EXHIBIT 99.1
SIDE AGREEMENT
April 26, 1998
Manor Care, Inc.
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Vitalink Pharmacy Services, Inc.
0000 Xxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attention:
Ladies and Gentlemen:
Genesis Health Ventures, Inc. ("Genesis") and Vitalink Pharmacy
Services, Inc. ("Vitalink") have executed on even date herewith an Agreement and
Plan of Merger (the "Merger Agreement") whereby Genesis will acquire Vitalink
through merger (the "Merger").
This agreement is intended to set forth the agreements and
understandings between Manor Care, Inc. ("Manor Care"), Vitalink and Genesis
relating to the subject matter hereof. All capitalized terms used herein have
the definitions ascribed to such terms in the Merger Agreement.
In consideration of, and as a condition and material inducement to,
Genesis's willingness to enter into the Merger Agreement with Vitalink, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the undersigned on behalf of Manor Care and Vitalink,
respectively, confirms this agreement with Genesis as follows:
1. Manor Care agrees to indemnify and hold harmless Genesis and its
directors and officers, its agents and representatives retained in connection
with the Merger Agreement, and Vitalink from any and all liabilities,
proceedings, suits, actions proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, amounts paid in settlement, losses,
expenses and fees and, subject to Section 4, attorneys' fees and expenses
(including any liability to a director, agent, representative or employee of
Vitalink under any provisions contained in the Articles of Incorporation or
Bylaws of Vitalink or any agreement of Vitalink existing at or prior to the
Effective Time to the extent not covered by insurance) which arise out of or
relate to any shareholder's allegation or claim that the Board of Directors of
Vitalink, as constituted at or prior to the Effective Time, has violated its
fiduciary duties or other obligations to the shareholders of Vitalink in
approving the Merger Agreement and the transactions contemplated thereby.
2. Manor Care agrees to indemnify and hold harmless Vitalink and its
subsidiaries for the taxes, interest and penalties of any person other than
Vitalink and its subsidiaries under Treasury Regulation Section 1.1502-6 for
periods during which Vitalink was a member of Manor Care's affiliated group for
U.S. federal income tax purposes (or any similar provision of state, local or
foreign law) in excess of the
amount of taxes, interest and penalties allocated to Vitalink pursuant to the
Tax Agreement between Manor Care, Inc. and Total Care Pharmacy Services, Inc.,
dated June 1, 1991.
3. Each of Manor Care and Vitalink agrees that from and after the
Effective Time, such party shall not take any action against the other to
collect any amounts for services rendered by such party to the other prior to
the Effective Time, except for amounts for which such party has billed the other
as of the Effective Time as reflected in the books and records of such other
party as of the Effective Time and amounts owed to Vitalink for services
rendered to Manor Care's patients prior to the Effective Time.
4. Manor Care agrees to indemnify and hold harmless Vitalink and its
Subsidiaries against all losses, claims, damages, expenses or liabilities
("Losses") arising out of or related to any claim or action against Vitalink or
its subsidiaries prior to the third anniversary of the Effective Time, in the
case of clauses (i) and (ii) of this Section 4, and prior to the term of the
applicable statute of limitations, in the case of clause (iii) of this Section
4, based upon (i) any action or omission by Manor Care in providing billing and
collection services to Vitalink and its subsidiaries or (ii) any action or
omission by Manor Care in billing and collecting amounts payable or reimbursable
in respect of services rendered by Vitalink to Manor Care and its patients prior
to the Effective Time or (iii) allegations of fraud or any violations of
applicable law, rule or regulation by Manor Care or its Subsidiaries (other than
Vitalink and its Subsidiaries) arising out of the execution of the Contracts or
the illegality or alleged illegality of any provision of the Contracts;
provided, however, that the indemnification provided for under this Section 4
-------- --------
shall not be available with respect to any Losses arising out of or based upon
any claim or action against Vitalink or its Subsidiaries (x) alleging that
amounts indicated by Vitalink as due and owing for providing services to
patients of Manor Care was not reasonable, was in excess of amounts owed or was
otherwise improperly paid and (y) alleging fraud or any violations of applicable
law by Vitalink or any of its Subsidiaries. As used in this agreement,
"Contracts" shall mean the Master Agreement for Pharmacy Services, Master
Pharmacy Consulting Agreement and Master Agreement for Infusion Therapy Products
and Services, each between Vitalink and ManorCare Health Services, Inc., as
amended and in effect as of the date hereof.
5. If any action is brought against an indemnified party in Sections
1, 2, 3 or 4 above, such indemnified party shall promptly notify the
indemnifying party in writing of the institution of such action. The
indemnifying party shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to Genesis. The omission to notify
Manor Care as required herein shall not relieve Manor Care from any liability
which it may have to any indemnified party, except to the extent Manor Care is
prejudiced by such omission. Manor Care shall not be liable for any settlement
of any such claim or action effected without its written consent, but if settled
with the written consent of Manor Care, Manor Care agrees to indemnify and hold
harmless any indemnified party from and against any loss or liability by reason
of such settlement. Manor Care shall not, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in which any indemnified party is or could have been a party and for
which indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
6. (a) Noncompetition. For a period of ten (10) years after the
--------------
date hereof (the "Term") neither Manor Care nor any of its affiliates shall,
directly or indirectly engage in the institutional pharmacy business in any
state in which Genesis or any affiliate of Genesis now or at anytime during the
Term owns or operates an institutional pharmacy business (the "Territory"), or
establish, acquire, engage, own, manage, operate, or control, or participate in
the establishment, ownership, management, operation or control of any Person in
the institutional pharmacy business in the Territory. Notwithstanding the
foregoing, Manor
Care may acquire an entity which among other businesses owns and operates an
institutional pharmacy business so long as the institutional pharmacy business
is not the primary business of the acquired entity and the institutional
pharmacy business is sold within one year of its acquisition. It is understood
that this Section 6 is for the benefit of Genesis and any third party to whom
Genesis sells any of the institutional pharmacies of Vitalink. As used herein,
"institutional pharmacy business" means the services provided under the
Contracts.
(b) Enforcement. Manor Care acknowledges that any breach by Manor
-----------
Care of any of the covenants and agreements of this Section 6 (the "Covenants")
will result in irreparable injury to Vitalink and Genesis for which money
damages could not adequately compensate Vitalink, and therefore, in the event of
any such breach, Vitalink and Genesis shall be entitled, in addition to all
other rights and remedies which Vitalink or Genesis may have at law or in
equity, to have an injunction issued by any competent court enjoining and
restraining Manor Care and/or all other Persons involved therein from continuing
such breach.
(c) Scope. If any portion of any Covenant or its application is
-----
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable
because of its scope, duration, geographical area or similar factor, then the
court making such determination shall have the power to reduce or limit such
scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
(d) Termination. If the term of the Contracts has been extended
-----------
through September 30, 2008 by virtue of automatic renewal or otherwise, these
provisions shall terminate.
7. This agreement will be governed and construed in accordance with
the laws of the State of Delaware.
8. This agreement shall be effective from and after the Effective
Time. If the Merger is not consummated this shall terminate and be of no further
force or effect. 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.
9. 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.
10. This letter agreement shall be binding upon Manor Care and its
successors and assigns and upon any entity to which all or substantially all of
the assets of Manor Care and its subsidiaries taken as a whole are transferred
in any corporate reorganization, division, split-up or spin-off; provided,
--------
however, that Manor Care may assign all of its rights and obligations under this
-------
agreement to a direct or indirect subsidiary of Manor Care which is to be spun
off as provided in the Form 10 filed with the Securities and Exchange Commission
by New ManorCare Health Services, Inc. and Manor Care shall be released from any
further obligations under or with respect to this agreement.
11. 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 in writing executed by
the waiving party.
12. 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.
13. In case any one or more of the provisions contained in this
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.
14. 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 rights, powers and remedies by any
party shall not preclude the simultaneous or subsequent 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.
15. This agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
If you agree with the foregoing, please so indicate by signing and
returning one executed copy of this letter, which will constitute our agreement
with respect to the subject matter of this letter.
Very truly yours,
GENESIS HEALTH VENTURES, INC.
By: /s/ Xxx X. Xxxxxxxxx
------------------------------------
Name: Xxx X. Xxxxxxxxx
Title: General Counsel - Corporate
and Secretary
Confirmed and Agreed as of the date written above:
MANOR CARE, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
VITALINK PHARMACY SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President