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EXHIBIT 3
RIGHTS AGREEMENT
RIGHTS AGREEMENT (the "Agreement"), dated as of April 26, 1998, by and
between GENESIS HEALTH VENTURES, INC., a Pennsylvania corporation ("Genesis")
and Manor Care Inc., a Delaware corporation ("Manor Care").
W I T N E S S E T H :
WHEREAS, Genesis, The Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of Genesis ("Acquisition Corporation"), and Vitalink
Pharmacy Services, Inc., a Delaware corporation ("Vitalink"), have entered into
an Agreement and Plan of Merger dated April 26, 1998 (the "Merger Agreement");
WHEREAS, as a result of the Merger (capitalized terms used without
definition herein having the meanings ascribed thereto in the Merger Agreement),
Manor Care will beneficially own shares of preferred stock, par value $.01 per
share, of Genesis (the "Preferred Stock"), which Preferred Stock is convertible
into shares of common stock, par value $.02 per share, of Genesis (the "Common
Stock"); and
WHEREAS, Genesis and Manor Care have agreed that this Agreement shall
become effective at the Effective Time of the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, Genesis and Manor Care hereby agree as follows:
STANDSTILL
Section 1. Manor Care Standstill Obligations.
Prior to the earlier of April 26, 2005 or the occurrence of a Director
Change (as defined below) and subject to the further provisions hereof:
(a) Neither Manor Care nor any affiliate of Manor Care including,
without limitation, New ManorCare Health Services, Inc. (collectively, the
"Manor Care Group") will, without the prior written consent of Genesis, directly
or indirectly, acquire any shares of any class of capital stock of Genesis which
is entitled to vote generally in the election of directors or is convertible or
exchangeable for any class of capital stock which is entitled to vote generally
in the election of
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directors (all such classes of capital stock of Genesis being referred to herein
as "Voting Securities") (except for the Preferred Stock, the Common Stock or
other securities issuable upon conversion of the Preferred Stock and pursuant to
stock splits, stock dividends or other distributions or offerings made available
to holders of Voting Securities generally); provided, however, that if at
any time the Manor Care Voting Power shall be less than the Maximum Percentage
of the Total Voting Power, then the Manor Care Group may acquire Voting
Securities unless the effect of such acquisition would be to increase the
aggregate voting power in the election of directors of all Voting Securities
then owned by all members of the Manor Care Group (such aggregate voting power
of all Voting Securities owned by all members of the Manor Care Group being
referred to herein as the "Manor Care Voting Power") to greater than 15% (the
"Maximum Percentage") of the total combined voting power in the election of
directors of all the Voting Securities then outstanding (such total combined
voting power of all the Voting Securities outstanding being referred to herein
as the "Total Voting Power").
If at any time the Manor Care Voting Power shall be increased to more
than the Maximum Percentage of the Total Voting Power as a result of a
repurchase of Voting Securities by Genesis or any other change in Genesis's
capitalization, no member of the Manor Care Group shall be required to dispose
of any Voting Securities.
As used in this Agreement, the following terms shall have the following
meanings:
The term "affiliate" shall have the meaning set forth in Rule 12b-2
under the Exchange Act.
"Continuing Director" shall mean any member of the Board of Directors of
Genesis, while such person is a member of the Board of Directors who either (i)
was a member of the Board of Directors on the date hereof, (ii) subsequently
becomes a member of the Board of Directors, if such person was recommended or
elected to succeed the Continuing Directors by a majority of the Continuing
Directors or (iii) was appointed at the direction of Manor Care.
"Director Change" shall mean (i) the Chief Executive Officer of
Genesis on the date hereof is removed from office by the Board of Directors or
the Board of Directors materially alters his authority or responsibilities such
that he does not exercise the authority or have the responsibilities formerly
associated with his position as the Chief Executive Officer, or (ii) the
majority of the Board of Directors does not consist of Continuing Directors.
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All references to securities "owned" or "acquired" by a person shall
include all securities owned of record by such person and all securities over
which such person has beneficial ownership within the meaning of Section 13(d)
of the Exchange Act.
The term "person" shall mean any person or group of persons within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder (the "Exchange Act").
(b) No member of the Manor Care Group shall make any "solicitation" of
"proxies" to vote or become a "participant" in a "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act) in opposition to the
recommendation of the majority of the directors of Genesis with respect to any
matter.
(c) No member of the Manor Care Group shall join a partnership,
limited partnership, syndicate or other group, or otherwise act in concert with
any other person, for the purpose of acquiring, holding, voting or disposing of
Voting Securities in violation of Section 1(a), or otherwise become a "person"
within the meaning of Section 13(d)(3) of the Exchange Act (in each case other
than solely with members of the Manor Care Group), nor shall any member of the
Manor Care Group deposit any Voting Securities in a voting trust or similar
arrangement or subject any Voting Securities to any voting agreement or pooling
arrangement other than in accordance with Section 4(b).
(d) No member of the Manor Care Group shall seek to call, or request
the call of, a special meeting of the shareholders of Genesis or seek to make,
or make, a shareholder proposal at any meeting of the shareholders of Genesis.
(e) No member of the Manor Care Group sha11 commence or announce any
intention to commence any tender offer for any shares of Stock, or take any
action that would require the Manor Care Group to file with or send to the
Securities and Exchange Commission (the "SEC") an amendment to Item 4 or Item 6
of its Schedule 13D under the Exchange Act with respect to the Voting
Securities.
(f) No member of the Manor Care Group shall, directly or indirectly,
assist, encourage or induce any person to bid for or acquire outstanding Voting
Securities or propose a tender offer, exchange offer or change of control of
Genesis; provided, however, that the mere sale of Voting Securities by any
member of the Manor Care Group and any action taken by the Manor Care Director
or Manor Care Observer in connection with his role as a board member or observer
shall not constitute
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assisting, encouraging or inducing within the meaning of this Section 1(f).
(g) No member of the Manor Care Group shall otherwise act alone or in
concert with others to seek control or influence the management, Board of
Directors or policies of Genesis other than pursuant to this Agreement or any
action taken by the Manor Care Director or Manor Care Observer in connection
with its role as a board member or observer.
(h) No member of the Manor Care Group shall arrange, or in any way
participate in, any financing for any transaction referred to in clauses (a)
through (g) above inclusive.
(i) No member of the Manor Care Group shall make public, or cause or
facilitate the public disclosure (including by disclosure to any journalist or
other representative of the media) of, any request, or otherwise seek (in any
fashion that would require public disclosure by Genesis), to obtain any
waiver or amendment of any provision of this Section 1, or to take any action
restricted hereby.
(j) In the event a tender or exchange offer is made by any person (other
than an affiliate of, or any person acting in concert with, any member of the
Manor Care Group) any member of the Manor Care Group holding Voting Securities
may tender or exchange its Voting Securities according to the terms of the
offer.
(k) If, at any time prior to April 26, 2003, the Manor Care Group
proposes to transfer to a third party Voting Securities having in excess of 15%
of the Total Voting Power, then as a condition to such transfer the transferee
must agree to be bound by the provisions of this Section 1 with respect to such
Voting Securities. Notwithstanding the foregoing, the Manor Care Group shall not
transfer Voting Securities to any person who owns any Voting Securities of
Genesis, if such transfer will result in such transferee having in excess of 15%
of the Total, Voting Power. Any purported transfer in violation of this section
will be void.
Section 2. Genesis Standstill Obligations.
(a) Genesis will not, without the prior written consent of Manor Care,
take or recommend to its shareholders any action during the term of this
Agreement which would impose limitations on the legal rights of the Manor Care
Group as Genesis shareholders other than those imposed pursuant to the express
terms of this Agreement which disproportionately affect the Manor Care Group
compared to holders of Preferred Stock or Common Stock generally.
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(b) Prior to the Effective Time, Genesis shall have taken appropriate
action with respect to its stockholders rights plan so as to exempt (i) the
holders of Preferred Stock or (ii) any person that is the direct assignee of any
holder of Preferred Stock to the extent that such assignee (A) acquires in a
single transaction from a holder of Preferred Stock over 15% of the Voting
Securities and (B) owns no other shares of Voting Securities from the
restrictions of such stockholders rights plan with respect to such shares of
Preferred Stock and shares of Common Stock issuable upon conversion thereof and
from and after the Effective Time, Genesis shall take no action which would
subject such holders of Preferred Stock to the restrictions of Genesis's
stockholders rights plan or any similar plan adopted after the Effective Time.
(c) Genesis will not require any Manor Care Director or Manor Care
Observer to enter into any confidentiality agreement or other arrangement that
would limit the ability of such Manor Care Director or Manor Care Observer to
communicate with Manor Care as contemplated by Section 3(c) hereof.
BOARD REPRESENTATION AND VOTING
Section 3. Covenants Regarding Board Representation.
(a) Designation. As promptly as practicable after receipt of written
notice from Manor Care, Genesis will cause one person designated by Manor Care
to be appointed to Genesis's Board of Directors (the "Manor Care Director") by
such Board to serve as a member of Class I. At the end of the term of any Manor
Care Director, Manor Care shall have the right to designate the same or a
different person to serve as the Manor Care Director for the next term and
Genesis's Board of Directors shall appoint such person to its Board of
Directors. If at any time the Manor Care Director is not elected or the Manor
Care Observer is prohibited from attending Board meetings, Genesis shall appoint
another person designated by Manor Care to be a Manor Care Director or Manor
Care Observer, as the case may be. Any such designation of a Manor Care Director
for appointment to Genesis's Board of Directors or, pursuant to Section 3(c), of
a person to attend Board meetings as an observer, shall be made after
consultation with Genesis, and any such Manor Care Director or Manor Care
Observer shall be reasonably acceptable to Genesis's Board of Directors (which
agreement will not be unreasonably withheld). Genesis hereby agrees and
acknowledges that Xxxx Xxxxxxxx and Xxxxx X. Xxxxx are acceptable to Genesis's
Board of Directors as a Manor Care Director or Manor Care Observer. Genesis's
Board of Directors shall include in the slate of nominees recommended by such
Board to
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Genesis's shareholders for election as a director at each annual meeting of the
shareholders of Genesis at which members of Class I directors are elected,
the person then designated by Manor Care for election to Genesis's Board of
Directors in accordance with the provisions of this Section 3(a). In the event
that the Manor Care Director shall cease to serve as a director for any reason,
the vacancy resulting therefrom shall be filled by a designee of Manor Care
being appointed by the Board of Directors according to the procedures described
above.
(b) Manor Care Observer. At any time that the Manor Care Group does not
have a Manor Care Director serving on Genesis's Board of Directors, Manor Care
shall be entitled to designate a non-voting observer for such Board seat and
such observer shall be entitled to attend all Board meetings (the "Manor Care
Observer").
(c) Confidential Information. The parties acknowledge and agree that
the Manor Care Director or Manor Care Observer, as the case may be, will be
under an obligation to Manor Care not to disclose to any person outside of Manor
Care, or use in any business other than Manor Care's, any confidential
information or material relating to the business of Manor Care or its
subsidiaries and that the Manor Care Director or Manor Care Observer shall be
under no obligation to disclose to Genesis any corporate opportunities that the
Manor Care Director or Manor Care Observer becomes aware of because of his or
her position as an officer, director or employee of Manor Care or any of its
affiliates. The parties acknowledge that there shall be no obligation on the
part of such Manor Care Director or Manor Care Observer to disclose any such
information or material to Genesis, even if such disclosure would be of
interest or value to Genesis. In addition, the parties acknowledge and agree
that any Manor Care Director or Manor Care Observer will be under an obligation
to Genesis not to disclose to any person outside of Genesis, or use in any
business other than Genesis's, any confidential information or material relating
to the business of Genesis or its subsidiaries; provided that the Manor Care
Director or Manor Care Observer may disclose to the officers and directors of
Manor Care information about the financial position or results of operations of
Genesis (which information shall not include specific information about the day
to day operations of Genesis's business or any proposed acquisition, disposition
or other material action to be taken by Genesis) if any such Manor Care
officer or director agrees that any confidential information so disclosed to him
or her shall not be disclosed by him or her to any other person to whom such
information has not been so disclosed by the Manor Care Director or Manor Care
Observer, except as may be compelled by law or legal process.
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(d) Removal of Directors; Vacancies. Manor Care shall have the right
to request the removal by Genesis's Board of Directors of the Manor Care
Director. Any such removal shall be subject to the applicable provisions of the
Amended and Restated Articles of Incorporation and By-Laws of Genesis
(including, without limitation, any shareholder vote requirement), as well as
applicable statutory provisions; provided that Genesis will use its best efforts
to cause the Genesis Board of Directors to vote in favor of such requested
removal. In the event that the Manor Care Director for any reason ceases to
serve as a member of the Genesis Board of Directors during his or her term of
office and at such time Manor Care would have the right to designate a Manor
Care Director hereunder (a) the director to fill such vacancy ("Manor Care
Director Vacancy") shall be designated by Manor Care and shall be reasonably
acceptable to Genesis's Board of Directors, and (b) such Manor Care Director
Vacancy shall be filled in accordance with Article Eighth of Genesis's Amended
and Restated Articles of Incorporation.
Section 4. Voting of Genesis Common Stock and Other Related Matters
(a) Each member of the Manor Care Group that is a holder of record of
Voting Securities shall be present, and each member of the Manor Care Group that
is a beneficial owner of Voting Securities shall cause the holder of record to
be present, in person or by proxy, at all meetings of shareholders of Genesis so
that all Voting Securities owned of record or beneficially by the Manor Care
Group may be counted for the purpose of determining the presence of a quorum at
such meetings.
(b) At any time prior to April 26, 2001, other than with respect to a
proposed Change of Control, the Manor Care Group will take all such action as
may he required so that all Voting Securities owned by the Manor Care Group are
voted (in person or by proxy) on all matters to be voted on by holders of Voting
Securities in accordance with the recommendation of the Board of Directors.
Manor Care shall cause the Manor Care Director to take such action as may be
necessary and to vote in accordance with the recommendation of Genesis's Board
of Directors to fill any vacancies in Genesis's Board of Directors (other than a
Manor Care Director Vacancy).
(c) Manor Care shall not, with respect to a proposed Change of Control
approved by the Board of Directors of Genesis and the shareholders of Genesis,
make any demand for payment pursuant to Section 262 of the Delaware General
Corporation Law.
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As used herein, a proposed "Change of Control" occurs (A) when the
shareholders of Genesis are asked to approve an agreement or plan (i) to merge
or consolidate Genesis with or into another company (other than a merger or
consolidation which would result in the Voting Securities outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
Genesis or such surviving entity outstanding immediately after such merger or
consolidation), or (ii) to sell, or otherwise dispose of, all or substantially
all of Genesis's property and assets, or (iii) to liquidate, dissolve or wind-up
Genesis or (B) when Genesis is the subject of a transaction pursuant to Rule
13e-3 under the Exchange Act.
REGISTRATION RIGHTS
Section 5. Registration Rights.
Genesis covenants and agrees as follows:
5.01. Definitions. For purposes of this Section 5:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Act").
(b) The term "Registrable Securities" means the shares of Preferred
Stock and Common Stock underlying such shares of Preferred Stock held, from time
to time, by the Manor Care Group.
(c) The term "Holder" means any member of the Manor Care Group which
owns of record Registrable Securities.
5.02. Request for Registration.
(a) If Genesis shall, at any time following the first anniversary of the
Effective Time, receive a written request from the Holders of Registrable
Securities representing at least 25% of the Voting Securities acquired by the
Manor Care Group at the Effective Time that Genesis file a registration
statement under the Act covering the registration of Registrable Securities,
then Genesis shall, within 10 days after the receipt thereof, give written
notice of such request to all Holders and effect within 90 days of the receipt
of such request, the registration under the Act on a Form S-1 or other
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appropriate form covering the sale of all Registrable Securities which the
Holders request to be registered.
(b) If the Holders initiating the registration request hereunder (the
"Initiating Holders") intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise Genesis as a
part of their request made pursuant to this Section 5.02 and Genesis shall
include such information in the written notice referred to in Section 5.02(a).
In such event, the right of any Holder to include Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
Registrable Securities through such underwriting shall (together with Genesis)
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Initiating Holders and
reasonably acceptable to Genesis. Genesis at its sole discretion may offer a
right to participate in any registration statement filed pursuant to this
Section 5.02 to other holders of Common Stock, and may itself participate in any
registration statement filed pursuant to this Section 5.02. However,
notwithstanding any other provision of this Section 5.02, if the offering is an
underwritten offering and the lead managing underwriter advises the Initiating
Holders that marketing factors require a limitation of the number of shares of
Preferred Stock or Common Stock to be underwritten, then (subject to any
contrary provisions in registration rights agreements executed by Genesis prior
to the date hereof) the total number of shares of Preferred Stock or Common
Stock to be underwritten shall be reduced, with such reduction coming first from
selling stockholders who are not Holders, and then from Genesis.
(c) Genesis is obligated to effect no more than three such registrations
pursuant to this Section 5.02.
(d) Notwithstanding the foregoing, if Genesis shall furnish to Holders
requesting a registration statement pursuant to this Section 5.02 a certificate
signed by the Chief Executive, Chief Operating, or Chief Financial Officer of
Genesis stating that, in the good faith judgment of a majority of the
disinterested directors, it would be materially detrimental to Genesis for such
registration statement to be filed, Genesis shall have the right to defer such
filing for a period of not more than 90 days after receipt of the request of the
Initiating Holders; provided, however, that Genesis may not utilize this right
more than once in any 12-month period.
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5.03. Piggyback Registration.
(a) If (but without any obligation to do so), prior to April 26, 2003,
Genesis proposes to register any of its Common Stock under the Act in connection
with the public offering of such Common Stock by Genesis (other than a
registration relating solely to the sale of securities to participants in a
dividend reinvestment plan, stock plan or employee benefit plan; a registration
relating solely to the issuance of securities to the security holders of an
acquired company in connection with an acquisition; or a registration on any
form which does not permit inclusion of selling stockholders), or Genesis
proposes to register any of its Common Stock on behalf of a holder of Common
Stock exercising demand registration rights similar to those set forth in
Section 5.02, (which shall not include a shelf registration) Genesis shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within 15 days after mailing of such
notice by Genesis, Genesis shall cause to be registered under the Act all of the
Common Stock that each such Holder has requested to be registered.
However, notwithstanding any other provision of this Section 5.03, if
the offering is an underwritten offering and the lead managing underwriter
advises the Holders that marketing factors require a limitation of the number of
shares of Common Stock to be underwritten, then (subject to any contrary
provisions in registration rights agreements executed by Genesis prior to the
date hereof) the total number of shares of Common Stock to be underwritten
shall be reduced, with such reduction coming first from the Holders.
5.04. Expenses of Registration.
All expenses incurred by or on behalf of Genesis in connection with
registrations, filings or qualifications pursuant to Sections 5.02 and 5.03,
including, without limitation, all registration, filing and qualification fees,
printers' and accounting fees, and fees and disbursements of counsel for Genesis
and one counsel to the selling Holders, shall be borne by Genesis. In no event
shall Genesis be obligated to bear any underwriting discounts or commissions
relating to Registrable Securities.
5.05. Obligations of Genesis. Whenever required under this Section 5 to
effect the registration of any Registrable Securities, Genesis shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use
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its reasonable efforts to cause such registration statement to become
effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to fifteen business days.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of
such states or other jurisdictions as shall be reasonably requested by the
Holders, provided that Genesis shall not be required to qualify to do business
or to file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the underwriters of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, and
then use its best efforts to promptly correct such statement or omission.
Notwithstanding the foregoing and anything to the contrary set forth in this
Section 5.05, each Holder acknowledges that there may occasionally be times when
Genesis must suspend the use of the prospectus forming a part of the
registration statement until such time as an amendment to the registration
statement has been filed by Genesis and declared effective by the SEC, or until
such time as Genesis has filed an appropriate report with
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the SEC pursuant to the Exchange Act. Each Holder hereby covenants that it will
(a) keep any such notice strictly confidential, and (b) not sell any shares of
Preferred Stock or Common Stock pursuant to such prospectus during the period
commencing at the time at which Genesis gives the Holder notice of the
suspension of the use of such prospectus and ending at the time Genesis gives
the Holder notice that it may thereafter effect sales pursuant to such
prospectus. Genesis shall only be able to suspend the use of such prospectus
for periods aggregating no more than 60 days in respect of any registration.
5.06. Indemnification.
In the event any Registrable Securities are included in a registration
statement under this Section 5:
(a) To the extent permitted by law, Genesis will indemnify and hold
harmless each Holder and the affiliates of such Holder, and their respective
directors, officers, general and limited partners, agents and representatives
(and the directors, officers, affiliates and controlling persons thereof), and
each other person, if any, who controls such Holder within the meaning of the
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus (but only if such statement is not
corrected in the final prospectus) contained therein or any amendments or
supplements thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading (but only if such omission is not corrected in the final
prospectus); provided, however, that the indemnity agreement contained in this
Section 5.06(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of Genesis (which consent shall not be unreasonably withheld), nor shall
Genesis be liable in any such case for any such loss, claim, damage, liability
or action which arises solely out of or is solely based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in such registration statement by any such Holder or
indemnified person.
Each indemnified party shall furnish such information regarding itself or
the claim in question as an indemnifying party may reasonably request in writing
and as shall be reasonably
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required in connection with defense of such claim and litigation resulting
therefrom.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless Genesis, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls Genesis
within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages or
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the Act, the Exchange Act or other federal or state law, insofar
as any such loss, claim, damage, liability or action arises solely out of or is
solely based upon (i) any Violation that occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in such registration statement and (ii) the failure of the selling Holder,
after actual receipt of any notice from the Company of the happening of any
event of the kind described in Section 5.05(f), to discontinue disposition of
such Registrable Securities covered by such registration statement until such
selling Holder has received copies of a supplemented or amended prospectus, or
until it is advised in writing by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any amendments or
supplements thereto; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 5.06(b) in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 5.06(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of such Holder, which
consent shall not be unreasonably withheld; provided, that, in no event shall
any indemnity under this Section 5.06(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
5.06 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 5.06, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure to deliver written notice to the
indemnifying party within a reasonable time after the commencement
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of any such action, if materially prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 5.06 to the extent of such prejudice, but
the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 5.06. The indemnified party shall have the right, but
not the obligation, to participate in the defense of any action referred to
above through counsel of its own choosing and shall have the right, but not the
obligation, to assert any and all separate defenses, cross claims or
counterclaims which it may have, and the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the employment of such
counsel has been specifically authorized in advance by the indemnifying party,
(ii) counsel advises that there is a conflict of interest that prevents counsel
for the indemnifying party from adequately representing the interests of the
indemnified party, (iii) the indemnifying party does not employ counsel that is
reasonably satisfactory to the indemnified party, or (iv) the indemnifying party
fails to assume the defense or does not reasonably contest such action in good
faith, in which case, if the indemnified party notifies the indemnifying party
that it elects to employ separate counsel, the indemnifying party shall not have
the right to assume the defense of such action on behalf of the indemnified
party and the reasonable fees and expenses of such separate counsel shall be
borne by the indemnifying party; provided, however, that, the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm (in addition to one firm acting as local counsel) for all
indemnified parties.
(d) If the indemnification provided for in Section 5.06(a) or 5.06(b) is
for any reason unavailable to an indemnified party in respect of any losses,
claims, damages or liabilities which are indemnifiable pursuant to such
Sections, then each indemnifying party under such paragraphs, in lieu of
indemnifying such indemnified party thereunder and in order to provide for just
and equitable contribution, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and the indemnified party
or parties on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof). The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material
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fact relates to information supplied by Genesis on the one hand or such Holder
or such other indemnified party, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
(e) The obligations of Genesis and the Holders under this Section 5.06
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 5.06 and the termination of this
Agreement.
(f) The underwriting agreement (if any) entered into in connection with
any underwritten public offering of the Registrable Securities shall contain
provisions on indemnification and contribution that are no less favorable to
Holders of Registrable Securities than those provisions contained in this
Agreement. To the extent that the provisions on indemnification and
contribution contained in such underwriting agreement satisfy the foregoing
sentence but are in conflict with the provisions of Section 5.06, the
provisions in such underwriting agreement shall control.
5.07. Reports Under the Exchange Act.
With a view to making available to the Holders the benefits of Rule 144
and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of Genesis to the public without registration or
pursuant to a registration on Form S-3, Genesis agrees to:
(a) use its commercially reasonable best efforts to make and keep public
information available, as those terms are understood and defined in Rule 144;
(b) use its commercially reasonable best efforts to file with the SEC in a
timely manner all reports and other documents required under the Act and the
Exchange Act; and
(c) furnish to any Holder forthwith upon request (i) a written statement
by Genesis as to its compliance with the reporting requirements of Rule 144,
(ii) a copy of the most recent annual or quarterly report of Genesis and such
other reports and documents so filed by Genesis, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule
or regulation of the SEC which permits the selling of any such securities
without registration.
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5.08. Assignment of Registration Rights.
The rights to cause Genesis to register Registrable Securities pursuant to
Section 5.02 may only be assigned by a Holder to a transferee or assignee of any
Registrable Securities if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Act and any such transferee or assignee shall be a Holder for purposes of
Section 5 entitled to the rights and subject to the obligations of Section 5,
including without limitation, the requirement that a request for registration
under Section 5.02 must be made by holders of at least 25% of the Voting
Securities acquired by the Manor Care Group at the Effective Time.
Section 6. Termination.
(a) Notwithstanding any other provision of this Agreement, this Agreement
may be terminated, upon 60 days prior written notice to the other party (i) by
Manor Care, in its sole discretion, if Genesis breaches any of its material
obligations pursuant to this Agreement and such breach is continuing on the
61st day following such notice, provided, however that the rights of Manor Care
contained in Sections 3 and 5 hereof shall survive such termination; (ii) by
Genesis, in its sole discretion, if Manor Care breaches any of its material
obligations pursuant to this Agreement and such breach is continuing on the
61st day following such notice or (iii) by either party, in its sole
discretion, if the Merger Agreement is terminated.
(b) Upon the disposition by the Manor Care Group to persons who are not
members of the Manor Care Group of greater than 50% of the Voting Securities
acquired by the Manor Care Group at the Effective Time, the provisions of
Sections 1, 2, 3 and 4 hereof shall terminate and be of no further force or
effect.
Section 7. Miscellaneous.
(a) Manor Care and Genesis each acknowledges and agrees that irreparable
damage would occur in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state thereof having jurisdiction, in
addition to any other remedy to which they may be entitled at law or equity.
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(b) If any provision of this Agreement is in violation of any
statute, rule, regulation, order or decree of any governmental authority, court
or agency, or subjects any member of the Manor Care Group to governmental
regulation to which it would not be subject except for such provision, then
such member of the Manor Care Group shall be relieved of its obligations under
such provision to the minimum extent necessary to cure such violation or
eliminate the applicability of such regulation.
(c) If requested in writing by Genesis, Manor Care shall present or
cause to be presented promptly all certificates representing Voting Securities
now owned or hereafter acquired by members of the Manor Care Group, for the
placement thereon of the following legend, which will remain thereon as long as
such Voting Securities are subject to the restrictions contained in this
Agreement:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER AND THE OTHER PROVISIONS OF A RIGHTS AGREEMENT
DATED AS OF APRIL 26, 1998, BETWEEN GENESIS HEALTH VENTURES, INC. AND MANOR
CARE, INC., AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN ACCORDANCE
THEREWITH. A COPY OF SAID AGREEMENT IS ON FILE AT THE OFFICE OF THE
CORPORATE SECRETARY OF GENESIS HEALTH VENTURES, INC.
Genesis agrees that upon any transfer of Voting Securities
represented by legended certificates made in compliance with the provisions of
this Agreement, it will, upon the presentation to its transfer agent of the
certificates containing such legend, remove such legend from the certificates
being sold or registered.
(d) Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
(e) This Agreement contains the entire understanding of the parties
with respect to the transactions contemplated hereby and may be amended only by
an agreement in writing executed by the parties hereto.
(f) For the convenience of the parties, any number of counterparts of
this Agreement may be executed by the parties hereto and each such executed
counterpart shall be deemed to be, an original instrument.
(g) All notices and other communications hereunder shall be in
writing and shall be delivered personally, by next-day courier or mailed by
registered or certified mail
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(return receipt requested), first class postage prepaid, or sent by facsimile,
telegram or telex, to the parties at the addresses specified below (or at such
other address for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt thereof).
Any such notice shall be effective upon receipt, if personally delivered or
telecommunicated, one day after delivery to a courier for next-day delivery, or
three days after mailing, if deposited in the U.S. mail, first class postage
prepaid.
(i) if to Manor Care, to:
Manor Care, Inc.
00000 Xxxxxxxxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.,
General Counsel
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: W. Xxxxxx Xxxxx, Esq.
(ii) if to Genesis, to:
Genesis Health Ventures, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxx Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxx Xxxxxxxxx, Esq.,
General Counsel
with a copy to:
Blank Rome Xxxxxxx & XxXxxxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(h) This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of
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Delaware applicable to contracts made and to be performed therein.
(i) Each of Manor Care and Genesis has all necessary power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Manor Care and Genesis and the consummation by each of
Manor Care and Genesis of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of Manor
Care and Genesis, respectively. This Agreement has been duly and validly
executed and delivered by each of Manor Care and Genesis and, assuming the due
authorization, execution and delivery by the other party, constitutes a legal,
valid and binding obligation of each of Manor Care and Genesis, enforceable
against each of them in accordance with its terms, except that such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting creditors'
rights generally.
(j) This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but, except as set forth in Section 5.08 of this
Agreement, this Agreement and any of the rights, interests or obligations
hereunder shall not be assigned by any of the parties hereto without the prior
written consent of the other parties; 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 other than pursuant to
Section 1. Genesis hereby consents to the Manor Care Group's transfer of any or
all shares of Preferred Stock or Common Stock owned by the Manor Care Group to
Manor Care, New Manor Care Health Services, Inc., or any of their respective
wholly owned subsidiaries if such transferee agrees to be bound by the terms of
this Agreement.
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IN WITNESS WHEREOF, Manor Care and Genesis have caused this Agreement to
be duly executed by their respective officers, each of whom is duly authorized,
all as of the day and year first above written.
GENESIS HEALTH VENTURES, INC.
By: /s/ XXX X. XXXXXXXXX
-----------------------------------
Name: Xxx X. Xxxxxxxxx
Title: General Counsel -- Corporate
and Secretary
MANOR CARE, INC.
By: /s/ XXXXX X. XXXXX
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: Senior Vice President
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