Exhibit 4
DOCTORS HEALTH SYSTEM, INC.
OPTION AGREEMENT
This Option Agreement (the "Option Agreement") is
entered into this ____ day of ______________, 199_, by and between Doctors
Health System, Inc., a Maryland corporation ("DHS"), and ("Optionee").
RECITALS:
1. DHS has registered certain shares of its
Class B Common Stock ,par value $.01 per share ("Class B Common Stock") and
options to acquire Class B Common Stock ("Options") with the Securities and
Exchange Commission ("SEC") and with certain applicable states.
2. Pursuant to such registration, DHS is
offering of some or all of such registered securities (the "Offering") the terms
of which are set forth in a Prospectus and a Prospectus Supplement (together
referred to herein as the "Prospectus") that are part of the registration
statement on Form S-1 filed with the SEC (the "Registration Statement").
3. Optionee desires to acquire the securities
offered pursuant to the terms of the Offering and, in connection therewith has
executed a [Sale Agreement/Independent Practice Association Agreement/Employment
Agreement](the "Main Agreement[s]; capitalized terms used and not otherwise
defined herein shall have the meanings ascribed to them in the Main
Agreement[s]").
4. Pursuant to the Offering and the Main
Agreement[s], the Company has agreed to grant Optionee __________ Options.
AGREEMENTS:
In consideration of the foregoing and of the mutual
agreements herein contained and set forth in the Main Agreement[s], the parties
hereto agree as follows:
ARTICLE 1
DEFINITIONS
For the purposes of this Option Agreement, the
definitions set forth in Sections 1.1 through 1.11 shall be applicable.
Section 1.1 Affiliate. "Affiliate" shall mean: (i)
any corporation in which DHS owns, directly or indirectly, fifty percent (50%)
or more of the total combined voting power of all classes of stock of such
corporation; and (ii) any Core Medical Group which is affiliated with DHS.
Section 1. 2 Class B Common Stock. "Class B Common
Stock" shall mean shares of DHS's authorized but unissued Class B common stock,
par value of one cent ($0.01) per share.
Section 1. 3 Exercise Date. "Exercise Date" shall mean
the date on which the Committee receives the written notice required under
Section 3.2 of this Option Agreement that Optionee has exercised the Option.
Section 1. 4 Grant Date. "Grant Date" shall mean the
date on which DHS issues an Option to Optionee pursuant to this Option
Agreement.
Section 1. 5 Offering. "Offering" shall mean the
offering of securities by DHS pursuant to which Optionee is acquiring the
Options, the terms of which are set forth in the Prospectus.
Section 1. 6 Options. "Options" shall mean those
options to acquire shares of Class B Common Stock of DHS granted to Optionee
pursuant to this Option Agreement, each such option, upon proper exercise,
entitling the Optionee to one share of Class B Common Stock pursuant to the
terms set forth in the Prospectus, the Purchase Agreement and this Option
Agreement.
Section 1.7 Fair Market Value. "Fair Market Value" of
a share of Class B Common Stock on the Grant Date or Exercise Date, as the case
may be, shall mean the last reported sale price per share of Class B Common
Stock, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on a national securities exchange or
included for quotation on the NASDAQ-National Market, or if the Class B Common
Stock is not so listed or admitted to trading or included for quotation, the
last quoted price, or if the Class B Common Stock is not so quoted, the average
of the high bid and low asked prices, regular way, in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or, if such system is no longer in use, the principal
other automated quotations system that may then be in use or, if the Class B
Common Stock is not quoted by any such organization, the average of the closing
bid and asked prices, regular way, as furnished by a professional market maker
making a market in the Class B Common Stock as selected in good faith by the
Company or by such other source or sources as shall be selected in good faith by
the Class B Company for any other reason, the Fair Market Value of shares of
Class B Common Stock shall be determined by the Company in such other manner as
it may deem appropriate. If, as the case may be, the relevant date is not a
trading day, the determination shall be made as of the next preceding trading
day. As used herein, the term "trading day" shall mean a day on which public
trading of securities occurs and is reported in the principal consolidated
reporting system referred to above, or if the Class B Common Stock is not listed
or admitted to trading on a national securities exchange or included for
quotation on the NASDAQ-National Market, any day other than a Saturday, a Sunday
or a day in which banking institutions in the State of New York are closed.
Section 1. 8 Option Price. "Option Price" shall mean
the price per share of Common Stock at which the Option may be exercised.
"Aggregate Option Price" shall mean the Option Price multiplied by the number of
Options to be exercised pursuant to a notice of exercise.
Section 1. 9 Prospectus. "Prospectus" shall mean the
Prospectus and Prospectus Supplement that are part of the Registration Statement
filed on Form S-1 by DHS and which set forth the terms of the Offering.
Section 1. 10 Main Agreement[s]. "Main Agreement[s]"
shall mean the [sale/independent practice association/employment]agreement
between DHS and Optionee pursuant to which Optionee agreed to the terms of the
Offering and pursuant to which Optionee is entitled to receive the Options.
Section 1. 11 Registration Statement. "Registration
Statement" shall mean the registration statement filed by DHS with the SEC with
respect to the registration of the securities of DHS, some or all of which are
the subject of the Offering.
ARTICLE 2
ISSUANCE OF OPTIONS
Section 2.1 Issuance of Options. DHS hereby grants to
Optionee, as of the date hereof (the "Grant Date") _____________________
(__________) Options to purchase shares of Class B Common Stock at an option
price of _______________________ ($________), (the "Option Price") or such
adjusted number of Options at such adjusted Option Price as may be established
from time to time pursuant to the provisions of Article V hereof. Each Option,
upon proper exercise thereof in accordance with this Option Agreement, entitles
Optionee to one share of DHS Class B Common Stock.
Section 2.2 Term of Options. The Options granted
pursuant to Section 2.1 shall expire on the day prior to the tenth anniversary
of the Grant Date, unless such Options terminate earlier pursuant to other
provisions of this Option Agreement.
ARTICLE 3
EXERCISE OF OPTIONS
Section 3.1 Exercisability of Options. The Options
shall be exercisable, in whole or in part, at any time on or after ____________,
199___ or, if earlier, upon Optionee's death, unless the Options have earlier
terminated pursuant to the provisions of this Option Agreement. Notwithstanding
anything to the contrary herein, no Option may be exercised unless the shares of
Class B Common Stock issuable upon exercise of such Options then subject to a
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), and unless such other action or consent as may
be required by federal or state law relating to the issuance or distribution of
securities shall have been taken or obtained.
Section 3.2 Manner of Exercise. The Options may be
exercised, in whole or in part, by delivering written notice of excercise to DHS
in such form as DHS may require from time to time. Such notice shall specify the
number of Options being exercised, and shall be accompanied by full payment of
the Aggregate Option Price. In addition, such notice shall be accompanied by (i)
a written acknowledgment of the restrictions on the transferability of the
shares of Class B Common Stock executed in the form of the letter attached
hereto and marked Exhibit A and (ii) a signed copy of a Stockholders Agreement
in such form as DHS may prescribe. Notwithstanding anything herein to the
contrary, all Class B Common Stock issued pursuant to the Options shall be
subject to the terms and conditions of said Stockholders Agreement. Payment of
the Aggregate Option Price may be made (i) in cash, (ii) in a number of shares
of Class B Common Stock (including shares of Class B Common Stock acquired upon
the exercise of an option) having a total Fair Value on the Exercise Date equal
to the Aggregate Option Price, or (iii) by a combination of the foregoing. The
Options may be exercised only in multiples of whole shares of Class B Common
Stock and no partial shares shall be issued.
Section 3.3 Issuance of Shares and Payment of Cash upon
Exercise. Upon exercise of the Options, in whole or in part, in accordance with
the terms of this Agreement and upon payment of the Aggregate Option Price, DHS
shall issue to Optionee the number of shares of Class B Common Stock equal to
the number of Options being exercised and for which payment was received, in the
form of fully paid and non-assessable Class B Common Stock.
Section 3.4 Reservation of Shares. DHS shall at all
times reserve and keep available for issuance upon the exercise of Options a
number of its authorized but unissued shares of Class B Common Stock that will
be sufficient to permit the exercise in full of all outstanding Options.
[Section 3.5 is applicable only to Options granted in
connection with acquisitions of medical practices.]
Section 3.5 Reacquisition Rights. As a condition to
exercising the Options, Optionee shall waive any rights which Optionee then has
to the reacquisition of such Optionee's practice. Upon such waiver, DHS and
Optionee agree that such reacquisition rights shall be terminated and shall be
null and void and of no further force and effect.
ARTICLE 4
TERMINATION OF OPTIONS
[Sections 4.2 and 4.3 are applicable only to Options
granted in connection with employment agreements.]
Section 4.1 Upon Optionee's Death. Unless such Options
are earlier terminated pursuant to the provisions of this Option Agreement, upon
Optionee's death Optionee's executor, personal representative or the person to
whom the Options shall have been transferred by will or the laws of descent and
distribution, as the case may be, may exercise all or any part of the Options
not previously exercised, provided such exercise occurs within twelve (12)
months after the date Optionee dies, but not later than the end of the stated
term of the Option and, provided further, that such person executes a
Stockholders Agreement in such form as DHS may prescribe.
Section 4.2 Termination of Employment For Reason Other
Than Death, Disability, Retirement or Wrongful Termination. Unless earlier
terminated pursuant to the provisions of this Option Agreement, Options granted
to Optionee that have not been exercised as of the date Optionee is no longer
employed by either DHS or an Affiliate for any reason other than Optionee's
death, Disability, Retirement or Wrongful Termination (as such terms are defined
in the Employment Agreement).
Section 4.3 Termination of Employment By Reason of
Disability, Retirement or Wrongful Termination. Unless the Options have earlier
terminated pursuant to the provisions of this Option Agreement, in the event
that Optionee ceases to be an employee of DHS or an Affiliate by reason of
Disability, Retirement or Wrongful Termination, Options that have not yet been
exercised may be exercised in whole or in part at any time on or after the date
of Disability, Retirement or Wrongful Termination, but not later than the end of
the stated term of the Option or as otherwise provided by the provisions of
Section 4.1 of this Option Agreement.
ARTICLE 5
ADJUSTMENTS
Section 5.1 Adjustment of Number of Options; Option
Price. Subject to the provisions of this Article 5, the Option Price shall be
subject to adjustment as follows:
(a) In the event any change is made to the Class
B Common Stock (whether by reason of (i) a merger, consolidation, reorganization
or recapitalization or (ii) a stock dividend, stock split, combination of
shares, exchange of shares or other change in capital structure effected without
receipt of consideration), then, appropriate adjustments shall be made to the
number of shares and Option Price of the Class B Common Stock subject to the
Options.
(b) If DHS is the surviving entity in any merger
or other business combination then the Options outstanding immediately after
such merger or other business combination, shall be appropriately adjusted to
apply and pertain to the number and class of securities that would be issuable
to the Optionee in the consummation of such merger or business combination if
the Options were exercised immediately prior to such merger or business
combination, and appropriate adjustments shall also be made to the Option Price.
ARTICLE 6
MISCELLANEOUS
Section 6.1 No Rights of Stockholder. Optionee shall
not have any of the rights of a stockholder with respect to the shares of Class
B Common Stock that may be issued upon the exercise of the Options until such
shares of Class B Common Stock have been issued to Optionee upon the due
exercise of the Options.
Section 6.2 Nontransferability of Option. The Option
shall be nontransferable otherwise than by will or the laws of descent and
distribution. During the lifetime of Optionee, the Options may be exercised only
by Optionee or, during the period Optionee is under a legal disability, by
Optionee's guardian or legal representative.
Sections 6.3 and 6.4 to be included if Optionee is
entering into Employment Agreement] Section 6.3 Non-Guarantee of Employment.
Nothing in the Offering, the Main Agreement or this Option Agreement shall be
construed as a contract of employment between DHS (or an Affiliate) and
Optionee, or as a contractual right of Optionee to continue in the employ of DHS
or an Affiliate, or as a limitation of the right of DHS or an Affiliate to
discharge Optionee at any time.
Section 6.4 Withholding Taxes. DHS or any Affiliate
shall have the right to deduct from any compensation or any other payment of any
kind (including withholding the issuance of shares of Class B Common Stock) due
Optionee the amount of any federal, state or local taxes required by law to be
withheld as the result of the exercise of the Option or the disposition of
shares of Class B Common Stock acquired pursuant to the exercise of the Option.
In lieu of such deduction, DHS may require Optionee to make a cash payment to
DHS or an Affiliate equal to the amount required to be withheld. If Optionee
does not make such payment when requested, DHS may refuse to issue any Class B
Common Stock certificate until arrangements satisfactory to the Company for such
payment have been made.
Section 6.5 Agreement Subject to Charter and By-Laws.
This Agreement is subject to the Charter and By-Laws of DHS, and any applicable
federal or state laws, rules or regulations.
Section 6.6 Headings. The headings in this Option
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Option Agreement.
Section 6.7 Notices. All notices and other
communications made or given pursuant to this Option Agreement shall be in
writing and shall be sufficiently made or given if hand delivered or mailed by
certified mail, addressed to Optionee at the address contained in the records of
DHS or an Affiliate, or to DHS for the attention of its Secretary at its
principal office.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Entire Agreement; Modification. This
Option Agreement contains the entire agreement between the parties with respect
to the subject matter contained herein and may not be modified, except in a
written document signed by each of the parties hereto.
Section 7.2 Counterparts. This Option Agreement may be
executed simultaneously in one or more counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same instrument.
Section 7.3 Governing Law. This Option Agreement shall
be governed by and construed under the laws of the State of Maryland without
regard to conflicts of law.
Section 7.4 Counterparts. This Option 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.
IN WITNESS WHEREOF, the parties have executed this
Option Agreement as of the date first above written.
DOCTORS HEALTH SYSTEM, INC.
By:
------------------------
OPTIONEE
---------------------------
EXHIBIT A
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx, 10th Floor
Owings Mills, Maryland 21117
Gentlemen:
I hereby exercise _________ Options granted to me on
____________________, 199____, by Doctors Health System, Inc. (the "Company"),
subject to all the terms and provisions thereof, and notify you of my desire to
purchase ____________ shares of Class B Common Stock of DHS at a price of
$___________ per share pursuant to the exercise of said Option. This will
confirm my understanding with respect to the shares to be issued to me by reason
of this exercise of the Option (the shares to be issued pursuant hereto shall be
collectively referred to hereinafter as the "Shares") as follows:
(a) I am a party to a Stockholders Agreement
with DHS (or will be upon DHS's execution of the Stockholders Agreement executed
by me and attached hereto) pursuant to which I have agreed to certain
restrictions on the transferability of the shares of Class B Common Stock and
other matters relating thereto, and the certificates for the Shares to be issued
to me shall contain a legend to that effect.
Total Amount Enclosed: $__________
Date:________________________ __________________________________________
(Optionee)
Received by Doctors Health System, Inc. on
________________________________, 19______
By:_______________________________________
