses incurred as a result of Permitted Investments. All net
earnings of Permitted Investments shall be paid to Parent as and when requested
by Parent. If for any reason (including losses) the Payment Fund is inadequate
to pay the amounts to which holders of Common Stock shall be entitled under
Section 3.1 or this Section 3.2, Parent shall in any event be liable for payment
thereof. The Payment Fund shall not be used for any purpose except as expressly
provided in this Agreement. If any cash or cash equivalents deposited with the
Paying Agent for purposes of paying the Merger Consideration for the Common
Stock pursuant to this Article 3 remain unclaimed following the expiration of
one year after the Effective Time, such cash or cash equivalents (together with
accrued interest) shall be delivered to the Surviving Corporation by the Paying
Agent and, thereafter, holders of certificates that immediately prior to the
Effective Time represented shares of Common Stock shall be entitled to look only
to the Surviving Corporation (subject to abandoned property, escheat or similar
laws) as general creditors thereof.
(b) Promptly after the Effective Time, the Paying
Agent shall mail to each holder of record of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares of Common
Stock that were converted into the right to receive the Merger Consideration
pursuant to Section 3.1 (the "Certificates") a form letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender by such holder to the Paying
Agent of a Certificate, together with such letter of transmittal duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor, cash in an amount equal to the product of the number of shares of
Common Stock represented by such Certificate multiplied by the Merger
Consideration, and such Certificate shall forthwith be canceled. No interest
will be paid or accrued on the cash payable upon the surrender of the
Certificates. If the payment is to be made to a person other than the person in
whose name a Certificate surrendered is registered, it shall be a condition of
payment that (a) the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and (b) the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 3.2, each Certificate shall represent for all
purposes whatsoever only the right to receive the Merger Consideration in cash
multiplied by the number of shares evidenced by such Certificate, without any
interest thereon.
(c) After the Effective Time there shall be no
transfers on the stock transfer books of the Surviving Corporation of the shares
of Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for transfer or for any
<PAGE>
10
other reason, they shall be canceled and exchanged for cash as provided in this
Article 3, except as otherwise provided by law.
Section 3.3 No Liability. None of Parent, Merger Sub,
the Company or the Paying Agent shall be liable to any person in respect of any
cash from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate shall
not have been surrendered prior to seven years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration payable
to the holder of such Certificate pursuant to this Article 3 would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 4.6)), any such Merger Consideration shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as disclosed to Parent and Merger Sub in a letter
delivered at or prior to the execution hereof (the "Disclosure Letter") the
Company represents and warrants to Parent and Merger Sub as follows:
Section 4.1 Organization. The Company and each of its
subsidiaries is duly organized and validly existing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company and each of its subsidiaries is
duly qualified to do business and in good standing in its jurisdiction of
organization and in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except for such failures to be so duly qualified and in
good standing that, individually or in the aggregate, will not have a Material
Adverse Effect (as defined in Section 10.1(c)) with respect to the Company. The
Company has previously delivered (or, in the case of subsidiaries, delivered or
made available) to Parent correct and complete copies of the certificates of
incorporation and by-laws (or equivalent governing instruments), as currently in
effect, of the Company and each of its subsidiaries.
Section 4.2 Capitalization. The authorized capital stock
of the Company is 7,000,000 shares of Preferred Stock and 70,000,000 shares of
Common Stock. At the close of business on June 13, 1997, (a) 30,817,069 shares
of Common Stock were issued and outstanding, (b) 4,341,346 shares of Common
Stock were
<PAGE>
11
reserved for issuance upon conversion of the Company's 7% Convertible
Subordinated Debentures due 2003 (the "7% Debentures"), (c) 3,690,686 shares of
Common Stock were reserved for issuance upon conversion of Company Stock
Options, (d) approximately 15,000 shares of Common Stock were reserved for
issuance pursuant to the Company's Employee Stock Purchase Program, and (e) no
shares of Common Stock were held by the Company in its treasury. Section 4.2 of
the Disclosure Letter sets forth a complete and correct list, as of the date of
this Agreement, of the holders of all Company Stock Options, the number of
shares of Common Stock subject to each such option and the exercise prices
thereof. Except as set forth above, at the close of business on June 13, 1997,
no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. All issued and outstanding shares
of Common Stock have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights. All shares of Common Stock which
may be issued upon conversion of the 7% Debentures or the Company Stock Options
have been duly authorized and will be, when issued in accordance with the terms
thereof, validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in this Section 4.2 or in Section 4.3 of the
Disclosure Letter and except with respect to purchases required to be made under
the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan") and the
Directors Retainer and Meeting Fee Plan (the "Directors Plan"), as of the date
of this Agreement, there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Company or any of its subsidiaries is a party or by which any of
them is bound (i) obligating the Company or any of its subsidiaries to issue,
deliver, sell, transfer, repurchase, redeem or otherwise acquire or vote, or
cause to be issued, delivered, sold, transferred, repurchased, redeemed or
otherwise acquired or voted, any shares of capital stock or other voting
securities of the Company or of any of its subsidiaries, (ii) restricting the
transfer of Common Stock or (iii) obligating the Company or any of its
subsidiaries to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking.
Section 4.3 Subsidiaries. All of the outstanding shares
of capital stock of each of the Company's subsidiaries that are owned by the
Company or any other subsidiary of the Company (collectively, the "Subsidiary
Shares") have been duly authorized and are validly issued, fully paid and
nonassessable and free of preemptive rights. Except as set forth in Section 4.3
of the Disclosure Letter, each of the Company's subsidiaries is a wholly owned
subsidiary. Except for the security interests listed in Section 4.3 of the
Disclosure Letter, all of the Subsidiary Shares are owned by the Company free
and clear of all liens, claims, charges, encumbrances or security interests
(collectively, "Liens") with respect thereto. Except for the capital stock of
its subsidiaries and, except as set forth in Section 4.3 of the Disclosure
Letter, the Company does not own, directly or indirectly, any capital stock or
other
<PAGE>
12
ownership interest in any corporation, limited liability company, partnership,
joint venture or other entity.
Section 4.4 Authorization; Binding Agreement. The
Company has the full corporate power and authority to execute and deliver this
Agreement and, subject to adoption of this Agreement by the stockholders of the
Company in accordance with the DGCL, the certificate of incorporation and
by-laws of the Company, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company, subject to the adoption
of this Agreement by the stockholders of the Company in accordance with the DGCL
and the certificate of incorporation and by-laws of the Company. This Agreement
has been duly and validly executed and delivered by the Company and, subject, in
the case of the Merger, to the adoption of this Agreement by the stockholders of
the Company in accordance with the DGCL and the certificate of incorporation and
by-laws of the Company, constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms except as
may be limited by (a) bankruptcy, insolvency, reorganization or other laws now
or hereafter in effect relating to creditors' rights generally and (b) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
Section 4.5 Noncontravention. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a) conflict with or result in any violation of any provision of the
certificate of incorporation or by-laws (or equivalent governing instruments) of
the Company or any of its subsidiaries, (b) except as set forth in Section 4.5
of the Disclosure Letter, require any consent, approval or notice under, or
conflict with or result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation, acceleration or loss of benefit or result in the
creation of any Lien upon the property or assets of the Company or any of its
subsidiaries) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, agreement or other instrument or obligation
(collectively, "Contracts and Other Agreements") to which the Company or any of
its subsidiaries is a party or by which any of them or any portion of their
properties or assets may be bound or (c) subject to the approvals, filings and
consents referred to in Section 4.6, violate any order, judgment, writ,
injunction, determination, award, decree, law, statute, rule or regulation
(collectively, "Legal Requirements") applicable to the Company or any of its
subsidiaries or any portion of their properties or assets; provided that no
representation or warranty is made in the foregoing clauses (b) and (c) with
respect to matters that, individually or in the aggregate, will not (x) have a
Material Adverse Effect with respect to the Company, (y) impair the ability of
the Company to perform its obligations under this Agreement in any material
respect or
<PAGE>
13
(z) delay in any material respect or prevent the consummation of any of the
transactions contemplated by this Agreement.
Section 4.6 Governmental Approvals. No consent, approval
or authorization of or declaration or filing with any foreign, federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality (each, a "Governmental Entity") on the part of the Company or
any of its subsidiaries that has not been obtained or made is required in
connection with the execution or delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, other
than (a) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware, (b) (1) filings and other applicable requirements under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (2) the filing with the SEC of (A) the Proxy Statement (as defined in
Section 4.8), and (B) such reports under Sections 13(a), 13(d), 14(d), 14(e) or
15(d) of the Exchange Act, as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (c) the filing of
appropriate documents with the relevant authorities of states other than
Delaware in which the Company or any of its subsidiaries is authorized to do
business, (d) such filings as may be required in connection with any state or
local tax which is attributable to the beneficial ownership of the Company's or
its subsidiaries', real property, if any, (e) such filings as may be required by
any applicable state securities or "blue sky" laws or state takeover laws,
(f) such filings and consents as may be required under any environmental, health
or safety law or regulation, or any health care licensure laws, reimbursement
authorities and their agents, certificate of need laws and other health care
laws and regulations, pertaining to any notification, disclosure or required
approval required by the Merger or the transactions contemplated by this
Agreement and (g) consents, approvals, authorizations, declarations or filings
that, if not obtained or made, will not, individually or in the aggregate, (x)
result in a Material Adverse Effect with respect to the Company, (y) impair the
ability of the Company to perform its obligations under this Agreement in any
material respect or (z) delay in any material respect or prevent the
consummation of any of the transactions contemplated by this Agreement.
Section 4.7 SEC Filings; Financial Statements;
Undisclosed Liabilities . The Company has made all filings required to be made
under the Exchange Act with the SEC since December 31, 1996 (the "SEC Filings").
As of their respective dates, the SEC Filings complied as to form in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Filings, and the SEC Filings did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements set forth in the SEC Filings
comply as to form in all material respects with
<PAGE>
14
applicable accounting requirements and the published rules and regulations of
the SEC promulgated under the Securities Act or the Exchange Act, as the case
may be, and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated in the notes to such financial statements) and fairly present
in all material respects the consolidated financial position of the Company and
its subsidiaries at the respective dates thereof and the consolidated results of
operations and cash flows for the respective periods then ended (subject, in the
case of unaudited interim financial statements, to exceptions permitted by Form
10-Q under the Exchange Act and to normal year-end adjustments). As of March 31,
1997, neither the Company nor any of its subsidiaries had, and since such date
neither the Company nor any of its subsidiaries has incurred, any liabilities of
any nature, whether accrued, absolute, contingent or otherwise, whether due or
to become due that are required to be recorded or reflected on a consolidated
balance sheet of the Company under generally accepted accounting principles,
except as reflected or reserved against or disclosed in the financial statements
of the Company included in the Filed SEC Filings (as defined in Section 4.9) or
as otherwise disclosed to Parent on or prior to the date hereof.
Section 4.8 Information Supplied. None of the
information supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9,
(iii) the proxy statement relating to the adoption of this agreement by the
Company's stockholders (the "Proxy Statement") or (iv) the information to be
filed by the Company in connection with the Offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the "Information Statement"), will, in the
case of the Offer Documents and the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the holders, or, in the case of the Proxy Statement, at the date the
Proxy Statement is first mailed to the Company's stockholders and at the time of
the meeting of the Company's stockholders held to vote on approval and adoption
of this Agreement, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Merger Sub in writing specifically
for inclusion or incorporation by reference therein. The Schedule 14D-9, the
Proxy Statement and the Information Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Merger Sub in writing specifically
for inclusion or incorporation by reference therein or as set forth in any of
Guarantor's (as defined in Section 9.1) SEC publicly available filings with the
SEC.
<PAGE>
15
Section 4.9 Absence of Certain Changes or Events. Except
as disclosed in the SEC Filings filed and publicly available prior to the date
hereof (the "Filed SEC Filings") since December 31, 1996, the Company and its
subsidiaries have conducted their respective businesses in the ordinary course
consistent with past practice and as of the date hereof there has not been (i)
any condition, event or occurrence that, individually or in the aggregate, has
resulted in a Material Adverse Effect with respect to the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) except as reflected in Section 4.2 of the Disclosure Letter
and except as disclosed in this Agreement or as set forth in Section 4.9 of the
Disclosure Letter, (x) any granting by the Company or any of its subsidiaries to
any executive officer or other key employee of the Company or any of its
subsidiaries of any increase in compensation, except for normal increases in the
ordinary course of business consistent with past practice or as required under
employment agreements in effect as of December 31, 1996, (y) any granting by the
Company or any of its subsidiaries to any such executive officer of any increase
in severance or termination pay, except as was required under any employment,
severance or termination agreements in effect as of December 31, 1996 or (z) any
entry by the Company or any of its subsidiaries into any employment, severance
or termination agreement with any such executive officer except in the ordinary
course of business consistent with past practice, (v) any damage, destruction or
loss, whether or not covered by insurance, that has had or will have a Material
Adverse Effect with respect to the Company or (vi) except insofar as may have
been disclosed in the Filed SEC Filings or required by a change in generally
accepted accounting principles, any change in accounting methods, principles or
practices except as required by generally accepted accounting principles.
Section 4.10 Finders and Investment Bankers. Neither the
Company nor any of its officers or directors has employed any investment banker,
business consultant, financial advisor, broker or finder in connection with the
transactions contemplated by this Agreement, except for Schroder Wertheim & Co.
Incorporated ("Schroder") and Smith Barney (the fees of which, in each case,
will be paid by the Company), or incurred any liability for any investment
banking, business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the transactions contemplated hereby, except for
fees payable to Schroder and Smith Barney. The Company has provided Parent with
a true and correct copy of the fee letter between the Company and each of Smith
Barney and Schroder.
Section 4.11 Voting Requirement. The affirmative vote of
the holders of a majority of the outstanding shares of Common Stock in favor of
adoption of this Agreement and the Merger is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement and the transactions
<PAGE>
16
contemplated hereby under any applicable law, rule or regulation or pursuant to
the requirements of the Company's certificate of incorporation or by-laws.
Section 4.12 Litigation. Except as disclosed in the
Filed SEC Filings or in Section 4.12 of the Disclosure Letter, there is no suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries that, individually or in the
aggregate, will have a Material Adverse Effect with respect to the Company (it
being understood that this representation shall not include any litigation which
might result in an order, injunction or decree of the nature described in
paragraph (a) of Exhibit A), nor is there any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding against the
Company or any of its subsidiaries having any such effect.
Section 4.13 Taxes. The Company and any consolidated,
combined, unitary or aggregate group for tax purposes of which the Company is or
has been a member has timely filed all material Tax Returns required to be filed
by it and has paid, or has set up an adequate reserve for the payment of, all
Taxes required to be paid as shown on such returns, and the most recent
financial statements contained in the SEC Filings reflect an adequate reserve
for all Taxes payable by the Company and each of its subsidiaries accrued
through the date of such financial statements whether or not shown as being due
on any returns. All material Taxes that the Company and its subsidiaries are
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued. The unpaid Taxes, including any
contingent tax liabilities and net deferred tax liabilities, of the Company and
each of its subsidiaries which have accrued as of the date of the most recent
financial statements contained in the SEC Filings do not materially exceed the
reserve for accrued tax liability set forth or included in such financial
statements. Neither the Company nor any of its subsidiaries has been notified
that any Tax Returns of the Company or its subsidiaries are currently under
audit by the Internal Revenue Service (the "IRS") or any state or local tax
agency and no action, suit, investigation, claim or assessment is pending or
proposed with respect to any material amount of Taxes of the Company or any of
its subsidiaries. No agreements have been made by the Company or its
subsidiaries for the extension of time or the waiver of the statute of
limitations for the assessment or payment of any federal, state or local Taxes.
No material claim for unpaid Taxes has become a lien or encumbrance of any kind
against the property of the Company or any of its subsidiaries or is being
asserted against the Company or any of its subsidiaries. As used herein, "Taxes"
shall mean any taxes of any kind, including but not limited to those on or
measured by or referred to as income, gross receipts, capital, sale, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, customs, duties or similar fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, domestic or foreign.
As used herein, "Tax Return" shall
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17
mean any return, report or statement required to be filed with any governmental
authority with respect to Taxes.
Section 4.14 Compliance with Laws. Except as set forth
in Section 4.14 of the Disclosure Letter or in the SEC filings, neither the
Company nor any of its subsidiaries is in conflict with, or in default or
violation of, any law, rule, regulation, order, judgment or decree applicable to
the Company or any subsidiary or by which any property or asset of the Company
or any subsidiary is bound or affected, except for any such conflicts, defaults
or violations that would not in the aggregate have a Material Adverse Effect
with respect to the Company. Except as set forth in Schedule 4.14 of the
Disclosure Letter or in the SEC filings, the Company and its subsidiaries have
all permits, licenses, authorizations, consents, approvals and franchises from
governmental agencies required to conduct their businesses as now being
conducted (the "Company Permits"), except for such permits, licenses,
authorizations, consents, approvals and franchises the absence of which would
not in the aggregate have a Material Adverse Effect with respect to the Company.
Except as set forth in Section 4.14 of the Disclosure Letter or in the SEC
filings, the Company and its subsidiaries are in compliance with the terms of
the Company Permits, except where the failure so to comply would not in the
aggregate have a Material Adverse Effect with respect to the Company.
Section 4.15 Title to Properties. The Company and its
subsidiaries have good, valid and marketable title to the properties and assets
reflected on the most recent consolidated balance sheet included in the SEC
Filings (the "Balance Sheet") (other than properties and assets disposed of in
the ordinary course of business since the date of the Balance Sheet), and all
such properties and assets are free and clear of any Liens, except as described
in the Filed SEC Filings and the financial statements included therein or in
Section 4.3 or 4.15 of the Disclosure Letter, liens for current taxes not yet
due and other than Liens or title imperfections that will not have a Material
Adverse Effect with respect to the Company.
Section 4.16 Other Agreements. Except as set forth in
Section 4.16 of the Disclosure Letter , neither the Company nor any of its
subsidiaries is in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument to which it is a party where such default will have a
Material Adverse Effect with respect to the Company.
Section 4.17 Employee Benefit Plans. (a) The Company and
each of its subsidiaries have complied, and currently are in compliance, in all
material respects with the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Code and all other
applicable laws with respect to each material compensation or benefit plan,
agreement, policy, practice, program or arrangement (whether or not subject to
ERISA) maintained by the
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18
Company or any of its subsidiaries for the benefit of any employee, former
employee, independent contractor or director of the Company and its subsidiaries
(including, without limitation, any employment agreements or any pension,
savings, profit-sharing, bonus, medical, insurance, disability, severance,
equity-based or deferred compensation plans) (collectively, the "Plans"). (b)
The Company has provided or made available a current, accurate and complete copy
of each Plan to Parent and, to the extent applicable to the Plans, (i) copies of
any funding instruments, (ii) summary plan descriptions and (iii) Forms 5500 for
the last three years.
(c) Each of the Plans that is intended to qualify
under Section 401(a) of the Code has received, or has filed for, a favorable
determination letter from the IRS ruling that the Plan, does so qualify and that
the trust is exempt from taxation pursuant to Section 501(a) of the Code.
(d) Except as set forth in Section 4.17(d) of the
Disclosure Letter, neither the Company nor any of its subsidiaries has within
the past 5 years maintained, adopted or established, contributed or been
required to contribute to, or otherwise participated in or been required to
participate in, any employee benefit plan or other program or arrangement
subject to Title IV of ERISA (including, without limitation, a "multi-employer
plan" (as defined in Section 3(37) of ERISA) and a defined benefit plan (as
defined in Section 3(35) of ERISA)).
(e) No Plan, other than a Plan which is an employee
pension benefit plan (within the meaning of Section 3(2)(A) of ERISA), provides
any material amount of health or medical benefits (whether or not insured), with
respect to current or former employees of the Company beyond their retirement or
other termination of service with the Company (other than (i) coverage mandated
by applicable law, (ii) benefits the full cost of which is borne by the current
or former employee (or his or her beneficiary) or (iii) benefits pursuant to
employment agreements or other arrangements disclosed pursuant to this
Agreement).
(f) Except as set forth in Section 4.17(f) of the
Disclosure Letter, neither the Company nor its subsidiaries has incurred any
withdrawal liability with respect to any Plan that is a multiemployer plan
(within the meaning of Section 3(37) of ERISA) which would have a Material
Adverse Effect with respect to the Company.
(g) No reportable event (within the meaning of
Section 4043 of ERISA) (other than an event for which the 30-day notice period
is waived) or prohibited transaction (within the meaning of Section 4975 of the
Code or Section 406 of ERISA) has occurred with respect to any Plan that will
have a Material Adverse Effect with respect to the Company.
(h) There are no pending or, to the knowledge of the
Company, threatened actions, claims or lawsuits by any individuals or entities
with respect to
<PAGE>
19
any Plan (other than for routine benefit claims) that will have a Material
Adverse Effect with respect to the Company.
(i) Except as set forth in Section 4.17(i) of the
Disclosure Letter, no payments or benefits under any Plan are triggered (in
whole or in part) solely as a result of the transactions contemplated by this
Agreement that will have a Material Adverse Effect with respect to the Company.
(j) No Plan provides for any stock option that is
exercisable into the stock of any of the subsidiaries of the Company.
Section 4.18 Insurance. The Company maintains, and has
maintained, without interruption, during the past three years, policies or
binders of insurance covering such risks, and events, including personal injury,
property damage and general liability, in amounts the Company reasonably
believes adequate for its business and operations.
Section 4.19 Environmental Matters.
(a) Except as set forth in the Filed SEC Filings,
(i) the assets, properties, businesses and operations of the Company and its
subsidiaries are and have been in compliance with applicable Environmental Laws
(as defined below), except for such non-compliance which has not had and will
not have a Material Adverse Effect with respect to the Company); (ii) the
Company and its subsidiaries have obtained and, as currently operating, are in
compliance with all Company Permits necessary under any Environmental Law for
the conduct of the business and operations of the Company and its subsidiaries
in the manner now conducted except for such non-compliance which has not had and
will not have a Material Adverse Effect with respect to the Company; (iii) all
Hazardous Substances generated at or in connection with the real properties and
operation of the Company have been transported and otherwise handled, treated
and disposed of in compliance with all applicable Environmental Laws and in a
manner that does not result in liability under Environmental Laws, except for
noncompliance or liability which has not had and will not have a Material
Adverse Effect with respect to the Company, (iv) no Hazardous Substances have
been disposed of or otherwise released, handled or stored by the Company on the
real properties on which the Company's business is conducted or elsewhere in
violation of applicable Environmental Laws or in a manner that would result in
liability under applicable Environmental Laws which will have a Material Adverse
Effect with respect to the Company and (v) neither the Company nor any of its
subsidiaries nor any of their respective assets, properties, businesses or
operations has received or is subject to any outstanding order, decree,
judgment, complaint, agreement, claim, citation, notice, or to the knowledge of
the Company, any investigation, inquiry or proceeding indicating that the
Company or any of its subsidiaries is or may be (a) liable for a violation of
any Environmental Law or
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20
(b) liable for any Environmental Liabilities and Costs (including, without
limitation, any such Environmental Liabilities or Costs incurred in connection
with being designated as a "potentially responsible party" pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act or any
analogous state law), where in each case such liability would have a Material
Adverse Effect with respect to the Company.
(b) For purposes of this Agreement, the terms below
shall have the following meanings:
"Environmental Law" means any law (including, without
limitation, common law), regulation, ordinance, guideline, code, decree,
judgment, order, permit or authorization or other legally enforceable
requirement of any Governmental Authority relating to worker or public safety
and the indoor and outdoor environment, including, without limitation,
pollution, contamination, Hazardous Substances, cleanup, regulation and
protection of the air, water or soils in the indoor or outdoor environment; and
"Environmental Liabilities and Costs" means all damages,
penalties, obligations or clean-up costs assessed or levied pursuant to any
Environmental Law;
"Hazardous Substances" means petroleum products, asbestos,
radioactive material, or hazardous or toxic substances or wastes as defined or
regulated under any Environmental Law.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company
as follows:
Section 5.1 Organization. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Merger Sub is a newly formed,
wholly owned subsidiary of the Parent and, except for activities incident to the
acquisition of the Company, Merger Sub has not engaged in any business
activities of any type or kind whatsoever.
Section 5.2 Authorization; Binding Agreement. Each of
Parent and Merger Sub has the full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution
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21
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of each of Parent and Merger Sub. This Agreement
has been duly and validly executed and delivered by each of Parent and Merger
Sub and constitutes a legal, valid and binding agreement of each of Parent and
Merger Sub, enforceable against each of them in accordance with its terms except
as may be limited by (a) bankruptcy, insolvency, reorganization or other laws
now or hereafter in effect relating to creditors' rights generally and
(b) general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
Section 5.3 Noncontravention. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a) conflict with or result in any violation of any provision of the
certificate of incorporation or by-laws of Parent or Merger Sub, (b) require any
consent, approval or notice under, or conflict with or result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any Contracts and Other
Agreements to which Parent or Merger Sub is a party or by which either of them
or any portion of their properties or assets may be bound or (c) subject to the
matters referred to in clauses (a), (b) and (c) of Section 5.4 below, violate
any Legal Requirements applicable to Parent or Merger Sub or any material
portion of their properties or assets; provided that no representation or
warranty is made in the foregoing clauses (b) and (c) with respect to matters
that, individually or in the aggregate, will not have a Material Adverse Effect
with respect to Parent.
Section 5.4 Governmental Approvals. No consent, approval
or authorization of, or declaration or filing with, any Governmental Entity on
the part of either Parent or Merger Sub that has not been obtained or made is
required in connection with the execution or delivery by Parent or Merger Sub of
this Agreement or the consummation by Parent or Merger Sub of the transactions
contemplated hereby, other than (a) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (b) (1) filings under the HSR
Act, (2) the filing with the SEC of such reports under Sections 13(a), 13(d),
14(d), 14(e) or 15(d) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this Agreement, and (3) as
set forth on Schedule 5.4 and (c) the filing of appropriate documents with the
relevant authorities of states other than Delaware in which Parent or any of its
subsidiaries is authorized to do business, (d) such filings as may be required
in connection with any state or local tax which is attributable to the
beneficial ownership of Parent's or its subsidiaries', real property, if any,
(e) such filings as may be required by any applicable state securities or "blue
sky" laws or state takeover laws, (f) such filings and consents as may be
required under any environmental, health or safety law or regulation, or any
health care licensure laws, reimbursement authorities and their agents,
certificate of need laws
<PAGE>
22
and other health care laws and regulations, pertaining to any notification,
disclosure or required approval required by the Merger or the transactions
contemplated by this Agreement and (g) consents, approvals, authorizations,
declarations or filings that, if not obtained or made, will not, individually or
in the aggregate, result in a Material Adverse Effect on the Parent or prevent
or significantly delay Parent or Merger Sub from consummating the transactions
contemplated hereby.
Section 5.5 Information Supplied. None of the
information supplied or to be supplied in writing by Parent or Merger Sub
specifically for inclusion or incorporation by reference in the Proxy Statement
will, in the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the holders, or, in the case of the Proxy Statement, at the date the
Proxy Statement is first mailed to the Company's stockholders or at the time of
the meeting of the Company's stockholders held to vote on approval and adoption
of this Agreement, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by
Parent or Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied in writing by the Company
specifically for inclusion or incorporation by reference therein.
Section 5.6 Financing. After giving effect to borrowings
under Parent's debt financing commitments (the "Debt Financing Commitments"),
true and complete copies of which have been provided to the Company, Merger Sub
will have sufficient funds available to purchase all the outstanding shares on a
fully diluted basis of Common Stock pursuant to the Offer and the Merger, to
refinance all indebtedness that will or may become due as a result of the
consummation of the Offer or the Merger and to pay all fees and expenses
incurred by it or disclosed pursuant to Section 4.10 related to the transactions
contemplated by this Agreement.
Section 5.7 Fraudulent Transfer Laws. Assuming the
Company is not Insolvent (as defined below) prior to the Effective Time,
immediately after the Effective Time and after giving effect to any change in
the Surviving Corporation's assets and liabilities as a result of the Merger,
the Surviving Corporation will not be Insolvent. For purposes hereof, an entity
will be deemed to be "Insolvent" if (i) such entity's financial condition is
such that either the sum of its debts is greater than the fair value of its
assets or the fair saleable value of its assets is less than the amount required
to pay its probable liability on existing debts as they mature, (ii) such entity
has unreasonably small capital with which to engage in its business or (iii)
such entity has incurred liabilities beyond its ability to pay as they become
due. The
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23
representation and warranty set forth in this Section 5.7 shall be deemed to be
made only upon the purchase of shares of Common Stock in the Offer.
Section 5.8 Finders and Investment Bankers. Neither
Parent or Merger Sub nor any of their respective officers or directors has
employed any investment banker, business consultant, financial advisor, broker
or finder in connection with the transactions contemplated by this Agreement,
except that Guarantor (as defined in Section 9.1) has employed Montgomery
Securities, Incorporated ("Montgomery"), or incurred any liability for any
investment banking, business consultancy, financial advisory, brokerage or
finders' fees or commissions in connection with the transactions contemplated
hereby, except for fees payable to Montgomery, all of which fees have been or
will be paid by the Guarantor.
Section 5.9 Regulatory Approval. Parent is not aware of
any existing impediment to the approval of the transactions contemplated hereby
by any Governmental Authority whose approval is required to consummate the
transactions contemplated hereby.
ARTICLE 6
COVENANTS
Section 6.1 Conduct of Business of the Company. Except
as set forth in Section 6.1 of the Disclosure Letter or contemplated by this
Agreement, during the period commencing on the date hereof and ending at the
Effective Time, the Company shall, and shall cause each of its subsidiaries to,
conduct its operations according to its ordinary course of business consistent
with past practice, and the Company shall, and shall cause each of its
subsidiaries to, use all reasonable efforts to preserve intact its business
organization and to maintain satisfactory relationships with its customers,
suppliers and others having material business relationships with it; provided,
that it shall not be a breach of this covenant if the Company fails to conduct
its operations according to its ordinary course of business consistent with past
practice if such deviation results from the limitations set forth in clauses (e)
or (g) below. Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the Effective Time, the
Company will not and will not permit any or its subsidiaries to, without the
prior written consent of the Parent:
(a) amend or propose to amend its certificate of
incorporation or by-laws (or equivalent governing instruments);
(b) authorize for issuance, issue, sell, pledge,
deliver or agree or commit to issue, sell, pledge or deliver (whether through
the issuance or
<PAGE>
24
granting of any options, warrants, calls, subscriptions, stock appreciation
rights or other rights or other agreements) or otherwise encumber any capital
stock of any class or any securities convertible into or exchangeable for shares
of capital stock of any class, other than the issuance of shares of Common Stock
issuable upon exercise of Company Stock Options or conversion of 7% Debentures
outstanding on the date of this Agreement or pursuant to the Stock Purchase Plan
or the Directors Plan (in each of such case, in accordance with the present
terms thereof);
(c) split, combine or reclassify any of its capital
stock or declare, pay or set aside for payment any dividend or other
distribution in respect of or substitution for its capital stock, or redeem,
purchase or otherwise acquire any shares of its capital stock;
(d) except as set forth in Schedule 4.9, increase or
establish any compensation or benefit plan, agreement, policy, practice, program
or arrangement that would be a Plan (had such plan, agreement, policy, practice,
program or arrangement been adopted prior to the date of this Agreement) or
otherwise increase in any manner the compensation payable or to become payable
by the Company or any of its subsidiaries to any of their respective directors,
officers, former employees, or employees, other than in the ordinary course of
business consistent with past practice or as required under any existing
employment agreement or Plan or this Agreement;
(e) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, limited liability company,
partnership, joint venture, association or other business organization or
division thereof or (y) any assets, outside of the ordinary course of business
that in the aggregate is in excess of $10 million; it being understood that the
foregoing does not restrict any construction project heretofore identified or
commenced by the Company that is not prohibited by Section 6.1(h) below;
(f) sell, lease, license, or otherwise dispose of, or
enter into any material contract, commitment, lease or agreement with respect
to, any properties or assets (i) that are material to the Company and its
subsidiaries taken as a whole and (ii) other than in the ordinary course of
business consistent with past practice;
(g) (x) incur any long-term indebtedness in excess of
the aggregate amount of the Company's consolidated long-term indebtedness
outstanding as of June 16, 1997 other than (i) indebtedness not to exceed $10
million at any one time outstanding, the proceeds of which are used to make
acquisitions permitted by clause (e) above; provided, that the ratio of the
principal amount of the indebtedness incurred to finance such acquisitions to
the aggregate pro forma cash flow of the businesses so acquired during the four
fiscal quarters preceding such acquisition does
<PAGE>
25
not exceed 6:1, and (ii) additional indebtedness not to exceed $10 million on
the date shares are purchased in the Offer, and except for intercompany
indebtedness between the Company and any of its subsidiaries or between such
subsidiaries, or (y) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect subsidiary or joint venture of the Company or to officers and employees
of the Company or any of its subsidiaries for travel, business or relocation
expenses in the ordinary course of business consistent with past practice;
(h) make or agree to make any new capital expenditure
or capital expenditures other than in accordance with the Company's 1997 budget
previously delivered to Parent;
(i) make any tax election or settle or compromise any
tax liability that will have a Material Adverse effect with respect to the
Company;
(j) make any material change to its accounting
methods, principles or practices, except as may be required by generally
accepted accounting principles;
(k) enter into any other agreements, commitments or
contracts that are material to the Company and its subsidiaries taken as a
whole, other than in the ordinary course of business consistent with past
practice, or otherwise make any material change that is adverse to the Company
(including by way of termination) in (i) any existing agreement, commitment or
arrangement that is material to the Company and its subsidiaries taken as a
whole or (ii) the conduct of the business or operations of the Company and its
subsidiaries; or
(l) agree, commit or arrange to do any of the
foregoing.
Section 6.2 Stockholder Approval; Proxy Statement.
Following the purchase of shares of Common Stock pursuant to the Offer, the
Company shall take all action necessary in accordance with applicable law to
convene a meeting of its stockholders as promptly as practicable to consider and
vote upon this Agreement and the transactions contemplated hereby. The Company
shall, through its Board of Directors (the "Board"), recommend that the
Company's stockholders vote in favor of the adoption of this Agreement and the
transactions contemplated hereby, subject to the Board's fiduciary duty under
applicable law. As soon as practicable, following the purchase of shares of
Common Stock pursuant to the Offer, the Company shall prepare and file with the
SEC under the Exchange Act the Proxy Statement and shall use its reasonable best
efforts to cause the Proxy Statement to be mailed to stockholders of the Company
as promptly as practicable after such filing. At the meeting of the Company's
stockholders, the Parent shall cause all Parent Shares to be
<PAGE>
26
voted in favor of the adoption of this Agreement and the transactions
contemplated hereby.
Section 6.3 Access and Information. Between the date of
this Agreement and the Effective Time, the Company shall, and shall cause its
subsidiaries to, afford the Parent and its authorized representatives (including
its accountants, financial advisors and legal counsel) reasonable access during
normal business hours to all of the properties, personnel, Contracts and Other
Agreements, books and records of the Company and its subsidiaries and shall
promptly deliver or make available to the Parent (a) a copy of each report,
schedule and other document filed by the Company pursuant to the requirements of
federal or state securities laws and (b) all other information concerning the
business, properties, assets and personnel of the Company and its subsidiaries
as the Parent may from time to time reasonably request. The terms of the
Confidentiality Agreements (the "Confidentiality Agreements") between the
Company and Parent are incorporated herein by reference and shall remain in full
force and effect.
Section 6.4 No Solicitation. The Company, its subsidiaries
and their respective officers, directors, employees, representatives and
advisors shall immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any Acquisition
Proposal; provided that following the cessation of any such discussions or
negotiations, future discussions or negotiations with any such parties shall be
governed solely by the provision of this Section 6.4 other than this sentence.
Except pursuant to this Agreement, neither the Company or any of its
subsidiaries, nor any of their respective officers, directors, employees or
representatives or advisors, shall, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any person or group (other than Parent and Merger Sub or any
affiliate, associate or designee of Parent or Merger Sub) concerning any
proposal (an "Acquisition Proposal") for an acquisition of all or any
substantial part of the business and properties or capital stock of the Company
and its subsidiaries taken as a whole, directly or indirectly, whether by
merger, consolidation, share exchange, tender offer, purchase of assets or
shares of capital stock or otherwise (an "Acquisition Transaction").
Notwithstanding the foregoing, (a) the Board may take, and disclose to the
Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with respect to any tender offer for shares
of capital stock of the Company; provided, that the Board shall not recommend
that the stockholders of the Company tender their shares in connection with any
such tender offer unless the Board shall have determined in good faith, after
consultation with outside counsel that failing to take such action would
constitute a breach of the Board's fiduciary duty under applicable law; (b) the
Company may, directly or indirectly, furnish information and access, in each
case only in response to unsolicited requests therefor, to any person or group
pursuant to customary confidentiality agreements, and may participate in
discussions and negotiate with such person or
<PAGE>
27
group concerning any Acquisition Proposal, if such person or group has submitted
a written Acquisition Proposal to the Board and the Board determines in its good
faith judgment, after consultation with outside counsel that failing to take
such action would constitute a breach of the Board's fiduciary duty under
applicable law; and (c) the Company may take the actions described in Section
8.1(c). The Board shall notify Parent immediately if any such Acquisition
Proposal is made and shall in such notice, indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal and,
subject to the fiduciary duties of the Board of Directors under applicable law,
shall keep Parent promptly advised of all developments which could reasonably be
expected to culminate in the Board of Directors withdrawing, modifying or
amending its recommendation of the Merger and the other transactions
contemplated by this Agreement. The Company agrees not to release any third
party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company is a party, unless the Board shall have
determined in good faith, that failing to release such third party or waive such
provisions would constitute a breach of the fiduciary duties of the Board of
Directors under applicable law.
Section 6.5 Reasonable Efforts; Additional Actions.
(a) Upon the terms and subject to the conditions of
this Agreement, each of the parties hereto shall use all reasonable efforts to
take, or cause to be taken, all action, and to do or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by, and in connection with, this Agreement,
including using all reasonable efforts to (i) obtain all consents, amendments to
or waivers under the terms of any of the Company's contractual arrangements
required by the transactions contemplated by this Agreement (other than
Agreements relating to its long term debt, consents, amendments or waivers the
failure of which to obtain will not, individually or in the aggregate, (x) have
a Material Adverse Effect with respect to the Company, (y) impair the ability of
the Company to perform its obligations under this Agreement in any material
respect or (z) delay in any material respect or prevent the consummation of any
of the transactions contemplated by this Agreement), (ii) effect promptly all
necessary or appropriate registrations and filings with Governmental Entities,
including, without limitation, filings and submissions pursuant to the HSR Act,
the Exchange Act, the DGCL and state and federal licensing authorities,
(iii) defend any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby and (iv) fulfill or cause the fulfillment of
the conditions to Closing set forth in Article 7. In connection with and without
limiting the foregoing, the Company and its Board of Directors shall (x) take
all action necessary to ensure that no state takeover statute or similar statute
or regulation (including, without limitation, Section 203 of the DGCL) is or
becomes applicable to the Offer, the Merger, this Agreement or any of the other
transactions
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28
contemplated by this Agreement or the Voting Agreement and (y) if any state
takeover statute or similar statute or regulation becomes applicable to the
Offer, the Merger, this Agreement or any other transaction contemplated by this
Agreement or the Voting Agreement, take all action necessary to ensure that the
Offer, the Merger and the other transactions contemplated by this Agreement and
the Voting Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on the Offer, the Merger, this Agreement and the other
transactions contemplated by this Agreement and the Voting Agreement.
Notwithstanding the foregoing, the Board of Directors of the Company shall not
be prohibited from taking any action permitted by the terms of this Agreement.
(b) If, at any time after the Effective Time, the
Surviving Corporation shall determine or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation the right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
(c) In furtherance and without limiting the above
provisions, each of the Company and Parent shall as promptly as practicable
following the execution and delivery of this Agreement, but not later than
10 days following the commencement of the Offer, file with the United States
Federal Trade Commission (the "FTC") and the United States Department of Justice
("DOJ") the notification and report form, if any, required for the transactions
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act. Any such notification and report form and
supplemental information shall be in substantial compliance with the
requirements of the HSR Act. Each of the Company and Parent shall furnish to the
other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. The Company and Parent shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, the FTC and the DOJ and shall comply promptly
with any such inquiry or request. Each of Parent and the Company shall use all
reasonable efforts to obtain any clearance required under the HSR Act for, and
<PAGE>
29
to provide assistance to the other in any antitrust proceedings related to, the
consummation of the transactions contemplated by this Agreement.
(d) Parent agrees to cause to be filed as promptly as
practicable and in no event later than July 15, 1997, all other applications and
notices ("Applications") required to be filed with Governmental Authorities in
order to consummate the Offer and the Merger, and to pursue diligently the
approval of such Applications.
Section 6.6. Notification of Certain Matters. The Company
shall give notice to Parent, and Parent and Merger Sub shall give notice to the
Company, promptly upon becoming aware of (a) any occurrence, or failure to
occur, of any event, which occurrence or failure to occur has caused or will
cause any representation or warranty in this Agreement to be untrue or
inaccurate in any material respect at any time after the date hereof and prior
to the Effective Time and (b) any material failure on its part to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided that the delivery of any notice pursuant to this Section
6.6 shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 6.7. Public Announcements. The initial press
release or releases with respect to the transactions contemplated by this
Agreement shall be in the form agreed to by Parent and the Company. Thereafter,
for as long as this Agreement is in effect, Parent and Merger Sub, on the one
hand, and the Company, on the other hand, shall not, and shall cause their
subsidiaries and affiliates not to, issue or cause the publication of any press
release or any other announcement with respect to the Offer, the Merger, this
Agreement or the other transactions contemplated hereby without the consent of
the other (which shall not be unreasonably withheld or delayed), except where
such release or announcement is required by applicable law or pursuant to any
listing agreement with, or the rules or regulations of, any securities exchange
or any other regulatory requirement. Parent and Merger Sub acknowledge and
accept that, promptly after the execution and delivery of this Agreement, the
Company will file with the SEC a Current Report on Form 8-K, reporting such
event and including a copy of this Agreement as an exhibit thereto.
Section 6.8 Indemnification and Insurance. (a) Merger Sub
agrees that all rights to indemnification existing in favor of the present or
former directors, officers, and employees of the Company (as such) or any of its
subsidiaries or present or former directors of the Company or any of its
subsidiaries serving or who served at the Company's or any of its subsidiaries'
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, as
provided in the Company's certificate of incorporation or by-laws, or the
articles of incorporation, by-laws or similar documents of any of the Company's
subsidiaries and the indemnification agreements with such present and
<PAGE>
30
former directors, officers and employees as in effect as of the date hereof
with respect to matters occurring at or prior to the Effective Time shall
survive the Merger and shall continue in full force and effect and without
modification (other than modifications following the Merger which would enlarge
the indemnification rights) for a period of not less than the statutes of
limitations applicable to such matters, and the Surviving Corporation shall
comply fully with its obligations hereunder and thereunder. Without limiting the
foregoing, the Company shall, and after the Effective Time, the Surviving
Corporation shall periodically advance reasonably incurred expenses as so
incurred with respect to the foregoing (including with respect to any action to
enforce rights to indemnification or the advancement of expenses) to the fullest
extent permitted under applicable law; provided, however, that the person to
whom the expenses are advanced provides an undertaking (without delivering a
bond or other security) to repay such advance if it is ultimately determined
that such person is not entitled to indemnification.
(b) For a period of six (6) years after the Effective
Time, the Surviving Corporation shall maintain officers' and directors'
liability insurance and fiduciary liability insurance covering the persons
described in paragraph (a) of this Section 6.8 (whether or not they are entitled
to indemnification thereunder) who are currently covered by the Company's
existing officers' and directors' or fiduciary liability insurance policies on
terms no less advantageous to such indemnified parties than such existing
insurance.
(c) The Surviving Corporation shall indemnify and
hold harmless (and shall advance expenses to), to the fullest extent permitted
under applicable law, each director, officer, employee, fiduciary and agent of
the Company or any subsidiary of the Company including, without limitation,
officers and directors, serving as such on the date hereof against any costs and
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation relating to any of the
transactions contemplated hereby, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), (i) the Surviving Corporation shall pay the reasonable fees and expenses
of counsel selected by the indemnified parties, promptly as statements therefor
are received and (ii) the parties hereto will cooperate in the defense of any
such matter; provided, however, that the Surviving Corporation shall not be
liable for any settlement effected without its prior written consent, which
consent shall not unreasonably be withheld.
(d) The Surviving Corporation shall pay all
reasonable costs and expenses, including attorneys' fees, that may be incurred
by and indemnified parties in enforcing the indemnity and other obligations
provided for in this Section 6.8.
<PAGE>
31
(e) In the event the Surviving Corporation or any of
its respective successors or assigns (i) consolidates with or merges into any
other person and is not the continuing ro surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, proper provisions shall be made so that the
successors and assigns of the Surviving Corporation assumes the obligations set
forth in this Section 6.8.
(f) This Section 6.8, which shall survive the
consummation of the Merger at the Effective Time and shall continue for the
periods specified herein, is intended to benefit the Company, the Surviving
Corporation, and any person or entity referenced in this Section 6.8 or
indemnified hereunder each of whom may enforce the provisions of this Section
6.8 (whether or not parties to this Agreement).
Section 6.9 Indemnification of Brokerage. Parent and
Merger Sub, on the one hand, and the Company, on the other hand, each agree to
indemnify and save the other harmless from any claim or demand for commission or
other compensation by any broker, finder, agent or similar intermediary claiming
to have been employed by or on behalf on Parent or Merger Sub or any of their
affiliates, on the one hand, or by the Company or any of its affiliates, on the
other hand, and to bear the cost of legal expenses incurred in defending any
such claim or demand.
Section 6.10 Directors. Promptly upon the acceptance for
payment of, and payment for, such number of shares of Common Stock by Merger Sub
pursuant to the Offer as satisfies the Minimum Condition (the "Majority
Acquisition"), and from time to time thereafter, Merger Sub shall be entitled to
designate such number of directors on the Board of Directors of the Company,
subject to compliance with Section 14(f) of the Exchange Act, as shall represent
a percentage of the Board of Directors equal to the percentage of the
outstanding shares of Common Stock owned by Merger Sub; provided that, from the
Majority Acquisition until the Effective Time, at least two persons who are
directors of the Company on the date hereof shall be directors of the Company
(the "Continuing Directors"); and provided further that, if the number of
Continuing Directors shall be reduced below two for any reason whatsoever, any
remaining Continuing Directors shall be entitled to designate a person to fill
such vacancy as a Continuing Director for purposes of this Agreement or, if no
Continuing Directors then remain, the other directors shall designate two
persons to fill such vacancies who shall not be officers, directors,
stockholders or affiliates of Parent, Merger Sub or the Company, and such
persons shall be deemed to be Continuing Directors for purposes of this
Agreement. The Company and its Board of Directors shall, at such time, take all
such action needed to cause Merger Sub's designees to be appointed to the
Company's Board of Directors, including either increasing the size of the Board
of Directors or securing the resignations of incumbent directors or both. At
such times, the Company will use its reasonable best efforts to cause persons
designated by Merger Sub to constitute the
<PAGE>
32
same percentages as is on the board of (i) each committee of the Board of
Directors; (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board, in each case only to the extent
permitted by law. Subject to applicable law, the Company shall promptly take all
action requested by Parent necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder not later than ten days prior to the scheduled Expiration Date of the
Offer, and the Company agrees to make such mailing with the mailing of the
Schedule 14D-9 (provided that Merger Sub shall have provided to the Company on a
timely basis all information required to be included in the Information
Statement with respect to Merger Sub's designees).
Section 6.11 Company Debt. Parent acknowledges that
following the Effective Time the Surviving Corporation will be required to
comply with (i) the terms of all debt of the Company and its subsidiaries which,
as a result of the transactions contemplated by this Agreement, are terminated,
accelerated or otherwise become due or become subject to termination or
acceleration, and (ii) the provisions of agreements governing debt of the
Company which is not subject to termination or acceleration as a result of the
transactions contemplated hereby, including, without limitation:
(a) the Indenture between the Company and United
Jersey Bank, as Trustee (the "Indenture"), dated as of November 18, 1992,
including without limitation, Section 3.15 of the Indenture, and shall not
permit the Surviving Corporation to take any action that would violate or
conflict with the terms of the Indenture. Parent shall cause the Surviving
Corporation to provide such notices to holders of the Company's 12.50% Senior
Subordinated Notes due 2002 (the "12.50% Notes") as required by Section 3.15 of
the Indenture and to enter into such supplemental indentures and deliver such
certificates and opinions as may be required under the Indenture; and
(b) the Fiscal Agency Agreement between the Company
and The Chase Manhattan Bank, N.A. as fiscal agent (the "Fiscal Agency
Agreement"), dated March 16, 1995, and the 7% Debentures. Parent shall cause the
Surviving Corporation to take all such actions as are required by Section 15 of
the Fiscal Agency Agreement and Section 6 of the 7% Debentures including
providing such notice to the Fiscal Agent as is required therein and to enter
into such supplemental indentures and deliver such certificates and opinions as
may be required under the Indenture.
Section 6.12 Employee Matters. (a) Parent agrees to cause
the Surviving Corporation to comply in all respects with the change of control
provisions of the employment agreements of each of Moshael J. Straus, Daniel E.
Straus, Stephen R. Baker, Andrew Horowitz, Alan D. Solomont and Susan S. Bailis.
<PAGE>
33
Without limiting the foregoing, all amounts payable upon such change in control
shall be paid in cash immediately following the Majority Acquisition.
(b) (A) Parent agrees to pay or to cause the
Surviving Corporation to pay, in either case upon the terms and subject to the
conditions set forth in this Section 6.12(b), to each of the employees of the
Company identified in Section 6.12(b) of the Disclosure Letter (the "Affected
Employees") an amount (the "Accrued Bonus Payment") equal to such Affected
Employee's annual bonus (which amount is set forth opposite such Affected
Employee's name in Section 6.12(b) under the heading "Annual Bonus" of the
Disclosure Letter; provided, that such amounts may be changed by the Company
after the date hereof upon notice to Parent if the aggregate Accrued Bonus
Payment (as reduced by the Accrued Bonus Payment of any Affected Employee whose
employment is terminated prior to the Effective Time) would not increase as a
result of such change) multiplied by a fraction, the numerator of which is the
number of days that have elapsed from December 31, 1996 (or the date of hire of
the Affected Employee, if later) until the Effective Time and the denominator of
which is 365; provided, that if any such Employee (other than the persons
referred to in Section 6.12(a)) terminates his or her employment other than for
Good Reason to Terminate (as defined below) prior to December 31, 1997, the
numerator shall be the lesser of 181 and the number of days that have elapsed
from the date of hire of the Affected Employee until June 30, 1997.
(B) Payment of each Affected Employee's Accrued Bonus
Payment shall be payable upon the earlier to occur of (i) the termination
following the purchase of shares of Common Stock pursuant to the Offer of such
Affected Employee's employment, (ii) the occurrence of an event that constitutes
Good Reason to Terminate and (iii) not later than February 15, 1998, if the
Affected Employee is employed by the Surviving Corporation or any of its
subsidiaries on December 31, 1997.
(C) Parent agrees that at or prior to the Effective
Time, it will deposit, or cause to be deposited, in a segregated bank account an
amount equal to the aggregate Accrued Bonus Payment as of the Effective Time.
(c) Parent agrees that the Surviving Corporation
shall make severance payments to each of the Company's corporate and
non-facility employees and non-ancillary employees identified in Section 6.12(c)
of the Disclosure Letter (which does not include any person identified in
Section 6.12(a) above), on the date of termination of any such employee by the
Surviving Corporation or its subsidiary (other than a termination for Cause (as
defined below)), as the case may be, or by such employee following the
occurrence of an event that constitutes Good Reason to Terminate, in an amount
equal to the amount set forth opposite such person's name in Section 6.12(c) of
the Disclosure Letter. Prior to the date that is eighteen months after the
Effective Time, Parent agrees that the Surviving Corporation shall not, and
<PAGE>
34
shall not permit its subsidiaries to, terminate any such employees on less than
90 days prior written notice (a "Notice of Termination") of such termination.
Notwithstanding the foregoing, no employee shall be entitled to the severance
payment described in this Section 6.12(c) if such employee receives a Notice of
Termination or is terminated by the Company or voluntarily resigns at any time
prior to the purchase of Common Stock pursuant to the Offer or on a date that is
after the date that is eighteen months after the Effective Time. For purposes of
this Agreement, "Cause" means conviction of a felony or a crime involving
personal dishonesty or theft or misappropriation of the property of the
Surviving Corporation or its subsidiaries.
(d) For purposes hereof, "Good Reason to Terminate"
shall be deemed to occur if Parent, the Surviving Corporation or any of their
subsidiaries or affiliates shall (i) take any action which substantially reduces
an Affected Employee's title, duties, responsibilities, salary, or, unless such
change affects all employees of the Surviving Corporation or its subsidiaries at
a comparable level of seniority and responsibility, benefits, or (ii) require
the Affected Employee to relocate permanently in excess of 25 miles from the
Affected Employees' primary place of business.
(e) Notwithstanding anything to the contrary
contained herein or in any other document, agreement or instrument, if any
person is terminated by the Company (other than for Cause) following the
purchase of shares of Common Stock pursuant to the Offer but prior to the
Effective Time, all Company Stock Options held by any such person shall be
treated as provided in Section 3.1(d) hereof.
ARTICLE 7
CONDITIONS
Section 7.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement shall have been adopted by the
affirmative vote of the stockholders of the Company by the requisite vote in
accordance with applicable law;
(b) No Legal Requirements (including, without
limitation, any temporary restraining order or preliminary injunction) shall
have been enacted, entered, promulgated, issued or enforced by any court or
Governmental Entity, and no other legal restraint or prohibition shall be in
effect, that prohibits or prevents the consummation of the Merger; provided,
that the party or parties invoking this condition shall use reasonable efforts
to have any such Legal Requirement vacated or removed; and
<PAGE>
35
(c) Any waiting period applicable to the Merger under
the HSR Act shall have expired or been terminated.
ARTICLE 8
TERMINATION
Section 8.1 Termination. This Agreement may be
terminated and the Merger contemplated hereby may be abandoned at any time prior
to the Effective Time, whether before or after adoption by the stockholders of
the Company:
(a) By the mutual written consent of Parent, Merger
Sub and the Company (but only by action of the Continuing Directors after the
purchase of Common Stock pursuant to the Offer);
(b) By Parent, Merger Sub or the Company (but only by
action of the Continuing Directors after the purchase of Common Stock pursuant
to the Offer):
(i) if a court of competent jurisdiction or
other Governmental Entity of the United States shall have issued an order
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such Order or other action shall have become
final and nonappealable; or
(ii) (x) as a result of the failure,
occurrence or existence of any of the conditions set forth in Exhibit A
(1) Merger Sub shall have failed to commence the Offer within five
business days following the date of this Agreement or (2) the Offer shall
have terminated or expired in accordance with its terms without Merger Sub
having accepted for payment any shares of Common Stock pursuant to the
Offer or (y) Merger Sub shall not have accepted for payment any shares of
Common Stock pursuant to the Offer by September 15, 1997 provided, that
such date may be extended at the option of Parent to October 15, 1997, but
only if Parent is and has been diligently pursuing approval of the
Applications with the relevant Governmental Authorities; provided,
further, however, that the passage of the period referred to in clause (y)
shall be tolled for any part thereof (but not exceeding 30 calendar days
in the aggregate) during which any party shall be subject to a non-final
order, decree, ruling or action restraining, enjoining or otherwise
prohibiting the purchase of shares of Common Stock pursuant to the Offer
or the consummation of the Merger; and provided further that the right to
terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be
available to any party whose willful breach of its representations and
<PAGE>
36
warranties contained herein or whose failure to perform any of its
obligations under this Agreement results in the failure, occurrence or
existence of any such condition;
(c) By the Company if the Company receives an
Acquisition Proposal in writing from any person or group (i) that the Board
determines in its good faith judgment is more favorable to the Company's
stockholders than the Offer and the Merger and (ii) as a result of which, the
Board determines in good faith, after consultation with outside counsel, that it
is obligated by its fiduciary duty under applicable law to terminate this
Agreement; provided, that such termination pursuant to this clause (c) shall not
be effective until the Company has made payment of the full fee and expense
reimbursement required by Section 8.2;
(d) By Parent or Merger Sub prior to the purchase of
shares of Common Stock pursuant to the Offer in the event of a material breach
by the Company of any representation, warranty, covenant or other agreement
contained in this Agreement which has not been cured within 15 days after the
giving of written notice to the Company;
(e) By the Company, if Parent or Merger Sub shall
have breached in any material respect any of their respective representations,
warranties, covenants or other agreements contained in this Agreement, which
failure to perform has not been cured within 15 days after the giving of written
notice to Parent or Merger Sub;
(f) By Parent, if, prior to the purchase of Common
Stock in the Offer, the Company shall have (1) withdrawn, modified or amended in
any respect adverse to Parent or Merger Sub its approval or recommendation of
this Agreement or any of the transactions contemplated herein (2) failed to
include in the Proxy Statement or Information Statement such recommendation, (3)
recommended any Acquisition Proposal or Acquisition Transaction from or with a
person other than Parent or any of its subsidiaries or (4) resolved to do any of
the foregoing;
(g) By Parent, if, prior to the purchase of Common
Stock in the Offer (i) an Acquisition Proposal that is publicly disclosed shall
have been commenced, publicly proposed or communicated to the Company which
contains a proposal as to price (without regard to the specificity of such price
proposal) and (ii) the Company shall not have rejected such proposal within 10
business days of its receipt or the date its existence first becomes publicly
disclosed, if sooner;
(h) By Parent, if (i) any person or group (as defined
in Section 13(d)(2) of the Exchange Act) (other than Guarantor, Parent, Merger
Sub or any of its or their affiliates) shall have become, or shall have made a
proposal seeking to become, after the date hereof the beneficial owner (as
defined in Rule 13d-3
<PAGE>
37
promulgated under the Exchange Act) of at least 35% of outstanding Common Stock,
other than acquisitions of securities for bona fide arbitrage purposes only, and
other than acquisition of beneficial ownership solely as a result of a person
having discretionary authority to vote or dispose of shares in an investment
advisory or similar capacity or shall have made a proposal to acquire, directly
or indirectly, all or substantially all of the consolidated assets of the
Company and its subsidiaries and (ii) following public announcement of such
person or group becoming such beneficial owner or proposing such beneficial
ownership or acquisition, at the next scheduled expiration of the Offer all
conditions to the Offer (other than the Minimum Condition) shall have been
satisfied or waived; and
(i) By the Company, if Parent shall not have
delivered the letter of credit referred to in Section 9.4 by June 25, 1997.
Section 8.2 Fees and Expenses.
(a) If: (1) the Company terminates this Agreement
pursuant to 8.1(c); (2) the Company terminates this Agreement pursuant to
Section 8.1(b)(ii) hereof and at such time Parent would have been permitted to
terminate this Agreement under Section 8.1(f) or (g) hereof; (3) Parent
terminates this Agreement pursuant to Section 8.1(f) or (g) hereof; or
(4) Parent terminates this Agreement pursuant to Section 8.1(d) or (h) and (in
the case of clause (4) only) within one year of such termination the Company
shall have consummated, or have entered into a definitive agreement with respect
to, an Acquisition Transaction pursuant to which the holders of the Common Stock
have received or will receive consideration (including the value of any retained
equity) equal to or greater than the Merger Consideration, then the Company
shall pay to Parent, within one business day following (in the case of
clauses (1), (2) and (3)) such termination and, in the case of clause (4), such
consummation or entering into of a definitive agreement, a fee, in cash, of
$25 million, provided, however, that the Company in no event shall be obligated
to pay more than one such fee and the amount of fees paid under Section 8.2(a)
and the amount of expense reimbursement paid under Section 8.2(b) shall not
exceed $25 million.
(b) Upon the termination of this Agreement under
circumstances in which the Company shall be obligated to pay a fee pursuant to
Section 8.2(a), then the Company shall reimburse Parent and Guarantor (not later
than one business day after submission of statements therefor) for all actual
documented out-of-pocket expenses incurred by or on behalf of any of them or
their affiliates in connection with the Offer and the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, fees and disbursements payable to financing sources,
investment bankers, counsel to Purchaser, Parent, the Guarantor or any of the
foregoing, and accountants) ("expenses"). In all cases, the total amount of fees
paid under Section 8.2(a) and reimbursement of expenses under
<PAGE>
38
this Section 8.2(b) shall not exceed $25 million. Upon termination of this
Agreement pursuant to Section 8.1(d), the Company shall reimburse Parent (not
later than one business day after submission of statements therefor) for
expenses, which reimbursement shall in no event exceed $12 million.
Section 8.3. Procedure for and Effect of Termination . In
the event that this Agreement is terminated and the Merger is abandoned by the
Parent or the Merger Sub, on the one hand, or by the Company, on the other hand,
pursuant to Section 8.1, written notice of such termination and abandonment
shall forthwith be given to the other parties and this Agreement shall terminate
and the Merger shall be abandoned without any further action. If this Agreement
is terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party under the terms of this Agreement except
with respect to the willful breach by any party hereto and except that the
provisions of this Section 8.3, Section 8.2, Section 6.9, Article 9 and the
final sentence of Section 6.3 shall survive the termination of this Agreement.
ARTICLE 9
GUARANTY
Section 9.1 Guaranty. Genesis Health Ventures, Inc., a
Pennsylvania corporation (the "Guarantor"), hereby unconditionally and
irrevocably guarantees, as a primary obligor and not as surety, to the Company,
the due and punctual observance, performance and discharge of each obligation of
Parent and Merger Sub contained in this Agreement and the Voting Agreement.
Parent and Merger Sub are hereinafter referred to as an "Obligor" with respect
to this Agreement and the Voting Agreement, respectively, and, collectively, as
"Obligors." This Agreement and the Voting Agreement are hereinafter each
referred to as a "Guaranteed Agreement" and, collectively, as the "Guaranteed
Agreements." Obligations of the Obligors guaranteed in this Section 9.1 are
hereinafter referred to as the "Obligations."
The Guarantor agrees that if either or both its Obligors
shall fail to observe, perform or discharge any Obligation, in accordance with
the terms of a Guaranteed Agreement, the Guarantor shall promptly itself,
observe, perform or discharge such Obligation, or cause the respective Obligor
to observe, perform or discharge such Obligation, in all cases as if and to the
extent that Guarantor was the primary obligor with respect to such Obligation,
and shall pay any and all actual damages that may be incurred or suffered by the
Company in consequence thereof, and any and all costs and expenses, including,
without limitation, attorneys' fees and
39
<PAGE>
expenses, that may be incurred by the Company in collecting such Obligation
and/or in preserving or enforcing any rights under this Guaranty or under the
Obligations.
In all events, the obligations of Guarantor under this
Guaranty shall be subject to the limitation set forth in Section 9.4.
Section 9.2 Absolute Guaranty. The liability of the
Guarantor under this Guaranty with respect to each and all of the Obligations
shall be absolute and unconditional, irrespective of any waiver of, amendment
to, modification of, consent or departure from, the Guaranteed Agreements,
including, without limitation, any waiver or consent involving a change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations.
Section 9.3. Continuing Guaranty. This Guaranty is a
guaranty of payment, performance and compliance and not of collection. This
Guaranty is a continuing guaranty and shall (a) remain in full force and effect
until all of the Obligations, including, without limitation, all amounts payable
under this Guaranty, have been indefeasibly paid, observed, performed or
discharged in full, (b) be binding upon the Guarantor and its successors, (c)
inure to the benefit of and be enforceable by the Guaranteed Parties and their
successors, (d) be binding upon and against the Guarantor without regard to the
validity or enforceability of the Guaranteed Agreements or any insolvency,
bankruptcy or reorganization of the Obligors or otherwise, and (e) continue to
be effective or be reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be returned by the Company
upon the insolvency, bankruptcy or reorganization of any of the Obligors or
otherwise, all as though such payment had not been made.
Section 9.4 Limitation. Notwithstanding anything to the
contrary set forth herein, in consideration of the substantial time and expense
invested by the Company in the transactions contemplated by this Agreement and
the loss of opportunities otherwise available to the Company as a result
thereof, if, at any scheduled expiration of the Offer occurring after August 15,
1997 on which each of the conditions set forth in clauses (a) through (g) on
Exhibit A (as well as the HSR Act condition set forth in clause (ii) of the
first sentence of the introductory paragraph of Exhibit A) has been satisfied or
waived, Parent shall not have satisfied or waived the condition set forth in
clause (iii) of the first sentence of the introductory paragraph of Exhibit A
and this Agreement is thereafter terminated, then the Guarantor shall pay to the
Company $30,000,000, in cash in immediately available funds. Subject to the next
sentence, upon making such payment none of Parent, Merger Sub, the Guarantor or
any of their affiliates shall have any further liability with respect to the
failure to complete the transactions contemplated by this Agreement. The
limitation set forth in this Section 9.4 shall not apply if Parent or Merger Sub
shall breach this Agreement (which breach remains unremedied after 5 days notice
thereof to Parent or Merger
<PAGE>
40
Sub) or if the Guarantor, Parent or Merger Sub fail to use reasonable best
efforts to obtain such financing.
(b) Guarantor shall deliver to the Company a clean,
irrevocable letter of credit for $30,000,000, drawn on Mellon Bank, N.A., in
form reasonably acceptable the Company to secure its obligation to pay the
amount as set forth in Section 9.4(a). Guarantor will use its reasonable best
efforts to deliver such letter of credit prior to commencement of the Offer, but
in all events shall deliver the same not later than June 25, 1997. The Company
agrees that a letter of credit that provides for a draw only against a
certificate of an executive officer of the Company to the effect that the
requirements of Section 9.4(a) have been met will be satisfactory to the
Company.
(c) Parent, Merger Sub and the Guarantor shall keep
the Company reasonably informed respecting the financing arrangements referred
to in Section 5.6 and will promptly notify the Company if their financing
sources indicate that they do not wish to proceed with such financing.
Section 9.5 Representations and Warranties. The
Guarantor represents and warrants to the Company that (a) it is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Pennsylvania, and has the full right and power to execute and deliver
this Guaranty and to perform fully its obligations hereunder, (b) the execution
and delivery by it of this Guaranty and the consummation of the transactions
contemplated hereby and by the Guaranteed Agreements have been duly authorized
by all necessary action on behalf of the Guarantor and (c) this Guaranty has
been duly executed and delivered by the Guarantor and is the valid and binding
obligation of the Guarantor enforceable in accordance with its terms.
ARTICLE 10
MISCELLANEOUS
Section 10.1 Certain Definitions. For purposes of this
Agreement, the following terms shall have the meanings ascribed to them in this
Section 10.1:
(a) "affiliate," with respect to any person, shall
mean any person controlling, controlled by or under common control with such
person;
(b) "knowledge," with respect to the Company, shall
mean the actual knowledge of any executive officer or director of the Company;
<PAGE>
41
(c) "Material Adverse Effect," with respect to any
person, shall mean a material adverse effect on the business, assets,
properties, financial condition or results of operations of such person and its
subsidiaries taken as a whole;
(d) "person" shall mean and include an individual, a
partnership, a joint venture, a limited liability company, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof; and
(e) "subsidiary," with respect to any person, shall
mean any corporation 50% or more of the outstanding voting power of which, or
any partnership, joint venture, limited liability company or other entity 50% or
more of the total equity interest of which, is directly or indirectly owned by
such person. For purposes of this Agreement, all references to "subsidiaries" of
a person shall be deemed to mean "subsidiary" if such person has only one
subsidiary.
Section 10.2. Amendment and Modification . Subject to
applicable law, this Agreement may be amended, modified or supplemented only by
a written agreement signed by each of the parties hereto at any time prior to
the Effective Time with respect to any of the terms contained herein; provided,
however, that after this Agreement is adopted by the Company's stockholders
pursuant to Section 6.2, no such amendment or modification shall (a) alter or
change the amount or kind of the consideration to be delivered to the
stockholders of the Company, (b) alter or change any term of the certificate of
incorporation of the Surviving Corporation or (c) alter or change any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the stockholders of the Company. If Merger Sub's designees are
appointed or elected to the Board of Directors of the Company as provided in
Section 6.10, after the acceptance for payment of shares of the Common Stock
pursuant to the Offer and prior to the Effective Time, the affirmative vote of a
majority of the Continuing Directors of the Company shall be required by the
Company to (i) amend or terminate this Agreement by the Company, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement, (iii)
extend the time for performance of Parent's and Merger Sub's respective
obligations under this Agreement, (iv) take any action to amend or otherwise
modify the Company's certificate of incorporation or by-laws or (v) take any
action that would adversely affect the rights of the holders of Common Stock or
the holders of Company Stock Options with respect to the transactions
contemplated hereby.
Section 10.3. Waiver of Compliance; Consents . Any failure
of Parent or Merger Sub, on the one hand, or the Company, on the other hand, to
comply with any obligation, covenant, agreement or condition herein may, subject
to Section 10.2, be waived by Parent, Merger Sub or the Company, respectively,
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition
<PAGE>
42
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 10.3 and in Section 10.2.
Section 10.4 Survival. The respective representations
and warranties of Parent, Merger Sub and the Company contained herein shall not
survive the Closing hereunder.
Section 10.5 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by telecopier (with a confirmed receipt
thereof), and on the next business day when sent by overnight courier service,
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
(b) if to Guarantor, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
<PAGE>
43
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(c) if to the Company, to:
The Multicare Companies, Inc.
411 Hackensack Avenue
Hackensack, New Jersey 07061
Attention: Daniel E. Straus
Telecopier: (201) 488-8734
with a copy to:
Paul, Weiss, Rifkind,
Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner
Telecopier: (212) 757-3990
Section 10.6 Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties.
Section 10.7 Expenses. Except as otherwise provided
herein, whether or not the Merger is consummated, all fees, charges and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees, charges or expenses.
Section 10.8 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CHOICE OF LAW PRINCIPLES THEREOF.
<PAGE>
44
Section 10.9 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
Section 10.10 Interpretation. The article and section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
Section 10.11 Entire Agreement. This Agreement (including
the schedules, exhibits, documents or instruments referred to herein) and the
Confidentiality Agreement embody the entire agreement and understanding of the
parties hereto in respect of the subject matter hereof and thereof and supersede
all prior agreements and understandings, both written and oral, among the
parties, or between any of them, with respect to the subject matter hereof and
thereof.
Section 10.12 No Third Party Beneficiaries. Except as
expressly provided in Sections 6.8 and 6.12, this Agreement is not intended to,
and does not, create any rights or benefits of any party other than the parties
hereto.
<PAGE>
IN WITNESS WHEREOF, the Parent, the Merger Sub and the
Company have caused this Agreement to be signed by their respective duly
authorized officers as of the date first above written.
WALTZ CORP.
By /S/ Karl I. Peterson
--------------------------------------
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
WALTZ ACQUISITION CORP.
By /S/ Karl I. Peterson
--------------------------------------
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
THE MULTICARE COMPANIES, INC.
By /S/ Daniel E. Straus
--------------------------------------
Name: Daniel E. Straus
Title: President and Co-Chief Executive
Officer
Solely for Purposes of Article 9:
GENESIS HEALTH VENTURES, INC.
By /S/ Michael R. Walker
--------------------------------------
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, Merger
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Merger Sub's obligation to pay for or return tendered shares of
Common Stock after the termination or withdrawal of the Offer), to pay for any
shares of Common Stock tendered pursuant to the Offer unless, (i) there shall
have been validly tendered and not properly withdrawn prior to the expiration of
the Offer such number of shares of Common Stock which would constitute, on a
fully diluted basis, a majority of the Company's voting power on the date of
purchase of all securities of the Company entitled to vote generally in the
election of directors or in a merger (the "Minimum Condition"), (ii) any waiting
period under the HSR Act applicable to the purchase of shares of Common Stock
pursuant to the Offer shall have expired or been terminated and (iii) Merger Sub
shall have received the proceeds of the financing pursuant to the Debt Financing
Commitments. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Merger Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any shares of Common Stock not theretofore accepted for
payment or paid for, and (subject to Section 1.1(a) and Section 6.5(a) of this
Agreement) may terminate the Offer if, at any time on or after the date of this
Agreement and before the acceptance of such shares for payment or the payment
therefor, any of the following conditions exists (other than as a result of any
action or inaction of Parent or any of its subsidiaries which constitutes a
breach of this Agreement):
(a) there shall have been any action or proceeding brought by any
Governmental Authority before any federal or state court, or any other or
preliminary or permanent injunction entered in any action or proceeding before
any federal or state court or governmental, administrative or regulatory
authority or agency, located or having jurisdiction within the United States, or
any statute, rule, regulation, or legislation, enacted, promulgated or issued by
any Governmental Authority located or having jurisdiction within the United
States, which has or would reasonably be expected to have the effect of:
(i) making illegal, or otherwise restraining or prohibiting or making materially
more costly the making of the Offer, the acceptance for payment of, payment for,
or ownership, directly or indirectly, of some of or all of the shares of Common
Stock by Parent or Merger Sub, the consummation of any of the transactions
contemplated by the Merger Agreement or materially delaying the Merger;
(ii) prohibiting or materially limiting the ownership or operation by the
Company or any of its subsidiaries, or by Parent, Merger Sub or any of Parent's
subsidiaries or Guarantor or any of its subsidiaries of all or any material
portion of the business or assets of the Company or any of its material
subsidiaries or Parent or any of its material subsidiaries, or compelling
Merger Sub, Parent or any of Parent's subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the
Company or any of its material subsidiaries or Parent or any of its
<PAGE>
material subsidiaries, as a result of the transactions contemplated by the Offer
or the Merger Agreement; (iii) imposing or confirming limitations on the ability
of Merger Sub, Parent or any of Parent's subsidiaries effectively to acquire or
hold or to exercise full rights of ownership of shares of Common Stock,
including, without limitation, the right to vote any shares of Common Stock
acquired or owned by Parent or Merger Sub or any of Parent's subsidiaries on
all matters properly presented to the stockholders of the Company, including,
without limitation, the adoption and approval of the Merger Agreement and the
Merger or the right to vote any shares of capital stock of any subsidiary
(other than immaterial subsidiaries) directly or indirectly owned by the
Company; or (iv) requiring divestiture by Parent or Merger Sub, directly or
indirectly, of any shares of Common Stock;
(b) after the date of this Agreement, there shall have occurred any
event, or Merger Sub shall have become aware of any fact, in either case, that
will have a Material Adverse Effect with respect to the Company, except for
changes resulting from or arising out of the Offer;
(c) any of the representation and warranties of the Company set forth
in this Agreement (without giving effect to any qualification regarding
materiality) shall not be true and correct in any material respect, in each case
as if such representations and warranties were made at the time of
determination;
(d) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(e) this Agreement shall have been terminated in accordance with its
terms or the Offer shall have been terminated with the consent of the Company;
(f) there shall have occurred (i) any general suspension of, or
limitation of prices for, trading on the NYSE, AMEX, Nasdaq National Market,
(ii) any declaration of banking moratorium or suspension or payment in respect
of banks in the United States, (iii) any material limitation whether or not
mandatory by a Government Entity on, or any other event that would limit, the
extension of credit by banks or other lending institutions, (iv) any
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States having a significant
adverse effect on the functionality of financial markets in the United States or
(v) in the case of any of the foregoing, existing at time of the commencement of
the Offer, a material acceleration or worsening thereof;
(g) any material approval, permit, authorization, consent or waiting
period of any Governmental Authority applicable to the purchase of shares of
Common Stock pursuant to the Offer or the Merger or the ownership or operation
by the Company or any of its subsidiaries, or by Parent or any of its
subsidiaries or by the Guarantor or
<PAGE>
any of its subsidiaries of all or any material portion of the business or assets
of the Company or any of its subsidiaries shall not have been obtained or
satisfied on terms satisfactory to the Parent in its reasonable discretion;
which, in the reasonable judgment of Merger Sub in any case and regardless of
circumstances, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Common Stock or to proceed with the
Merger.
Notwithstanding anything contained herein, no condition involving
(i) performance of agreements by the Company or (ii) the accuracy of
representations and warranties made by the Company, shall be deemed not
fulfilled, and Parent and Merger Sub shall not be entitled to fail to accept
shares of Common Stock for payment or terminate the Offer on such basis, if the
respects in which such agreements have not been performed or the representations
and warranties are inaccurate (without giving effect to any qualification
regarding materiality), in the aggregate, are not materially adverse to the
business, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
The foregoing conditions are for the sole benefit of Merger Sub and
Parent and may, subject to the terms of this Agreement, be waived by Merger Sub
and Parent in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent, or Merger Sub at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances and each
such right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
EXHIBIT 11(c)(2)
TENDER AGREEMENT AND IRREVOCABLE PROXY
AGREEMENT, dated as of June 16, 1997, among WALTZ CORP., a
Delaware corporation ("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), and Moshael J. Straus
(the "Stockholder").
Parent, Merger Sub and The Multicare Companies, Inc., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger").
WHEREAS, as of the date hereof, Stockholder is the record and
beneficial owner of, and has the right to vote and dispose of, the number of
shares of Common Stock set forth on the signature page hereto;
WHEREAS, as an inducement and a condition to its entering into
the Merger Agreement and incurring the obligations set forth therein, including
the Offer and the Merger, Parent has required that Stockholder enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined
herein have the respectively meanings ascribed to them in the Merger Agreement.
In addition, for purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to Stockholder,
"AFFILIATE" shall not include the Company and the Persons that directly, or
indirectly through one or more intermediaries, are controlled by the Company.
"BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" with respect to
any securities means having "BENEFICIAL OWNERSHIP" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all Affiliates of such Person and all other persons with whom such Person would
<PAGE>
2
constitute a "GROUP" within the meaning of Section 13(d) of the Exchange Act and
the rules promulgated thereunder.
"OWNED SHARES" means the shares of Common Stock Beneficially
Owned by Stockholder on the date hereof, together with any other shares of
Common Stock, or any other securities of the Company entitled, or which may be
entitled, to vote generally in the election of directors and any other shares of
Common Stock or such other securities which may hereafter be Beneficially Owned
by Stockholder (including upon exercises of options or otherwise).
"PERSON" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"REPRESENTATIVE" means, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including
any investment banker, financial advisor, agent, representative or expert
retained by or acting on behalf of such Person or its subsidiaries).
"TRANSFER" means, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of such
security or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing. As a
verb, "TRANSFER" shall have a correlative meaning.
2. Tender of Shares. Stockholder hereby agrees to validly
tender (or cause the record owner thereof) and not withdraw, pursuant to and in
accordance with the terms of the Offer, all Owned Shares. Stockholder hereby
acknowledges and agrees that Merger Sub's obligation to accept for payment and
pay for shares of Common Stock in the Offer, including any Owned Shares tendered
by Stockholder, is subject to the terms and conditions of the Offer. The parties
agree that Stockholder will, for all Owned Shares tendered by Stockholder in the
Offer and accepted for payment by Merger Sub, receive a price per Owned Share
equal to $28.00, or such higher per share consideration paid to other
stockholders who have tendered into the Offer.
3. Voting of Owned Shares; Proxy; Other Covenants. (a)
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the earlier of (x) the consummation of the Offer and (y)
the termination of this Agreement (such period being referred to as the "VOTING
PERIOD"), at any meeting (whether annual or special, and whether or not an
adjourned or postponed meeting) of the Company's stockholders, however called,
or in connection with any written consent of the Company's stockholders, subject
to the absence of a preliminary or permanent injunction or other requirement
under applicable law by any United States federal, state or foreign court
barring such action, Stockholder shall vote (or cause to be voted) all Owned
Shares: (i) in favor of the
<PAGE>
3
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval and adoption of the Merger and the terms thereof and each of the
other actions contemplated by the Merger Agreement and this agreement and any
actions required in furtherance thereof and hereof; (ii) against any action or
agreement that would impede, interfere with, or prevent the Offer or the Merger;
and (iii) except as otherwise agreed to in writing in advance by the Parent,
against the following actions (other than the Offer, the Merger and the
transactions contemplated by the Merger Agreement and this Agreement): (I) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or any of its subsidiaries (including
any transaction contemplated by an Acquisition Proposal); (II) any sale, lease
or transfer of a material amount of the assets or business of the Company or its
subsidiaries, or any reorganization, restructuring, recapitalization, special
dividend, dissolution, liquidation or winding up of the Company or its
subsidiaries; (III) any change in the present capitalization of the Company
including any proposal to sell any material equity interest in the Company or
any amendment of the certificate of incorporation of the Company and (IV)
against an election of new members of the Board of Directors of the Company
except where the vote is cast in favor of the nominees of a majority of the
existing directors of the Company. Stockholder shall not enter into any
agreement, arrangement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Section 3(a).
(b) IRREVOCABLE PROXY. STOCKHOLDER HEREBY GRANTS TO,
AND APPOINTS MERGER SUB AND ANY DESIGNEE OF MERGER SUB, EACH OF THEM
INDIVIDUALLY, STOCKHOLDER'S IRREVOCABLE (UNTIL THE TERMINATION OF THIS
AGREEMENT) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE
THE OWNED SHARES OF STOCKHOLDER AS INDICATED IN SECTION 3(a) ABOVE. STOCKHOLDER
INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION OF THIS AGREEMENT)
AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND HEREBY
REVOKES ANY PROXY PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO
STOCKHOLDER'S OWNED SHARES.
(c) Stockholder Capacity. Stockholder is making this
Agreement solely in his capacity as the owner of the Owned Shares and not in his
capacity as a director or officer, and the agreements set forth in this Section
2 or 3 shall in no way restrict Stockholder in the exercise of his fiduciary
duties as a director and officer of the Company, which, in the case of Section
3(d), such duties will be exercised only in accordance with the instructions of
the Company's Board of Directors acting in compliance with the requirements of
Section 6.4 of the Merger Agreement. Stockholder signs solely in his or her
capacity as the record and Beneficial Owner of the Owned Shares.
(d) Stockholder shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect
<PAGE>
4
to any Acquisition Proposal. The Stockholder shall not, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any person or group (other than Parent and Merger
Sub or any affiliate, associate or designee of Parent or Merger Sub) concerning
any proposal (an "Acquisition Proposal") for an acquisition of all or any
substantial part of the business and properties or capital stock of the Company
and its subsidiaries taken as a whole, directly or indirectly, whether by
merger, consolidation, share exchange, tender offer, purchase of assets or
shares of capital stock or otherwise (an "Acquisition Transaction").
4. Restrictions on Transfer, Other Proxies.
Stockholder shall not, until the termination of this
Agreement, directly or indirectly; (i) expect as provided in Section 2 hereof,
Transfer to any Person any or all Owned Shares; or (ii) except as provided in
Section 3(b), grant any proxies or powers of attorney, deposit any Owned Shares
into a voting trust or enter into a voting agreement, understanding or
arrangement with respect to such Owned Shares. Notwithstanding anything to the
contrary provided in this Agreement, Stockholder shall have the right to
Transfer Owned Shares (i) to any Family Member, (ii) to the trustee or trustees
of a trust solely (except for remote contingent interests) for the benefit of
Stockholder and/or one or more Family Members, (iii) to a foundation created or
established by Stockholder, (iv) to a corporation of which Stockholder and/or
any Family Members owns all of the outstanding capital stock, (v) to a
partnership of which Stockholder and/or any Family Members owns all of the
partnership interests, (vi) to the executor, administrator or personal
representative of the estate of Stockholder, (vii) to any guardian, trustee or
conservator appointed with respect to the assets of Stockholder or (viii) by
operation of law; provided, that in the case of any Transfer pursuant to clauses
(i) through (vii), the transferee shall execute an agreement to be bound by the
terms of this Agreement, or terms substantially identical thereto. "Family
Member" shall have the meaning ascribed to "Related Parties" under Section
672(c) of the Internal Revenue Code of 1986, as amended.
5. Representations and Warranties of Stockholder.
Stockholder hereby represents and warrants to the Parent and Merger Sub as
follows:
(a) Stockholder has all necessary power and authority
and legal capacity to execute and deliver this Agreement and perform his
obligations hereunder. No other proceedings or actions on the part of
Stockholder are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Stockholder and constitutes the valid and binding agreement of
Stockholder, enforceable against Stockholder in accordance with its terms except
(i) to the extent limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights and (ii) the remedy of specified performance and
injunctive and other
<PAGE>
5
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) Stockholder is the record holder and Beneficial
Owner of the Owned Shares which, as of the date hereof, are set forth on the
signature page hereto. Stockholder has good and marketable title to all of the
Owned Shares, free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. The Owned Shares
constitute all of the capital stock of the Company Beneficially Owned by
Stockholder, and except for not more than 150,000 shares of Common Stock owned
by a foundation referred to in clause (iii) of Section 4, the Owned Shares and
shares of Common Stock issuable upon exercise of options held by Stockholder,
neither Stockholder nor any of his Affiliates Beneficially Owns or has any right
to acquire (whether currently, upon lapse of time, following the satisfaction of
any conditions, upon the occurrence of any event or any combination of the
foregoing) any shares of Common Stock or any securities convertible into Common
Stock. Except as provided in Section 3(b) hereof and the up to 150,000 shares of
Common Stock referred to in this Section 5(c), Stockholder has sole power to
vote and to dispose of the Owned Shares.
(d) Stockholder understands and acknowledges that
Parent is entering into, and causing the Merger Sub to enter into, the Merger
Agreement, and is incurring the obligations set forth therein, in reliance upon
Stockholder's execution and delivery of this Agreement.
(e) None of the execution and delivery of this
Agreement by Stockholder the consummation by Stockholder of the transactions
contemplated hereby or compliance by Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach of the certificate of
incorporation or by-laws of the Company, or (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, or violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets.
6. Representations and Warranties of Parent and
Merger Sub. Parent and Merger Sub hereby represent, warrant and covenant to
Stockholder as follows:
(a) Parent and Merger Sub each is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, and each of them is in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and Merger Sub have all necessary
corporate power and authority to
<PAGE>
6
execute and deliver this Agreement and perform their respective obligations
hereunder. The execution and delivery by Parent and Merger Sub of this Agreement
and the performance by Parent and Merger Sub of their respective obligations
hereunder have been duly and validly authorized by the Board of Directors of
Parent and Merger Sub and no other corporate proceedings on the part of Parent
or Merger Sub are necessary to authorize the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Parent and Merger Sub and constitutes a valid and binding
agreement of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms except (i) to the extent limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) None of the execution and delivery of this
Agreement by Parent or Merger Sub, the consummation by Parent or Merger Sub of
the transactions contemplated hereby or compliance by Parent or Merger Sub with
any of the provisions hereof shall (A) conflict with or result in any breach of
the certificate of incorporation or by-laws of Parent or Merger Sub, or (B)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or any of their respective properties or
assets may be bound, or violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to Parent or Merger Sub or any of their
respective properties or assets.
7. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
8. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Parent shall have purchased and paid for all of the Owned Shares of
Stockholder in accordance with the Offer, (b) the date on which the Merger
Agreement is terminated under such circumstances in which Parent is not and will
not be entitled to a payment pursuant to Section 8.2 of the Merger Agreement and
(c) May 31, 1998.
<PAGE>
7
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) Stockholder agrees that this Agreement and the
respective rights and obligations of Stockholder hereunder shall attach to any
shares of Common Stock, and any securities convertible into such shares, that
may become Beneficially Owned by Stockholder.
(c) Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(d) This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties and their
respective successors, personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall (except as required by the proviso to Section 4) be assigned by
either party (whether by operation of law or otherwise) without the prior
written consent of the other party; provided, that Parent and Merger Sub may
assign their rights and obligations hereunder to any assignee of such parties'
rights and obligations under the Merger Agreement. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
(e) This Agreement may not be amended, changed,
supplemented, or otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by each of the parties hereto. The
parties may waive compliance by the other parties hereto with any
representation, agreement or condition otherwise required to be complied with by
such other party hereunder, but any such waiver shall be effective only if in
writing executed by the waiving party.
(f) All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the address for such party set forth in Section
10.5 of the Merger Agreement and at the following address if to the Stockholder.
If to Stockholder, to Stockholder's address or
facsimile number set forth on the signature page hereto;
<PAGE>
8
Copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attn: Carl L. Reisner, Esq.
or to such other address or facsimile number as the Person to whom notice is
given shall have previously furnished to the others in writing in the manner set
forth above.
(g) Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
affecting the validity or enforceability of the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
(h) Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement, each non-breaching
party would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement.
(i) All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
(j) THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
<PAGE>
9
DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR
OF ANY OTHER JURISDICTION.
(k) The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. "Include," "includes,"
and "including" shall be deemed to be followed by "without limitation" whether
or not they are in fact followed by such words or words of like import.
(l) This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, Parent, Merger Sub and
Stockholder have caused this Agreement to be duly executed as of the day and
year first above written.
WALTZ CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
WALTZ ACQUISITION CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
/s/ Moshael J. Straus
Stockholder
Address: 411 Hackensack Avenue
Hackensack, New Jersey 07601
Owned Shares: 7,006,983
<PAGE>
Exhibit 11(c)(3)
TENDER AGREEMENT AND IRREVOCABLE PROXY
AGREEMENT, dated as of June 16, 1997, among WALTZ CORP., a
Delaware corporation ("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation
and a wholly-owned subsidiary of Parent ("Merger Sub"), and Daniel E. Straus
(the "Stockholder").
Parent, Merger Sub and The Multicare Companies, Inc., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger").
WHEREAS, as of the date hereof, Stockholder is the record and
beneficial owner of, and has the right to vote and dispose of, the number of
shares of Common Stock set forth on the signature page hereto;
WHEREAS, as an inducement and a condition to its entering into
the Merger Agreement and incurring the obligations set forth therein, including
the Offer and the Merger, Parent has required that Stockholder enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used and not defined
herein have the respectively meanings ascribed to them in the Merger Agreement.
In addition, for purposes of this Agreement:
"AFFILIATE" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to Stockholder,
"AFFILIATE" shall not include the Company and the Persons that directly, or
indirectly through one or more intermediaries, are controlled by the Company.
"BENEFICIALLY OWNED" or "BENEFICIAL OWNERSHIP" with respect to
any securities means having "BENEFICIAL OWNERSHIP" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all Affiliates of such Person and all other persons with whom such Person would
<PAGE>
2
constitute a "GROUP" within the meaning of Section 13(d) of the Exchange Act and
the rules promulgated thereunder.
"OWNED SHARES" means the shares of Common Stock Beneficially
Owned by Stockholder on the date hereof, together with any other shares of
Common Stock, or any other securities of the Company entitled, or which may be
entitled, to vote generally in the election of directors and any other shares of
Common Stock or such other securities which may hereafter be Beneficially Owned
by Stockholder (including upon exercises of options or otherwise).
"PERSON" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"REPRESENTATIVE" means, with respect to any Person, such
Person's officers, directors, employees, agents and representatives (including
any investment banker, financial advisor, agent, representative or expert
retained by or acting on behalf of such Person or its subsidiaries).
"TRANSFER" means, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of such
security or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing. As a
verb, "TRANSFER" shall have a correlative meaning.
2. Tender of Shares. Stockholder hereby agrees to validly
tender (or cause the record owner thereof) and not withdraw, pursuant to and in
accordance with the terms of the Offer, all Owned Shares. Stockholder hereby
acknowledges and agrees that Merger Sub's obligation to accept for payment and
pay for shares of Common Stock in the Offer, including any Owned Shares tendered
by Stockholder, is subject to the terms and conditions of the Offer. The parties
agree that Stockholder will, for all Owned Shares tendered by Stockholder in the
Offer and accepted for payment by Merger Sub, receive a price per Owned Share
equal to $28.00, or such higher per share consideration paid to other
stockholders who have tendered into the Offer.
3. Voting of Owned Shares; Proxy; Other Covenants. (a)
Stockholder hereby agrees that during the period commencing on the date hereof
and continuing until the earlier of (x) the consummation of the Offer and (y)
the termination of this Agreement (such period being referred to as the "VOTING
PERIOD"), at any meeting (whether annual or special, and whether or not an
adjourned or postponed meeting) of the Company's stockholders, however called,
or in connection with any written consent of the Company's stockholders, subject
to the absence of a preliminary or permanent injunction or other requirement
under applicable law by any United States federal, state or foreign court
barring such action, Stockholder shall vote (or cause to be voted) all Owned
Shares: (i) in favor of the
<PAGE>
3
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval and adoption of the Merger and the terms thereof and each of the
other actions contemplated by the Merger Agreement and this agreement and any
actions required in furtherance thereof and hereof; (ii) against any action or
agreement that would impede, interfere with, or prevent the Offer or the Merger;
and (iii) except as otherwise agreed to in writing in advance by the Parent,
against the following actions (other than the Offer, the Merger and the
transactions contemplated by the Merger Agreement and this Agreement): (I) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or any of its subsidiaries (including
any transaction contemplated by an Acquisition Proposal); (II) any sale, lease
or transfer of a material amount of the assets or business of the Company or its
subsidiaries, or any reorganization, restructuring, recapitalization, special
dividend, dissolution, liquidation or winding up of the Company or its
subsidiaries; (III) any change in the present capitalization of the Company
including any proposal to sell any material equity interest in the Company or
any amendment of the certificate of incorporation of the Company and (IV)
against an election of new members of the Board of Directors of the Company
except where the vote is cast in favor of the nominees of a majority of the
existing directors of the Company. Stockholder shall not enter into any
agreement, arrangement or understanding with any Person the effect of which
would be inconsistent or violative of the provisions and agreements contained in
this Section 3(a).
(b) IRREVOCABLE PROXY. STOCKHOLDER HEREBY
GRANTS TO, AND APPOINTS MERGER SUB AND ANY DESIGNEE OF MERGER SUB, EACH OF THEM
INDIVIDUALLY, STOCKHOLDER'S IRREVOCABLE (UNTIL THE TERMINATION OF THIS
AGREEMENT) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE
THE OWNED SHARES OF STOCKHOLDER AS INDICATED IN SECTION 3(a) ABOVE. STOCKHOLDER
INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE TERMINATION OF THIS AGREEMENT)
AND COUPLED WITH AN INTEREST AND WILL TAKE SUCH FURTHER ACTION AND HEREBY
REVOKES ANY PROXY PREVIOUSLY GRANTED BY STOCKHOLDER WITH RESPECT TO
STOCKHOLDER'S OWNED SHARES.
(c) Stockholder Capacity. Stockholder is making this
Agreement solely in his capacity as the owner of the Owned Shares and not in his
capacity as a director or officer, and the agreements set forth in this Section
2 or 3 shall in no way restrict Stockholder in the exercise of his fiduciary
duties as a director and officer of the Company, which, in the case of Section
3(d), such duties will be exercised only in accordance with the instructions of
the Company's Board of Directors acting in compliance with the requirements of
Section 6.4 of the Merger Agreement. Stockholder signs solely in his or her
capacity as the record and Beneficial Owner of the Owned Shares.
(d) Stockholder shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect
<PAGE>
4
to any Acquisition Proposal. The Stockholder shall not, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any person or group (other than Parent and Merger
Sub or any affiliate, associate or designee of Parent or Merger Sub) concerning
any proposal (an "Acquisition Proposal") for an acquisition of all or any
substantial part of the business and properties or capital stock of the Company
and its subsidiaries taken as a whole, directly or indirectly, whether by
merger, consolidation, share exchange, tender offer, purchase of assets or
shares of capital stock or otherwise (an "Acquisition Transaction").
4. Restrictions on Transfer, Other Proxies.
Stockholder shall not, until the termination of this
Agreement, directly or indirectly; (i) expect as provided in Section 2 hereof,
Transfer to any Person any or all Owned Shares; or (ii) except as provided in
Section 3(b), grant any proxies or powers of attorney, deposit any Owned Shares
into a voting trust or enter into a voting agreement, understanding or
arrangement with respect to such Owned Shares. Notwithstanding anything to the
contrary provided in this Agreement, Stockholder shall have the right to
Transfer Owned Shares (i) to any Family Member, (ii) to the trustee or trustees
of a trust solely (except for remote contingent interests) for the benefit of
Stockholder and/or one or more Family Members, (iii) to a foundation created or
established by Stockholder, (iv) to a corporation of which Stockholder and/or
any Family Members owns all of the outstanding capital stock, (v) to a
partnership of which Stockholder and/or any Family Members owns all of the
partnership interests, (vi) to the executor, administrator or personal
representative of the estate of Stockholder, (vii) to any guardian, trustee or
conservator appointed with respect to the assets of Stockholder or (viii) by
operation of law; provided, that in the case of any Transfer pursuant to clauses
(i) through (vii), the transferee shall execute an agreement to be bound by the
terms of this Agreement, or terms substantially identical thereto. "Family
Member" shall have the meaning ascribed to "Related Parties" under Section
672(c) of the Internal Revenue Code of 1986, as amended.
5. Representations and Warranties of Stockholder.
Stockholder hereby represents and warrants to the Parent and Merger Sub as
follows:
(a) Stockholder has all necessary power and authority
and legal capacity to execute and deliver this Agreement and perform his
obligations hereunder. No other proceedings or actions on the part of
Stockholder are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Stockholder and constitutes the valid and binding agreement of
Stockholder, enforceable against Stockholder in accordance with its terms except
(i) to the extent limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights and (ii) the remedy of specified performance and
injunctive and other
<PAGE>
5
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) Stockholder is the record holder and Beneficial
Owner of the Owned Shares which, as of the date hereof, are set forth on the
signature page hereto. Stockholder has good and marketable title to all of the
Owned Shares, free and clear of all liens, claims, options, proxies, voting
agreements, security interests, charges and encumbrances. The Owned Shares
constitute all of the capital stock of the Company Beneficially Owned by
Stockholder, and except for not more than 150,000 shares of Common Stock owned
by a foundation referred to in clause (iii) of Section 4, the Owned Shares and
shares of Common Stock issuable upon exercise of options held by Stockholder,
neither Stockholder nor any of his Affiliates Beneficially Owns or has any right
to acquire (whether currently, upon lapse of time, following the satisfaction of
any conditions, upon the occurrence of any event or any combination of the
foregoing) any shares of Common Stock or any securities convertible into Common
Stock. Except as provided in Section 3(b) hereof and the up to 150,000 shares of
Common Stock referred to in this Section 5(c), Stockholder has sole power to
vote and to dispose of the Owned Shares.
(d) Stockholder understands and acknowledges that
Parent is entering into, and causing the Merger Sub to enter into, the Merger
Agreement, and is incurring the obligations set forth therein, in reliance upon
Stockholder's execution and delivery of this Agreement.
(e) None of the execution and delivery of this
Agreement by Stockholder the consummation by Stockholder of the transactions
contemplated hereby or compliance by Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach of the certificate of
incorporation or by-laws of the Company, or (B) result in a violation or breach
of, or constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or provisions
of any note, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of his properties or assets may be bound, or violate any
order, writ, injunction, decree, judgment, statute, rule or regulation
applicable to the Stockholder or any of his properties or assets.
6. Representations and Warranties of Parent and
Merger Sub. Parent and Merger Sub hereby represent, warrant and covenant to
Stockholder as follows:
(a) Parent and Merger Sub each is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, and each of them is in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and Merger Sub have all necessary
corporate power and authority to
<PAGE>
6
execute and deliver this Agreement and perform their respective obligations
hereunder. The execution and delivery by Parent and Merger Sub of this Agreement
and the performance by Parent and Merger Sub of their respective obligations
hereunder have been duly and validly authorized by the Board of Directors of
Parent and Merger Sub and no other corporate proceedings on the part of Parent
or Merger Sub are necessary to authorize the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby.
(b) This Agreement has been duly and validly executed
and delivered by Parent and Merger Sub and constitutes a valid and binding
agreement of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms except (i) to the extent limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) None of the execution and delivery of this
Agreement by Parent or Merger Sub, the consummation by Parent or Merger Sub of
the transactions contemplated hereby or compliance by Parent or Merger Sub with
any of the provisions hereof shall (A) conflict with or result in any breach of
the certificate of incorporation or by-laws of Parent or Merger Sub, or (B)
result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which Parent or Merger Sub is a
party or by which Parent or Merger Sub or any of their respective properties or
assets may be bound, or violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to Parent or Merger Sub or any of their
respective properties or assets.
7. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
8. Termination. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Parent shall have purchased and paid for all of the Owned Shares of
Stockholder in accordance with the Offer, (b) the date on which the Merger
Agreement is terminated under such circumstances in which Parent is not and will
not be entitled to a payment pursuant to Section 8.2 of the Merger Agreement and
(c) May 31, 1998.
<PAGE>
7
9. Miscellaneous.
(a) This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) Stockholder agrees that this Agreement and the
respective rights and obligations of Stockholder hereunder shall attach to any
shares of Common Stock, and any securities convertible into such shares, that
may become Beneficially Owned by Stockholder.
(c) Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
(d) This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties and their
respective successors, personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall (except as required by the proviso to Section 4) be assigned by
either party (whether by operation of law or otherwise) without the prior
written consent of the other party; provided, that Parent and Merger Sub may
assign their rights and obligations hereunder to any assignee of such parties'
rights and obligations under the Merger Agreement. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
(e) This Agreement may not be amended, changed,
supplemented, or otherwise modified or terminated, except upon the execution and
delivery of a written agreement executed by each of the parties hereto. The
parties may waive compliance by the other parties hereto with any
representation, agreement or condition otherwise required to be complied with by
such other party hereunder, but any such waiver shall be effective only if in
writing executed by the waiving party.
(f) All notices and other communications hereunder
shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by certified or registered mail,
postage prepaid, addressed at the address for such party set forth in Section
10.5 of the Merger Agreement and at the following address if to the Stockholder.
If to Stockholder, to Stockholder's address or
facsimile number set forth on the signature page hereto;
<PAGE>
8
Copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attn: Carl L. Reisner, Esq.
or to such other address or facsimile number as the Person to whom notice is
given shall have previously furnished to the others in writing in the manner set
forth above.
(g) Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
affecting the validity or enforceability of the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. If any provision
of this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
(h) Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement, each non-breaching
party would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at law or in equity, to compel specific performance
of this Agreement.
(i) All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not constitute
a waiver by such party of its right to exercise any such or other right, power
or remedy or to demand such compliance.
(j) THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
<PAGE>
9
DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF OR
OF ANY OTHER JURISDICTION.
(k) The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. "Include," "includes,"
and "including" shall be deemed to be followed by "without limitation" whether
or not they are in fact followed by such words or words of like import.
(l) This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, Parent, Merger Sub and Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
WALTZ CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary
and Assistant Treasurer
WALTZ ACQUISITION CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary
and Assistant Treasurer
/s/ Daniel E. Straus
Stockholder
Address: 411 Hackensack Avenue
Hackensack, New Jersey 07601
Owned Shares: 7,006,983
Doc#:DS4:73830.1 25-060
<PAGE>
Exhibit 11(c)(4)
1
NONCOMPETITION AND CONSULTING AGREEMENT
AGREEMENT, dated as of June 16, 1997, among GENESIS HEALTH
VENTURES, INC., a Pennsylvania corporation, ("G"), WALTZ CORP., a Delaware
("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub") and Moshael J. Straus (the "Consultant").
Parent, Merger Sub, G and THE MULTICARE COMPANIES, INC., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to them
in the Merger Agreement.
The Consultant is a co-founder of, and is employed as Co-Chief
Executive Officer by the Company, and has confidential knowledge of its business
and affairs and is considered by Parent to be a key employee of the Company.
Parent wishes to secure for itself and the Company following the Merger the
services of the Consultant, and to assure itself that the Consultant agrees to
certain restrictions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Engagement.
Parent hereby irrevocably appoints the Consultant, and the
Consultant hereby agrees to be a consultant, for a period of 12 months
commencing on the date of the Closing (as defined below) (the "Consulting
Term"), to perform such reasonable consulting services as the chief executive
officer of Parent shall request, subject to Section 3 below.
2. Effectiveness.
This Agreement shall become effective simultaneously with, and
subject to, the consummation of the Merger (the "Closing"). The parties
acknowledge that until this Agreement becomes effective, the Consultant may
remain an officer and director of the Company and will be under no obligation
under, and will not be subject to the restrictions of this Agreement. If the
Merger Agreement is terminated, this Agreement shall be simultaneously
terminated.
<PAGE>
3. Duties.
During the Consulting Term, the Consultant as an independent
contractor shall make himself available upon reasonable notice for such time
during regular business hours as shall be reasonably necessary for the business
of the Company. Such consulting services shall be rendered in Hackensack, New
Jersey.
4. Consideration.
(a) As compensation for the Consultant's services hereunder,
Parent hereby agrees to pay the Consultant, and the Consultant agrees to accept
as full compensation for his services, a consulting fee of $1.5 million per
annum payable in immediately available funds at the Closing. In addition, the
Consultant shall be reimbursed for all expenses actually incurred by the
Consultant in the performance of his duties upon presentation to Parent of
expense statements or vouchers or such other supporting information as Parent
requires for its senior executives.
(b) As consideration for the Consultant's agreement to the
restrictive covenants in Section 6 herein (the "Restrictive Covenants"), Parent
hereby agrees to pay the Consultant, and the Consultant agrees to accept as full
consideration for his agreement to the Restrictive Covenants, (i) the benefits
set forth in Section 5 hereof, and (ii) a cash payment in the amount of $1.5
million payable in immediately available funds at the Closing.
5. Benefits; Office Facilities.
Parent agrees that for a period of six months following the
Effective Time the Consultant may continue the exclusive use of his and his
secretary's office space and office equipment; provided, that the foregoing
obligation will be excused if and when the Company ceases to maintain office
facilities in Hackensack, New Jersey. Such office space shall include a separate
conference room to be shared with the other current Co-Chief Executive Officer
of the Company. Parent agrees that the equipment and office furnishings located
in the Consultant's office shall be the property of the Consultant.
6. Restrictive Covenants.
6.1 Noncompetition and Consulting Agreement. The
Consultant shall not, for a period of one year after the date hereof, in any
capacity (including, but not limited to, owner, partner, shareholder,
consultant, agent, employee, officer, director or otherwise), directly or
indirectly, for his own account or for the benefit of any person, establish,
engage in or be connected with any Competitive Business. As used herein, the
term "Competitive Business" means any Restricted Business conducted in the
Restricted Zone. Restricted Business means institutional pharmacy,
rehabilitation services, long-term care services, skilled nursing
<PAGE>
facilities or assisted living facilities but does not include providing any
other goods or services to skilled nursing facilities, assisted living
facilities and other health care facilities. The Restricted Zone means any town
in Connecticut or Rhode Island in which the Company operates a long term care
facility and an area of fifteen miles surrounding such facility; any county in
Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the Company
operates a long term care facility and an area of fifteen miles surrounding such
facility; all portions of Massachusetts east of Worcester; all portions of
Pennsylvania east of Harrisburg and an area of fifteen miles around any facility
located in Virginia or Vermont; but in no event includes any portion of any
state other than Connecticut, Rhode Island, Illinois, New Jersey, Ohio, West
Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or Wisconsin. In no
event shall this Section 6.1 restrict the Consultant from owning interests in,
or developing, real estate so long as the Consultant is not operating any
Restricted Business. In addition, the Consultant shall not pursue any of the
development projects listed on Schedule 6.1 hereto.
6.2 Confidentiality. For a period of three years commencing
on the Closing Date, the Consultant shall not, except with the express prior
written consent of Parent, directly or indirectly, disclose, communicate or
divulge to any Person, or use for the benefit of any Person, any secret,
confidential or proprietary knowledge or information with respect to the conduct
or details of the Company or the business engaged in by the Company including,
but not limited to, technical know-how, processes, customers, prospects, costs,
designs, marketing methods and strategies, finances and suppliers. The provision
of this Section 6.1 shall not apply to any information which at the time of
disclosure (i) is generally available to or known to the public (other than as a
result of unauthorized disclosure directly or indirectly by the Consultant) or
(ii) the Consultant discloses, at the direction and authorization of Parent, or,
subject to the remainder of this Section 6.2 as required by law. If the
Consultant is required in a judicial, administrative or governmental proceeding
to disclose any information which is the subject of the restrictions contained
in this Section 6.2, then the Consultant will notify Parent as soon as possible
so that Parent may either seek an appropriate protective order or relief, or
waive the provisions of this Section 6.2. If, in the absence of such an order,
relief or waiver, the Consultant is required, in the written opinion of counsel,
to disclose such information to any court, administrative agency or governmental
authority, then the Consultant may disclose such information without liability
under this Agreement.
6.3 Nonsolicitation of Employees. The Consultant shall not
for a period of two years after the date hereof, except with the express written
consent of Parent (which shall not be unreasonably withheld or delayed in the
case of an employee of the Company or the Surviving Corporation who has received
a notice of termination from the Company or the Surviving Corporation, as the
case may be) or as is otherwise contemplated by the Merger Agreement, directly
or indirectly, whether as an employee, owner, partner, agent, director, officer,
shareholder or in any other capacity, for his own account or for the benefit of
any Person; (i) solicit,
<PAGE>
divert or induce any of (1) the Company's employees or (2) the Surviving
Corporation's employees to leave or to work for him or any Person with which he
is connected; or (ii) hire any of the Company's or the Surviving Corporation's
employees and other than the other Co-Chief Executive Officer, the Chief
Operating Officer and the Consultant's personal secretary and the other persons
who shall be acceptable to Parent and identified on a schedule to be agreed upon
prior to the purchase of shares in the Offer.
6.4 Remedies. (a)The parties to this Agreement agree that
any breach by the Consultant of the covenants and agreements contained in
Sections 6.1 and 6.2 will result in irreparable injury to Merger Sub for which
money damages could not adequately compensate Merger Sub. Therefore, in the
event of any breach of such Sections, Merger Sub shall be entitled (in addition
to any other rights and remedies which it may have at law or in equity) to have
an injunction issued by any competent court of equity enjoining and restraining
the Consultant and/or any other Person involved therein from continuing such
breach. In any action to enforce the provisions of Sections 6.1 or 6.2, the
Consultant and/or any other Person involved therein shall expressly waive the
defense that any remedy at law is adequate.
(b)In the event the Consultant is found by a
nonappealable judgment of a court of competent jurisdiction to have violated
Section 6.3, in addition to the reasonable fees and expenses of Parent's counsel
incurred to enforce such provision, the Consultant shall pay to Parent, as
liquidated damages, an amount equal to 200% of the applicable employee's annual
compensation (including, without limitation, salary, bonus and benefits) at the
time of the violation (the "Liquidated Damages"); provided, that in the event
the Consultant is found by such court to have not violated Section 6.3, Parent
shall pay to the Consultant the reasonable fees and expenses of counsel incurred
by the Consultant to defend such action and any actual damages resulting from
Parent's interference with the Consultant's commercial relationships.
6.5 Enforceability. If any portion of the covenants or
agreements contained herein, or the application thereof, is construed to be
invalid or unenforceable, then the other portions of such covenants(s) or
agreement(s) or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be unenforceable because of the
area covered, the duration thereof, or the scope thereof, then the court making
such determination shall have, for purposes of enforcement in equity, the power
to reduce the area and/or duration and/or limit the scope thereof, and the
covenant or agreement shall then be enforceable in its reduced form.
6.6 Intent of Parties. Each of the parties hereto
recognize and agree that this Agreement is necessary and essential to enable
Parent to realize
<PAGE>
and derive substantial benefits, rights and expectations of the Merger
Agreement, that the area and duration of the covenants herein are in all things,
under the circumstances of the Merger Agreement, reasonable; and that good and
valuable consideration exists for the Consultant's agreeing to be bound by such
covenants.
6.7 Definition. As used herein, the term "Person" means
any individual, sole proprietorship, joint venture, partnership, corporation,
association, joint-stock company, unincorporated organization, cooperative,
trust, estate, government (or any branch, subdivision or agency thereof),
governmental, administrative or regulatory authority, or any other entity of any
kind or nature whatsoever.
7. Additional Agreement. The Consultant agrees to pay to the
Surviving Corporation, immediately following the Effective Time, the principal
amount of indebtedness, and accrued interest thereon, owed by the Consultant or
Health Resources of Cinnaminson, Inc., one of the Company's subsidiaries.
8. Other Provisions.
8.1 All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in person
or by telecopier (with a confirmed receipt thereof), and on the next business
day when sent by overnight courier service, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
<PAGE>
(ii) if to G, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(iii) if to the Consultant, to
Moshael J. Straus
140 S. Woodland Street
Englewood, N.J. 0763
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner
Telecopy No. (212) 757-3990
8.2 Entire Agreement. This Noncompetition and Consulting
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto.
8.3 Waivers and Amendments. This Noncompetition and
Consulting Agreement may be amended, superseded, canceled, renewed or extended,
and the terms hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other such right, power or privilege.
<PAGE>
8.4 Governing Law. This Noncompetition and Consulting
Agreement shall be governed by and construed in accordance with the laws of the
State of New Jersey without regard to choice of law principles.
8.5 Successors and Assigns; Assignment. This
Noncompetition and Consulting Agreement is binding upon and shall inure to the
benefit of the parties hereto and their respective successors. This
Noncompetition and Consulting Agreement, and the Consultant's rights and
obligations hereunder, may not be assigned by the Consultant. Parent may assign
this Noncompetition and Consulting Agreement and its rights, together with its
obligations, hereunder in connection with any sale, transfer or other
disposition of all or substantially all of its assets or business, whether by
merger, consolidation or otherwise.
8.6 No Third Party Beneficiaries. This Noncompetition
and Consulting Agreement is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
8.7 Counterparts. This Noncompetition and Consulting
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two copies hereof each signed by one of the parties
hereto.
8.8 Headings. The headings in this Noncompetition and
Consulting Agreement are for reference only and shall not affect the
interpretation of this Noncompetition and Consulting Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition and Consulting Agreement as of the date first above written.
WALTZ CORP.
By: /s/ James L. Singleton
Name: James L. Singleton
Title: President ans Assistant Secretary
<PAGE>
WALTZ ACQUISITION CORP.
By: /s/Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President, Secretary and
Assistant Treasurer
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer
/s/ Moshael J. Straus
Moshael J. Straus
<PAGE>
EXHIBIT 11(c)(5)
NONCOMPETITION AND CONSULTING AGREEMENT
AGREEMENT, dated as of June 16, 1997, among GENESIS HEALTH
VENTURES, INC., a Pennsylvania corporation, ("G"), WALTZ CORP., a Delaware
("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub") and Daniel E. Straus (the "Consultant").
Parent, Merger Sub, G and THE MULTICARE COMPANIES, INC., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to them
in the Merger Agreement.
The Consultant is a co-founder of, and is employed as Co-Chief
Executive Officer by the Company, and has confidential knowledge of its business
and affairs and is considered by Parent to be a key employee of the Company.
Parent wishes to secure for itself and the Company following the Merger the
services of the Consultant, and to assure itself that the Consultant agrees to
certain restrictions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Engagement.
Parent hereby irrevocably appoints the Consultant, and the
Consultant hereby agrees to be a consultant, for a period of 12 months
commencing on the date of the Closing (as defined below) (the "Consulting
Term"), to perform such reasonable consulting services as the chief executive
officer of Parent shall request, subject to Section 3 below.
2. Effectiveness.
This Agreement shall become effective simultaneously with,
and subject to, the consummation of the Merger (the "Closing"). The parties
acknowledge that until this Agreement becomes effective, the Consultant may
remain an officer and director of the Company and will be under no obligation
under, and will not be subject to the restrictions of this Agreement. If the
Merger Agreement is terminated, this Agreement shall be simultaneously
terminated.
<PAGE>
2
3. Duties.
During the Consulting Term, the Consultant as an independent
contractor shall make himself available upon reasonable notice for such time
during regular business hours as shall be reasonably necessary for the business
of the Company. Such consulting services shall be rendered in Hackensack, New
Jersey.
4. Consideration.
(a) As compensation for the Consultant's services hereunder,
Parent hereby agrees to pay the Consultant, and the Consultant agrees to accept
as full compensation for his services, a consulting fee of $1.5 million per
annum payable in immediately available funds at the Closing. In addition, the
Consultant shall be reimbursed for all expenses actually incurred by the
Consultant in the performance of his duties upon presentation to Parent of
expense statements or vouchers or such other supporting information as Parent
requires for its senior executives.
(b) As consideration for the Consultant's agreement to the
restrictive covenants in Section 6 herein (the "Restrictive Covenants"), Parent
hereby agrees to pay the Consultant, and the Consultant agrees to accept as full
consideration for his agreement to the Restrictive Covenants, (i) the benefits
set forth in Section 5 hereof, and (ii) a cash payment in the amount of $1.5
million payable in immediately available funds at the Closing.
5. Benefits; Office Facilities.
Parent agrees that for a period of six months following the
Effective Time the Consultant may continue the exclusive use of his and his
secretary's office space and office equipment; provided, that the foregoing
obligation will be excused if and when the Company ceases to maintain office
facilities in Hackensack, New Jersey. Such office space shall include a separate
conference room to be shared with the other current Co-Chief Executive Officer
of the Company. Parent agrees that the equipment and office furnishings located
in the Consultant's office shall be the property of the Consultant.
6. Restrictive Covenants.
6.1 Noncompetition and Consulting Agreement. The
Consultant shall not, for a period of one year after the date hereof, in any
capacity (including, but not limited to, owner, partner, shareholder,
consultant, agent, employee, officer, director or otherwise), directly or
indirectly, for his own account or for the benefit of any person, establish,
engage in or be connected with any Competitive Business. As used herein, the
term "Competitive Business" means any Restricted Business conducted in the
Restricted Zone. Restricted Business means institutional pharmacy,
rehabilitation services, long-term care services, skilled nursing
<PAGE>
3
facilities or assisted living facilities but does not include providing any
other goods or services to skilled nursing facilities, assisted living
facilities and other health care facilities. The Restricted Zone means any town
in Connecticut or Rhode Island in which the Company operates a long term care
facility and an area of fifteen miles surrounding such facility; any county in
Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the Company
operates a long term care facility and an area of fifteen miles surrounding such
facility; all portions of Massachusetts east of Worcester; all portions of
Pennsylvania east of Harrisburg and an area of fifteen miles around any facility
located in Virginia or Vermont; but in no event includes any portion of any
state other than Connecticut, Rhode Island, Illinois, New Jersey, Ohio, West
Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or Wisconsin. In no
event shall this Section 6.1 restrict the Consultant from owning interests in,
or developing, real estate so long as the Consultant is not operating any
Restricted Business. In addition, the Consultant shall not pursue any of the
development projects listed on Schedule 6.1 hereto.
6.2 Confidentiality. For a period of three years commencing
on the Closing Date, the Consultant shall not, except with the express prior
written consent of Parent, directly or indirectly, disclose, communicate or
divulge to any Person, or use for the benefit of any Person, any secret,
confidential or proprietary knowledge or information with respect to the conduct
or details of the Company or the business engaged in by the Company including,
but not limited to, technical know-how, processes, customers, prospects, costs,
designs, marketing methods and strategies, finances and suppliers. The provision
of this Section 6.1 shall not apply to any information which at the time of
disclosure (i) is generally available to or known to the public (other than as a
result of unauthorized disclosure directly or indirectly by the Consultant) or
(ii) the Consultant discloses, at the direction and authorization of Parent, or,
subject to the remainder of this Section 6.2 as required by law. If the
Consultant is required in a judicial, administrative or governmental proceeding
to disclose any information which is the subject of the restrictions contained
in this Section 6.2, then the Consultant will notify Parent as soon as possible
so that Parent may either seek an appropriate protective order or relief, or
waive the provisions of this Section 6.2. If, in the absence of such an order,
relief or waiver, the Consultant is required, in the written opinion of counsel,
to disclose such information to any court, administrative agency or governmental
authority, then the Consultant may disclose such information without liability
under this Agreement.
6.3 Nonsolicitation of Employees. The Consultant shall not
for a period of two years after the date hereof, except with the express written
consent of Parent (which shall not be unreasonably withheld or delayed in the
case of an employee of the Company or the Surviving Corporation who has received
a notice of termination from the Company or the Surviving Corporation, as the
case may be) or as is otherwise contemplated by the Merger Agreement, directly
or indirectly, whether as an employee, owner, partner, agent, director, officer,
shareholder or in any other capacity, for his own account or for the benefit of
any Person; (i) solicit,
<PAGE>
4
divert or induce any of (1) the Company's employees or (2) the Surviving
Corporation's employees to leave or to work for him or any Person with which he
is connected; or (ii) hire any of the Company's or the Surviving Corporation's
employees and other than the other Co-Chief Executive Officer, the Chief
Operating Officer and the Consultant's personal secretary and the other persons
who shall be acceptable to Parent and identified on a schedule to be agreed upon
prior to the purchase of shares in the Offer.
6.4 Remedies. (a) The parties to this Agreement agree that
any breach by the Consultant of the covenants and agreements contained in
Sections 6.1 and 6.2 will result in irreparable injury to Merger Sub for which
money damages could not adequately compensate Merger Sub. Therefore, in the
event of any breach of such Sections, Merger Sub shall be entitled (in addition
to any other rights and remedies which it may have at law or in equity) to have
an injunction issued by any competent court of equity enjoining and restraining
the Consultant and/or any other Person involved therein from continuing such
breach. In any action to enforce the provisions of Sections 6.1 or 6.2, the
Consultant and/or any other Person involved therein shall expressly waive the
defense that any remedy at law is adequate.
(b) In the event the Consultant is found by a nonappealable
judgment of a court of competent jurisdiction to have violated Section 6.3, in
addition to the reasonable fees and expenses of Parent's counsel incurred to
enforce such provision, the Consultant shall pay to Parent, as liquidated
damages, an amount equal to 200% of the applicable employee's annual
compensation (including, without limitation, salary, bonus and benefits) at the
time of the violation (the "Liquidated Damages"); provided, that in the event
the Consultant is found by such court to have not violated Section 6.3, Parent
shall pay to the Consultant the reasonable fees and expenses of counsel incurred
by the Consultant to defend such action and any actual damages resulting from
Parent's interference with the Consultant's commercial relationships.
6.5 Enforceability. If any portion of the covenants or
agreements contained herein, or the application thereof, is construed to be
invalid or unenforceable, then the other portions of such covenants(s) or
agreement(s) or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be unenforceable because of the
area covered, the duration thereof, or the scope thereof, then the court making
such determination shall have, for purposes of enforcement in equity, the power
to reduce the area and/or duration and/or limit the scope thereof, and the
covenant or agreement shall then be enforceable in its reduced form.
6.6 Intent of Parties. Each of the parties hereto recognize
and agree that this Agreement is necessary and essential to enable Parent to
realize
<PAGE>
5
and derive substantial benefits, rights and expectations of the Merger
Agreement, that the area and duration of the covenants herein are in all things,
under the circumstances of the Merger Agreement, reasonable; and that good and
valuable consideration exists for the Consultant's agreeing to be bound by such
covenants.
6.7 Definition. As used herein, the term "Person" means any
individual, sole proprietorship, joint venture, partnership, corporation,
association, joint-stock company, unincorporated organization, cooperative,
trust, estate, government (or any branch, subdivision or agency thereof),
governmental, administrative or regulatory authority, or any other entity of any
kind or nature whatsoever.
7. Additional Agreement. The Consultant agrees to pay to the
Surviving Corporation, immediately following the Effective Time, the principal
amount of indebtedness, and accrued interest thereon, owed by the Consultant or
Health Resources of Cinnaminson, Inc., one of the Company's subsidiaries.
8. Other Provisions.
8.1 All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in person
or by telecopier (with a confirmed receipt thereof), and on the next business
day when sent by overnight courier service, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
<PAGE>
6
(ii) if to G, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(iii) if to the Consultant, to
Moshael J. Straus
140 S. Woodland Street
Englewood, N.J. 07631
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Carl L. Reisner
Telecopy No. (212) 757-3990
8.2 Entire Agreement. This Noncompetition and Consulting
Agreement contains the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, written or oral, with
respect thereto.
8.3 Waivers and Amendments. This Noncompetition and
Consulting Agreement may be amended, superseded, canceled, renewed or extended,
and the terms hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other such right, power or privilege.
<PAGE>
7
8.4 Governing Law. This Noncompetition and Consulting
Agreement shall be governed by and construed in accordance with the laws of the
State of New Jersey without regard to choice of law principles.
8.5 Successors and Assigns; Assignment. This Noncompetition
and Consulting Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective successors. This Noncompetition and
Consulting Agreement, and the Consultant's rights and obligations hereunder, may
not be assigned by the Consultant. Parent may assign this Noncompetition and
Consulting Agreement and its rights, together with its obligations, hereunder in
connection with any sale, transfer or other disposition of all or substantially
all of its assets or business, whether by merger, consolidation or otherwise.
8.6 No Third Party Beneficiaries. This Noncompetition and
Consulting Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
8.7 Counterparts. This Noncompetition and Consulting
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same instrument. Each
counterpart may consist of two copies hereof each signed by one of the parties
hereto.
8.8 Headings. The headings in this Noncompetition and
Consulting Agreement are for reference only and shall not affect the
interpretation of this Noncompetition and Consulting Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition and Consulting Agreement as of the date first above written.
WALTZ CORP.
By: /s/ James L. Singleton
Name: James L. Singleton
Title: President and
Assistant Secretary
<PAGE>
8
WALTZ ACQUISITION CORP.
By: /s/ Karl I. Peterson
Name: Karl I. Peterson
Title: Vice President,
Secretary and
Assistant Treasurer
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
Name: Michael R. Walker
Title: Chairman and
Chief Executive
Officer
/s/ Moshael J. Straus
Moshael J. Straus
<PAGE>
EXHIBIT 11(c)(6)
NONCOMPETITION AGREEMENT
AGREEMENT, dated as of June 16, 1997, among GENESIS HEALTH
VENTURES, INC., a Pennsylvania corporation, ("G"), WALTZ CORP., a Delaware
Corporation ("Parent"), WALTZ ACQUISITION CORP., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub") and Stephen R. Baker (the
"Covenantor").
Parent, Merger Sub, G and THE MULTICARE COMPANIES, INC., a
Delaware corporation (the "Company"), have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), pursuant to which
Merger Sub is merging with and into the Company and the Company will survive as
a wholly-owned subsidiary of Parent (the "Merger"). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to them
in the Merger Agreement.
The Covenantor is employed as the Chief Operating Officer and
an Executive Vice President by the Company, and has confidential knowledge of
its business and affairs and is considered by Parent to be a key employee of the
Company. Parent wishes to assure itself that the Covenantor agrees to certain
restrictions set forth in this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
1. Effectiveness.
This Agreement shall become effective simultaneously
with, and subject to, the consummation of the Merger (the "Closing"). The
parties acknowledge that until this Agreement becomes effective, the Covenantor
may remain an officer and director of the Company and will not be subject to the
restrictions of this Agreement. If the Merger Agreement is terminated, this
Agreement shall be simultaneously terminated.
2. Consideration.
(a) As consideration for the Covenantor's agreement
to the restrictive covenants in Section 4 herein (the "Restrictive Covenants"),
Parent hereby agrees to pay the Covenantor, and the Covenantor agrees to accept
as full consideration for his agreement to the Restrictive Covenants, (i) the
benefits set forth in Section 3 hereof, and (ii) a cash payment in the amount of
$500,000, payable in immediately available funds at the Closing.
<PAGE>
2
3. Benefits; Office Facilities.
Parent agrees that for a period of six months
following the Effective Time the Covenantor may continue the exclusive use of
his and his secretary's office space and office equipment; provided, that the
foregoing obligation will be excused if and when the Company ceases to maintain
office facilities in Hackensack, New Jersey. Parent agrees that the equipment
and office furnishings located in the Covenantor's office shall be the property
of the Covenantor.
4. Restrictive Covenants.
4.1 Noncompetition Agreement. Covenantor shall not,
for a period of one year after the date hereof, in any capacity (including, but
not limited to, owner, partner, shareholder, consultant, agent, employee,
officer, director or otherwise), directly or indirectly, for his own account or
for the benefit of any person, establish, engage in or be connected with any
Competitive Business. As used herein, the term "Competitive Business" means any
Restricted Business conducted in the Restricted Zone. Restricted Business means
institutional pharmacy, rehabilitation services, long term care services,
skilled nursing facilities or assisted living facilities but does not include
providing any other goods or services to skilled nursing facilities, assisted
living facilities and other health care facilities. The Restricted Zone means
any town in Connecticut or Rhode Island in which the Company operates a long
term care facility and an area of fifteen miles surrounding such facility; any
county in Illinois, New Jersey, Ohio, West Virginia or Wisconsin in which the
Company operates a long term care facility and an area of fifteen miles
surrounding such facility; all portions of Massachusetts east of Worcester; all
portions of Pennsylvania east of Harrisburg and an area of fifteen miles around
any facility located in Virginia or Vermont; but in no event includes any
portion of any state other than Connecticut, Rhode Island, Illinois, New Jersey,
Ohio, West Virginia, Wisconsin, Massachusetts, Pennsylvania, Virginia, or
Wisconsin. In no event shall this Section 4.1 restrict the Covenantor from
owning interests in, or developing, real estate so long as the Covenantor is not
operating any Restricted Business. In addition, Covenantor shall not pursue any
of the development projects listed on Schedule 4.1 hereto.
4.2 Confidentiality. For a period of three years
commencing on the Closing Date, the Covenantor shall not, except with the
express prior written consent of Parent, directly or indirectly, disclose,
communicate or divulge to any Person, or use for the benefit of any Person, any
secret, confidential or proprietary knowledge or information with respect to the
conduct or details of the Company or the business engaged in by the Company
including, but not limited to, technical know-how, processes, customers,
prospects, costs, designs, marketing methods and strategies, finances and
suppliers. The provision of this Section 4.1 shall not apply to any information
which at the time of disclosure (i) is generally available to or known to the
public (other than as a result of unauthorized disclosure directly or indirectly
by Covenantor) or (ii) Covenantor discloses, at the direction and authorization
of Parent,
<PAGE>
3
or, subject to the remainder of this Section 4.1 as required by law. If
Covenantor is required in a judicial, administrative or governmental proceeding
to disclose any information which is the subject of the restrictions contained
in this Section 4.2, then Covenantor will notify Parent as soon as possible so
that Parent may either seek an appropriate protective order or relief, or waive
the provisions of this Section 4.2. If, in the absence of such an order, relief
or waiver, Covenantor is required, in the written opinion of counsel, to
disclose such information to any court, administrative agency or governmental
authority, then Covenantor may disclose such information without liability under
this Agreement.
4.3 Nonsolicitation of Employees. The Covenantor
shall not for a period of two years after the date hereof, except with the
express written consent of Parent (which shall not be unreasonably withheld or
delayed in the case of an employee of the Company or the Surviving Corporation
who has received a notice of termination from the Company or the Surviving
Corporation, as the case may be) or as is otherwise contemplated by the Merger
Agreement, directly or indirectly, whether as an employee, owner, partner,
agent, director, officer, shareholder or in any other capacity, for his own
account or for the benefit of any Person; (i) solicit, divert or induce any of
(1) the Company's employees or (2) the Surviving Corporation's employees to
leave or to work for him or any Person with which he is connected; or (ii) hire
any of the Company's or the Surviving Corporation's employees and other than the
Co-Chief Executive Officers and the Covenantor's personal secretary and other
persons who shall be acceptable to Parent and identified on a schedule to be
agreed upon prior to the purchase of shares in the Offer.
4.4 Remedies. (a) The parties to this Agreement agree
that any breach by Covenantor of the covenants and agreements contained in
Sections 4.1 and 4.2 will result in irreparable injury to Merger Sub for which
money damages could not adequately compensate Merger Sub. Therefore, in the
event of any breach of such Sections, Merger Sub shall be entitled (in addition
to any other rights and remedies which it may have at law or in equity) to have
an injunction issued by any competent court of equity enjoining and restraining
Covenantor and/or any other Person involved therein from continuing such breach.
In any action to enforce the provisions of Sections 4.1 or 4.2, Covenantor
and/or any other Person involved therein shall expressly waive the defense that
any remedy at law is adequate.
(b) In the event Covenantor is found by a
nonappealable judgment of a court of competent jurisdiction to have violated
Section 4.3, in addition to the reasonable fees and expenses of Parent's counsel
incurred to enforce such provision, Covenantor shall pay to Parent, as
liquidated damages, an amount equal to 200% of the applicable employee's annual
compensation (including, without limitation, salary, bonus and benefits) at the
time of the violation (the "Liquidated Damages"); provided, that in the event
Covenantor is found by such court to have not violated Section 4.3, Parent shall
pay to Covenantor the reasonable fees and expenses
<PAGE>
4
of counsel incurred by Covenantor to defend such action and any actual damages
resulting from Parent's interference with Covenantor's commercial relationships.
4.5 Enforceability. If any portion of the covenants
or agreements contained herein, or the application thereof, is construed to be
invalid or unenforceable, then the other portions of such covenants(s) or
agreement(s) or the application thereof shall not be affected and shall be given
full force and effect without regard to the invalid or unenforceable portions.
If any covenant or agreement herein is held to be unenforceable because of the
area covered, the duration thereof, or the scope thereof, then the court making
such determination shall have, for purposes of enforcement in equity, the power
to reduce the area and/or duration and/or limit the scope thereof, and the
covenant or agreement shall then be enforceable in its reduced form.
4.6 Intent of Parties. Each of the parties hereto
recognize and agree that this Agreement is necessary and essential to enable
Parent to realize and derive substantial benefits, rights and expectations of
the Merger Agreement, that the area and duration of the covenants herein are in
all things, under the circumstances of the Merger Agreement, reasonable; and
that good and valuable consideration exists for Covenantor's agreeing to be
bound by such covenants.
4.7 Definition. As used herein, the term "Person"
means any individual, sole proprietorship, joint venture, partnership,
corporation, association, joint-stock company, unincorporated organization,
cooperative, trust, estate, government (or any branch, subdivision or agency
thereof), governmental, administrative or regulatory authority, or any other
entity of any kind or nature whatsoever.
5. Other Provisions.
5.1 All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person or by telecopier (with a confirmed receipt thereof), and on the next
business day when sent by overnight courier service, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(i) if to Parent or Merger Sub, to:
Waltz Corp.
65 East 55th Street
New York, New York 10022
Attention: James L. Singleton
Telecopier: (212) 705-0199
<PAGE>
5
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: William E. Curbow
Telecopier: (212) 455-2502
(ii) if to G, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Michael R. Walker
Telecopier: (610) 444-7483
with a copy to:
Blank, Rome, Comiskey & McCauley
1200 Four Penn Center Plaza
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo
Telecopier: (215) 569-5555
(iii) if to the Covenantor, to
Stephen R. Baker
3508 Belmar Boulevard
Neptune, N.J. 07753
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6065
Attention: Carl L. Reisner
Telecopy No. (212) 757-3990
5.2 Entire Agreement. This Noncompetition Agreement
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, written or oral, with respect
thereto.
5.3 Waivers and Amendments. This Noncompetition
Agreement may be amended, superseded, canceled, renewed or extended, and the
<PAGE>
6
terms hereof may be waived, only by a written instrument signed by the parties
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any other or further exercise thereof
or the exercise of any other such right, power or privilege.
5.4 Governing Law. This Noncompetition Agreement
shall be governed by and construed in accordance with the laws of the State of
New Jersey without regard to choice of law principles.
5.5 Successors and Assigns; Assignment. This
Noncompetition Agreement is binding upon and shall inure to the benefit of the
parties hereto and their respective successors. This Noncompetition Agreement,
and the Covenantor's rights and obligations hereunder, may not be assigned by
the Covenantor. Parent may assign this Noncompetition Agreement and its rights,
together with its obligations, hereunder in connection with any sale, transfer
or other disposition of all or substantially all of its assets or business,
whether by merger, consolidation or otherwise.
5.6 No Third Party Beneficiaries. This Noncompetition
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
5.7 Counterparts. This Noncompetition Agreement may
be executed by the parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original but all such counterparts
together shall constitute one and the same instrument. Each counterpart may
consist of two copies hereof each signed by one of the parties hereto.
<PAGE>
7
5.8 Headings. The headings in this Noncompetition
Agreement are for reference only and shall not affect the interpretation of this
Noncompetition Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Noncompetition Agreement as of the date first above written.
WALTZ CORP.
By:/s/Karl I. Peterson
____________________
Name: Karl I. Peterson
Title: Vice President,
Secretary and
Assistant Treasurer
WALTZ ACQUISITION CORP.
By:/s/ Karl I. Peterson
_____________________
Name: Karl I. Peterson
Title: Vice President,
Secretary and
Assistant Treasurer
GENESIS HEALTH VENTURES, INC.
By:/s/ Michael R. Walker
_____________________
Name: Michael R. Walker
Title: Chairman and
Chief Executive Officer
/s/ Stephen R. Baker
_____________________
Stephen R. Baker
<PAGE>
Exhibit 11(c)(7)
GENESIS HEALTH VENTURES, INC.
148 West State Street
Kennett Square, Pennsylvania 19348
June 16, 1997
CONFIDENTIAL
Straus Associates
c/o Daniel Straus
411 Hackensack Avenue
Hackensack, NJ 07601
Re: Harrington Court, Colchester, Connecticut
Gentlemen:
The following confirms an agreement between Genesis Health
Ventures, Inc., a Pennsylvania corporation located in Kennett Square,
Pennsylvania, or its designee (hereinafter referred to as "Buyer") and Straus
Associates, a New York partnership with its principal place of business in
Hackensack, New Jersey ( the "Partnership") for Buyer to acquire the land and
buildings owned by the Partnership located on Harrington Court, Colchester,
County of New London, Connecticut, as more particularly described on Schedule A
attached hereto and made a part hereof (collectively, the land, building,
fixtures and personalty, being the "Facility").
1. Structure of Transaction. Buyer will purchase the Facility
through an asset purchase.
2. Consideration. In consideration for the Facility, on the
Closing Date, Buyer agrees to pay the Partnership Eight
Million Four Hundred Thousand Dollars ($8,400,000) (the
"Purchase Price") which shall be paid in cash on the Closing
Date.
3. Facility Lease. The Facility is subject to that certain Lease,
made as of November 14th, 1986, by and between the Partnership
and Health Resources of Colchester, Inc., a Connecticut
corporation, as amended by those certain Amendments of Lease,
made as of November 18, 1992 and December 17, 1993
(collectively, the "Lease"). Buyer agrees that the Lease will
be assumed by Buyer on the Closing Date on the same economic
<PAGE>
Straus Associates
June 16, 1997
Page 2
terms existing on the Closing Date; provided, that the amount
of annual rent payable to Buyer pursuant to Section 2.1 of the
Lease will be fixed to equal the annual debt service payments
under the indebtedness described in such section.
4. Access. The Partnership will provide Buyer, its accountants,
counsel, and other representatives reasonable access to all
the properties, books, contracts and other records of the
Facility.
5. Conduct of Business. From the date of this letter until
definitive agreements are executed and the transactions
described herein are consummated, the Partnership will
continue to operate the Facility in the usual, regular and
ordinary manner consistent with past practices, and to comply
with all applicable laws, rules and regulations.
6. Limited Representations and Warranties. The Partnership hereby
represents and warrants to Buyer (i) attached as Exhibit A
hereto is a complete and correct copy of the Lease as in
effect on the date hereof, (ii) no person has an option to
acquire the Facility and (iii) attached as Exhibit B hereto is
a summary presentation of the operating results of the
Facility for the fiscal years ended December 31, 1995, 1996
and for the fiscal quarter ended March 31, 1997.
7. Conditions. The parties agree that this agreement is subject
to the following conditions:
(a) Execution by the parties of customary real estate
transfer documents at the closing.
(b) The parties receiving all necessary governmental and
third party licenses, permits, regulatory approvals
and consents for the Transaction;
(c) The Facility being transferred free and clear of all
liens, encumbrances and restrictions, except the
Lease and except for other imperfections which do not
materially adversely affect the value of the Facility
as a skilled nursing facility;
(d) Compliance with all laws applicable to the proposed
transaction; and
(e) Consummation of the Merger (as defined in the
Agreement and Plan of Merger (the "Merger Agreement")
by and among The Multicare Companies, Inc., Waltz
Acquisition Corp. and the other parties who are
signatories thereto).
<PAGE>
Straus Associates
June 16, 1997
Page 3
8. Closing. Buyer and the Partnership shall close the
transactions described herein contemporaneously with the
Effective Time (as defined in the Merger Agreement) (such
date, the "Closing Date").
9. Assignment. Buyer may assign its rights under this agreement
to any designee; provided that Buyer shall remain obligated
hereunder regardless of any such assignment.
10. Termination. This agreement shall terminate upon the earlier
of (a) the Closing Date and (b) the date the Merger Agreement
is terminated.
Please indicate your acceptance of the terms and conditions of
this agreement by executing it in the space provided below, and returning one
executed copy to Genesis. Once executed and returned to Genesis, this letter
will constitute a binding agreement between the parties. Upon our receipt
thereof, Genesis will undertake the preparation of the proposed definitive
agreements covering the transactions described herein.
Very truly yours,
GENESIS HEALTH VENTURES, INC.
By: /S/ Michael R. Walker
--------------------------------
The foregoing is agreed to by the undersigned.
STRAUS ASSOCIATES
By: Daniel E. Straus , its general partner
----------------------------------------
------------------------------------
Name:
<PAGE>
