SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 1999
GENESIS HEALTH VENTURES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 1-11666 06-1132947
- ------------------------------------ --------------------------------- ---------------------------------
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or Identification Number)
organization)
101 East State Street
Kennett Square, Pennsylvania 19348
-------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (610) 444-6350
--------------
Item 5. Other Events.
On November 15, 1999, Genesis Health Ventures, Inc. ("Genesis")
announced the closing of its transaction with The Cypress Group L.L.C.
("Cypress") and TPG Partners II, L.P. ("TPG") to restructure the Multicare joint
venture.
Background
In October 1997, Genesis, affiliates of Cypress, TPG and certain of its
affiliates and an affiliate of Nazem, Inc. ('Nazem") acquired all of the issued
and outstanding common stock of Genesis ElderCare Corp., a Delaware corporation.
Cypress, TPG and Nazem purchased 210,000, 199,500 and 10,500 shares of Genesis
ElderCare Corp. common stock, respectively, representing in the aggregate
approximately 56.4% of the issued and outstanding common stock of Genesis
ElderCare Corp., for an aggregate purchase price of $420 million. Genesis
purchased 325,000 shares of Genesis ElderCare Corp. common stock, representing
approximately 43.6% of the issued and outstanding common stock of Genesis
ElderCare Corp., for an aggregate purchase price of $325 million. Cypress, TPG
and Nazem are sometimes collectively referred to herein as the "Sponsors."
In connection with their investments in the common stock of Genesis
ElderCare Corp., Genesis, Cypress, TPG and Nazem entered into a stockholders
agreement dated as of October 9, 1997 (the "Multicare Stockholders Agreement"),
relating to their respective ownership interests in Genesis ElderCare Corp.
In October 1997, as a result of a tender offer and a merger
transaction, Genesis ElderCare Corp. acquired 100% of the outstanding shares of
common stock of The Multicare Companies, Inc. ("Multicare"), making Multicare a
wholly-owned subsidiary of Genesis ElderCare Corp.
On October 9, 1997, Genesis ElderCare Corp. and Genesis ElderCare
Network Services, Inc., a wholly-owned subsidiary of Genesis, entered into a
management agreement (the "Management Agreement") pursuant to which Genesis
ElderCare Network Services manages Multicare's operations.
Genesis, Cypress, TPG and Nazem also entered into an agreement, dated
as of October 9, 1997 (the "Put/Call Agreement").
Restructuring
On October 8, 1999, Genesis entered into a restructuring agreement
with Cypress, TPG and Nazem ( the "Restructuring Agreement") to restructure
their joint investment in Genesis ElderCare Corp., the parent company of
Multicare. The full text of the Restructuring Agreement is filed as Exhibit 2.1
to this report.
Amendment to Put/Call Agreement; Issuance of Preferred Stock
Pursuant to the Restructuring Agreement, the Put under the Put/Call
Agreement was terminated in exchange for:
o 24,369 shares of Genesis' Series H Senior Convertible
Participating Cumulative Preferred Stock, which was issued to
Cypress, TPG and Nazem, or their affiliated investment funds,
in proportion to their respective investments in Genesis
ElderCare Corp., and
o 17,631 shares of Genesis' Series I Senior Convertible
Exchangeable Participating Cumulative Preferred Stock ,which
was issued to Cypress, TPG and Nazem, or their affiliated
investment funds, in proportion to their respective
investments in Genesis ElderCare Corp.
In connection with the restructuring transaction, the restrictions in
the Put/Call Agreement related to Genesis' right to take certain corporate
actions, including its ability to sell all or a portion of its pharmacy
business, were terminated. In addition, the Call under the Put/Call Agreement
was amended to provide Genesis with the right to purchase all of the shares of
common stock of Genesis ElderCare Corp. not owned by Genesis for two million
dollars in cash at any time prior to the 10th anniversary of the closing date of
the restructuring transaction. The full text of the Amended and Restated
Put/Call Agreement is filed as Exhibit 10.2 to this report.
Investment in Genesis
Each of Cypress and TPG invested, directly or through affiliated
investment funds, $25 million into Genesis in exchange for 6.25 million shares
of Genesis common stock and a ten year warrant to purchase one million shares of
Genesis common stock at an exercise price of $5.00 per share. In other words,
Cypress and TPG in the aggregate invested $50 million in Genesis for an
aggregate of 12.5 million shares of Genesis common stock and warrants to
purchase two million shares of Genesis common stock. The warrant certificate
establishing the terms and conditions of the warrants is filed as Exhibit 4.1 to
this report.
Registration Rights
Subject to limitations contained in the Restructuring Agreement, the
holders of the Genesis common stock, warrants, Series H Preferred Stock and
Series I Preferred Stock issued in connection with the restructuring transaction
and all securities issued or distributed in respect of these securities have the
right on five occasions to demand registration under the Securities Act of these
securities. Genesis is required to pay all registration expenses, subject to
limitations contained in the Restructuring Agreement. In addition, holders of
the Genesis common stock, warrants, Series H Preferred Stock and Series I
Preferred Stock issued in connection with the restructuring transaction and all
securities issued or distributed in respect of these securities have "piggyback"
registration rights under which they have the right to include these securities
in a registered offering of securities of Genesis effected on behalf of Genesis
or another selling shareholder, subject to reduction by the managing underwriter
of that offering, if any, if marketing factors so require.
Amendment to Stockholders Agreement
On November 15, 1999, the Multicare Stockholders Agreement was amended
to:
o provide that all shareholders will grant to Genesis an
irrevocable proxy to vote their shares of common stock of
Genesis ElderCare Corp. on all matters to be voted on by
shareholders, including the election of directors;
o provide that Genesis may appoint two-thirds of the members of
the Genesis ElderCare Corp. board of directors;
o omit the requirement that specified significant actions
receive the approval of at least one designee of each of
Cypress, TPG and Genesis;
o permit Cypress, TPG and Nazem and their affiliates to sell
their Genesis ElderCare Corp. stock, subject to certain
limitations contained in the Amended and Restated Stockholders
Agreement;
o provide that Genesis may appoint 100% of the members of the
operating committee of the board of directors of Genesis
ElderCare Corp.; and
o eliminate all pre-emptive rights.
The full text of the Amended and Restated Stockholders Agreement is filed as
Exhibit 10.1 to this report.
Irrevocable Proxy
Cypress, TPG and Nazem and their affiliated investment funds gave to
Genesis an irrevocable power of attorney directing Genesis to cast for, against
or as an abstention in the same proportion as the other Genesis voting
securities are cast, the number of shares of securities of Genesis so that
Cypress, TPG and Nazem together will not have the right to vote more than 35% of
the total voting power of Genesis in connection with any vote other than a vote
relating to an amendment to Genesis' articles of incorporation to amend, modify
or change the terms of any class or series of preferred stock. This power of
attorney will terminate upon the existence of the circumstances that would cause
the standstill to terminate as described below under "-- Standstill."
Directors of Genesis
Pursuant to the terms of the Series H Preferred Stock, Cypress and TPG,
acting jointly, or in the event that only one of Cypress and TPG then owns or
has the right to acquire Genesis common stock, Cypress or TPG, as applicable,
are entitled to designate a number of directors of Genesis representing at least
23% of the total number of directors constituting the full board of directors of
Genesis. However, for so long as the total number of directors constituting the
full board of directors of Genesis is nine or fewer, Cypress and/or TPG are only
entitled to designate two directors on the Genesis board of directors. Cypress
and TPG have this right to designate directors so long as they own any
combination of Genesis voting securities or securities convertible into Genesis
voting securities constituting more that 10% of Genesis' total voting power. For
this purpose, the Series I Preferred Stock and the non-voting common stock
issued upon conversion of the Series I Preferred Stock will be considered voting
securities.
Each committee of the Genesis board of directors will include at least
one director designated by Cypress and/or TPG unless applicable law or the rules
or regulations of the primary exchange or quotation system on which Genesis'
common stock is then listed or quoted prohibits the appointment of a Cypress
and/or TPG designated director to a particular committee.
For so long as Cypress and/or TPG have the right to designate directors
on the Genesis board of directors, Genesis shall not, without the consent of at
least two of the Cypress/TPG designated directors:
o enter into any transaction or series of transactions which
would constitute a change in control, as defined in the
Restructuring Agreement; or
o engage in a "going private" transaction.
Pre-emptive Rights
As a result of the restructuring transaction, Cypress and TPG each have
a right, subject to the limitations contained in the Restructuring Agreement, to
participate in future offerings of any shares of, or securities exchangeable,
convertible or exercisable for any shares of, any class of Genesis' capital
stock. However, Cypress' and TPG's right to participate will not apply to the
following:
o sales of securities in underwritten public offerings;
o sales of warrants offered in connection with sales of debt
securities pursuant to Rule 144A of the Securities Act;
o the issuance of securities in exchange for assets or all of
the stock of another company;
o issuances and sales of securities to employees and directors
pursuant to benefit plans; and
o issuances and sales of securities in connection with joint
ventures or other strategic relationships relating to a
Healthcare Related Business, as such phrase is defined in the
Restructuring Agreement; provided that the securities issued
do not represent more than 5% of the total voting power of
Genesis.
Standstill
The Sponsors have agreed that neither they nor their affiliates will,
without Genesis' prior written consent, either alone or as part or a group,
acquire any voting securities of Genesis, except for the voting securities to be
issued in the restructuring transaction and pursuant to stock splits, stock
dividends or other distributions or offerings made available to holders of
Genesis voting securities generally. However, these restrictions will terminate
if:
o the Genesis board of directors approves a transaction with any
person which would result in that person:
o beneficially owning securities representing more than
35% of the total voting power of Genesis; or
o owning all or substantially all of Genesis' assets;
o any person, other than Genesis in the case of an exchange
offer, has commenced a tender or exchange offer for Genesis
voting securities or securities exchangeable, convertible or
exercisable for Genesis voting securities where all of these
voting securities represent more than 35% of the total voting
power of Genesis; or
o Cypress and TPG no longer have the right to designate
directors on the Genesis board of directors as described above
under "-- Directors of Genesis Upon the Consummation of the
Restructuring Transaction."
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
None.
(b) Pro Forma Financial Information
Pro forma financial information related to the Multicare restructuring
transaction is incorporated by reference from Genesis' Definitive Proxy
Statement filed with the Securities and Exchange Commission on October
13, 1999.
(c) Exhibits
2.1 Restructuring Agreement dated October 8, 1999 among The
Cypress Group L.L.C., TPG Partners II, L.P., Nazem, Inc.,
Genesis and the other signatories thereto.
3.1 Amendment to Genesis' Amended and Restated Articles of
Incorporation.
4.1 Certificate of Designations for Genesis' Series H Senior
Convertible Participating Cumulative Preferred Stock.
4.2 Certificate of Designations for Genesis' Series I Senior
Convertible Exchangeable Participating Cumulative Preferred
Stock.
4.3 Form of Warrant issued in connection with the Multicare
restructuring transaction.
10.1 Amended and Restated Stockholders Agreement dated November 15,
1999 by and among Genesis ElderCare Corp., The Cypress Group
L.L.C., TPG Partners II, L.P., Nazem, Inc., Genesis and the
other signatories thereto.
10.2 Amended and Restated Put/Call Agreement dated November 15,
1999 among The Cypress Group L.L.C., TPG Partners II, L.P.,
Nazem, Inc., Genesis and the other signatories thereto.
99.1 Press Release dated November 15, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENESIS HEALTH VENTURES, INC.
By:/s/ IRA C. GUBERNICK
------------------------------------------
Vice President - Office of the Chairman
and Corporate Secretary
Date: November 29, 1999
-----------------
EXHIBITS INDEX
Exhibit No. Description
----------- -----------
2.1 Restructuring Agreement dated October 8, 1999 among The
Cypress Group L.L.C., TPG Partners II, L.P., Nazem, Inc.,
Genesis and the other signatories thereto.
3.1 Amendment to Genesis' Amended and Restated Articles of
Incorporation.
4.1 Certificate of Designations for Genesis' Series H Senior
Convertible Participating Cumulative Preferred Stock.
4.2 Certificate of Designations for Genesis' Series I Senior
Convertible Exchangeable Participating Cumulative
Preferred Stock.
4.3 Form of Warrant issued in connection with the Multicare
restructuring transaction.
10.1 Amended and Restated Stockholders Agreement dated November
15, 1999 by and among Genesis ElderCare Corp., The Cypress
Group L.L.C., TPG Partners II, L.P., Nazem, Inc., Genesis
and the other signatories thereto.
10.2 Amended and Restated Put/Call Agreement dated November 15,
1999 among The Cypress Group L.L.C., TPG Partners II,
L.P., Nazem, Inc., Genesis and the other signatories
thereto.
99.1 Press Release dated November 15, 1999.