STOCKHOLDER OPTION AND PROXY AGREEMENT
AGREEMENT, dated as of July 11, 1996, among G Acquisition Corporation,
a Delaware corporation (the "Purchaser"), Tomahawk Holdings, Inc., a Delaware
corporation ("Stockholder"), Tomahawk Capital Holdings, Inc., a Pennsylvania
corporation ("Capital"), Daniel Veloric ("Mr. Veloric") and Genesis Health
Ventures, Inc., a Pennsylvania Corporation ("Genesis"). Stockholder, Capital and
Mr. Veloric are referred to collectively hereinafter individually as an "Owner"
and collectively as "Owners".
WHEREAS, Genesis, the Purchaser and Geriatric & Medical Companies,
Inc., a Delaware corporation (the "Company") are entering into an Agreement and
Plan of Merger simultaneously herewith (the "Merger Agreement") pursuant to
which the Purchaser will merge with and into the Company (the "Merger"); and
WHEREAS, Stockholder is the owner of the number of shares of common
stock, par value $.10 per share ("Common Stock"), of the Company set forth on
the signature page hereof (the "Shares"); and
WHEREAS, Capital owns 100% of the outstanding capital stock of
Stockholder; and
WHEREAS, Mr. Veloric owns 100% of the outstanding capital stock of
Capital; and
WHEREAS, the Purchaser wishes to consummate the Merger pursuant to the
terms and conditions of the Merger Agreement; however, before executing the
Merger Agreement, Purchaser requires certain assurances and commitments from the
Owners as set forth herein; and
WHEREAS, in order to induce the Purchaser to enter into the Merger
Agreement, the Owners desire to give the Purchaser an option to purchase the
Shares, and further desire to make certain other agreements regarding voting and
sales of the Shares, all upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Grant of Option. The Stockholder hereby grants to the Purchaser, an
exclusive and irrevocable option (the "Option") to purchase any or all of the
Shares at a price of $5.75 per Share, subject to adjustment as provided in
Section 4 hereof (the "Exercise Price").
2. Exercise of Option.
a. The Option, subject to the conditions set forth in Section
3 hereof, may be exercised by the Purchaser, in whole or in part, at any time or
from time to time on and after the date hereof and prior to the earlier of (i)
the day following the Effective Time (as defined in the Merger Agreement) or
(ii) (A) one year after the termination of the Merger Agreement, if the Merger
is not approved by a vote of more than 50% of the shares of the Company or if
the Agreement is terminated after the Company has willfully taken actions or
willfully failed to take actions which cause a default under the Agreement or a
condition to Purchaser's consummation of the Agreement not to be met; (B) six
months after termination of an unsuccessful proposed Third Party Acquisition if
the Agreement had been terminated under Section 11.1(e) or (f) of the Merger
Agreement as a result of a proposed Third Party Acquisition, (C) upon
termination of the Merger Agreement if the Merger Agreement is terminated by the
Company upon a default by Genesis and (D) three months after the termination of
the Agreement if the Agreement is terminated for any reason other than
2(a)(ii)(A), (B) or (C) above. The Owners will not, prior to the termination of
the Option, take, or refrain from taking, any action which would have the effect
of preventing or disabling the Stockholder from delivering the Shares to the
Purchaser upon exercise of the Option or otherwise performing their obligations
under this Agreement.
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b. In the event the Purchaser elects to exercise the Option in
accordance with Section 2(a) hereof, the Purchaser shall send a written notice
to the Stockholder specifying the number of the Shares the Purchaser will
purchase and the place and date (not later than ten business days nor earlier
than one business day) from the date such notice is mailed but not earlier than
the expiration of any applicable waiting period under Title II of the Hart-Scott
Rodino Antitrust Improvements Act of 1976 ("Hart-Scott Act") for the closing of
such purchase.
c. The Owners agree to comply with the following procedures
for the simultaneous exercise of the Option by purchase and sale and delivery of
the Option Shares by the Owners, the provisions of subsection (b) above to the
contrary notwithstanding (provided that the applicable waiting period under the
Hart-Scott Act has expired at the time of such delivery). The Purchaser shall be
entitled to deliver to the Stockholder a non-binding notice of intention to
exercise the Option, specifying the time, date and place of Purchaser's intended
exercise and purchase, no later than 24 hours prior to such time and date. Upon
receipt of such notice, the Owners shall take all steps necessary to enable them
to, and shall, effect the sale and delivery of the Option Shares to the
Purchaser upon simultaneous exercise of the Option, as provided and subject to
the conditions in Section 3 below, at such place, on such date (which may be a
weekend or legal holiday), and at such time (which may be outside of business
hours, such as 12:02 a.m. on a given day). The Purchaser shall have no liability
to the Owners, and all of the terms and conditions of this Agreement shall
remain in effect, including this subsection (c), if the Option is in fact not
exercised in the manner contemplated by such non-binding notice of intention.
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3. Payment and Delivery of Certificate(s). At any closing of a purchase
of any of the Shares hereunder, (a) the Purchaser will pay to the Stockholder
the Exercise Price for all of the Shares so purchased by certified check,
cashier's check or wire transfer and (b) the Stockholders will deliver or cause
to be delivered to the Purchaser a certificate or certificates representing (or
cause to be made book-entry delivery to an account designated by the Purchaser
of) the number of the Shares so purchased, duly endorsed or accompanied by stock
powers duly executed in blank in the case of certificates.
4. Adjustment in Exercise Price. In the event that at any time after
the date hereof and up to and including the Effective Time the highest price
paid by the Purchaser (or any subsidiary or affiliate of the Purchaser) for any
share of Company Common Stock exceeds the Exercise Price set forth in Section 1
hereof (as previously adjusted pursuant to this Section 4) then (a) the Exercise
Price shall thereupon be adjusted to the highest such price, and (b) as to
Shares as to which the Option has previously been exercised, the Purchaser or
Genesis shall promptly deliver to the Stockholder a certified check, cashier's
check or wire transfer in the amount of the product of (i) the amount of such
excess price per share, multiplied by (ii) the number of Shares as to which the
Option has previously been exercised; provided, however, that if shares of
Company Common Stock are purchased under any tender offer by Purchaser for
shares of the Company by Purchaser or other affiliate of Genesis (an "Offer"),
the Exercise Price shall in no event exceed the price paid in such Offer.
5. Additional Payment Under Certain Circumstances. If, after the
Purchaser has exercised the Option and prior to the consummation of the Merger,
the Purchaser directly or indirectly sells or otherwise disposes of any Shares
purchased pursuant to the Option (other than
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in the Merger or to Genesis or any direct or indirect wholly owned subsidiary of
Genesis, which transferee agrees to be bound by this Agreement as if such
transferee were the "Purchaser" hereunder) then the Purchaser or Genesis shall
pay to the Stockholder, as promptly as practicable after such sale or other
disposition, the amount (the "Excess Amount") on a per share basis, if any, by
which the net proceeds received by the Purchaser upon the sale or other
disposition exceeds the aggregate price paid by the Purchaser to the Stockholder
upon exercise of the Option for the purchase of such Share. In the event that
the Purchaser receives securities or other property other than cash upon any
sale or disposition of a Share, the "price" of such Share which the Purchaser
will be deemed to have paid at the time the Purchaser purchased such Share for
purposes of calculating the Excess Amount, if any, shall be deemed to be the
amount of cash received upon the sale of such Share plus the fair market value
of such securities and other property at the time of receipt. For purposes of
the foregoing, (i) the fair market value of securities which are publicly traded
shall be deemed to be the closing price of such securities on the date of
receipt (or, if not a business day, on the next preceding business day) on the
New York Stock Exchange, if the securities are listed thereon, or, if not so
listed, on any other national securities exchange on which such securities are
listed and principally traded, or, if not listed on any national securities
exchange, the average of the closing bid and asked prices in the
over-the-counter market on the date of receipt (or, if not a business day, on
the next preceding business day) and; (ii) the fair market value of any other
property shall be as determined by a nationally recognized investment banking
firm (the fees of which will be borne equally by the Company and the Purchaser)
mutually selected by the parties or, if none can be so selected, then as
selected by the President of the New York Stock Exchange. If the Purchaser has
not (and is not deemed to
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have) sold or disposed of all of the Shares which the Purchaser has acquired by
exercising the Option by April 1, 1997, then the Excess Amount shall be
determined solely with respect to each Share sold or disposed of (or deemed to
have been sold or disposed of) by such date and the provisions of this Section 5
shall thereupon terminate with respect to Shares not sold or disposed of (and
not so deemed to have been sold or disposed of) as of such date.
6. Certain Covenants of the Owners.
a. Until the expiration of the Option pursuant to Section 2
hereof, except as described in Section 8(d) hereof, the Owners will not sell,
transfer, pledge, hypothecate or otherwise dispose of any of the Shares (or any
interest therein), and will not enter into any contract, agreement, commitment
or arrangement with respect to any of the foregoing, without the prior written
consent of the Purchaser, other than to the Purchaser pursuant to any Offer or
upon the exercise of the Option by the Purchaser or consummation of the Merger,
and the Stockholder is expressly permitted to tender its shares to Purchaser or
Genesis pursuant to any Offer and to be paid in accordance with any such Offer.
b. The Owners hereby agree promptly to endorse the certificate
or certificates representing the Shares with a legend referring to this
Agreement (in a form satisfactory to the Purchaser) and, if requested by
Purchaser, to take such actions as to enable the Stockholder to deliver such
certificate or certificates to an escrowholder satisfactory to the Purchaser (or
promptly to make book-entry delivery of the Shares to an account acceptable to
the Purchaser) to be held in escrow pending delivery hereunder.
c. From and after the date of this Agreement and prior to the
earlier of the Effective Time and the termination of the Merger Agreement
according to its terms, the Owners
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shall not (i) purchase, or enter into any contract to purchase, any shares of
Company Common Stock, (ii) tender any shares of Company Common Stock pursuant to
any tender offer or exchange offer other than any Offer, or (iii) grant any
person a proxy or other right to vote or direct the vote of any shares of
Company Common Stock, except in order to comply with paragraphs 6(d) and (f).
d. When the Merger Agreement is submitted to the stockholders
of the Company for approval, the Stockholder shall take all action necessary as
a stockholder to approve and implement the Merger Agreement. The Owners shall
not seek to assert any appraisal right.
e. From and after the date of this Agreement and prior to the
termination of the Merger Agreement according to its terms, other than with
respect to any Offer and the Merger, the Owners will not form or participate in
any Group (as that term is used in Rule 13(d)(3) of the Securities Exchange Act
of 1934, as amended) which intends to seek control of the Company or any
subsidiary thereof (other than a Group of which Genesis is a member). The Owners
will immediately notify the Purchaser (i) if any Owner receives any inquiries or
proposals relating to the formation of such a Group and (ii) if any information
is requested from, or any negotiations or discussions are sought to be initiated
with, the Company or the Owners with respect to the formation of such a Group.
f. The Owners hereby agree that, from and after the date
hereof and until the Expiration Date (as defined in Section 7), at any meeting
of the stockholders of the Company, however called, or in connection with any
written consent of the stockholders of the Company, and to the extent permitted
by applicable law, the Owners shall vote (or cause to be voted) or act by
written consent with respect to the Shares (a) in favor of adoption and approval
of the Merger
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Agreement and the Merger and the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement; (b) against any action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company contained in the
Merger Agreement or of any of the Owners contained in this Agreement; and (c)
against any action, agreement or transaction that is intended or could
reasonably be expected to facilitate a person other than the Purchaser or its
affiliate in acquiring control of the Company ("Competing Transaction") or any
other action, agreement or transaction (other than the Merger Agreement or the
transactions contemplated thereby) that is intended, or could reasonably be
expected to impede, interfere or be inconsistent with, delay, postpone,
discourage or materially adversely affect the consummation of the Merger or the
performance by the parties hereto of their respective obligations under this
Agreement, including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or its subsidiaries; (ii) a sale, lease or transfer of a
material amount of assets of the Company and its subsidiaries or a
reorganization, recapitalization or liquidation of the Company or its
subsidiaries; (iii) a material change in the policies or management of the
Company, except as otherwise agreed to in writing by Purchaser; (iv) an election
of new members to 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; (v) any material change in the present capitalization or dividend
policy of the Company or any amendment of the Company's certificate of
incorporation or bylaws; or (vi) any other material change in the Company's
corporate structure or business. The Owners shall not enter into any agreement
or understanding with any person or entity prior to the Expiration Date to vote
any Company
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Common Stock or give instructions in any manner inconsistent with clauses (a),
(b) or (c) of the preceding sentence.
g. The Stockholder hereby agrees, while this Agreement is in
effect, to promptly notify the Purchaser of the number of any additional shares
of Company Common Stock acquired by the Owners, if any, after the date hereof.
h. The Owners hereby agree, except with respect to Purchaser
and its affiliates, on or after the date hereof, that the Owners shall not
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to any matter described in Section 6 (a),
(c) or (e) hereof or any Competing Transaction, participate in any negotiations
concerning, or provide to any other person any information or data relating to
the Company or its subsidiaries for the purpose of, or have any substantive
discussions with any person relating to, or otherwise cooperate with or assist
or participate in, or facilitate, any inquiries or the making of any proposal
which constitutes, or would reasonably be expected to lead to, any effort to
attempt by any other person to seek to effect any matter described in Section
6(a), (c) or (e) hereof or any Competing Transaction, or agree to or endorse any
Competing Transaction; provided, however, that notwithstanding anything to the
contrary contained herein, at any time Mr. Veloric is a director of the Company,
Mr. Veloric, in his capacity as a director of the Company at such time, may take
such actions in respect of a Competing Transaction as the directors of the
Company are permitted to take by Section 6.5 of the Merger Agreement. The Owners
agree to immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any possible Competing Transactions or any matter described in Section 6 (a),
(c) or (e) hereof.
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i. Mr. Veloric shall cause each of the Stockholder, and
Capital and each other corporation, partnership or other entity controlled by
Mr. Veloric which owns, directly or indirectly, an equity interest in the
Stockholder to comply with the obligations of the Owners hereunder. Mr. Veloric
hereby guarantees the performance by each other Owner of its obligations
hereunder.
7. Proxy. THE STOCKHOLDER HEREBY GRANTS TO A PERSON TO BE DESIGNATED BY
PURCHASER, AND ANY SUCCESSOR PERSON, THE STOCKHOLDER'S PROXY AND APPOINTS SUCH
PERSON AS ITS ATTORNEY-IN-FACT (WITH FULL POWER OF SUBSTITUTION) TO VOTE OR ACT
BY WRITTEN CONSENT, TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW, WITH RESPECT
TO THE SHARES IN ACCORDANCE WITH SECTION 6 HEREOF. THIS PROXY IS COUPLED WITH AN
INTEREST AND SHALL BE IRREVOCABLE, AND THE STOCKHOLDER WILL TAKE SUCH FURTHER
ACTION OR EXECUTE SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE
INTENT OF THIS PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY IT WITH
RESPECT TO THE SHARES.
The proxy set forth in this Section 7 hereof shall terminate on the
Expiration Date. As used herein, the term "Expiration Date" means the earlier of
the (i) day following the Effective Time and (ii) the date which is one year
following the termination of the Merger Agreement in accordance with the terms
thereof or such shorter period as may be required by applicable law (unless
extended by the mutual written consent of the parties hereto).
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8. Representations and Warranties.
The Owners represent and warrant to Purchaser that, subject to
Section 8(d) below:
a. The Stockholder is the sole owner of the Shares and has
full right, power and authority to sell and vote the Shares, to enter into and
perform this Agreement and to grant the Option granted herein. Capital owns 100%
of the outstanding voting stock of Stockholder. Mr. Veloric owns 100% of the
outstanding capital stock of Capital. The execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by Mr. Veloric and the board of directors of each of the
Stockholder and Capital and the Agreement is the valid and binding obligation of
each Owner, enforceable against such Owner in accordance with its terms;
b. Each of the Stockholder and Capital is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation;
c. None of the Owners owns any options, warrants or other
rights to acquire any shares of Company Common Stock except for the Shares;
d. The Stockholder does now, and at all times prior to the
expiration of the Option will, own the Shares free and clear of all liens,
claims, encumbrances security interests and rights or interests of others of any
kind other than the Purchaser, except for (i) security interests granted by the
Stockholder to Commerce Bank and Prudential Securities (collectively, the
"Current Lenders") in order to secure certain future obligations of the
Stockholder to the Current Lenders for borrowed money and (ii) future succeeding
security interests granted by Stockholder to future lenders (collectively, the
"Future Lenders") which replace the Current Lender's security interest in order
to secure obligations of the Stockholder to such Future Lenders provided that
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Stockholder enters into an agreement prior to granting such security interest on
the following terms: The agreement will be reasonably satisfactory to Purchaser
and provide (i) that the Future Lenders authorize Purchaser to exercise its
Option hereunder by paying all or a portion of the Purchase Price to such Future
Lenders, (ii) that Purchaser shall otherwise enjoy the full benefits
contemplated hereunder and (iii) that Future Lenders will not interfere with
Purchaser's rights hereunder. Owners further agree that at no time may more than
two Current Lenders and Future Lenders in the aggregate have a security interest
in the Shares;
e. The Owners agree to use their best efforts to enter into an
agreement with Current Lenders whereby Current Lenders will authorize Purchaser
to exercise its Option and enjoy the full benefits contemplated hereunder and
agree to not interfere with Purchaser's rights hereunder. Owners further agree
that upon any exercise of the Option, Purchaser can pay all or a portion of the
Purchase Price to Current Lenders or any Future Lenders in order to obtain the
Shares free and clear of any lien of any Current Lender or Future Lender on such
Shares; and
f. Upon exercise of the Option granted herein, the Purchaser
will receive good and marketable title to the Shares, free of all liens, claims,
encumbrances, security interests and rights or interests of others of any kind.
9. Description of Shares. For all purposes of this Agreement, the
Shares shall mean the Shares as defined in Section 1 hereof, and all securities
or property (including cash) issued or exchanged with respect to such Shares
from and after the date of this Agreement in connection with any reorganization,
recapitalization, reclassification, merger, consolidation, spin-off, partial or
complete liquidation, stock dividend, split-up, sale of assets, or other
distribution to stockholders of the Company or combination of the Company Common
Stock or any other
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change in its capital structure. In the event of any such change, the Exercise
Price per Share shall be appropriately adjusted, so as to fairly and equitably
preserve, as far as practicable, the original rights of the Purchaser and
Stockholder hereunder.
10. Specific Performance. The Owners acknowledge that the Option
granted to the Purchaser herein, and all the agreements of the Owners contained
herein are unique and that the parties hereto will not have adequate remedies at
law if any of them fails to perform any of its obligations under this Agreement.
Accordingly, each party hereto agrees that each other party hereto shall have
the right, in addition to any other rights which it may have, to specific
performance and equitable injunctive relief, without the requirement for the
posting of a bond, if such party shall fail or threaten to fail to perform any
of its obligations under this Agreement.
11. Miscellaneous.
a. Assignability. The rights and obligations of the Purchaser
shall be assignable by the Purchaser to and only to any direct or indirect
wholly owned subsidiary of Genesis, if and only if such other party shall, by a
written instrument reasonably satisfactory to the Stockholder, agree to assume
all of the Purchaser's obligations hereunder and to be bound by all of the terms
and conditions of this Agreement. The obligations of the Owners shall not be
assignable without the prior written consent of the Purchaser, and any purported
assignment without such prior written consent shall be null and void.
b. Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any third
party any rights or remedies by virtue of this Agreement or any exercise or
non-exercise of the Option granted hereby.
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c. Amendments. This Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by the parties hereto.
d. Notices. Except as otherwise expressly provided herein, all
notices, requests, claims, demands and other communications hereunder shall be
in writing and shall be furnished by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier services, such as
Federal Express), or by any courier service such as Federal Express providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Owners:
(i) Daniel J. Veloric
1000 Broadmoor Avenue
Bryn Mawr, PA 19010
Fax: (215) 748-8118
(ii) Tomahawk Capital Holdings, Inc.
Tomahawk Holdings, Inc.
1000 Broadmoor Avenue
Bryn Mawr, PA 19010
Fax: (215) 748-8118
Attn: Chairman and Chief Executive Officer
Attn: Law Department
With a copy to:
Mesirov Gelman Jaffe Cramer & Jamieson
1735 Market Street
Philadelphia, PA 19103-7598
Fax: (215) 994-1111
Attn: Robert P. Krauss, Esquire
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If to the Purchaser:
(i) G Acquisition Corporation
148 West State Street
Kennett Square, PA 19348
Fax: (610) 444-7483
Attn: Chairman and Chief Executive Officer
Attn: Law Department
With a copy to:
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Fax: (215) 569-5555
Attn: Stephen E. Luongo, Esquire
If to Genesis Health Ventures, Inc.:
148 West State Street
Kennett Square, PA 19348
Fax: (610) 444-7483
Attn: Chairman and Chief Executive Officer
Attn: Law Department
With a copy to:
Blank Rome Comisky & McCauley
Four Penn Center Plaza
Philadelphia, PA 19103
Fax: (215) 569-5555
Attn: Stephen E. Luongo, Esquire
The addresses set forth above may be changed by any party hereto upon furnishing
to the other parties hereto a notice of such change in accordance with the terms
of this paragraph.
e. Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive law of the Commonwealth of
Pennsylvania applicable to contracts made and to be performed in such
commonwealth.
f. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
g. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction thereof.
h. Time of the Essence. The parties hereto agree that time
shall be of the essence in the performance of all obligations hereunder.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TOMAHAWK CAPITAL HOLDINGS, INC.
By: /s/ Daniel J. Veloric
----------------------------------
Name: Daniel J. Veloric
Title: Chief Executive Officer
TOMAHAWK HOLDINGS, INC.
By: /s/ Daniel J. Veloric
----------------------------------
Name: Daniel J. Veloric
Title: Chief Executive Officer
/s/ Daniel J. Veloric
----------------------------------
Daniel J. Veloric
Number of Shares: 3,748,178
G ACQUISITION CORPORATION.
By: /s/ Michael R. Walker
----------------------------------
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer
GENESIS HEALTH VENTURES, INC.
By: /s/ Michael R. Walker
----------------------------------
Name: Michael R. Walker
Title: Chairman and Chief Executive
Officer