Exhibit 10.38
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is entered into as of
September 4, 1996, by and between DOCTORS HEALTH SYSTEM, INC., a Maryland
corporation (the "COMPANY"), and GENESIS HEALTH VENTURES, INC., a Delaware
corporation ("GENESIS"). This Agreement is delivered in connection with that
certain Stock Purchase Agreement dated as of even date herewith between the
Company and Genesis (the "STOCK PURCHASE AGREEMENT"), pursuant to which the
Company has agreed to issue and sell, and Genesis has agreed to purchase,
(i) 571,428 shares of the Company's Series C Convertible Preferred Stock,
par value $17.50 per share (the "SERIES C PREFERRED STOCK"), and (ii) an
option to purchase up to 500,000 additional shares of Series C Preferred
Stock (the "OPTION") pursuant to that certain Option Agreement dated as of
even date herewith between the Company and Genesis (the "OPTION AGREEMENT").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereby agree
as follows:
1. Definitions. As used in this Agreement the following terms
have the meanings indicated:
"Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"Approved Underwriter" has the meaning set forth in Section
3(f) of this Agreement.
"Business Day" means any day that is not a Saturday or Sunday
or a day on which banks located in the City of Baltimore are authorized or
required to be closed.
"Common Stock" means the Class C Common Stock, par value $0.01
per share, of the Company or any other equity securities of the Company into
which such securities are converted, reclassified, reconstituted or exchanged.
"Company Underwriter" has the meaning set forth in Section
4(a) of this Agreement.
"Demand Registration" has the meaning set forth in Section
3(a) of this Agreement.
"Fair Market Value" means the average of the closing price per
share for the Registrable Securities as to which a registration is being
effected as reported on the NYSE Composite Transactions Tape for the 20
consecutive trading days immediately prior to the applicable date of
determination, or, if such securities are not then listed and traded on the
NYSE, the closing price for such securities for such period on the principal
national securities exchange (or market) on which they are then traded as
reported in the principal consolidated transaction reporting system with respect
to securities listed on such exchange (or market) or, if such securities are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date, such securities are not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market marker making a market in such securities
selected by the Board of Directors of the Company. The term "trading day" shall
mean a day on which the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a Business Day.
"Holder" means Genesis and any transferee or transferees of
Genesis to whom Registrable Securities have been transferred in accordance with
the provisions of Section 9(f) of this Agreement, other than a transferee to
whom such securities have been transferred pursuant to a registration statement
under the Securities Act or Rule 144 or Regulation S under the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holders' Counsel" has the meaning set forth in Section
6(a)(i) of this Agreement.
"Incidental Registration" has the meaning set forth in Section
4(a) of this Agreement.
"Indemnified Party" has the meaning set forth in Section 7(c)
of this Agreement.
"Indemnifying Party" has the meaning set forth in Section 7(c)
of this Agreement.
"Inspector" has the meaning set forth in Section 6(a)(viii) of
this Agreement.
"NASD" has the meaning set forth in Section 6(a)(xiv) of this
Agreement.
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"Option Agreement" has the meaning assigned to such term in
the first paragraph of this Agreement.
"Person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Public Offering" means any underwritten offering of shares of
Common Stock pursuant to an effective registration statement filed under the
Securities Act.
"Records" has the meaning set forth in Section 6(a)(viii) of
this Agreement.
"Registrable Securities" means (a) any shares of Common Stock
issued to Holder, or to its successors or assigns, as appropriate, as a result
of the conversion of the shares of Series C Preferred Stock acquired pursuant to
the Stock Purchase Agreement or the Option Agreement, or upon exercise by Holder
of any warrants or other rights to purchase or to acquire Common Stock, and (b)
any additional shares of Common Stock or other equity securities of the Company
that may be issued to Holder in respect of or exchange for any shares of Common
Stock referred to in clause (a) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise and shares of Common Stock issuable upon
conversion, exercise or exchange thereof.
"Registration Expenses" has the meaning set forth in Section
6(d) of this Agreement.
"Registration Statement" means a registration statement filed
by the Company pursuant to the Securities Act which covers all or a portion of
the Registrable Securities, and all amendments and supplements to such
registration statement.
"SEC" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Stock Purchase Agreement" has the meaning assigned to such
term in the first paragraph of this Agreement.
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"Underwriter" means an underwriter, placement or selling agent
and any "underwriter" within the meaning of Section 2(11) of the Securities Act.
2. General: Securities Subject to this Agreement.
(a) Grant of Rights. The Company hereby grants
registration rights to the Holder upon the terms and conditions set forth in
this Agreement.
(b) Registrable Securities. For the purposes of this
Agreement, Registrable Securities will cease to be Registrable Securities when
(i) a registration statement covering such Registrable Securities has been
declared effective under the Securities Act by the SEC and such Registrable
Securities have been disposed of pursuant to such effective registration
statement, (ii) the entire amount of Registrable Securities proposed to be sold
in a single sale, in the opinion of counsel satisfactory to the Company and the
Holder, each in their reasonable judgment, may be distributed to the public
without any limitation as to volume pursuant to Rule 144 (or any successor
provision then in effect) under the Securities Act or (iii) the Registrable
Securities are proposed to be sold or distributed by a Person not entitled to
the registration rights granted by this Agreement.
(c) Holders of Registrable Securities. A Person is
deemed to be a holder of Registrable Securities whenever such Person owns of
record Registrable Securities, or holds an option to purchase, or a security
convertible into or exercisable or exchangeable for, Registrable Securities
whether or not such acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such rights. If the
Company receives conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the Company may act
upon the basis of the instructions, notice or election received from the
registered owner of such Registrable Securities. Registrable Securities issuable
upon exercise of an option or upon conversion of another security shall be
deemed outstanding for the purposes of this Agreement.
3. Demand Registration.
(a) Request for Demand Registration. At any time
beginning 180 days after the conversion of the Series C Preferred Stock in
connection with a Public Offering, the Holder may make a written request to the
Company to register, under the Securities Act (other than pursuant to a
registration statement on Form S-4 or S-8 or any successor thereto) and under
the securities or "blue sky" laws of any jurisdiction designated by such Holder
(a "DEMAND REGISTRATION"), the number of Registrable Securities stated in such
request. The Company shall not be obligated to effect more than one (1) Demand
Registration pursuant to this Section 3 on Form S-1 under the Securities Act or
any successor form or similar
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long-form registration or, if available, on Form S-2 or S-3 or any similar
short-form registration. If at the time of any request to register Registrable
Securities pursuant to this Section 3(a), the Company is engaged in, or has
fixed plans to engage in within sixty (60) days of the time of such request, a
Public Offering or is engaged in any other activity which, in the good faith
determination of the Board of Directors of the Company, would be materially
adversely affected by the requested registration to the material detriment of
the Company, then the Company may at its option direct that such request be
delayed for a reasonable period not in excess of ninety (90) days from the
effective date of such offering or the date of completion of such other material
activity, as the case may be. In addition, the Company shall not be required to
effect more than one registration on behalf of all persons who have been granted
registration rights by the Company in any 12 month period or any registration
within one hundred twenty (120) days after the effective date of any other
Registration Statement of the Company. A request for a Demand Registration shall
state the amount of the Registrable Securities proposed to be sold and the
intended method of disposition thereof. Upon a request for a Demand
Registration, the Company shall promptly take such steps as are necessary or
appropriate to prepare for the registration of the Registrable Securities to be
registered.
(b) Incidental or "Piggy-Back" Rights with Respect to
a Demand Registration. The Holder may offer its Registrable Securities under any
demand registration pursuant to any other registration rights agreement or other
similar agreement between the Company and any other holder of the Company's
securities. Within ten (10) days after the receipt of a request for such demand
registration, the Company shall (i) give written notice thereof to the Holder
and (ii) subject to Section 3(e), include in such registration all of the
Registrable Securities held by the Holder from whom the Company has received a
written request for inclusion therein within ten (10) days of the receipt by the
Holder of such written notice referred to clause (i) above. Each such request by
the Holder shall specify the number of Registrable Securities proposed to be
registered and the intended method of disposition thereof.
(c) Effective Demand Registration. A registration
shall not constitute a Demand Registration until it has become effective and
remains continuously effective for the lesser of (i) the period during which all
Registrable Securities registered in the Demand Registration are sold and
(ii) 120 days; provided, however, that a registration shall not constitute a
Demand Registration if (x) after such Demand Registration has become effective,
such registration or the related offer, sale or distribution of Registrable
Securities thereunder is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court for any
reason not attributable to the Holder and such interference is not thereafter
eliminated or (y) the conditions to closing specified in the underwriting
agreement, if any, entered into in connection with such Demand Registration are
not satisfied or waived other than by reason of a
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failure by the Holder or (z) the Company sells for its account at least one-half
of the shares included in the registration.
(d) Expenses. In any registration initiated as a
Demand Registration, the Company shall pay all Registration Expenses (other than
underwriting discounts and commissions) in connection therewith, whether or not
such Demand Registration becomes effective.
(e) Underwriting Procedures. If the holders of a
majority in aggregate amount of the Registrable Securities to be included in the
Demand Registration so elects, the offering of Registrable Securities pursuant
to such registration shall be in the form of a firm commitment Public Offering
and the managing underwriter or underwriters selected for such offering shall be
the Approved Underwriter (as hereinafter defined) selected in accordance with
Section 3(f). In connection with any Demand Registration under this Section 3
involving an underwriting, none of the Registrable Securities held by any Holder
shall be included in such underwriting unless such Holder accepts the terms of
the underwriting as agreed upon by the Company, Genesis and the Approved
Underwriter, and then only in such quantity as will not, in the opinion of the
Approved Underwriter, jeopardize the success of such Public Offering by the
Holder. If the Approved Underwriter advises the Company in writing that in its
opinion the aggregate amount of such Registrable Securities requested to be
included in such Public Offering is sufficiently large to have a material
adverse effect on the success of such Public Offering, then the Company shall
include in such registration only the aggregate amount of Registrable Securities
that in the opinion of the Approved Underwriter may be sold without any such
material adverse effect and the amount of such shares that may be included in
such registration shall be reduced first by any shares proposed to be sold in
such Public Offering by the Company's executive officers (the "MANAGEMENT
STOCKHOLDERS"), second by any shares proposed to be sold by shareholders other
than the Holder and the Management Stockholders, third by any shares proposed to
be sold by the Company and fourth by a further amount to the Holder.
(f) Selection of Underwriters. If any Demand
Registration of Registrable Securities is in the form of an underwritten
offering, the managing underwriter for such Public Offering (the "APPROVED
UNDERWRITER") shall be chosen by the holders of a majority of the aggregate
Registrable Securities being registered; provided, however, that the Approved
Underwriter shall be acceptable to the Company in its reasonable judgment.
4. Incidental or "Piggy-Back" Registration.
(a) Request for Incidental Registration. At any time
the Company proposes to file a Registration Statement under the Securities Act
with respect to an offering by the Company for its own account (other than a
registration
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statement on Form S-4 or S-8 or any successor thereto), then the Company shall
give written notice of such proposed filing to the Holder at least thirty (30)
days before the anticipated filing date, and such notice shall describe the
proposed registration and distribution and offer the Holder the opportunity to
register the number of Registrable Securities as the Holder may request (an
"INCIDENTAL REGISTRATION") in writing. The Company shall, and shall use its best
efforts (within ten (10) days of the notice provided for in the preceding
sentence) to cause the managing underwriter or underwriters of a proposed Public
Offering (the "COMPANY UNDERWRITER") to permit the Holder to include its
Registrable Securities in such Public Offering on the same terms and conditions
as the securities of the Company included therein; provided, however, that the
Company shall not be obligated to effect more than three (3) Incidental
Registrations pursuant to this Section 4, not including any Incidental
Registration in which the Company, based on the opinion of the Company
Underwriter, does not include any Registrable Securities which the Holder has
requested to be included. In connection with any Incidental Registration under
this Section 4(a) involving an underwriting, the Company shall not be required
to include any Registrable Securities in such underwriting unless the holders
thereof accept the terms of the underwriting as agreed upon between the Company
and the Company Underwriter, and then only in such quantity as will not, in the
opinion of the Company Underwriter, jeopardize the success of the Public
Offering by the Company. If in the written opinion of the Company Underwriter
the registration of all or part of the Registrable Securities which the Holder
has requested to be included would materially adversely affect such Public
Offering, then the Company shall be required to include in such Incidental
Registration, to the extent of the amount that the Company Underwriter believes
may be sold without causing such adverse effect; first, all of the securities to
be offered for the account of the Company; second, the Registrable Securities to
be offered for the account of the Holder pursuant to this Section 4 and any
other securities requested to be included in such underwriting (other than
securities to be offered for the account of any of the Management Stockholders),
pro rata (in accordance with the proportion that the Fair Market Value of all
securities proposed to be included in such registration by each holder bears to
the Fair Market Value of all securities proposed to be included in such
registration by Holder and all other Persons exercising incidental registration
rights in such registration); and third; all securities to be offered for the
account of the Management Stockholders.
(b) Expenses. The Company shall bear all Registration
Expenses (other than underwriting discounts and commissions) in connection with
any Incidental Registration pursuant to this Section 4, whether or not such
Incidental Registration becomes effective; provided, however, that the Holder
shall bear the costs of its own legal counsel.
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5. Holdback Agreements.
(a) Restrictions on Public Sale by the Holder. In the
event that the Company effects a Public Offering in which shares of the
Company's Common Stock are sold to one or more Underwriters, the Holder agrees,
if requested by the managing underwriters, not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities Act,
of any equity securities (except as part of such Public Offering) during the
15-day period prior to the requested effective date of the registration
statement for such offering and during the 120-day period commencing with the
actual effective date of the registration statement for such offering.
(b) Restrictions on Public Sale by the Company. The
Company agrees not to effect any public sale or distribution of any of its
securities, or any securities convertible into or exchangeable or exercisable
for such securities (except pursuant to registrations on Form S-4 or S-8 or any
successor thereto), during the 15-day period prior to the requested effective
date of the registration statement for such offering and during the period
beginning on the actual effective date of any Demand Registration and ending on
the earlier of (i) the date on which all Registrable Securities registered on
such registration statement are sold and (ii) 120 days after the effective date
of such registration statement.
6. Registration Procedures.
(a) Obligations of the Company. Whenever registration
of Registrable Securities has been requested pursuant to Section 3 or Section 4
of this Agreement, the Company shall use its best efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Company shall, as expeditiously as
possible:
(i) use its best efforts to prepare and file
with the SEC a registration statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate
and which form shall be available for the sale of such Registrable
Securities in accordance with the intended method of distribution
thereof, and use its best efforts to cause such registration statement
to become effective; provided, however, that (x) before filing a
registration statement or prospectus or any amendments or supplements
thereto, the Company shall provide counsel selected by the holders
holding a majority of the Registrable Securities being registered in
such registration ("HOLDERS' COUNSEL") and any other Inspector (as
hereinafter defined) with an adequate and appropriate opportunity to
participate in the preparation of such registration statement and each
prospectus included therein (and each amendment or supplement thereto)
to be filed with the SEC, which documents shall be subject to the
review of
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Holders' Counsel, and (y) the Company shall notify the Holders' Counsel
and each seller of Registrable Securities of any stop order issued or
threatened by the SEC and take all reasonable action required to
prevent the entry of such stop order or to remove it if entered;
(ii) prepare and file with the SEC such
amendments and supplement to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for the lesser of (x) twenty-four
(24) months and (y) such shorter period which will terminate when all
Registrable Securities covered by such registration statement have been
sold, and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration
statement;
(iii) as soon as reasonably possible,
furnish to each seller of Registrable Securities, prior to filing a
registration statement, copies of such registration statement as is
proposed to be filed, and thereafter such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) and such
other documents as each such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
seller;
(iv) use its best efforts to register or
qualify such Registrable Securities under such other securities or
"blue sky" laws of such jurisdictions as any seller of Registrable
Securities may request, and to continue such qualification in effect in
such jurisdiction for as long as permissible pursuant to the laws of
such jurisdiction, or for as long as any such seller requests or until
all of such Registrable Securities are sold, whichever is shortest, and
do any and all other acts and things which may be reasonably necessary
or advisable to enable any such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller;
provided, however, that the Company shall not be required to
(x) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 6(a)(iv),
(y) subject itself to taxation in any such jurisdiction or (z) consent
to general service of process in any such jurisdiction;
(v) use its best efforts to cause the
Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and
operations of the Company to enable
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the seller or sellers of Registrable Securities to consummate the
disposition of such Registrable Securities;
(vi) notify each seller of Registrable
Securities at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus
included in such registration statement contains an untrue statement of
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made,
and the Company shall promptly prepare a supplement or amendment to
such prospectus and furnish to each seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, after delivery to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made;
(vii) enter into and perform customary
agreements (including an underwriting agreement in customary form with
the Approved Underwriter or Company Underwriter, if any, selected as
provided in Section 3 or Section 4, as the case may be) and take such
other actions as are prudent and reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities;
(viii) make available for inspection by any
seller of Registrable Securities, any managing underwriter
participating in any disposition pursuant to such registration
statement, Holders' Counsel and any attorney, accountant or other agent
retained by any such seller or any managing underwriter (each, an
"INSPECTOR" and collectively, the "INSPECTORS"), all financial and
other records, pertinent corporate documents and properties of the
Company and its subsidiaries (collectively, the "RECORDS") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's and its subsidiaries' officers,
directors and employees, and the independent public accountants of the
Company, to supply all information reasonably requested by any such
Inspector in connection with such registration statement. Records that
the Company determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (x) the disclosure of such Records is necessary to
avoid or correct a misstatement or omission in the registration
statement, (y) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or
(z) the information in such Records was known to the Inspectors on a
non-confidential basis prior to its disclosure by the
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Company or has been made generally available to the public. Each seller
of Registrable Securities agrees that it shall, upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(ix) if such sale is pursuant to an
underwritten offering, use its best efforts to obtain a "cold comfort"
letter from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by "cold
comfort" letters as Holders' Counsel or the managing underwriter
reasonably request;
(x) use its best efforts to furnish, at the
request of any seller of Registrable Securities on the date such
securities are delivered to the underwriters for sale pursuant to such
registration or, if such securities are not being sold through
underwriters, on the date the registration statement with respect to
such securities becomes effective, an opinion, dated such date, of
counsel representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making such
request, covering such legal matters with respect to the registration
in respect of which such opinion is being given as such seller may
reasonably request and are customarily included in such opinions;
(xi) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably practicable
but no later than fifteen (15) months after the effective date of the
registration statement, an earnings statement covering a period of
twelve (12) months beginning after the effective date of the
registration statement, in a manner which satisfies the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder;
(xii) cause all such Registrable Securities
to be listed on each securities exchange on which similar securities
issued by the Company are then listed, provided that the applicable
listing requirements are satisfied;
(xiii) keep Holders' Counsel advised in
writing as to the initiation and progress of any registration under
Section 3 or Section 4 hereunder;
(xiv) cooperate with each seller of
Registrable Securities and each underwriter participating in the
disposition of such Registrable Securities and their respective counsel
in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD"); and
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(xv) use best efforts to take all other
steps necessary to effect the registration of the Registrable
Securities contemplated hereby.
(b) Seller Information. The Company may require each
seller of Registrable Securities as to which any registration is being effected
to furnish to the Company such information regarding the distribution of such
securities as the Company may from time to time reasonably request in writing.
(c) Notice to Discontinue. Holder agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 6(a)(vi), the Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until the Holder's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 6(a)(vi) and, if
so directed by the Company, the Holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
which is current at the time of receipt of such notice. If the Company shall
give any such notice, the Company shall extend the period during which such
registration statement shall be maintained effective pursuant to this Agreement
(including, without limitation, the period referred to in Section 6(a)(ii)) by
the number of days during the period from and including the date of the giving
of such notice pursuant to Section 6(a)(vi) to and including the date when the
Holder shall have received the copies of the supplemented or amended prospectus
contemplated by and meeting the requirements of Section 6(a)(vi).
(d) Registration Expenses. The Company shall pay all
expenses (other than as set forth in Sections 3(d) and 4(b)) arising from or
incident to the performance of, or compliance with, this Agreement, including,
without limitation, (i) all SEC, stock exchange and NASD registration and filing
fees, (ii) all fees and expenses incurred in complying with securities or "blue
sky" laws (including reasonable fees, charges and disbursements of counsel in
connection with "blue sky" qualifications of the Registrable Securities),
(iii) all printing, messenger and delivery expenses, (iv) the fees, charges and
disbursements of counsel to the Company and of its independent public
accountants and any other accounting fees, charges and expenses incurred by the
Company (including, without limitation, any expenses arising from any special
audits incident to or required by any registration or qualification) and any
legal fees, charges and expenses incurred by the Company and, in the case of a
Demand Registration, the Holder and (v) any liability insurance or other
premiums for insurance obtained in connection with any Demand Registration or
Incidental Registration pursuant to the terms of this Agreement, regardless of
whether such registration statement is declared effective. All of the
expenses described in this Section 6(d) are referred to herein as "REGISTRATION
EXPENSES."
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(e) Information Blackout.
(i) At any time when a Registration
Statement effected pursuant to Section 3 relating to Registrable
Securities is effective, upon written notice from the Company to Holder
that the Company has determined in good faith that sale of Registrable
Securities pursuant to the Registration Statement would require
disclosure of non-public material information having an adverse effect
on the Company (an "INFORMATION BLACKOUT"), Holder shall immediately
suspend sales of Registrable Securities pursuant to such Registration
Statement until the earlier of:
(A) 60 days after the Company makes
such good faith determination, and
(B) such time as the Company
notifies the Holder that such material information has been
disclosed to the public or has ceased to be material or that
sales pursuant to such Registration Statement may otherwise be
resumed (the number of days from such suspension of sales by
the Holder until the day when such sale may be resumed
hereunder is hereinafter called a "SALES BLACKOUT PERIOD").
(ii) Any delivery by the Company of notice
of an Information Blackout during the forty-five (45) days immediately
following effectiveness of any Registration Statement effected pursuant
to Section 3 above shall give the holders of a majority of the
Registrable Securities being sold the right, by written notice to the
Company within twenty (20) business days after the end of such
Information Blackout, to cancel such registration, in which event
Holder shall have one additional registration right under Section 3
above ("BLACKOUT TERMINATION RIGHT").
(iii) If there is an Information Blackout
and the Blackout Termination Right, if any, pursuant to clause
(ii) above, is not available or exercised, the time period set forth
in Section 6(a)(ii) shall be extended for a number of days equal to the
number of days in the Sales Blackout Period.
7. Indemnification: Contribution.
(a) Indemnification by the Company. The Company
agrees to indemnify and hold harmless, to the fullest extent permitted by law,
each Holder, its officers, directors, trustees, partners, employees, advisors
and agents and each Person who controls (within the meaning of the Securities
Act or the Exchange Act) such Holder from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue, or allegedly untrue,
statement of a material fact contained in any
13
registration statement, prospectus or preliminary prospectus or notification or
offering circular (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or arising out of or based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in any information
concerning such Holder furnished in writing to the Company by such Holder
expressly for use therein. The Company shall also provide customary indemnities
to any underwriters of the Registrable Securities, their officers, directors and
employees and each Person who controls such underwriters (within the meaning of
the Securities Act and the Exchange Act) to the same extent as provided above
with respect to the indemnification of the Holders of Registrable Securities.
(b) Indemnification by Holders. In connection with
any registration statement in which a Holder is participating pursuant to
Section 3 or Section 4 hereof, each such Holder shall furnish to the Company in
writing such information with respect to such Holder as the Company may
reasonably request or as may be required by law for use in connection with any
such registration statement or prospectus and each Holder agrees to indemnify
and hold harmless, to the fullest extent permitted by law, the Company, any
underwriter retained by the Company and their respective directors, officers,
employees and each Person who controls the Company or such (within the meaning
of the Securities Act and the Exchange Act) to the same extent as the foregoing
indemnity from the Company to the Holders set forth in Section 7(a) hereof, but
only with respect to any such information with respect to such Holder furnished
in writing to the Company by such Holder expressly for use therein; provided,
however, that the total amount to be indemnified by such Holder pursuant to this
Section 7(b) shall be limited to the net proceeds received by such Holder in the
offering to which the registration statement or prospectus relates.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder (the "INDEMNIFIED PARTY") agrees to
give prompt written notice to the indemnifying party (the "INDEMNIFYING PARTY")
after the receipt by the Indemnified Party of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which the Indemnified Party intends to claim indemnification
or contribution pursuant to this Agreement; provided, however, that the failure
so to notify the Indemnifying Party shall not relieve the Indemnifying Party of
any liability that it may have to the Indemnified Party hereunder. If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such Indemnified Party. The Indemnified Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and
14
expenses of such counsel (other than reasonable costs of investigation) shall be
paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay
the same, (ii) the Indemnifying Party fails to assume the defense of such action
with counsel satisfactory to the Indemnified Party in its reasonable judgment or
(iii) the named parties to any such action (including any impleaded parties)
have been advised by such counsel that either (x) representation of such
Indemnified Party and the Indemnifying Party by the same counsel would be
inappropriate under applicable standards of professional conduct or (y) there
may be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party. In either of such
cases, the Indemnifying Party shall not have the right to assume the defense of
such action on behalf of such Indemnified Party. No Indemnifying Party shall be
liable for any settlement entered into without its written consent, which
consent shall not be unreasonably withheld.
(d) Contribution. If the indemnification provided for
in this Section 7 from the Indemnifying Party is unavailable to an Indemnified
Party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of and benefits to the Indemnifying Party and Indemnified Party
in connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits to such Indemnifying Party and Indemnified Party shall be
deemed to be in the same respective proportions as the total proceeds from the
Public Offering received by such Indemnifying Party and Indemnified Party. The
relative faults of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
Sections 7(a), 7(b) and 7(c), any legal or other fees, charges or expenses
reasonably incurred by such party in connection with any investigation or
proceeding, provided that the total amount to be indemnified by such Holder
shall be limited to the net proceeds received by such Holder in the offering.
The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. No person
15
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person.
8. Rule 144. The Company covenants that it shall file (a) any
reports required to be filed by it under the Exchange Act and (b) take such
further action as each Holder of Registrable Securities may reasonably request
(including providing any information necessary to comply with Rules 144 and 144A
under the Securities Act), all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such rule may be amended from time to time, or
(ii) any similar rules or regulations hereafter adopted by the SEC. The Company
shall, upon the request of any Holder of Registrable Securities, deliver to such
Holder a written statement as to whether it has complied with such requirements.
9. Miscellaneous.
(a) Recapitalizations, Exchanges, etc. The provisions
of this Agreement shall apply, to the full extent set forth herein with respect
to (i) the shares of Common Stock and (ii) any and all equity securities of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in conversion of, in exchange for or in substitution of, the shares of Common
Stock and shall be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations and the like occurring after the
date hereof. The Company shall cause any successor or assign (whether by merger,
consolidation or otherwise) to enter into a new registration rights agreement
with the Holder on terms substantially similar to this Agreement as a condition
of any such transaction.
(b) No Inconsistent Agreements. The Company shall not
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holder in this Agreement or grant any additional
registration rights to any Person or with respect to any securities which are
not Registrable Securities which are prior in right to or inconsistent with the
rights granted in this Agreement.
(c) Remedies. The Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of their rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate.
(d) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be amended, modified
or
16
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless consented to in writing by the parties hereto.
(e) Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be made by registered or certified first-class mail, return receipt
requested, telecopier, courier service, overnight mail or personal delivery:
(i) if to the Company:
Doctors Health System, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
(ii) if to the Holder:
Genesis Health Ventures, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
with copies (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
All such notices and communications shall be deemed
to have been duly given when delivered by hand, if personally delivered; when
delivered by courier or overnight mail, if delivered by commercial courier
service or overnight mail; five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged,
if telecopied.
(f) Successors and Assigns: Third Party
Beneficiaries. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto. The Demand
Registration rights of the Holder contained in Section 3 hereof and the other
rights of the Holder with respect thereto shall be, with respect to any
Registrable Securities, (i) automatically transferable to any Affiliate of the
Holder and (ii) in all other cases, transferred only with the consent of the
Company. The incidental or "piggy-back" registration rights of the Holder
contained in Sections 3(b) and 4 hereof and the other rights of the Holder
17
with respect thereto shall be, with respect to any Registrable Securities,
automatically transferred by the Holder to any Person who is the transferee of
such Registrable Securities. All of the obligations of the Company hereunder
shall survive any such transfer. No Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of any of
the rights granted hereunder.
(g) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(j) Severability. If any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
it being intended that the parties shall in good faith negotiate a modification
to this Agreement that preserves the essence of the agreement of the parties
contained herein and all of the rights and privileges of the Holder, as so
modified, shall be enforceable to the fullest extent permitted by law.
(k) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and in the Stock Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
(l) Further Assurances. Each of the parties shall
execute such documents and perform such further acts as may be reasonably
required or desirable to carry out or to perform the provisions of this
Agreement.
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IN WITNESS WHEREOF, the undersigned have executed, or have
caused to be executed, this Agreement on the date first written above.
DOCTORS HEALTH SYSTEM, INC.
By:______________________________
Name:
Title:
GENESIS HEALTH VENTURES, INC.
By:______________________________
Name:
Title:
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