EXHIBIT 10.31
FOR SETTLEMENT PURPOSES ONLY
TERMINATION AND RELEASE AGREEMENT
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THIS TERMINATION AND RELEASE AGREEMENT (the "Agreement") dated
as of September 3, 1997, by and among GranCare, Inc., a Delaware corporation
("GranCare"), Manor Care, Inc., a Delaware corporation ("Manor Care"), Vitalink
Pharmacy Services, Inc., a Delaware corporation ("Vitalink;" together with Manor
Care and GranCare, referred to collectively herein as the "Transaction
Parties"), and, solely for the purpose of making the representations and
warranties set forth in Section 7 hereof and obtaining and granting the release
contained in Section 8 hereof, Apollo Management, L.P., a Delaware limited
partnership ("Apollo") and Living Centers of America, Inc., a Delaware
corporation ("LCA").
W I T N E S S E T H:
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WHEREAS, in connection with the consummation of the transactions
contemplated by that certain Amended and Restated Agreement and Plan of
Distribution dated as of September 3, 1996 (the "Distribution Agreement") and
that certain Amended and Restated Agreement and Plan of Merger dated as of
September 3, 1996 (the "Vitalink Merger Agreement"), GranCare, Vitalink and
Manor Care executed and delivered a Non-Competition
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Agreement, dated as of February 12, 1997 (the "Non-Competition Agreement");
WHEREAS, GranCare desires to obtain the flexibility to pursue such
strategic initiatives as it may determine from time to time to present the best
alternatives then available to GranCare free from the limitations that Vitalink
has asserted are imposed by the Non-Competition Agreement; and
WHEREAS, the Transaction Parties desire to terminate the
Non-Competition Agreement on the terms and subject to the conditions
contemplated by this Agreement.
NOW THEREFORE, in consideration of the premises and covenants set forth
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, do hereby agree as follows:
Section 1. As of the Closing Date (as defined below), the
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Non-Competition Agreement shall be terminated and have no further force and
effect with respect to any of the Transaction Parties.
Section 2. At the Closing (as defined below) of the transactions
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contemplated by this Agreement, GranCare shall pay to Vitalink and Manor Care,
in cash by wire transfer of immediately available funds, the sums of $18,500,000
and $500,000, respectively (collectively, the "Termination Fee") in
consideration of the cancellation and termination of the Non-Competition
Agreement.
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Section 3. In recognition of the intention of the Transaction Parties
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to terminate the Non-Competition Agreement as of the Closing Date, the
Transaction Parties will, concurrently with the execution of this document,
execute stipulations and proposed orders in the forms attached hereto as
Schedule 3.1 which orders will, inter alia, vacate the preliminary injunction
issued in the Litigation (as defined in Section 8 hereof), and the stipulation
and order to be filed in the Court of Chancery for the State of Delaware (the
"Chancery Court Stipulation) will provide that GranCare will not consummate the
LCA Transactions (as defined in the Chancery Court Stipulation) in their present
or any alternative form except contemporaneously with or subsequent to the
payment of the Termination Fee as contemplated by this Agreement. The
Transaction Parties shall use commercially reasonable efforts to secure the
entry of such orders. Nothing in this Agreement or the proposed Chancery Court
Stipulation shall constitute a waiver by LCA or Apollo of any rights with
respect to GranCare conferred upon them by the GranCare Merger Agreement (as
defined in the Proxy Statement/Prospectus (as defined below)).
Section 4. In furtherance of the reciprocal obligations of GranCare and
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Vitalink pursuant to Article IV of the Distribution Agreement, following the
Closing, GranCare and Vitalink will cooperate fully with each other in
completing any audits and/or the preparation of any necessary filings regarding
prior financial or fiscal periods. Such cooperation shall include, but is not
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limited to, GranCare requesting (if so requested by Vitalink) Ernst & Young to
perform audit work for Vitalink at Vitalink's expense. The foregoing agreement
shall be subject at all times to the other provisions of the Distribution
Agreement.
Section 5. The consummation of the transactions contemplated hereby
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(the "Closing") shall occur at the offices of Powell, Goldstein, Xxxxxx & Xxxxxx
LLP, or at such other location as the Transaction Parties may agree, on such
date as GranCare shall select following the fulfillment or waiver of all
conditions to such Closing; provided, however, that in no event shall the
Closing be effective (the "Closing Date") later than the first to occur of
either the Effective Time of the Mergers (as defined in Amendment No. 2 to the
Joint Proxy Statement/Prospectus of GranCare and LC A (the "Proxy
Statement/Prospectus")) or July 31, 1998.
Section 6. The obligation of the Transaction Parties to consummate the
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transactions contemplated by this Agreement is subject only to the fulfillment
or waiver of the following conditions:
(i) The waiver or fulfillment of all of the conditions to
the consummation of the LCA Transactions in the form
described in the Proxy Statement/Prospectus or any
alternative form. This condition may be waived by
GranCare in its sole discretion.
(ii) The waiver or fulfillment of all of the conditions to
the termination of that certain Shareholders Agreement,
dated as of February 12, 1997, by and between Manor
Care and
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Vitalink. This condition may be waived by Manor Care in
its sole discretion.
Section 7. The parties hereto do hereby represent and warrant as
---------- follows:
(i) Manor Care is duly organized, validly existing and in
good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to
carry on its business as now being conducted. Manor
Care has the requisite corporate power and authority to
enter into this Agreement and consummate the
transactions contemplated hereby. The execution and
delivery of this Agreement by Manor Care and the
consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate
action on the part of Manor Care. This Agreement has
been duly executed and delivered by Manor Care and
constitutes a valid and binding obligations of Manor
Care enforceable against Manor Care in accordance with
its terms.
(ii) Vitalink is duly organized, validly existing and in
good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to
carry on its business as now being conducted. Vitalink
has the requisite corporate power and authority to
enter into this Agreement and consummate the
transactions contemplated hereby. The execution and
delivery of this Agreement by Vitalink and the
consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate
action on the part of Vitalink. This Agreement has been
duly executed and delivered by Vitalink and constitutes
a valid and binding obligation of Vitalink enforceable
against Vitalink in accordance with its terms.
(iii) GranCare is duly organized, validly existing and in
good standing under the laws of the State of Delaware
and has the requisite corporate power and authority to
carry on its
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business as now being conducted. GranCare has the
requisite corporate power and authority to enter into
this Agreement and consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by GranCare and the consummation of the
transactions contemplated hereby have been duly
authorized by all necessary corporate action on the
part of GranCare. This Agreement has been duly executed
and delivered by GranCare and constitutes a valid and
binding obligation of GranCare enforceable against
GranCare in accordance with its terms.
(iv) Apollo is duly organized, validly existing and in good
standing under the laws of the State of Delaware and
has the requisite power and authority under its
organizational documents to carry on its business as
now being conducted. Apollo has the requisite power and
authority to enter into this Agreement solely for the
purpose of granting and obtaining the release contained
in Section 8 hereof. The execution and delivery of this
Agreement by Apollo and the granting of the release
contemplated hereby have been duly authorized by all
necessary action on the part of Apollo. This Agreement
has been duly executed and delivered by Apollo and
constitutes a valid and binding obligation of Apollo
enforceable against Apollo in accordance with its
terms.
(v) LCA is duly organized, validly existing and in good
standing under the laws of the State of Delaware and
has the requisite corporate power and authority to
carry on its business as now being conducted. LCA has
the requisite corporate power and authority to enter
into this Agreement solely for the purpose of granting
and obtaining the release contained in Section 8
hereof. The execution and delivery of this Agreement by
LCA and the granting of the release contemplated hereby
have been duly authorized by all necessary corporate
action on the part of LCA. This Agreement has been duly
executed and delivered by LCA enforceable against LCA
in accordance with its terms.
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Section 8. Effective as of the Closing Date, and simultaneously with
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the payment of the Termination Fee , each of GranCare, Apollo and LCA, as one
party, and Manor Care and Vitalink, as the other party, do hereby settle,
release and discharge the other party; the other party's past or present
officers, directors, employees, partners, principals, counsel, investment
bankers, agents, controlling persons, if any; the other party's past or present
affiliates; and the other party's past and present affiliates' respective past
or present officers, directors, employees, partners, principals, counsel,
investment bankers, agents, controlling persons, if any, (but nothing herein
shall constitute a release or waiver of any claims by GranCare, Apollo and LCA
against one another) of and from any and all manner of claims, actions or
proceedings of any nature which have been, could have been, or could be brought
in any local, state or federal court, administrative agency or other tribunal,
including but not limited to, those arising under common law, federal law, or
state statutory law, including the state and federal securities laws, in law or
in equity, suits, debts, liens, contracts, agreements, promises, liability,
claims, demands, damages, loss, cost or expense, of any nature whatsoever, known
or unknown, fixed or contingent, including all claims for incidental,
consequential, punitive or exemplary damages or other equitable relief
(including injunctive relief) arising out of any of the foregoing, which each
now has or may hereafter have against any of the foregoing, by reason of any
matter, cause or thing whatsoever from
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the beginning of time to the date hereof, arising out of or relating to the
Non-Competition Agreement, including, without limitation, in the case of the
Transaction Parties, any claims and causes of action that were or could have
been asserted by any or all of them against any or all of the other Transaction
Parties directly related to or arising out of the Non-Competition Agreement ,
including claims or causes of action that were or could have been asserted in
that certain litigation commenced by Manor Care and Vitalink in the Court of
Chancery in and for the County of New Castle, State of Delaware, entitled
Vitalink Pharmacy Services, Inc. and Manor Care, Inc. v. GranCare, Inc. f/k/a
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New GranCare, Inc., Civil Action No. 15744, and all proceedings before the Court
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of Chancery of the State of Delaware and the Supreme Court of the State of
Delaware (collectively, the "Litigation"), and, in the case of Apollo and LCA,
any claims that could have been asserted by either or both of them against Manor
Care and/or Vitalink, or by Manor Care and/or Vitalink against Apollo or LCA
arising out of or relating to the Litigation or the actions of any released
party in connection therewith or the actions of Apollo or LCA in connection with
the various proposed transactions described in the Proxy Statement/Prospectus,
except claims and causes of action arising out of or relating to any breach of
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or failure to perform any obligation under this Agreement or any document or
instrument delivered pursuant to or in connection with this Agreement. For
purposes of this Agreement, the term
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"affiliates" shall have the meaning as defined in Rule 12b-2 under the
Securities Exchange Act of 1934. Nothing herein shall constitute a release or
termination of any written contract among the parties hereto other than the
Non-Competition Agreement or a release by any party of any claims by such party
against such party's own employees, officers and directors.
Section 9. At the Closing, the Transaction Parties shall execute and
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deliver any agreements and other documents contemplated by this Agreement
necessary to give effect to the consummation of the transactions contemplated
hereby and GranCare shall pay to Vitalink and Manor Care the Termination Fee.
Effective as of the Closing Date, Manor Care, Vitalink and GranCare, in
recognition of the termination and discharge of the Non-Competition Agreement,
shall take such action as shall be necessary to dismiss with prejudice the
Litigation.
Section 10. This Agreement shall be governed by the laws of the State of
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Delaware (regardless of the law that might otherwise govern under applicable
Delaware principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
Section 11. This Agreement shall be binding on and inure to the benefit
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of the parties hereto and their respective legal representatives, successors and
assigns including, without limitation, any successor by
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operation of law to any of such parties. Nothing in this Agreement, expressed or
implied, is intended to confer on any persons other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 12. In case any one or more of the provisions contained in this
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Agreement should be invalid, illegal or unenforceable in any respect against a
party hereto, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
and such invalidity, illegality or unenforceability shall only apply as to such
party in the specific jurisdiction where such judgment shall be made.
Section 13. All notices and other communications hereunder shall be in
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writing and shall be deemed to have been duly given when delivered in person, by
facsimile transmission with confirmation of receipt, or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
if to GranCare:
GranCare, Inc.
Xxx Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
if to Manor Care:
Manor Care, Inc.
00000 Xxxxxxxxxx Xxxx
00
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
if to Vitalink:
Vitalink Pharmacy Services, Inc.
0000 X. Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
if to Apollo:
c/o Apollo Management, L.P.
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
if to LCA:
Living Centers of America, Inc.
00000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
Section 14. This Agreement may be executed in two or more counterparts,
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each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Section 15. This Agreement may be amended, modified or supplemented
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only with the written agreement of GranCare, Vitalink and
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Manor Care and, with respect to any amendments to Section 7 or Section 8 hereof,
the written agreement of Apollo and LCA.
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IN WITNESS WHEREOF, the parties hereto have executed this Termination
and Release Agreement as of the date first written above.
MANOR CARE, INC.
By: /s/ Xxxxxxx Xxxxxx, Xx.
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Xxxxxxx Xxxxxx, Xx.
Chief Executive Officer
VITALINK PHARMACY SERVICES, INC.
By: /s/ Xxxxx X. XxXxxxx
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Xxxxx X. XxXxxxx
President
GRANCARE, INC.
By: /s/ M. Xxxxx Xxxxxx
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M. Xxxxx Xxxxxx
Chief Executive Officer
The undersigned has executed this Termination and Release Agreement
solely for the purpose of making the representations and warranties set forth in
Section 7 and obtaining and granting the release contained in Section 8
hereinabove.
APOLLO MANAGEMENT, L.P.
By: AIF Management, Inc.
Its: General Partner
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By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Vice President
The undersigned has executed this Termination and Release Agreement
solely for the purpose of making the representations and warranties set forth in
Section 7 and obtaining and granting the release contained in Section 8
hereinabove.
LIVING CENTERS OF AMERICA, INC.
By: /s/ Xxxxxx Xxxxx
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Xxxxxx Xxxxx
Chief Executive Officer
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